CBSE Class 12 Accountancy Chapter 5: Dissolution of Partnership Firm NCERT Solutions

The dissolution of a partnership and the dissolution of a partnership firm are distinct concepts. Here's a comparison based on key aspects:

When a partnership firm is dissolved, specific accounting treatments are applied to unrecorded assets and liabilities.

i) Accounting Treatment for Unrecorded Assets

An unrecorded asset is an asset that was not shown in the firm's books of accounts but still exists and has some realizable value. The accounting treatment depends on how it is disposed of:

1. When the unrecorded asset is sold for cash: The amount received from the sale is credited to the Realisation Account, and the Cash Account is debited. The journal entry is:

   $$Cash\; A/c\; Dr.$$

   $$To\; Realisation\; A/c$$

   (Being unrecorded asset sold for cash)

2. When the unrecorded asset is taken over by a partner: If a partner agrees to take over the unrecorded asset, their Capital Account is debited with the agreed value of the asset, and the Realisation Account is credited.

   $$Partner\text{'}s\; Capital\; A/c\; Dr.$$

   $$To\; Realisation\; A/c$$

   (Being unrecorded asset taken over by the partner)

ii) Accounting Treatment for Unrecorded Liabilities

An unrecorded liability is an obligation that was not recorded in the firm's books of accounts but needs to be settled upon dissolution. The accounting treatment is as follows:

When an unrecorded liability is paid off, the Realisation Account is debited with the amount paid, and the Cash Account (or the relevant creditor's account if it's a specific one) is credited. The journal entry is:

Realisation A/c Dr.

To Cash A/c

(Being unrecorded liability paid off)

If an unrecorded liability is taken over by a partner, the Realisation Account is debited, and the Partner's Capital Account is credited with the agreed amount. However, the source material only details the payment of unrecorded liabilities, not their takeover by partners.