CBSE Class 12 Accountancy Dissolution of Partnership Firm Worksheet Set 02

True/False

Question 1. Realisation account is a Nominal Account.
Answer: True
In simple words: The Realisation Account records gains and losses on the sale of assets during dissolution. It is a temporary account created to track income and costs, which are features of a Nominal Account — all Nominal Accounts close at the end of the period.

Exam Tip: Remember that Realisation Account handles expenses and gains/losses, making it an income/expense (Nominal) account, not a permanent Real or Personal account.

Question 2. All assets including of cash are transferred to the Realisation Account.
Answer: False
In simple words: Cash is usually NOT transferred to Realisation Account. Only non-cash assets (like inventory, equipment, debtors) are transferred to Realisation Account. Cash stays in the Bank/Cash Account and is used to pay liabilities and distribute final settlements to partners.

Exam Tip: Cash and Bank balances remain in their own accounts and are managed separately — they are not transferred to Realisation Account.

Question 3. An unrecorded computer system was sold for Rs.20,000. Realisation Account will be credited by Rs.20,000.
Answer: True
In simple words: When an unrecorded asset is sold, the sale proceeds are credited to the Realisation Account. Since the asset was not in the books, there is no debit side entry — it is a pure gain. The credit of Rs.20,000 represents the cash received from the sale, which improves the firm's position during dissolution.

Exam Tip: Unrecorded assets sold are pure gains — credit Realisation Account for the full sale price, with no offsetting debit for book value (since none exists).

Question 4. Any amount paid for the unrecorded liabilities is credited to Realisation Account.
Answer: False
In simple words: When unrecorded liabilities are paid, the Realisation Account is DEBITED (not credited), because paying out cash represents a loss or expense. The credit entry goes to Cash/Bank Account. An unrecorded liability that reduces firm assets is a loss to the firm.

Exam Tip: Unrecorded liabilities paid out are debited to Realisation Account as losses. The payment reduces cash, which is why Realisation Account is debited.

Question 5. Dissolution of the firm means the dissolution of the partnership.
Answer: True
In simple words: Dissolution of a firm means the partnership relationship ends and the business operations stop. All assets are sold, liabilities are paid, and partners receive their final settlements. The partnership as a legal entity ceases to exist.

Exam Tip: Dissolution refers to the complete winding up of the partnership firm — the business ends, the partnership contract terminates, and all affairs are settled.

Fill in the Blanks

Question 1. When the firm is dissolved, General Reserve is transferred to...................... in the profit-sharing ratio.
Answer: Partners' Capital Accounts
In simple words: General Reserve is a reserve kept from past profits. At dissolution, it must be shared among partners based on their profit-sharing ratio and transferred to their capital accounts so they get their share of this reserve in the final settlement.

Exam Tip: All reserves (General Reserve, Profit & Loss Reserve, etc.) must be distributed to partners' capital accounts in their agreed profit-sharing ratio during dissolution.

Question 2. Goodwill Account appearing in the books on the dissolution date is closed by transferring it to...................... side of the...................... account.
Answer: credit, Partners' Capital Accounts
In simple words: Goodwill on the books represents value the partners have built. At dissolution, it is transferred to the credit side of each partner's Capital Account, sharing the goodwill value among them in the profit-sharing ratio. This recognises the value they created during partnership.

Exam Tip: Goodwill is credited to partners' capital accounts in their profit-sharing ratio — this gives each partner their share of the goodwill value at dissolution.

Question 3. At the time of dissolution, there were Debtors Rs.1,32,000, Provision for Doubtful Debts Rs.12,000, Rs.24,000 of the book debts proved bad. The Rs...................... realised from the debtors will be...................... in the Realisation Account.
Answer: 1,08,000, credited
In simple words: Debtors transferred to Realisation Account = Rs.1,32,000. From this, Rs.24,000 of debts went bad (cannot be collected). The Provision for Doubtful Debts of Rs.12,000 was already set aside. Amount realised = Rs.1,32,000 - Rs.24,000 = Rs.1,08,000. This is credited to Realisation Account, showing cash received from debtors.

