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CMA Intermediate · Financial Accounting · Dissolution of Partnership Firms including Piecemeal Distribution

On dissolution, partner Arun agrees to take over machinery with a book value of ₹90,000 at an agreed value of ₹75,000. Which entry records this?

The entry is Arun's Capital Account debited and Realisation Account credited with ₹75,000, the agreed value. The partner receives the asset instead of cash, so his capital is reduced. The credit is at the agreed value, not the book value, and the ₹15,000 shortfall stays as realisation loss.

  1. AArun's Capital A/c Dr ₹75,000 to Realisation A/c ₹75,000Correct
  2. BRealisation A/c Dr ₹75,000 to Arun's Capital A/c ₹75,000
  3. CArun's Capital A/c Dr ₹90,000 to Realisation A/c ₹90,000
  4. DCash A/c Dr ₹75,000 to Realisation A/c ₹75,000

Explanation

The machinery is already debited to the Realisation Account at book value of ₹90,000. Taking it over is treated as a realisation at the agreed value, so the Realisation Account is credited ₹75,000 and Arun's capital is debited. No cash moves, and the book value is not used for the credit. The ₹15,000 shortfall remains in the realisation loss.

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