 Dissolution Of Partnership Firm

 Meaning :- Dissolution refers to Winding up of existing business Activity due to Lack of

capital, death of Any Partner, Insolvency of partner, Suffering from continuous losses
and as per court order or government regulation.

 Following ledgers A/c need to be prepare while doing dissolution of partnership firm :-
 Realisation A/c (Treat It As A Nominal A/c)
 Partners Capital/Partners Current A/c
 Cash/bank A/c

 Steps Required to solve the problems while doing dissolution Of

Partnership firm

 1 . Transfer All the Assets to the Debit side of Realisation A/c At Book Value Except
Losses And Fictitious Assets:-
Realisation A/c --- Dr

To Sundry Assets A/c

 Note:- Losses Will Transfer to Partners Capital/Current A/c Dr Side in their profit
sharing Ratio

 2. Transfer All The outsider Liabilities to the Credit side of Realisation A/c At Book
Value :-
Sundry Liabilities A/c—Dr
To Realisation A/c

 Note :-

 A) Partners Capital Transfer to Partners Capital A/c

 B) Profit And Reserves Transfer to the partners Capital /Currenta A/c in their PSR

 3 Sale of Assets:-
 A) If Assets Sold By Firm :-
 Cash/Bank A/c – Dr
To Realisation A/c

 B) If Assets Taken Over By Partner

Partners Capital / Current A/c -- Dr

To Realisation A/c
 4) Payment Of Liability :-

 If Liabilities Paid By Firm

Realisation A/c --- Dr

To Cash/Bank A/c

 If Liabilities Paid By Partner

Realisation A/c
To Partners Capital/ Current A/c

5) Payment Of Realisation Expenses :-

Realisation A/c –Dr
To Cash/Bank A/c
6) Close Realisation A/c :-

A) If Profit
Realisation A/c—Dr
To Partners Capital/Current A/C
B) If Loss
Partners Capital/current A/c --- Dr
To Realisation A/c
 7) Close Partners Capital A/c And Balance will Transfer to Cash/ Bank A/c :-
A) If Amount Payble to Partners (In Case Of excess Capital):-

Partners Capital A/c ---Dr

To Cash /Bank A/c
B) If Amount Recievable from Partners ( In Case of Short Cpital) :-

Cash/Bank A/c----Dr
 To Partners Capital A/c

 8) Close Cash/Bank A/c it will close Automatically .