Exam Tip: Calculate debtors realised as (Debtors - Bad Debts). The Provision is used to absorb part of the bad debt loss, but the calculation focuses on actual cash collected.

Question 4. Expenses of realisation are...................... to Realisation Account.
Answer: debited
In simple words: Realisation expenses (like legal fees, commissions, auction costs) represent costs incurred to wind up the firm. These are debited to Realisation Account because they reduce the net gain or increase the net loss on dissolution.

Exam Tip: All costs of winding up the business are debited to Realisation Account — they represent money going out to settle the firm.

Question 5. At the time of dissolution, Suhana, a partner agreed to pay creditors Rs.8,000 and...................... Account will be credited by Rs.8,000.
Answer: Suhana's Capital
In simple words: When a partner agrees to pay creditors on behalf of the firm, the firm's obligation to that creditor is removed. The partner's Capital Account is credited by the amount he pays, because this reduces what the firm owes him in the final settlement — it is treated as a contribution from the partner to the firm.

Exam Tip: When a partner settles firm liabilities, credit their Capital Account — this recognises their contribution and reduces the amount they will receive in final settlement.

Very Short Answer Questions

Question 1. Give one distinction between reconstitution of a firm and dissolution of a firm.
Answer: In case of reconstitution of a firm — that is, dissolution of a partnership — the firm continues, while in case of dissolution of a firm, the firm's business is discontinued.
In simple words: Reconstitution means the partnership changes (like a partner leaving or a new partner joining) but the business goes on. Dissolution means the whole business stops completely.

Exam Tip: Key difference: Reconstitution = partnership continues under new terms; Dissolution = partnership ends entirely and business closes.

Question 2. Varun and Arun are partners in a firm sharing profits and losses equally. On the date of dissolution of the partnership firm, Varun's wife's loan was Rs.45,000, whereas Arun's loan was Rs.65,000. Which loan will be paid first and why?
Answer: Varun's wife's loan will be paid first as it is an outside liability (third party liability).
In simple words: Varun's wife's loan is owed to someone outside the partnership, so it is paid with priority. Arun's loan to the firm is an internal debt. External creditors (like Varun's wife) are always paid before internal debts during dissolution.

Exam Tip: Outside liabilities (to third parties) have priority over inside liabilities (owed to partners). Always pay external creditors first during dissolution.

Question 3. Distinguish between 'Reconstitution of Partnership' and 'Dissolution of Partnership Firm' on the basis of closure of books.
Answer:

Exam Tip: In reconstitution, accounting continues; in dissolution, all books close permanently because the business ends.

Question 4. Distinguish between dissolution of partnership and partnership firm on the basis of 'Settlement of assets and liabilities'.
Answer:

Exam Tip: Dissolution of partnership involves revaluation; dissolution of firm involves actual sale of all assets and payment of all liabilities.

Question 5. Name the liability which is not shown in the Balance Sheet, but paid at the time of dissolution of the firm.
Answer: Unrecorded liability.
In simple words: Unrecorded liabilities are debts the firm owes but never entered into the books. They do not show on the Balance Sheet, yet at dissolution they must be traced, accepted, and paid. Examples include forgotten bills, unclaimed wages, or unacknowledged loans.

Exam Tip: Watch for unrecorded liabilities in dissolution questions — they appear suddenly and must be paid, even though they were never on the books.

Question 6. State any two grounds on the basis of which court may order for the dissolution of the firm.
Answer: (i) A partner turns into a person of unsound mind.
(ii) A partner is found to be guilty of misconduct.
In simple words: (i) If a partner becomes mentally unfit to manage partnership affairs, the court can order dissolution. (ii) If a partner engages in dishonest or improper conduct that harms the partnership, the court has the power to end the partnership.

Exam Tip: Memorise at least two grounds: unsound mind and misconduct. Other grounds include bankruptcy, continuous loss, and impossible objectives.

Question 7. Under which section, settlement of accounts under dissolution is made?
Answer: Section 48 of the Indian Partnership Act, 1932.
In simple words: The law that governs how accounts are settled when a partnership dissolves is Section 48 of the Partnership Act of 1932. This section sets the rules for paying creditors, returning capital, and distributing profits to partners.

