Mukund's Loan of ₹50,000 to the firm, was settled at ₹55,000 at the time of firm's dissolution, where Mukund was one of the partner. What entry will be passed?
Answer & explanation
Correct answer: option 2
The correct answer is option (2)-
Mukund Loan A/c Dr. ₹50,000
Realisation A/c Dr. ₹5,000
To Cash A/c ₹55,000
To settle the loan (The loan amount is less than the settlement amount)
- Debit (Decrease) the Loan Account (to record the loan repayment).
- Debit (Decrease) the Realisation Account
- Credit (Increase) Cash or Bank Account( to show the payment made).
So, journal entry will be-
Mukund Loan A/c Dr. ₹50,000
Realisation A/c Dr. ₹5,000
To Cash A/c ₹55,000