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ACCOUNTANCY – XII          
 
Distinction between Dissolution of Partnership and Dissolution of Firm 
     
Basis  Dissolution of Partnership Dissolution of Firm   
      
1. Termination of The business is not terminated. The business of the firm is    
 business        
2. Settlement of Assets and liabilities are Assets are sold and   
 assets and revalued and new balance liabilities are paid-off.   
 liabilities sheet is drawn.    
3. Court’s Court does not intervene A firm can be dissolved by   
 intervention because partnership is the court’s order.   
   dissolved by mutual    
   agreement.    
4. Economic Economic relationship Economic relationship   
 relationship between the partners between the partners   
   continues though in comes to an end.   
   a changed form.    
5. Closure of books Does not require because The books of account are   
   the business is not closed.   
   terminated.    
6. Other dissolution It may or may not involve It necessarily involves   
   
dissolution of the firm. 
   
   dissolution of partnership.   
 
Accounts to be prepared at the time of dissolution 
? Realisation a/c 
? Partners capital a/c 
? Cash a/c or bank a/c 
? Partners loan a/c 
 
Step for dissolution (BAPP) 
1. balance sheet khali karu (clear the balance sheet- X me ) 
2. assets and liabilities to be sold off (bank or by PCA- X me ) 
3. Profit and loss for realisation( transferred to PCA - X me) 
4. Partners capital is paid off ( transferred to bank a/c - X me) 
 
FORMAT OF REALISATION A/C 
? NOMINAL A/C (SO FOLLOW THE RULE OF NOMINAL A/C) 
 
Format of partner’s capital a/c 
Particulars A B Particulars A B 
To balance b/d (dr. balance –assets) Xxx Xxx By balance b/d (cr. Side – liabilities ) Xxx Xxx 
Page 2


ACCOUNTANCY – XII          
 
Distinction between Dissolution of Partnership and Dissolution of Firm 
     
Basis  Dissolution of Partnership Dissolution of Firm   
      
1. Termination of The business is not terminated. The business of the firm is    
 business        
2. Settlement of Assets and liabilities are Assets are sold and   
 assets and revalued and new balance liabilities are paid-off.   
 liabilities sheet is drawn.    
3. Court’s Court does not intervene A firm can be dissolved by   
 intervention because partnership is the court’s order.   
   dissolved by mutual    
   agreement.    
4. Economic Economic relationship Economic relationship   
 relationship between the partners between the partners   
   continues though in comes to an end.   
   a changed form.    
5. Closure of books Does not require because The books of account are   
   the business is not closed.   
   terminated.    
6. Other dissolution It may or may not involve It necessarily involves   
   
dissolution of the firm. 
   
   dissolution of partnership.   
 
Accounts to be prepared at the time of dissolution 
? Realisation a/c 
? Partners capital a/c 
? Cash a/c or bank a/c 
? Partners loan a/c 
 
Step for dissolution (BAPP) 
1. balance sheet khali karu (clear the balance sheet- X me ) 
2. assets and liabilities to be sold off (bank or by PCA- X me ) 
3. Profit and loss for realisation( transferred to PCA - X me) 
4. Partners capital is paid off ( transferred to bank a/c - X me) 
 
FORMAT OF REALISATION A/C 
? NOMINAL A/C (SO FOLLOW THE RULE OF NOMINAL A/C) 
 
Format of partner’s capital a/c 
Particulars A B Particulars A B 
To balance b/d (dr. balance –assets) Xxx Xxx By balance b/d (cr. Side – liabilities ) Xxx Xxx 
ACCOUNTANCY – XII          
 
To realisation (assets are taken by 
partner) 
Xxx Xxx By realisation (liabilities are taken by 
partner) 
Xxx Xxx 
To P & L / losses (old ratio - assets) Xxx Xxx By reserves (old ratio- liabilities) Xxx Xxx 
To realisation losses (old ratio – 
realisation a/c) 
Xxx Xxx By realisation profits (old ratio – 
realisation a/c)  
Xxx Xxx 
TOTAL   TOTAL   
 
