CLASS- 12TH CBSE

DISSOLUTION
MEANING OF DISSOLUTION OF PARTNERSHIP FIRM

According to section 39 of the Indian partnership Act,

1932, “Dissolution of the firm means dissolution of
partnership among all the partners in the firm. “In
dissolution of firm, all assets of the firm are realized,
i.e., sold and liabilities are paid.
 Difference between dissolution of firm
and Dissolution of partnership

Basic Dissolution of firm Dissolution of Partnership

It means change in business

It means closure of the firm relationship among the
Meaning
and end of business. partners. The firm continues
its business.

It can be either voluntarily by

Court’s
the partners or compulsorily by It is always voluntary.
Intervention
order of court.

Business Business of the firm comes to

Business of the firm continues.
Continuation an end.

Closure of
Books of account of the firm Books of account of the firm
books of
are closed. need not be closed.
Account
 Difference between firm’s Debts
and Private Debts

Basic Firm’s Debts Private Debts

Private debt means debt owed by a

Firm’s debt means the debt owed by
Meaning partner as individual to any other
the firm to outsiders.
person, i.e., other than for business.

All the partners are liable jointly Concerned partner is personally

Liability
and severally for the firm’s debts. liable for his private debts.

Share of the concerned partner in

Application of Firm’s property is applied first for excess of firm’s property over
firm’s property payment of firm’s debts. firm’s debts can be applied for
payment of private debts.

Excess of partner’s private property Private property is applied first

Application of
over his private debts can be applied for payment of private debts then
private property
for payment of firm’s debts. towards firm’s liability.
Journal Entries at Time of Dissolution
a) Journal Entries of Sold of Assets and Payment of Liabilities
b) Journal Entries of Realisation Expenses

a) Journal Entries of Sold of Assets and Payment of Liabilities

1. For transfer of assets:
All asset accounts excluding cash, bank and Realisation A/c Dr.
the fictitious assets, if any are closed by To Assets (Individually) A/c
transfer to the debit of Realisation
Account at their book values.

2. For transfer of liabilities

All external liability accounts including Liabilities (Individually) Dr.
provisions, if any, are closed by To Realisation A/c
transferring them to the credit of
Realisation account.
 Journal Entries at Time of Dissolution

3. For sale of assets Bank A/c Dr.

(Including unrecorded asset) To Realisation A/c

4. For an asset taken over by a partner Partner’s Capital A/c Dr.

(Including unrecorded asset) To Realisation A/c

5. For payment of liabilities Realisation A/c Dr.

(Including unrecorded liability) To Bank A/c

6. For a liability which a partner takes

Ralisation A/c Dr.
responsibility to discharge
To Partner’s Capital A/c
(Including unrecorded liability)

7. For any liability settle with any asset No Entry

1
1. X tools 50% of stock @Discount of
20% Remaining stock sold @ profit of
30% on cost. [BV: 4,00,000]

2. Debtors: 264000
Provision 24000
(48,000 debtors proved bad)

3. Building : 5,00,000 (BV)

Sold : 800,000
@ 2% Commission was given/agent

4. Machine = 10,000 by given to creditor

@ 5% discount

5. Stock : 40,000 BV
Realised 150%

6. ‘X’ an old customer whose A/c of 10,000

was w/off paid 70%.
7. Partner ‘A’ agreed to take g/w not
recorded in books @ 50,000

8. There was an old table w/off from

books. Realizable value 5,000/- partner
‘A’ tooks at @30% discount.

9. Govt. bonds costing 20,000 (Being

1000 in number) were w/off from
books. MV @ 15 ₹ each. Partners
divided in PSR (3:2)

10. Partner A tooks 40% stock @ 10%

less than BV Remaining sold for 40,000
[BV 85,000]

11. Partner A agreed to pay creditor of

30,000 for 20,000.
12. There was a contingent liability
37000; bills discounted but not
matured. But a bill of 5,000/-
because insolvent & 50% received
liability yet not recorded.

13. A creditor for 1,40,000 took machine

valuing 180,000 & Paid to firm
40,000.

14. A B/P of 30,000 accepted furniture

valuing 28,000 in full settlement.

15. A creditor of 70,000 (BV) accepted

30,000 cash & investments of
45,000 for full settlement.

16. 50% furniture taken over by partner

A at 20% less than books value.
Remaining sold for 105000
[Furniture BV: 220,000]
17. Creditors BV 30,000. They were
due after 1 month but paid
immediately @ 6% p.a. discount.

18. Total assets BV: 2,00,000 50%

taken by X at 20%, 40% of
remaining assets sold at 30%
profit & 5% realized nothing. The
remaining assets taken by creditor
in full settlement.
19. Stock BV [7800] ; Asset: 17,000]
Partner A tools stock @ 7,000 &
some sundry assets at 7200 (Being
10% less than BV).
Partner B took remaining s/assets
at 90% of books value less Rs 100
discount.

20. Debtors sold to collection agency

@ 50% Book value BV 10,000.
21. Stock 80,000 BV. A tools 50%
stock @ discount of 20%. Remaining
stock sold @ profit of 30%.

22. Asset = 51,000 BV. They realized

at loss of 2% of net collection.
[Eg: 100 realized
[ loss: 2% of 100 = Rs 2
51,000
:. BV = 102 :. × 100 = 50,000
102

23. Current A/c of

A – 10,000 Cr.
B – 20,000 Cr existing in B/s

24. Partner A has debit balance

40,000 & firm has taken loan from
him 50,000. (After all adjustments)

25. Partner A has taken loan from

firm 10,000 /- (It will not be trans’
to capital A/c)
26. Workmen's reserve 10,000 (No
Liability)

27. Partner’s loan A/c 10,000. He

agreed to accept 9500 as final
settlement.

