Class 12 Accountancy - BIHAR
Dissolution of Partnership Firm
The chapter 'Dissolution of Partnership Firm' in Class 12 Accountancy deals with the formal closing down of a business partnership, where the existing relation between partners comes to an end and all assets are realized and liabilities are paid off. For Bihar Board (BSEB) students, this is a crucial high-scoring chapter. It requires deep understanding of ledger accounts preparation, specifically the Realization Account, Partners' Capital Accounts, and Bank or Cash Account. Board exams frequently feature comprehensive 6-mark or 8-mark numerical problems based on the preparation of these accounts and treatment of unrecorded assets and liabilities.
Start Learning FreeKey Concepts
Dissolution of Partnership vs. Dissolution of Firm
Dissolution of partnership simply changes the relation among partners while the business may continue, whereas dissolution of the firm means the complete closure of the business and winding up of all operations.
Realization Account
A nominal account opened at the time of dissolution to ascertain the profit or loss on the realization of assets and payment of liabilities.
Treatment of Accumulated Profits and Losses
General reserves, accumulated profits, and losses are transferred directly to the partners' capital accounts in their old profit-sharing ratio.
Settlement of Partners' Loans
A partner's loan is paid off after external liabilities are settled but before any capital is returned to the partners, and it is usually paid through a separate account.
Piecemeal Distribution
A method of distributing cash among partners progressively as and when assets are realized, rather than waiting for the complete realization of all assets.
Important Formulas
Board Exam Info
In the Bihar School Examination Board (BSEB) Class 12 Accountancy exam, this chapter typically carries around 8 to 12 marks. Questions generally include objective (MCQ) questions, short-answer theoretical questions, and a mandatory long-answer numerical problem requiring the preparation of the Realization Account, Partner's Capital Accounts, and Bank Account.
Frequently Asked Questions
Is Realization Account a nominal account?
Yes, Realization Account is a nominal account. All asset realizations are credited, and asset book values, liabilities paid, and expenses are debited to find net profit or loss.
How are unrecorded assets treated upon realization?
Unrecorded assets, when sold, are credited to the Realization Account and debited to the Cash/Bank Account. They do not appear on the asset side before realization.
What is the difference between Revaluation Account and Realization Account?
Revaluation Account is prepared when a partnership is reconstituted (admission, retirement), whereas Realization Account is prepared when the entire firm is dissolved and closed.
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