Partnership

Dissolution

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common

Unrecorded liabilities when paid are shown in:

Debit of Realisation Account

Debit of Bank Account

Credit of Realisation Account

Debit of Revaluation Account

✅ Correct Option: 1,4

When unrecorded liabilities are discovered and paid, the treatment depends on whether it occurs during reconstitution or dissolution of the partnership:

During Reconstitution (Admission/Retirement/Change in Ratio):

When unrecorded liabilities are paid, they represent a loss to the firm and must be adjusted.

Journal Entry:

Revaluation Account Dr.

To Bank Account

The Revaluation Account is debited as the unrecorded liability reduces the firm's net worth, representing a loss that must be shared by the old partners in their old profit-sharing ratio.

During Dissolution:

When unrecorded liabilities are paid during dissolution, they are treated as a loss.

Journal Entry:

Realisation Account Dr.

To Bank Account

The Realisation Account is debited because any liability paid (whether recorded earlier or not) reduces the amount available for distribution to partners, thus representing a loss on realisation.

Note: Bank Account is credited in both cases (not debited) as cash is going out of the business. The options refer to which account is debited when the payment is made.

Therefore, unrecorded liabilities when paid are shown in the Debit of Realisation Account (during dissolution) or Debit of Revaluation Account (during reconstitution).

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:

2022: 20 Aug Shift 2

Raman and Naman were in partnership sharing profit and losses as 3 : 2. Their partnership firm was dissolved on 31 March 2022. On the date of dissolution, Naman's loan was Rs. 20,000. Naman agreed to take stock (already transferred to Realisation A/c) of Rs. 15,000 at Rs. 18,000 and balance in cash for the settlement of loan. Journal Entry for above transaction is:

2026: 19 May Shift 1

Profit & Loss Adjustment A/c is not prepared in which of the following case?

2025: 13 May Shift 1

Which of the following indicate the situation of compulsory dissolution.

2025: 22 May Shift 1

Dissolution of a firm takes place on the happening of certain contingencies in the following cases:

(A) By the death of a partner

(B) By the adjudication of a partner as an insolvent

(D) If constituted for a fixed term, by the expiry of that term

Choose the correct answer from the options given below:

2026: 13 May Shift 2

Choose the correct sequence of Closing of Ledger Accounts at the time of dissolution of a Partnership Firm.

(A) Closing of Cash at Bank & Cash in hand account.

(B) Realisation of Assets and payment of external liabilities recorded in Realisation Account.

(D) Closing Partner's capital account by settling the final payment to partners or receipt from partners.

Choose the correct answer from the options given below:

Unrecorded liabilities when paid are shown in:

Solution

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