These MCQs are based on examination questions for practice to prepare for final exams.

Answerrs are given at the end.

1. New ratio is not to be calculated on:

a) Admission of a partner

b) retirement of a partner

c) death of a partner

d) dissolution of partnership firm

2. On dissolution of a firm fictitious assets are transferred to:

a) credit side of partners’ capital account

b) debit side of realisation account

c) debit side of partners’ capital account

d) credit side of realisation account

3. In case of dissolution Rohit one of the partners was paid only ₹6000 for his loan to the firm which amounted to ₹6500. ₹ 500 will be recorded in which account and on which side:

a) Realisation account debit side

b) Realisation account credit side

c) loan account debit side

d) A's capital account credit side

4. Section 41 of partnership act 1932 deals with dissolution of a firm:

a) by mutual agreement

b) compulsory dissolution

c) by notice

d) by order of court

5. Settlement of accounts in case of dissolution of partnership is dealt with …… section of partnership act 1932:

a) Section 45

b) section 46

c) section 47

d) section 48

6. At the time of dissolution total assets are worth ₹3,00,000 and external liabilities are worth ₹1,40,000. If assets realised 120% and realisation expenses paid were ₹6,000, then profit/loss on realisation will be:

a) Profit ₹60,000

b) Loss ₹60,000

c) Loss ₹56,000

d) Profit ₹54,000

7. On the basis of the following data, how much final payment will be made to a partner on firm’s dissolution? Credit balance of Capital Account of the partner was ₹50,000. Share of loss on realisation amounted to ₹10,000. Firm’s liability taken over by him was for ₹8,000.

a) ₹32,000

b) ₹48,000

c) ₹40,000

d) ₹52,000

8. On the day of dissolution of the firm ‘Ankit Brothers’ had partner’s capital amounting to ₹1,50,000 external liabilities ₹35,000, Cash balance ₹8,000 and P&LA/c(Dr.) ₹7,000. If Realisation expense and loss on Realisation amounted to₹5,000 and ₹25,000 respectively, the sale of assets realized:

a) ₹1,64,000

b) ₹1,45,000

c) ₹1,57,000

d) ₹1,50,000

9. In which of the following cases is the business of a firm not dissolved compulsorily?

a) When all but one partner becomes insolvent.

b) When the business of the firm becomes illegal.

c) When there is a change in profit sharing ratio between existing partners.

d) When a partner who is a citizen of a country becomes an alien enemy because of the declaration of war with his country and India.

10. Ruhi, Juhi and Sheetal were partners sharing profits equally. At the time of dissolution of the partnership firm, Ruhi’s loan to the firm will be:

a) Credited to Ruhi’s Capital Account.

b) Debited to Realisation Account.

c) Credited to Realisation Account.

d) Credited to Bank Account.

Class 12 Accountancy MCQs Dissolution of Partnership Firm

11. State the order of payment of the following, in case of dissolution of partnership firm.

A-to each partner proportionately what is due to him on account of capital;

B-for the debts of the firm to the third parties;

C-to each partner proportionately what is due to him/her from the firm for advances as distinguished from capital (i.e. partner’ loan).

a) A,B,C

b) A,C,B

c) C,A,B

d) B,C,A

12. Book value of creditors given in the Balance Sheet before dissolution was ₹2,00,000. Half of the creditors accepted furniture of ₹1,20,000 at an agreed value of 10% less than the book value and cash of ₹8,000 in settlement of their claim. Remaining creditors were paid at a discount of 5%. Bank Account will be credited in Realisation Account for payment to creditors by:

a) ₹95,000

b) ₹1,03,000

c) ₹1,08,000

d) ₹1,00,000

13. At the time of dissolution of a firm, creditors are ₹3,20,000, firm's capital is ₹4,80,000, Bank Balance is ₹50,000. Other assets realised ₹6,00,000. Gain/Loss in the Realisation Account will be:

a) ₹1,50,000 (Gain)

b) ₹1,60,000 (Gain)

c) ₹2,00,000 (Gain)

d) ₹1,50,000 (Loss)

