NCERT Solutions for Class 12 Accountancy I Chapter 5 Dissolution of Partnership Firm – Here are all the NCERT solutions for Class 12 Accountancy I Chapter 5. This solution contains questions, answers, images, explanations of the complete chapter 5 titled Dissolution of Partnership Firm taught in Class 12. If you are a student of Class 12 who is using NCERT Textbook to study Accountancy I, then you must come across chapter 5 Dissolution of Partnership Firm. After you have studied lesson, you must be looking for answers of its questions. Here you can get complete NCERT Solutions for Class 12 Accountancy I Chapter 5 Dissolution of Partnership Firm.
NCERT Solutions Class 12 Accountancy Chapter 5 Dissolution of Partnership Firm
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Class | 12 |
Subject | Accountancy |
Book | Accountancy Not For Profit Organisation And Partnership Accounts |
Chapter Number | 5 |
Chapter Name |
Dissolution of Partnership Firm |
NCERT Solutions Class 12 Accountancy chapter 5 Dissolution of Partnership Firm
Class 12, Accountancy chapter 5, Dissolution of Partnership Firm solutions are given below in PDF format. You can view them online or download PDF file for future use.
Dissolution of Partnership Firm
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Question & Answer
Q.1: Give the journal entry(ies) to be recorded for the following, in case of the dissolution
of a partnership firm.
(1). For closure of assets accounts.
(2). For closure of liabilities accounts.
(3). For sale of assets.
(4). For settlement of a creditor by transfer of fixed assets to him.
(5). For expenses of realisation when actual expenses are paid by the partner on behalf of the firm.
(6). When a partner discharges the liability of the firm.
(7). For payment of partner’s loan.
(8). For settlement of capital accounts.
Ans : (1) Missing (2) Missing (3) Missing (4) Missing (5) Missing (6) Missing (7) Missing (8) Missing
Q.2: State the accounting treatment for:
i. Unrecorded assets ii. Unrecorded liabilities
Ans : i) Accounting Treatment for Unrecorded Assets Unrecorded asset is an asset, the value of which has been written off in the books of accounts but the asset is still in usable position. The accounting treatment for unrecorded asset is: a) When the unrecorded asset is sold for cash Cash A/c Dr. To Realisation A/c (Unrecorded assets sold for cash) b) When the unrecorded asset is taken over by any partner Partner's Capital A/c Dr. To Realisation A/c (Unrecorded asset taken over by the partner) ii) Accounting Treatment for Unrecorded Liabilities Unrecorded liabilities are those liabilities which are not recorded in the books of account. The accounting treatment for unrecorded liability is: a) When the unrecorded liability is paid off Realisation A/c Dr. To Cash A/c (Unrecorded liability paid in cash) b) When the unrecorded liability is taken over by a partner Realisation A/c Dr. To Partner's Capital A/c (Unrecorded liability taken over by the partner)
Q.3: 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
Ans : a) If partner's loan appears on the assets side of the Balance Sheet then it implies that the partner has taken loan from the business and is liable to pay back to the business. In such case, the loan amount is transferred to his capital account. Thus the accounting entry will be: Partner’s Capital A/c Dr. To Partner's Loan A/c (Partner's loan transferred to Partner's Capital Account) b) If partner's loan appears on the liabilities side of the Balance Sheet then it implies that the partner has forwarded loan to the firm and the firm is liable to pay back the amount to the partner. In such case, partner's loan is paid off after paying all the external liabilities. The partner's loan is not transferred to the Realisation Account, in fact, it is paid in cash. The following accounting entry is passed.- Partner’s Loan A/c Dr. To Cash/Bank A/c (Partner’s loan paid in cash)
Q.4: State the order of settlement of accounts on dissolution.
Ans : The following are the rules of settlement of accounts on dissolution as per the Section 48 of Partnership Act 1932. 1. Application of Assets: Amount received by the realisation (sale) of the assets shall be used in the following order: a) First of all the external liabilities and expenses are to be paid. b) Then, all loans and advances forwarded by the partners should be paid. c) Then, the capital of each partner should be paid off. If there remains any surplus after the payment of (a), (b) and (c), then it should be distributed among the partners in their profit sharing ratio. 2. Treatment of Loss: In case of loss and any deficiency of capital this should be paid in the following order: a) First these should be adjusted against firm's profits. b) Then, against the total capital of the firm. c)Even if there exists any loss and deficiencies then it should be borne by all the partners individually in their profit sharing ratio.
Q.5: Explain the process dissolution of partnership firm?
Ans : Dissolution of partnership firm implies discontinuation of the business of the partnership firm. According to the Section 39 of Partnership Act, dissolution of partnership between all the partners of a firm is called dissolution of partnership firm. Dissolution involves winding up of business, disposal of assets and paying off the liabilities and distribution of any surplus or borne of loss by the partners of the firm. As per the Partnership Act 1932, a partnership firm may be dissolved in the following manners:
1) Dissolution by Agreement A firm may be dissolved with: a) the consent of all the partners, or b) the contract between the partners 2) Compulsory Dissolution A firm may be dissolved by: a) the adjudication of all the partners or of all partners but one as insolvent b) happening of an event or change in government policies that make the business unlawful. 3) Dissolution on the happening of Certain Contingencies Subject to the contract between the partners, a firm is dissolved a) if formed for a specific period then on the expiry of the period b) if formed for a specific purpose then on completion of the purpose c) on the death of partner/partners d) on insolvency of a partner/partners 4) Dissolution by Notice If partnership is at will then the partnership firm is dissolved if any partner giving notice in writing to all the other partners expressing his/her intention to dissolve the firm. 5) Dissolution by Court The court may order to dissolve a partnership firm when: a) a partner becomes insane or lunatic. b) a partner becomes permanently incapable of performing the duties. c) a partner is guilty of misconduct and affects the business activities. d) a partner repeatedly breaks the terms of agreement . e) a partner transfers his interest to a third party without the consent of other partners. f) a business persistently incurs losses. Besides these above mentioned circumstances, a partnership firm may be dissolved if the court at any stage finds dissolution of the firm to be justified and inevitable. The following are the rules of settlement of accounts on dissolution as per the Section 48 of Partnership Act 1932. 1. Application of Assets: Amount received by the realisation (sale) of the assets shall be used in the following order: a) First of all the external liabilities and expenses are to be paid. b) Then, all loans and advances forwarded by the partners should be paid. c) Then, the capital of each partners should be paid off. If there remains any surplus after the payment of (a), (b) and (c), then it should be distributed among the partners in their profit sharing ratio. 2. Treatment of Loss: In case of loss and any deficiency of capital, then this should be paid in the following order: a) First these should be adjusted against firm's profits. b) Then, against the total capital of the firm. c) If still there exists any loss and deficiencies, then it should be borne by all the partners individually in their profit sharing ratio.
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