Give journal entries for the following transactions: (a) To record the realization of various assets and liabilities. (b) A firm has a stock of ₹ 1,60,000. Aziz a partner took over... Give journal entries for the following transactions: (a) To record the realization of various assets and liabilities. (b) A firm has a stock of ₹ 1,60,000. Aziz a partner took over 50% of the stock at a discount of 20%. Read more

Steps to Solve

1. Recording the Realization of Assets and Liabilities

To record the realization of various assets and liabilities, we will generally credit the assets and debit the liabilities.

• Debit: Realization Account $ (TOTAL ASSETS) $
• Credit: Liabilities Account $ (TOTAL LIABILITIES) $

2. Journal Entry for Stock Transfer to Aziz

Aziz is taking over 50% of the stock valued at ₹ 1,60,000 at a discount of 20%.

• Calculate the total stock Aziz is taking over:

  • $ 50% \text{ of } ₹ 1,60,000 = ₹ 80,000 $

• Calculate the discount on the stock:

  • $ 20% \text{ of } ₹ 80,000 = ₹ 16,000 $

• Therefore, the book value for Aziz:

  • $ ₹ 80,000 - ₹ 16,000 = ₹ 64,000 $

3. Journal Entry for Aziz's Purchase

Now we will create the journal entry reflecting Aziz's purchase of the stock.

• Debit: Aziz's Capital Account

  • Amount: ₹ 64,000

• Credit: Stock Account

  • Amount: ₹ 80,000

4. Recording the Discount

We also need to record the discount on stock.

• Debit: Discount Allowed Account
  • Amount: ₹ 16,000