dissolution of partnership firm recording

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DISSOLUTION of PARTNERSHIP FIRM Difference between dissolution of partnership and dissolution of partnership ‘firm’ Presenter : J.K.Saini 1

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  • 1. DISSOLUTION of PARTNERSHIPFIRM Difference between dissolution ofpartnership and dissolution of partnershipfirmPresenter : J.K.Saini 1

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. 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. ACCOUNTING PROCEDUREIn order to close the books of the firm, thefollowing accounts are prepared :-1. Realisation Account2. Partners Loan a/c3. Partners Capital accounts4. Cash or Bank accountPresenter : J.K.Saini 4 5. Realisation AccountTo Assets ( at their bookvalues)By Outsiders liabilities(B/P, creditors, bankloan, expenses o/s,provident fund, wifesLoan 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. To Bank( payment of liability.. net amount)To Partners capital a/c( if paid by a partner)To Bank(Expenses of realisation)To CapitalsAB (Profit )By Bank(sale of assets) at S.PBy Partners capital a/c(asset taken over)By CapitalsAB (loss)Presenter : J.K.Saini 6 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. 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, wifes loan, Employee saving account)Presenter : J.K.Saini 8 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. For Realisation of assets. Sold for cashBank a/c DrTo Realisation a/c Taken over by a partnerPartners 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. For disposal of liabilities Paid in cashRealisation a/c DrTo Bank a/c (net amount) Paid by a partnerRealisation a/c DrTo partners Capital a/cNote:- all outsiders liabilities must be paidincluding contingent and unrecorded liablities.Presenter : J.K.Saini 11 12. For expenses of dissolutionRealisation a/c DrTo Bank a/cPresenter : J.K.Saini 12 13. For commission /remunerationallowed to a partnerRealisation a/c DrTo Partners Capital a/cPresenter : J.K.Saini 13 14. For Profit on Realisation a/cRealisation a/c DrTo Capitals a/cAB ( In profit ratio)Presenter : J.K.Saini 14 15. In case of lossCapitals a/c DrAB ( In profit ratio)To Realisation a/cPresenter : J.K.Saini 15 16. Treatment of Partners loan ( asalready appearing in the balancesheetIt should be directly paidPartners 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. For Cr. Balance in Capital Account- It is tobe paidPartners Capital a/c Dr.To BankIn Case of Dr. Balance :Bank a/c DrTo Partners Capital a/cPresenter : J.K.Saini 17