Class 12 Accountancy - RAJASTHAN
Dissolution of Partnership Firm
The chapter 'Dissolution of Partnership Firm' in Class 12 Accountancy under the Rajasthan Board (RBSE) deals with the complete closure of a business and termination of partnership relations among all partners. Students learn how to settle accounts by closing all books of accounts, realizing assets, paying off external liabilities, and finally distributing any surplus or deficit among partners. This chapter is highly crucial for board exams as it tests practical accounting treatment through comprehensive numerical problems involving the Realization Account, Partners' Capital Accounts, and Bank or Cash Account.
Start Learning FreeKey Concepts
Dissolution of Firm vs Dissolution of Partnership
Dissolution of a firm means the complete closure of the business and termination of all relations among partners, whereas dissolution of partnership simply means a change in the existing relationship between partners while the business may continue.
Realization Account
A nominal account prepared at the time of dissolution to ascertain the profit or loss on the realization of assets and payment of liabilities.
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.
Settlement of Partners' Loan
A partner's loan is paid off after settling outside liabilities but before making any payment to partners towards their capital accounts.
Garner v. Murray Rule
An insolvency rule applied when a partner becomes insolvent, requiring solvent partners to bring in cash for their share of realization loss.
Important Formulas
Board Exam Info
In the Rajasthan (RBSE) Class 12 Accountancy board exam, this chapter typically carries around 6 to 8 marks. Questions usually include one large practical numerical problem of 6 marks requiring the preparation of Realization Account, Partners' Capital Accounts, and Bank/Cash Account, along with 1 or 2 objective or very short answer questions.
Frequently Asked Questions
What is the difference between Dissolution of Partnership and Dissolution of Firm?
Dissolution of partnership involves reconstitution of the firm where only some partners change, whereas dissolution of firm means the business operations completely stop and the firm is wound up.
Are partner's loan accounts transferred to the Realization Account?
No, a partner's loan is not transferred to the Realization Account because it is an internal liability. It is paid through a separate Partner's Loan Account after external liabilities are cleared.
How are realization expenses treated if borne by a partner?
If a partner agrees to bear realization expenses, the amount agreed is credited to that partner's capital account and debited to the Realization Account.
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