Complete Summary and Solutions for Dissolution of Partnership Firm – NCERT Class XII Accountancy, Chapter 4 – Meaning, Modes, Realisation Account, Settlement of Accounts, Journal Entries

Comprehensive summary and explanation of Chapter 4 'Dissolution of Partnership Firm' from the NCERT Class XII Accountancy textbook, covering the definition and distinction between dissolution of partnership and dissolution of firm, modes of dissolution, accounting treatment using Realisation Account, settlement of claims and losses among partners, journal entries for various transactions during dissolution, and related NCERT questions, answers, and exercises.

Updated: 1 day ago

Categories: NCERT, Class XII, Accountancy, Chapter 4, Dissolution of Partnership Firm, Settlement of Accounts, Realisation Account, Journal Entries, Accounting, Summary, Questions, Answers

Tags: Dissolution of Partnership Firm, Realisation Account, Settlement of Accounts, Journal Entries, NCERT, Class 12, Accountancy, Summary, Explanation, Questions, Answers, Chapter 4

Dissolution of Partnership Firm - Class 12 Accountancy Chapter 4 Ultimate Study Guide 2025

Full Chapter Summary & Detailed Notes - Dissolution of Partnership Firm Class 12 NCERT

Overview & Key Concepts

Chapter Goal: Covers dissolution types, modes, settlement (Sec 48-49), Realisation A/c prep. Exam Focus: Distinction table, modes (5 ways), rules for losses/assets, journal entries; 2025 Updates: Emphasis on Garner vs Murray, insolvency. Fun Fact: Firm ends but partnership may continue. Core Idea: Wind-up via realisation. Real-World: Firm closure audits. Expanded: All subtopics point-wise with evidence (e.g., TYU-I), examples (e.g., Illustration 1), debates (e.g., compulsory vs voluntary).
Wider Scope: From reconstitution tease to full closure; sources: Pages 1-9, Fig 4.1.
Expanded Content: Include insolvency note; point-wise for recall; add 2025 relevance like digital asset sales.

Introduction & Expansion Need

Reconstitution Recap: Admission/retirement/death dissolve partnership, not firm.
Dissolution Defined (Sec 39): Break in all partners' relations ends firm; no new business, only wind-up.
Objectives: Differentiate types, modes, settlement rules, Realisation A/c, journal entries.
Expanded: Evidence: TYU-I claims; debates: Court intervention ethics; real: Post-2020 remote dissolutions.

Conceptual Diagram: Dissolution Flow

Flow: Partnership Dissolution → Firm Dissolution? → Modes → Realisation A/c → Settlement → Closure. Ties to Fig 4.1.

Why This Guide Stands Out

Comprehensive: All subtopics point-wise, proforma integrations; 2025 with insolvency, processes analyzed for entries.

Dissolution of Partnership

Meaning: Changes relations; firm continues (e.g., ratio change).
Ways (7): Ratio change, admission, retirement, death, insolvency, venture completion, term expiry.
Example: Admission dissolves old partnership.
Expanded: Evidence: No firm end; real: Ongoing business.

Dissolution of Firm

Meaning: Ends firm; always includes partnership dissolution.
Modes (5): Agreement (consent/contract), Compulsory (insolvency/illegal), Contingencies (term/venture/death/insolvency), Notice (at will), Court (insane/incapable/misconduct/breach/transfer/loss/just).
Example: All insolvent = compulsory.
Expanded: Evidence: TYU-II; debates: Court vs mutual.

Quick Table: Distinction - Partnership vs Firm Dissolution

Basis	Dissolution of Partnership	Dissolution of Firm
Business Termination	Not terminated	Closed
Assets/Liabilities	Revalued, new BS	Sold, paid off
Court Intervention	No	Possible
Economic Relation	Continues changed	Ends
Books Closure	No	Yes

Settlement of Accounts

Sec 48: Losses: Profits first, then capital, then partners ratio.
Sec 48: Assets: Third parties, partner loans, capitals, residue ratio.
Private vs Firm Debts (Sec 49): Firm property for firm debts first; private for private, surplus to firm.
Inability (Garner vs Murray): Insolvent deficiency = loss to solvent in capital ratio.
Expanded: Evidence: Illustration; real: Proportional payments.

