Journal Entry for Excess Liquidation Expenses

When actual expenses exceed the fixed amount of liquidation, the following journal entry needs to be passed:

Date: [Date of Journal Entry]

Particulars | Debit | Credit
--- | --- | ---
Liquidation Expenses | 1200 |
Cash/Bank | | 1200

Explanation:

• The liquidation expenses account is debited with Rs. 1200, which is the actual expense incurred.

• The cash/bank account is credited with Rs. 1200, which is the amount paid for the liquidation expenses.

Significance of the Journal Entry:

The above journal entry is significant because it helps to:

• Account for the excess amount of expenses incurred in the liquidation process.

• Record the payment made for the liquidation expenses.

• Determine the actual cost of liquidation.

• Maintain accurate financial records for future reference.

Conclusion:

Hence, it is important to pass the journal entry for excess liquidation expenses to ensure that the accounts reflect the correct financial position of the company. This will help to avoid any discrepancies in the financial statements and ensure transparency in the company's operations.