Settlement of Accounts (Part B) Video Lecture - Commerce

[Music]
hello friends friends will continue with
dissolution of partnership form so in
this we have discussed what is
dissolution what we have to do on
resolution we are moving from a rented
accommodation to a fully furnished house
right so what will you do with the
assets that you have in the rented
accommodation you have to seal those
assets same way in case of dissolution
what you have to do is you have to sell
your assets because you are closing down
your partnership right you are closing
down your partnership form so what you
decide is you will sail all the assets
you will settle all the liabilities if
there is anything left after that will
be distributed by the partners among
themselves clear then we discussed about
the realization account that as soon as
you decide that you have to move out of
your rented accommodation and you have
decided to sell your research you
collect your assets and put it in one
carton then that carton is known as the
realization account you will close all
the assets and liabilities account and
that will be transferred to the
realization account clear that's what we
have discussed in the previous lectures
then what we do is we settle we realize
money from the sale of assets and we
settle the liabilities clear that's all
so we have discussed now friends coming
back to the story now you have decided
to move out of your rented accommodation
you have decided to sell your assets you
collect all the assets at one play
that is known as the realization account
right now what will happen you will go
to the market to sell the assets right
on that you will have to incur some
expenses like if you are going to sell
you a refrigerator you cannot carry the
refrigerator on your motorbike or in
your car isn't it
if you have to sell your refrigerator
you can't take the refrigerator on your
motorbike or on your car you will have
to hire a tempo or a rickshaw for this
isn't it so you will take the
refrigerator in a rickshaw or a tempo
right you will have to incur the
expenses on the hiring of a rickshaw
tempo
isn't it so that means if you have to
sail the SH if you have to realize money
from the SH you have to be R some
expenses also right so what I say is you
are moving out of rented accommodation
so if you are moving out of entered
accommodation to a fully furnished home
you have decided to sail as it's in the
selling of assets first you have
collected the assets that is the
realization account then you have to go
to the market to see all those assets
and on that you have to incur some
expenses clear like I told you that if
you have to take refrigerator to the
market to sell it you can't carry it on
your motorbike or in your car you have
to hire a rickshaw or a temple to take
refrigerator to the market
and sale right so you have to incur some
expenses in the process of selling
assets similarly similarly partnership
firm partnership firm has to incur some
expenses in the process of dissolution
right so partnership form also has to
incur some expenses in the process of
dissolution what is dissolution you are
moving out of your rented accommodation
right so if you are moving out of your
rented accommodation you have to sell
assets so if there is a dissolution of a
partnership firm you have to sell assets
first of all what you will do is you
will transfer all the assets to
realization account you will put all the
assets in one carton clear subject to
conditions like fictitious assets are
not transferred unrecorded assets are
not transferred like right so then you
have to go to the market to sell those
assets and in that process we have to
incur certain expenses
similarly the partnership form has to
incur certain expenses in the process of
dissolution right this is we what we can
say them as realization expenses clear
friends now the question is who will
bear the expenses and who will pay the
expenses
now we have a question in mind that we
have to incur expenses that's fine
our partnership form is going to close
that's fine who will dear these
realisation expenses and who will pay
the expenses for this we have certain
conditions we have certain permutations
and combinations
the first one is expenses are borne by
expenses are born and paid by
partnership home that means when you are
moving out of your account accommodation
right whatever the expenses are there
whatever the expenses are there on the
sale of assets you yourself are paying
those expenses so in case of partnership
form the partnership firm is paying the
expenses so what will be the journal
entry in that case our cash or bank will
be credited and what will be debited is
our cotton that is realization so
everything we have to do is through
cotton now what is the cotton
realization account to cash or bank
account clear so this is the first case
when the expenses are bought and paid by
partnership firm itself second case
expenses as borne by firm but
paid by a partner now what happens is
when you are moving out of the
accommodation you have to sell the
assets what you do is instead of taking
the headache yourself you hire a person
to carry out the sale of the assets
right you hire one person who will who
is taking the responsibility of selling
your assets and you say to that person
that whatever will be the expenses you
pay I will pay you the expenses then
whatever will be the expenses first you
pay on your behalf
then I will reimburse you those expenses
the same is the case in the dissolution
the firm appoints one of the partners to
carry out the dissolution clear the
expenses on dissolution are paid by the
partners right and then the firm will
compensate the partner for expenses paid
so what are the points Oh points
partner to carry out dissolution clear
second
partner will pay expenses at first right
the partner will pay the expenses out of
