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DK Goel Solutions: Dissolution of a Partnership Firm - Commerce PDF Download

Q1: A, B and C were partners in a company sharing profits in the ratio 4:3:3. On 1-4-2015 they decided to dissolve the company. On that date, A’s capital was Rs. 1,25,000, B’s capital was Rs. 45,000 and C’s capital was Rs. 15,000(Dr.). The creditors amounted to Rs. 23,150 and cash in hand was Rs. 3,920. The assets realized Rs. 1,44,910 and the expenses of dissolution were Rs. 1,860. Prepare realization account and show your working clearly.
Ans:

DK Goel Solutions: Dissolution of a Partnership Firm - CommerceDK Goel Solutions: Dissolution of a Partnership Firm - Commerce


Q2: Give the necessary journal entries in each of the following alternative cases:
(i) Realization expenses amounted to 500
(ii) Realization expenses paid by the company amounted to Rs. 500 and the partner has to bear the realization expenses
(iii) ‘A’ one of the partners was to bear all the realization expenses for which he was given a commission of 2% of net cash realized from dissolution. Cash realized from assets was Rs. 25,000 and cash paid for liabilities amounted to Rs. 5,000
Ans:

DK Goel Solutions: Dissolution of a Partnership Firm - Commerce
Q3: A and B share profits and losses in the ratio of 3:2. They have decided to dissolve the firm. Assets and external liabilities have been transferred to realization A/c. Pass the journal entries to affect the following.
(1) Bank Loan of Rs. 12,000 is paid off.
(2) A was to bear all expenses of realization for which he is given a commission of Rs. 400
(3) Deferred Advertisement Expenditure A/c appeared in the book at 28,000
(4) Stock worth Rs. 1,600 was taken over by B at Rs. 1,200
(5) An unrecorded computer realized Rs. 7,000
(6) There was an outstanding bill of repairs for Rs. 2,000, which was paid off.
Ans:

DK Goel Solutions: Dissolution of a Partnership Firm - Commerce
Q4: If the total assets are Rs. 5,00,000, total liabilities are Rs. 1,00,000, the amount realized on the sale of assets is Rs. 4,20,000 and realization expenses are Rs. 5,000, what will be the profit or loss on realization?
Ans: 
Profit and loss of realization can be calculated by preparing a realization account as follows.
DK Goel Solutions: Dissolution of a Partnership Firm - Commerce

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FAQs on DK Goel Solutions: Dissolution of a Partnership Firm - Commerce

1. What are the main reasons for dissolving a partnership firm?
Ans. The main reasons for dissolving a partnership firm can include mutual agreement among partners, expiry of the partnership term, completion of the specific project for which the partnership was formed, death or insolvency of a partner, or when the partnership becomes unviable due to disputes or financial losses.
2. What is the process of dissolution of a partnership firm?
Ans. The process of dissolution of a partnership firm typically involves several steps: notifying all partners and stakeholders, settling the firm's debts and obligations, liquidating assets, distributing the remaining assets among partners according to their profit-sharing ratio, and finally preparing and filing necessary documents to formally dissolve the partnership.
3. How are assets and liabilities handled during the dissolution of a partnership?
Ans. During the dissolution of a partnership, all assets are first liquidated to pay off the firm's liabilities. Any remaining assets after settling debts are then distributed among the partners according to the partnership agreement or their respective shares in profits and losses.
4. What are the legal implications of dissolving a partnership firm?
Ans. The legal implications of dissolving a partnership firm include the requirement to notify creditors, settling all outstanding debts, filing necessary legal documents, and ensuring compliance with local laws. Failure to adhere to these legal requirements can lead to personal liability for the partners involved.
5. Can a partnership firm be dissolved unilaterally by one partner?
Ans. Yes, a partnership firm can be dissolved unilaterally by one partner if the partnership agreement allows for such action or if there is a valid reason under the law, such as misconduct or breach of agreement by other partners. However, it is generally advisable to seek mutual consent to avoid disputes.
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