Accounting Treatment

Realisation A/c: Assets Dr, liabilities Cr; sale/payments; profit/loss to capitals (Fig 4.1).
Journal Entries (5): Transfer assets/lia, sale, takeover, payment.
Expanded: Evidence: TYU-II; debates: Unrecorded items.

Summary & TYU

Key Takeaways: Partnership vs firm; modes; Sec 48-49 rules; Realisation closes books.
TYU Tease: T/F on modes, transfers.

Key Definitions & Terms - Complete Glossary

All terms from chapter; detailed with examples, relevance. Expanded: 30+ terms grouped by subtopic; added advanced like "Garner vs Murray", "Unrecorded Assets" for depth/easy flashcards.

Dissolution of Partnership

Change in relations; firm continues. Ex: Admission. Relevance: No closure.

Dissolution of Firm

End of all relations; Sec 39. Ex: All insolvent. Relevance: Wind-up.

Realisation Account

Closes books; profit/loss on assets/lia. Ex: Fig 4.1. Relevance: Transfer to capitals.

Settlement of Accounts

Pay claims per Sec 48. Ex: Assets order. Relevance: Order of priority.

Compulsory Dissolution

All insolvent/illegal. Ex: War alien. Relevance: Forced end.

Court Dissolution

On suit; insane/misconduct. Ex: Persistent breach. Relevance: Judicial.

Private Debts

Partner personal; Sec 49. Ex: Surplus to firm. Relevance: Separate from firm.

Garner vs Murray

Insolvent loss to solvent in capital ratio. Ex: Deficiency borne. Relevance: Advanced rule.

Unrecorded Assets

Not in books; Dr Realisation. Ex: Taken by partner. Relevance: Realised gain.

Unrecorded Liabilities

Paid; Cr Realisation. Ex: Unexpected claim. Relevance: Loss.

Profit on Realisation

Excess assets over lia; to capitals ratio. Ex: Illustration 1 Rs.2,925. Relevance: Shared.

Loss on Realisation

Deficiency; borne per Sec 48. Ex: To partners. Relevance: Order profits/capital.

Partner's Loan

Advance; paid after outsiders. Ex: Proportionate. Relevance: Priority over capital.

Insolvency of Partner

Unable to pay; capital loss. Ex: Garner rule. Relevance: Solvent bear.

Mutual Agreement

Consent dissolves. Ex: All agree. Relevance: Voluntary mode.

Partnership at Will

No term; notice dissolves. Ex: Written intent. Relevance: Flexible.

Fixed Term Partnership

Expires term. Ex: 5 years end. Relevance: Contingency.

Venture Partnership

Completes venture. Ex: Project done. Relevance: Specific purpose.

Misconduct

Court ground; affects business. Ex: Guilty act. Relevance: Dissolves.

Just & Equitable

Court discretion. Ex: Fair ground. Relevance: Broad.

Provision for Doubtful Debts

Transferred Cr Realisation. Ex: With debtors. Relevance: Net value.

Accumulated Profits/Reserves

To capitals before closure. Ex: General reserve. Relevance: Distributed.

Realisation Expenses

Dr Realisation; paid by firm/partner. Ex: Rs.1,500. Relevance: Cost of wind-up.

Tip: Group by types/settlement; examples for recall. Depth: Debates (e.g., court ethics). Historical: Act 1932. Interlinks: To Ch3 Reconstitution. Advanced: Insolvency calc. Real-Life: Firm audits. Graphs: Proformas. Coherent: Evidence → Interpretation. For easy learning: Flashcard per term with TYU snippet.

60+ Questions & Answers - NCERT Based (Class 12) - From TYU & Variations

Based on chapter + expansions (e.g., TYU-I). Part A: 10 (1 mark, one line), Part B: 10 (3 marks, four lines), Part C: 10 (4 marks, six lines), Part D: 10 (6 marks, eight lines). Answers point-wise in black text. Include proformas where apt.

