Read the following passage and answer the question.
X & Y are partners sharing profits and losses in the ratio 4:3. They decide to dissolve the firm. On the date of dissolution following information is available-
X's Capital = ₹1,25,030
Y's Capital = ₹2,070
Creditors = ₹23,150
Cash = ₹4,520
Remaining assets realised at ₹1,24,910 and the dissolution expenses are ₹1,860. Both Partners are solvent.
In which of the following account payment of realisation is shown?
Answer & explanation
Correct answer: option 1
The correct answer is option 1- Cash A/c.
If some expenses are incurred by the firm during the realisation of assets and payment of liabilities and the firm makes the payment, the entry will be as follows: Realisation Account Dr. To Bank/Cash Account
This entry reflects the payment made by the firm to settle the realisation expenses incurred during the dissolution process.
So, here journal entry will be-
Realisation A/c Dr. ₹1,860
To Cash A/c ₹1,860