Dissolution of partnership firm by deepak madan
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Transcript of Dissolution of partnership firm by deepak madan
By:- Deepak MadanM.Com. B.ed
DISSOLUTION OF PARTNERSHIP
FIRM
ObjectivesTo state meaning of topic
To differentiate b/w dissolution of partnership and partnership
To know the modes of dissolution
To know different rules of settlement of claims
To make Realization A/c
To Record journal entries and ledgers to close books of firms
IntroductionIt is the breaking or discontinuous of relationship
among all partners. It brings an end to the existence of firm, After which no business is transacted except the activities related to closing of books of accounts.
Difference b/w Partnership and Partnership firm( dissolution)
In dissolution of partnership existing partnership may dissolve but business may continue.
But in case of dissolution of partnership firm there are no more activities except closing of business firm
Modes of DissolutionBy Agreement.
Compulsory dissolution.
On happening of certain contingencies.
Dissolution by Notice.
Dissolution By court.
Settlement of Accounts
Treatment of losses Application of Assets
Losses, including deficiencies of capital shall be paid as :-i) First out of profits.ii) Next out of capital of
partners, andiii) Lastly, if necessary by the
individually in their profit sharing ratio.
Assets including sum contributed by partners for deficiency :-i) Debts of third partyii) Loans and advances by
partner except capitaliii) Capital payable to partnersiv) Residue divided in profit
sharing ratio
Points to be Remembered For Private Debts and Firm's Debts
Firm’s property will be used for payment of firm’s liability first, surplus will be divided in their profit sharing ratio.
Private property will be used for payment of private debt first.
Personal property does not includes property of wife and children.
Realization AccountParticulars Amoun
tParticulars Amou
nt
To Assets (land building, debtors, Plant & machinery etc.To Cash/Bank (payment of liabilities and unrecorded liability)To Partner’s capital( liability assumed by partner)To Profit trr. to partners capital in profit sharing ratio.
By All Liabilities( bills payable, creditors etc.By provisions (all) By Cash/Bank ( sale of assets& unrecorded AssetsBy Partners capital( assets taken by partner)By Loss trr To capital a/c
Journal Entries For Transfer of Assets:-
Realization a/c_____Dr.
To Assets A/c
For Transfer of Liabilities:-
liabilities a/c_____Dr.
To Realization A/c
For sale of Assets:-
Bank a/c_____Dr.
To Realization A/c
Journal EntriesFor Assets taken over by partner:-
Partner capital a/c_____Dr.
To Realization A/c
For Payment ofLiabilities:-
Realization a/c_____Dr.
To Bank A/c
For a Liability which a partner takes responsibility to discharge:-
Realization a/c_____Dr.
To Partner capital A/c
Journal Entries for Realization exp
For Payment of realization exp:-
Realization a/c_____Dr.
To Bank A/c
For Exp. Paid by partner on behalf of partner.
Realization a/c_____Dr.
To Partner’s capital A/c
For Expenses which a partner takes responsibility to discharge on agreed remuneration:-
a) Payment made by firm
Partner capital A/c---- Dr.
To Bank A/c
b) When amount is paid by partner then no entry will be passed
c) For agreed remuneration to such partner
Realization a/c_____Dr.
To Partner’s capital A/c
Points to RememberFor realization and settlement of assets and liabilities
all entries will passed as recorded assets and liabilities.
All accumulated profits and losses with reserves are to be transferred to capital accounts.
Loan of partner will be paid separately before settlement of capital account.
Any profit or loss arising from realization account will be transferred to capital account in their ratio.
At the end partners will be paid through bank to settle their account.
Journal entries will be passed for above mentioned points.