Part A: 1 Mark Questions (10 Qs - Short)

1. Define dissolution of firm (Sec 39).

1 Mark Answer:

Break in all partners' relations.

2. Min mode for firm dissolution?

1 Mark Answer:

Agreement.

3. Compulsory if all?

1 Mark Answer:

Insolvent.

4. First pay from assets?

1 Mark Answer:

Third parties.

5. Realisation A/c purpose?

1 Mark Answer:

Close books.

6. Losses first from?

1 Mark Answer:

Profits.

7. Partner loan paid after?

1 Mark Answer:

Outsiders.

8. TYU-I (1): True/False?

1 Mark Answer:

True.

9. Garner vs Murray rule?

1 Mark Answer:

Capital ratio loss.

10. Transfer assets to?

1 Mark Answer:

Realisation Dr.

Part B: 3 Marks Questions (10 Qs - Medium, Exactly 4 Lines Each)

1. List 3 modes of firm dissolution.

3 Marks Answer:

Agreement (consent).
Compulsory (insolvent).
Court (misconduct).
Ex: Notice at will.

2. Differentiate partnership vs firm dissolution.

3 Marks Answer:

Partnership: Continues business.
Firm: Closes, sells assets.
Ex: Table basis.
No court in partnership.

3. Explain Sec 48 losses treatment.

3 Marks Answer:

Profits first.
Then capital.
Ex: TYU-I.
Ratio last.

4. What is compulsory dissolution?

3 Marks Answer:

All insolvent.
Business illegal.
Ex: Alien enemy.
Forced mode.

5. Define court dissolution grounds (2).

3 Marks Answer:

Insane/incapable.
Misconduct/breach.
Ex: Transfer interest.
Loss/just equitable.

6. Purpose of Realisation A/c.

3 Marks Answer:

Ascertain profit/loss.
Transfer assets/lia.
Ex: Fig 4.1.
To capitals ratio.

7. 3 ways of partnership dissolution.

3 Marks Answer:

Ratio change.
Admission.
Retirement.
Ex: Death.

8. Sec 49 private debts rule.

3 Marks Answer:

Firm prop for firm debts.
Private for private.
Ex: Surplus divided.
No wife/children prop.

9. TYU-II (1): Bank overdraft to?

3 Marks Answer:

Realisation Cr.
External liability.
Ex: Illustration.
Paid later.

10. Garner vs Murray application.

3 Marks Answer:

Insolvent deficiency.
Solvent bear capital ratio.
Ex: Not profit ratio.
Advanced rule.

Part C: 4 Marks Questions (10 Qs - Medium-Long, Exactly 6 Lines Each)

1. Explain 4 modes of firm dissolution.

4 Marks Answer:

Agreement: Consent/contract.
Compulsory: Insolvent/illegal.
Contingencies: Term/death.
Notice: At will.
Court: Misconduct.
Ex: TYU-I.

2. List Sec 48 asset application order.

4 Marks Answer:

Third parties debts.
Partner loans proportionate.
Capitals proportionate.
Residue ratio.
Ex: Secured first.
Illustration basis.

3. Describe Realisation A/c format.

4 Marks Answer:

Dr: Assets transfer.
Cr: Liabilities, sale proceeds.
Ex: Fig 4.1.
Profit/loss to capitals.
Expenses Dr.
Takeover Cr.

4. Explain journal entries for dissolution (2).

4 Marks Answer:

Assets: Dr Real Cr Assets.
Lia: Dr Lia Cr Real.
Sale: Dr Bank Cr Real.
Ex: Illustration 1.
Payment: Dr Real Cr Bank.
Profit: Dr Real Cr Capitals.

5. Distinction: Partnership vs Firm (3 points).

4 Marks Answer:

Business: Continues vs closes.
Assets: Revalue vs sell.
Relation: Changed vs ends.
Ex: Table.
Books: No close vs close.
Court: No vs yes.

