Partnership

Dissolution

Medium

common

At the time of the Dissolution of a Partnership Firm, which statement is not false :-

The amount of Provision for Debtors is transferred to the Credit Side of the Realisation Account.

The amount of Provision for Debtors is transferred to the Debit Side of the Realisation Account.

The amount of Provision for Debtors is transferred to the Credit Side of the Bank Account.

The amount of Provision for Debtors is transferred to the Credit Side of the Capital Account.

✅ Correct Option: 1

At the time of dissolution of a partnership firm, a Realisation Account is prepared to record the sale of assets and settlement of liabilities.

The accounting treatment is:

All assets (except cash/bank) → Debit side of Realisation Account (at book value)
All liabilities (except partners' capital and loans) → Credit side of Realisation Account

Treatment of Provision for Debtors:

Provision for Debtors is a negative asset (contra-asset account). During dissolution:

Debtors are transferred to Realisation Account at their gross book value (without deducting provision). To maintain the net effect, the Provision for Debtors is transferred to the Credit side of Realisation Account.

Journal Entry:

Realisation A/c Dr.

To Debtors A/c

(Debtors transferred at gross value)

Provision for Doubtful Debts A/c Dr.

To Realisation A/c

(Provision transferred to credit side)

This ensures that the net realizable value of debtors is properly reflected in the Realisation Account. The provision, being a liability against the asset, naturally goes to the credit side.

Therefore, Option 1 is the correct statement (not false) → Provision for Debtors is transferred to the Credit Side of the Realisation Account.

2022: 20 July Shift 1

In the balance sheet Total Debtors appear at Rs. 1,50,000 and provision for doubtful debts appear at Rs. 1,500. How much amount will be realised from debtors, if bad debts amounted to Rs. 20,000 and remaining debtors realised at a discount of 15% ?

2026: 21 May Shift 1

On dissolution of a firm, Investment and Investment Fluctuation Fund appeared in the balance sheet. These will be transferred to:

2025: 30 May Shift 1

Which item among the following is NOT listed on the credit side of a Realization Account?

2025: 22 May Shift 2

If the asset is taken over by the creditor in lieu of the amount due to him, then the journal entry will be:

2026: 13 May Shift 1

At the time of Dissolution of a Partnership Firm, the assets of the firm, including any sum contributed by the partners to make up deficiencies of capital, shall be applied among the partners in the following manner and order:

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

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

(D) In paying to each partner proportionately what is due to him on account of capital; and

Choose the correct answer from the options given below:

2025: 13 May Shift 2

Unrecorded liabilities when paid at the time of dissolution of a partnership firm, are shown in:

At the time of the Dissolution of a Partnership Firm, which statement is not false :-

Solution

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