A partner named Ubha was to look after the dissolution process for which she was allowed a remuneration of ₹12,000. She also agreed to bear dissolution expenses. Actual expenses ₹9,500 were paid by the firm. Pass the journal entry for payment of dissolution expenses.
Answer & explanation
Correct answer: option 3
The correct answer is option 3-
Ubha's Capital A/c Dr. ₹9,500
To Cash /Bank A/c ₹9,500
(Dissolution expenses paid by the firm and borne by ubha)
(i) Realisation A/c Dr. 12,000
To Ubha's Capital A/c 12,000
(Remuneration allowed to ubha)
(ii) Ubha's Capital A/c Dr. 9,500
To Cash /Bank A/c 9,500
(Dissolution expenses paid by the firm and borne by ubha)
The expenses are paid by the firm so its cash balance is decreased by that amount. It should be borne by ubha but paid by the firm, so her account is decreased by the same amount by debiting her account.