14. On the day of dissolution of the firm ‘Neel Brothers’ had partner’s capital amounting to ₹1,50,000, external liabilities ₹35,000, Cash balance ₹8,000 and P&LA/c(Dr.) ₹7,000. If Realisation expense and loss on Realisation amounted to₹5,000 and ₹25,000 respectively, the amount realised by sale of assets is:

a) ₹1,64,000

b) ₹1,45,000

c) ₹1,57,000

d) ₹1,50,000

15. Arun, Varun and Chetan are partners. The firm had given a loan of ₹20,000 to Varun. They decided to dissolve the firm. In the event of dissolution the loan will be settled by transferring it to the:

a) debit side of realisation account

b) transferring it to the credit side of realisation account

c) transfer it to the debit side of Varun's capital account

d) Varun paying Arun and Chetan privately.

16. In case of dissolution, total creditors of the firm were ₹30,000; creditors worth ₹10000 were given a piece of furniture costing ₹7000 in full and final settlement. Remaining creditors allowed a discount of 10%. What will be the amount with which cash will be credited in the realisation account for payment to creditors:

a) ₹28,000

b) ₹27,000

c) ₹18,000

d) ₹25,000

17. On dissolution of a firm, its Balance Sheet revealed total creditors ₹50,000; Total Capital ₹48,000; Cash Balance ₹5,000. Its assets were realised at 10% less. Loss on realisation will be:

a) ₹6,000

b) ₹11,760

c) ₹11,400

d) ₹9,300

18. X and Y are partners in a partnership firm sharing profit and losses in the ratio of 3:2. On 31st March 2024 the firm was dissolved. On the date, Furniture of book value of ₹80,000 was sold for ₹74,000 by auction and auctioneer's Commission was ₹2,000, then bank account will be debited with:

a) ₹66,000

b) ₹68,000

c) ₹72,000

d) ₹70,000

19. Mitesh is a Partner, who has given a loan of ₹1,09,000 to the firm. At the time of dissolution of the firm he accepted ₹1,00,000 in full settlement of his loan. What will be the journal entry?

a) Mitesh's Loan A/c Dr. 1,09,000

To Bank A/c 1,00,000

To Realisation A/c 9,000

b) Mitesh's Loan A/c Dr. 1,00,000

To Bank A/c 1,00,000

c) Mitesh's Loan A/c Dr. 1,09,000

To Bank A/c 9,000

To Realisation A/c 1,00,000

d) Mitesh's Loan A/c Dr. 1,09,000

To Bank A/c 1,00,000

To Mitesh's Capital A/c 9,000

20. At the time of dissolution of partnership firm, if the realizable value of intangible asset is not given, the realised value will be taken as:
a) market value

b) book value

c) nil

d) none of these

More questions will be added from time to time...

Class 12 Accountancy MCQs Dissolution of Partnership Firm - Answers

1. d) dissolution of partnership firm
2. c) debit side of partners’ capital account
3. b) Realisation account credit side
4. b) compulsory dissolution
5. d) section 48
6. d) Profit ₹54,000
7. b) ₹48,000
8. d) ₹1,50,000
9. c) When there is a change in profit sharing ratio between existing partners.
10. d) Credited to Bank Account.
11. d) B,C,A
12. b) ₹1,03,000
13. d) ₹1,50,000 (Loss)
14. d) ₹1,50,000
15. c) transfer it to the debit side of Varun's capital account
16. c) ₹18,000
17. d) ₹9,300
18. c) ₹72,000
19. a) Mitesh's Loan A/c Dr. 1,09,000To Bank A/c 1,00,000To Realisation A/c 9,000
20. c) nil

Class 12 Accountancy MCQs Death of Partner

Class 12 Accountancy MCQs Share Capital

Learning Games and Activities in Accountancy – Class 12

The post Class 12 Accountancy MCQs Dissolution of Partnership Firm appeared first on Commerceatease - Website for 11th & 12th Commerce.