28. Creditor to whom firm owed Rs.

6,000/- Accepted stock of 5000 @
dis of 5% & balance in cash 6000

29. Creditor 40,000. Creditor of

10,000 given 8000 furniture in full
& final settlement. Remaining
allowed @ discount of 10%.
30. Creditor of 80,000. ¼ agreed to take
furniture. ¼ agreed to settle dues @ 2%
discount p.a. due to early settlement one
month ¼ agreed to collect his amount
directly from our debtor. Partner A
agreed to settle him personally at 80%
1. X tools 50% of stock @Discount of X’s Capital A/c Dr. 1,60,000
20% Remaining stock sold @ profit of Cash A/c Dr. 2,60,000
30% on cost. [BV: 4,00,000] To Realisation A/c 4,20,000

2. Debtors: 264000
Cash A/c Dr. 2,16,000
Provision 24000
To Realisation A/c 2,16,000
(48,000 debtors proved bad)
Cash A/c Dr. 8,00,000
3. Building : 5,00,000 (BV) To Realisation A/c 8,00,000
Sold : 800,000
@ 2% Commission was given/agent Realisation A/c Dr. 16,000
To Cash A/c 16,000

4. Machine = 10,000 by given to creditor

No Entry
@ 5% discount

5. Stock : 40,000 BV Cash A/c Dr.

60,000
Realised 150% To Realisation A/c 60,000

6. ‘X’ an old customer whose A/c of Cash A/c Dr.

7,000
10,000 was w/off paid 70%. To Realisation A/c 7,000
7. Partner ‘A’ agreed to take g/w not A’s Capital A/c Dr. 50,000
recorded in books @ 50,000 To Realisation A/c 50,000

8. There was an old table w/off from

A’s Capital A/c Dr.
books. Realizable value 5,000/- partner 3,500
To Realisation A/c 3,500
‘A’ tooks at @30% discount.

9. Govt. bonds costing 20,000 (Being

A’s Capital A/c Dr. 9,000
1000 in number) were w/off from
B’s Capital A/c Dr. 6,000
books. MV @ 15 ₹ each. Partners 15,000
To Realisation A/c
divided in PSR (3:2)

10. Partner A tooks 40% stock @ 10% A’s Capital A/c Dr. 30,600
less than BV Remaining sold for 40,000 Cash A/c Dr. 40,000
[BV 85,000] To Realisation A/c 70,600

11. Partner A agreed to pay creditor of Realisation A/c Dr. 20,000

30,000 for 20,000. To A’s Capital A/c 20,000
12. There was a contingent liability Realisation A/c Dr. 5,000
37000; bills discounted but not To Bank A/c 5,000
matured. But a bill of 5,000/-
because insolvent & 50% received Cash A/c Dr. 2,500
liability yet not recorded. To Realisation A/c 2,500

13. A creditor for 1,40,000 took

Cash A/c Dr. 40,000
machine valuing 180,000 & Paid to
To Realisation A/c 40,000
firm 40,000.

14. A B/P of 30,000 accepted furniture

No Entry
valuing 28,000 in full settlement.

15. A creditor of 70,000 (BV) accepted

Realisation A/c Dr. 30,000
30,000 cash & investments of
To Cash A/c 30,000
45,000 for full settlement.

16. 50% furniture taken over by partner

A’s Capital A/c Dr.
A at 20% less than books value. 88,000
Cash A/c Dr.
Remaining sold for 105000 1,05,000
To Realisation A/c 1,93,000
[Furniture BV: 220,000]
17. Creditors BV 30,000. They were due
Realisation A/c Dr. 28,850
after 1 month but paid immediately
To Cash A/c 28,850
@ 6% p.a. discount.

18. Total assets BV: 2,00,000 50% taken

by X at 20%, 40% of remaining
X’s Capital A/c Dr. 80,000
assets sold at 30% profit & 5%
Cash A/c Dr. 52,000
realized nothing. The remaining
To Realisation A/c 1,32,000
assets taken by creditor in full
settlement.
19. Stock BV [7800] ; Sundry Asset:
17,000 Partner A tooks stock @
7,000 & some sundry assets at 7200 A’s Capital A/c Dr. 14,200
(Being 10% less than BV). B’s Capital A/c Dr. 8,000
Partner B took remaining sundry To Realisation A/c 22,200
assets at 90% of books value less Rs
100 discount.

20. Debtors sold to collection agency @ Cash A/c Dr. 5,000

50% Book value BV 10,000. To Realisation A/c 5,000
21. Stock 80,000 BV. A tooks 50% A’s Capital A/c Dr. 40,000
stock @ discount of 20%. Remaining Cash A/c Dr. 52,000
stock sold @ profit of 30%. To Realisation A/c 92,000

22. Asset = 51,000 BV. They realized

at loss of 2% of net collection. Cash A/c Dr. 50,000
[Eg: 100 realized ] To Realisation A/c 50,000
[ loss: 2% of 100 = Rs 2
51,000
:. BV = 102 :. × 100 = 50,000]
102

23. Current A/c of A’s Current A/c Dr.

10,000
A – 10,000 Cr. B’s Current A/c Dr.
20,000
B – 20,000 Cr existing in B/s To Realisation A/c 30,000

24. Partner A has debit balance

A’s Loan A/c Dr. 50,000
40,000 (After all adjustments)
To A’s Capital A/c 40,000
& firm has taken loan from him
To Cash A/c 10,000
50,000.

