DISSOLUTION OF PARTNERSHIP FIRM
REALSIATION A/C
PARTICULATS AMOUNT PARTICULARS AMOUNT
To Assets (except Cash, Bank & By Provision for Doubtful Debts
fictitious assets) By Creditors
Land & Building By Bills Payables
Plant & Machinery By Loan
Debtors (before Provision) By Bank Overdraft
Stock By Spouse (husband/wife) Loan
Investment By Investment Fluctuation Reserve
Goodwill (in Balance Sheet)
Furniture & Fixtures
Bills Receivables
To Partner’s Capital By Partner’s Capital (Assets taken-over)
(Liabilities/Expenses)
To Cash (liabilities /expenses) By Cash (Assets realized)
To Realisation profit By Realisation loss
(in Old Ratio) (in Old Ratio)
Decrease Partner’s Capital A/c (in old Ratio) Increase
Particulars A B Particulars A B
To P & L (Dr. Balance) By Balance B/d
To Realisation (Loss) By WCR
To Realisation (Assets taken) By IFR
To Advertisement/ Deferred By Realisation (Profit)
Revenue Expenditure By Realisation (Exp/ Liab)
By P & L (Cr. Balance)
To Balance C/d By General Reserve
Journal Entries
1. Assets Realised
Cash A/c-Dr
To Realisation A/c
2. Assets taken over by partner
Partner’s Capital -Dr
To Realisation A/c
3. Liabilities Paid
Realisation A/c-Dr
To Cash A/c
4. Liabilities & Expenses paid by Partner
Partner’s Capital A/c-Dr
To Cash A/c
5. Partner’s Loan Paid
Partner’s Loan A/c-Dr
To Cash A/c
6. Realisation Profit
Realisation A/c-Dr
To Partner’s Capital A/c
7. Realisation Loss
Partner’s Capital A/c-Dr
To Realisation A/c
Q1. A, B and C were partners sharing profits in the ratio of 3:1:1. Their Balance Sheet on 31.03.2025, the date
on which they dissolve their firm, was as follows:
Liabilities (₹) Assets (₹)
Creditors 6,000 Sundry Assets 17,000
Loan 1,500 Stock 7,800
Capital A/cs: Debtors 24,200
A 27,500 (-) Provision (1,200) 23,000
B 10,000 Bills Receivables 1,000
C 7,000 44,500 Cash 3,200
52,000 52,000
It was agreed that:
(i) A to take over Bills Receivable at ₹800, debtors amounting to ₹ 20,000 at ₹ 17,200 and the
creditors of 6,000 were to be paid by him at this figure.
(ii) B to take over all stock for ₹ 7,000 and some sundry assets at ₹ 7,200 (being 10% less than the
book value)
(iii) C to take over remaining sundry assets at 90% of the book value and assume the responsibility of
discharge of loan together with accrued interest ₹ 300. The remaining debtors were sold to debt
collecting agency at 50% of the book value
(iv) The expenses of realization were ₹ 270.
Prepare Realisation A/c & Partner’s Capital A/c.
Q2. Simar, Raja and Rita were partners in a firm sharing profits and losses in the ratio of 2 : 2 : 1. The firm was
dissolved on 31st March, 2019. After the transfer of assets (other than cash) and external liabilities to the
Realisation Account, the following transactions took place :
(i) A debtor whose debt of ₹90,000 had been written off as bad, paid ₹88,000 in full settlement.
(ii) Creditors to whom ₹ 1,21,000 were due to be paid, accepted stock at ₹71,000 and the balance was paid to them
by a cheque.
(iii) Raja had given a loan to the firm of ₹ 18,000. He was paid ₹17,000 in full settlement of his loan.
(iv) Investments were ₹53,000 out of which investments worth ₹43,000 were taken over by Simar at ₹52,000 and the
balance of the investments were sold for ₹ 12,000.
(v) Expenses on dissolution amounted to ₹ 19,000 and the same were paid by the firm.
(vi) Profit on dissolution amounted to ₹30,000.
Pass the necessary journal entries for the above transactions in the books of the firm.
Q3. S, R and M were partners in a firm sharing profits and losses in the ratio of 2: 2: 1. On 31st March, 2020
their balance sheet was as follow:
Balance Sheet
As at 31st March 2020
Liabilities Amount Assets Amount
Capital: M's Capital 10,000
S 2,00,000 Plant 2,20,000
R 1,50,000 3,50,000 Investment 70,000
Creditors 75,000 Stock 50,000
Bills Payable 40,000 Debtors 60,000
Outstanding Salary 35,000 Bank 10,000
Profit and loss account 80,000
5,00,000 5,00,000
(i) S was appointed to realize the assets and discharge the liabilities. S was to receive 5% commission
on sale of assets (except cash) and was to bear all expenses of realization.