his pocket then after that the form will
compensate partner for the expenses
incurred clear first of all what will
happen is a partner is appointed he has
given the responsibility to carry out
the dissolution you hire one person he
is given the responsibility to sell your
assets right partner will pay expenses
at first you ask that hired person to
pay the expenses first and then you will
reimburse whatever the expenses are so
when you are reimbursing when the
partner is paying we won't record
anything partner is paying from his
pocket
there is no journal entry in the books
off firm but when the form is
compensating the partner for the
expenses what will be the journal entry
for this realization because we have to
do everything from our cotton
realization account debit and what will
be the credited if you have to credit
partner you will always credit the
partners capital accounts right all the
adjustments will be through partners
capital accounts so this point is clear
that you have hired a person you ask
that person to carry out the sale on
your behalf you ask that person to pay
the expenses from his pocket and then
you will reimburse whatever the expenses
are in dissolution a partner is
appointed to carry out the dissolution
of the partnership partner will pay the
expenses at first from his own pocket
then the firm will compensate partner
for the expenses incurred right clear
friends now coming to the third case
third case is partner is given fixed
remuneration and expenses are to be
borne by partner clear now what is
happening is you have collected all the
assets in one carton that is the
realization account you hired a person
who will carry out the sale on your
behalf right instead of taking the
headache yourself you decided to hire a
person who will carry the sale of assets
on your behalf
now what you do is in the earlier case
you were asking the person to pay the
expenses from his pocket and then you
will reimburse in this case you are
saying to the person that we will pay
you a lump sum amount we will pay you
some remuneration a lump sum amount that
will include the expenses
so whatever the expenses you pay whether
they are more than the remuneration or
less than the remuneration you hire a
person who will carry out the sale of
assets on your behalf you ask that
person that irrespective of what is the
amount of expenses we will pay you a
lump sum amount right we will pay you a
lump sum amount then after that what are
the expenses on the realization that is
your headache right we will not pay you
according to the expenses but we will
pay you a lump sum amount
right so in this case also partner
partner gets fixed remuneration right
irrespective of expenses on dissolution
right now expenses can be more or less
expenses can be more or less than the
remuneration but these all expenses are
to be paid by expenses are to be paid by
partner right clear friends now when you
are paying the remuneration to the
partner you will record the journal
entry in your books what will be the
journal entry for remuneration you will
record the journal entry that will be
realization account debit to partners
capital accounts clear so we'll adjust
it through partners capital accounts so
what is happening here is we are paying
partner a fixed remuneration
irrespective of expenses on dissolution
the headache of expenses on dissolution
is on the partner whether the expenses
are more than remuneration all the
expenses are less than remuneration we
are not concerned with this right
so what we
be the entry recorded in books it will
be for the remuneration paid to partners
after that the partner is paying
expenses that is not the business
headache the form will not record any
entry related to the expenses that are
being paid by partners because it is the
partners responsibility now not the
firm's responsibility now in this there
can be a case when a partner says that I
don't have enough money to beer the
expenses right now so we ask firm to pay
expenses on his behalf right partner
asks firm to pay expenses on his behalf
right
so the responsibility of expenses is
partner but the firm is paying firm is
paying expenses on behalf of partner
which will be recovered from partner
these expenses will be recovered from
partner because here the liability is
not of the form to pay the expenses
liabilities of the partner we are just
paying in the face determination
expenses liabilities of the partner
right so these expenses will be
recovered from the partner if you have
to recover these expenses from the
partner right when you are paying
expenses on the behalf of partner what
will be the journal entry we will adjust
this amount from the partners capital
account right I will say partners
capital account debit and you are paying
the expenses to cash or bank account so
here instead of realization we will
debit the partners capital accounts why
we debit the partners capital account
because we have to recover these expense
amount from the partner the payment of
expense was not the responsibility of
the partnership firm but it was the
responsibility of the partner so we have
to recover this amount clear now next
case this was case number three case
number four now what is the fourth case
four cases remuneration
is paid to the partner right and
expenses are also paid by the form in
the earlier case we are paying the
remuneration to partner and the
liability to pay expenses is on the
partner but in this case what is saying
is that we are paying remuneration to
partner for carrying out the dissolution
but expenses will be paid by firm right
partner will get remuneration for
carrying out
for carrying out resolution process
right
but partner is not responsible partner
is not responsible to pay expenses like
you hire a person to carry out the sale
of your assets and you tell that person