25. Partner A has taken loan from

Cash A/c Dr. 10,000
firm 10,000 /- (It will not be
To A’s Loan A/c 10,000
transfer to capital A/c)
26. Workmen's reserve 10,000 WCR A/c Dr. 10,000
(No Liability) To Partner’s Capital A/c
(Distributed in PSR)

27. Partner’s loan A/c 10,000. He Partner’s Loan A/c Dr. 10,000
9,500
agreed to accept 9500 as final To Cash A/c
500
settlement. To Realisation A/c

28. Creditor to whom firm owed Rs.

Realisation A/c Dr.
6,000/- Accepted stock of 5000 @ 1,250
To Cash A/c 1,250
dis of 5% & balance in cash

29. Creditor 40,000. Creditor of

10,000 given 8000 furniture in full Realisation A/c Dr. 27,000
& final settlement. Remaining To Cash A/c 27,000
allowed @ discount of 10%.
30. Creditor of 80,000.

¼ agreed to take furniture. No entry

¼ agreed to settle dues @ 2% Realisation A/c Dr. 19,967

discount p.a. due to early settlement To Cash A/c 19,967
one month

¼ agreed to collect his amount No entry

directly from our debtor.

¼ Partner A agreed to settle him Realisation A/c Dr. 16,000

personally at 80% To A’s Cap A/c 16,000
 Journal Entries at Time of Dissolution

b) Journal Entries of Realisation Expenses

Realisation A/c Dr.
(i) For Parment of Realisation Expenses
To cash A/c

Realisation (Bear) A/c Dr.

(ii) Realisation expenses paid by partner To partner’s capital A/c

(iii) Firm promise to pay a fixed amount to a

Partner for dissolution expense and Partner Realisation (Bear) A/c Dr.
Bear less than or more then amount for To Partner’s capital A/c
expense.

(iv) Partner agrees to bear Realisation

No entry
Expenses
 Journal Entries at Time of Dissolution

b) Journal Entries of Realisation Expenses

(v) Partner agrees to bear but firm pay Partner’s cap A/c Dr.
realisation expenses To cash A/c

(vi) Realisation expenses paid by firm on Partner’s cap A/c Dr.

Behalf of partner To cash A/c

Realisation A/c Dr.

(vii) Expenses of realisation partial paid by
Partner’s capital A/c Dr.
firm or partial by partner.
To cash A/c
2
b) Journal Entries of Realisation Expenses
Realisation 1,000 -
(i) Expenses of Realisation Paid Rs. 1,000 To cash - 1,000

Realisation (bear) Dr. 1,000 -

(ii) Realisation expenses paid by partner
To part’s cap - 1,000
Rs. 1,000

Realisation (Bear) 10,000 -

(iii) Partner is passed fixed amount of
To Part’s cap - 10,000
10,000. His expenses are of Rs. 11,000

(iv) Expenses of Realisation 10,000.

No entry
Partner agrees to bear it.
 Journal Entries at Time of Dissolution

b) Journal Entries of Realisation Expenses

(v) Partner agrees to bear but firm spends Partner’s cap A/c 10,000 -
Rs. 10,000 To cash - 10,000

(vi) Realisation expenses 10,000 paid by Partner’s cap A/c 10,000 -

firm on Behalf of partner To cash - 10,000

Realisation (20%) 2000 –

(vii) Expenses of realisation 10,000 80%
Part’s cap A/c (80%) 8,000 –
bear by partner.
To cash - 10,000

(viii) Partner agrees to do dissolution work. Part’s cap 1000 -

Firm agree to pay that 10,000. He requests Realisation 10,000 -
to pay 11,000 To cash - 11,000
 ACCOUNTING ON DISSOLUTION OF
PARTNERSHIP FIRM

1. Realization Account,
2. Loan by partner Accounts,
3. Loan by firm to Partner Accounts,
4. Partners’ capital Accounts, and
5. Bank or cash account.

1. Realisation Account: Realisation Account is prepared on the

dissolution of a firm. The purpose of preparing this account is to
close the books of account of the dissolved firm and to
determine gain (Profit) or loss on the realization of assets and
payment of liabilities.
Realisation Account
 2
Realisation A/c
Particulars Amt. Particulars Amt
A, B and C were partners sharing profits and
losses in the ratio of 2 : 2 : 1. Their balance
Sheet as at 31st March, 2018 was as follows:

Liabilities Amt. Assets Amt.

Capital A/c’s Cash at Bank 3,00,000
A 7,50,000 Deb. 1,95,000
B 3,00,000 (-) Prov.(5,000) 1,90,000
C 2,50,000 13,00,000 Stock 3,00,000
Creditors 2,00,000 Fixed Assets 7,10,000
15,00,000 15,00,000

On the above date, they dissolved the firm and

following amounts were realised:
Fixed Assets ₹ 6,75,000; Stock ₹ 3,39,000;
Debtors ₹ 1,35,000; Creditors were paid ₹
1,85,000 in full settlement of their claim.
Expanses on realisation amounted to ₹ 19,000.
Prepare Realisation A/c.
 Realisation A/c
Particulars Amt. Particulars Amt.
Debtors 1,95,000 Creditors 2,00,000
Stock 3,00,000 Provision for DD 5,000
Fixed Assets 7,10,000
Cash/ Bank
Cash/ Bank Debtors 1,35,000
Creditors 1,85,000 Stock 3,39,000
Real. Exp 19,000 Fixed Assets 6,75,000

Loss Transfer to
Capital A/c
A 22,000
B 22,000
C 11,000 55,000
14,09,000 14,09,000
3
A and B were partners in a firm sharing profits in the ratio of 3 : 2. On 31st
March, 2011, the balance sheet of the firm was as follows

Liabilities Amt. Assets Amt.