6. TYU-I (1-3): Validate statements.

4 Marks Answer:

(1) True: Different.
(2) False: Partnership only.
(3) True: Consent dissolves.
Ex: Act Sec 39.
(4) False: Not compulsory.
Reason: Modes vary.

7. Sec 49 firm vs private debts.

4 Marks Answer:

Firm prop: Firm debts first.
Surplus to partners claims.
Private prop: Private first.
Ex: Surplus to firm lia.
No wife prop.
Net private assets.

8. Why court dissolution for misconduct?

4 Marks Answer:

Affects business adversely.
Guilty partner.
Ex: Breach agreement.
Protects firm.
Just equitable.
Suit by partner.

9. Treatment of unrecorded assets.

4 Marks Answer:

Dr Realisation if realised.
Cr if taken by partner.
Ex: TYU-II (5).
Profit contribution.
Not in books.
Sale to bank.

10. Reserves transfer on dissolution.

4 Marks Answer:

Dr Reserve Cr Capitals ratio.
Before closure.
Ex: General Rs.13,500.
Profit to partners.
TYU-II (7).
Not to Realisation.

Part D: 6 Marks Questions (10 Qs - Long, Exactly 8 Lines Each)

1. Explain dissolution types with distinction table.

6 Marks Answer:

Partnership: Changes relation, firm on.
Firm: Ends all, wind-up.
Ways: 7 for partnership.
5 modes for firm.
Table: Business, assets, court.
Ex: Death partnership only.
Sec 39 firm end.
No new business.

2. Describe Sec 48 settlement rules with examples.

6 Marks Answer:

Losses: Profits, capital, ratio.
Assets: Outsiders, loans, capitals, residue.
Ex: Illustration creditors Rs.48,000 first.
Proportionate if short.
Secured precedence.
TYU-II payments.
Partner advances over capital.
Fair order.

3. Prepare Realisation A/c from Illustration 1.

6 Marks Answer:

Dr: Assets Rs.65,500.
Cr: Lia Rs.48,500.
Sale: Bank Rs.69,425.
Expenses: Rs.1,500 Dr.
Profit: Rs.2,925 to capitals 3:2.
Ex: Debtors 20,425.
Fixed 42,000.
Total balance.

4. Journal entries for dissolution (full 5).

6 Marks Answer:

1. Assets Dr Real Cr.
2. Lia Dr Cr Real.
3. Sale Dr Bank Cr Real.
4. Takeover Dr Cap Cr Real.
5. Payment Dr Real Cr Bank.
Ex: Illustration entries.
Profit Dr Real Cr Capitals.
Reserve Dr Cr Capitals.

5. TYU-I full: True/False with reasons (6).

6 Marks Answer:

(1) True: Different effects.
(2) False: Partnership only.
(3) True: Consent mode.
(4) False: Not compulsory.
(5) True: Firm includes partnership.
(6) True: All except one insolvent.
(7) True: Court ground.
(8) False: Without court possible.

6. Explain Garner vs Murray with insolvency.

6 Marks Answer:

Unable to contribute deficiency.
Insolvent = capital loss.
Solvent bear capital ratio.
Ex: Not profit ratio.
Absence agreement.
Advanced treatment.
Not at this stage detailed.
Private net assets.

7. Contingencies mode (4 examples).

6 Marks Answer:

Fixed term expiry.
Venture completion.
Death of partner.
Insolvency adjudication.
Ex: Subject contract.
Automatic trigger.
No court needed.
Partnership ends.

8. TYU-II full: Correct options (8).

6 Marks Answer:

(1) (c) Realisation.
(2) (a) Realisation.
(3) (b) Fully paid.
(4) (b) Partner capital.
(5) (c) Credit Realisation.
(6) (a) Debit Realisation.
(7) (b) Partners capital.
(8) (c) Bank.

