Transcript PARTNERSHIP DISSOLUTION

PARTNERSHIP
DISSOLUTION
•6A
•ERIC&
KIM
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 dissolution
• 1)Transfer all the assets,liabilities to the
realization account(dr. realization),and realization
expenses also transfer to realization account (dr.
realization ,cr.bank )
•
•
creditor x
•
•
•
•
asset
x
realization
expense x
commission x
realization
bank
realization
expense
x
commission x
2)All assets will be sold to other (cr. realization,dr.bank ) or
taken over by partners in their agree price
(cr.realization ,dr. partners’ capital ),if give to partners for
gift,not count
realization
bank
bank asset
sold
realization :
x
asset sold x
asset take over by partners
realization
capital
capital A
A
asset take over
by partner
x
realization
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:
discount received x discount
received x
partnership pay the liabilities
creditor
capital A x
capital
A
creditor x
4)Collection of debts:If there are any bad debt recovered or debts
collected ,cr.realization ,dr.bank,if partners undertake to collect
the debts on behalf of the partnership, just cr realization ,dr.partners’
capital.
Bank
bad debt
recovered
realization
bad debt
x
debt collected x
recovered
x
debt collected x
partners undertake to collect the debts on behalf of the partnership
capital
realization
A
Realization:
debt collect
capital A
x
debt collect x
5) “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 capital
capital account
current a/c
current account
capital x
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 not settle debit
balance in his Capital account.The solvency 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
A
capital deficiency
account
B
A
X
capital deficiency X
B
Conclusion 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
on realization
x
collected by partner
x
bank :bad debt recovered
x
creditor: discount received
x
capital loss on realization
x
Bank account
balance b/d
x
realization account:
asset sold
x
capital account:
c
x
balance b/d
x
creditors
x
realization expense
x
partners loan
x
capital account
:
a
x
b
x
Partner 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
bank
share of c insolvency:
capital c
x
share of c insolvency:
x
x
bank
(balance figure)
x
x
x
capital a
x
capital b
x
P.S. Bank A/c must be balanced
otherwise you are calculate wrong
E
N
D