Dissolution of Partnership Firm Class 12 Notes: The article hands out complete and detailed revision notes for Class 12 Accountancy Chapter 4, Dissolution of Partnership Firm. These short and full revision notes on the dissolution of partnership firm have been prepared by the subject matter experts in accordance with the updated and revised CBSE Syllabus 2024. Also, a PDF download link has been attached at the bottom of the article for your reference. Students to wish to save the dissolution of partnership revision notes can download them using the link.
Revision Notes for Class 12 Accountancy will help you improve your understanding of the subject. They will further add to your knowledge and guide you in understanding various concepts and topics present in the chapter. These are quite handy and students can use them whenever in need. They are great last-minute revision guides and will help you sail across the ocean of syllabi easily and in no time.
Related:
CBSE Class 12 Accountancy Syllabus 2023-2024
CBSE Class 12 Accountancy MCQs
NCERT Solutions for Class 12 Accountancy
CBSE Class 12 Accountancy Chapter 2 Mind Maps
CBSE Class 12 Accountancy Chapter 1 Revision Notes
CBSE Class 12 Accountancy Chapter 2 Revision Notes
CBSE Class 12 Accountancy Chapter 3 Revision Notes
Revision Notes for CBSE Class 12 Accountancy Chapter 4 Dissolution of Partnership Firm
When does the Dissolution of a Partnership take place?
Dissolution of a partnership takes place under the following circumstances:
- Change in existing profit sharing ratio among partners
- Admission of a new partner
- Retirement of a partner
- Death of a partner
- Insolvency of a partner
- Completion of the venture, if the partnership is formed for that
- Expiry of the period of the partnership, if the partnership is for a specific period of time
When does Dissolution of a Partnership Firm take place?
Dissolution of a partnership firm takes place by the following methods:
- The firm gets dissolved through an agreement with the consent of all the partners by a contract between the partners
- The firm has to be dissolved compulsorily when all the partners or all but one partner, become insolvent, rendering them incompetent to sign a contract, when the business of the firm becomes illegal or when some event has taken place which makes it unlawful for the partners to carry on the business of the firm in partnership, g., when a partner who is a citizen of a country becomes an alien enemy because of the declaration of war with his country and India.
- If contingencies such as the following take place: if constituted for a fixed term, by the expiry of that term, if constituted to carry out one or more ventures, by the completion thereof, by the death of a partner, or by the adjudication of a partner as an
- If the dissolution is at will the firm can be dissolved if a partner submits a notice in writing to the rest of the partners
- There is an intervention from the court if the partner becomes insane, becomes permanently incapable of performing his duties as a partner, when a partner is guilty of misconduct that is likely to adversely affect the business of the firm, when a partner persistently commits a breach of partnership agreement, when a partner has transferred the whole of his interest in the firm to a third party, when the business of the firm cannot be carried on except at a loss, or when, on any ground, the court regards dissolution to be just and
Difference Between Dissolution of a Partnership and Dissolution of a Firm
| Dissolution of a Partnership | Dissolution of a Partnership Firm |
| The business can continue, it does not get terminated. | The business gets terminated |
| Assets and Liabilities are revalued a new balance sheet is prepared | Assets and Liabilities are sold and paid off respectively |
| No intervention of the court. It gets dissolved mutually | It is dissolved by the court’s order |
| The economic relationship between partners continues | The economic relationship between partners comes to an end |
| Closure of books is not required | The balance books are closed |
Settlement of Accounts
While settling the accounts on dissolution of a partnership firm, Section 48 of the Indian Partnership Act implies that:
- Treatment of Losses- The losses have to be paid firstly out of profits of the firm, secondly out of the capital of partners, and lastly by partners individually in their profit sharing ratio.
- Application of Assets- The assets of the firm will be utilised in paying the debts of the firm to the third parties, in paying each partner proportionately what is due to him/her from the firm for advances as distinguished from capital (i.e. partner’s loan), in paying to each partner proportionately what is due to him on account of capital and the residue, if any, shall be divided among the partners in their profit sharing
- Private Debts and Firm’s Debts- The property of the firm shall be applied first in the payment of debts of the firm and then the surplus, if any, shall be divided among the partners as per their claims, which can be utilized for payment of their private liabilities and the private property of any partner shall be applied first in payment of his private debts and the surplus, if any, may be utilized for payment of the firm’s debts, in case the firm’s liabilities exceed the firm’s
What is a Realisation Account?
The Realisation Account is prepared to record the transactions relating to the sale and realization of assets and settlement of creditors. Any profit or loss arising act of this process is shared by partners in their profit-sharing ratio. Partners’ accounts are also settled and the Cash or Bank account is closed.
To download the complete Revision Notes for CBSE Class 12 Dissolution of Partnership Firm, click on the link below
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Also Check:
CBSE Class 12 Commerce Study Materials
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