On dissolution of partnership firm, an investment of ₹30,000 was found to be unrecorded in the books. The same was accepted by a creditor in full settlement of his dues of ₹32,000. The accounting treatment of the transaction will be:
Answer & explanation
Correct answer: option 2
The correct answer is Option (2) → No entry is to be recorded for this
The creditor has already been transferred to the credit of the Realisation Account. When he accepts an asset in full and final settlement of his dues, nothing is paid in cash and the unrecorded investment never enters the books, so no journal entry is passed; the realisation profit or loss already reflects the settlement.
Option (1) Credit Realisation A/c by ₹2,000 — Incorrect. The ₹2,000 difference is not recorded separately; the creditor’s ₹32,000 stays on the credit side and no payment is debited.
Option (3) Debit Realisation A/c by ₹30,000 — Incorrect. No cash is paid to the creditor, so there is no debit for a payment.
Option (4) Credit Realisation A/c by ₹30,000 — Incorrect. An unrecorded asset is credited to Realisation only when it is sold or taken over by a partner; here the creditor takes it in settlement.
NCERT (2026-27 edition): |