Partnership

Dissolution

Easy

common

In the case of dissolution of firm, accumulated losses are transferred to:

Capital Accounts in Profit Sharing Ratio

Realisation Account in Profit Sharing Ratio

Capital Accounts in Equal Ratio

Realisation Account in Equal Ratio

✅ Correct Option: 1

When a firm is dissolved, accumulated losses (such as debit balance in Profit and Loss Account or deferred revenue expenditure) represent losses that have occurred in the past but have not yet been distributed among the partners.

These accumulated losses are not assets or liabilities to be realized or settled, hence they do not go to the Realisation Account. The Realisation Account deals only with the realization of assets and payment of external liabilities.

Since these are losses that belong to the firm, they must be borne by the partners in their profit sharing ratio (the same ratio in which they share profits and losses during the normal course of business).

Journal Entry:

Partners' Capital Accounts Dr. (in PSR)

To Accumulated Loss Account

Example: If accumulated loss is ₹30,000 and partners A and B share profits in 2:1 ratio, then A will bear ₹20,000 and B will bear ₹10,000 by debiting their respective capital accounts.

The treatment is similar to how accumulated profits (reserves) are distributed to partners' capital accounts in their profit sharing ratio during dissolution.

Correct Option: 1 - Capital Accounts in Profit Sharing Ratio

2025: 29 May Shift 2

At the time of dissolution, a firm transferred Rs.100,000 Assets to the realization account and 50% of the assets were taken over by Kiran at 20% discount. How much net assets were taken over by Kiran?

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: 27 May Shift 2

Identify the steps involved in the accounting treatment in the case of dissolution of firm:

(A) Capital accounts of partners are prepared and their final settlement is done.

(B) The balance of realisation account (profit or loss on realization) is transferred to partners' capital accounts in the profit sharing ratio.

(D) Realisation account is prepared.

(E) Bank account is prepared.

Choose the correct answer from the options given below:

2025: 22 May Shift 1

When a firm is dissolved with the consent of all the partners, it is called:

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?

2025: 4 June Shift 2

In case of dissolution of a firm, the firm ceases to conduct business and has to settle its accounts. The assets of the firm, including any sum contributed by the partners to make up deficiencies of capital, shall be applied in the following manner and order:

(A). In paying to each partner proportionately what is due to him on account of capital.

(B). The residue, if any, shall be divided among the partners in their profit sharing ratio.

(C). In paying the debts of the firm to third parties.

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

Choose the correct answer from the options given below:

In the case of dissolution of firm, accumulated losses are transferred to:

Solution

Related questions:

Keyboard Shortcuts

CUET Accountancy Past Year Questions (Topic-Wise)