Give any one difference between reconstitution of firm and dissolution of a firm.

Distinguish between 'Dissolution of Partnership' and 'Dissolution of Partnership Firm' on the basis of  Settlement of accounts.

Why is the balance at bank never transferred to the realisation account on the dissolution of partnership firm?

How are assets taken over by a partner be recorded in the partnership books on dissolution?

Mention the account where you transfer the amount of cash in hand at the time of dissolution of firm.

X, Y and Z are partners in a firm sharing profits in the ratio of 3 : 2 : 1 respectively.  The firm was dissolved on 01.03.2013.  After transferring assets (other than cash) and third party liabilities to the Realisation Account, you are provided with the following information:

  (i) There was a balance of Rs. 18,000 in the firm's profit and Loss Account.

  (ii) There was an unrecorded bike of Rs. 50,000 which was taken over by x.

  (iii) Creditors of Rs. 5,000 were paid Rs. 4,000 in full settlement of accounts.

Pass necessary Journal Entries for the above at the time of dissolution of firm.

Parul, Payal and Priyanka are partners.  They decided to dissolve their firm pass necessary journal entries for following after various assets (other than cash and bank) and the third party liabilities have been transferred to Realisation Account.

(a) There was total debtors of Rs. 76,000.  A provision of bad and doubtful debts also stood in the books at Rs. 6,000. Amounting Rs. 12,000 debtors proved bad and rest paid the amount due.

(b) Parul agreed to pay off her husband's loan of Rs. 7,000 at a discount of 5%.

(c) A machine which was not recorded in the books was taken over by Payal at Rs. 3,00 whereas its expected value was Rs. 5,000.

(d) A contingent liability (not provided for ) of Rs. 4,000 was also discharged.

(e) The firm had a debit balance of Rs. 27,000 in the profit and loss Account on the date of dissolution.

(f) Priyanka paid the realisation expenses of Rs. 15,000 out of her pocket and she was to get a fixed remuneration of Rs. 18,000 for completing dissolution process.

P and Q were partners in a firm sharing profits in the ratio of 3 : 2.  On 31.3.2011 their Balance Sheet was as follows :

                      Balance Sheets of P and Q

                             as on 31-3-2011

The firm was dissolved on 1-4-2011 and the Assets and Liabilities were settled as follows :

(i) Creditors agreed to take over Land and  Building at a valuation of their full claim.

(ii) Stock was taken over by Q at Rs. 50,000 for cash.

(iii) Bad debts proved Rs. 5,000

(iv) Goodwill was found valueless.

(v) Workmen compensation claim was Rs. 80,000.

Pass necessary Journal Entries for dissolution of the firm.

In case of dissolution of a firm, which liabilities are to be paid first?

Sandhya Rathi and Meenakshi Gupta are partners in a firm, sharing profits and losses equally. On 1st April, 2018                                       

The firm was dissolved on the date given above. The following transactions took place.
(i) Sandhya Rathi undertook to pay Mr Rathi's loan and took over 50% of the stock at a discount of 20%.
(ii) Book debts realised Rs54,000, balance of the stock was sold off at a profit of 30% on cost.
(iii) Sundry creditors were paid out at a discount of 10%. Bills payable were paid in full.
(iv) Plant and machinery realised Rs75,000, land and building Rs1,20,000.
(v) Realisation expenses were Rs 5,250.
Show realisation account, partners' capital accounts and bank account in the books of the firm.

P, Q and R were partneRs. in a firm sharing profits in the ratio of 2:2:1. Their balance sheet as at 31st March, 2018 was as follows                                                                  Balance Sheet as at 31st March, 2018

On this date, the firm was dissolved. P was appointed to realise the assets. P was to receive 5% commission on the sale of assets(expect cash) and was to bear all expenses of realisation. P realised the assets as follows.
DeptoRs. 20% less, stock Rs. 42,600, investments 80%, plant 90% of the book value. Expenses of realisation amounted to Rs.9,000 paid by the firm on behalf. Commission received in advance was returned to the customeRs. after deducting Rs.3,600.
Firm had to pay Rs.10,200 to outstanding salary not provided for earlier. Compensation paid to employees amounted to Rs.20,400. This liability was not provided for in the above balance sheet. Rs.24,000 has to be paid for provident fund.
Prepare realisation account, capital accounts of partneRs. and cash account.

P, Q and R commenced business on 1st January, 2015 with capitals of Rs.2,00,000, Rs.2,00,000 and Rs1,00,000 respectively. Profits are shared in the ratio of 4:3:3. Capital carried interest @ 5% per annum. During the year 2015, the firm suffered a loss of Rs.1,50,000 before allowing interest on capital. Drawings od each partner during the year were Rs.20,000.
On 31st December, 2015, the partners agreed to dissolve the firm as it was no longer profitable. The creditors on that date were Rs.40,000. The assets realised a net value of Rs.3,20,000 and the expenses of realisation were Rs.7,000.
Prepare realisation account, partners' capital accounts and cash account along with necessary working to close the books of the firm.

On 1st April, 2014 X, Y and Z started business sharing profits and losses in the ratio of 3 : 2 : 1 respectively.  They contributed Rs. 1,00,000 Rs. 80,000 and Rs. 40,000 respectively as their capital which were deposited into bank.  Each partner withdrew Rs. 15,000 during the year.  The partnership was dissolved on 31st March, 2015.  X took up the stock at an agreed price of Rs. 25,000.  Y took up Furniture at Rs.5,000 and Z took up debtors at Rs.18,500.  Creditors were paid off and then remained a balance of Rs. 14,000 in the bank account.

Prepare necessary accounts to show the distribution of cash at bank and of the required cash brought in by any of the partners.

Rishi and Aarav were partneRs. in a firm sharing profits in the ratio of 4:1. On 31st March 2015, their balance sheet was as follows.

On the above date, the firm was dissolved.
(i) Rishi took over 40% of the stock at 10% less than its book value and the remaining stock was sold for Rs.80,000. Furniture realised Rs.1,60,000
(ii)An unrecorded investment was sold for Rs.40,000. Machinery was sold at a loss of Rs.1,20,000.
(iii)DebtoRs. realised Rs..1,10,000.
(iv) There was on the outstanding bill for repaiRs. for which Rs.38,000 was paid.
Prepare realisation account.

X,Y and Z were partners Sharing Profits in the ratio of 2 : 2 : 1.  Their Balance-Sheet as on March 31st 2010, the date on which they dissolve their firm, was as follows :

It was agreed that:

(a) X to take over Furniture at Rs. 8,000, debtors amounting to Rs. 1,20,000 at 1,17,200 and the creditors of Rs. 16,000 were to be paid by him at this figure.

(b) Y is to take over all stock for Rs. 17,000 and some sundry assets at Rs. 72,000 (being 10% less than the book value).

(c) Z to take over remaining sundry assets at 80% of the book value and assume the responsibility of discharge of loan together with accrued interest of Rs. 2,300.

(d) The expenses of realization were Rs. 2,700.  The remaining debtors were sold to a debt collecting agency at 50% of the Book value.

Prepare Realisation A/c, Partners Capital A/cs and Cash A/c.