Exam Tip: Memorise "Section 48" as the key provision for settlement of accounts in dissolution — it is frequently asked.

Question 8. What Journal Entry would be passed if a partner agreed to discharge the firm's liability?
Answer: Realisation A/c Dr.
To Partner's Capital A/c
In simple words: When a partner agrees to pay a firm's liability using their personal funds, the Realisation Account is debited (recording the settlement of the liability), and the partner's Capital Account is credited (reducing their final claim because they paid firm debts).

Exam Tip: Partner paying firm liabilities = Debit Realisation, Credit Partner's Capital Account. This is the reverse of the normal payment entry.

Question 9. Show Journal entry, if 60% of debtors of full value Rs.70,000 realised on dissolution.
Answer: Cash/Bank A/c Dr. Rs.42,000
To Realisation A/c Rs.42,000
In simple words: 60% of Rs.70,000 = Rs.42,000 cash collected from debtors. The cash is debited to Bank (money coming in), and Realisation Account is credited (showing the cash realisation from the asset).

Exam Tip: Always calculate the actual cash realised first (applying the percentage), then pass the journal entry debiting Cash and crediting Realisation Account.

Question 10. Name some specific liabilities which are transferable to realisation account but payment of these is not made on dissolution of firm.
Answer: (i) Provision for Depreciation A/c
(ii) Investment Fluctuation Reserve A/c
In simple words: These accounts represent reserves or provisions set aside from past profits. They are transferred to Realisation Account during dissolution but are not paid out in cash — instead they help offset losses on asset sales. They are internal adjustments within the firm's accounting.

Exam Tip: Distinguish between items transferred to Realisation Account (which affect the final gain/loss) and actual cash payments made to creditors (which are different).

Very Short Answer Questions (Continued)

Question 11. Give journal entry for the treatment of Unrecorded liability at the time of dissolution.
Answer: Realisation A/c Dr.
To Cash/Bank A/c
In simple words: When an unrecorded liability is paid during dissolution, the Realisation Account is debited (this is a loss because cash is going out for something never recorded), and Cash/Bank Account is credited (cash is leaving the bank).

Exam Tip: Unrecorded liabilities paid = Debit Realisation Account. This creates a loss that reduces the final distribution to partners.

Question 12. At the time of dissolution of a partnership firm, the book value of sundry assets transferred to Realisation Account was Rs.4,00,000. 50% of these sundry assets were taken by partner M at 20% discount. 40% of the remaining assets were sold at a profit of 30% on cost. 5% of the balance was found obsolete and realised nothing. The remaining assets were taken over by a creditor in full settlement of his claim. Give necessary journal entries.
Answer:

Exam Tip: Break down assets into groups by treatment (partner taking at discount, sold at profit, obsolete, taken by creditor), calculate each, then pass one combined journal entry.

Question 13. Sundry Debtors are appearing at Rs.2,16,000 and Provision for Doubtful Debts at Rs.12,000 in the Balance Sheet before dissolution. The Sundry Debtors will be transferred at which figure in Realisation Account?
Answer: Sundry debtors will be transferred to Realisation Account at Rs.2,16,000.
In simple words: Sundry Debtors are transferred at their book value shown in the Balance Sheet, which is Rs.2,16,000, regardless of the Provision for Doubtful Debts. The Provision itself is also transferred separately and helps absorb bad debt losses when they occur.

Exam Tip: Always transfer debtors at their gross book value in Balance Sheet — the provision is transferred separately and acts as a buffer for bad debts.

Question 14. Profit and Loss Account shows a debit balance of Rs.15,000. Give journal entry for transferring it in Partners' Capital Accounts at the time of dissolution of a partnership firm if Anuj and Bulbul were two partners in a firm.
Answer: Anuj's Capital A/c Dr. Rs.7,500
Bulbul's Capital A/c Dr. Rs.7,500
To Profit & Loss A/c Rs.15,000
(Being loss transferred to partners)
In simple words: The Profit & Loss Account shows a loss of Rs.15,000 from past operations. This loss must be shared among partners in their profit-sharing ratio (equal here: 50% each). Each partner's Capital Account is debited with their share of the loss (Rs.7,500 each), which reduces the amount they will receive at final settlement.