Sundry Creditors 1,17,000 Building 2,40,000
Capital A/c’s Furniture 1,75,000
A 3,00,000 Debtors 80,000
B 2,00,000 Stock 75,000
Cash 47,000

6,17,000 6,17,000
The firm was dissolved on 1st April, 2011 and the assets and liabilities were
settled as follows
(i) Building was taken over by creditors as their full and final payment.
(ii) Furniture was taken over by B for cash payment at 5% less than the
book value.
(iii) Debtors were collected by a debt collection agency at a cost of f5,000.
(iv) Stock realised ₹ 70,500.
(v) B agreed to bear all realisation expenses. For this service, B is paid ₹
500. Actual expense on realisation amounted to ₹ 1,000.
Pass necessary journal entries for dissolution of the firm.
 Realisation A/c
Particulars Amt Particulars Amt
To Sundry Assets By Creditors A/c 1,17,000
Building 2,40,000 By Cash A/c
Furniture 1,75,000 Furniture 1,66,250
Debtors 80,000 Debtors 75,000
Stock 75,000 Stock 70,500 3,11,750
To B’s Capital (Exp) 500 By Loss transferred to
A 85,050
B 56,700 1,41,750

5,70,500 5,70,500
4
A and B were equal partners in a firm. They decided to dissolve the
partnership on 31st December, 2018. Their financial position was as follows:
₹ ₹
Creditors 2,700 Cash at Bank 3,000
General Reserve 3,000 Debtors 1,000
B’s loan A/c 3,000 Plant 4,700
Capital A/cs: Stock 15,000
A: 12,000 Building 6,000
B: 13,000 24,000 Furniture 3,000
32,700 32,700

Building was sold for ₹ 6,300. Furniture for ₹ 3,300 and stock for ₹ 13,800.
Debtors realised only ₹ 800 and plant realized ₹ 4,800. Creditors were paid
₹ 2,600 in full statement. Expenses of realisation amounted to ₹ 500.
Prepare Realisation Account.
 REALISATION ACCOUNT
Dr. Cr.
₹ ₹
To Debtors A/c 1,000 By Creditors 2,700
To Plant A/c 4,700 By Bank A/c 29,000
To Stock A/c 15,000 By Loss transferred to
To Building A/c 6,000 A’s Capital A/c 550
To Furniture A/c 3,000 B’s Capital A/c 550

To Bank A/c 2,600

Creditor 2,600
Realisation Exp. 500 3,100
32,800 32,800
5 C, D and E were partners in a firm sharing profits in the ratio of 3:1:1. Their Balance
Sheet as at 31st March,
2022 was as follows:
Liabilities Assets
Sundry Creditors 1,00,000 Cash at Bank 2,00,000
Bills Payable 2,00,000 Investment 3,00,000
C's Loan 1,20,000 Stock 2,00,000
Capital A/cs: Debtors 1,00,000
C 4,00,000 Machinery 3,20,000
D 2,00,000
E 1,00,000

11,20,000 11,20,000
On the above date, the firm was dissolved due to certain disagreement among the
partners:
(i) Machinery of Rs. 3,00,000 were given to creditors in full settlement of their
account and remaining machinery was sold for Rs. 10,000.
(i) Investments realized Rs. 2,90,000.
(iii) Stock was sold for 1,80,000.
(iv) Debtors for 20,000 proved bad.
(V) Realisation expenses amounted to Rs. 10,000.
Prepare Realisation Account.
 REALISATION ACCOUNT

Amt. Amt.
To Machinery 3,20,000 By Sundry Creditors 1,00,000
To Investment 3,00,000 By Bills Payable 2,00,000
To Stock 2,00,000 By Bank A/c
To Debtors 1,00,000 Machinery 10,000
To Bank A/c: Investment 2,90,000
Bills Payable 2,00,000 Stock 1,80,000
Realisation exp. 10,000 2,10,000 Debtors 80,000 5,60,000
To Loss transferred to:
C's Capital A/c 1,62,000
D's Capital A/c 54,000
E's Capital A/c 54,000

4,41,250 4,41,250
6
A and B decided to dissolve their business on 31st December, 2018. On
that date their Balance Sheet stood as follows:
BALANCE SHEET

Liabilities ₹ Assets ₹
Creditors 12,000 Cash 2,000
A’s Loan 16,000 Debtors 10,000
Capital A/cs: Stock 40,000
A: 12,000 Plant 20,000
B: 13,000 24,000 Fixtures 8,000
Goodwill 8,000
88,000 88,000
Partners sharing profits and losses in the ratio of capital. Sundry debtors
realized ₹ 7,400; Stock ₹ ₹ 37,000; plant and fixtures realized 80% of
their books value and goodwill realized ₹ 12,000. Creditors paid off at 5%
discount and cost of dissolution amounted to ₹ 1,200. Prepare Realisation
Account.
 REALISATION ACCOUNT

Dr. Cr.
₹ ₹
To Debtors A/c 10,000 By Creditors 12,000
To Stock A/c 40,000 By Cash A/c 78,800
To Plant A/c 20,000 (Assets Realised)
To Fixtures 8,000 By Capital A/c:
To Goodwill 8,000 A 5,200
To Cash A/c B 2,600 7,800
Creditor 11,400
Dissolution Exp. 1,200 12,600

98,600 98,600
7 Hanif and Jubed were partners in a firm sharing profits in the ratio of their capitals.
On 31st March, 2013, their balance sheet was as follows

Liabilities Amt. Assets Amt.

