Target Exam

CUET

Subject

-- Accountancy Part A

Chapter

Dissolution of Partnership Firm

Question:

What is the journal entry at the time of dissolution of partnership firm, if realisation expenses of ₹7,500 were to be borne by firm but paid by partner Ajay?

Options:

Realisation A/c Dr.            â‚¹7500
   To Ajay’s Capital A/c             â‚¹7500
(Realisation expenses paid by partner)

Ajay’s Capital A/c  Dr.   â‚¹7500
   To Realisation A/c                      â‚¹7500
(Realisation expenses paid by partner)

No entry passed

Revaluation A/c Dr.            â‚¹7500
   To Ajay’s Capital A/c             â‚¹7500
(Realisation expenses paid by partner)

Correct Answer:

Realisation A/c Dr.            â‚¹7500
   To Ajay’s Capital A/c             â‚¹7500
(Realisation expenses paid by partner)

Explanation:

The correct answer is option 1-
Realisation A/c Dr.            â‚¹7500
   To Ajay’s Capital A/c             â‚¹7500
(Realisation expenses paid by partner)

 

When realisation expenses are paid by a partner on behalf of the firm:
Realisation A/c Dr.
   To Partner’s Capital A/c.

Partner's account is credited as Expenses are paid by a partner which have to be paid back by the firm to the partner. Crediting her account will increase their balance. So, the correct journal entry will be-
Realisation A/c Dr.  ₹7,500  To Ajay's Capital A/c ₹7,500.