Pari, a partner was paid remuneration including expenses of ₹20,000 to carry out dissolution of firm. Actual expenses were ₹10,000. Pass the journal entry for this?
Answer & explanation
Correct answer: option 1
The correct answer is option 1-
Realisation A/c Dr. ₹20,000
To Pari Capital A/c ₹20,000
(Remuneration allowed to Pari for looking after dissolution work)
For agreed remuneration to such partner who agrees to undertake the dissolution work-
Realisation A/c Dr.
To Partner’s Capital A/c
(Being remuneration and realisation expenses payable to partner)
* Agreed amount is paid to partner irrespective whether realisation expenses are more or less than the agreed amount. So, the journal entry will be passed for 20,000 not 10,000. So, the correct journal entry will be- Realisation A/c Dr. ₹20,000 To Pari Capital A/c ₹20,000.