<br>

CHAPTER-3
Dissolution of a Partnership Firm SUBHASH DEY (Shree Radhey Publications) 3.51

RECAP Accounting Concepts, Journal and Ledger Accounts

JOURNAL ENTRIES ON DISSOLUTION OF A FIRM

I. For transfer of assets and liabilities For settlement with the creditor through transfer of assets
• Transfer of assets: All asset accounts (a) When creditor accepts
a asset
in fullsettlement of his claim:
excluding cash, bank and the
fictitious assets (P&L A/C Dr., deferred revenue expenditure) are closed No entry an asset as part payment of his dues:
by transfer to the debit of Realisation Account at their book values. (b) When the creditor acCcepts only.
The entry will be made for cash payment by the firm
Realisation A/c (Book value) Dr. Realisation A/c Dr.
To Assets A/c (Individually) To Bank A/c
Note: Sundry debtors are transferred at gross value and the provision (c) When a creditor accepts
an asset whose value is more than
for doubtful debts is transferred to the credit ide of Realisation pay cash to the firm for the
the due amount: The creditor will
Account along with liabilities. Similarly, Provision for depreciation is difference.
transferred to the credit side of Realisation Account. Bank A/c
Dr.

Transfer of external liabilities: All external liability accounts To Realisation A/c

including provisions (e.g. provision for doubtful debts, provision
for depreciation)are closed by transferring them to the credit of
Realisation account. Top TIp
bills payables in the
External Liabilities A/c (individually) Dr. After transferring liabilities like creditors and regarding
To Realisation A/c (Book value) any information
Realisation Account, in the absence of
are treated as Fully paid.
II. For settlement of Assets including unrecorded assets, (their payment, such liabilities
if any:
Realisation of assets: Assets sold/realised at realised amount. IV. For payment of Realisation Expenses/
Bank A/c Dr. Dissolution Expenses/ Cost of dissolution and agrees
To Realisation A/c for agreed remuneration to such
partner who
or asset taken over dissolution work
Asset taken over by partner: Assets unrecorded to undertake the
by a partner at agreed amount. Realisation expenses
Partner'sCapital A/c Dr. For payment of Realisation Expenses: firm in
are the expenses incurred and paid by the the process of
To Realisation A/c payment of liabilities.
realisation of assets and
Unrecorded assets
goodwill is sold: (a) When the realisation expenses paid by firm: Dr.
() If any unrecorded asset including Dr. Realisation A/c
Bank A/C To Bank A/c
To Realisation A/c (b) When realisation
expenses are paid by a partner on
is taken over by a
partner:
(ii) If unrecorded asset behalf of the firm:
Dr. Dr.
Partner'sCapital A/c Realisation A/c
To Realisation A/c To Partner's Capital A/c
dissolution work for
(c) When a partner undertakes theto bear the realisation
a remuneration and has agreed
ToP TIP expenses:
through Bank expenses:
• an asset is sold to a partner, the entry will be over.
If () If the partner himself
pays/incurs the realisation
asset taken
Account as asset sold is different from No entry expenses is made by the firm on
is not given it should be
• If the realised value of tangible assets (ii) If payment of realisation drawings of that
itself. behalf of that partner it is treated like
considered as realised at book value
• If the realised value of intangible
assets is not given it should be partner from the firm:
Dr.
Partner's Capital A/c
considered as nil (zero value). To Bank A/c
of External Liabilities • For agreed remuneration to such partner who
agrees to
III. For discharge/settlement any:
inciuding unrecorded liabilities, if undertake the dissolution work: Dr.
liabilities: Payment of external/ Realisation A/c
• Payment of external/outside agreed amount, e.g. Bank loan, To Partner's Capital A/c
outside liabilities by the firm
at excluding
Creditors, Bills payable,
Partner's relative's loan but
on realisation
partner's loan. V. For transfer of profit or loss
Dr.
Realisation A/c For transfer of profit on realisation
To Bank A/c Dr.
discharge Realisation A/c
For a liability which
a partner takes responsibility to (individually)
Dr. To Partners' Capital A/c
Realisation A/c A/c on realisation
To Partner's Capital For transfer of loss
Dr.
any unrecorded liability Partners' Capital A/c(individually)
For settlement of
Realisation A/c Dr. To Realisation A/c
To Bank A/c
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3.52 SUBHASH DEY (Shree Radhey Publications)Accountancy XI Volume l: Accounting for Partnership Firms
VI. For transfer of accumulated profits and accumulated • When there is no workmen's compensation claim: The full
losses/ fictitious assets amount of workmen's compensation fund willbe transferred to
For transfer of accumulated profits: Accumulated profits in partners' capital accounts in their profit sharing ratio.
the form of general reserve or credit balance of Profit and Loss Workmen's Compensation Fund/Reserve A/c Dr.
Account are transferred to Partners' capital accounts in To Partners' Capital A/c (individually)
their profit
sharing ratio.
General Reserve A/c When workmen's compensation claim is more than
Dr. Workmen's Compensation Fund: Workmen's compensation fund
Profit and Loss A/c Dr. will be credited to Realisation account. The payment will be made by
To Partners' Capital A/c (individually)
the amount of workmen's compensation claim.
For transfer of accumulated losses/fictitious assets: () Workmen's Compensation Fund/Reserve A/c Dr.
Accumulated losses/fictitious assets in the form of debit To Realisation A/c (full amount of fund)
balance
of profit and loss account, Deferred Revenue Expenditure, etc. are (ii) Realisation A/c Dr.
transferred to partners' capital acCounts in their profit sharing ratio. To Bank A/c (Claim amount)
Partners' CapitalA/c (individually) Dr.
To Profit and Loss A/c
To Deferred Revenue Expenditure A/c
IX. For settlement of partners' capital accounts:
If the partner's capital account shows a credit balance: The
VII. For settlement of Partner's Loan balance is paid to partners whose capital accounts show a credit
balance.
•For payment of Loan due to a partner (appearing on the
liabilities side of the balance sheet) Partner's Capital A/c Dr.
To Bank A/c
Partner's Loan A/c Dr.
To Bank A/c If the partner's capital account showsa debit balance: The
• For settlement of Loan to a partner (appearing on the assets partner will bring in the necessary cash.
side of the balance sheet) Bank A/c Dr.
Bank A/c To Partner's Capital A/c
Dr.
To Loan to Partner A/c
TOP TIP
VIII. For treatment of Workmen's Compensation Fund On dissolution of the firm, partner's capital accounts are closed
When workmen's compensation claim is less than Workmen's through Cash/Bank Account. The aggregate amount finally
Compensation Fund: Workmen's compensation claim amount payable to the partners must equal to the amount available in
will be credited to Realisation A/c and the payment will also
bank and cash accounts. Thus, all accounts of a firm are closed
be made. The surplus of workmen's compensation fund will be case of dissolution.
transferred to partners' capital accounts in their profit sharing ratio. If partners' capitals are fixed, partner's current accounts are
(i) Workmen's Compensation Fund/Reserve A/c Dr.
closed through partners' capital accounts. The balance in
To Realisation A/c (Claim amount)
partners' current accounts will be transferred to partners'
To Partners' Capital A/c (individually)
capital accounts. Then the settlement will be done through bank
(ii) Realisation A/c Dr. account in partners' capital accounts.
To Bank A/c (Claim amount)

PREPARATION OF REALISATION ACCOUNT

Dr. Realisation Account Cr.
Particulars Particulars
|To Sundry Assets (excluding cash, bank and the fictitious assets e.g. By External Liabilities
profit and loss A/c Dr., deferred revenue expenditure) Secured loans (eg. Mortgage Bank loan)
Tangible fixed assets (e.g. Plant and Machinery Furniture and Unsecured loans (e.g. Sundry creditors, Bills
Fittings, Land and buildings) payable, O/s expenses)
Intangible fixed assets (e.g Goodwil, Patents, Copyrighe) Bank overdraft
Non-current investments Partner's relative's loan
Current assets (eg. Debtors, Bills receivables, Stock) Employees' provident fund
Loan to other parties Provisions (e.g. Provision for doubtful debts, Provision
To Bank Alc (payment of external liabilities and unrecorded liabilities, for depreciation, Repairs and renewal reserve)
if any by the
frm at agreed amount, eg Bank loan, Greditors, Bills Investment fluctuation fund
payable, Partners relatives loan but excluding partners loan) |By Bank Alc (assets or unrecorded assets including
To Partner's Capital Alc (external liabiliry or unrecorded liability goodwil soldrealised at realised amount)
discharged by a partner) |By Partner's Capital Alc (assets or unrecorded asset
To Bank Alc (Payment of realisation expenses/dissolution expenseslcost of taken over by a partner at agreed amount)
dissolution the firm) By Partner's Capital Alc (Los ransfered to

To Partner's Capital Alc (realisation epenses paid by a partner) partners' capital accounts in their profit sharing ratio)
To Partner's Capital A/c (remuneration, e.g commission, salary) (individual)
To Partner's Capital Alc (Profit trangferred to partners' capital acouns
in their profit sharing ratio) (individualy)
<br>

CHAPTER-3
Dissolution of a Partnership Firm SUBHASH DEY (Shree Radhey Publications) 3.53

