Target Exam

CUET

Subject

Part A

Chapter

Dissolution of Partnership Firm

Question:

In case of Fixed Capital Method, at the time of dissolution of a firm, An unrecorded asset are taken over by a partner, which Journal Entry will be recorded in the books of the Partnership Firm:

Options:

Bank A/c Dr.
      
To Realisation A/c

Realisation A/c   Dr.
      
To Bank A/c

Partners's Capital Account A/c Dr.
       To Realisation A/c

Partners's Current Account A/c Dr.
       To Realisation A/c

Correct Answer:

Partners's Current Account A/c Dr.
       To Realisation A/c

Explanation:

The correct answer is option 4-
Partners's Current Account A/c Dr.
       To Realisation A/c

Under the fixed capital method, the capitals of the partners shall remain fixed unless additional capital is introduced or a part of the capital is withdrawn as per the agreement among the partners. All items like share of profit or loss, interest on capital, drawings, interest on drawings, etc. are recorded in a separate accounts, called Partner’s Current Account. Thus under this method, two accounts are maintained for each partner viz., capital account and current account.

For an asset taken over by a partner, the following journal entry is passed-
Partner’s Capital A/c Dr.
       To Realisation A/c
But here specific condition is given that the fixed capital method is followed, so the entry pertaining to unrecorded assets will now be carried out through the partner's current account.

So, the correct journal entry will be- 
Partners's Current Account A/c Dr.
       To Realisation A/c