Plant and Machinery (book value ₹60,000) was handed over to a Creditor at an agreed valuation of 10% less than the book value.
What journal entry will be passed in the books of the firm at the time of dissolution of the firm?
Answer & explanation
Correct answer: option 2
The correct answer is Option (2) → No Entry will be passed
On dissolution, Plant and Machinery is already transferred to the debit of the Realisation Account and the creditor to its credit. When the creditor accepts the machinery (at ₹60,000 − 10% = ₹54,000) in full and final settlement, no cash moves and both items are already in the Realisation Account, so no journal entry is passed.
An entry is needed only for cash: if the creditor is paid something extra, or pays the firm the difference.
NCERT (2026-27 edition): NCERT (2026-27 edition):
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