Exercises
JoURNAL ENTRIES

Q.1 Pass necessary journal entries on the dissolution ofa partnership firm in the following cases:
(i) Expenses of dissolution
3,400 were paid bya partner, Vishal.
(1) Shiv, a partner, agreed to do the work of dissolution for a commission of 24,500. He also agreed to bear the
dissolution expenses. Actual dissolution expenses3,900 were paid from the firm's bank account.
()Naveen, a partner, agreed to carry out the dissolution work for which he was allowed a remuneration of T3,000.
Naveen also agreed to bear the dissolution expenses. Actual expenses on dissolution
2,700 were paid by Naveen.
(iv) Vivek, a partner, was appointed to look afier the dissolution wotk for a remuneration of 7,000. He ageed to bear the
dissolution expenses. Atual dissolution expenses T6,500 were paid by Rishi, another partner, on behalf of Vivek.
(v) GauraY, a partner, was appointed to undertake the work of dissolution for a commission of 12,500. He agreed to
bear the dissolution expenses. Gaurav took over furniture of T12,500 as his commission. The furniture had already
been transferred to realisation account.
(vi) A debtor, Ravinder, for 19,000 agreed to pay the dissolution expenses which were 18,000 in full settlement of his debt.
Q.2 Disha, Preeti and Ritvik were partners in a firm sharing profits and losses in the ratio of 3:2:1.The firm was dissolved
on 31st March, 2025. After transfer of assets (other than cash) and external liabilities to the Realisation Account, the
following transactions took place:
() A debtor, whose debt of 70,000 was written off as bad, paidZ68,000 in full settlement
(ii) A creditor, to whom 1,00,000 were due to be paid, accepted furniture at 56,000 and the balance was paid to him
by cheque.
(iii) Ritvik had given a loan of 21,000 to the frm. He accepted 19,000 in full settlement of his loan.
(iv) Stock was worth T88,000 out of which stock worth 78,000 was taken over by Disha at 60,000 and the balance of
the stock was sold for 12,000.
(v) Ofice equipment of T90,000 was taken over by creditors of the book value of R82,000 in full settlement.
(vi) There was unrecorded Bike of 40,000 which was taken over by Ritvik.
Pass the necessary journal entries for the above transactions in the books of the firm, assuming that partners' capitals were
fixed.
to
Q.3 Gaurav, Saurabh and Vaibhav were partners in firm sharing profits and losses in the ratio 2:2:1.They at decided
a of
assets (other than cash in hand and cash Bank) and
dissolve the firm on 31st March, 2025. After transferring Sundry
party to realisation account, the assets were realised and liabilities were paid as follows:
third liabilities
a
(i) Land and building (book value 3,00,000) was sold for 4,00,000 through broker who charged 2% commission.
claimn and the remaining assets were taken
(ii) The remaining creditors were paid 76,000 in full settlement of their
over by Vaibhav for 17,000.
accounts in the previous year. The same has been
(iii) There was an old computer which was written off in the books of
taken over by Saurabh for3,000.
in the book of the firm.
Pass necessary journal entries for the above transactions was dissolved on
profits and losses in the ratio of :3. The firm
4
a
Q.4 Namita and Akhil were partners in firm sharing the following
of assets (other than cash) and external liabilities to Realisation Account,
31st March, 2025. After transfer
transactions took place:
(i) Akhil undertook to
pay off a bank loan of?49,000.
was paid to the broker
(ii) Investment of 39,000
were sold on the open market for 32,000. A commission of600

for the same. dissolution process for which he

was allowed a remuneration of13,000. He
(iii) Akhil was appointed to undertake the were 21,000.
expenses. Actual expenses paid by Akhil
agreed to bear dissolution
was paid off by Namita.
(iv) Akhil sister's loan 22,000 books of the firm.
to record the above transactions in the
Pass the necessary journal entries a firm sharing profits and losses in the ratio
of 2:3: 1. The firm was dissolved
were partners in
0.5 Muskaan, Priya and Rohan external liabilities to realisation
account, the following
on 31-3-2025. After transfer of assets (other than cash) and
transaction took place:
<br>

3.54 SUBHASH DEY (Shree Radhey Publications) Accountancy XII Volume I: Accounting for Partnership Firms
O) Furnirure of? 70,000 was sold for 74,000 by auction and auctioneer's commission amounted to 3,000.
(ii) There was an unrecorded computer which was sold to Priya for?7,000.
(ii) Creditors were paid off 44,000 in full settlement of their account of 249,000.
(iv) Expenses on dissolution were 15,000 and paid by Rohan.
Pass necessary journal entries for the above transaction in the books of the firm, assuming that partners capitals were
fixed.
Q.6 The firm of R, K and S was dissolved on31.3.2025. 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 T,000.
was ?5,000.
(i) A machine that was not recorded in the books was taken over by Kat 3.000 whereas its expected value
(ii) R had given the firm a loan of?10,000. It was paid back to him at the time of dissolution.
Lal and Pal were partners in a firm sharing profits in the ratio
of
3:7. On 1.4.2025, their firm was dissolved. After
27 transferring assets (other than cash) and outsider's liabilities to realisation account, you are given the following

information:
(a) A creditor of 3,60,000 acepted machinery valued at 5,00,000 and paid to the firm Ž1,40,000.
(b) A second creditor for 50,000, accepted stock at 45,000 in fullsertlement of his claim.
(c) Loss on dissolution was i5,000.
were made by
Pass necessary journal entries for the above transactions in the books of firm assuming that all payments
cheque.
Q.8 Prem and Suresh were partners in firm sharing profits in the ratio
a of
7: 8. On 1.4.2025 their firm was dissolved.
Afrer transferring assets (ocher than cash) and outsider's liabilities to realisation account, you are given the following
information.
(a) Raman, a creditor of ZÁ,00,000 accepted land valued at 7,00,000 and paid 3,00,000 to the firm.
(b) Gopal, a second creditor for 1,05,000accepted 90,000 in cash and investments of 14,000, in full settlement of
his account.
Hari, a third creditor amounting to 75,000 accepted stock of the book value of 60,000 for 45,000 and the
(c)
balance was paid off to him by cheque.
(d) Loss on dissolution was 45,000.
Pass necessary journal entries for the above transactions in the books of the firm.
was dissolved
Q.9 Naina, Uday and Tara were partners in firm sharing profits and losses in the ratio of 5:3:2. The firm
a
on 31-3-2025. After transfer of assets (other than cash)and external liabilities to Realisation Account, the following
transaction took place:
(i) A typewriter completely written off from the books
was sold for4,000.
(ii) Loan of T30,000 advanced by the firm to Uday was paid off by him.
(ip) Tara was to get remuneration of T42,000 for completing the dissolution process. Actual Realisation expenses
amounted to 51,000 and were paid by the firm.
(iv) Creditors of T23,000 took over all the investments at 12,000. Remaining amount was paid off to them in cash.
(v) Machinery (book value 60,000) was given to creditor at a discount of 20%.
(vi) Naina's Loan of 40,000 was settled by giving an unrecorded asset of 45,000.
Pass necessary journal entries for the above transactions in the books of the firm.
Q.10 A and B were partners in a firm sharing profits in the ratio of 2 : 1. They decide to dissolve their frm on 31 March,
2025. Pass necessary journal entries for the following transactions on dissolution of the firm:
6) Debtors and stock appeared in the books at 21,000 and 7,500 respectively. Stock worth 500 became obsolete
and debtors of 1,000 proved bad.
(i) Land and building (Book value I,60,000) was sold for 3,00,000 through a broker who charged 2% commission.
(ii) One bill receivable for T20,000 under discount was dishonoured as the acceptor had become insolvent and was
unable to pay anything and hence the bill had to be met by the firm. The amount realised against the bill was
18,200.
0.11 Chanda, Tara and Nisha were partners in a firm sharing profits and loses in the ratio of 3 to
on necessary
:2: 1. They decidedassets
dissolve the firm 31st March, 2025. Pass Journal Entries for the following transactions after all
(orher than cash and bank) and third party liabilities have been transferred to Realisation Account.
<br>

CHAPTER-3 Dissolution of a Partnership Firm SUBHASH DEY (Shree Radhey Publications) 3.55
() A typewriter completely written off from the books was
sold for 9,000.
(ii) Nisha was to get a remuneration of42,000 for completing the dissolution process.
(ii) Creditors ofR23,500 took over all the investments at 10,000, Remaining amount was paid to them in cash.
Q12 1,Uand V were partners in a firm sharing profits and losses in the ratio of 2 1:2. Their frm was incuring hue
:

losses thus it had to be closed. After transferring assets (other than cash in hand and bank) and third party liabilities to
Realisation account the following transactions
took place:
away 60% of the stock at book value less 10% for 790,000,and the remaining stock was sold for 40,000.
0took
(ii) Creditors of 78,000 took over machinery of
80,000 in full settlement of their claim.
(iii) 5,000 debtors previously
writen off were recovered.
(iv) Mrs. V's loan of72,000 was paid off by the
firm.
Pass necessary journal entries for the above transactions in the books
of T, and V.
U

Q.13 Madhav, Madhusudan and Mukund were partners in Jaganath Associates. They decided to dissolve the firm on 31st
March 2025. Pass necessary journal entries for the following transactions after various assets (other than cash) and
third-party liabilities have been transferred to Realisation account:
) Old machine fully written off was sold for 42,000 while a payment of 6,000 is made to the bank for a bill
discounted being dishonoured.
G) Madhusudan accepted an unrecorded asset of T80,000 at 75,000 and the balance through cheque, against the
payment of his loan to the firm of1,00,000.
(iii) Stock of book value of R30,000 was taken by Madhavy, Madhusudan and Mukund in
their profit sharing ratio.
(iv) The firm had paid Realisation expenses amounting to 5,000 on behalf of Mukund.
There was a vehicle loan of T2,00,000 which was paid off by surrender of asset to the bank at an agreed value of
() Z1,40,000
and the shortfall was met from firm's bank account.
(vi) Machinery (book value 6,00,000) was given to creditor at a discount of 20%.
Q14 Prateck, Neeraj and Umang were partners in a firm, sharing profits and losses in the ration of 7 :2 1. The firm
:

was dissolved on 31st March, 2025. After transfer of assets (other chan cash) and external liabilities to the Realisation
Account, the following transactions took place:
(i) Furniture of R45,000 was sold by auction for 66,000 and the auctioneer's commission
amounted to 2,000.
(i) Office equipment of T90,000 was taken over by creditors of the book value of T82,000 in full settlement.
(ii) Umang had given a loan of 1,09,000 to the firm. He accepted 1,00,000 in full sertlement of his loan.
(iv) Investments were 53,000 out of which 23,000 was taken over by Neeraj at 25,000. Balance of the investments
were sold for 35,000.
(v) Expenses incurred on dissolution were 21,000 and were paid by Prateek.
(vi) The firm had a debit balance of T40,000 in the Profit and Loss Account.
Passche necessary journal entries for the above transactions in the books of the firm, assuming that partners' capitals were
fixed.
Q15 necessary journal entries in the following cases on the dissolution of a partnership firm of partners X, Y, A & B:
Pass

() Realisation expenses of ? 5,000 were to borne by X, a partner. However, it was paid by Y.