These are the main journal entries usually asked in exam. There’s no set collection given here but jumbled to bring random factor for preparation.

All the following Journal Entries have been given here assuming that:

(a) All the assets and liabilities have already been transferred to Realisation Account.

(b) Persons mentioned in transactions are Partners, unless specifically mentioned.

Examination Journal Entries on Dissolution

1. Dissolution expenses amounted to ₹6,500.

Realisation A/c Dr. 6,500

To Cash / Bank A/c 6,500

2. Dissolution expenses ₹7,800 were paid by Abha.

Realisation A/c Dr. 7,800

To Abha's Capital A/c 7,800

3. Vibha was appointed to look after the dissolution process for which she was given a remuneration of ₹12,000.

Realisation A/c Dr. 12,000

To Vibha's Capital A/c 12,000

4. Sudha was appointed to look after the dissolution work for which she was allowed a remuneration of ₹15,000. She agreed to bear dissolution expenses. Actual dissolution expenses paid by her amounted to ₹11,800.

Realisation A/c Dr. 15,000

To Sudha's Capital A/c 15,000

5. Anuj was to look after the dissolution process for which he was allowed a remuneration of ₹12,000 he also agreed to bear dissolution expenses. Actual expenses ₹9,500 were paid by the firm.

(i) Realisation A/c Dr. 12,000

To Anuj's Capital A/c 12,000

(ii) Anuj's Capital A/c Dr. 9,500

To Cash /Bank A/c 9,500

6. Anuradha looked after the dissolution work for remuneration of ₹8,500 and agreed to bear dissolution expenses upto ₹ 6,000. Actual expenses paid by her were ₹7,600.

(i) Realisation A/c Dr. 8,500

To Anuradha's Capital A/c 8,500

(ii) Realisation A/c Dr. 1,600

To Anuradha's Capital A/c 1,600

7. Vibha was appointed to look after the dissolution work for which she was allowed a remuneration of ₹12,000. She agreed to take over investment of the book value of ₹11,000 towards payment of her remuneration.

No Entry

8. Creditors worth ₹85,000 accepted ₹40,000 as cash and Investment worth ₹43,000, in full settlement of their claim.

Realisation A/c Dr. 40,000

To Bank A/c 40,000

9. Creditors were ₹16,000. They accepted Machinery valued at ₹18,000 in settlement of their claim.

No Journal Entry

10. Creditors were ₹90,000. They accepted Buildings valued ₹1,20,000 and paid cash to the firm ₹30,000.

Bank A/c Dr.  30,000

To Realisation A/c 30,000

Examination Journal Entries on Dissolution

11. There was an old computer which was written off in the books of accounts in the previous year. The same has been taken over by a partner Nitin for ₹3,000.

Nitin’s Capital A/c   Dr. 3,000

To Realisation A/c   3,000

12. Payment of unrecorded liabilities of ₹3,200.

Realisation A/c Dr. 3,200

To Bank A/c 3,200

13. Profit on Realisation amounting to ₹18,000 is to be distributed between the partners Ashish and Tarun equally.

Realisation A/c Dr. 18,000

To Ashish’s Capital A/c 7,500

To Tarun’s Capital A/c 7,500

14. An unrecorded asset realised ₹5,500.

Bank A/c Dr. 5,500

To Realisation A/c 5,500

15. A Firm has a Stock of ₹1,60,000. Aziz, a partner took over 50% of the Stock at a discount of 20%, Remaining Stock was sold at a profit of 30% on cost.

(1) Aziz’s Capital A/c Dr. 64,000

To Realisation A/c 64,000

(2) Bank A/c Dr. 1,04,000

To Realisation A/c 1,04,000

16. Land and Buildging (book value ₹1,60,000) sold for ₹ 3,00,000 through a broker for 2%, commission on the deal.

Bank A/c Dr. 2,94,000

To Realisation A/c 2,94,000

17. Plant and Machinery (book value ₹60,000) was handed over to a Creditor at an agreed valuation of 10% less than the book value.

