Partnership Accounts : Dissolution of Firm
ICSE · Class 12 · Accountancy
Flashcards for Partnership Accounts : Dissolution of Firm — ICSE Class 12 Accountancy. Quick Q&A cards covering key concepts, definitions, and formulas.
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What does dissolution of a firm mean?
Answer
Dissolution of a firm means the business closes down completely. Assets are disposed off, liabilities are paid off, and the accounts of all partners are settled. Section 39 of the Indian Partnership A…
What is the difference between dissolution of partnership and dissolution of firm?
Answer
Dissolution of partnership means the relationship of some partners with the firm ends, while the remaining partners continue the business. Dissolution of firm means the business ends completely and al…
What is a Realisation Account?
Answer
A Realisation Account is a new nominal account opened on dissolution of a firm to find out profit or loss on realisation of assets and payment of third-party liabilities. Its balance is transferred to…
Why is Realisation Account prepared on dissolution?
Answer
It is prepared to calculate profit or loss from selling assets and paying outside liabilities during dissolution. It helps close the books of the firm after all assets and liabilities are settled.
How are assets transferred to Realisation Account?
Answer
All assets except cash, bank, debit balance of partners’ capital/current accounts, loan to partner, and fictitious assets are transferred to the debit side of Realisation Account at book value. If the…
How are outside liabilities transferred to Realisation Account?
Answer
All liabilities except undistributed profits, partners’ capital/current accounts, and loan from partners are transferred to the credit side of Realisation Account at book value. If the question is sil…
Which items are not transferred to Realisation Account?
Answer
Balance of partner’s loan account, partners’ capital accounts, and cash/bank account are not transferred to Realisation Account. Undistributed profits are also not transferred to Realisation Account; …
What is the accounting treatment of goodwill on dissolution?
Answer
Goodwill is treated like any other asset on dissolution. If nothing is mentioned about its realisation, it is assumed to be valueless and nothing is received for it.
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