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At the time of retirement of partner, a bill of exchange for Rs5000 which was previously discounted with the banker was dishonoured as the drawee had became insolvent and nothing could be realised from his estate. The accountant seeks your advice on its treatment.?
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At the time of retirement of partner, a bill of exchange for Rs5000 wh...
Treatment of dishonoured bill of exchange at retirement of partner



  • Journal entry: The dishonoured bill of exchange needs to be reversed in the books of accounts by passing a journal entry which will be:


    • Debit: Bank account (Rs5000)

    • Credit: Bill receivable account (Rs5000)


  • Adjustment for retiring partner: The retiring partner's capital account needs to be adjusted to the extent of his share in the dishonoured bill. The adjustment entry will be:


    • Debit: Retiring partner's capital account (his share in the dishonoured bill)

    • Credit: Bill receivable account (his share in the dishonoured bill)


  • Calculation of retiring partner's share: The retiring partner's share in the dishonoured bill will be calculated based on his share in the partnership firm.



Conclusion:


In conclusion, the dishonoured bill of exchange needs to be reversed in the books of accounts and the retiring partner's capital account needs to be adjusted to the extent of his share in the dishonoured bill. The calculation of retiring partner's share will be based on his share in the partnership firm.
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At the time of retirement of partner, a bill of exchange for Rs5000 which was previously discounted with the banker was dishonoured as the drawee had became insolvent and nothing could be realised from his estate. The accountant seeks your advice on its treatment.?
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