Class 12 Accountancy - ODISHA
Dissolution of Partnership Firm
The chapter 'Dissolution of Partnership Firm' in Class 12 Accountancy under the Odisha Board (BSE) covers the complete termination of a partnership business. Unlike the retirement or death of a single partner, dissolution means the firm ceases to exist entirely. Students will learn the systematic closing of books of accounts through the preparation of Realization Account, Partners' Capital Accounts, and Bank or Cash Account. Mastering this chapter is crucial for board exams as it consistently features comprehensive 8-mark numerical problems that test your understanding of asset realization, liability settlement, and partner final payouts.
Start Learning FreeKey Concepts
Dissolution of Firm vs. Dissolution of Partnership
Dissolution of partnership involves only a change in the existing relationship among partners, whereas dissolution of the firm means the complete closure and winding up of the business.
Realization Account
A nominal account prepared at the time of dissolution to find out the profit or loss on the realization of assets and settlement of liabilities.
Settlement of Accounts
As per the Indian Partnership Act, losses (including deficiencies of capital) are paid first out of profits, then out of capital, and lastly by partners individually in their profit-sharing ratio.
Treatment of Unrecorded Assets and Liabilities
Unrecorded assets realized are credited to the Realization Account, and unrecorded liabilities paid off are debited to the Realization Account.
Partner's Loan Account
A loan advanced by a partner to the firm is settled after outside creditors are paid, but before any capital is returned to the partners; it is not transferred to the Realization Account.
Important Formulas
Board Exam Info
In the Odisha (BSE) Class 12 Accountancy board exams, this chapter typically carries around 8 to 10 marks. Questions usually include one compulsory long-answer numerical problem worth 8 marks involving the preparation of a Realization Account, Partner's Capital Accounts, and Bank Account, alongside 1 or 2 objective-type questions.
Frequently Asked Questions
Is Partner's Loan Account transferred to the Realization Account?
No, a partner's loan is a separate liability and is paid directly through the Bank or Cash account after outside creditors are cleared.
How do we treat unrecorded assets when they are sold?
When an unrecorded asset is sold, the Cash/Bank account is debited and the Realization account is credited with the amount realized.
What is the order of payment of liabilities on dissolution?
First, outside liabilities are paid, then partners' loans are repaid, next partners' capitals are refunded, and the remaining surplus is distributed among partners in their profit-sharing ratio.
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