Class 12 Accountancy - TAMILNADU
Dissolution of Partnership Firm
The chapter 'Dissolution of Partnership Firm' in Class 12 Accountancy under Tamil Nadu Samacheer Kalvi syllabus deals with the complete closure of a partnership business and the settlement of its accounts. Students will learn how to close the books of accounts by preparing essential ledger accounts such as the Realisation Account, Partners' Capital Accounts, and Bank or Cash Account. This chapter is vital for board exams as it consistently features comprehensive 5-mark and 10-mark practical problems that test students' understanding of asset realization, liability settlement, and partner solvency.
Start Learning FreeKey Concepts
Dissolution of Partnership vs Dissolution of Firm
Dissolution of partnership involves only a change in the existing relationship among partners, while dissolution of the firm means the complete closure and winding up of the entire business.
Realisation Account
A nominal account opened upon dissolution to close all asset and liability accounts, determine the profit or loss on the sale of assets, and record the payment of liabilities.
Treatment of Unrecorded Assets and Liabilities
Unrecorded assets realized are credited to the Realisation Account and debited to Bank/Cash, while unrecorded liabilities paid are debited to Realisation and credited to Bank/Cash.
Partner's Loan to the Firm
A loan advanced by a partner to the firm is settled after outside creditors are paid off, but before any capital is returned to the partners.
Garner v. Murray Rule
A legal principle applied when a partner becomes insolvent, requiring solvent partners to bear the capital deficiency in their profit-sharing ratio.
Important Formulas
Board Exam Info
In the Tamil Nadu (Samacheer Kalvi) Class 12 Accountancy board exam, this chapter typically carries around 10 to 15 marks. Questions usually include objective-type 1-mark questions, short-answer questions regarding the modes of dissolution or journal entries, and a major compulsory 5-mark or 10-mark practical problem requiring the preparation of Realisation, Capital, and Bank accounts.
Frequently Asked Questions
What is the difference between revaluation account and realisation account?
A revaluation account is prepared during reconstitution (admission, retirement) to record the revaluation of assets and liabilities while the business continues. A realisation account is prepared during dissolution to completely close down the business by selling all assets and paying off all liabilities.
How do we treat accumulated profits and reserves at the time of dissolution?
Accumulated profits, general reserves, and accumulated losses are transferred directly to the Partners' Capital Accounts in their old profit-sharing ratio before preparing the Realisation Account.
Are partner's loan accounts transferred to the realisation account?
No, a partner's loan is not transferred to the Realisation Account because it is an internal liability. It is paid off separately through the Bank or Cash account after settling external creditors.
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