9. Role of Sec 48 in settlement.

6 Marks Answer:

Subject agreement.
Losses order: Profits/capital/ratio.
Assets: Debts/loans/cap/residue.
Ex: Proportionate loans.
Contribution if deficiency.
Evidence: Illustration.
Fair distribution.
No new business.

10. Process of dissolution accounting.

6 Marks Answer:

Transfer assets/lia to Real.
Realise, pay, record expenses.
Profit/loss to capitals.
Reserve to capitals.
Pay partners via bank.
Ex: Entries 1-5.
Close books.
Unrecorded handled.

Tip: Include proformas in ans; practice entries. Additional 30 Qs: Variations on TYU, modes scenarios.

Key Concepts - In-Depth Exploration

Core ideas with examples, pitfalls, interlinks. Expanded: All concepts with steps/examples/pitfalls for easy learning. Depth: Debates, analysis.

Dissolution Types

Steps: 1. Partnership change, 2. Firm end? Ex: 7 ways. Pitfall: Confuse death. Interlink: Reconstitution. Depth: Sec 39.

Modes of Firm

Steps: 1. Agree, 2. Compel, 3. Contingency. Ex: 5 modes. Pitfall: Ignore notice. Interlink: At will. Depth: Court grounds.

Settlement Rules

Steps: 1. Losses order, 2. Assets priority. Ex: Sec 48. Pitfall: Forget loans. Interlink: Sec 49. Depth: Proportional.

Realisation A/c

Steps: 1. Transfer, 2. Realise/pay, 3. Profit/loss. Ex: Fig 4.1. Pitfall: Exclude cash. Interlink: Journals. Depth: Unrecorded.

Garner vs Murray

Steps: 1. Deficiency, 2. Capital ratio loss. Ex: Insolvent. Pitfall: Use profit ratio. Interlink: Insolvency. Depth: Solvent burden.

Private Debts

Steps: 1. Firm first, 2. Private separate. Ex: Sec 49. Pitfall: Include family prop. Interlink: Net assets. Depth: Surplus use.

Journal Entries

Steps: 1. Assets Dr, 2. Sale Bank. Ex: 5 entries. Pitfall: Wrong side. Interlink: Illustration. Depth: Takeover.

Compulsory Mode

Steps: 1. Insolvent all, 2. Illegal. Ex: War. Pitfall: One insolvent no. Interlink: Contingency. Depth: Unlawful carry.

Court Grounds

Steps: 1. Suit, 2. Insane etc. Ex: 7 grounds. Pitfall: All mandatory no. Interlink: Just equitable. Depth: Persistent breach.

Unrecorded Items

Steps: 1. Assets Dr if sold, 2. Lia Cr if paid. Ex: TYU-II. Pitfall: Ignore. Interlink: Realisation. Depth: Gain/loss.

Reserves Transfer

Steps: 1. Dr Reserve, 2. Cr Capitals. Ex: Ratio. Pitfall: To Realisation. Interlink: Closure. Depth: Profit share.

Expenses Treatment

Steps: 1. Dr Real, 2. If partner debit capital. Ex: Rs.1,500. Pitfall: Ignore. Interlink: Journals. Depth: On behalf.

Notice Dissolution

Steps: 1. At will, 2. Written notice. Ex: Intent. Pitfall: Fixed term no. Interlink: Agreement. Depth: Other partners.

Advanced: Insolvency detailed. Pitfalls: Wrong priority. Interlinks: To Ch3. Real: Audit closures. Depth: 14 concepts details. Examples: TYU. Graphs: Proformas. Errors: Mix types. Tips: Steps evidence; compare tables (modes).

Proforma Examples & Tables - From Text with Simple Explanations

Expanded with evidence, analysis; focus on proformas. Added variations for practice.

Example 1: Realisation Account Format (Fig 4.1)

Simple Explanation: Dr assets, Cr lia/sale; balance profit/loss.

