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?

Mukund Loan A/c Dr.   ₹50,000
Realisation A/c Dr.      ₹5,000
           To Cash A/c              ₹55,000

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