List-I List-II (A) Payment of loans due to partners (I) Realisation A/c Dr
To Bank A/c(B) For settlement of partners' accounts, in case their capital account shows a debit
balance(II) Bank A/c Dr.
To loan to partners(C) For settlement of loan by a firm to a partner (III) Bank A/c Dr.
To Partner's Capital A/c(D) For settlement of any unrecorded liability (IV) Partner's Loan A/c Dr.
To Bank A/c
Choose the correct answer from the options given below:
Partnership Settlement Journal Entries Explained
This solution details the correct accounting entries for various partnership settlement scenarios, matching items from List-I with the appropriate entries from List-II. Understanding these entries is crucial for accurately reflecting financial transactions during partnership adjustments or dissolutions.
Partners' Loan Payment Matching
Transaction (A): Payment of loans due to partners
When a firm repays a loan that was given by a partner to the firm, the partner's loan account, which represents the liability owed to the partner, is debited. The Bank account is credited because the payment is made out of the firm's cash or bank balance.
The journal entry is:
$\text{Partner's Loan A/c} \text{ Dr.} \text{ To } \text{ Bank A/c}$
This corresponds to entry (IV) in List-II.
Capital Settlement with Debit Balance
Transaction (B): For settlement of partners' accounts, in case their capital account shows a debit balance
If a partner's capital account has a debit balance, it signifies that the partner owes money to the firm. When settling their final account, the partner would typically pay this amount to the firm. This payment increases the firm's bank balance (debit) and reduces the partner's capital account balance (credit) to zero, settling the account.
The journal entry is:
$\text{Bank A/c} \text{ Dr.} \text{ To } \text{ Partner's Capital A/c}$
This corresponds to entry (III) in List-II.
Firm Loan to Partner Settlement
Transaction (C): For settlement of loan by a firm to a partner
This scenario describes a situation where the firm had previously lent money to a partner, and now the partner is repaying that loan to the firm. The firm receives the money, so the Bank account is debited. The loan given to the partner (an asset for the firm) is now settled, so the 'Loan to partners' account is credited.
The journal entry is:
$\text{Bank A/c} \text{ Dr.} \text{ To } \text{ Loan to partners}$
This corresponds to entry (II) in List-II.
Unrecorded Liabilities Settlement
Transaction (D): For settlement of any unrecorded liability
When dealing with liabilities that were not initially recorded in the firm's books (common during dissolution), their payment is usually debited to the Realisation Account. The Realisation Account reflects all gains and losses from the sale of assets and settlement of liabilities. The Bank account is credited as the payment is made.
The journal entry is:
$\text{Realisation A/c} \text{ Dr.} \text{ To } \text{ Bank A/c}$
This corresponds to entry (I) in List-II.
Settlement Entry Pairings Summary
Below is a summary table showing the correct matches between List-I and List-II based on the explanations above:
| List-I Item | Description | List-II Entry |
|---|---|---|
| (A) | Payment of loans due to partners | (IV) Partner's Loan A/c Dr. To Bank A/c |
| (B) | Settlement of partners' accounts, in case their capital account shows a debit balance | (III) Bank A/c Dr. To Partner's Capital A/c |
| (C) | Settlement of loan by a firm to a partner | (II) Bank A/c Dr. To Loan to partners |
| (D) | Settlement of any unrecorded liability | (I) Realisation A/c Dr. To Bank A/c |
Important Questions from Match the Following
Directions : Given below are some idioms/phrases followed by four alternative meanings for each. Choose the most appropriate answer from among the options (a), (b), (c) and (d).
A sea change
Directions : Given below are some idioms/phrases followed by four alternative meanings for each. Choose the most appropriate answer from among the options (a), (b), (c) and (d).
Early bird
Directions : Given below are some idioms/phrases followed by four alternative meanings for each. Choose the most appropriate answer from among the options (a), (b), (c) and (d).
Be in the pink
Directions : Given below are some idioms/phrases followed by four alternative meanings for each. Choose the most appropriate answer from among the options (a), (b), (c) and (d).
A pearl of wisdom
Select the most appropriate meaning of the given idiom.
forty winks