Exam Tip: Losses on Profit & Loss Account are debited to partners' capital accounts in their profit-sharing ratio — they reduce each partner's final entitlement.

Question 15. The amount of Sundry Assets transferred to Realisation Account is Rs.80,000. Assets realised 96% of their book value. What amount should be credited to Realisation Account?
Answer: Rs.76,800.
In simple words: Assets with book value Rs.80,000 realised at 96% of that value. Amount realised = Rs.80,000 × 96% = Rs.76,800. This amount is credited to Realisation Account, showing the cash received from selling the assets.

Exam Tip: Apply the realisation percentage to the book value to find the cash received, then credit Realisation Account with that amount.

Question 16. At which value the various assets are transferred to Realisation Account?
Answer: Book value.
In simple words: Assets are transferred to Realisation Account at the same value shown in the Balance Sheet before dissolution — this is the book value. Later, when they are actually sold, any difference between sale price and book value shows up as a gain or loss in the Realisation Account.

Exam Tip: Transfer all assets at balance sheet book value to Realisation Account — this is the standard rule. Gains/losses are measured against this base.

Question 17. Which account is to be credited if realisation expenses are paid by a partner?
Answer: Partner's Capital Account.
In simple words: When a partner pays realisation expenses from their personal funds, the Realisation Account is debited (recording the expense), and the partner's Capital Account is credited (because the partner has contributed their own money to wind up the firm, which reduces what they owe back).

Exam Tip: Partner paying dissolution costs = Debit Realisation Account, Credit Partner's Capital Account. This is a contribution that benefits their final settlement.

Question 18. Siyaram, a partner was to get 3% of the value of assets realised and 15% of the amount finally paid to partners. He has to bear realisation expenses of Rs.10,000. The assets realised Rs.4,20,000 (including cash at Bank Rs.20,000). Cash payment made to Sundry creditors Rs.1,00,000. Pass necessary journal entry.
Answer: Realisation A/c Dr. Rs.58,200
To Siyaram's Capital A/c Rs.58,200
(Being remuneration for dissolution due to Siyaram)
In simple words: Siyaram's commission has two parts: (1) 3% of assets realised (excluding the cash already in bank): 3% of (Rs.4,20,000 - Rs.20,000) = 3% of Rs.4,00,000 = Rs.12,000. (2) 15% of amount finally paid to partners. After paying creditors (Rs.1,00,000), expenses (Rs.10,000), and his own commission, the amount left for partners is Rs.3,08,000. Siyaram's share = 15% of Rs.3,08,000 = Rs.46,200. Total compensation to Siyaram = Rs.12,000 + Rs.46,200 = Rs.58,200. The Realisation Account is debited (showing expense) and Siyaram's Capital Account is credited (reducing his final payment claim since he receives commission).

Exam Tip: When a partner receives a commission on realisation, calculate both percentages carefully (on assets realised excluding cash, and on final amount paid to partners), sum them, then debit Realisation Account and credit that partner's Capital Account.

Question 19. If creditors of the firm Rs.50,000, X's Capital Rs.20,000, Y's Capital Rs.30,000, Loan from bank Rs.50,000. Find out total assets of the firm.
Answer: Assets = Rs.1,50,000
In simple words: Total Liabilities = Creditors (Rs.50,000) + Bank Loan (Rs.50,000) = Rs.1,00,000. Total Capital = X's Capital (Rs.20,000) + Y's Capital (Rs.30,000) = Rs.50,000. Using the accounting equation: Assets = Liabilities + Capital = Rs.1,00,000 + Rs.50,000 = Rs.1,50,000.

Exam Tip: Remember the balance sheet equation: Assets = Liabilities + Capital. Add all liabilities (creditors, loans) and all partner capitals, then you have total assets.