No Journal Entry

18. Realisation expenses are to be borne by Rashmi, and he will be paid ₹70,000 as remuneration for completing the dissolution process. The actual expenses incurred by Rashmi were ₹1,20,000.

Realisation A/c Dr. 70,000

To Rashmi’s Capital A/c 70,000

19. 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 Atul, at a discount of 20%; 40% of the remaining assets are sold at a profit of 30% on cost; 5% of the balance being obsolete, realised nothing and remaining assets are handed over to a Creditor, in full settlement of his claim.

(1) Realisation A/c Dr. 1,00,000

To Sundry Assets 1,00,000

(2) Atul’s Capital A/c Dr. 40,000

To Realisation A/c 40,000

(3) Bank A/c Dr. 26,000

To Realisation A/c 26,000

(4) No Journal Entry for Handing over remaining assets to Creditors.

20. Ashish, an old customer whose account for ₹1,000 was written off as bad in the previous year, paid 60% of the amount.

Bank A/c Dr. 600

To Realisation A/c 600

21. Paras agreed to take over the firm’s goodwill (not recorded in the books of the firm), at a valuation of ₹30,000.

Paras A/c Dr. 30,000

To Realisation A/c 30,000

22. There was an old typewriter which had been written off completely from the books. It was estimated to realise ₹400. It was taken away by Riya at an estimated price less 25%.

Riya’s Capital A/c Dr. 300

To Realisation A/c 300

Examination Journal Entries on Dissolution

23. here were 100 shares of ₹10 each in Star Limited acquired at a cost of ₹2,000 which had been written off completely from the books. These shares are valued @ ₹6 each and divided among the partners A and B in their profit-sharing ratio.

A’s Capital A/c   Dr. 300

B’s Capital A/c    Dr. 300

To Realisation A/c  600

24. The firm paid ₹40,000 as compensation to employees.

Realisation A/c  Dr. 40,000

To Bank  40,000

25. Sundry creditors amounting to ₹36,000 were settled at a discount of 15%.

Realisation A/c  Dr. 30,600

To Bank  30,600

26. Loss on realisation ₹42,000 was to be distributed between Kartik and Hari in the ratio of 3:4.

Kartik’s Capirtal A/c   Dr. 18,000

Hari’s Capital A/c    Dr. 24,000

To Realisation A/c  42,000

27. Dhawan’s Loan of ₹50,000 to the firm was settled by paying ₹42,000.

Dhawan’s Loan A/c   Dr.  50,000

To Bank A/c 42,000

To Realisation A/c 8,000

28. Avni’s Loan of ₹40,000 was settled by paying giving an unrecorded asset of ₹45,000.

Avni’s Loan A/c  Dr. 40,000

To Realisation A/c 40,000

29. Loan to Paru ₹60,000 was settled through payment of Paru’s brother loan of the same amount.

Realisation A/c Dr. 60,000

To Loan to Paru A/c  60,000

30. Noor’s loan of ₹80,000 to the firm and she took over machinery of ₹60,000 as part payment.

Noor’s Loan A/c  Dr. 80,000

To Realisation A/c 60,000

To Bank A/c  20,000

31. At the time of dissolution, Perry, a creditor of the firm agreed to take over the furniture of the book value of ₹1,00,000 at ₹89,000 and the balance in cash in full settlement of his account of ₹1,10,000.

Realisation A/c Dr. 21,000

To Bank A/c 21,000

32. Gracy a partner, is allowed a remuneration of ₹13,000 for dissolution work and is to bear all the expenses of realisation which amounted to ₹5,000 were paid by the firm.

Realisation A/c 13,000

To Gracy’s Capital A/c 8,000

To Bank A/c 5,000

33. Komal a partner, agreed to pay off her brother’s loan of ₹13,000 at a discount of 5%.

Realisation A/c  Dr. 12,350

To Komal’s capital A/c 12,350

34. All partners are agreed that the process of realisation at the time dissolution will be accomplished by Arun for which he will be paid ₹10,000 along with the amount of expense which amounted to 2% of total value realised from the Assets on dissolution. Some assets were sold for Cash at a cumulative Value of ₹12,00,000 and the remaining were taken over by creditors at a valuation of ₹3,00,000.

