Worksheet On Dissolution of Partnership - Board Exam Questions
Worksheet On Dissolution of Partnership - Board Exam Questions
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CHAPTER 6
DISSOLUTION OF A PARTNERSHIP FIRM
Dissolution of a firm : As per Indian Partnership Act, 1932 : “Dissolution
firm means termination of partnership among all the partners of the firm” When a
firm is dissolved, the business of the firm terminates. All the assets the firm are
disposed of and all outsiders’ liabilities and partners’ loan and partner capital are
paid.
Dissolution of Partnership : Dissolution of Partnership refers to terminal of old
partnership agreement (i.e., Partnership Deep) and a reconstruction the firm. It
may take place on
· Change in profit sharing ratio among the existing partner:
· Admission of a partner; and
· Retirement of Death of partner.
It may or may not result into closing down of the business as the remount
partners may decide to carry on the business under a new agreement.
Accounting Treatment Of Dissolution
On dissolution of a firm, the following accounts are opened to close the
books of the firm .
Realisation Account;
Partner’s Loan Account;
Partner’s Capital Accounts; and
Cash or Bank Account.
Realisation Account
It is nominal account opened on the dissolution of a firm to ascertain the
profit or loss on realization of assets and payment of outsider’s liabilities. This
account is closed by transferring the balance (i.e., profit or loss on realization) to
partner’s capital accounts.
FORMAT OF REALISATION ACCOUNT
Particular Rs Particular Rs
To sundry Assets A/c By Sundry Liabilities A/c
(Excluding cash or bank (Excluding Cr. Balance of P
balance. Fictitious assets. & L A/c, Reserves, Partners’
Dr. balance of P & Lac, Dr. Capital/Current A/cs, Loan
balance of partner’s from partner and Bank
Capital/current A/cs, Loans Overdraft)
to partners) By provision on any Assets A/c
To Cash/Bank A/c (Amount (Such as provision for
paid for discharging Depreciation, Provision for
Liabilities-recorded and Doubtful Debts, Joint Life
unrecorded) Policy Reserve etc.)
To Cash Bank A/c By Cash/Bank A/c
(Expenses on Realisation) (Amount received on
To Partner’s Capital A/cs realization of assets-
(Liabilities taken over by a recorded and unrecorded)
Partner commission payable
to him or any expenses
payable to him)
To Partner’ Capital A/cs
(For transferring profit on
Realisation)
On the above date the firm was dissolved. The assets were realized and
the liabilities
were paid off as follows :
(a) Debtors of Rs. 6,000 were proved bad.
(b) Girija agreed to pay off her brother’s Loan.
(c) One of the creditors for Rs. 10,000 was paid only Rs. 3,000 in full
settlement of his account.
(d) Buildings were auctioned for Rs.1,80,000 and the auctioneer’s
commission amounted to Rs. 8,000.
(e) Ganesh took over part of stock at Rs. 4,000 (being 20% less than the
book value). Balance of the Stock was handed over to the remaining
creditors in full settlement of their account.
(f) Investments realized Rs. 9,000 less.
(g) Realisation expenses amounted to Rs.17,000 and were paid by
Ganesh.
Prepare Realisation Account, Partners’ Capital Accounts and Bank
Account.
2018- Delhi
8 Srijan, Raman and Manan were partners in a firm sharing profits and 8
losses in the ratio of 2 : 2 : 1. On 31st March, 2017 their Balance Sheet
was as follows :
10 4
Prepare realisation Account
2020
11 Pass the necessary journal entries for the following transactions on the 4
dissolution of the partnership firm of Tony and Rony after the various
assets (other than cash) and external liabilities have been transferred to
Realization Account :
(i) An unrecorded asset of Rs. 2,000 and cash Rs. 3,000 was paid for
liability of Rs. 6,000 in full settlement.
(ii) 100 shares of Rs. 10 each have been taken over by partners at market
value of Rs. 20 per share in their profit sharing ratio, which is 3 : 2.
(iii) Stock of Rs. 30,000 was taken over by a creditor of Rs. 40,000 at
a discount of 30% in full settlement.
(iv) Expenses of realisation Rs. 4,000 were to be borne by Rony. Rony
used the firm’s cash for paying these expenses.
12. Vasudha and Dewan were partners in a firm sharing profits and losses 6
in the ratio of 2 : 3. The firm was dissolved on 31st March, 2019. After
transfer of assets (other than cash) and external liabilities to Realization
Account, the following transactions took place :
(i) Investments of the face value of Rs. 60,000 were sold in the open
market for Rs. 63,000 for which a commission of Rs. 700 was paid to
the broker.
(ii) Creditors worth Rs. 65,000 were settled by handing over the entire
stock to them along with a payment of Rs. 23,000 by cheque.
(iii) There was old furniture which had been completely written off from
the books of the firm. It was taken over by Vasudha at Rs. 2,000.
(iv) Dewan undertook to pay Ms. Dewan’s loan of Rs. 45,000.
(v) Dewan was appointed to look after the process of dissolution for
which he was allowed a remuneration of Rs. 7,000. He agreed to bear
the dissolution expenses. Actual expenses incurred by Dewan were Rs.
11,000, which were paid by the firm.
(vi) Loss on realisation amounted to Rs. 9,000.
Pass the necessary journal entries to record the above transactions in the
books of the firm.
13. Harish and Gopal were partners in a firm sharing profits in the ratio of 6
3 : 2. On 31st March, 2018, their Balance Sheet was as follows :
On the above date the firm was dissolved. The various assets were
realized and liabilities were settled as under :
(i) Gopal agreed to pay his wife’s loan.
(ii) Leasehold premises realised Rs.1,50,000 and Debtors Rs. 12,000
less.
(iii) Half of the creditors agreed to accept furniture of the firm as full
settlement of their claim and remaining half agreed to accept 10% less.
(iv) 50% stock was taken over by Harish on payment by cheque of Rs.
90,000 and remaining stock was sold for Rs.94,000.
(v) Realization expenses of Rs.10,000 were paid by Gopal on behalf of
the firm.
Prepare Realization Account.
14. Niyati, Kartik and Ratik were partners in a firm sharing profits and
losses in the ratio of 5:3:2. The firm was dissolved on 31st March, 2019
by the order of the court. After transfer of assets (other than cash) and
external liabilities to Realization Account, the following transactions
took
place :
(a) An unrecorded liability of the firm of Rs.45,000 was paid by Niyati.
(b) Creditors, to whom Rs.67,000 were due to be paid, accepted
furniture at Rs.35,000 and the balance was paid to them in cash.
(c) Kartik had given a loan of Rs.18,000 to the firm which was paid to
him.
(d) Stock worth Rs.85,000 was taken over by Ratik at Rs.72,000.
(e) Expenses on dissolution amounted to Rs.6,000 and were paid by
Kartik.
(f) Loss on dissolution amounted to Rs.40,000.
Pass the necessary journal entries for the above transactions in the
books of the firm.