Question

What Journal Entry will be passed on dissolution of partnership firm, when creditors of ₹ 40,000 accepted investments of ₹ 50,000 (Book value)?

Options

• Creditors A/c    Dr.      40,000
     To Realisation A/c               40,000

• Realisation A/c     Dr.   40,000
     To Creditors A/c                   40,000

• Creditors A/c      Dr.    50,000
      To Investments A/c             50,000

• No Entry

Answer 1

No Entry

Explanation:

When a liability is resolved with an asset, no entry is made in the books during dissolution because no cash or bank accounts are reclaimed or paid.