12 Journal Entries on Dissolution of Partnership Firm
The students find the topic of Dissolution of Partnership Firm easy but many of them don't get full marks, when they have to pass Journal Entries in Board Exam.
Following are the main Journal Entries on Dissolution of Partnership Firm, from which there's usually a 5 - 6 Marks Question:
- Transfer of assets - from Balance Sheet to Realisation Account - (At Book Value):
Realisation A/c Dr.
To Assets (Individually) A/c
- Transfer of liabilities/Provision for Doubtful Debts - from Balance Sheet to Realisation Account - (At Book Value):
Liabilities (individually)/ Provision for Doubtful Debts A/c Dr.
To Realisation A/c
- Sale of assets (transferred / unrecorded/ taken over by a partner) - (At Actual Realisation amount):
Bank/Partner’s Capital/ A/c Dr.
To Realisation A/c
- Payment of liabilities (transferred / unrecorded /taken over by a Partner) - (At Actual Payment/settlement amount):
Realisation A/c Dr.
To Bank/ Partner’s Capital A/c
- Settlement of Liability through Transfer of Assets, Only Cash entry is to be shown:
Realisation A/c Dr.
To Bank A/c
OR
Bank A/c Dr.
To Realisation A/c
- Payment of Realisation Expenses -
(a) When incurred and paid by the firm:
Realisation A/c Dr.
To Bank A/c
(b) When paid by a partner on behalf of the firm:
Realisation A/c Dr.
To Partner’s Capital A/c
(c) When a partner has agreed to bear the realisation expenses:
(i) if payment is made by the firm
Partner’s Capital A/c Dr.
To Bank A/c
(ii) if the partner himself pays, no entry is required
Note: In the absence of information about who is paying the expenses, it is implied that expenses are paid by the partner who has agreed to bear expenses.
As per CBSE syllabus, clear instruction will be there in the question paper about the payment of Realisation Expenses.
- For agreed Remuneration to a partner for dissolution work.
Realisation A/c Dr.
To Partner’s Capital A/c
- Transfer of profit on realisation (Cr. Balance)
In case of profit on realisation
Realisation A/c Dr.
To Partners’ Capital A/c (individually) A/c
Reverse Entry in case of Loss.
- Settlement of loan by a firm to a partner:
Bank A/c Dr.
To loan to partners A/c
- Payment of loans due to partners:
Partner’s Loan A/c Dr.
To Bank A/c
- Transfer of Accumulated profits:
General Reserve A/c Dr.
To Partners’ Capital A/c (individually in Profit Sharing Ratio)
Reverse Entry for fictitious assets.
- Settlement of partners’ capital accounts -
(a) If, he brings in the necessary cash:
Bank A/c Dr.
To Partner’s Capital A/c
(b) If, the balance is paid to partners
Partners’ Capitals A/cs (individually) Dr.
To Bank A/c
If, however partners' current accounts were there, they must be closed by transfer to Capital Accounts of the Partners first.
These are the main 12 Journal Entries on Dissolution of Partnership Firm. All journal entries on Dissolution of partnership firm fall under these.
Dissolution of Partnership Firm
38 Journal Entries on Dissolution of Partnership Firm in Exam.