DISSOLUTION OF PARTNERSHIP

5 FIRM
(b) To find out profit or loss on realisation of
SECTION-A assets and payment of liabilities of the firm.
1. What do you mean by dissolution of 7. How do you treat PBD on dissolution of a
partnership? firm?
Ans. Dissolution of partnership means reconstitution of a Ans. On dissolution of a firm PBD is transferred to thecredit
partnership firm due to admission, retirement or death side of the realisation account.
of a partner.

2. What do you mean by dissolution of Date Particulars Debit Credit

partnership firm? (EQ) PBD A/c Dr xxx
To realisation A/c Xxxx
Ans. Section 39 of the Indian Partnership Act, 1932 the
dissolution of the partnership between all thepartners (Being PBD transferred
of a firm is called the dissolution of a firm.
to realisation account)
Accountancy

8. Give the journal entry for an asset taken

over by a partner on dissolution of a firm.
II-PUC

3. State any two circumstances or modes under (M-2019, J-2019)

which partnership firm is dissolved.
Ans. (a) Dissolution by agreement Ans.
(b) Compulsory dissolution.
Date Particulars Debit Credit
4. State any two differences betweendissolution
of partnership and dissolution of Partners capital A/c Dr xxx
partnership firm. (EQ) To realisation A/c Xxxx
Ans. (Being asset taken overby
a partner)
Dissolution of Dissolution of
Partnership partnership firm 9. Give the journal entry for liability taken
Business of the firm isnot Business of the firm is over by a partner on dissolution of firm.
terminated terminated (PUB-4, J-2020)
The books of accountsare The books of accountsare
not closed closed Ans.
It may or may not involve It involves dissolution of
dissolution of firm partnership Date Particulars Debit Credit
Realization A/c Dr xxx
5. What is realisation account? (PUB-5) To Partners Capital A/c Xxxx

(Being liability taken overby

Ans. Realisation account is an account prepared atthe partner)
time of dissolution of a firm to ascertainthe profit
or loss on the realisation of assets and payment of
liabilities. Profit or loss is transferred to partners 10. Give the journal entry for transferring
capital accounts in their profit sharingratio. assets to realization A/c. (PUB-1)
6. Why realisation account prepared?
(PUB-2)
Date Particulars Debit Credit
Ans. (a) To close the accounts of various assets and
liabilities appearing in the books of firm. Realization A/c Dr xxx
Xxxx
To Assets A/c
(Being Assets transferred
to realization account)
 II PUC - Accountancy

11. Give the journal entry for transfer of outside liability to realization account.
Ans.
Date Particulars Debit Credit
Liability A/c Dr xxx
To Realization A/c Xxxx
(Being outside liability transferred to realization account)

12. Give the journal entry for payment of partner’s loan account on dissolution of firm. (MQP-6)

Ans.
Date Particulars Debit Credit
Partners Loan A/c Dr xxx
To Cash or Bank A/c Xxxx
(Being Partners Loan paid)
13. Give the journal entry for Sale of an assets on dissolution of firm. (EQ)
Ans.
Date Particulars Debit Credit

Accountancy
Cash or Bank A/c Dr xxx
Xxxx

II-PUC
To Realisation A/c
(Being Assets Sold for cash)

14. Give journal entry for payment of liabilities/unrecorded liabilities/realisation expenses paid on
Ans. dissolution of firm. (M-2020)

Date Particulars Debit Credit

Realisation A/c Dr xxx
To Cash or Bank A/c Xxxx

(Being Liability or Unrecorded liability or realization expensespaid)

15. Give the journal entry for transfer of profit on realization. (EQ)

Ans.

Date Particulars Debit Credit

Realisation A/c Dr xxx
To Partners Capital A/c Xxxx

(Being profit transferred on realisation)

16. Give the journal entry for transfer of loss on realization. (PUB-3)
Ans.
Date Particulars Debit Credit
Partners capital A/c Dr xxx
To Realization A/c Xxxx
(Being Loss transferred on realisation)
II PUC - Accountancy

1. Suvarna and Sunanda are partners sharing profits and losses equally. Their Balance Sheet as on
31. 3. 2018 was as follows: (PUB-3)
Balance Sheet as on 31.3.2018
Liabilities ` Assets `
Creditors 50,000 Cash at Bank 15,000
Bills payable 10,000 Debtors 55,000
Sunanda’s Loan 25,000 Less: PBD 3,000 52,000
Reserve Fund 15,000 Stock 40,000
Capitals: Suvarna 60,000 Furniture 15,000
Sunanda 80,000 Machinery 25,000
Building 81,000
Profit and Loss A/c 12,000
2,40,000 2,40,000

On the above date the firm dissolved. The following information is available:
(a) Assets Realized: Debtors ` 52,000, Stock ` 39,000 Machinery ` 24,000, Building ` 75,000 and
furniture `13,000.
(b) Creditors and Bills Payable are paid at a discount of 5%.
(c) Dissolution expenses `4,000.
Prepare: (i) Realization Account (ii) Partners Capital Account and (iii) Bank Account.