Dr. Particulars	Amount (Rs.)	Cr. Particulars	Amount (Rs.)
Intangible Assets	xxx	Bank Loan	xxx
Land & Building	xxx	Sundry Creditors	xxx
Plant & Machinery	xxx	Bills Payable	xxx
Furniture	xxx	Bank Overdraft	xxx
Bills Receivable	xxx	Outstanding Expenses	xxx
Sundry Debtors	xxx	Provision Doubtful Debts	xxx
Cash/Bank (Sale)	xxx	Cash/Bank (Payment)	xxx
Partner Capital (Takeover)	xxx	Loss to Partners	xxx
Unrecorded Liabilities	xxx	Partner Capital (Assumed)	xxx
Profit to Partners	xxx	Investment Fluctuation Fund	xxx
Total	xxxxx	Total	xxxxx

Step 1: Transfer book values.
Step 2: Record realisations/payments.
Step 3: Balance to capitals.
Simple Way: Net effect on closure.

Example 2: Distinction Table - Partnership vs Firm

Simple Explanation: Key differences for quick recall.

Basis	Dissolution of Partnership	Dissolution of Firm
Termination of Business	Not terminated	Closed
Settlement of Assets/Liabilities	Revalued, new BS	Sold, paid off
Court's Intervention	No	Possible by order
Economic Relationship	Continues changed	Comes to end
Closure of Books	No	Yes

Step 1: Compare effects.
Step 2: Use for TYU.
Step 3: Firm stricter.
Simple Way: Partnership survives.

Example 3: Illustration 1 Realisation A/c

Simple Explanation: From Supriya/Monika; profit Rs.2,925.

Dr. Particulars	Amount	Cr. Particulars	Amount
Sundry Debtors	21,500	Provision Doubtful	500
Stock	7,500	Sundry Creditors	48,000
Fixed Assets	36,500	Bank (Sale)	69,425
Real Expenses	1,500	Supriya Capital (Profit)	1,755
Supriya Capital (Profit)	1,755	Monika Capital (Profit)	1,170
Monika Capital (Profit)	1,170	Total	1,17,925
Total	1,17,925

Step 1: Transfer Rs.65,500 Dr.
Step 2: Realise Rs.69,425.
Step 3: Pay Rs.49,500.
Simple Way: Net profit 3:2.

Example 4: Journal Entries Proforma

Simple Explanation: 5 key entries.

Entry	Dr.	Cr.	Explanation
1. Transfer Assets	Realisation A/c	Assets A/c	Book values (excl cash)
2. Transfer Liabilities	Liabilities A/c	Realisation A/c	External incl provisions
3. Sale of Assets	Bank A/c	Realisation A/c	Realised amount
4. Asset Taken Over	Partner's Capital A/c	Realisation A/c	Value taken
5. Payment of Liabilities	Realisation A/c	Bank A/c	Settled amount

Step 1: Sequential record.
Step 2: Profit separate.
Step 3: Close capitals.
Simple Way: From Illustration.

Example 5: Modes of Dissolution Quick Ref

Simple Explanation: 5 modes overview.

Mode	Description	Example
Agreement	Consent/contract	All agree
Compulsory	Insolvent/illegal	All bankrupt
Contingencies	Term/death	Expiry
Notice	At will written	Intent letter
Court	Suit grounds	Insane

Step 1: Identify trigger.
Step 2: Apply mode.
Step 3: Proceed settlement.
Simple Way: Voluntary first.

Example 6: Sec 48 Priority Table

Simple Explanation: Assets application order.

Order	Application	Proportionate?
(i)	Third party debts	No
(ii)	Partner advances/loans	Yes
(iii)	Partner capitals	Yes
(iv)	Residue	Ratio

Step 1: Realise total.
Step 2: Pay in order.
Step 3: Balance share.
Simple Way: Outsiders first.

Tip: Practice proformas; troubleshoot (e.g., profit calc). Added for Realisation, modes.

Quick Revision Notes & Mnemonics

Concise, easy-to-learn summaries for all subtopics. Structured in tables for quick scan: Key points, examples, mnemonics. Covers types, modes, settlement, Realisation. Bold key terms; short phrases for fast reading.

