Question

show the entries made at the time of dissolution of a time​

Answer 1

We are required to show the entries that should be passed at the time of dissolution of a firm. The entries that will be passed when a firm is being dissolved will be as under:

• There are four basic entries that are required to be passed during this dissolution.
• The first one is the Realisation account.
• Under this, we have to show the end result of the assets and liabilities that the firm possessed and the transfer of the profit or loss to the partner's account.
• The journal entry for Realisation will be as under:

Sundry liabilities a/c Dr.

Partner's loss a/c (If there is a loss on dissolution)

To Sundry Assets a/c

To partner's gain a/c (If there is a profit on dissolution)

(Being all the liabilities and assets transferred)

• The second one is the Partner's Loan account.
• The journal entry for Partner's loan account will be:

Partner’s loan A/c Dr.  

    To Bank/Cash A/c

(Being the loan of a partner paid)

• The third one is the Partners’ Capital Accounts.
• The journal entry for Partner's Capital account will be:

Profit and Loss A/c Dr.  

General reserve A/c Dr.  

  To Partners’ Capital A/c  

(being the profit of the firm transferred to capital A/c)  

Partners’ Capital A/cs Dr.  

   To Profit and Loss A/c  

   To Deferred Revenue Expenditure A/c  

(being the loss of the firm transferred to capital Accounts)

• Journal entries for the Transfer of Realisation profit/ loss

Realization A/c  

  To Partners’ Capital A/c  

(being the profit on Realisation transferred)  

Partners’ Capital A/cs  

  To Realization A/c  

(being the loss on Realisation transferred)

For final settlement with partners:

• The fourth entry will be when the partners give cash or when the final payment is made to the partner's account.
• The respective journal entry for the above transaction will be:

a. The partner brings Cash to meet the deficiency in capital

Bank/Cash A/c Dr.  

  To Partners’ Capital A/c  

(being amount brought by partner)  

b. On payment to partners or closing partners’ capital accounts

Partners’ Capital A/c Dr.  

  To Bank/Cash A/c  

(being amount paid to partner)

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Your question was misspelled. The actual question will be:

Show the entries that should be made at the time of the dissolution of a firm.

Answer 2

Answer: The entries to be made at the time of dissolution of a time are

1. Realisation Account.
2. Partner’s Loan Account.
3. Partners’ Capital Accounts.
4. Bank or Cash Account.

Explanation:

1.Realisation Account.

Realization accounts are prepared with the intention of closing the books of the dissolved company and calculating profit or loss on the sale of assets and payment of liabilities. This is done by:

• moving every asset—aside from cash and bank accounts—to the account's debit side.
• transferring all liabilities to the account's credit side, with the exception of the partners' loan accounts and capital accounts.
• crediting the account with the asset sale receipt.
• debiting the account for the payment of liabilities.
• subtracting the firm's dissolution costs.

The account's balance could be either a profit or a loss. In accordance with the Partners' profit-sharing ratio, we transfer this balance to their capital accounts.

2.Partner’s Loan Account.

The loan made by a partner to a company is kept in that partner's account; it is not transferred to the firm's Realization account. When settlement, or payment of liabilities, occurs, we pay the loan to the partner after paying the external liabilities but before paying the capital.

3.Partners’ Capital Accounts.

When a partner assumes ownership of the firm's assets, we deduct that amount from their capital accounts as a payment against their capital. If a partner assumes the firm's responsibility, we credit that amount to their capital accounts. In accordance with their profit-sharing ratio, we additionally transfer reserves, realised profit/loss, and undistributed profits/losses to capital accounts. Entries include:

• Regarding the transfer of reserves and unused profits/losses:
• Realization Profit/Loss Transfer
• The following conditions must be met for the final settlement with partners:

             a. The partner provides cash to cover the capital shortfall;

             b. On payment to partners or shutting partners' capital accounts.

4.Bank or Cash Account.

On the negative side, we display the opening balance, the proceeds from asset sales, and the amount contributed by partners. On the credit side, we display the amount paid for liabilities, expenses, and partners.

There is no money left in the bank/cash account after resolving the partners' claims.

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