Read the following case study and answer the question:
Naina and Nayantara are Partners in a firm, sharing profits in ratio 3 : 2. They decided to dissolve their firm on 31, March 2021 when their Balance-Sheet was as follows:
|
Liabilities |
Amt. (₹) |
Assets |
Amt. (₹) |
|
Capital: Naina 1,00,000 Nayantara 80,000 Creditors Bills Payable |
1,80,000 60,000 20,000 |
Machinery Investment Stock Debtors Cash at Bank |
80,000 50,000 22,000 1,03,000 5,000 |
|
|
2,60,000 |
|
2,60,000 |
The Assets and liabilities were disposed off as follows:
(a) Machinery was given to creditors in full settlement of their amount and stock was given to Bills Payable in full settlement.
(b) Investment were taken over by Nayantara at book value.
(c) Debtors of book value ₹50,000 taken over by Naina at 10% less and remaining debtors realised ₹51,000.
(d) Realisation expenses amounted to ₹5,000.
Journal entry for payment of realisation expense will be:
Answer & explanation
Correct answer: option 4
The correct answer is Option (4)-
Realisation A/c Dr. 5,000
To Cash/Bank A/C. 5,000
When no information is given then it is implemented that realisation expenses are paid by the firm.
So, the journal entry will be debit the realisation account and credit cash account.