(Gi) Investments
costing 25,000 (comprising 1000 shares), had been written off from che books completely. These
shares are valued at 20 each and were divided amongst the partners.
(iii) Y's loan of 50,000 settled at48,000.
Q16 Pass the necessary journal entries for the following transaction on the dissolution of the partnership firm of Tony and
Rony afrer the various assets (other than cash) and external liabilities have been transferred to Realisation Account:
() An unrecorded asset of 2,000 and cash 3,000 was paid for liability of 6,000 in full sertlement.
(i) 100 shares of 3 10 each have been taken over by partners at marker value of? 20 per shares in their profit sharing
ratio, which is 3:2.
(ii) Stock of 30,000 was taken over by a creditor of 40,000 at a discount of 30% in full settlement.
(iv) Expenses of realisation Tá0,000 were to be borne by Rony. Rony used the firm's cash for paying these expenses.
Q.17 Give journal entries for the following transactions on dissolution of a firm:
(0) Plant and Machinery (book value T60,000) was handed over to a Creditor at an agreed valuation of 10% less than
che book value.
(ii) Investment whose face value was 4,000 was realised at 50%.
(iii) The book value of assets (other than cash and bank) transferred to Realisation Account is 1,00,000. 50% of the
assets are taken over by a partner Arul, at a discount of 20%; 40% of the remaining assets are sold at a profit of 30%
<br>

Accountancy XII Volume : Accounting for Partnership Firms

3.56 SUBHASH DEY (Shree Radhey Publications)
are handed over to a Creditor., in
nothing and remaining assets
on
cost: 59% the balance bcing obsolete,
of realiscd
full settlement of his claim. 7 : On 31st March, 2025, the
Q.18 Ravi, Shankar and Madhur were partners in a firm sharing profits in
the ratio of 2:1.
cash at bank) and third party liabilities
firm was than cash in hand and
dissolved, after transferring sundry assets (other
in the Realisation account the following transactions took place. balanCe creditors were handed
were paid 3.500 in ful settlement of thecir claim and
() Creditors amounting to 5,000
over stock of T90,000 in full settlement of their claim of 95,000. same had to be mer
discounted with the bank was dishonoured by its acceptor and the
(0) A bill receivable of 2,000
by the firm.
(ii) Profit on realisation amounted to 6,000.
in the books of Ravi, Shankar and Madhu.
rass necessary journal entries for the above transactions year only, through
were partners in firm. They had joined a partnership firm last
a
Q19 Charu, Dhwani, Iknoor and Paavni to meeting other financial requirements, a few partners
a verbal agreement. They contributed Capitals to the firm and
a year, their conflicts arose due to certain disagreements and they
decided to
also provided loan to the firm. Within to carry out the
is a financial advisor and legal consultant,
dissolve the firm. The firm had appointed Ms. Kavya, who assets liabilities to Realisation
transferred various and external
dissolution process. In the first instance, Ms. Kavva had you, being an intern in her firm.
Kavya has delegated this assignment to
Alc. Due to her busy schedule; Ms.
On the date of dissolution, you have observed the following transactions:
) Dhwani's Loan of? 50,000 to the firm was settled an
by paying ? 42,000.
asset of R 45,000.
(ii) Paavni's Loan of 40,000 was settled by giving unrecorded
(iii) Loan to Charu of
60,000 was settled by payment to her brother's loan of the same amount.
(iv) Iknoor's Loan of 80,000 to the firm and she took
over Machinery of 60,000 as part payment.
You are required to pass necessary entries for all the above mnentioned transactions.
to dissolve the firm. Pass
Q.20 Nandu, Bandu and Chandu were partners in firm. On 31st March, 2025 they decided
a
necessary journal entries for the following transactions after the various assets (other than cash and bank) and outside
liabilities have been transferred to Realisation Account:
() Stock of1,40,000 was taken by Nandu at a discount of 30%. was paid off to them
(ii) Creditors to whom the firm owed 40,000 accepted stock at 4,000 and the balance amount
by a cheque.
was sold for 4,000, whereas its estimated
(ii) An old computer which had been written off completely from the books
market value was 10,000.
(iv) Chandu had given a loan of 1,00,000 to the firm, which was paid off to him through a cheque.
(v) 24,000 were recovered from a debtor which was written off as bad debt in the previous year.
(vi) Bandu was appointed to look after che dissolution work for which he was allowed a remuneration of 26,000.
Bandu agreed to bear the dissolution expenses. Actual dissolution expenses of T36,000 were paid by Bandu.
Q.21 Pass the necessary journal entries for the following transactions on the dissolution of the partnership firm ofTina and
Rina after the various assets (other than cash and bank) and external liabilities have been transferred to realisation
account: (i) There was an outstanding bill for repairs for which 20,000 were paid. (ii) The firm had stock of 80,000.
Tina took over 50% of the stock at a discount of 20% while the remaining stock was sold of for 52,000. (ii) The
firm had 100 shares of 10 each which were taken over by the partners at market value of per share in their profit
20
sharing ratio of 3 2. (iv) Realisation expenses of {4,000 were paid by Rina. (v) Tina had given the firm a loan of
:

740,000 which was duly paid off. (vi) Rina agreed to pay off her husband's loan of 10,000 at a discount of 10%.
Q.22 Pass the necessary journal entries for the following transactions on dissolution of the firm of Avyan and Shruti after
various assets (other than cash) and third party liabilities have been transferred to Realisation Account:
(1) Sundry creditors amounting to
40,000 were settled at a discount of 10%.
(ii) An unrecorded computer of 50,000 was taken over by Shruti.
(ii) Creditors of 5,000 agreed to take over debtors of k8,000 in full settlement of their claim.
(iv) The firm had a debit balance of 42,000 in the Profit and Loss Account on the date of dissolution.
(•) There was an old furniture with the firm which had been written off completely from the books. This was sold for 79,000.
(vi) Realisation expenses amounting to 11,000 were paid by Shruti.
<br>

CHAPTER-3
Dissolution of a Partnership Firm sUBHASH DEY (Shree Radhey Publications) 3.57

Numerical Questions
Q.1 The following is the Balance sheet Tanu and Manu, who share profits and losses in
of
the ratio of 5 :3.
Balance Sheet of Tanu and Manu as on March 31, 2025
Liabilities
|Amount () Assets Amount )
Sundry Creditors at bank
94,000Cash 16,000
Bank Loan 50,000 Sundry Debtors
General Reserve 55,000
16,000 Stock 75,000
Capitals: Motor car 90,000
Tanu 1,10,000 Machinery 45,000
Manu 90,000 2,00,000 Investment 70,000
Fixtures 9,000
3,60,000 3,60,000
On the above date the firm is dissolved and the following agreement was made:
1) The banker took away the sundry debtors in full settlement of the loan.
(i) Sundry creditors accepted stock at 5,000 less and the balance was paid to them through cheques.
(ii) Machinery is sold to Manu for 40,000.
(iv) Motor car was taken over by Tanu for Ž60,000.
(v) Investment realised 76,000 and fixtures T4,000.
(vi) The expenses of dissolution amounted to 2,000, paid by Tanu.
Prepare Realisation Account and Partners Capital Accounts.
[Ans. Loss on realisation Z46,000; Payment to partners: Tanu 33,250 and Manu 78,750]
Q2 Mona and Sona were partners in a firm sharing profits in the ratio of 2
:3. On 31st March, 2025, their Balance Sheet
was as under:

Liabilities Amount ) Assets Amount ()

Capitals: Land and Building 5,00,000
Mona 4,00,000 Investment (Market value 90,000) 1,00,000
Sona 6,00,000 10,00,000 Stock 2,00,000
Employee's Provident Fund 2,00,000 Debtors 3,10,000
Creditors 2,10,000 Less: Provision for bad debts 10,000 3,00,000
Bank 3,10,000
14,10,000 14,10,000
The firm was dissolved on lst April, 2025 and the assets and liabilities were settled as follows:
(i) Half of the creditors accepted 50% of the stock. Remaining creditors were paid in full.
(ii) The remaining stock was realised at 90% and debtors realised 80% of their book value.
(ii) Sona took over the responsibility to realise the assets and discharge the liabilities at a remuneration of 20,000 and
was to bear all expenses of realisation. She paid realisation expenses of18,000 out of her personal account.
(iv) Investment realised 335% less on the open market.
Prepare Realisation Account.
[Ans. Loss on realisation 1,17,000]
<br>

I: Accounting for Partnership Firms

(Shree Radhey Publications)Accountancy Volume
DEY XII
3.58 SUBHASH
as on March 31, 2025
Their Balance Shect
: :
in the ratio of 5 3 2.
Q.3 Amit, Sumit and Vinit are partners sharing profit
was as follows:
Assets Amount )
Liabilities Amount )
Machinery 80,000
Capitals:
1,50,000
Amit 40,000 Investments
10,000
Sumit 50,000 Stock
1,50,000 35,000
Vinit 60,000 Debtors
Cash at bank 15,000
Profit and Loss A/c 10,000
Mrs. Amit's loan 40,000
Sundry creditors 90,000
2,90,000
2,90,000
over his wife's lon. One of the Creditors for 2,600 did not claim the
The firm was dissolved on that date. Amit took
amount. Other assets realised as follows:
() Machinery was sold for 70,000.
were given to Creditors in full settlement of their account. The remaining
(ii) Investments with book value ofR1,00,000
book value.
investments were taken over by Vinit at an agreed value of 10% less than the
(iü) Debtors for 73,000 proved to be bad.
(iv) Realisation expenses were
I,500. not be realised. Remaining stock were sold at 2,000
(v)Stock included obsolete items worth 1,000, which could
profit on cost.
Prepare ledger accounts to close the books of the firm.
partners: Amit 70,750; Sumit 44,50 and Vinit 11,300; Bank Account
[Ans. Loss on realisation 28,500; Payment to
total 1,28, 000.] as on March 31, 2025,
losses as3:2. Their Balance Sheet
Q.4 Romesh and Bhawan were in partnership sharing profit and
was as follows:
Amount ) Assets Amount )
Liabilities
60,000Cash at bank 30,000
Bank Loan
80,000 Debtors 70,000
Creditors 2,00,000
Bills Payables 40,000 Stock
Investments 1,40,000
Bhawan's Loan 20,000
Buildings 60,000
Capitals:
Romesh 1,00,000
Bhawan 2.00.000 3,00,000
5,00,000 5,00,000
is available:
They decided to dissolve the firm. The following information
was realised at book value and building was sold for 51,000,
) Debtors were recovered 5% less. Stock to ?10,000. The same were accepted by one
(ii) It is found that investment not recorded in the books amounted
were paid at a discount of 10%.
creditor for this amount and other Creditors
less 10%). The remaining investments were taken
(iii) Romesh took over some of the Investments at 8,100 (book value
over by Bhawan at 90% of the book value less 900 discount.
(iv) Bhawan paid bank loan along with
one year interest at 6% p.a.
paid.
(v) An unrecorded liability of S,000
of realisation of assets and payment of liabilities.
Prepare the account to ascertain the net effect
[Ans. Loss on realisation 19,000)
a profits and losses in the ratio of 3:2. They decided to dissolve their
0.5 Pradeep and Rajesh were partners in firm sharing was deputed to realise the assets and to pay off the liabilities. He was
partnership firm on 31st March, 2025. Pradeep
paid 1.000 as commission for his services. The balance sheet
of
the firm on 31st March, 2025 was as follows:
<br>