Realisation A/c Dr. 40,000

Arun’s Capital 40,000

35. Deferred Advertisement Expenditure A/c appeared in the books at ₹28,000.

Partners’ Capital A/c 28,000 (In profit sharing ratio)

To Realisation A/c 28,000

36. Out of the Stock of ₹1,20,000; Tarun (a partner) took over 1/3 of the stock at a discount of 25% and 50% of remaining stock was took over by a Creditor of ₹30,000 in full settlement of his claim. Balance amount of stock realized at ₹25,000.

(1) Tarun’s capital A/c Dr. 30,000

To Realisation A/c 30,000

(2) No Journal Entry

(3) Bank A/c Dr. 25,000

To Realisation A/c 25,000

37. An outstanding bill for repairs and renewal of ₹3,000 was settled through an unrecorded asset which was valued at ₹10,000. Balance being settled in Cash.

Bank A/c  Dr. 7,000

To Realisation A/c 7,000

38. At the time of dissolution, Harry, a creditor of the firm agreed to take over the furniture of the book value of ₹1, 00,000 at ₹ 89,000 and the balance in cash in full settlement of his account of ₹1, 10,000.

Realisation A/c Dr. 21,000

To Bank A/c 21,000

12 Journal Entries on Dissolution of Partnership Firm

The post Examination Journal Entries on Dissolution appeared first on Commerceatease - Website for 11th & 12th Commerce.

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:

1. Transfer of assets - from Balance Sheet to Realisation Account - (At Book Value):

Realisation A/c Dr.

To Assets (Individually) A/c

2. 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

3. 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

4. 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

5. 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

6. 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.

7. For agreed Remuneration to a partner for dissolution work.

Realisation A/c Dr.

To Partner’s Capital A/c

8. 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.

9. Settlement of loan by a firm to a partner:

Bank A/c Dr.

To loan to partners A/c

10. Payment of loans due to partners:

Partner’s Loan A/c Dr.

To Bank A/c

11. Transfer of Accumulated profits:

General Reserve A/c Dr.

To Partners’ Capital A/c (individually in Profit Sharing Ratio)

Reverse Entry for fictitious assets.

12. 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.

Examination Journal Entries on Dissolution

Dissolution of Partnership Firm

Learning Games and Activities in Accountancy – Class 12

The post 12 Journal Entries on Dissolution appeared first on Commerceatease - Website for 11th & 12th Commerce.

For preparing Realisation Account, Balance Sheet is necessary.

If it is not given in the question, it must be prepared.

Balance Sheet prepared from the given information is called Memorandum Balance Sheet.

It is prepared on the basis of normal Balance Sheet Equation i.e.

Capital + Liabilities = Assets

• Usually, missing information is Sundry Assets (balancing figure) on Asset side.
• If however assets besides cash are given, then cash is the balancing figure.
• If, cash is given and both the sides are not equal, then the difference is Accumulated losses or profits depending on the side of the balance sheet.

After preparing the Memorandum Balance Sheet, Follow the usual procedure of preparing Realization account and other related accounts.

The most important point relating to the accounting procedure of realization is that, in the end the balance in all the ledger accounts become nil.

The final payments/receipts to/from partners should make the bank balance nil.

Check your Understanding

12 Journal Entries on Dissolution of Partnership Firm

38 Journal Entries on Dissolution of Partnership Firm in Exam.

The post Memorandum Balance Sheet appeared first on Commerceatease - Website for 11th & 12th Commerce.

Meaning The complete end of the partnership business.

(You must have watched the animated video)
Condition of preparing Accounts on Dissolution of Firm:

Complete Balance sheet of the firm.

Memorandum Balance Sheet.

Using C+L=A

More wow points for you...

1. No old or new PSR, Gaining Ratio/ Sacrifice Ratio.
2. No special treatment of Goodwill
3. Balance Sheet is not to be prepared as all account balances become nil after this process.