Format of bank a/c 
Particulars Rs. Particulars Rs. 
To balance b/d(FROM BALANCE SHEET) XXX By balance b/d( for bank overdraft) XXX 
To realisation  (assets realised) 
Recorded or not recorded 
XXX By realisation ( liabilities paid off) 
Recorded or not recorded 
XXX 
To partners capital a/c 
(PARTNERS PAYS BACK TO THE FIRM) 
XXX By partners capital a/c  
(PARTNER IS PAID OFF) 
XXX 
  By partners loan a/c XXX 
TOTAL  TOTAL  
 
Format of Partners loan a/c 
Particulars Rs. Particulars Rs. 
TO BANK A/C (loan paid off ) XXX By balance b/d( from balance 
sheet) 
XXX 
TOTAL  TOTAL  
Journal entries 
Transactions Entry  
Step 1 balance sheet khali karu (clear the balance sheet- X me ) 
For transfer of assets 
? All asset accounts excluding cash, bank and the fictitious assets, if any are closed by 
transfer to the debit of Realisation Account at their book values 
? sundry debtors are transferred at gross value and the provision for doubtful debts is 
transferred to the credit side of Realisation Account along with liabilities 
The same thing will apply to fixed assets if provision for depreciation 
account is maintained 
 
 
 
Realisation A/c 
To Assets A/c 
For transfer of liabilities 
?  All external liability accounts including provisions, if any, are closed by transferring 
them to the credit of Realisation account. 
 
 
Liabilities 
To Realisation A/c 
Step 2 assets and liabilities to be sold off (bank or by PCA- X me ) 
 
For sale of assets 
 
Bank a/c 
  To Realisation a/c 
For an asset taken over by a partner Partner’s Capital A/c 
To Realisation A/c 
        For payment of liabilities Realisation A/c 
To Bank A/c 
For a liability which a partner takes responsibility to discharge Realisation A/c 
To Partner’s Capital 
A/c 
For unrecorded sale of assets Bank a/c 
  To Realisation a/c 
For an unrecorded asset taken over by a partner Partner’s Capital A/c 
To Realisation A/c 
        For any unrecorded payment of liabilities Realisation A/c 
To Bank A/c 
For any unrecorded liability which a partner takes responsibility to discharge Realisation A/c 
To Partner’s Capital 
A/c 
Page 3


ACCOUNTANCY – XII          
 
Distinction between Dissolution of Partnership and Dissolution of Firm 
     
Basis  Dissolution of Partnership Dissolution of Firm   
      
1. Termination of The business is not terminated. The business of the firm is    
 business        
2. Settlement of Assets and liabilities are Assets are sold and   
 assets and revalued and new balance liabilities are paid-off.   
 liabilities sheet is drawn.    
3. Court’s Court does not intervene A firm can be dissolved by   
 intervention because partnership is the court’s order.   
   dissolved by mutual    
   agreement.    
4. Economic Economic relationship Economic relationship   
 relationship between the partners between the partners   
   continues though in comes to an end.   
   a changed form.    
5. Closure of books Does not require because The books of account are   
   the business is not closed.   
   terminated.    
6. Other dissolution It may or may not involve It necessarily involves   
   
dissolution of the firm. 
   
   dissolution of partnership.   
 
Accounts to be prepared at the time of dissolution 
? Realisation a/c 
? Partners capital a/c 
? Cash a/c or bank a/c 
? Partners loan a/c 
 
Step for dissolution (BAPP) 
1. balance sheet khali karu (clear the balance sheet- X me ) 
2. assets and liabilities to be sold off (bank or by PCA- X me ) 
3. Profit and loss for realisation( transferred to PCA - X me) 
4. Partners capital is paid off ( transferred to bank a/c - X me) 
 
FORMAT OF REALISATION A/C 
? NOMINAL A/C (SO FOLLOW THE RULE OF NOMINAL A/C) 
 
Format of partner’s capital a/c 
Particulars A B Particulars A B 
To balance b/d (dr. balance –assets) Xxx Xxx By balance b/d (cr. Side – liabilities ) Xxx Xxx 
ACCOUNTANCY – XII          
 
To realisation (assets are taken by 
partner) 
Xxx Xxx By realisation (liabilities are taken by 
partner) 
Xxx Xxx 
To P & L / losses (old ratio - assets) Xxx Xxx By reserves (old ratio- liabilities) Xxx Xxx 
To realisation losses (old ratio – 
realisation a/c) 
Xxx Xxx By realisation profits (old ratio – 
realisation a/c)  
Xxx Xxx 
TOTAL   TOTAL   
 
