CUET CUET Accountancy 2024 - The entry for realisation expenses in above case study will be: | PYQs + Solutions

CUET Accountancy 2024

Accountancy

Dissolution of Partnership Firm

Easy

G, K and B were partners running a partnership for last 10 years, sharing profit and loss in the ratio of 5 : 3 : 2. Post Covid, their firm was affected badly and started incurring losses. On 31st March, 2023 they all decided to dissolve the firm due to continuous losses. Their capital balances were ₹ 4,00,000, ₹ 3,00,000 and ₹ 2,00,000 respectively. Firm had liabilities ₹ 80,000, Cash balance ₹ 40,000, other Sundry Assets ₹ 8,50,000 and P&L A/c constituted the rest. Assets realised at 80% and liabilities were paid in full. There was unrecorded liability of ₹ 50,000 which was settled at ₹ 40,000. Realisation expenses amounted to ₹ 30,000, being paid by G on behalf of the firm.

The entry for realisation expenses in above case study will be:

Realisation A/c Dr.

\newline

To Cash A/c

Realisation A/c Dr.

\newline

To G's Capital A/c

G's Capital A/c Dr.

\newline

To Realisation A/c

Cash A/c Dr.

\newline

To Realisation A/c

Correct Option: 2

G, K, and B are partners sharing profits and losses in a specific ratio. Due to losses, they decided to dissolve their partnership. They have capital balances and assets, but also liabilities and expenses to settle.

G paid the realisation expenses of ₹ 30,000 on behalf of the firm. This means G is effectively contributing to the firm's costs, which will affect his capital account.

The correct entry for the realisation expenses is:

Realisation A/c Dr.

\newline

To G's Capital A/c

This shows that the expense reduces G's capital because he paid it for the firm.

So, the answer is Option 2.

CUET Accountancy 2024 PYQs

The entry for realisation expenses in above case study will be:

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