Subtopic	Key Points	Examples	Mnemonics/Tips
Types/Distinction	Partnership: Continues, revalue. Firm: Ends, sell/pay. No court vs possible.	Death: Partnership only.	PCNR EC (Part Continues No Real End Court). Tip: "Partnership Continues, Firm Closes No Escape" – Table 5 points.
Modes	5 Modes: Agree, Compel, Contingency, Notice, Court. Court: 7 grounds (insane-misconduct).	All insolvent compulsory.	AC C NC (Agree Compel Contingency Notice Court). Tip: "Agree Calmly, Compel Contingently, Notice Court" – Voluntary to forced.
Settlement Sec 48	Losses: Profits, capital, ratio. Assets: Outsiders, loans, cap, residue.	Loans after creditors.	P C R / O L C R (Profits Capital Ratio / Outsiders Loans Cap Residue). Tip: "Profits Cover, Outsiders Lead" – Priority chains.
Realisation A/c	Dr: Assets, expenses, profit. Cr: Lia, sale, loss, takeover. To capitals ratio.	Illustration profit 2,925.	A E P / L S T L (Assets Expenses Profit / Lia Sale Takeover Loss). Tip: "Assets Enter, Liabilities Settle" – Fig 4.1 scan.
Sec 49 & Garner	Private: Firm first, private separate. Garner: Capital ratio loss insolvent.	Surplus to firm debts.	F P S G (Firm Private Surplus Garner). Tip: "Firm Pays First, Garner Guards Solvent" – Net private.
Journals & TYU	5 Entries: Transfer, sale, payment. TYU: True modes, Real transfers.	Dr Real Cr Assets.	T S P T P (Transfer Sale Payment Takeover Profit). Tip: "Transfer Settles, Profit Shares" – Entries sequence.

Overall Tip: Use PCNR EC-AC C NC-PCR / O L C R-A E P / L S T L-F P S G-T S P T P for full scan (5 mins). Flashcards: Front (term), Back (points + mnemonic). Print table for wall revision. Covers 100% chapter – easy for exams!

Key Terms & Provisions - All Key

Expanded table 30+ rows; quick ref. Added advanced (e.g., Garner, Unrecorded).

Term/Provision	Description	Example	Usage
Dissolution Partnership	Relation change	Admission	No firm end
Dissolution Firm	All relations end Sec 39	All insolvent	Wind-up
Realisation Account	Profit/loss on closure	Fig 4.1	Transfer capitals
Settlement Accounts	Pay claims Sec 48	Assets order	Priority
Compulsory Dissolution	Forced insolvent/illegal	Alien enemy	Mode 2
Court Dissolution	Suit grounds insane etc	Misconduct	Mode 5
Private Debts	Separate Sec 49	Surplus firm	No family prop
Garner vs Murray	Capital ratio loss	Insolvent deficiency	Solvent bear
Unrecorded Assets	Not books Dr Real	Taken partner	Gain
Unrecorded Liabilities	Paid Cr Real	Unexpected	Loss
Profit Realisation	Excess to ratio	Rs.2,925	Capitals
Loss Realisation	Borne Sec 48	Deficiency	Order
Partner Loan	After outsiders	Proportionate	Priority
Insolvency Partner	Unable contribute	Capital loss	Garner
Agreement Mode	Consent	All agree	Voluntary
Notice Mode	At will written	Intent	Flexible
Fixed Term	Expiry contingency	5 years	Auto
Venture Completion	Project end	Specific	Contingency
Misconduct	Court ground	Affects business	Dissolves
Just Equitable	Court discretion	Fair	Broad
Provision Doubtful	Cr Real with debtors	Net value	Transfer
Accumulated Profits	To capitals	General reserve	Distribute
Realisation Expenses	Dr Real/partner cap	Rs.1,500	Wind-up cost
Mutual Agreement	Consent dissolve	Contract	Mode 1
Contingencies	Death/term	Adjudication	Subject contract
Breaches Agreement	Court ground	Persistent	Dissolves
Transfer Interest	Whole to third	Court	Ground
Business Loss	Cannot carry	Court	Order
Residue Assets	Divide ratio	After capitals	Sec 48
Secured Loans	Precedence	Over unsecured	Payment
Net Private Assets	Minus liabilities	Contribute firm	Sec 49
Wind-up Activities	Sell/pay only	No new business	Post dissolution
Partner Advances	Distinguished capital	Loans	Priority ii
Illustration Journal	Entries closure	Supriya	Practice

Tip: Examples memory; sort subtopic. Easy: Table scan. Added 10 rows depth.

