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Chapter Analysis
Intermediate35 pages • EnglishQuick Summary
The chapter 'Dissolution of Partnership Firm' outlines the meaning and various modes of dissolution of a partnership firm. It explains the differences between the dissolution of a partnership and a firm, how to settle accounts among partners, and the accounting treatment required post-dissolution. The primary focus is on preparing the Realisation Account and the settlement of claims in accordance with the Partnership Act, 1932.
Key Topics
- •Dissolution of Partnership vs. Firm
- •Modes of Dissolution of Partnership
- •Settlement of accounts among partners
- •Accounting Treatment on Dissolution
- •Realisation Account Preparation
- •Partner's Loan Treatment
- •Section 48 of Partnership Act, 1932
- •Differences in dissolution approaches by agreement and court
Learning Objectives
- ✓Define the dissolution of partnership and a partnership firm.
- ✓Differentiate between dissolution of partnership and partnership firm.
- ✓Describe various modes of dissolution under the partnership act.
- ✓Explain the settlement of partner claims and accounts.
- ✓Prepare a Realisation Account for dissolution purposes.
Questions in Chapter
State the difference between dissolution of partnership and dissolution of partnership firm.
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State the accounting treatment at the time of dissolution of a firm for: i. Unrecorded assets ii. Unrecorded liabilities
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On dissolution, how will you deal with partner’s loan if it appears on the (a) assets side of the balance sheet, (b) liabilities side of balance sheet.
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Distinguish between firm’s debts and partner’s private debts.
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State the order of settlement of accounts on dissolution.
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On what account realisation account differs from revaluation account.
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Explain the process dissolution of partnership firm?
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What is a Realisation Account?
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Reproduce the format of Realisation Account.
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How deficiency of creditors is paid off at the time of dissolution of firm.
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Additional Practice Questions
What are the primary differences between the dissolution of a partnership and a dissolution of a partnership firm?
easyAnswer: The dissolution of a partnership implies a change in the relationship between partners due to events such as death or retirement, whereas the dissolution of a firm involves the stopping of all business activities and closing down completely.
How should unrecorded assets and liabilities be treated during the dissolution of a partnership firm?
mediumAnswer: Unrecorded assets should be credited to the Realisation Account at net sale value, and unrecorded liabilities should be debited to the Realisation Account at the amount paid.
Draw the format of a Realisation Account.
mediumAnswer: A Realisation Account is formatted as follows: on the debit side, list assets transferred (excluding bank), creditors, any expenses paid by cash or bank and any liabilities assumed by partners. On the credit side, list the sale of assets, liabilities transferred to partners, and profit shared among partners.
What steps should be undertaken to settle a partner’s loan appearing on both the asset and liability side during dissolution?
hardAnswer: For loans on the asset side, they should be repaid before capitals, and for loans on the liability side, they should be paid after external liabilities but before any capital repayment.
State the rules of settling accounts among partners as per the Partnership Act, 1932 during dissolution.
hardAnswer: The rules involve settling losses against profits, capitals, and then individual partners; applying assets to repay firm debts, advance payments by partners, and finally distributing any surplus in profit sharing ratio.