that we will pay you the remuneration
and over and above that remuneration if
you incur some expenses on the sale of
asset that also we will pay you so the
firm is paying remuneration also to the
partner because he is carrying out the
dissolution process for that the firm is
paying the remuneration but in this case
the expense part is not covered the
expenses will still be paid by the
partnership firm so what will be the
journal entry first will be when you pay
the remuneration to the partner the
journal entry will be realization
account debit to partners capital
account this is for remuneration clear
and when the partnership form is paying
the expenses because in this case the
liability of paying expenses is on
partnership form so that will be the
very first case realization our carton
account debit to cash or bank account
clear
clear friends so these two cases in the
third case we are paying remuneration to
the one partner and that partner is only
responsible for paying the expenses
irrespective of expenses we are paying
remuneration but in the fourth case what
we have discussed is that we are paying
remuneration to partner for carrying out
the dissolution process but partner is
not responsible to pay expenses
liability to pay expenses is on the
partnership firm clear clear friends now
in this case in this case if I say
partner pays expenses on behalf of firm
the partner has paid expenses on behalf
of firm the partner was not liable to
pay expenses but he is paying expenses
on behalf of firm what will be the
journal entry you will compensate
partner right and when you will
compensate partner the entry will be
realization account debit to partners
capital accounts
clear friends I hope this much is clear
now what is the next case the first and
the final case they say one partner one
partner is liable to pay expenses but
expenses are paid by other partner what
it says that X is partner X's liable to
pay expenses but partner Y pays expenses
what will be the journal entry now Y is
not liable to pay expenses but he is
paying expenses so we will compensate Y
who will compensate Y X will compensate
y because it was the liability of
partner X to pay the expenses which are
paid by Y so what will be the journal
entry x capital account debit who will
bondage the person who is liable to pay
expenses wise capital will be credited
because Y was not liable to pay expenses
so he will be compensated he will be
compensated by the person who was liable
to pay expenses so X capital is debited
and Y is capital is credited please
clear friends so all the four cases are
clear the first case was paid by firm
second case was the responsibility was
given to the partner to carry out the
partnership
sorry dissolution process but the
expenses are borne by the firm right
expenses are first fed by the partner
then reimbursed by firm third cases
partner is given the remuneration as
well as given the responsibility of
incurring the expenses so in this case
it is the liability of the partner to
pay expenses firm is not liable to the
expenses but firm can pay on behalf of
partner fourth cases remuneration is
paid to partner and the expenses are
also paid by the firm here the partner
is not responsible to pay expenses
partner will get remuneration he will
get remuneration for carrying out the
dissolution process but he is not liable
to pay expenses please fourth is one
partner is liable but the payment is
made by the other partner right so that
other partner Y will be compensated by
crediting his capital account and he
will be compensated by the partner by
the person who was liable to pay the
expenses clear friends I hope this much
is clear
expenses part is clear so let us do a
practical problem on this path journal
entries for the following transactions
okay before that make one note that is
important here if the question is silent
if the question is silent we will assume
we will assume that expenses are borne
and paid by partnership firm clear if
the question is silent then we will
assume that expenses are borne and paid
by partnership from clear friends so now
let's do a practical problem on this
right
very easy practical problem he says pass
the necessary journal entries for the
following transactions realization
expenses amounted to ten thousand that's
it
that means these realization expenses
have been paid by whom the pump isn't it
so
what is the first entry if the form is
paying the realization expenses the
entry will be realization everything out
of carton to cash or bank account yes
ten thousand ten thousand clear next
realization expenses amounted to five
thousand was paid by a partner the
liability to pay expenses was of the
firm but these expenses are paid by the
sorry partner right then we will
compensate that partner what will be the
journal entry case - it is realization
the liability to pay was of the firm but
is paid by partner so partner will be
compensated by crediting his account and
he will be compensated by the person who
is liable that is firm for the form we
use realization account that is curtain
five thousand and five thousand clear
next realization expenses amounted to
five thousand but paid by a firm on
behalf of a partner right so can you
understand the language of the question
he says realization expenses amounted to
five thousand were paid by the firm on
behalf of the partner so can you tell me
who is liable to pay the expenses here
whose liability is here it is the
partners liability to pay the expenses
but who is paying for miss being so
ultimately the form will recover the
amount from whom partner so what will be
the journal entry partners capital
account debit and what will be credited
cash or bank because we are making the
payment on behalf of partner amount is
five thousand and five thousand clear
friends next a partner was paid
remuneration including expenses that is