Sundry Creditors 1,50,000 Bank 2,80,000
Workmen’s Compensation Fund 3,00,000 Debtors 3,40,000
General Reserve 75,000 Stock 1,50,000
Capital A/c’s Furniture 4,60,000
Hanif 10,25,000 Machinery 8,20,000
Jubed 5,00,000

20,50,000 20,50,000

On the above date, the firm was dissolved

(i) Debtors were realised at a discount of 5%. 50% of the stock was taken over by
Hanif at 10% less than the book value. Remaining stock was sold for ₹ 65,000.
(ii) Furniture was taken over by Jubed for ₹ 1,35,000. Machinery was sold as scrap for
₹ 74,000.
(iii) Creditors were paid in full.
(iv) Expenses on realisation ₹ 8,000 were paid by Hanif. Prepare realisation account.
 REALISATION ACCOUNT
Dr. Cr.
₹ ₹
To Debtors A/c 3,40,000 By Creditors 1,50,000
To Stock A/c 1,50,000 By Cash A/c
To Furniture 4,60,000 Debtors 3,23,000
To Machinery 8,20,000 Stock 65,000
To Cash A/c (Creditors) 1,50,000 Machinery 74,000 4,62,000
To Hanif’s Capital A/c 8,000 By Hanif’s Capital A/c (Stock) 67,500
(Realisation Exp.) By Jubed Capital A/c (Furniture) 1,35,000
By Capital A/c:
Hanif 7,42,333
Jubed 3,71,167 11,13,500

19,28,000 19,28,000
8
Shanti and Satya were partners in a firm sharing profits in the ratio of 4 : 1. On
31st March, 2013, their balance sheet was as follows

Liabilities Amt. Assets Amt.

Sundry Creditors 45,000 Bank 75,000
Workmen’s Compensation 40,000 Debtors 60,000
Fund
Capital A/c’s Stock 85,000
Shanti 2,00,000 Furniture 1,00,000
Satya 1,65,000 Machinery 1,30,000

4,50,000 4,50,000

On the above date, the firm was dissolved

(i) Shanti took over 40% of the stock at 10% less than its book value and the
remaining stock was sold for ₹ 40,000. Furniture realised ₹ 80,000.
(ii) All unrecorded investment was sold for ₹ 20,000. Machinery was sold at a loss
of ₹ 60,000.
(iii) Debtors realised ₹ 55,000.
(iv) There was an outstanding bill for repairs for which ₹ 19,000 were paid.
Prepare realisation account.
 REALISATION ACCOUNT
Dr. Cr.
₹ ₹
To Debtors A/c 60,000 By Creditors 45,000
To Stock A/c 85,000 By Cash A/c
To Furniture 1,00,000 Debtors 55,000
To Machinery 1,30,000 Stock 40,000
To Cash A/c (Creditors) Machinery 70,000
Creditors 45,000 Furniture 80,000
O/s Repair Bill 19,000 64,000 Unrecorded Investment 20,000 2,65,000
By Shanti’s Capital A/c (Stock) 30,600
By Capital A/c:
Shanti 7,42,333
Satya 3,71,167 98,400

4,39,000 4,39,000
9
Rita and Sobha are partners in a firm, Fancy Garments Exports, sharing profits and losses
equally. On 1st April, 2024, the Balance Sheet of the firm was:

Liabilities Assets
Sundry Creditors 75,000 Cash 6,000
Bills Payable 30,000 Bank 30,000
Rita's Loan 25,000 Stock 75,000
Reserve 24,000 Book Debts 66,000
Capital A/cs: Less: Provision (6,000) 60,000
Rita 90,000 Plant and Machinery 45,000
Sobha 30,000 Land and Building 48,000
Loan to Shobha 10,000
2,74,000 2,74,000
The firm was dissolved on the date given above. The following transactions took place:
(b) Book Debts realised 54,000; Stock realised 81,250.
(c) Sundry Creditors were paid out at a discount of 10%. Bills Payable were paid in full.
(d) Land and Building 1,20,000.
(e) Rita took the goodwill of the firm at a value of 30,000.
(f) An unrecorded asset of 6,900 was handed over to an unrecorded liability of 6,000 in full
settlement.
(g) Realisation expenses were 5,250
Show Realisation Account.
 Amt. Amt.
To Stock 75,000 By Provision for DD 6,000
To Book Debts 66,000 By Sundry Creditors 75,000
To Plant and Machinery 45,000 By Bills Payable 30,000

To Land and building 48,000 By Rita's Capital A/c 30,000

To Bank A/c: (Goodwill taken over)
Sundry Creditors 67,500 By Bank A/c
Bills Payable 30,000 Stock 81,250
Realisation exp. 5,250 1,02,750 Book Debts 54,000
To Profit transferred to: Machinery 45,000
Rita's Capital A/c 52,250 Plant and Machiner 1,20,000 3,00,250
Sobha's Capital 52,250