Sheet on 31.3.2018 was as follows: (MQP-6)

Balance Sheet as on 31.3.2018
Liabilities ` Assets `
Creditors 15,000 Cash in hand 5,000
Anand’s loan 5,000 Cash at Bank 16,000
Bills payable 10,000 Debtors 25,000
Bank loan 8,000 Bills receivable 5,000
Profit and Loss A/c 22,000 Investment 18,000
Capitals: Anand 20,000 Machinery 25,000
Chandu 20,000 Furniture 16,000
Vijay 10,000
1,10,000 1,10,000
On the above date the firm dissolved. The following information is available:
(a) Assets Realised: Debtors ` 24,000, Bills Receivable ` 4,000, Investments ` 15,000, Machinery
`22,000.
(b) Chandu took the furniture for ` 10,000.
(c) Creditors and Bills Payable are paid at a discount of 5%.
(d) Unrecorded Investment Realized ` 4,000.
(e) Dissolution expenses ` 2,250.
Prepare: (i) Realisation Account (ii) Partners Capital Account and (iii) Bank Account.
II PUC - Accountancy

3. Anitha and Sunitha are partners sharing profits and losses equally. Their balance sheet as on
31.3.2014 was as follows: (PUB-5)
Balance Sheet as on 31.3.2018

Liabilities ` Assets `
Bills payable 6,000 Cash at Bank 6,000
Creditors 20,000 Debtors 28,000
Anitha’s Loan 5,000 Less: P.B.D. 2,000 26,000
Vanitha’s Loan 5,000 Stock 40,000
Reserve fund 30,000 Investment 20,000
Capitals: Furniture 14,000
Anitha 50,000 Buildings 60,000
Sunitha 50,000
1,66,000 1,66,000

Accountancy
On the above date the firm dissolved. The following information is available:

II-PUC
(a) The assets realised as follows: Debtors ` 25,600, Stock ` 39,000 and Building ` 66,000.
(b) Anitha took over 50% of investments at 10% less on its book value and remaining investments
were sold at a gain of 20%.
(c) Furniture was taken over by Sunitha at ` 12,000
(d) Anitha agreed to bear all Realisation expenses. For the service Anitha is paid ` 2,600. Actual
Realisation Expenses amounted to ` 2,000.
Prepare: (i) Realisation Account (ii) Partners Capital Account and (iii) Bank Account.

4. Shruti, Shilpa and Shreya were partners in a firm sharing profits and losses in the
ratio of 2:2:1.They decided to dissolve the firm. Their Balance Sheet on the date of
dissolution was as follows:

Balance Sheet as on 31.3.2018

Liabilities ` Assets `
Creditors 30,000 Cash at Bank 6,000
Bills payable 20,000 Debtors 30,000
Shreya’s Loan 8,000 Stock 30,000
General Reserve 10,000 Furniture 22,000
Capitals: Machinery 20,000
Shruti 40,000 Buildings 50,000
Shilpa 30,000
Shreya 20,000
1,58,000 1,58,000
The assets realised as follows:
(a) Debtors realised 10% less than the book value, the Stock realised
15% more than the bookvalue and buildings realised ` 60,000.
Accountancy

(b) The Furniture was taken over by Shruti at ` 20,000.

II-PUC

(c) The Machinery was taken over by Shipa at ` 15,000.

II PUC - Accountancy

(d) Creditors and Bills Payable were paid off at a discount of 5%.
(e) Cost of dissolution amounted to ` 1,500.
Prepare: (i) Realisation Account (ii) Partners Capital Accounts and (iii) Bank
Account.

5. Rashmi and Geetha were partners in a firm sharing profits and losses in the ratio of 3:2. Their
Balance Sheet on 31.3.2018 was as follows: (PUB-1)
Balance Sheet as on 31.3.2018
Liabilities ` Assets `
Sundry Creditors 10,000 Cash at Bank 5,000
Bills payable 10,000 Bills Receivable 10,000
Rashmi’s Loan 5,000 Debtors 20,000
Reserve Fund 10,000 Stock 15,000
Capitals: Furniture 10,000
Rashmi 30,000 Machinery 15,000
Geetha 40,000 Goodwill 30,000
1,05,000 1,05,000

On above date the firm was dissolved:

(a) The assets realised as follows: Bills receivable ` 7,500, Debtors and Stock realized 10% less

Accountancy
than the book value, Machinery realized 5% more than the book value and goodwill realized at

II-PUC
(b) The furniture was taken over by Geetha at ` 8,000.
(c) All the liabilities were discharged in full.
(d) Dissolution expenses amounted to ` 600.
Prepare: (i) Realization Account (ii) Partners Capital Accounts and (iii) Bank Account.

