Dissolution of a partnership does not

mean the formal termination of a business.

A partnership is liquidated, when its

business operations are completely
Partnershi terminated or ended. The partnership
assets are sold, the partnership creditors
p are paid and the remaining assets, if any,
are distributed to the partners as a return
Liquidatio of their investments.

n Partnership dissolution with liquidation may

be caused by any of the following factors:
• The accomplishment of the purpose for which
the partnership was organized
• The termination of the term/period covered
by the partnership contract
• The bankruptcy of the firm
• The mutual agreement among the partners to
close the busines
 Types of
Liquidatio
n Lump-sum liquidation or liquidation by
totals – this is a type of liquidating whereby
the distribution of cash to the partners is done
only after al the non-cash assets have been
realized, the total amount of gain or loss on
realization is known, and all liabilities have
been paid

Liquidation by installment or piece

meal liquidation – this is a type of
liquidation whereby assets are realized on a
piecemeal basis and cash is distributed to
partners on a periodic basis as it becomes
available, that is, even before all non-assets
are converted into cash
Procedure
s in Lump-
Sum
Liquidatio
n
1. Sale of non-cash assets and
distribution or allocation of gain and
loss

2. Distribution of cash to creditors and

partners
 Illustrative Problem:

Encina, Endrada and Elina

Statement of Financial Position
December 1, 2020

Statement
Cash 8,000.00 Liabilities 44,800.00
Other
Assets 136,000.00 Endrada, Loan 2,000.00
Elina, loan 3,200.00

of Encina, Capital
Endrada, Capital
38,000.00
24,000.00

Liquidatio Total Asset 144,000.00

Elina, Capital
Total Liab & Equity
32,000.00
144,000.00

n Case :
(1) The other assets were sold for P140,000
(2) The other assets were sold for P100,000
(3) The other assets were sold for P74,000
(4) The other assets were sold for P68,000. Deficient partner
was solvent
(5) The other assets were sold for P68,000. Deficient partner
was insolvent
(6) The other assets were sold for P68,000. Distribution of
available cash is
a. before eliminating capital deficiency; and
b. after eliminating capital deficiency
Case 1 - The other
assets were sold
for P140,000
Case 2 - The other
assets were sold
for P100,000
Case 3 - The other
assets were sold
for P74,000
Case 4 - The other
assets were sold
for P68,000.
Deficient partner
was solvent
Case 5 -The other
assets were sold
for P68,000.
Deficient partner
was insolvent
Case 6 - The other assets
were sold for P68,000.
Distribution of available
cash is
a. before
eliminating capital
deficiency; and
b. after eliminating
capital deficiency
THE SCHEDULE TO
ACCOMPANY