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PARTNERSHIP DISSOLUTION 6A6A ERIC& KIMERIC& KIM The reasons of dissolution : 1)The changes in the partnership due to the retirement or death of the partner(s).

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Presentation on theme: "PARTNERSHIP DISSOLUTION 6A6A ERIC& KIMERIC& KIM The reasons of dissolution : 1)The changes in the partnership due to the retirement or death of the partner(s)."— Presentation transcript:

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2 PARTNERSHIP DISSOLUTION 6A6A ERIC& KIMERIC& KIM

3 The reasons of dissolution : 1)The changes in the partnership due to the retirement or death of the partner(s). 2)The bankruptcy of the business of the partnership. 3)The business of the partnership take over by limited company.

4 The procedures of dissolution The procedures of dissolution 1)Transfer all the assets,liabilities to the realization account(dr. realization),and realization expenses also transfer to realization account (dr. realization,cr.bank )1)Transfer all the assets,liabilities to the realization account(dr. realization),and realization expenses also transfer to realization account (dr. realization,cr.bank ) realization bank creditor x realization asset x expense x realization commission x expense x commission x

5 2)All assets will be sold to other (cr. realization,dr.bank ) or taken over by partners in their agree price (cr.realization,dr. partners’ capital ),if give to partners for gift,not count realization bank : bank asset realization : sold x asset sold x

6 asset take over by partners asset take over by partners realization capital capital A A asset take over realization by partner x asset take over x

7 3)Settle the liabilities of creditor by partnership(dr. creditors,cr. bank ),if there are any discount received,then dr.creditors,cr.realization.If the partnership pay the liabilities,then dr creditors,cr partners’ capital. Creditor bank bank x creditor x

8 Have discount received realization creditor creditor : realization: discount received x discount discount received x discount received x received x

9 partnership pay the liabilities creditor capital capital A x A creditor x

10 Collection of debts:bad debt recovered or debts collected 4)Collection of debts:If there are any bad debt recovered or debts collected,cr.realization,dr.bank,if partners undertake to collect the debts on behalf of the partnership, just cr realization,dr.partners’ capital. Bank realization bad debt recovered x debt collected x

11 partners undertake to collect the debts on behalf of the partnership capital realization A Realization: capital A debt collect x

12 “Profit and loss on realization” 5) “Profit and loss on realization” If the cr. Side of realization a is larger than the dr.side,that’s mean there are profit on it,so cr.the capital account otherwise,that’s mean loss on it, then dr.capital account. There are two methods to count the “profit or loss on realization” :use profit and loss ratio or ratio given in exam.

13 realization account profit on realization x loss on realization x capital account loss on realization x gain on realization x

14 6)transfer the current balance to capital capital account current a/c x current account capital x

15 7)Capital deficiency(debit balance in capital a/c), (solvency by partner) capital account A balance b/f x bank x bank account A x

16 can not solvency partners If partner is insolvency,partner can not settle debit balance in his Capital account.The solvency partners will share the deficiency in one of following ratios: a)p&l share ratio or b) agree ratio given in exam dr.capital(solvency partners), cr capital(insolvency partner ) it will be done as follow:

17 If A is insolvent,B will help A capital account A B A B capital deficiency X

18 Conclusion for the format realization account asset x bank asset sold x creditor x capital :asset take over x realization expense x bad:debt collected x commission x capital bad debt capital :profit collected by partner x on realization x bank :bad debt recovered x creditor: discount received x capital loss on realization x

19 Bank account balance b/d x balance b/d x realization account: creditors x asset sold x realization expense x capital account: partners loan x c x capital account : a x b x

20 Partner C is insolvency capital account a b c a b c asset take over balance b/f x x x by partners x x creditor x loss on realization x x x current account x x x current account x x x bank x share of c insolvency: capital c x x capital a x bank capital b x (balance figure) x x

21 P.S. Bank A/c must be balanced otherwise you are calculate wrong E N D


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