4,41,250 4,41,250
10
Ashish and Kanav were partners in a firm sharing profits and losses in the ratio of
3 : 2. On 31st March, 2018 their balance sheet was as follows:
Liabilities Amt. Assets Amt.
Sundry Creditors 42,000 Bank 35,000
Employees’ Provident Fund 60,000 Debtors 19,000
Mrs. Ashish’s Loan 90,000 Stock 24,000
Kanav’s Loan 35,000 Furniture 40,000
Workmen’s Compensation Fund 20,000 Plant 2,10,000
Investment Fluctuation Reserve 4,000 Investment 32,000
Capital A/c’s Profit & Loss A/c 10,000
Ashish 1,20,000
Kanav 80,000

3,70,000 3,70,000
On the above date, they decided to dissolve the firm.
(i) Ashish agreed to take over funriture at ₹ 38,000 and pay-off Mrs Ashish’s loan.
(ii) Debtors realised ₹ 18,500 and plant realised 10% more.
(iii) Kanav took over 40% of the stock at 20% less than the book value. Remaining
stock was sold at a gain of 10%.
(iv) Trade creditors took over investments in full settlement.
(v) Kanav agreed to take over the responsibility of completing dissolution at an
agreed remuneration of ₹ 12,000 and to bear realisation expenses. Actual expenses
of realisation amounted to ₹ 8,000.
Prepare realisation account.
 REALISATION ACCOUNT
Dr. Cr.
₹ ₹
To Debtors A/c 19,000 By Creditors 42,000
To Stock A/c 24,000 By Employees’ Provident Fund 60,000
To Furniture 40,000 By Mrs. Ashish Loan 9,000
To Machinery 2,10,000 By Investment Fluctuation Reserve 4,000
To Investment 32,000 By Ashish Capital (Furniture) 38,000
To Ashish Capital 9,000 By Cash A/c
(Mrs. Ashish’s Loan) Debtors 18,500
To Kanav’s Capital A/c 12,000 Stock 60% 15,840
(Realisation expenses) Plant 2,31,000 2,65,340
To Cash A/c 60,000 By Kanav’s Capital A/c 7,680
(Employees’ Provident Fund) (40% Stock)
To Capital A/c:
Ashish 12,012
Kanav 8,008 20,020
4,26,020 4,26,020
Preparation of all
Ledger Accounts at
time of Dissolution
11

Ramesh and Umesh were partners in a firm sharing profits in the ratio of 7:3. On 31st
March, 2013, their Balance Sheet was as follows:

Liabilities Assets

Creditors 1,70,000 Bank 1,60,000

General Reserve 4,10,000 Debtors 2,40,000
Ramesh's Loan 80,000 Stock 1,30,000
Capital A/cs: Furniture 2,00,000
Ramesh 7,00,000 Machinery 9,30,000
Umesh 3,00,000 10,00,000

16,60,000 16,60,000
On the above date the firm was dissolved.
(a) Ramesh took over 50% stock at Rs 10,000 less than the book value. The remaining
stock was sold at a loss of Rs 15,000. Debtors were realised at a discount of 5%.
(b) Furniture was taken over by Umesh for Rs 50,000 and machinery was sold for Rs
4,50,000.
(c) Creditors were paid in full.
Prepare necessary ledger accounts.
 1 Realisation Account
Particulars Amt. Particulars Amt.
To Debtors 2,40,000 By Creditors 1,70,000
To Stock 1,30,000 By Ramesh Capital A/c 55,000
To Furniture 2,00,000 (Stock)
To Machinery 9,30,000 By Umesh Capital A/c 50,000
To Bank A/c (Creditors) 1,70,000 (Furniture)
By Bank
Stock 50,000
Machinery 4,50,000
Debtors 2,28,000 7,28,000
By Loss transferred to capital A/c
Ramesh 4,66,900
Umesh 2,00,100 6,67,000

16,70,000 16,70,000

2 Partner’s Capital Account

Particulars Ramesh Umesh Particulars Ramesh Umesh
To Realisation (Loss) 4,66,900 2,00,100 By Balance b/d 7,00,000 3,00,000
To Realisation (Stock & Furniture) 55,000 50,000 By General Reserve 2,87,000 1,23,000
To Bank A/c 4,65,100 1,72,900

9,87,000 4,23,000 9,87,000 4,23,000

3 Ramesh’s Account 4 Bank Account

Particulars Amt. Particulars Amt. Particulars Amt. Particulars Amt.
To Bank A/c 80,000 By Balance b/d 80,000 To Balance b/d 1,60,000 By Realisation A/c 1,70,000
To Realisation A/c 7,28,000 By Ramesh’s Capital 4,65,100
80,000 80,000 By Umesh’s Capital 1,72,900
By Ramesh’s Loan A/c 80,000

