# Dissolution of Partnership Firm Notes | SwaVid Dissolution of Partnership Firm, NCERT Class 12 Accountancy: notes with key ideas, formats, common mistakes and 3 quick checks with worked answers. Canonical: https://www.swavid.com/cbse/class-12/accountancy/chapter/dissolution-of-partnership-firm Source: https://www.swavid.com/cbse/class-12/accountancy/chapter/dissolution-of-partnership-firm # Dissolution of Partnership Firm ## Definitions, formats and formulas ## Key ideas ## Common mistakes ## Quick checks ## Keep going ## Questions parents ask ## Class 12 Accountancy on SwaVid ### Dissolution of partnership versus firm ### Modes of dissolution ### Settlement of accounts ### Realisation account ### Treatment of partner loan ### Asset taken by creditor ### Next chapter ### Related chapter ### Related chapter ### Related chapter ### All chapters SwaVid › CBSE › Class 12 › Accountancy › Dissolution of Partnership Firm Notes written by SwaVid from the NCERT textbook. Class 12 Accountancy, NCERT Accountancy Part I: partnership firms. Key ideas, definitions and common mistakes. CBSE does not print marks for a single chapter. Short answer. This chapter explains the complete closure of a partnership firm and the winding up of its business affairs. Students learn how to settle liabilities, realize assets, and close all ledger accounts using the Realisation Account. Source: NCERT Accountancy Part I: partnership firms (Reprint 2026-27) , Dissolution of Partnership Firm Dissolution of partnership ends the existing agreement and leads to reconstitution, while the business continues. Dissolution of the firm terminates all business relations among all partners and dissolves the firm completely. A firm may be dissolved by mutual agreement, compulsory dissolution on insolvency or unlawfulness, happening of certain contingencies, notice in partnership at will, or an order of the court under Section 44. Under Section 48, losses including capital deficiencies are paid first out of profits, next out of capital, and lastly by partners in their profit-sharing ratio. Assets are applied to pay outside debts, then partner loans, then partner capital balances, and any surplus is shared in the profit-sharing ratio. Realisation Account is a nominal account prepared to record the sale of assets and discharge of liabilities upon dissolution. The balance of this account represents profit or loss on realisation, which is transferred to partners' capital accounts in their profit-sharing ratio. A loan advanced by a partner to the firm is not transferred to Realisation Account. It is settled through a separate Partner's Loan Account after paying external liabilities but before settling partners' capital accounts. When a creditor accepts an asset in full or partial satisfaction of their claim, no entry is passed for the value of the asset handed over against the liability settled. Only the residual cash paid or received, if any, is recorded. Try each question first. Then tap it to see the answer. Gross debtors and provision were transferred to Realisation Account at book value. Cash collected from debtors is ₹ 42,000. Entry: Bank A/c Dr. 42,000 / To Realisation A/c 42,000 Bank A/c Dr. ₹ 42,000 / To Realisation A/c ₹ 42,000 Total creditors due = ₹ 30,000. Value settled via typewriter = ₹ 8,000 (no entry needed for this exchange). Remaining cash paid = ₹ 30,000 - ₹ 8,000 = ₹ 22,000. Entry: Realisation A/c Dr. 22,000 / To Bank A/c 22,000 Realisation A/c Dr. ₹ 22,000 / To Bank A/c ₹ 22,000 For remuneration allowed to X: Realisation A/c Dr. 10,000 / To X's Capital A/c 10,000. For expenses paid by the firm on X's behalf: X's Capital A/c Dr. 6,000 / To Bank A/c 6,000. Realisation A/c Dr. ₹ 10,000 / To X's Capital A/c ₹ 10,000 and X's Capital A/c Dr. ₹ 6,000 / To Bank A/c ₹ 6,000 Accounting for Share Capital . Accounting for Partnership: Basic Concepts . Reconstitution of a Partnership Firm - Admission of a Partner . Reconstitution of a Partnership Firm - Retirement/Death of a Partner . The 10 chapters of Class 12 Accountancy . CBSE does not give marks to one chapter. It prints marks for units or parts, and the chapter list page shows them all. No. They are written by SwaVid from the NCERT textbook. The CBSE curriculum is the reference for what is assessed. Accounting for Share Capital. SwaVid is an AI tutor for Indian students in Classes 6 to 12. It finds the earlier ideas a child missed, then teaches today’s chapter. Start free to see how it works. - NCERT NCERT book, Class 12 - 80 marks, theory paper - 3 quick checks - Transferring cash, bank, or fictitious assets to Realisation Account . Do not transfer cash or bank balances to Realisation Account. Fictitious assets like debit balance of Profit and Loss Account are transferred directly to Partners' Capital Accounts. - Recording an entry when a creditor accepts an asset in full settlement . Pass no journal entry when an asset is taken by a creditor in full settlement of their dues, because both were already transferred to Realisation Account. - Transferring partner loan to Realisation Account . Do not transfer a partner loan account to Realisation Account. Open a separate Partner's Loan Account and pay it directly through Bank or Cash. - Ignoring unrecorded liabilities or assets . Unrecorded assets realized or unrecorded liabilities paid must be passed through Cash or Bank and Realisation Account, even if they had no book value. ## Key Links - [CBSE](https://www.swavid.com/cbse) - [Class 12](https://www.swavid.com/cbse/class-12) - [Accountancy](https://www.swavid.com/cbse/class-12/accountancy/chapters) - [Start free →](https://www.swavid.com/signup) - [All 10 chapters](https://www.swavid.com/cbse/class-12/accountancy/chapters) - [NCERT Accountancy Part I: partnership firms (Reprint 2026-27)](https://ncert.nic.in/textbook.php?leac1=0-4) - [Open notes](https://www.swavid.com/cbse/class-12/accountancy/chapter/accounting-for-share-capital) - [Open notes](https://www.swavid.com/cbse/class-12/accountancy/chapter/accounting-for-partnership-basic-concepts) - [Open notes](https://www.swavid.com/cbse/class-12/accountancy/chapter/reconstitution-of-a-partnership-firm-admission-of-a-partner) - [Open notes](https://www.swavid.com/cbse/class-12/accountancy/chapter/reconstitution-of-a-partnership-firm-retirement-death-of-a-partner) - [Class 12 Accountancy](https://www.swavid.com/cbse/class-12/accountancy/chapters) - [Start free →](https://www.swavid.com/signup)