The correct answer is  Any of the options

Key Points

 Dissolution of partnership firm:

• According to Section 39 of the Indian Partnership Act 1932, the dissolution of a partnership firm among all the partners is the Dissolution of the Partnership Firm.
• The organisation ceases to exist when a partnership firm dissolves.
• After this, the partnership firm cannot enter into any transaction with anybody. It can only sell the assets to realize the amount, pay the liabilities of the firm and discharge the claims of the partners.

Important Points Modes of Dissolution of Partnership Firm:

1. Dissolution by Agreement: A firm is dissolved

• with the consent of all the partners or
• in accordance with a contract between the partners.

2. Compulsory Dissolution:  A firm is dissolved compulsorily in the following cases:

• when all the partners or all but one partner, become insolvent, rendering them incompetent to sign a contract
• when the business of the firm becomes illegal; or
• when some event has taken place which makes it unlawful for the partners to carry on the business of the firm in partnership, e.g., when a partner who is a citizen of a country becomes an alien enemy because of the declaration of war with his country and India.

3. Dissolution by Notice: In case of partnership at will, the firm may be dissolved if any one of the partners gives a notice in writing to the other partners, signifying his intention of seeking dissolution of the firm.

4. Dissolution by Court: At the suit of a partner, the court may order a partnership firm to be dissolved on any of the following grounds:

• when a partner becomes insane;
• when a partner becomes permanently incapable of performing his duties as a partner;
• when a partner is guilty of misconduct which is likely to adversely affect the business of the firm;
• when a partner persistently commits breach of partnership agreement;
• when a partner has transferred the whole of his interest in the firm to a third party;
• when the business of the firm cannot be carried on except at a loss; or
• when, on any ground, the court regards dissolution to be just and equitable

5. On the happening of certain contingencies: Subject to contract between the partners, a firm is dissolved :

• if constituted for a fixed term, by the expiry of that term
• if constituted to carry out one or more ventures, by the completion thereof;
• by the death of a partner;
• by the adjudication of a partner as an insolvent

The correct answer is For Closing the Partnership accounts

Key Points Realisation account:

• Realisation Account is prepared at the time of dissolution of a partnership firm.
• This account acts as a record of sale of assets and liabilities and to calculate the profit or loss on sale.
• All the assets except cash and bank a/c are transferred to the debit side of realisation account and liabilities (not capital accounts) are transferred to the credit side of realisation account
• Preparation of realisation account is the first step in the process of Closing of partnership accounts.

Important Points Format of Realisation account:

The Correct answer is Credited to Bank Account

Key Points Dissolution of partnership firm:

• According to Section 39 of the Indian Partnership Act 1932, the dissolution of a partnership firm among all the partners is the Dissolution of the Partnership Firm.
• The organisation ceases to exist when a partnership firm dissolves.
• After this, the partnership firm cannot enter into any transaction with anybody. It can only sell the assets to realize the amount, pay the liabilities of the firm and discharge the claims of the partners.

Important Points When a partner gives a loan to the firm, at the time of dissolution of the firm, the amount of loan is settled by paying through the bank account.

Therefore, At the time of dissolution of the partnership firm, Rohan’s loan to the firm will be credited to the bank account.

The Correct answer is Realisation account 

Key Points

Realisation account:

• Realisation Account is prepared at the time of dissolution of a partnership firm.
• This account acts as a record of sale of assets and liabilities and to calculate the profit or loss on sale.
• All the assets except cash and bank a/c are transferred to the debit side of realisation account and liabilities (not capital accounts) are transferred to the credit side of realisation account
• Preparation of realisation account is the first step in the process of Closing of partnership accounts.

Important PointsTreatment of Unrecorded assets 

• Unrecorded assets are assets that have been written off fully yet remain physically present in the business.
• When the firm is dissolved, these assets are directly credited to the Realisation account.