(ii) Assets were realised as follows: Plant: 85,000; Stock: 33,000; Debtors: 47,000
(iii) Investments were realised at 95% of the book value.
(iv) The firm had to pay 7,500 for an outstanding repair bill not provided for earlier.
(v) A contingent liability in respect of bills receivable, discounted with the bank, had also materialized
and had to be discharged for 15,000.
(vi) Expenses of realization amounting to 3,000 were paid by S.
(vii) Prepare Realisation account, Partners' capital Accounts.
Q4. Hema and Garima were partners in a firm sharing profits in the ratio of 3:2. On March 31, 2015, their Balance
Sheet was as follows: Balance Sheet of Hema and Garima as at March 31, 2015
Liabilities Amount Assets Amount
Creditors 36,000 Bank 40,000
Garima’s Husband Loan 60,000 Debtors 76,000
Hema’s Loan 40,000 Stock 2,00,000
Furniture 20,000
Capital: Leasehold Premises 1,00,000
Hema 2,00,000
Garima 1,00,000
4,36,000 4,36,000
On the above date the firm was dissolved. The various assets were realized and liabilities were settled as under:
(i) Garima agreed to pay her husband’s loan.
(ii) Leasehold Premises realized 1,50,000 and Debtors 2,000 less.
(iii) Half the creditors agreed to accept furniture of the firm as full settlement of their claim and remaining half
agreed to accept 5% less.
(iv) 50% Stock was taken over by Hema on cash payment of 90,000 and remaining stock was sold for 94,000.
(v) Realisation expenses of 10,000 were paid by Garima on behalf of firm.
(vi) Pass necessary journal entries for the dissolution of the firm.
Q5. The firm of R, K and S was dissolved on 31.3.2019. Pass necessary journal entries for the following after
various assets (other than cash and Bank) and the third party liabilities had been transferred to realisation
account.
(i) K agreed to pay off his wife’s loan of ₹ 6,000.
(ii) Total Creditors of the firm were ₹ 40,000. Creditors worth ₹10,000 were given a piece of furniture costing
₹8,000 in full and final settlement. Remaining creditors allowed a discount of 10%.
(iii) A machine that was not recorded in the books was taken over by K at ₹ 3,000 whereas its expected value was
₹ 5,000.
(iv) The firm had a debit balance of ₹ 15,000 in the profit and loss A/c on the date of dissolution.
Q6. 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 realize the assets and to pay off the
liabilities. He was paid ₹ 1,000 as commission for his services. The financial position of the firm on 31st March,
2018 was as follows:
Liabilities Amount Assets Amount
Creditors 80,000 Building 30,600
Mrs. Pradeep’s Loan 40,000 Investments 1,20,000
Investment Fluctuation Fund 24,000 Debtors 34,000
Capital: (-) Provision (4,000) 30,000
Pradeep 42,000 B/R 37,400
Rajesh 42,000 Bank 6,000
Rajesh’s Loan 8,000 P & L A/c 8,000
Goodwill 4,000
2,36,000 2,36,000
Following terms and conditions were agreed upon:
i. Pradeep agreed to pay off his wife’s loan.
ii. Half of the debtor’s realized ₹ 12,000 and remaining debtors were used to pay off 25% of the creditors.
iii. Investment sold to Rajesh for ₹ 27,000
iv. Building realized ₹ 1,52,000
v. Remaining creditors were to be paid after two months, they were paid immediately at 10% p.a. discount
vi. Bill receivables were settled at a loss of ₹ 1,400
vii. Realization expenses amounted to ₹ 2,500 Prepare Realization Account.
Q7. E, F and G were partners in a firm sharing profits in the ratio of 2 : 2 : 1. On March 31, 2017, their firm was
dissolved. On the date of dissolution, the Balance Sheet of the firm was as follows:
Liabilities Amount Assets Amount
Capitals: G’s Capital 500
E 1,30,000 Profit & Loss Account 10,000
F 1,00,000 Land & Building 1,00,000
Creditors 45,000 Furniture 50,000
Outstanding Expenses 17,000 Machinery 90,000
Debtors 36,500
Bank 5,000
2,92,000 2,92,000
F was appointed to undertake the process of dissolution for which he was allowed a remuneration of Rs. 5,000. F
agreed to bear the dissolution expenses. Assets realized as follows:
(i) The Land & Building was sold for Rs. 1,08,900.
(ii) Furniture was sold at 25% of book value.
(iii) Machinery was sold as scrap for Rs. 9,000.
(iv) All the Debtors were realized at full value. Creditors were payable on an average of 3 months from the date of
dissolution. On discharging the Creditors on the date of dissolution, they allowed a discount of 5%.
Prepare Realisation A/c.