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 or 6 Marks Question:
- For transfer of assets to Realisation Account (Book Value):
Realisation A/c Dr.
To Assets (Individually) A/c
- For transfer of liabilities/Provision for Doubtful Debts to Realisation Account (Book Value):
Liabilities (individually)/ Provision for Doubtful Debts A/c Dr.
To Realisation A/c
- For sale of assets (transferred or unrecorded)/ taken over by a partner (Actual Realisation):
Bank/Partner’s Capital/ A/c Dr.
To Realisation A/c
- For payment of liabilities (transferred or unrecorded)/taken over by a Partner (Actual Payment/settlement):
Realisation A/c Dr.
To Bank/ Partner’s Capital A/c
- For 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
- For 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.
- For agreed remuneration to a partner for dissolution work.
Realisation A/c Dr.
To Partner’s Capital A/c
- For 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.
- For settlement of loan by a firm to a partner:
Bank A/c Dr.
To loan to partners A/c
- For payment of loans due to partners:
Partner’s Loan A/c Dr.
To Bank A/c
- For transfer of accumulated profits:
General Reserve A/c Dr.
To Partners’ Capital A/c (individually in Profit Sharing Ratio)
Reverse Entry for fictitious assets.
- For settlement of partners’ 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