Accountancy Part ADissolution of Partnership Firm

If the asset is taken over by the creditor in lieu of the amount due…

If the asset is taken over by the creditor in lieu of the amount due to him, then the journal entry will be:

Answer & explanation

Correct answer: option 3

The correct answer is Option (3) → No entry

On dissolution, the asset is already in the Realisation Account (debited at book value) and the creditor is already in it too (credited). When the creditor takes the asset in full settlement, nothing moves in cash and both items stay within the Realisation Account, so no journal entry is needed.

NCERT (2026-27 edition):
Journal Entries – “… 7. For settlement with the creditor through transfer of assets when a creditor accepts an asset in full and final settlement of his account, no journal entry needs to be recorded.”