Based on following Balance Sheet of Tarnav and Manav as at 31st March 2022, answer question:
Balance Sheet as at 31st March 2022
|
Liabilities |
₹ |
Assets |
₹ |
|
Sundry Creditors |
30,000 |
Cash at Bank |
13,000 |
|
80,000 |
|
80,000 |
On that date the firm was dissolved on the following terms:
(i) Tarnav promised to pay Sanjay's loan and took over stock in trade at ₹4,000.
(ii) Creditors, payable after one month, were paid immediately at a discount of 6% per annum.
(iii) Debtors of ₹1,000 proved bad, plant realised 130%.
(iv) Expenses on Realisation were ₹1,500 borne and paid by Manav.
(v) Manav took over an old computer completely written off from the book at ₹500.
Record journal entry relating to realisation expenses:
Answer & explanation
Correct answer: option 4
The correct answer is Option (4) → No need to record the journal entry
The realisation expenses are both borne and paid by Manav. When a partner has agreed to bear the realisation expenses and pays them himself, the money does not pass through the firm and the cost is not the firm’s, so no entry is made in the firm’s books.
The entries in the options belong to other cases:
Realisation A/c Dr. To Bank A/c — the firm bears and pays the expenses.
Realisation A/c Dr. To Manav’s Capital A/c — applies only when a partner pays an expense that the firm bears; here Manav bears it himself.
Manav’s Capital A/c Dr. To Bank A/c — Manav bears them but the firm pays them.
NCERT (2026-27 edition):
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