CHAPTER-3
Dissolution of a Partnership Firm SUBHASH DEY (Shree Radhey Publications) 3.59

Liabilities Amount ()
Amount )Assets
Creditors 80,000 Building 1,20,000
Mrs. Pradeep's Loan 30,600
40,000 Investment
Aman's Loan
24,000 Debtors 34,000
Investment Fluctuation Fund Less: Provision for Doubtful Debts 4.000 30,000
8,000
Capitals:
Bills Receivable 37,400
Pradeep 40,000 Bank 6,000
Rajesh 35.000 75,000 Profit and Loss A/c 8,000
Current Accounts: GoodwilI 4,000
Pradeep 2,000
Rajesh Z,000 9,000
2,36,000 2,36,000
) Pradeep agreed to pay off his wife's loan.
(i) Half of the debtors were realised through a debt-collecting agency, which charged R5,000. Renmaining debtors were
used to pay off 25% of the creditors.
(ii) Investment was sold to Rajesh for 27,000 and Building realised T1,52,000.
(iv) Creditors of T30,000 accepted bills of exchange in settlement of their claim. Remaining creditors were to be paid
after two months, they were paid immediately at 10% p.a. discount.
(v) Realisation expenses amounted to 2,500.
Prepare Realisation Account.
[Ans. Profit on realisation 24,000]
Q6 Following is the Balance Sheet of X andY, who share profits and losses in the ratio of 4:1, as at 31 March, 2025.
Liabilities Amount )Assets Amount )
Sundry creditors 8,000 Bank 20,000
Bank Overdraft 6,000 Debtors 17,000
X's Brother's Loan 8,000 Less: Provision for Doubtful Debts (2.000) 15,000
Y's Loan 3,000 Stock 15,000
Investments Fluctuation Fund 5,000 Investment 25,000
Capital Acs: Building 25,000
X 50,000 Goodwill 10,000
40,000 90,000 Profit & Loss A/c 10,000
1,20,000 1,20,000
The firmn was dissolved on the above date.
(i) X agreed to pay off his brother's loan.
(i) Bank overdraft/ Bank loan was paid off with interest of S00.
(ii) Debtors of T5,000 proved bad.
(iv) Investments realised 20% less.
(v) One of the creditors for 5,000 was paid only 3,000.
(vi) Building was auctioned for 30,000 and the auctioneer's commission amounted to 1,000.
(vii) Y took over part of stock at 4,000 (20% less than the book value). Balance stock realised 50%.
(viii) Realisation expenses 2,000 were paid by Y.
(ix) Y's loan was settled at R3,500.
Prepare Realisation Account and Y's Loan Account.
(Ans. Loss on realisation I6,000]
Q7 Prachi, Ritika and Ishita were partners in a firm sharing profits and losses in the ratio of 5 3:2. In spite of repeated
:

a
reminders by the authorities, they kept dumping hazardous material into nearby river. The court ordered for che
dissolution of their partnership firm on 31 March 2025. Prachi was deputed to realise the assets and pay che liabilities.
She was paid 1,000 as commission for her services. The financial position of the firm was as follows:
<br>

Accountancy XII Volume I: Accounting for Partnership Firms

3.60 sUBHASH DEY (Shree Radhey Publications)
Balance Sheet of A, B andC as on December 31, 2025
Liabilities Amount )Assets |Amount )
Creditors 37,000
10,000 Furniture
Investment Fluctuation Fund Stock 5,500
4,500
Capitals: Investments 15,000
Prachi 40,000 Bank 9,000
Ritika Ishita's Capital 18,000
30,000
84,500 84,500
Following was agreed upon:
(i) Prachi took over investments for 12,500.
was sold at cost.
(i)) Stock costing 1,000 became obsolete and could not realised anything, and the remaining stock
(iii) There was old furniture which has been written off completely from the books. Ritika agreed to take away the same
at the price of 3,000.
(iv) Workmen's compensation claim was 8,000.
(v) Realisation expenses amounted to 1,000.
Prepare Realisation Account, Partners' Capital Accounts and Bank Account to close the books of the firm.
Amount brought in by Gauri
|Ans. Loss on realisation 6,000; Payment to partners: Sahaj 25,500; Nimish25,200;
19,200; Bank Account total 69,700.)
Q.8 Rose and Lily shared profits in the ratio of 2 : 3. Their Balance Shect on March 31, 2025 was as follows:

Liabilities Amount ()Assets Amount )

Creditors 40,000 |Cash at Bank 16,000
Lily's Loan 32,000 Debtors 80,000
Profit and Loss A/c 50,000 Less: Provision for doubtful debts 3.600 76,400
Capitals: Inventory 1,09,600
Rose 1,60,000 Bills receivable 40,000
Lily 2,40,000 Buildings 2,80,000
5,22,000 5,22,000
Rose and Lily decided to dissolve che firm on he above date. Assets (except bills receivables) realised T4,84,000.
Creditors were payable after two months but were settled immediately at 5% discount. Cost of realisation was 2,400.
There was a Motor Cycle in the frm which was bought out of the irms money, was not shown in the books of the
firm. It was now sold to Lily for 10,000. There was a contingent liability in respect of oustanding electric bill of
75,000. Bills Receivable was taken over by Rose at 33,000.
Pass necessary Journal entries on dissolution of the firm.
[Ans. Proft on realisation 15,600; Payment to partners: Rose 1,53,240 and Lily 2,79,360]
9.9 Surjit and Rahiwere sharing profits (or losses) in the ratio of3 : 2, their Balance Sheet as on March 31, 2025 is as
follows:
Liabilities Amount ) Assets Amount )
Creditors 38,000 Bank 11,500
Mrs. Surjit's Loan 10,000 Stock 6,000
Reserve Fund 15,000 Debtors 19,000
Rahi's Loan 5,000 Furniture 4,000
Capitals: Plant 28,000
Surjit 10,000 Investment 10,000
Rahi 8,000 Profit and Loss A/c 7,500
86,000 86,000
The firm was dissolved on March 31, 2025. Surjit agreed to take the investments at 8,000 and to pay off Mrs. Surjit's loan.
Other assets were realised as follows: Stock T5,000; Debtors 18,500; Furniture 4,500; Plant 25,000.
Expenses on realisation amounted to 1,600. Creditors agreed to accept 37,000 as a final settlement.
Pass necessary journal entries on dissolution of the firm.
[Ans. Loss on realisation 6,600; Payment to partners: Surjit 12,540 and Rahi 8,360]
<br>

CHAPTER-3 Dissolution of a Partnership Firm 3.61

SUBHASH DEY (Shree Radhey Publications)
Q.10 Following the Balance Shect Vinit and Yogesh as on 31st March, 2025:
of

Liabilities Amount(Assets Amount (3)

Creditors 60,000
3,60,000 Bank
Mrs. Vinit's Loan 70,000
60,000 Stock
Yogesh's Loan 1,00,000
1,00,000 Investment
Investment Fluctuation Fund 30,000 Debtors 2,00,000
Capitals: Less: Provision for doubtful debts 20,.0001,80,000
Vinit 2,00,000 Fixed assets 3,80,000
Yogesh 1.00,000 3,00,000 Profit and Loss Alc 40,000
Loan to Vinit 20,000
8,50,000 8,50,000
The firm was dissolved on 31st March, 2025. Vinit promised to pay off Mrs. Vinit's Loan and took away stock at 20%
discount. Yogesh took away 90% of the investments at 10% discount. Sunil, a debtor of 50,000 had to pay off the
amount due 3 months after the date of dissolution. He was allowed a discount of 5% for making payment immediately.
The remaining debtors were collected in full. Creditors were paid 3,50,000 in full settlement of their claim. Fixed
assets realised $2,82,000 and remaining investment realised 7,500. There was an old furniture which has been written
off completely from the books. Yogesh took away the same for R4,000. Realisation expenses 2,000 were paid by Vinit.
Prepare Realisation A/c, Partners' Capital A/cs and Bank A/c.
[Ans. Loss on realisation 64,000; Payment to Vinit 1,54,000 and Amount brought in by Yogesh 37,000; Bank
Account total 6, 04,000.]
Q.11 Following is the Balance Sheet of
and B as at 31 March, 2025.
A

Liabilities Amount ) Assets Amount )

Sundry creditors 30,000 Cash in Hand 500
Bills payable 8,000 Cash at Bank 8,000
Mrs A's loan 5,000 Stock-in-trade 5,000
B's Loan 10,000 Investmnents 10,000
Investments Fluctuation Fund 1,000 Debtors 20,000
General reserve 10,000 Less: Provision for Doubtful Debts (2,000) 18,000
Capital A/s Plant and Machinery 20,000
A 10,000 Building 15,000
B 10,000 20,000 Goodwill 4,000
Deferred Revenue Advertisement 3,500
Expenditure
84,000 84,000
The firm was dissolved on 31 March, 2025 and following was agreed:
) A promised to pay off Mrs A's loan and took stock-in-trade at T4,000.
(ii) B took half the investment @ 10% discount.
(iii) Alldebtors were good.
(iv) Credicors and bills payable were due on an average basis of one month after 31 March but chey were paid
immediately on 31 March @ 69% discount per annum.
() Plant realised 25,000; Building 40,000; Goodwill R6,000 and remaining investments at 4,500.
(v) There was an old rypewriter in the Arm which had been written off complercly rom the books, It is now estimated
to realise 300. It was talken away by B at this estimated price.
(vi) looked after the dissolution work for a remuneration of 8,500 and agreed to bear dissolution expenses up to
A
7,000. Actual expenses paid by A were 7,600.
(viii) B's loan was sertled by giving an unrecorded computer of 2,000.
1

Prepare Realisation Account.

