Class 12 Accountancy - WEST-BENGAL
Dissolution of Partnership Firm
The chapter Dissolution of Partnership Firm in Class 12 Accountancy under WBBSE deals with the complete closure of a business relationship among partners. Unlike admission or retirement where the firm continues, dissolution involves winding up operations, selling assets, paying off liabilities, and final settlement of accounts. Students learn systematic accounting treatment through four core ledger accounts: Realization Account, Partners' Capital Accounts, Partners' Loan Account, and Bank/Cash Account. This chapter is highly scoring and carries significant weight in the West Bengal Board exams, frequently featuring comprehensive 6-mark or 8-mark numerical problems.
Start Learning FreeKey Concepts
Dissolution of Partnership vs. Dissolution of Firm
Dissolution of partnership only changes the relationship among partners with the business continuing, whereas dissolution of the firm means complete closure of the business and winding up of all affairs.
Realization Account
A nominal account prepared at the time of dissolution to find out the profit or loss on realization of assets and settlement of outside liabilities.
Treatment of Partners' Loan
A loan advanced by a partner to the firm is paid off after settling outside liabilities but strictly before making any payment toward partners' capital accounts.
Unrecorded Assets and Liabilities
Assets not appearing in the books that realize some value are credited to Realization Account, and unrecorded liabilities that are paid off are debited to Realization Account.
Garner v. Murray Rule
A legal principle applied when a partner becomes insolvent, stating that the capital loss due to insolvency must be borne by solvent partners in their capital ratio.
Important Formulas
Board Exam Info
In the West Bengal (WBBSE) Class 12 Accountancy board exam, this chapter typically carries 8 to 10 marks. Questions usually include one short answer type question (1-2 marks) and a compulsory or alternative long numerical question (6-8 marks) involving the preparation of Realization, Partners' Capital, and Bank accounts.
Frequently Asked Questions
What is the difference between Realization Account and Revaluation Account?
Revaluation Account is prepared during admission, retirement, or death to record changes in asset and liability values while the firm continues. Realization Account is prepared only on dissolution to completely close down the business by selling all assets and paying off all liabilities.
How do we treat a partner's loan on dissolution of the firm?
A partner's loan is an internal liability towards a partner, but as per accounting rules, it is paid off immediately after external liabilities are cleared, and it is NOT transferred to the Realization Account.
Are realization expenses debited to Realization Account always?
Realization expenses are debited to Realization Account if the firm bears them. If a partner has agreed to bear realization expenses in exchange for a fixed commission, the amount is credited to that partner's capital account and debited to Realization Account.
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