8,88,000 8,88,000
12

Pradeep and Rajesh were partners in a firm sharing profits and losses in the ratio of 3:2.
They decided to dissolve their partnership firm on 31st March, 2018. Pradeep was deputed
to realise the assets and to pay off the liabilities. He was paid Rs. 1,000 as commission for
his services. The financial position of the firm on 31st March, 2018 was as follows:
Balance Sheet as at 31 March, 2018
Liabilities Amt Assets Amt
Creditors 80,000 Building 1,20,000
Mrs. Pradeep's Loan 40,000 Investment 30,600
Rajesh's Loan 24,000 Debtors 34,000
Investment Fluctuation Fund 8,000 Less: Pro. For DD (4,000) 30,000
Capital A/cs: Bills Receivable 37,400
Pradeep 42,000 Bank 6,000
Rajesh 42,000 84,000 Profit and loss A/c 8,000
Goodwill 4,000
2,36,000 2,36,000
Following terms and conditions were agreed upon:
➢ Pradeep agreed to pay off his wife's loan.
➢ Debtors realised Rs. 12,000.
➢ Investment sold to Rajesh for Rs. 27,000.
➢ Building realised Rs. 1,52,000.
➢ Remaining creditors were to be paid Rs. 59,000
➢ Bill receivables were settled at a loss of Rs. 1,400.
➢ Realisation expenses amounted to Rs. 2,500.
Prepare Realisation Account.
 1 Realisation Account
Particulars Amount Amount
To Investment Account 30.600 By Creditors A/c 80,000
To Debtors A/c 34,000 By Mrs. Pradeep's Loan A/c 40,000
To Bills Receivable A/c 37,400 By Provision for DD. 4,000
To Building A/c 1,20,000 By Investment Fluctuation Fund 8,000
To Goodwill A/c 4,000 By Rajesh’s A/c
To Pradeep's Capital A/c (investment ) 27,000
(Wife’s Loan) 40,000 By Cash A/c
To Cash A/c Debtors A/c 12,000
Creditors 59,000 Building A/c 1,52,000
Expense 3,500 62,500 Bills Receivable A/c 36,000 2,00,000
To Cash A/c (Realisation Exp.)
To Partner's Capital A/c
(profit)
Pradeep 18,300
Rajesh 12,200 30,500
3,59,000 3,59,000

2 Partner’s Capital Account

Particulars Pradeep Rajesh Particulars Pradeep Rajesh
To Profit & Loss A/c 4,800 3,200 By Balance b/d 42,000 42,000
To Realisation (Investment) 27,000 By Realisation A/c (Wife’s loan) 40,000
To Bank A/c 95,500 24,000 By Realisation A/c (profit) 18,300 12,200
1,00,300 54,200 1,00,300 54,200
9,87,000 4,23,000

3 Ramesh’s Account 4 Bank Account

Particulars Amount Particulars Amount Particulars Amount Particulars Amount
To Bank A/c 24,000 By Balance b/d 24,000 To Balance b/d 6,000 By Realisation A/c 62,500
To Realisation A/c 2,00,000 By Pradeep’s Capital 95,500
24,000 24,000 By Rajesh’s Capital 24,000
By Rajesh’s Loan A/c 24,000

2,06,000 2,06,000
13
Following is the balance sheet of A and B on 30th June 2018. They share profits
and losses equally. Their balance sheet is as follows:
Balance sheet
Liabilities Amt Assets Amt
Sundry Creditors 5,000 Cash in hand 2,500
Reserve Fund 3,000 Stock 6,000
B’s wife Loan 2,000 Bills Receivable 3,000
A’s loan 4,000 Debtors
Bills payable 1,000 8,000 7,600
Contingency Reserve 1,000 Reserve 1,900
Capital A/c: - 400 5,000
A 10,000 Furniture 8,000
B 8,000 18,000 Machinery
Building
34,000 34,000

They decided to dissolve the firm on the above date. Assets are realized as
follows: Buildings 10,000; Machinery 4,500; Furniture 1,400; Debtors 7,200;
Bills Receivable 2,800; Stock 5,700. Creditors were paid off at a discount of
4% and bills payable and B’s wife’s Loan were paid in full. Realization expenses
amounted to 600.
Prepare necessary ledger Accounts regarding dissolution.
 1 Realisation Account

Particulars Amount Amount

To stock 6,000 By Sundry Creditors A/c 5,000
To bills Receivable A/c 3,000 By bills Payable A/c 1,000
To Debtors A/c 8,000 By B’s Wife laon A/c 2,000
To Furniture A/c 1,900 By Reserve for doubtful debts A/c 400
To Machinery A/c 5,000 By Cash A/c (Assets Realised) 31,600
To Building A/c 8,000 By Loss on realization transferred to
To cash A/c (Liabilities paid off) 7,800 partners capital A/cs
To cash A/c (Expenses) 600 A 150
B 150 300

40,300 40,300

2 Partner’s Capital Account

Particulars A B Particulars A B
To Realisation A/c (Loss) 150 150 By Balance b/d 10,000 8,000
To Cash A/c 11,850 9,850 By Reserve Fund A/c 1,500 1,500
By contingency Reserve A/c 500 500
12,000 10,000 12,000 10,000

3 A’s Loan A/c 4 Cash A/c

Particulars Amount Particulars Amount
Particulars Amount Particulars Amount
To balance b/d 2,500 By Realisation 7,800
To cash A/c 4,000 By Balance b/d 4,000
(Liabilities)
To Realisation A/c 31,600 By Realisation 600
4,000 4,000
(Assets) (Expenses)
By A’s Loan A/c 4,000
By A’s Capital A/c 11,850
By B’s Capital A/c 9,850
34,100 34,100
14
Kalu, Malu and Lalu are in partnership sharing profit and losses equally. On 31st March,
2018 their balance sheet was as follows:
Balance sheet
Liabilities Amt Assets Amt
Creditors 13,000 Cash at bank 1,500
Malu’ loan 2,500 Debtors 12,500
Bills Payable 500 Stock 29,000
Reserve fund 3,000 Furniture 1,000
Kalu’s current A/c 1,500 Machinery 5,000
Malu’s Current A/c 1,500 Lalu’s current A/c 3,000
Capital Accounts: Goodwill 10,000
Kalu 20,000
Malu 10,000
Lalu 10,000 40,000
62,000 62,000