[Ans. Profit on realisation 24,390]
<br>

XII Volume l: Accounting for Partnership Firms

3.62 SUBHASH DEY (Shree Radhey Publications)Accountancy

Q.12 Sonia, Rohit and Udit are partners sharing profs in the ratio of
5
:3:2. Their Balance Sheet as on March 31, 2025
was as follows:
Liabilities Amount )Assets Amount ()
2,00,000
Creditors 30,000 Building
Bills payable Machinery 40,000
30,000
Bank loan 1,60,000
1,20,000 Stock
Bills receivable 1,20,000
Sonias Loan 1,30,000
General reserve 80,000
80,000 Furniture
Capitals: Cash at bank 60,000
Sonia 70,000
Rohit 90,000
Udit 110,000 2,70,000
6,60,000
6,60,000
The firm was dissolved on that date.
(i) Building and stock realised for 1,90,000 and 1,50,000 respectively.
(i1) Rohit paid the realisation expenses of 10,000 for which he
was paid off 12,000 for completing the dissolution
process.
(iüi) Sonia took over furniture at as part payment of her loan to the firm.
75,000
a
(iv) Creditors accepted machinery at valuation of T35,000.
(v) Bankers accepted Bills receivables for 1, 10,000 and remaining cash.
Prepare Realisation Account.
[Ans. Loss on realisation 52, 000]
Q.13 Girija and Ganesh were partners in
a firm sharing, profits and losses in the ratio of 2
:
3. On 31st March, 2025 their
Balance Sheet was as follows:
Liabilities Amount )Assets Amount )
Creditors 80,000 Cash at Bank 20,000
Bank Overdraft 50,000 Debtors 55,000
Girija's Brother's loan 77,000 Less: Provision for doubtful debts 2,000 53,000
Ganesh's loan 28,000 Stock 78,000
Investment Fluctuation Fund 15,000 Investments 89,000
Capitals: Building 2,50,000
Girija 1,50,000 Profit and Loss A/c 10,000
Ganesh 1,00,000 2,50,000
5,00,000 5,00,000
On the above date the firm was dissolved.
() Girija looked after the process of dissolution for 15,000 and she agreed to bear dissolution expenses. Actual
dissolution expenses 20,000 was paid by Ganesh on behalf of Girija.
(i) Debrors of T6,000 were proved bad.
(iii) Girija agreed to pay off her brother's loan.
(iv) One of the creditors for I0,000 was paid only T3,000 in full settlement of his account.
were auctioned for 1,80,000 and the auctioneer's commission amounted to T8,000.
() Buildings
(vi) Ganesh took over part of stock at 4,000 (20% less than the book value). Balance of he Stock was handed over to
the remaining creditors in full settlement of their account.
(vi) Investments realised 79,000 less.
Prepare Realisation Account, Partners' Capital Accounts and Bank Account.
[Ans. Loss on realisation 88,000; Payment to partners: Girija 1,82, 800 and Ganesh 57,200; Bank Account total
3,21,000.)
<br>

CHAPTER-3 Dissolution of a Partnership Firm SUBHASH DEY (Shree Radhey Publications) 3.63
Q.14 Ashok, Babu and Chetan are in partnership sharing proft in che proportion of 1/2, 1/3, 1/6 respectively. They dissove
the partnership of the December 31, 2025, when the balance sheet of the firm as under:
Liabilities Assets Amount )
|Amount )
Sundry Creditors Bank 7,500
20,000
Bills Payable
25,500 Sundry Debtors 58,000
Babu's Loan
30,000 Stock 39,500
Capital Accounts: Machinery 48,000
Ashok 70,000 Investment 42,000
Babu 55,000 Freehold property 50,500
Chetan 27,000 1,52,000
Current Accounts:
Ashok 10,000
Babu 5,000
Chetan 3,000 18,000
2,45,500 2,45,500
The machinery was taken over by Babu for 45,000, Ashok took over the Investment for 40,000.Freehold property
was taken over by Chetan at 55,000. The remaining assets realised as follows: Sundry Debtors 56,500 and Stock
36,500. Sundry Creditors were settled at discount of 7%. An office computer, not shown in the books of accounts,
realised 9,000. Realisation expenses amounted to 33,000.
Prepare Realisation Account, Partners' Capital and Current Accounts.
[Ans. Profit on realisation 2,400; Payment to partners: Ashok 41,200; Babu 15,800; Amount brought in by Chetan
24,600]
Q.15 A, B and C are running a hardware shop in partnership. Their financial position is as under:
Balance Sheet as at March 31, 2025
Liabilities Amount )Assets |Amount )
Creditors 20,000 Land and Building 50,000
Bank Loan 7,000 Ofice Equipment 5,000
B's Loan 20,000 Stock 40,000
Capitals: Debtors 30,000
A 27,000 Bank 6,000
B 34,000
23.000 84,000
1,31,000 1,31,000
Partners agreed to dissolve the firm on that date on the following terms:
() Ofice equipment was accepted by a creditor for 7,000 at 3,500 and the balance was paid to him by cheque.
(ii) Bankers accepted stock worth 5,000 at the same value and the balance in cash
(iii) B's loan was settled at ?19,000.
(iv) The firm purchased 200 convertible debentures of a leasing company in 2022-23. Afrer sometime the investment
was treated as bad and was written off. These debentures were found to be having a market value of 8,000 and
a at this value.
Were accepted by creditor
() Assets realised in che following manner: Land and Building 3 times more; Remaining Stock 5,000 less; Debrors
<20,000.
(vi) Creditors allowed a discount of T200; and realisation expenses amounted to 1,800.
Prepare Realisation Account and B's Loan Account.
[Ans. Profit on realisation I,40,900]
<br>

Firms
3.64 sUBHASH DEY (Shree Radhey Publications)Accountancy XI Volume t Accounting for Partnership
On March 31, 2025 their balance sheet was follows:
:
1. as
Q.16 Sanjay. Tarun and Vineet shared profit in the ratio
of 3
2:
Liabilities Amount ()Assets |Amount ()
Capitals: Plant 90,000
Sanjay 1,00,000 Debtors 60,000
Tarun 1,00,000 Furniture 32,000
Vineet 45.000 2,45,000 Stock 60,000
Creditors 80,000 Investments 70,000
Bills payable 30,000 Bills receivable 36,000
Vineet's Loan 25,000 Bank 32,000
3,80,000 3,80,000

On this date the firm was dissolved.

(0 Sanjay was appointed to realise the assets. Sanjay was to receive 6% commission on the sale of assets (except bank
balance) and was to bear allexpenses of realisation. Expenses of realisation amounted to R4,500, which were paid by
the firm on behalf on Sanjay.
(Gi) Sanjay realised the assets as follows: Plant
72,00, Debtors 54,000, Furniture 18,000, Stock 90% of the book
value, Investments 76,000 and Bills receivable 31,000. Vineet's Loan was settled at 23,700.
(ii) There were 3,000 shares of T10 each in Dey'sedu Ltd. acquired at a cost of T40,000 which had been written off
completely from the books. These shares are valued @t6 each and divided among the partners in their profit sharing
ratio.
Prepare Realisation Account, and Vineet's Loan Account.
[Ans. Loss on realisation 42, 000]
Q17 Sunny and Bobby were partners in a fim sharing profits and losses in the ratio of 3 :
2, their balance sheet as at 3lst
March, 2025:
Liabilities Amount () Assets Amount )
Creditors 1,90,000 Bank 5,000
Bills Payable 1,10,000 Fixed Deposits 70,000
Employees provident fund 50,000 Stock 86,000
Mrs. Sunny's Loan 55,000 Investments 1,04,000
Bobby's Loan 85,000 Debtors 1,77,000
Investment Fluctuation Fund 30,000 () Provision for doubtful debts 12,000 1,65,000
Capitals: Other Fixed Assets 3,80,000
Sunny 2,20,000 Deferred Revenue Expenditure 35,000
Bobby 1.20,000 3,40,000 Sunny's Loan 15,000
8,60,000 8,60,000
The firm was dissolved on 31st March, 2025. The assets were realized and the liabilities were paid as under:
(a) Sunny promised to pay off Mrs. Sunny's Loan.
(b) Bobby took away stock at 20% discount and 80% of the investments at 10% discount.
(c) Dharam, a debtor of? 60,000 had to pay the amount due 2 months after the date of dissolution. He was allowed a
discount of 9% p.a. for making immediate payment.
(d) Creditors were paid 1,75,000 in full settlement of their claim.
(e) 90% of Other fixed assets realised 1,98,000 and the remaining assets were realised at a discount of 1 5%.
() Balance of investments were sold at 75% value and Fixed Deposits were realised atl 109%.
(g) There was an old furniture which had been written off completely from the books. Bobby took away the same for
?41,000 against his loan and balance to him was given in cash.
(h) Realisation expenses ? 20,000 were paid by Sunny and Bobby equally on behalf of the firm.
You are required to prepare Realisation A/c.
[Ans. Loss on realisation 41,000]
<br>

CHAPTER-3 Dissolution of a Partnership Firm SUBHASH DEY (Shree Radhey Publications) 3.65
Q.18 Archana, Vandana and Arti were partners in a Arnm sharing profts and losses in
the ratio of
5:3:2. Their Balance
Sheet on 31st March, 2025 was as follows. Prepare
Realisation Account.
Liabilities Amount ) Assets Amount )
:
Capitals Investments 80,000
Archana 80,000 Plant 1,00,000
Vandana 70,000 Stock 40,000
Arti 60,000 2,10,000 Debtors 50,000
General Reserve 30,000 Cash at Bank 30,000
Creditors 60,000
3,00,000 3,00,000
The firm was dissolved on the above date. () Assets were realised as follows : Debtors 40,000; Srock 50,000; Plant
60,000 (i) 25% of the Investments were taken over by Vandana at 18,000. Remaining Investments were taken over
by Archana at 10% less than its book value. (ii) Expenses of realisation 20,000 were paid by Arti.
[Ans. Loss on realisation 68,000]
Q19 Abhay, Bikram and Chris were partners in a firm sharing profits and losses equally. They decided to dissolve their
partnership firm on 3 1st March, 2025. The firm's Balance Sheet on the date of dissolution was as follows:
Liabilities Amount ) Assets Amount )
Capital Plant and Machinery 80,000
Abhay 68,000 Furniture 45,000
Bikram 1,00,000 Motor Car 1,25,000
Chris 77,000 2,45,000 Stock 30,000
Creditors 1,20,000 Debtors 70,000
Cash at Bank 15,000
3,65,000 3,65,000
The following information is available: (1) Plant and Machinery was taken over by Abhay at an agreed valuation of
? 75,000. (ii) Furniture realised 40,000. (ii) Motor car was taken over by Bikram for 1,30,000. (iv) Debtors
realised 10% less. (v) 10% of the stock was taken over by Chris for? 4,500. The remaining stock was sold for 30,000.
(vi) Realisation expenses amounted to 5,000.
Prepare Realisation Account.
[Ans. Loss on realisation 12,500]
Q.20 Sonia and Rohit were partners in a firm sharing profits and losses in the ratio of 3 :
2. On 3 1st March, 2025 their
Balance Sheet was as follows:
Liabilities Amount ) Assets Amount )
Capitals : Building 2,00,000
Sonia 70,000 Machinery 1,40,000
Rohit 90,000 1,60,000 Furniture 80,000
General Reserve 80,000 Debtors 1,20,000
Sonia's Loan 1,30,000 Stock 60,000
Bank Loan 2,20,000 Cash at Bank 60,000
Creditors 70,000
6,60,000 6,60,000
The firm was dissolved on the above date on the following terms:
(i) Building, machinery and furniture realised 3,44,000.
(i) Debrors realised 90% only.
(iii) Creditors took away half of the stock in full settlement of their account.
(iv) Remaining stock realised 72,000.
(v) Realisation expenses amounting to 14,000 were paid by Rohit.
Prepare Realisation Account.
[Ans. Loss on realisation 20, 000]
<br>

