COMMON JOURNAL ENTRIES FOR DISSOLUTION
1. REALISATION ACCOUNT
(A) Transfer of Assets to Realisation
Realisation A/c Dr
To Sundry Assets A/c
(B) Transfer of Liabilities to Realisation
Sundry Liabilities A/c Dr
To Realisation A/c
(C) Sale of Assets for Cash/Bank
Cash/Bank A/c Dr
To Realisation A/c
(D) Asset taken over by Partner
Partner’s Capital A/c Dr
To Realisation A/c
(E) Unrecorded asset realised
Cash/Bank A/c Dr
To Realisation A/c
(F) Unrecorded asset taken by partner
Partner’s Capital A/c Dr
To Realisation A/c
(G) Payment of Liabilities
Realisation A/c Dr
To Cash/Bank A/c
(H) Creditor takes asset (no cash involved)
👉 No Entry (already transferred to
Realisation)
(I) Realisation Expenses paid by firm
Realisation A/c Dr
To Cash/Bank A/c
(J) Realisation Expenses paid by partner
Realisation A/c Dr
To Partner’s Capital A/c
(K) Partner paid expenses on behalf of firm
Realisation A/c Dr
To Partner’s Capital A/c
(L) Commission/Remuneration to partner for
dissolution work
Realisation A/c Dr
To Partner’s Capital A/c
(M) Loss on Realisation
Partners’ Capital A/c Dr
To Realisation A/c
(N) Profit on Realisation
Realisation A/c Dr
To Partners’ Capital A/c
2. PARTNER’S CAPITAL ACCOUNT
(A) Asset taken over
Partner’s Capital A/c Dr
To Realisation A/c
(B) Realisation expenses borne by partner
Realisation A/c Dr
To Partner’s Capital A/c
(C) Expenses paid by firm on behalf of partner
Partner’s Capital A/c Dr
To Bank A/c
(D) Distribution of Profit on Realisation
Realisation A/c Dr
To Partners’ Capital A/c (ratio)
(E) Distribution of Loss on Realisation
Partners’ Capital A/c Dr (ratio)
To Realisation A/c
(F) Undistributed P&L balance (loss)
Partners’ Capital A/c Dr
To Profit & Loss A/c
(G) Undistributed P&L balance (profit)
Profit & Loss A/c Dr
To Partners’ Capital A/c
(H) Final payment to partners
Partner’s Capital A/c Dr
To Cash/Bank A/c
(I) Deficiency brought by partner
Cash/Bank A/c Dr
To Partner’s Capital A/c
3. PARTNER’S LOAN ACCOUNT
(A) Loan repaid to partner
Partner’s Loan A/c Dr
To Bank A/c
(B) Interest/extra payment on loan
Realisation A/c Dr
To Bank A/c
(C) Loan paid by partner on behalf of firm
Realisation A/c Dr
To Partner’s Capital A/c
4. BANK / CASH ACCOUNT
(A) Assets realised
Bank A/c Dr
To Realisation A/c
(B) Liabilities paid
Realisation A/c Dr
To Bank A/c
(C) Recovery of bad debts previously written off
Bank A/c Dr
To Realisation A/c
(D) Partner brings cash
Bank A/c Dr
To Partner’s Capital A/c
(E) Payment to partners (final settlement)
Partner’s Capital A/c Dr
To Bank A/c
🎯 EXAM MEMORY TRICK (Very Useful)
Rule of Realisation:
|
Situation |
Debit |
Credit |
|
Asset
realised |
Bank |
Realisation |
|
Liability
paid |
Realisation |
Bank |
|
Expense |
Realisation |
Bank |
|
Partner
benefit |
Partner
Capital |
Realisation |
|
Profit |
Realisation |
Partner
Capital |
|
Loss |
Partner
Capital |
Realisation |
FLOWCHART
OF DISSOLUTION ENTRIES
Start
↓
Transfer Assets → Realisation
Transfer Liabilities → Realisation
↓
Sell assets / Taken by partners
Pay liabilities & expenses
↓
Find Profit or Loss on Realisation
↓
Transfer to Capital Accounts
↓
Settle Partner Loans
↓
Pay Capitals through Bank
↓
Firm Closed