Question 20. Give journal entry for accounting treatment in case of dissolution for transferring debtors along with provision for doubtful debts.
Answer: (i) Realisation A/c Dr.
To Debtors' A/c (full value)

(ii) Provision for Doubtful Debts A/c Dr.
To Realisation A/c
In simple words: (i) Debtors are transferred to Realisation Account at their full book value (let's say Rs.100). This records the asset being available for collection. (ii) The Provision for Doubtful Debts is also transferred, but credited to Realisation Account. This reduces the net debit position in Realisation Account and helps absorb the risk of bad debts when they occur during asset realisation.

Exam Tip: Two separate entries: (1) Debtors transferred at gross value, (2) Provision transferred as a credit to Realisation — this nets them properly.

Short Answer Questions

Question 1. Pass necessary journal entries on the dissolution of a partnership firm in the following cases:
(i) Expenses of dissolution were Rs.9,000.
(ii) Expenses of dissolution Rs.3,400 were paid by a partner, Vishal.
(iii) Shiv, a partner, agreed to do the work of dissolution for a commission of Rs.4,500. He also agreed to bear the dissolution expenses. Actual dissolution expenses Rs.3,900 were paid from the firm's bank account.
(iv) Naveen, a partner, agreed to look after the dissolution work for which he was allowed a remuneration of Rs.3,000. Naveen also agreed to bear the dissolution expenses. Actual expenses on dissolution Rs.2,700 were paid by Naveen.
(v) Vivek, a partner, was appointed to look after the dissolution work for a remuneration of Rs.7,000. He agreed to bear the dissolution expenses. Dissolution expenses Rs.6,500 were paid by Rishi, another partner, on behalf of Vivek.
(vi) Gaurav, a partner, was appointed to look after the work of dissolution for a commission of Rs.12,500. He agreed to bear the dissolution expenses. Gaurav took over furniture of Rs.12,500 as his commission. The furniture had already been transferred to realisation account.
Answer:

Exam Tip: Distinguish between: (1) Expenses paid by firm (debit Realisation A/c, credit Cash), (2) Expenses paid by partner (debit Realisation A/c, credit Partner's Capital), (3) Commission or remuneration (debit Partner's Capital A/c, credit Realisation A/c), (4) Assets taken as commission (debit Partner's Capital A/c, credit Realisation A/c).

Question 2. Adiraj and Karan were partners in a firm sharing profits and losses in the ratio 3 : 2. On 31st March, 2018 the firm was dissolved. After the transfer of assets (other than cash in hand and at bank) and third party liabilities to the Realisation Account, the following information was provided:
(i) Furniture of Rs. 70,000 was sold for Rs. 68,000 by auction and auctioneer's commission amounted to Rs. 2,000.
(ii) Adiraj's loan amounting to Rs. 35,000 was paid.
(iii) Out of the stock of Rs. 80,000, Karan took over 50% of the stock at a discount of 20% while the remaining stock was sold off at a profit of 30% on cost.
(iv) A bill receivable of Rs. 3,000 under discount was dishonoured as the acceptor had become insolvent and hence the bill had to be met by the firm.
(v) Profit and Loss Account showed a debit balance of Rs. 56,000.
(vi) Realisation expenses amounted to Rs. 2,000 which were paid by Adiraj.
Pass the necessary journal entries for the above transactions on the dissolution of the firm.
Answer:

In simple words: When a partnership dissolves, we record all asset sales, loan payments, and costs in the Realisation Account. Profits or losses from selling assets get split among partners according to their profit-sharing ratio. Each partner's capital account is updated to reflect their share of any gains or losses from winding up the business.

Exam Tip: Always update the Realisation Account for all asset disposals and dissolution costs; then transfer the resulting gain or loss to partners' capital accounts in their profit-sharing ratio.

Question 3. Pass the necessary journal entries for the following transactions on the dissolution of the firm of Sudha and Shiva after the various assets (other than cash) and outside liabilities have been transferred to Realisation Account:
(i) Sudha agreed to pay off her husband's loan Rs. 19,000.
(ii) A debtor whose debt of Rs. 9,000 was written off in the books paid Rs. 7,500 in full settlement.
(iii) Shiva took over all investments at Rs. 13,300.
(iv) Sundry creditors Rs. 10,000 were paid at 9% discount.
(v) Realisation expenses Rs. 3,400 were paid by Sudha for which she was allowed Rs. 3,000.
(vi) Loss on realisation Rs. 9,400 was divided between Sudha and Shiva in 3 : 2 ratio.
Answer:

In simple words: During firm dissolution, we record all activities through the Realisation Account. Partners settle personal obligations, collect outstanding debts, accept assets at agreed values, and pay creditors. Any costs of winding up and losses from asset sales get shared between partners based on their profit-sharing ratio.

