In accounting for the dissolution of a partnership firm, various transactions must be recorded in the appropriate ledger accounts. Match each dissolution transaction on the left with its correct double-entry accounting treatment on the right.
- Transferring the book value of non-cash assets to close their respective ledger accountsDebit Realization Account and Credit respective Asset Accounts
- Payment of dissolution expenses directly by a partner using personal fundsDebit Realization Account and Credit Partner's Capital Account
- Settlement of an advance or loan given by a partner to the firmDebit Partner's Loan Account and Credit Cash or Bank Account
- Discount allowed by trade creditors upon final settlement during realizationDebit Creditors Account and Credit Realization Account
Answer
1. Transfer of non-cash assets matches with debiting Realization Account and crediting Asset Accounts. 2. Realization expenses paid by a partner matches with debiting Realization Account and crediting Partner's Capital Account. 3. Settlement of partner's loan matches with debiting Partner's Loan Account and crediting Cash/Bank Account. 4. Discount received from creditors matches with debiting Creditors Account and crediting Realization Account.
Each transaction is matched strictly according to double-entry principles on partnership dissolution: transferring asset book values requires debiting Realization and crediting asset accounts; personal payment of realization costs by a partner requires debiting Realization and crediting the partner's capital account; discharging a partner's loan requires debiting the partner's loan account and crediting cash/bank; and receiving discount from creditors requires debiting creditors and crediting Realization.
Step-by-Step Solution
Key Concept
Double-entry rules for partnership dissolution and realization accounts