PARTNERSHIPPARTNERSHIPDISSOLUTIONDISSOLUTION
•66AA
•ERIC&ERIC&KIMKIM
The reasons of dissolution:
• 1)The changes in the partnership due to the retirement or death of the partner(s).
• 2)The bankruptcy of the business of the partnership.
• 3)The business of the partnership
• take over by limited company.
The procedures of dissolutionThe procedures of dissolution
• 1)1)Transfer all the assets,liabilities to theTransfer all the assets,liabilities to the realizatiorealization account(n account(dr. realization),anddr. realization),and realizationrealization expenses expenses alsoalso transfer to transfer to realization accountrealization account (dr. realization , (dr. realization ,cr.bank )cr.bank )
• realization bank• creditor x realization
• asset x expense x
• realization commission x
• expense x
• commission x
2)2)All assets will be sold to otherAll assets will be sold to other (cr. realization,dr.bank )(cr. realization,dr.bank ) or or taken over by partners in their taken over by partners in their agree price agree price ((cr.realization ,dr. partners’cr.realization ,dr. partners’ capital capital )),if give to partners for ,if give to partners for gift,not countgift,not count
realization bank
bank asset realization ::
sold x asset sold x
asset take over by partnersasset take over by partners realization capital
capital A A
asset take over realization
by partner x asset take over x
3)Settle the liabilities of creditor by partnership(dr. creditors,cr. bank ),if there are any discount received,then dr.creditors ,cr.realization.If the partnership pay the liabilities,then dr creditors,cr partners’ capital. Creditor bank bank x creditor x
Have discount received
realization creditor
creditor : realization: creditor : realization:
discount received discount received xx discount discount
received received xx
partnership pay the liabilities
creditor capital
capital A x A
creditor x
4)Collection of debts:Collection of debts:If there are any bad debt recoveredbad debt recovered or or debtsdebts collectedcollected ,cr.realization ,dr.bank,if partners undertake to collect the debts on behalf of the partnership, just cr realization ,dr.partners’ capital.
Bank realization
bad debt bad debt
recovered x recovered x
debt collected x debt collected x
partners undertake to collect the debts on behalf of the partnership
capital realization
A
Realization: capital A
debt collect x debt collect x
5) “Profit and loss on realization”“Profit and loss on realization” If the cr. Side of realization a is larger than the dr.side,that’s mean there are profit on it,so cr.the capital account otherwise,that’s mean loss on it, then dr.capital account. There are two methods to count the “profit or loss on realization” :use profit and loss ratio or ratio given in exam.
realization account
profit on realization x loss on realization x
capital account
loss on realization x gain on realization x
6)transfer the current balance to capital6)transfer the current balance to capital
capital account
current a/c x
current account
capital x
7)Capital deficiency(debit balance in capital a/c),
(solvency by partner)
capital account
A
balance b/f x bank x
bank account
A x
If partner is insolvency,partner can notcan not settle debit balance in his Capital account.The solvency partnerssolvency partners will share the deficiency in one of following ratios:
a)p&l share ratio or b) agree ratio given in exam
dr.capital(solvency partners), cr capital(insolvency partner)
it will be done as follow:
If A is insolvent,B will help A
capital account
A B A B
capital deficiency X capital deficiency X
Conclusion for the formatConclusion for the format realization account
asset x bank asset sold x
creditor x capital :asset take over x
realization expense x bad:debt collected x
commission x capital bad debt
capital :profit collected by partner x
on realization x bank :bad debt recovered x
creditor: discount received x
capital loss on realization x
Bank account
balance b/d x balance b/d x
realization account: creditors x
asset sold x realization expense x
capital account: partners loan x
c x capital account: a x
b x
Partner C is insolvencyPartner C is insolvency capital account
a b c a b c
asset take over balance b/f x x x
by partners x x creditor x
loss on realization x x x current account x x x
current account x x x bank x
share of c insolvency: share of c insolvency:
capital c x x capital a x
bank capital b x
(balance figure) x x
P.S. Bank A/c must be balancedP.S. Bank A/c must be balancedotherwise you are calculate wrongotherwise you are calculate wrong
EE
NN
DD