Exam Tip: Record each dissolution activity separately in the Realisation Account; the final balance (profit or loss) is distributed to partners' capital accounts in their agreed ratio.

Question 4. The firm of Manjeet, Sujeet and Jagjeet was dissolved on 31st March, 2018. It was agreed that Sujeet will take care of the dissolution related activities and will get 10% of the value of assets realised. Sujeet agreed to bear the realisation expenses. Assets realised Rs. 10,00,750 and realisation expenses were Rs. 90,000, which were paid from the firm's cash. Rs. 4,50,000 was paid to the creditors in full settlement of their claim. Pass necessary journal entries for the above transactions in the books of the firm.
Answer:

In simple words: When one partner handles the firm's winding up, they get paid a fee based on how much they recover from selling assets. The firm pays the dissolution costs upfront, and these are charged to that partner's account. Cash from asset sales covers creditor payments and dissolution expenses.

Exam Tip: When a partner receives remuneration for dissolution work, record it as a credit to their capital account; any expenses they bear on behalf of the firm reduce their capital balance further.

Question 5. Prem and Suresh were partners in a firm sharing profits in the ratio of 7 : 8. On 1st April, 2015 their firm was dissolved. After transferring assets (other than cash) and outsider's liabilities to realisation account, you are given the following information:
(a) Raman, a creditor of Rs. 4,00,000 accepted land valued at Rs. 7,00,000 and paid Rs. 3,00,000 to the firm.
(b) Gopal, a second creditor for 1,05,000 accepted Rs. 90,000 in cash and investments of Rs. 14,000 in full settlement of his account.
(c) Hari, a third creditor amounting to Rs. 75,000 accepted stock of the book value of Rs. 60,000 for Rs. 45,000 and the balance paid to him by cheque.
(d) Loss on dissolution was Rs. 45,000.
Pass necessary journal entries for the above transactions in the books of the firm.
Answer:

In simple words: When creditors accept assets in settlement rather than cash, the firm records the cash received and the assets given up through the Realisation Account. Any loss from settling creditors at less than their due amount is shared among partners in their profit-sharing ratio.

Exam Tip: When creditors accept assets or a mix of assets and cash as settlement, record the asset transfer and cash outflow separately in the Realisation Account to determine the gain or loss on each creditor settlement.

Question 6. Pass necessary journal entries on the dissolution of a partnership firm in the following cases:
(i) Expenses of dissolution were Rs. 4,500.
(ii) Expenses of dissolution Rs. 5,000 were paid by a partner, Sudhir.
(iii) Sudha, a partner, agreed to do the dissolution work for a commission of Rs. 7,300. She also agreed to bear the dissolution expenses. Actual dissolution expenses paid by Sudha were Rs. 7,500.
(iv) Somesh, a partner, agreed to do the dissolution work for a commission of Rs. 5,000. He also agreed to bear the dissolution expenses. Actual dissolution expenses Rs. 4,750 were paid from the firm's bank account.
(v) Sheetal, a partner, was appointed to look after the dissolution work for a remuneration of Rs. 8,000. She also agreed to bear the dissolution expenses. Actual dissolution expenses Rs. 7,500 were paid by Smita, another partner, on behalf of Sheetal.
(vi) Somaya, a partner, was appointed to look after the dissolution process for a remuneration of Rs. 11,000. Somaya agreed to bear the dissolution expenses. Somaya took over stock of the same value as her remuneration. The stock had already been transferred to realisation account.
Answer:

In simple words: When partners handle firm winding up, they may get paid a fee (remuneration) and may also cover dissolution costs themselves. The Realisation Account records all these transactions. If a partner pays costs from their own pocket, their capital account gets credited. If they take firm assets as payment, their capital account gets charged.