Partnership Firms
Accountancy XII Volume I: Accounting for
SUBHASH DEY (Shree Radhey Publications)
3.66

Competency Based Questions was dissolved.

a firm sharing profits in the ratio
of
5: 3. On 28.2.2025 the firm
were partners in was 1,80,000. Creditors on that date
Q.1 Sameer and Sudhir was F2,40,000 and Sudhir's capital
Sameer's capital arnd bank
On the date of dissolution, Account. Cash balance was 20,000
was a balance of 1,36,000 in Gencral Reserve
were 80,000 and there were 2,000 which were paid by Sudhir.
was nil. Sundry assets realised R7,50,000 and expenses on dissolution your workings clearly.
balance
Account and Partners' Capital Accounts. Show
Prepare Realisation Account, Cash and Bank 4,07,500 and Sudhir ?2,82,500. Cash and Bank
1,32, 000; Payment to partners: Sameer
|Ans.Profit on realisation ?
A/c TotalR7,70,000] agree upon dissolution of the firm. The
were partners in a firm. On 31 March 2025 they mutually
Q.2 Sonu and Ashu
Balance Sheet on that date was as under: Amount )
Liabilities Amount ) Assets
15,000
12,000 Cash at bank
Loans 45,000
18,000 Stock
Creditors 16,000
Capitals: Furniture
70,000
1,10,000 Debtors
Sonu 52,000
68,000 1,78,000 Plant and Machinery
Ashu 10,000
Loan to Ashu
2,08,000
2,08,000
The accountant of the firm prepared the realisation account as under:
Cr.
Dr. Realisation Account
Amount ) Particulars Amount )
Particulars
45,000 By Loans A/c 12,000
To Stock Alc 18,000
To Furniture A/c 16,000 By Creditors A/c
By Sonu's capital A/c (plant & machinery) 60,000
To Debtors A/c 70,000
52,000 By Ashu's capital A/c (debtors) 69,000
To Plant and Machinery A/c
17,100 By Bank Alc:
To Bank Alc (creditors)
To Sonu's Capital A/c (loan) 12,000 Stock 42,000
To Bank A/c (realisation expenses) 1,600 Furniture 13,900 55,900
To Profit tr. to: Sonu's capital A/c 900
Ashu's capital A/c 300 1,200
2,14,900 2,14,900
(a) Analyse che given information and explain how each item was treated to prepare the Realisation Account.
a
(b) Explain the need for preparing a Realisation Account on dissolution of firm.
(c) State the mode of dissolution of the firm described above.
() What journal entry will be passed in the books of account for the treatment of Loan to Ashu?

0.3 Meena and Tina were partners in a firm and sharing profit as 3 : 2. On 31 March 2025, their firm was dissolved in
accordance with a contract between them.
Balance Sheet of Meena and Tina as on March 31, 2025
Liabilities Amount ) Assets Amount ()
Capital
:
Machinery 70,000
Meena 90,000 Investments 50,000
Tina 80,000 1,70,000 Stock 22,000
Sundry creditors 60,000 Sundry Debtors 1,03,000
Bills payable 20,000 Cash at bank 5,000
2,50,000 2,50,000
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CHAPTER-3
Dissolution ofa Partnership Firm
SUBHASH DEY (Shree Radhey Publications) 3.67
The assets and liabilities were disposed as
of follows:
() Machinery was given to creditors in full settlement of their account
settlement. and Stock was given to bilis Paya
(1) nvestment was taken over by Tina at book value Sundry debrors of book value
10% less and remaining debtors 50,000 taken over by Meena at
realised 51,000.
(i) Realisation expenses amount to
The incomplete Realisation Account2,000.
has been given below:
Realisation Account
Particulars
To Machinery A/c |Amount () Particulars Amount )

To Investments A/c
70,000 |By Sundry creditors A/c 60,000
50,000 By Bills payable A/c 20,000
To Stock A/c
22,000 By
To Sundry debtors Alc
1,03,000 By
To.....
|By
|By
By

(a) Complete the Realisation Account.

(b) State the mode of dissolution of the firm described above.
(c) State the rules as provided in Section 48 of the Partnership Act 1932 regarding
Treatment of Losses' on the
dissolution of a firm.
[Ans. Loss on realisation 21,000]
Bora, Singh and Ibrahim were partners in a firm sharing profts in the raio of5 1. On 2.3.2025 cheir firm was
Q4 :3:
dissolved. The assets were realised and the liabilities were paid. Given below are the Realisation Account, Partners'
Capital Accounts and Bank Account of the firm. The accountant of the firm left a few amounts unposted in these
accounts. You are required to complete these accounts by posting the correct amounts.
Dr. Realisation Account Cr.
Particulars Amount Particulars Amount )
To Stock Alc 10,000 By Provision for bad debts Alc 5,000
To Debtors A/c 25,000 By Sundry Creditors Alc 16,600
To Plant and Machinery A/c 40,000 By Bills Payable A/c 3,400
To Bank Alc By Mortgage Loan A/c 15,000
Sundry Creditors 16,000 By Bank Alc (assets realised)
Bills Payable 3,400 Stock 6,700
Mortgage Loan 15,000 34,400 Debtors 12,500
To ........ Plant & Machinery 36,000 55,200
To Bank Alc (Expenses) 620 By
By
1,10,420 1,10,420
Dr. Partners' Capital Accounts Cr.
Particulars Bora ) Singh Ibrahim Particularsd Bora ) Singh ) Ibrahim )
By Balance b/d 22,000 18,000 10,000
By General Reserve 2,500 1,500 500
24,500 19,500 10,500 24,500 19,500 10,500
Dr. Bank A/c Cr.
Particulars Amount Particulars Amount )
To Balance b/d 19,500 By
By Realisation Alc (Outstanding repairs) 400
To
To Realisation A/c 6,220 By
(unrecorded assets realised) By
80,920 80,920
<br>

3.68 sUBHASH DEY

(Shree Radhey Publications)Accountancy XII Volume I Accounting for Partnership Firms
[Ans. Loss on realisation 9,000; Payment to partners: Bora 19,500; Singh Z16, 500 and lbrahim 9, 500. Bank Alc
Torals0,920]
Q.5 Sanjay and Sameer were partners in a firm sharing profts in the raio of 2 : 3.On 31.3.2025 their Balance Sheet was as
follows:
Liabilities Amount ) Assets Amount )
Capitals: Land and Building 3,00,000
Sanjay 2,00,000 Stock 1,00,000
Sameer 3,00,000 5,00,000 Debtors 1,50,000
Creditors 1,05,000 Bank 1,55,000
Workmen Compensation Fund 1,00,000
7,05,000 7,05,000
The firm was dissolved on 1.4.2025 and the Assets and Liabilities were settled as follows:
() Sanjay agreed to take over Land and Building at T3,50,000 by making payment through an RTGS.
(ii) Stock was sold at 10% less.
(ii) Creditors accepted Debtors in full sedement of their claim.
The accountant of the firm was in a hurry and passed the following journal entries:
Journal
Date Particulars L.E Dr. Amt. ) Cr. Amt.
1
April Realisation A/c Dr. 5,50,000
2025 To Land and Building A/c 3,00,000
To Stock Alc 1,00,000
To Debtors Alc 1,50,000
(assets transferred to Realisation A/c)
Creditors A/c Dr. 1,05,000
To Realisation A/c 1,05,000
(creditors transferred to Realisation A/c)
Sanjay's Capital Alc Dr. 3,50,000
To Realisation A/c 3,50,000
(land & building sold to Sanjay)
Bank A/c Dr. 2,40,000
To Realisation A/c 2,40,000
(stock and debtors realised 2,40,000)
You are required to pass all the correct entries on dissolution of the firm of Sanjay and Sameer.
[Ans. Loss on realisation 5,000; Payment to partners: Sanjay 2,38,000 and Sameer 3,57, 000]
Q.6 Rusting, a partner of a firm under dissolution was to get a remuneration 2% of the total assets realised other than cash
and 10% of the amount distributed to the partners. Sundry assets (including Cash 8,000) realised at 1,16,000 and
sundry liabilities to be paid 31,340. Calculate Rusting's remuneration and Show your workings clearly. Also pass
necessary journal entry for remuneration.
[Ans. Rusting's commission = 10,626]
Q.7 Ashu and Harish are partners sharing profit and losses as 3: 2. They decided to dissolve the firm on March 31, 2025.
Balance Sheet of Ashu and Harish as on March 31, 2025
Liabilities Amount () Assets Amount )
Capitals: Building 80,000
Ashu 1,08,000 Machinery 70,000
Harish 54,000 1,62,000 Furniture 14,000
Creditors 88,000 Stock 20,000
Bank overdraft 50,000 Investments 60,000
Debtors 48,000
Cash at Bank 8,000
3,00,000 3,00,000
<br>

CHAPTER-3
Dissolution of a Partnership Firmn SUBHASH DEY (Shree Radhey Publications) 3.69
Ashu is to take over the building at 295,000 and Machinery and Furniture are taken over by Harish at value of 80,000.
AShu agrecd to pay the creditors and Harish agreed to met bank overdraft. Stock and Investments are taken by the
partners in their profit sharing ratio. Debtors realised or R46,000. Some expenses were incurred and paid he Arm the
process of realisation
of assets and payment of liabilities.
Prepare Realisation Account, if it is given that the dissolution resulted into a profit and
the amount brought in by
Harish was 5,600. Show your workings clearly.
[Ans. Realisation expenses 3,000 and Profit on realisation
6,000]

Dissolution of A
Partnership Firm Self Assessment Test

Time allowed : 45 min.