Format of bank a/c 
Particulars Rs. Particulars Rs. 
To balance b/d(FROM BALANCE SHEET) XXX By balance b/d( for bank overdraft) XXX 
To realisation  (assets realised) 
Recorded or not recorded 
XXX By realisation ( liabilities paid off) 
Recorded or not recorded 
XXX 
To partners capital a/c 
(PARTNERS PAYS BACK TO THE FIRM) 
XXX By partners capital a/c  
(PARTNER IS PAID OFF) 
XXX 
  By partners loan a/c XXX 
TOTAL  TOTAL  
 
Format of Partners loan a/c 
Particulars Rs. Particulars Rs. 
TO BANK A/C (loan paid off ) XXX By balance b/d( from balance 
sheet) 
XXX 
TOTAL  TOTAL  
Journal entries 
Transactions Entry  
Step 1 balance sheet khali karu (clear the balance sheet- X me ) 
For transfer of assets 
? All asset accounts excluding cash, bank and the fictitious assets, if any are closed by 
transfer to the debit of Realisation Account at their book values 
? sundry debtors are transferred at gross value and the provision for doubtful debts is 
transferred to the credit side of Realisation Account along with liabilities 
The same thing will apply to fixed assets if provision for depreciation 
account is maintained 
 
 
 
Realisation A/c 
To Assets A/c 
For transfer of liabilities 
?  All external liability accounts including provisions, if any, are closed by transferring 
them to the credit of Realisation account. 
 
 
Liabilities 
To Realisation A/c 
Step 2 assets and liabilities to be sold off (bank or by PCA- X me ) 
 
For sale of assets 
 
Bank a/c 
  To Realisation a/c 
For an asset taken over by a partner Partner’s Capital A/c 
To Realisation A/c 
        For payment of liabilities Realisation A/c 
To Bank A/c 
For a liability which a partner takes responsibility to discharge Realisation A/c 
To Partner’s Capital 
A/c 
For unrecorded sale of assets Bank a/c 
  To Realisation a/c 
For an unrecorded asset taken over by a partner Partner’s Capital A/c 
To Realisation A/c 
        For any unrecorded payment of liabilities Realisation A/c 
To Bank A/c 
For any unrecorded liability which a partner takes responsibility to discharge Realisation A/c 
To Partner’s Capital 
A/c 
ACCOUNTANCY – XII          
 
For payment of realisation expenses 
? Other cases are given below 
Realisation A/c 
To Bank A/c 
For payment of partners loan Partners loan a/c 
  To bank a/c 
Step 3 Profit and loss for realisation( transferred to PCA - X me) 
 
? For profit at the time of realisation 
 
Realisation A/c 
To Partner’s Capital 
A/c 
(in old ratio) 
? for losses at the time of dissolution  Partner’s Capital A/c 
To Realisation A/c 
(in old ratio) 
Step 4 Partners capital is paid off ( transferred to bank a/c - X me) 
? payment of partners capital a/c 
excess cash paid to the partner 
Partner’s Capital A/c 
 To bank a/c 
? payment received from partners  
required cash brought by the partner 
Bank a/c 
To Partner’s Capital 
A/c 
IMPORTANT POINTS OF THIS CHAPTER TO KEPT IN MIND ALWAYS---- 
? NO NEW RATIO 
? NO SPECIAL TREATMENT OF GOODWILL 
? ALL EXTERNAL LIABILITIES ARE PAID OFF (main bhut imandaar admi hu apni sabhi liabilities ki payment 
krni hai) 
Expect - 1. Provision for doubtful debts 
 2. Provision for depreciation 
 3. IFF 
 4. Repairs and renewal reserve  
? All others reserves are to be distributed as in the admission and retirement of partners 
 
 
Two types are debts (liabilities) are there 
? firm debt -  the responsibility of this debt is of the firm hence its to be paid by the firms fund and is to be 
shown in the realisation a/c  
? private debt- the responsibility is of this debt is of the partners debt hence it should be paid by partners 
from his private funds due to which its not shown in the realisation a/c 
When a firm debts becomes a private debt   
? when any commission is paid to the partner to bear the expenses its becomes a private debt 
Entry for commission  
       Realisation a/c 
         To partners capital a/c 
Liability / debt Paid by firm Paid by partners 
Firm debt Realisation a/c 
  To bank a/c 
Realisation a/c 
  To partners capital a/c 
Private debt Partners capital a/c 
  To bank a/c 
No entry 
 