Realization Account is a nominal account prepared for the purpose of calculating and distributing the profit/loss arising out of realization of assets and repayment of liabilities, at the time of dissolution of a partnership firm.

Accompanied by: Capital accounts, Bank account, partners’ loan account.

Steps in preparing various accounts:

1. First of all Transfer the items of Balance Sheet to the concerned accounts as mentioned here.
2. Then Complete Realisation Account.
3. Complete Capital Accounts of the partners.
4. Then complete the Bank Account.
5. Bank account should be left with nil balance.

Items of Balance Sheet:

 Items of Balance Sheet should be transferred to various accounts as under:

All items appearing on assets side of the firm’s balance sheet, other than cash, bank balance, accumulated losses, loan to a partner, current account (debit) are transferred to the debit side of realization account, at book values.

But Debtors must be transferred at Gross value and the Provision for Doubtful Debts be transferred on Credit side of Realisation Account.

All items appearing on liabilities side of the firm’s balance sheet, other than accumulated profits, partner’s loan and capital and current accounts are transferred to the credit side of realization account, at book values.

Assets transferred to the debit side of Realization account can be

a) sold off,

b) taken over by a partner or

c) can be used to pay off a liability.

Liability transferred to the credit side of Realization account can be

a) paid off,

b) assumed by a partner or

c) can be set off against an asset.

If asset is used to pay off a liability, there is no corresponding treatment except for the net payment paid/received in cash/bank which must be shown in realization account.

* Workmen Compensation Reserve, should be transferred to the credit side of Realization account to the extent of the concerned liability. Excess of this reserve can be directly transferred to the credit side of Partners capital accounts in their profit sharing ratio.

Investment Fluctuation Reserve must be transferred to credit side of Realisation Account.

** Employees Provident Fund must be transferred to the credit side of realization account as it is for definite liability to be paid to the employees.

*** Loss on realization is shown on the credit side.

For Realisation Account, Capital Accounts and Bank Account, Check:

Accounts relating to Dissolution

Realisation expenses, Check:

Realisation Expenses

For Journal Entries:

12 Journal Entries on Dissolution of Partnership Firm

For a collection of Journal Entries on Dissolution, as set in Final Exams.

38 Journal Entries on Dissolution of Partnership Firm in Exam.

Class 12 Accountancy MCQs Dissolution of Partnership Firm

The post Dissolution of Partnership Firm appeared first on Commerceatease - Website for 11th & 12th Commerce.

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 

                                                                             Capital Accounts of the Partners

                                                                                      Bank Account

                                                                        Partner’s Loan account

Realisation Expenses on Dissolution of Firm

Class 12 Accountancy MCQs Dissolution of Partnership Firm

Self-Learning Activities in Accountancy Class 12

The post Accounts Relating to Dissolution of Firm appeared first on Commerceatease - Website for 11th & 12th Commerce.

Expenses of realization can be treated in the following ways, depending on the information available and the instruction given in the question.

(a) When realization expenses are borne and paid by the firm:

Realization A/c                      Dr.

Bank A/c

(b) When the firm has agreed to pay remuneration to a partner for the realization proceedings irrespective of the actual realization expenses:

Realization A/c                     Dr.

Partners’ Capital A/c

(c) When the actual expenses are paid by the firm on behalf of a partner:

Partners’ Capital A/c          Dr.

Bank A/c

(d) When the partner agrees to pay the expenses on behalf of the firm:

Realization A/c                   Dr.

Partners’ Capital A/c

NOTE: You must check in question paper the words 'borne by' and 'paid by' and treat accordingly.

Treatment of Goodwill

Goodwill is treated like any other asset, there is no special treatment on Dissolution of firm.

Sometimes, question is silent about the repayment of some liabilities. In that case, it is assumed that these have been repaid at their book values.

As per C.B.S.E. syllabus, the realizable value of asset must be given.

Test Yourself

Memorandum Balance Sheet

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