Journal Entry for Treatment of Unrecorded Assets

If an Unrecorded Asset is sold for cash:

If taken over by any partner:

The correct answer is Transferred to Partner's Capital Account

Key Points

 Dissolution of partnership firm:

• According to Section 39 of the Indian Partnership Act 1932, the dissolution of a partnership firm among all the partners is the Dissolution of the Partnership Firm.
• The organisation ceases to exist when a partnership firm dissolves.
• After this, the partnership firm cannot enter into any transaction with anybody. It can only sell the assets to realize the amount, pay the liabilities of the firm and discharge the claims of the partners.

Important Points Treatment of accumulated profit/losses at the time of dissolution of the firm:

•  Undistributed profits/losses are ​transferred to capital accounts in their profit-sharing ratio

Journal Entry:

In case of undistributed Profit

In case of undistributed Loss

The correct answer is Both B & C

Important Points Difference between Revaluation Account and Realisation Account

The correct answer is It is paid in full

Key Points

 Dissolution of partnership firm:

• According to Section 39 of the Indian Partnership Act 1932, the dissolution of a partnership firm among all the partners is the Dissolution of the Partnership Firm.
• The organisation ceases to exist when a partnership firm dissolves.
• After this, the partnership firm cannot enter into any transaction with anybody. It can only sell the assets to realize the amount, pay the liabilities of the firm and discharge the claims of the partners.

Important Points If nothing is stated regarding the settlement of any outside liability, then it should be assumed that the amount equal to book value is paid.

Hence, it is shown as a payment in realisation account and also transferred to Bank Account.

Additional Information

 Realisation account:

• Realisation Account is prepared at the time of dissolution of a partnership firm.
• This account acts as a record of sale of assets and liabilities and to calculate the profit or loss on sale.
• All the assets except cash and bank a/c are transferred to the debit side of realisation account and liabilities (not capital accounts) are transferred to the credit side of realisation account
• Preparation of realisation account is the first step in the process of Closing of partnership accounts.

 Format of Realisation account:

The correct answer is Partner’s Capital Account

Key Points Realisation expenses:

 Those costs incurred throughout the process of realisation and have been incurred as a result of the dissolution of a partnership firm are called realisation expenses.

Important PointsTreatment of Realisation expenses paid by the firm on behalf of a partner.

When realisation expenses are paid by the firm on behalf of a partner, such
expenses are debited to Partner’s Capital Account.

Journal Entry:

The correct answer is Cash/Bank Account

Key Points

 Dissolution of partnership firm:

• According to Section 39 of the Indian Partnership Act 1932, the dissolution of a partnership firm among all the partners is the Dissolution of the Partnership Firm.
• The organisation ceases to exist when a partnership firm dissolves.
• After this, the partnership firm cannot enter into any transaction with anybody. It can only sell the assets to realize the amount, pay the liabilities of the firm and discharge the claims of the partners.

Important Points The accounts are prepared in the following order at the time of dissolution of partnership

1. Realisation Account: This account acts as a record of sale of assets and liabilities and to calculate the profit or loss on sale.
2. Partner’s Loan Account: This account is prepared only when a loan is given by the partner to the firm.
3. Partners’ Capital Accounts: This account is prepared to settle the dues of the partners.
4. Bank or Cash Account: This account is prepared to record all cash inflows and cash outflows during dissolution of partnership firm.

Additional Information Format of Realisation Account:

Format of Partners’ Capital Accounts:

Format of Partners’ Bank/Cash Accounts:

The correct answer is Recorded in realisation and sold like any other asset

Key Points Dissolution of partnership firm:

• According to Section 39 of the Indian Partnership Act 1932, the dissolution of a partnership firm among all the partners is the Dissolution of the Partnership Firm.
• The organisation ceases to exist when a partnership firm dissolves.
• After this, the partnership firm cannot enter into any transaction with anybody. It can only sell the assets to realize the amount, pay the liabilities of the firm and discharge the claims of the partners.

Important Points Treatment of goodwill at the time of dissolution of partnership:

• Goodwill appearing in the balance sheet is treated as any other asset.
• In case, there is no information regarding the realisation of goodwill, it is assumed the goodwill does not have any value and no amount is realised for it.