Partnership ACCOUNTS Unit-4 (1).pptx dissolution of a firm
- 1. UNIT-IV
- 2. DISSOLUTION Meaning Dissolution means discontinunance .In case of Admission, Retirement,or Death of the partner,there is dissolution of partnership.
- 3. Modes of dissolution Legal provisions for partnership dissolution are contained in sec .39 to sec 55 of the partnership Act of 1932 . 1.Without the intervention of court a)By agreement among all partners b)compulsory dissolution c)On the happening of a certain event d) By notice under sec 43wnen partnership
- 4. Settlement of Accounts In the absence of any specific agreement between the partners as to the mode of settlement of accounts after the dissplution of the partnership firm. 1.Losses including deficiencies of capital shall be paid first out of profits. 2.The assets of the firm ,inclding any sums contributed by the partners to make up deficiencies.
- 5. a) In paying the debts of the firm to third parties. b) In paying to each partner rateably what is due to him from the firm for advances as distihguished from capital c)In paying to each partner ratebly what is due to him on account of capital d)The residue ,if any would be divided among the partners in the proportions in which share profits
- 6. Firm debts vs private debts Where both debts due from firm and partner in his individual capacity exist the legal position as to settlement of such debt. A) Debts of the firm would be paid first out of the property of the firm and surplus of assets B)Private debts of the partners would be apid first out the [rivate estate of the partners and surplus of private assets.
- 7. Accounting Treatments 1. For closing asset accounts 2. For closing liabilities accounts 3. For realizing assets 4. For discharging liabilities 5. For expenses on dissolution 6. For treatment of free reserves 7. For closing realization account 8. For the treatment of provisions against assets 9. For closing accumulated lossess
- 8. Goodwill Goodwill does not pose any speculator problem in the case of dissolution of the firm. A)If it appears in the balance sheet ,it if treated like any other assets and is transferred to realisation account B)If it does not appear it is not calculated C)If something is realised in cash for goodwill then cash account is debited D)If one of the partners agree to apy for goodwill then it is recordedby debiting.
- 9. Accounting for unrecorded assets and liabilites A) Do not transfer them to realisation account B)If money is realised from the sale of unrecorded assets them it is in the nature. C) If unrecorded assets is taken away by one of the partners then it is brought into account D)If unrecorded liability is paid then realistaion is debited and cash or bank account E) Incase one of the partners takes upon himself to pay the unrecorded liability then realisation account.
- 10. INSOLVENCY If a partner goes insolvent then the following are the consequences: 1.The partner adjudicted as insolvent ceases to be a partner 2.He cases to be a partner on the date on which the order of adjustments 3.The firm is dissolved on the date of the order of adjudictiation 4.The estate of the insolvent is not liable for any act of the firm 5.The firm cannot be held liable for any act of the insolvents partner
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