Maximm Marks: 20
Q.1 Match the columns and select the correct alternative: (1)
Column I Column II
() Dissolution of a firm which, on any ground, is regarded to be just and| (A) Dissolution on the
equitable. happening of certain
contingencies
(i1) Dissolution of a firm by the death of a partner, subject to a contract between (B) Dissolution by Court
the partners.
(ii) Dissolution of a firm when some event has taken place which makes it (C) Compulsory Dissolution
unlawful for the partners to carry on the business of the firm in partnership
(iv) Dissolution of a firm in accordance with a contract between the partner. (D) Dissolution by Agreement
Alternatives:
(a) (i)-(B), (i)-(A), (ii)-(C), (iv)-(D) (b) ()-(A), (ii)-(B), (ii)-(C), (iv)-(D)
(c) ()-(A), (iî)-(B), (ii)-(D), (iv)-(C) (d) ()-(D), (ii)-(A), (ii)-(C), (iv)-(B)
Q2 Anu, Bina and Charan are partners. The firm had given a loan of T20,000 to Bina. They decided to dissolve the firm.
In the event of dissolution, the loan will be settled by: (1)
(a) Transferring it to debit side of Realisation A/c (b) Transferring it to credit side of Realisation A/c
(c) Transferring it to debit side of Bina's capital Alc (d) Bina paying cash to the firm
,
Q.3 On the day of dissolution of the firm Roop Brothers' had partners' capital amounting to 1,50,000 external liabilities
F35,000, Cash balance T8,000 and P&L Alc (Dr.) 7,000. If Realisation expenses and loss on Realisation amounted to
E5,000 and 25,000 respectively, the amount realised by sale of asets is: (1)
(a) (b) 1,45,000 (c) ?1,57,000 (d) 1,50,000
1,64,000
Q.4 Given below are two statements - Assertion (A) and Reason (R). Choose the correct alternative: (1)
Assertion (A): When a liability is to be discharged by a partner, his/her capital account is credited.
Reason (R): Payment of liability is firm's responsibility. So, when a partner takes responsibility to discharge a liability.
his claim in the firm increases.
(a) Both (A) and (R) are true and (R) is a correct explanation of A).
(b) Both (A) and (R) are true, but (R) is not the correct explanation of (A).
(c) Both (A) and (R) are false.
(d) (A) is false, but (R) is true.
a 20,000 to the firm and
Q.5 A and B are partners in a firm sharing profits in the ratio of3: 2. Mrs. 'A had given loan
of

che frm also obrained a loan of T10,000 from B. The firm was dissolved and its assets were realised for 25,000.
State the order of payment of Mrs 'As loan and B's loan, if there were no creditors of the firm. You are required to state
1932.
the provisions of Section 48 of the Partnership Act, (3)
Q.6 Distinguish between Dissolution of Partnership and Dissolution of Firm on the basis of: (3)
assets and liabilities (ii) Economic relationship (ii) Closure of books
() Settlement of
2: 1. On 31st March, 2025 their
:
of 2
Q.7 B, and D were partners in a firm sharing profits and losses in the ratio
C

Balance Sheet was as follows:

<br>

Publications)Accountancy XII Volume I: Accounting for Partnership Firms

3.70 SUBHASH DEY (Shree Radhey
Amount )
Liabilities Amount () Assets
17,000
Sundry Creditors 1,20,000 Bank
2,00,000
Profit and Loss A/c 2,000 Debtors
Less: Provision for bad debts 5,000 1,95,000
Capitals:
4,50,000
13,00,000 Stock
60,000)
2,00,000 Furniture 11,00,000
D
2,00,000 17,00,000 Land and Building
18,22,000
18,22,000
the firm was dissolved., Debtors were sold to a debt collection agency at 10% less than the book
On the above date
value. Stock ? 2,00,000 was taken over by B at F90.000 less than its book value and the remaining stock realised
was over by C for T65.000., Creditors were paid 10% less in full settlement of their
amount.
1,80,000. Furniture taken
was of dissolution for which he was to be paid 40,000.
Land and Building realised 18,00,000. B assigned the work
(4)
Prepare Realisation Account.
on dissolution of the firm of Aman and Rajat on 31st
Q.8 Give the necessary journal entries for the following transactions
party liabilities to Realisation Account.
March, 2025, after the transfer of various assets (other than cash) and the third
They shared profits and losses in the ratio of 2 : 1. (6)
was a bill of exchange of10,000 under discount. The bill was received from Derek who became insolvent.
(a) There
(b) Bills payable ofT30,000 falling due on 30th April, 2020 were discharged at 29,550.
(c) Creditors of 30,000 took over stock of 10,000 at 10% discount and the balance was paid to them in cash.
was estimated to realise 600. It was taken
(d) There was an old typewriter which had been written off completely. It
away by Rajat at 25% less than the estimated price.
(e) Aman agreed to take over the responsibility of completing dissolution at
an agreed remuneration ofR1,000 and to
bear all realisation expenses. Actual realisation expenses T800 were paid by the firm.
() Loss on realisation was 54,000.

Dissolution of A
Partnership Firm Self Assessment Test
2
Time allowed : 45 min. Maximum Marks : 20
Q.1 Given below are two statements – Assertion (A) and Reason (R). Choose the correct alternative: (1)
Assertion (A): Dissolution of a firm necessarily brings in dissolution of partnership.
Reason (R): Because dissolution of a firm implies breaking of relationship between all the partners of a firm. This
brings an end to the existence of firm.
Alternatives:
(a) Both(A) and (R) are true and (R) is a correct explanation of (A).
(b) Both (A) and (R) are true, but (R) is not the correct explanation of (A).
(c) Both (A) and (R) are false.
(d) (A) is false, but (R) is true.
Q.2 At the time of dissolution of partnership firm, journal entry for the settlement of loan advanced by the firm to a partner
would be: (1)
Journal
Date Particulars L.E Dr. Amt. () Cr. Amt. )
(a) Bank A/c Dr.
To Loan to Partner A/c
(b) |Loan to partner Alc Dr.
To Bank Alc
(c) |Realisation A/c Dr.
To Loan to Partner Alc
(d) |None of these
<br>

CHAPTER-3
Dissolution of a Partnership Firm
SUBHASH DEY (Shree Radhey Publications) 3.71
Q3 Khan and Gupta were partners in a firm sharing profits and losses in
the racio of 1 :3. Mrs. Khan gave the
loan of 1,00,000. Gupta also gave the firm a loan of 1.50.000 besides
his capital. On lst April, 2025 the firm wa
im a
dissolved and its assets realised 1,40,000. Assuming that there was no
payment of Mrs. Khan's loan third party liability of the firm, state the order o
and Gupta's loan. (1)
Q.4 On the dissolution of a firm, the cash-in-hand is
(a) Realisation Account transferred to: (1)
(c) Cash and Bank (b) Capital Accounts of the partners in profit sharing ratio
Account (d) Creditors' Account
Q.5 State any six grounds when the court may order a
partnership firm to be dissolved. (3)
Q.6 Explain the rules as provided in Section 48 of the Partnership Act 1932
regarding settlement accounts case of
dissolution of a firm. of in
(3)
Q.7 A and B are partners sharing profits and losses equally, On 31st March, 2025,
they decided to dissolve their firm. On
the date of dissolution, their Balance Sheet was as
under:
Liabilities
Amount ) Assets Amount )
Creditors 3,00,000 Bank 3,00,000
A's Loan
60,000 Stock 2,40,000
Mrs. A's Loan
70,000 Furniture 2,00,000
Capitals: Plant and Machinery 1,00,000
A 2,30,000 Profit and Loss A/c 50,000
B 2,30,000 4,60,000
8,90,000 8,90,000
CreditorsS were paid at 20% less. Furniture was taken over by A for 1,80,000. B took over the stock at ?1,80,000. A
promised to pay off Mrs. A's loan. Realisation expenses of 20,000 were paid by B.
Prepare Realisation Account. (4)
Q.8 Supriya and Monika were partners in a firm. Following is the balance sheet as on March 31, 2025.
Liabilities Amount ) Assets Amount ()
Supriyas Capital 32,500 Cash and Bank 40,500
Monika's Capital 11,500 Stock 7,500
Sundry Creditors 48,000 Sundry debtors 21,500
Reserve fund 13,500 Less: Provision for doubtful debts 500 21,000
Fixed Assets 36,500
1,05,500 1,05,500
The firm was dissolved on the above date. The Realisation Account is prepared by the accountant as under:
Dr. Realisation Account Cr.

Particulars Amount ) Particulars Amount )

Stock A/c 7,500 Provision for doubtful debts A/c 500
Sundry debtors Alc 21,500 Sundry creditors A/c 48,000
Fixed assets A/c 36,500 Bank Alc (assets realised)
Bank A/c (Creditors) 48,000 Debtors 20,425
Bank A/c (Realisation expenses) 1,500 Stock 7,000
Profit transferred to: Fixed assets 42,000 69,425
Supriya's Capital A/c 1,755
Monika's Capital Alc 1170 2,925
1,17,925 1,17,925
was treated to prepare the Realisation Account.
(a) Analyse the given information and explain how each item (2)
accounts
(b) Pass the necessary journal entries for the adjustment of accumulated profit/loss and settlement of partners'
on dissolution of the firm. (2)
assets.
(c) State the rules as provided in Section 48 of the Partnership Act 1932 related to the applicaion of (2)
<br>

3.72 SUBHASH DEY (Shree Radhey Publications) /Accountancy XII Volume I: Accounting for Partnership Firms

Dissolution of A Partnership Firm Self Assessment Test

3
Time allowed : 45 min. Maximum Marks : 20
Q1 Statement-I: Subjcct to contract berween the partners, a firm is dissolved by the death a partner. (1)
Statement-lI: Dissolution of partnership necessarily involves dissolution of the firm.
(a) Both the statements are truc. (b) Both the statements are false.
(c) Statement-l is true, Statement-II is false. (d) Statement-II is true, Statement-I is false.
Q2 At the time of dissolution of a firm, Creditors are 70,000; Firm's Capital is 1,20,000; Cash Balance is 10,000.
Other assets realised 1,50,000. Gain/Loss in the realisation account will be: (1)
(a) 30,000 (Gain) (b) 40,000 (Gain)
(c) 40,000 (Loss) (d) 30,000 (Loss)
Q3 and C were partners in a firm sharing profits and losses in the ratio of 11 :9. B had given a loan of T80,000 to the
B

