Question

At the time of Dissolution of partnership firm, realisation gain is
(a) Credit to Partner's Capital ASC
(b) Debited to Partner's Capital AIC
(c) Credited to Bank A/C
(d) Debited to Bank A/C​

Answer 1

Answer:

ou have learnt about the reconstitution of a

partnership firm which takes place on account

of admission, retirement or death of a partner. In such

a situation while the existing partnership is dissolved,

the firm may continue under the same name if the

partners so decide. In other words, it results in the

dissolution of a partnership but not that of the firm.

According to Section 39 of the partnership Act 1932,

the dissolution of partnership between all the partners

of a firm is called the dissolution of the firm. That

means the Act recognises the difference in the

breaking of relationship between all the partners of a

firm and between some of the partners; and it is the

breaking or discontinuance of relationship between

all the partners which is termed as the dissolution of

partnership firm. This brings an end to the existence

of firm, and no business is transacted after

dissolution except the activities related to closing of

the firm as the affairs of the firm are to be wound up

by selling firm’s assets and paying its liabilities and

discharging the claims of the partners.

5.1 Dissolution of Partnership

As stated earlier dissolution of partnership changes

the existing relationship between partners but the

firm may continue its business as before. The

dissolution of partnership may take place in any of

the following ways:

(1) Change in existing profit sharing ratio among

partners;

(2) Admission of a new partner;

LEARNING OBJECTIVES

After studying this chapter

you will be able to :

• State the meaning of

dissolution of

partnership firm;

• Differentiate between

dissolution of partnership and dissolution of a

partnership firm;

• Describe the various

modes of dissolution of

the partnership firm;

• Explain the rules

relating to the settlement

of claims among all

partners;

• Prepare Realisation

Account;

• Record journal entries

and prepare the

necessary ledger

accounts to close the

books of the firm and

settlement of partners’

claim.

Dissolution of Partnership Firm 5