Cases 
 Whose 
liability  
Case 
 
Who 
discharges  
Entry  
Firm (i) Realisation expenses amounted to Rs. 8,000.  Firm Realisation A/c  8,000 
To Bank A/c          8,000 
Firm (ii) Realisation expenses amounted to Rs. 8,000 were 
paid by partner X  
private Realisation A/c  8,000 
To X’s capital A/c        8,000 
private (iii) Realisation expenses amounted to Rs. 10,000 were 
paid by the firm on behalf of a partner X.  
Firm  X’s capital A/c    10,000  
  To bank a/c           10,000 
private (iv) Realisation expenses amounted to Rs.15,000. Mr. X, 
one of the partners, has to bear these expenses.  
Firm  X’s capital A/c    15,000  
  To bank a/c           15,000 
Page 4


ACCOUNTANCY – XII          
 
Distinction between Dissolution of Partnership and Dissolution of Firm 
     
Basis  Dissolution of Partnership Dissolution of Firm   
      
1. Termination of The business is not terminated. The business of the firm is    
 business        
2. Settlement of Assets and liabilities are Assets are sold and   
 assets and revalued and new balance liabilities are paid-off.   
 liabilities sheet is drawn.    
3. Court’s Court does not intervene A firm can be dissolved by   
 intervention because partnership is the court’s order.   
   dissolved by mutual    
   agreement.    
4. Economic Economic relationship Economic relationship   
 relationship between the partners between the partners   
   continues though in comes to an end.   
   a changed form.    
5. Closure of books Does not require because The books of account are   
   the business is not closed.   
   terminated.    
6. Other dissolution It may or may not involve It necessarily involves   
   
dissolution of the firm. 
   
   dissolution of partnership.   
 
Accounts to be prepared at the time of dissolution 
? Realisation a/c 
? Partners capital a/c 
? Cash a/c or bank a/c 
? Partners loan a/c 
 
Step for dissolution (BAPP) 
1. balance sheet khali karu (clear the balance sheet- X me ) 
2. assets and liabilities to be sold off (bank or by PCA- X me ) 
3. Profit and loss for realisation( transferred to PCA - X me) 
4. Partners capital is paid off ( transferred to bank a/c - X me) 
 
FORMAT OF REALISATION A/C 
? NOMINAL A/C (SO FOLLOW THE RULE OF NOMINAL A/C) 
 
Format of partner’s capital a/c 
Particulars A B Particulars A B 
To balance b/d (dr. balance –assets) Xxx Xxx By balance b/d (cr. Side – liabilities ) Xxx Xxx 
ACCOUNTANCY – XII          
 
To realisation (assets are taken by 
partner) 
Xxx Xxx By realisation (liabilities are taken by 
partner) 
Xxx Xxx 
To P & L / losses (old ratio - assets) Xxx Xxx By reserves (old ratio- liabilities) Xxx Xxx 
To realisation losses (old ratio – 
realisation a/c) 
Xxx Xxx By realisation profits (old ratio – 
realisation a/c)  
Xxx Xxx 
TOTAL   TOTAL   
 
Format of bank a/c 
Particulars Rs. Particulars Rs. 
To balance b/d(FROM BALANCE SHEET) XXX By balance b/d( for bank overdraft) XXX 
To realisation  (assets realised) 
Recorded or not recorded 
XXX By realisation ( liabilities paid off) 
Recorded or not recorded 
XXX 
To partners capital a/c 
(PARTNERS PAYS BACK TO THE FIRM) 
XXX By partners capital a/c  
(PARTNER IS PAID OFF) 
XXX 
  By partners loan a/c XXX 
TOTAL  TOTAL  
 
Format of Partners loan a/c 
Particulars Rs. Particulars Rs. 
TO BANK A/C (loan paid off ) XXX By balance b/d( from balance 
sheet) 
XXX 
TOTAL  TOTAL  
Journal entries 
Transactions Entry  
Step 1 balance sheet khali karu (clear the balance sheet- X me ) 
For transfer of assets 
? All asset accounts excluding cash, bank and the fictitious assets, if any are closed by 
transfer to the debit of Realisation Account at their book values 
? sundry debtors are transferred at gross value and the provision for doubtful debts is 
transferred to the credit side of Realisation Account along with liabilities 
The same thing will apply to fixed assets if provision for depreciation 
account is maintained 
 
 
 
Realisation A/c 
To Assets A/c 
For transfer of liabilities 
?  All external liability accounts including provisions, if any, are closed by transferring 
them to the credit of Realisation account. 
 
