Partnership

Dissolution

Medium

G, K and B were partners running a partnership for last 10 years, sharing profit and loss in the ratio of 5 : 3 : 2. Post Covid, their firm was affected badly and started incurring losses. On 31st March, 2023 they all decided to dissolve the firm due to continuous losses. Their capital balances were ₹ 4,00,000, ₹ 3,00,000 and ₹ 2,00,000 respectively. Firm had liabilities ₹ 80,000, Cash balance ₹ 40,000, other Sundry Assets ₹ 8,50,000 and P&L A/c constituted the rest. Assets realised at 80% and liabilities were paid in full. There was unrecorded liability of ₹ 50,000 which was settled at ₹ 40,000. Realisation expenses amounted to ₹ 30,000, being paid by G on behalf of the firm.

Determine the amount of Profit and Loss Account.

(Cr.) ₹ 90,000

(Dr.) ₹ 90,000

(Cr.) ₹ 1,30,000

(Dr.) ₹ 1,30,000

✅ Correct Option: 2

Given:

Capitals = 4,00,000 + 3,00,000 + 2,00,000 = 9,00,000

Liabilities = 80,000

Cash = 40,000

Sundry Assets = 8,50,000

Concept:

Balance Sheet Equation:

Assets = Liabilities + Capital

Calculation:

Assets = 8,50,000 + 40,000 + P&L

Liabilities = 9,00,000 + 80,000

So,

8,90,000 + P&L = 9,80,000

P&L = 9,80,000 − 8,90,000

P&L = 90,000 (Option 2)

2026: 29 May Shift 2

State the order of payment to be followed on the dissolution of a firm:

A. To each partner proportionately what is due to him/her from the firm for advances provided i.e. Partner's Loan A/c

B. To each partner proportionately what is due to him/her on account of capital

C. For the debts of the firm to outside parties

Choose the correct answer from the options given below:

2022: 20 Aug Shift 2

X, Y, Z are partners who decided to dissolve their firm. Realisation expenses were to be borne by Y for which he was to be given remuneration of Rs. 10,000. Actual expenses were Rs. 12,000. How much amount will be transferred to Y's Capital A/c for it?

2026: 11 May Shift 2

When the firm is dissolved, its books of account are to be closed and the profit or loss arising on realisation of its assets and discharge of liabilities is to be computed. For this purpose, a Realisation Account is prepared. Identify correct statements related to Realisation Account.

A. Transfer all assets (other than cash in hand, bank balance and fictitious assets, if any), and all external liabilities to this account.

B. The balance in this account is not transferred to partners' capital accounts in the profit sharing ratio.

C. The balance in this account is transferred to partners' capital accounts in the profit sharing ratio.

D. Ascertain the net effect (profit or loss) of realisation of assets and payment of liabilities.

Choose the correct answer from the options given below:

2025: 30 May Shift 2

Which account is debited for Realisation expenses paid?

2025: 4 June Shift 2

In case of Fixed Capital Method, at the time of dissolution of a firm, An un-recorded asset are taken over by a partner, which Journal Entry will be recorded in the books of the Partnership Firm :-

2026: 21 May Shift 1

When both the debts of the firm and private debts of a partner co-exist, the Property of the firm as per Section 49 of the Indian Partnership Act, shall apply:

(A) Payment of debts of the firm first.

(B) The surplus, if any, shall be divided among the partners as per their claims, which can not be utilised for payment of their private liabilities.

(C) The surplus, if any, shall be divided among the partners as per their claims, which can be utilised for payment of their private liabilities.

(D) Payment of private debts of the partners first.

Choose the correct answer from the options given below.

Determine the amount of Profit and Loss Account.

Solution

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