fim and the firm also took a loan of T1,60,000 from Mrs. C. On 31st March, 2025 the firm was dissolved and its
assets realised R1,20,000. Assuming that the firm did not have any other third party liability, state the order of payment
of B's loan and Mrs. C's loan. (1)
Q4 Statement-I: Provision for doubtful debts is transfered to credit of Realisation Account at the time of dissolurion of
partnership.
Statement-II: When the business of the firm becomes illegal, the way of dissolution of the firm is Compulsory
dissolution. (1)
(a) Both the statements are true. (b) Both the statements are false.
(c) Statement-Iis true, Statement-II is false. (d) Statement-II is true, Statement-I is false.
Q.5 Distinguish between dissolution by agreement and dissolution by notice. (3)
Q.6 Explain the rules as provided in Section 48 of the Partnership Act 1932 regarding Treatment of Losses and Application of
Assets.
(3)
Q.7 Aman, Ahmad and Ally decided to start a partnership firm, which will be engaged in the distribution of dairy products
in Maharashtra šEate. They decide to share profits and losses in the ratio
of 2 : 1 : 2. Aman is a holder of Senior
Secondary School Certificate from Central Board of Secondary Education with Business
Studies as one of his elective
subjects. Ahmad had done his post graduation in History and Ally in dairy
farming. They operated the business
successfully for 4 years. On 31 March 2025 Ally died. Subject to the contract
between the partners the firm was
dissolved. On that date, their Balance Sheet was as follows:
Liabilities Amount ) Assets
Creditors 80,000 Fixed Assets (Tangible)
Amount )
1,20,000
|Capitals: Aman 60,000 Patents 10,000
Ahmad 50,000 Stock 70,000
Ally 30,000 1,40,000Debtors
Profit and Loss A/c 20,000
50,000 Bank 50,000
2,70,000 2,70,000
Stock realised 1 0,000. Debtors were realised at their book value. Identify
the mode of dissolution of firm in the above
case. Prepare Realisation Account.
Q.8 Give the necessary journal entries for the following transactions on dissolution the firm (4)
March 2025, after the various assets (other than cash) and the of of Anita and Ravi on 31st
third party liabilities have been transferred to Realisation
Account. They shared profits and losses in the ratio 3 : 2.
(a) Ravi was to get a remuneration of R23,000for completing
the dissolution process. He also agreed to bear Realisation
expenses. Realisation expenses of 10,000 were paid by Ravi
from the firm's cash.
(b) Amitesh, an old customer whose account for 60,000 was written
off as bad debt in the previous year, paid 90%.
(c) Creditors of 40,000, accepted furniture valued at
38,000 full settlement of their claim.
in
(d) Land and Building was sold for 3,00,000 through a broker who charged 2% commission.
(e) There were 500 shares of
40 cach in Vision Ld., acquired at a cost of 22,000 and had been written off completely
from the books. These shares are now valued at ?50 each and
divided among the partners in their profit sharing ratio.
() Profit on realisation was 45,000. (6)
<br>

CHAPTER-3
Dissolution of a Partnership Firm Publications) 3.73
SUBHASH DEY (Shree Radhey

Dissolution of A Partnership Firm

4 Self Assessment Test

Tine allowed : 45 min. :

Maximum Marks 20
0.1 Read the following statements carefully and choose
the correct alternative: (1)
Statement-I: A firm may be dissolved if any one of the partners gives a notice in writing to the partners,
his intention of seeking dissolution other sIgnirylng
of the firm.
Statement-II: A partnership is dissolved when there is a death a partner.
of
(a) Both the statementS are true.
(b) Both the statements are false.
(c) Statement-I is true, Statement-II is false.
(d) Statement-II is true, Statement-I is false.
Q.2 On the basis of the following data, how much final payment will be made to a partner on firms dissolution? (1)
Credit balance of capital account of the partner was 50,000. Share of loss on Realisation amounted to T10,000. Firm's
liability taken over by him was for 8,000:
32,000
(a) (b) 48,000 (c) 40,000 (d) 52,000
Q23 Varunand Arun are partners in a firm. On the date of dissolution of the partnership firm, Varun's wife's loan was
Z45,000, whereas Arun's loan was T65,000. Which loan will be paid off first and why? (1)
Q4 Total assets of a partnership firm, which was dissolved were T30,00,000 and its total liabilities were 6,00,000. Assets
were realised at 80% and liabilities were settled at 5% less. If dissolution expenses were 30,000, the profit or loss on
dissolution was: (1)
(a) Profit 18,00,000 (b) Loss T6,00,000 (c) Profit T6,00,000 (d) Loss 18,00,000
Q.5 Chander and Naresh were partners in a firm sharing profits in 3 :2 ratio. On 28.2.2025 their firm was dissolved.
After the transfer of various assets (other than cash) and third party liabilities to Realisation Account, the following
transactions took place:
(i) A machine that was not recorded in the books was taken over by Chander at 3,000 whereas its expected value was 5,000.
(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%.
(ii) Loss on dissolution was 3,400.
Pass necessary journal entries for the above transactions in the books of the firm. (3)
Q.6 State the three cases when a firm is dissolved compulsorily. (3)
Q.7 A and B, who were partners in a firm, mutually decided to dissolve the partnership firm on 31 March 2025. On the date of
che dissolution, As Capital was 1,25,000 and B's Capital was 20,000. Creditors amounted to 23,000 and Cash at Bank
5,000. Remaining assets realised for T1,25,000 and the expenses of dissolution were 2,000. Both A and B were solvent.
(a) Prepare Realisation Account. Show your workings clearly. (3)
(b) State the mode of dissolution described above. (1)
were On 1.3.2025 their firm was dissolved. The
Neela and
Q.8 Mala, were Kala partners sharing profits in the ratio of 3
:2:1.
assets ealiscd and liabilities were paid. The accountant prepared Realisation Account, Partners' Capital Accounts
and Bank Account, but forgot to post few amounts in these accounts.
You are required to complete che following accounts by posting correct amounts. (6)
Dr. Realisation Account Cr.
Particulars Amount ) Particulars Amount )

By Provision for bad debts 1,000

To Sundry Assets:
Machinery 10,000 By Creditors 15,000
21,000 By Sheela's Loan 13,000
Stock
Debtors 20,000 By Repairs and Renewals Reserve 1,200
Prepaid Insurance 400 By Bank Alc (Assets realised)
3,000 54,400 Machinery 8,000
Investments
To Mala's Capital Alc (Sheelas Loan) 13,000 Stock 14,000
To Bank Alc (Creditors paid) 15,000 Debtors 16,000 38,000
To By Mala's Capital Ac (Investments) 2,000
To Bank Alc (expenses) 800 By
<br>

3.74 sUBHASH DEY (Shree Radhey Publications) Accountancy XII Volume I: Accounting for Partnership Firms

Dr. Partners' Capital Accounts Cr.

Particulars Mala ) Neela ) Mala (R) Neela R) Kala
Kala () Particulars
lo .***********.. By
To By .......*
To Bank A/c 12,000 ....
9,000 By
23,000 15,000 3,000 23,000 15,000 3,000

Dr. Bank Account Cr.

Particulars Amount ) Particulars Amount )
To Balance b/d 2,800 By
To By Realisation A/c 5,000
To Kala's Capital Ac 1,000 (Dishonoured bill paid)
By
By
By .........*.....

Dissolution of A
Partnership Firm Self Assessment Test
5
Time allowed : 45 min. Maximum Marks : 20
Q1 Statement-I: A firm one partner become insolvent. (1)
is compulsorily dissolved when all partners or when all except
Statement-II: Court can order a firm to be dissolved when a
partner becomes insane.
(a) Both the statements are true. (b) Both the statements are false.
(c) Statement-I is true, Statement-II is false. (a) Statement-II is true, Statement-I is false.
Q.2 On dissolution of the firm of Ramesh, Suresh and Naresh, Naresh had agreed to bear all realisation expenses for which
he was paid 14,500. Actual expenses on realisation 11,000 were paid by Naresh. Amount to be credited to Naresh's
capital Alc will be: (1)
(a) 11,000 (b) 3,500 (c) 14,500 (d) 25,500
Q.3 Which of the following will be transferred to Realisation Account at the time of dissolution of firm? (1)
(i) Provision for Doubtful Debts (ii) Partners' Loan (ii) General Reserve (iv) Goodwill
(a) (i) and (iv) (b) (), (i) and (iv) (c) (), (iii) and (iv) (d) (), (i) and (iii)
Q.4 On dissolution of a partnership firm, the Realisation account is debited with (1)
(a) All the liabilities of the firm (b) Cash received on the sale of the assets
(c) Any asset taken over by one of the partners (d) All assets to be realised
Q.5 Distinguish between firm's debts and partner's private debts. State the rules, as stated in Section 49 of the Partnership
Act 1932, which shall apply where Private Debts and Firm's Debts co-exist. (3)
Q.6 Jain, Sharma and Verma were partners in a firm sharing profits in the rato of 1 : 2 : 1. On 31st March, 2025 thei
firm was dissolved. It was agreed that Sharma will undertake the dissolution work and will be paid 15,000 as
remuneration. The dissolution expenses were 5,000. R2,84,000 were paid to the creditors in full settlement of their
claim of {3,00, 000. Dissolution of the firm resulted into a loss of 18,000. Pass necessary journal entries for the above
transactions. (3)
Q7 and Y are partners in a firm with a profit sharing ratio of 3 :2. They decided to dissolve the firm on June 1, 2020.
X
On that date their capitals stood as T20,000 and 10,000 respectively. Amount owed by Y to the firm was T6,400 and
there was a loan by X for 8,000. Creditors were 50,000 and Cash at Bank 5,400. The remaining assers realised
59,200 (other than loan to Y and cash). Realisation expenses amounted to 2,000. Prepare Realisation Account. Show
your workings clearly. (4)
Q.8 Madhu completed her master's in food rechnology. She worked for some time in a company manufacturing chutneys,
pickles and murabbas. She was not happy in the company and decided to have her own organic food processing unit as
a sole proprietorship business. Madhu collaborated with Vardan and Nitin, who were running a partnership business of
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CHAPTER-3
Dissolution of a Partnership Firm SUBHASH DEY (Shree Radhey Publications) 3.75
preparation and supplying sweets through home delivery at a production cum show-room 'Express Sweets.
2024 they joined hands to set up 'Sweets and Confectionerv' business, On 1 Apr
sharing profits in the ratio of 5
the firm incurred continuous losses year after vear. As a result, che firm was dissolved on :3:2. hoWevci
31st March, 2025. On at
date, their Balance Sheet was as follows:
Liabilities
Amount ) Assets Amount )
Sundry Creditors 70,000 Land and Building 3,50,000
Nitin's Loan 3,00,000
20,000 Stock (Market value 74,00,000)
Mrs. Nitin's Loan
20,000 Debtors 2,00,000
Capitals: Madhu 4,00,000 Less: Provision 10,000 1,90,000
Vardan 3,00,000 Cash at Bank 70,000
Nitin 1,00,000 8,00,000
9,10,000 9,10,000
Stock were sold to Vardan at a discount of 1/6 on cost. Debrors were realised at 10% less than the book value. Mrs.
Nitins loan was settled by giving her a computer of 22,000 not recorded in the books. Madhu paid off one of the
creditors 20,000 in settlement of his amount of30,000. Nitin's Loan was settled at 25,000.
Pass the necessary journal entries on dissolution of the firm. (6)