If loan of ₹1,10,000 from X, a partner , appears on the liability side of the balance sheet of the firm and X’s capital account has a debit balance of ₹10,000. What journal entry will be passed on payment of such loan at the time of dissolution of the firm .

Dear Student

If a partner has a debit capital balance after all the adjustments of dissolution, His loan account to the firm shall be transferred to his capital account to the extent of the debit balance and the balance shall be treated as liability and shall be paid as liability is paid.

Therefore Journal entries:
Journal in the books
Date Particulars    Debit   Credit 
  X's Loan A/c Dr.               10,000  
    To X's Capital A/c                   10,000
  (Being adjustment made for debit balance of capital account)      
  X's Loan A/c Dr.            100,000  
    To Bank A/c                100,000
  (Being Remaining loan discharged as liability on dissolution)      


  • 2
  • -1
What are you looking for?