including expenses means he is given the
remuneration inclusive of expenses and
the responsibility of expenses is now on
partner
he says a partner was paid a
remuneration including expenses of 7,500
to carry out the dissolution of firm
actual expenses were ten thousand now
what will be the journal entry that we
will record in the books first we will
pay the remuneration to the partner what
will be the entry for that will say
realization when we are paying
remuneration to the partner partners
capital accounts will be credited with
seventy five hundred and seventy five
hundred this much gear now it says the
actual expenses
10,000 was the firm liable to pay these
expenses the partnership firm was not
liable to pay these expenses of 10,000
because it is given that we have paid
the remuneration inclusive of expenses
ks3 remember case 3 it is the partners
liability so whether the partner has
paid 10,000 he pays 50,000 or any amount
it is not relevant to us what is
relevant to us is the remuneration that
we are paying to the partner so these
actual expenses of 10,000 we will not
record any entry for this clear is this
clear friends next point dissolution
expenses were 8,000 out of the said
expenses 3,000 were to be borne by the
firm and the balance was to be born by
partner out of the eight thousand three
thousand were to be borne by the firm
and rest were to be born by partner that
is five thousand but all the a thousand
is paid by firm that means the partners
liability of five thousand was also paid
by firm so what will be the journal
entry for this three thousand was the
liability of the firm only four that
will say realization account debit to
cash or
bank account this is 3000 because it was
the liability of form only and firm has
paid that now the remaining 5000 was the
liability of the partner but the firm is
pink on behalf of partner so we will
recover that amount from partner only so
what will be the journal entry partners
capital account debit will debate the
partner because we have to recover that
amount from the partner and will credit
the cash or bank because we have paid
the expenses this is 5000 clear friends
I hope this is clear right next
dissolution expenses were eight thousand
three thousand were to be borne by the
form and the balance by partner the
expenses were paid by the partner
entrusting three thousand was to be paid
by the firm liability three thousand
liability was for the firm but this
liability was paid by the partner the
balances already paid by the partner
that is not relevant to us but he has
paid is not relevant to us but what is
relevant is rupees three thousand was
the liability of the firm that liability
is met by partner now the firm will
compensate the partners for that
liability isn't it so the sixth case
will say what will be the entry if you
are compensating the partner partners
capital accounts will be credited and
what will be debited is realization
account debit to partners capital
accounts why because three thousand was
the liability of the partnership form
which has been paid by the partners now
the firm will compensate the partners
because it was the liability of firm
right now that in
5,000 or whatever the remaining amount
is that is bid paid by the partner so no
entry will be recorded in the books it
is not really went to us yes next seven
dissolution expenses of five thousand
were to be born and paid by a partner
there were realization expenses of five
thousand and it was the responsibility
of the partner to pay those expenses and
partner has paid those expenses what
will be the journal entry for this no
entry
whatever the partner has paid it was his
responsibility and it is the not the
responsibility of the business so we
will not record this entry at all clear
next ex the partner is paid remuneration
of five thousand for dissolution of firm
realization expenses of eight thousand
are met by the firm case for partner is
paid the remuneration also and the
expenses also are to be met by the forum
so what will be the journal entry first
for remuneration first we will pay the
partner first remuneration for carrying
out the dissolution so that will be
realization account debit to X capital
account five thousand then firm is
liable to pay expenses and firm is
paying the expenses what will be the
entry for that realization account debit
to cash or bank account right this is
eight thousand clear this is case for
remember clear now the last point
realization expenses of five thousand
were to be borne by X that is it was the
liability of partner
x2 pay the expenses of 5,000 but these
expenses were paid by Y that is another
partner Y so we will compensate Y and we
will take that money from X and we have
to do the adjustments through capital
account so X capital account will be
debited and Y is capital account will be
credited because we have to compensate Y
and who will compensate by the person
whose liability was to pay the expenses
clear friends I hope this expenses part
is clear I have tried my best to cover
the whole right I really hope this part
is clear to you just remember the 5
cases right understand the story that I
have told you that whether you are
incurring the expenses whether you are
hiring the person and asking the person
to pay the expenses and then you will
reimburse or you are paying a lump sum
amount to the person and you ask that
person that whatever the expenses is it
is all yours clear so this is all about
the realisation expenses right if you
have any queries related to any topic
just send me an email
at KSD teaching add the rate of
gmail.com right so in the next lecture
in the next lecture we'll do closing of
realization account closing of
realization account right we'll do the
practical problems on this realization
account right friends so that's all for
this lecture friends thank you so much