EXAM MEMORY TRICK - COMMON JOURNAL ENTRIES FOR DISSOLUTION - PREPARED BY Dr.PRASANTH VENPAKAL

 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