Partnership

Dissolution

Medium

Case study

A and B were partners in a partnership firm. Due to the ill health of B they decided to dissolve the firm. The position of Assets and Liabilities on the date of dissolution was:

Balance Sheet

Liabilities	Rs.	Assets	Rs.
Loan by B	20,000	Goodwill	30,000
Capitals		Furniture	40,000
A. 1,00,000		Building	90,000
B. 1,40,000	2,40,000	Debtors	50,000
		Cash	50,000
	2,60,000		2,60,000

It was agreed that following transactions will take place :

A. A wanted to start the business in sole proprietorship So he took Building and Furniture at 10% less than book value.

B. All the debtors proved good except a person C who did not pay Rs. 10,000.

The accumulated profits and reserve are transferred to:

Revaluation A/C

Realisation A/C

Partner's Capital A/C

Cash/Bank A/C

✅ Correct Option: 3

At the time of dissolution, accumulated profits and reserves belong to the partners. They are transferred directly to Partners' Capital Accounts in the profit-sharing ratio. They are not routed through Realisation A/c since they represent partners' own funds.

Question 41

Due to the ill health of B, they decided to dissolve the firm. It comes under ____ form of dissolution.

Question 42

The amount recovered from the debtors is:

Question 43

Following items appear on the Debit side of Realisation A/C except :

A. Transfer of Assets

B. Payment of liabilities

C. Provisions

D. Realisation expenses

E. Asset taken over by partner

Choose the correct answer from the options given below:

Question 44

The treatment of Goodwill appearing in the balance sheet will be:

The accumulated profits and reserve are transferred to:

Solution

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