6. Annu and Tanu are partners sharing profits and losses 3:2. They agreed to dissolve their
firm on31.3.2018 when their Balance Sheet was as
follows:

(PUB-4)
Balance Sheet as on 31.3.2018

Liabilities ` Assets `
Capitals: Machinery 70,000
Anu 90,000 Investments 50,000
Tanu 80,000 1,70,000 Stock 22,000
Reserve Fund 10,000 Sundry Debtors 1,03,000
Creditors 60,000 Cash at bank 15,000
Bills Payable 20,000
2,60,000 2,60,000
II PUC - Accountancy

The assets and liabilities were disposed off as follows:

(a) Machinery were given to creditors in full settlement of their account and Stock
were given toBills Payable in full settlement.
(b) Tanu took over Investments at book value. Sundry Debtors of book value ` 50,000
were takenover by Anu at 10% less and remaining debtors realised ` 51,000.
(c) Anu paid Realisation expenses of ` 1,000 and he was to get a remuneration of `
2,000 forcompleting dissolution process.
Prepare (i) Realisation account (ii) Partners Capital Accounts and
(iii) Bank Account.

7. Rekha and Chetana sharing profits as 3 : 1 and they agree upon dissolution. The balance sheet
ason 31 March, 2018 is as under:
Balance Sheet of Rekha and Chetana as on 31 March, 2018
Liabilities ` Assets `
Loan 2,400 Cash at bank 5,000
Creditors 3,600 Stock 9,000
Capitals: Furniture 3,200
Rekha 22,000 Debtors 14,000
Chetana 13,600 Plant and Machinery 10,400
41,600 41,600

Additional information
(a) Rekha took over plant and Machinery at an agreed value of ` 12,000.
(b) Stock and furniture were sold for ` 8,400 and ` 2,780 respectively.
(c) Debtors were took over by Chetana at ` 13,000
(d) Liabilities were paid in fully by the firm.
(e) Realisation expenses were ` 320.
Prepare: (i) Realisation Account (ii) Partners Capital Accounts and (iii) Bank Account.

8. Vinay, Vaibha and Naveen are partners in firm sharing profit and losses in the ratio 3 : 2 : 1

Balance Sheet as on 31.3.2018

Liabilities ` Assets `
Creditors 40,000 Cash at Bank 15,000
Bills payable 10,000 Debtors 50,000
Naveen’s Loan 12,000 Stock 60,000
General Reserve 6,000 Furniture 28,000
Capitals: Machinery 45,000
Vinay 80,000 Building 50,000
Vaibha 60,000
Naveen 40,000
2,60,000 2,60,000

The assets realised as follows:

II PUC - Accountancy

(a) Debtors realised 10% less than the book value, the stock realised 15% more than the bookvalue
and Buildings realised ` 60,000.
(b) Creditors and Bills Payable were paid in full.
(c) Furniture was taken over by Vinay at ` 25,000.
(d) Machinery was taken over by Vaibhav at ` 40,000.
(e) Cost of dissolution amounted to ` 3,000.
Prepare: (i) Realisation Account
(ii) Partners Capital Accounts and (iii) Bank Account.

9. Anup and Sumit are equal partners in a firm. They decided to dissolve the partnership on 31.03.2019 when
their Balance sheet was as under (M-2020)
Balance Sheet as on 31.3.2018

Liabilities ` Assets `
Creditors 30,000 Cash at Bank 14,000
Loan 40,000 Sundry Debtors 12,000
Reserve Fund 10,000 Machinery 47,000
Capitals: Anup 60,000 Stock 42,000
Sumit 60,000 Land and Building 60,000
Furniture 25,000
2,00,000 2,00,000

On the above date the firm dissolved. The following information is available:
(a) Assets Realised: Land and Building ` 72,000, Furniture ` 22,500, Stock ` 40,500, Machinery `
48,000, Sundry Debtors ` 10,500.
(b) The creditors were paid ` 25,500 in full settlement.
(c) Expenses of realisation amounted to ` 2,500.
Prepare: (i) Realisation Account (ii) Partners Capital Account and (iii) Bank Account.

10. Seeta and Sarita sharing profits in the ratio of 3:1 and they agreed to dissolve the firm.. The Balance
Sheet as on 31.03.2019 is as under:
Balance Sheet as on 31.03.2019
Liabilities Amount Assets Amount
Loan 12,000 Cash at Bank 25,000
Creditors 18,000 Stock 45,000
Capital: Furniture 16,000
Seeta 1,00,000 Debtors 70,000
Sarita 78,000 1,78,000 Plant & Machinery 52,000
2,08,000 2,08,000

Additional information:
(1) Seeta took over plant and machinery at an agreed value of `60,000.
(2) Stock and Furniture were sold for ` 42,000 and ` 13,900 respectively.
(3) Liabilities were paid in full.
(4) Realisation expenses were `1,500
(5) Debtors were taken over by Sarita at `69,000.
Prepare : (i) Realisation Account (ii) Capital Accounts of Partners and (iii) Bank Account.