Partnership

Dissolution

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common

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

Realisation Account in Equal Ratio

Realisation Account in Profit Sharing Ratio

Capital Accounts in Equal Ratio

Capital Accounts in Profit Sharing Ratio

✅ Correct Option: 4

When a firm is dissolved, accumulated losses (such as debit balance of Profit and Loss Account or deferred revenue expenditure) represent losses that have already been incurred by the firm in previous years.

These accumulated losses are not assets or liabilities to be realized, so they are not transferred to Realisation Account.

Since these are past losses that belong to the partners, they must be borne by the partners in the same manner they share profits and losses - that is, in their Profit Sharing Ratio.

Journal Entry:

Partner's Capital A/cs (individually) Dr. (in PSR)

To Accumulated Losses A/c

This entry closes the accumulated losses account by debiting the partners' capital accounts in their profit-sharing ratio.

For example, if partners A and B share profits in 3:2 ratio and there is an accumulated loss of ₹50,000:

A's Capital A/c will be debited with ₹30,000
B's Capital A/c will be debited with ₹20,000

This follows the fundamental principle that partners share profits and losses in their agreed ratio, whether the firm continues or is dissolved.

2023: 28 May Shift 1

Rohit a partner paid the realisation expenses of Rs. 10,000 and he was to get a remuneration of Rs. 12,000 for completing the dissolution process and realisation expenses were borne by Rohit. The amount transferred to his capital A/c will be :

2026: 24 May Shift 1

In case of dissolution, application of assets of the firm shall be applied in a particular manner and order.

Arrange the following steps in a sequence:

(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.

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

Choose the correct answer from the options given below:

2025: 31 May Shift 1

After transferring liabilities like creditors and bills payables in the Realisation Account, in the absence of any information regarding their payment, such liabilities are treated as:

2025: 14 May Shift 1

In case of dissolution of a firm, Losses including deficiencies of capital, shall be paid first out of ....

2026: 24 May Shift 1

In case of dissolution of a firm:

(A) The firm ceases to conduct business and has to settle its accounts.

(B) It disposes off all its assets for satisfying all the claims against it.

(D) Rules as provided in Section 48 of the Indian partnership will be applicable.

Choose the correct answer from the options given below:

2025: 30 May Shift 1

A firm is dissolved compulsorily in the following cases:

(A) When all the partners or all but one partner, become insolvent, rendering them incompetent to sign a contract.

(B) When the business of the firm becomes illegal

(D) When some event has taken place which makes it unlawful for the partners to carry on the business of the firm in partnership.

Choose the correct answer from the options given below:

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

Solution

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