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Dissolution of partnership firm recording


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Dissolution of partnership firm recording

  1. 1. DISSOLUTION of PARTNERSHIPFIRM Difference between dissolution ofpartnership and dissolution of partnership‘firm’Presenter : J.K.Saini 1
  2. 2. Modes of dissolution ofpartnership firm… A firm may be dissolved By agreement By notice Contingency By Court etc.Presenter : J.K.Saini 2
  3. 3. Order of settlement of accountson dissolution of firm. Expenses of Dissolution Outsider liabilities Partners loan if any and Capital and Current account balances ofpartnersPresenter : J.K.Saini 3
  4. 4. ACCOUNTING PROCEDUREIn order to close the books of the firm, thefollowing accounts are prepared :-1. Realisation Account2. Partner’s Loan a/c3. Partner’s Capital accounts4. Cash or Bank accountPresenter : J.K.Saini 4
  5. 5. Realisation AccountTo Assets ( at their bookvalues)By Outsiders liabilities(B/P, creditors, bankloan, expenses o/s,provident fund, wife’sLoan etc.By Provisions ( as alreadyappearing in B/S(e.g. Provisions for doubtfuldebts, provisions fordepreciation,Investment fluctuationfund, J.L.P.Reserve etc.Presenter : J.K.Saini 5
  6. 6. To Bank( payment of liability.. net amount)To Partner’s capital a/c( if paid by a partner)To Bank(Expenses of realisation)To CapitalsAB (Profit )By Bank(sale of assets) at S.PBy Partner’s capital a/c(asset taken over)By CapitalsAB (loss)Presenter : J.K.Saini 6
  7. 7. Journal EntriesFor closing assets ( as already appearing in the balancesheet)Realisation a/c …DrTo Assets ( at the respective book values)Note:- The following items from the asset side are not closed1. Cash and Bank balances2. Profit and loss balance (loss)3. Capital a/c / Current a/c balancePresenter : J.K.Saini 7
  8. 8. 2. For closing outsider liabilities Respective liability a/c …DrTo Realisation a/c( outsider liabilities are B/P, creditors, bankloan, expenses o/s, employees providentfund, wife’s loan, Employee saving account)Presenter : J.K.Saini 8
  9. 9. For closing the provisionsProvisions for doubtful debts a/c …DrProvisions for depreciation, a/c …DrInvestment fluctuation fund, a/c …DrJ.L.P. Reserve a/c …DrTo Realisation a/cPresenter : J.K.Saini 9
  10. 10. For Realisation of assets. Sold for cashBank a/c …DrTo Realisation a/c Taken over by a partnerPartner’s Capital a/c …DrTo Realisation a/c Taken over by a creditor in settlement of hisdebtNo journal entry is required to theextent of amount settled.Presenter : J.K.Saini 10
  11. 11. For disposal of liabilities Paid in cashRealisation a/c …DrTo Bank a/c (net amount) Paid by a partnerRealisation a/c …DrTo partner’s Capital a/cNote:- all outsiders liabilities must be paidincluding contingent and unrecorded liablities.Presenter : J.K.Saini 11
  12. 12. For expenses of dissolutionRealisation a/c …DrTo Bank a/cPresenter : J.K.Saini 12
  13. 13. For commission /remunerationallowed to a partnerRealisation a/c …DrTo Partner’s Capital a/cPresenter : J.K.Saini 13
  14. 14. For Profit on Realisation a/cRealisation a/c …DrTo Capitals a/cAB ( In profit ratio)Presenter : J.K.Saini 14
  15. 15. In case of lossCapitals a/c …DrAB ( In profit ratio)To Realisation a/cPresenter : J.K.Saini 15
  16. 16. Treatment of Partner’s loan ( asalready appearing in the balancesheetIt should be directly paidPartner’s loan a/c …DrTo Bank a/cNote:- Interest on loan paid is an expense..Realisation a/c …DrTo Bank a/cPresenter : J.K.Saini 16
  17. 17. For Cr. Balance in Capital Account- It is tobe paidPartner’s Capital a/c … Dr.To BankIn Case of Dr. Balance :Bank a/c …DrTo Partner’s Capital a/cPresenter : J.K.Saini 17