 
Liabilities 
To Realisation A/c 
Step 2 assets and liabilities to be sold off (bank or by PCA- X me ) 
 
For sale of assets 
 
Bank a/c 
  To Realisation a/c 
For an asset taken over by a partner Partner’s Capital A/c 
To Realisation A/c 
        For payment of liabilities Realisation A/c 
To Bank A/c 
For a liability which a partner takes responsibility to discharge Realisation A/c 
To Partner’s Capital 
A/c 
For unrecorded sale of assets Bank a/c 
  To Realisation a/c 
For an unrecorded asset taken over by a partner Partner’s Capital A/c 
To Realisation A/c 
        For any unrecorded payment of liabilities Realisation A/c 
To Bank A/c 
For any unrecorded liability which a partner takes responsibility to discharge Realisation A/c 
To Partner’s Capital 
A/c 
ACCOUNTANCY – XII          
 
For payment of realisation expenses 
? Other cases are given below 
Realisation A/c 
To Bank A/c 
For payment of partners loan Partners loan a/c 
  To bank a/c 
Step 3 Profit and loss for realisation( transferred to PCA - X me) 
 
? For profit at the time of realisation 
 
Realisation A/c 
To Partner’s Capital 
A/c 
(in old ratio) 
? for losses at the time of dissolution  Partner’s Capital A/c 
To Realisation A/c 
(in old ratio) 
Step 4 Partners capital is paid off ( transferred to bank a/c - X me) 
? payment of partners capital a/c 
excess cash paid to the partner 
Partner’s Capital A/c 
 To bank a/c 
? payment received from partners  
required cash brought by the partner 
Bank a/c 
To Partner’s Capital 
A/c 
IMPORTANT POINTS OF THIS CHAPTER TO KEPT IN MIND ALWAYS---- 
? NO NEW RATIO 
? NO SPECIAL TREATMENT OF GOODWILL 
? ALL EXTERNAL LIABILITIES ARE PAID OFF (main bhut imandaar admi hu apni sabhi liabilities ki payment 
krni hai) 
Expect - 1. Provision for doubtful debts 
 2. Provision for depreciation 
 3. IFF 
 4. Repairs and renewal reserve  
? All others reserves are to be distributed as in the admission and retirement of partners 
 
 
Two types are debts (liabilities) are there 
? firm debt -  the responsibility of this debt is of the firm hence its to be paid by the firms fund and is to be 
shown in the realisation a/c  
? private debt- the responsibility is of this debt is of the partners debt hence it should be paid by partners 
from his private funds due to which its not shown in the realisation a/c 
When a firm debts becomes a private debt   
? when any commission is paid to the partner to bear the expenses its becomes a private debt 
Entry for commission  
       Realisation a/c 
         To partners capital a/c 
Liability / debt Paid by firm Paid by partners 
Firm debt Realisation a/c 
  To bank a/c 
Realisation a/c 
  To partners capital a/c 
Private debt Partners capital a/c 
  To bank a/c 
No entry 
 
Cases 
 Whose 
liability  
Case 
 
Who 
discharges  
Entry  
Firm (i) Realisation expenses amounted to Rs. 8,000.  Firm Realisation A/c  8,000 
To Bank A/c          8,000 
Firm (ii) Realisation expenses amounted to Rs. 8,000 were 
paid by partner X  
private Realisation A/c  8,000 
To X’s capital A/c        8,000 
private (iii) Realisation expenses amounted to Rs. 10,000 were 
paid by the firm on behalf of a partner X.  
Firm  X’s capital A/c    10,000  
  To bank a/c           10,000 
private (iv) Realisation expenses amounted to Rs.15,000. Mr. X, 
one of the partners, has to bear these expenses.  
Firm  X’s capital A/c    15,000  
  To bank a/c           15,000 
ACCOUNTANCY – XII          
 