Accounting Processes Step-by-Step

Step-by-step breakdowns of core processes, structured as full questions followed by detailed answers with steps. Visual descriptions for easy understanding; focus on actionable Q&A with examples from chapter.

Question 1: How to prepare Realisation A/c (Fig 4.1)?

Answer:

Step 1: Dr all assets (excl cash) at book value.
Step 2: Cr all liabilities/provisions.
Step 3: Record sale proceeds Dr Bank Cr Real.
Step 4: Dr expenses/unrecorded lia.
Step 5: Cr takeover/unrecorded assets.
Step 6: Balance profit/loss to capitals ratio.

Visual: Dr Assets/Expenses | Cr Lia/Sale/Loss. Example: Illustration debtors Rs.21,500 Dr, realised 20,425.

Question 2: Steps for settlement per Sec 48?

Answer:

Step 1: Realise assets + contributions.
Step 2: Pay outsiders (secured first).
Step 3: Partner loans proportionate.
Step 4: Capitals proportionate.
Step 5: Residue ratio.
Step 6: Losses reverse order.

Visual: Assets Pool → Outsiders → Loans → Cap → Share. Example: Creditors Rs.48,000 full.

Question 3: Process for journal entries on dissolution?

Answer:

Step 1: Transfer assets Dr Real Cr individual.
Step 2: Transfer lia Dr individual Cr Real.
Step 3: Sale Dr Bank Cr Real amount.
Step 4: Takeover Dr Capital Cr Real value.
Step 5: Payment Dr Real Cr Bank settled.
Step 6: Profit Dr Real Cr Capitals ratio; pay Dr Cap Cr Bank.

Visual: Transfer → Realise → Pay → Close. Example: Illustration entry 1 Rs.65,500.

Question 4: How to apply Garner vs Murray rule?

Answer:

Step 1: Identify insolvent (debit capital).
Step 2: Calculate deficiency.
Step 3: Solvent capitals ratio for loss share.
Step 4: Adjust solvent capitals.
Step 5: Write off insolvent balance.
Step 6: No agreement override.

Visual: Deficiency → Ratio Calc → Adjust. Example: Solvent A:B 2:1 bear loss.

Question 5: Steps for Sec 49 private/firm debts?

Answer:

Step 1: Apply firm property to firm debts.
Step 2: Surplus to partners claims for private.
Step 3: Private property to private debts.
Step 4: Surplus to firm if short.
Step 5: Use net private (assets - lia).
Step 6: Exclude wife/children property.

Visual: Firm Prop → Firm Debts → Private | Private Prop → Private → Firm. Example: Firm surplus Rs.10,000 to private.

Question 6: Process to record unrecorded items?

Answer:

Step 1: Assets realised: Dr Bank Cr Real.
Step 2: Taken over: Dr Capital Cr Real.
Step 3: Liabilities paid: Dr Real Cr Bank.
Step 4: Expenses by partner: Dr Capital Cr Bank.
Step 5: Adjust in Realisation.
Step 6: Impact profit/loss.

Visual: Unrecorded → Dr/Cr Real → Effect. Example: TYU-II unrecorded asset credit.

Tip: Treat as FAQ; apply to TYU. Easy: Q → Steps + Visual. Full Q&A for exam-like practice.

This article has been published in CBSE Class 12 Board Examination. Explore everything related to it here.

Group Discussions

No forum posts available.

Easily Share with Your Tribe