On the date they dissolved their partnership. The following arrangement was made among
the partners-
1. Kalu agrees to pay creditors.
2. Malu takes over the stock at an agreed valuation of 25,000.
3. Lalu takes over goodwill at 15,000.
4. Bills Payable were cleared off, 10 being allowed for discount.
5. The remaining assets were auctioned and realized 15,000. Expenses of realization
amounted to 120.
6. Malu’s loan was also paid off.
Show the Realisation Account, Malu’s loan A/c, Partners’ current Accounts, capital
accounts and Bank Account.
 1 Realisation Account

Particulars Amount Particulars Amount

To Debtors 12,500 By Creditors 13,000
To stock 29,000 By Bill payable 500
To Furniture 1,000 By Malu’s current A/c (stock) 25,000
To Machinery 5,000 By Lalu’s current A/c (Goodwill) 15,000
To goodwill 10,000 By Bank A/c (Assets) 15,000
To Kalu’s current A/c (Creditors By Current A/cs: (Loss)
paid off) 13,000 Kalu 870
To Bank A/c: Malu 870
Bills Payable 490 Lalu 870 2,610
Expenses 120 610
71,110 71,110
2 Malu’s loan A/c

Particulars Amount Particulars Amount

To bank A/c 2,500 By balance b/d 2,500

3 Partner’s Current A/c

Particulars Kalu Malu Lalu Particulars Kalu Malu Lalu

To Balance b/d - - 3,000 By balance b/d 1,500 1,500 -
To Realisation: - - - By Reserve fund 1,000 1,000 1,000
(Stock) - 25,000 - By Realisation 13,000 - -
(Goodiwll) - - 15,000 (Creditors) - - -
(Loss) 870 870 870 By capital A/c - 23,370 17,870
To capital A/c 14,630 - -
15,500 25,870 18,870 15,500 25,870 18,870
 4 Partner’s Capital A/c

Particulars Kalu Malu Lalu Particulars Kalu Malu Lalu

To Current A/c - 23,370 17,870 By balance b/d 20,000 10,000 10,000
To Bank A/c 34,630 - - By Current A/c 14,630 - -
By Bank A/c - 13,370 7,870
34,630 23,370 17,870 34,630 23,370 17,870

5 Bank A/c

Particulars Amount Particulars Amount

To Cash A/c 1,500 By Realisation A/c
To Realisation A/c (Sundry Assets) 15,000 Bills Payable 490
To Malu’s Capital A/c 13,370 Expenses 120 610
To Lalu’s Capital A/c 7,870 By Malu’s Loan A/c 2,500
By Kalu’s Capital A/c 34,630
37,740 37,740
15
Jay, Ajay and Vijay are partners in a firm sharing profit & Loss in the ratio of 1/2:1/3:1/6.
On 31st March, 2018 they decided to dissolve the firm. The balance sheet of the firm on
that date was as follows:
Balance sheet
Liabilities Amount Assets Amount
Capital A/c: Cash at Bank 2,000
Jay 25,000 Debtors 37,500
Ajay 15,000 Less: R.B.D 2,500 35,000
Vijay 2,750 42,750 Stock 26,000
Current A/c Land & Building 9,500
Jay 150 Plant and Machinery 21,500
Ajay 50
Vijay 50 250
Reserve Fund 1,500
Creditors 49,500
94,000 94,000

The assets realized: Debtors 36,500; Stock 25,000; Plant and machinery 12,500. The
land and building was taken over by Jay at an agreed valuation of 7,500. Expenses of
realization amount to 1,500.
Prepare Realisation Account, Partner’s Capital Account and bank Account.
 1 Realisation Account

Particulars Amount Particulars Amount

To Sundry Debtors 37,500 By sundry Creditors 49,500
To stock 26,000 By R.B.D. 2,500
To land & Building 9,500 By bank A/c
To plant and Machinery 21,500 Sundry Debtors 36,500
To bank A/c (Realisation expense) 1,500 Stock 25,000
To Bank A/c (Creditors) 49,500 Plant & Machinery 12,500 74,000
By Jay capital A/c (L &B) 7,500
By Capital A/c (Loss transferred):
Jay 6,000
Ajay 4,000
Vijay 2,000 12,000
1,45,500 1,45,500

2 Partner’s Capital A/c

Particulars Jay Ajay Vijay Particulars Jay Ajay Vijay

To Realisation A/c 7,500 - - By balance b/d 25,000 15,000 2,750
To Realisation A/c (Loss) 6,000 4,000 2,000 By Current A/c 150 50 50
To bank A/c 12,400 11,550 1,050 By Reserve Fund 750 500 250
25,900 15,550 3,050 25,900 15,550 3,050

3 Bank A/c
Particulars Amount Particulars Amount
To Balance b/d 2,000 By Realisation A/c (Expenses) 1,500
To Realisation A/c (Assets) 74,000 By Realisation A/c (Creditors) 49,500
By Jay’s Capital A/c 12,400
By Ajay’s Capital A/c 11,550
By Vijay’s Capital A/c 1,050 25,000
76,000 76,000