Question

Atul and Peter were partners in a firm sharing profits and losses in the ratio of 3 : 5. They dissolved their firm on 31st March, 2024, when their Balance Sheet showed the following balances:

Particulars	(₹)
Atul’s Capital	40,000
Peter’s Capital	35,000
Atul’s Current Account	3,000 (Dr.)
General Reserve	22,000
Loan from Atul	12,000

On the date of dissolution of the firm:

1. Peter paid the realisation expenses of ₹ 2,000 on behalf of the firm.
2. Atul discharged his wife’s loan of ₹ 5,000 which she had given to the firm.
3. The dissolution resulted in a profit of ₹ 24,000 from the realisation of assets and settlement of liabilities.

You are required to pass journal entries to close the books of the firm (including the entries to show the final settlement of the amount due from the partners/due to the partners by the firm).

Answer 1

Journal Entries
Sr. No.	Particulars	L.F.	Debit (₹)	Credit (₹)
1.	Atul’s Capital A/c   ...Dr.		3,000	-
	To Atul’s Current A/c		-	3,000
	(Being Atul’s Current A/c closed)
2.	Atul’s Loan A/c   ...Dr.		12,000	-
	To Bank A/c		-	12,000
	(Being workmen compensation claim met out of the reserve)
3.	General Reserve A/c   ...Dr.		22,000	-
	To Atul’s Capital A/c		-	8,250
	To Peter’s Capital A/c		-	13,750
	(Being balance of GR transferred to partners’ capital accounts)
4.	Realisation A/c   ...Dr.		2,000	-
	To Peter’s Capital A/c		-	2,000
	(Being realisation expenses paid by Peter)
5.	Realisation A/c   ...Dr.		5,000	-
	To Atul’s Capital A/c		-	5,000
	(Being Atul’s wife’s loan discharged by Atul)
6.	Realisation A/c   ...Dr.		24,000	-
	To Atul’s Capital A/c		-	9,000
	To Peter’s Capital A/c		-	15,000
	(Being profit on realisation transferred to partners’ capital accounts)
7.	Atul’s Capital A/c   ...Dr.		59,250	-
	Peter’s Capital A/c   ...Dr.		65,750	-
	To Bank A/c		-	1,25,000
	(Being partner’s capital accounts settled)