Accounts Relating to Dissolution of Firm
Accounts Relating to Dissolution of Firm include mainly Realization Account, Partners' Capital Accounts and Bank Account. In case of loan by partner to the firm Partner's Loan Account is also prepared separately.
Realization Account - Meaning:
Realization Account is a nominal account prepared at the time of Dissolution of Partnership Firm, for the purpose of realization of assets and repayment/settlement of liabilities and sharing the profit/loss on realization among the partners.
Realization Account
| Debit Amounts | Credit Amounts |
| To Asset A/c (at book value) individually
To Bank A/c (actual payment of liability) To Partner’s Capital A/c (liability taken over at agreed value) To Bank A/c (unrecorded liability paid) To Bank A/c (realization expenses paid) To Partner’s Capital A/c (Agreed Remuneration) To Partners’ Capital A/c (profit on realization distributed in profit sharing ratio)*** |
By External liability A/c (at book value) individually
By Bank A/c (asset actually realized) By Partner’s Capital A/c (asset taken over at agreed value) By Bank A/c (unrecorded asset realized) By Investment Fluctuation Reserve A/c (book value) * By Workmen Compensation Reserve A/c (book value) * By Employees Provident Fund A/c (book value) ** |
Capital Accounts of the Partners
| Debit Amounts | Credit Amounts |
| To Current A/c (debit)
To Accumulated Losses To Realization A/c (asset taken over) To Realization A/c (loss on realization) To Bank A/c (Balancing figure-payment)
|
By Balance B/d (opening balance)
By Current A/c (credit) By Accumulated Profits/Reserves By Realization A/c (liability taken over) By Realization A/c (remuneration for realization) By Realization A/c (profit on realization) By Bank(Balancing figure-receipt)
|
Bank Account
| Debit Amounts | Credit Amounts |
| To Balance B/d (opening balance)
To Cash (b/d) To Realization A/c (Assets sold) To Partner's Capital A/c (brought) |
By Realization A/c (Liabilities paid)
By Partner’s Loan A/c (Repayment) By Realization A/c (realization expenses paid) By Partners’ Capital A/c (repayment)
|
Partner’s Loan account
| Debit Amounts | Credit Amounts |
| To Bank (if paid)
To Partner’s Capital A/c (if transferred to Capital) |
By Balance B/d (opening balance) |
Realisation Expenses on Dissolution of Firm
How to prepare Accounts Relating to Dissolution of Firm?
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