Exam Tip: Always distinguish between remuneration (which goes to the partner's capital as a credit) and expenses borne (which come from the Realisation Account and are credited to the partner's capital account for costs they paid themselves).

Question 7. X and Y are partners sharing profits and losses equally. They decided to dissolve their firm. Give journal entries for settlement of creditors through assets in the following alternative cases:
(i) A, a creditor (already transferred to Realisation Account) for Rs.25,000 accepted furniture (already transferred to Realisation Account) at Rs.36,000, in full settlement of his claim.
(ii) B, a creditor (already transferred to Realisation Account) for Rs.25,000 accepted furniture (already transferred to Realisation Account) at Rs.20,000 in settlement of his claim.
(iii) C, a creditor (already transferred to Realisation Account) for Rs.30,000 agreed to take Machinery (already transferred to Realisation Account) at Rs.48,000 (book value Rs.50,000) in settlement of his claim.
(iv) D, a creditor of Rs.20,000 (unrecorded in the books) agreed to accept computer (unrecorded in the books) at Rs.15,000 plus Rs.2,000 in full settlement of his claim.
Answer:
Books of X and Y
Journal

In simple words: When a creditor accepts assets in place of cash, you record the difference between the liability and the asset value. If the asset value is higher than the liability, the company gains; if lower, it loses. In Case (i), no entry is needed because the asset value equals what is owed. In the other cases, you record the cash difference required.

Exam Tip: Always check if the asset value given equals, exceeds, or falls short of the creditor's claim - this determines whether you record a gain, loss, or no adjustment.

Question 8. Give necessary journal entries in each of the following cases at the time of dissolution of firm:
(i) Expenses of realisation amounted Rs.7,400.
(ii) Expenses of realisation Rs.7,400 were paid by Ravi, a partner.
(iii) Realisation expenses were to be borne by Deepak, a partner, for which he was allowed a commission of 2% of net cash realised from dissolution. The net cash realised from dissolution was Rs.1,00,000 and actual realisation expenses were Rs.7,400.
(iv) Expenses of realisation Rs.7,400 were to be borne by Khan, a partner. Khan used firm's cash for paying these expenses.
Answer:
Journal Entries

In simple words: When the firm pays dissolution expenses, it comes out of cash. If a partner pays these costs, the firm records it as a debt to that partner. If a partner gets a commission for bearing expenses, that amount is credited to their account. The actual cash paid out is recorded based on who pays it - the firm or the partner.

Exam Tip: Always identify who pays the realisation expenses - the firm, a partner, or the firm on behalf of a partner - as this determines whether you debit Cash, a Partner's Capital, or both.

Question 9. J, K and L were partners in a firm sharing profits in the ratio of 4:5:1. On 31st March, 2018 their firm was dissolved. On this date, the Balance Sheet showed a balance of Rs.1,34,000 in Debtors Account and a balance of Rs.14,000 in Provision for Bad Debts Account. Both the accounts were closed by transferring their balances to Realisation Account. Rs.4,000 of the debtors became bad and nothing could be realised from them on dissolution. K agreed to look after the dissolution work for which he was allowed a remuneration of Rs.16,000. K also agreed to bear dissolution expenses for which he was allowed a lumpsum payment of Rs.4,000. Actual dissolution expenses were Rs.6,500 and the same were paid from the firm's cash. Loss on dissolution amounted to Rs.37,000.
Answer:
In the Books of J, K and L
Journal

In simple words: When a firm dissolves, you record the cash collected from debtors to the Bank. You then record any payments or remuneration given to partners during the closure process. Finally, you distribute the total loss from the realisation process among the partners in their profit-sharing ratio. Each partner bears their share of the loss according to their partnership agreement.

Exam Tip: Remember to calculate each partner's share of the realisation loss using the profit-sharing ratio (here 4:5:1), and always show the firm's actual expense separately from the lumpsum allowance given to the partner responsible for dissolution.

Please click on below link to download CBSE Class 12 Accountancy Dissoultion of Partnership Firm Worksheet Set B