What journal entries will be recorded for the following transactions on the dissolution of a firm: [a] Payment of unrecorded liabilities of Rs.3,200. [b] Stock worth Rs.7,500 is taken over by a partner Rohit. [c] Profit on Realisation amounting to Rs.18,000 is to be distributed between the partners Ashish and Tarun in the ratio of 5:7. [d] An unrecorded asset realised Rs.5,500.
Realisation Account Dr. 3,200 To Bank Account 3,500 (Being unrecorded liabilities paid)
Rohit's Capital Account Dr. 7,500 To Realisation Account 7,500 (Being stock taken over by partner Rohit)
Realisation Account Dr. 18,000 To Ashim's Capital Account 7,500 To Tarun's Capital Account 10,500 (Being profit on realisation distributed in 5:7 ratio)
Working: Ashim's share = 18,/12 = Rs.7,500 Tarun's share = 18,/12 = Rs.10,500
Bank Account Dr. 5,500 To Realisation Account 5,500 (Being unrecorded asset realised)
Explanation
For dissolution journal entries: (a) Unrecorded liabilities are debited to Realisation Account and credited to Bank Account when paid. (b) When a partner takes over an asset, their Capital Account is debited and Realisation Account is credited at the agreed value. (c) Profit on realisation is transferred to partners' capital accounts in their profit-sharing ratio by debiting Realisation Account and crediting respective Capital Accounts. (d) When unrecorded assets are realised, Bank Account is debited and Realisation Account is credited with the amount realised.