Balance Sheet of a firm disclosed as a footnote , contigent liability for ₹ 5,000 in respect of a bill discounted . The bill was received from Z . Later on , it was learnt that Z became insolvent and a dividend of 60% was received from his estate . Give Journal enrty to record the above event when the firm was dissolved .

Balance Sheet of a firm disclosed as a footnote , contigent liability

1.	Balance Sheet of a firm disclosed as a footnote , contigent liability for ₹ 5,000 in respect of a bill discounted . The bill was received from Z . Later on , it was learnt that Z became insolvent and a dividend of 60% was received from his estate . Give Journal enrty to record the above event when the firm was dissolved .
Answer» Solution :Contingent liability has no balance and hence it is not to be transferred to the Realisation Account . In this case , TWO JOURNAL entries are required : (i) For payment of₹ 5,000 to the bank from whom the bill was DISCOUNTED because on the dishonour of the bill , bank will CALL on the firm for payment of dues : Realisation A/c `"" .....Dr. "" `₹ 3,000 To Realisation A/c `""`₹ 3,000

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