Firm- upto 
(Rs.8000) 
Private- rest  
(v) Realisation expenses amounted to Rs.20,000. 
Rs.8,000 were to be borne by the firm and the balance 
by X, a partner.  
Firm Realisation A/c  8,000 
X’s capital A/c    12,000 
To Bank A/c            20,000 
Firm- upto 
(Rs.8000) 
Private- rest 
(vi) Dissolution expenses amounted to Rs. 20,000. 
Rs.8,000 were to be borne by the firm and the balance 
by X, a partner. The expenses were paid by X.  
private Realisation A/c  8,000 
To X’s capital A/c        8,000 
private (vii) S, a partner, was allowed a remuneration of 
Rs.10,000 to carry out dissolution. Actual expenses 
amounted to Rs.16,000.  
Expenses will not be shown only the entry for 
commission is passed  
private Realisation A/c  10,000 
To S’s capital A/c        10,000 
private (viii) V, a partner, paid realisation expenses of Rs.10,000 
and these were to be borne by him. 
private No entry 
Special points  
LOAN TAKEN FROM A PARTNER IS PAID THROUGH THE BANK OR CASH A/C 
LOAN GIVEN TO A PARTNER WILL BE TRASNFERRED(DEBITED) TO HIS CAPITAL A/C  
 
IFF IS ALWAS TRANSFFERED TO REALISATION A/C only if investments are appearing in the assets side 
and  
Otherwise will be distributed among the partners. 
 
Bank overdraft is not transferred to realisation a/c . it is shown as by balance b/d in bank(credit side) a/c 
Bank loan must be transferred to realisation a/c 
 
If any liability took over any assets in full settlement of their claim     - no entry is passed  
? balance is to be paid if required  
Case 1 creditors of Rs.50,000  took over building of Rs63,000 in full settlement of their claim -    no entry  
Case 2 creditors on the date was Rs.50,000 out of which creditors of Rs.40,000 took over building of Rs63,000 in 
full settlement  
            of their claim -                                         realisation a/c   10,000 
                                                                                      to bank a/c        10,000 
Settlement of Partners loan a/c (appearing in the balance sheet liability side) 
Case Transaction Entry 
1. A’s Loan of Rs.10,000 No info  Partners loan a/c      10,000 
  To bank a/c                    10,000 
2. A’s Loan of Rs.10,000 is settled by paying Rs.8,000  Partners loan a/c    10,000 
  To bank a/c                  8,000 
  To realisation a/c        2,000 
3. A’s Loan of Rs.10,000 is settled by paying Rs.12,000  Partners loan a/c    10,000 
Realisation a/c        2,000 
  To bank a/c                  12,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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FAQs on Formats of all Account - Crash Course of Accountancy - Class 12 - Commerce

1. What is an account commerce?
Ans. Account commerce refers to the process of conducting commercial transactions through an online account. It involves buying and selling goods or services using an account or a platform, usually operated by a company or a marketplace.
2. How does account commerce work?
Ans. Account commerce works by creating an account on a platform or marketplace that facilitates transactions. Users can browse, search, and select products or services, add them to their cart, and proceed to checkout. They can then complete the transaction by making payment through various online payment methods.
3. What are the advantages of account commerce?
Ans. Account commerce offers several advantages, such as convenience, accessibility, and a wide range of options. Users can shop from the comfort of their homes, access a variety of products or services, compare prices, read reviews, and make secure payments. It also provides a platform for small businesses to reach a larger customer base.
4. How can I ensure the security of my account commerce transactions?
Ans. To ensure the security of account commerce transactions, it is important to follow certain practices. These include using strong and unique passwords, enabling two-factor authentication, avoiding public Wi-Fi for transactions, keeping the operating system and security software up to date, and being cautious of phishing attempts or suspicious links.
5. Are there any risks associated with account commerce?
Ans. While account commerce offers convenience, there are also some risks involved. These may include the possibility of fraudulent sellers or scams, potential data breaches that could expose personal information, or issues with product quality or delivery. It is advisable to research and choose reputable platforms, read reviews, and be cautious while sharing personal or financial information online.
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