1 April 31 March
P & L A/c
Balance Sheet
Balance Sheet
Liabilities Amount Assets Amount
Payment Realise
Dissolution of Partnership Dissolution of partnership firm
The Partnership is dissolved but the The firm winds up the business.
business continues. The Business is
not terminated
Assets and liabilities are revalued Assets are sold and the liabilities
through revaluation account and the are paid off through Realisation
Balance sheet is prepared account.
The Books of accounts are not closed The Books of accounts are closed.
as the business is not terminated.
The Assets of the firm and the amount contributed by the partners to make up the deficiency of
capital shall be applied for –
i) First to pay the debts of the firm to the third parties.
ii) Next, Partners Loan(Partner has advanced to the firm)
iii) Partners capitals
iv) The residue, if any shall be distributed among the partners in their profit sharing ratio.
Meaning of external / outside liability eg: Creditors, bills payable, bank loan, bank overdraft,
outstanding expenses, employees provident fund.
Treatment : Transfer in the Cr. side of Realisation account and compulsorily paid.
Meaning of internal liabilities/special reserves eg: provision for bad debts, provision for
depreciation, investment fluctuation fund, and Joint life policy fund.
Treatment: Transfer in the Cr. side of Realisation a/c only and no payment is to be done.
Preparation of Memorandum Balance Sheet:
It is prepared for calculating the missing figures of various assets or liabilities.
Sometimes, the total value of sundry assets is not given. However, the value
realized from the assets is given, the partner’s capital and other liabilities are also
given. In that case sundry assets have to be ascertained by preparing the old balance sheet. The
amount of capital and other liabilities are added. The sum total is the amount of assets. If
information about contingent liability is given then it will be shown by way of foot note.
Accountancy by Yashdeep Chaturvedi- +91-7007705331
P & L A/c
Balance Sheet
Balance Sheet
Liabilities Amount Assets Amount
Payment Realise
Dissolution of Partnership Dissolution of partnership firm
The Partnership is dissolved but the The firm winds up the business.
business continues. The Business is
not terminated
Assets and liabilities are revalued Assets are sold and the liabilities
through revaluation account and the are paid off through Realisation
Balance sheet is prepared account.
The Books of accounts are not closed The Books of accounts are closed.
as the business is not terminated.
The Assets of the firm and the amount contributed by the partners to make up the deficiency of
capital shall be applied for –
i) First to pay the debts of the firm to the third parties.
ii) Next, Partners Loan(Partner has advanced to the firm)
iii) Partners capitals
iv) The residue, if any shall be distributed among the partners in their profit sharing ratio.
Meaning of external / outside liability eg: Creditors, bills payable, bank loan, bank overdraft,
outstanding expenses, employees provident fund.
Treatment : Transfer in the Cr. side of Realisation account and compulsorily paid.
Meaning of internal liabilities/special reserves eg: provision for bad debts, provision for
depreciation, investment fluctuation fund, and Joint life policy fund.
Treatment: Transfer in the Cr. side of Realisation a/c only and no payment is to be done.
Preparation of Memorandum Balance Sheet:
It is prepared for calculating the missing figures of various assets or liabilities.
Sometimes, the total value of sundry assets is not given. However, the value
realized from the assets is given, the partner’s capital and other liabilities are also
given. In that case sundry assets have to be ascertained by preparing the old balance sheet. The
amount of capital and other liabilities are added. The sum total is the amount of assets. If
information about contingent liability is given then it will be shown by way of foot note.
Accountancy by Yashdeep Chaturvedi- +91-7007705331
