Revaluation of Assets and Liabilities

Oct 13, 2025 by magicalceylontours.com 92 views

Dissolution of Partnership Firm: Journal Entries

Understanding Partnership Dissolution

When a partnership firm is dissolved, the partners' interests in the business are liquidated, and the assets are distributed among them according to their share of profits and losses. In this scenario, Amit, Mohit, and Charu are partners in a firm sharing profits and losses in the ratio 7:2:1. The dissolution of the partnership firm requires specific journal entries to record the transactions accurately.

Journal Entries for Partnership Dissolution

The following journal entries will be passed in the books of Amit, Mohit, and Charu for the dissolution of their partnership firm:

Revaluation of Assets and Liabilities

Journal Entry 1:
- Debit: Revaluation Reserve (Asset) - 100,000
- Credit: Revaluation Reserve (Liability) - 100,000
This journal entry records the revaluation of assets and liabilities at the time of dissolution.

Distribution of Assets and Liabilities

Journal Entry 2:
- Debit: Mohit's Capital - 14,000
- Credit: Cash - 14,000
This journal entry records the distribution of assets to Mohit according to his share of profits and losses.
Journal Entry 3:
- Debit: Charu's Capital - 7,000
- Credit: Cash - 7,000
This journal entry records the distribution of assets to Charu according to his share of profits and losses.
Journal Entry 4:
- Debit: Amit's Capital - 42,000
- Credit: Cash - 42,000
This journal entry records the distribution of assets to Amit according to his share of profits and losses.

Settlement of Partners' Capital Accounts

Journal Entry 5:
- Debit: Mohit's Capital - 28,000
- Credit: Charu's Capital - 28,000
This journal entry records the settlement of Mohit's capital account with Charu's capital account.
Journal Entry 6:
- Debit: Charu's Capital - 14,000
- Credit: Amit's Capital - 14,000
This journal entry records the settlement of Charu's capital account with Amit's capital account.
Journal Entry 7:
- Debit: Amit's Capital - 18,000
- Credit: Mohit's Capital - 18,000
This journal entry records the settlement of Amit's capital account with Mohit's capital account.

Final Settlement

Journal Entry 8:
- Debit: Mohit's Capital - 2,000
- Credit: Cash - 2,000
This journal entry records the final settlement of Mohit's capital account.
Journal Entry 9:
- Debit: Charu's Capital - 1,000
- Credit: Cash - 1,000
This journal entry records the final settlement of Charu's capital account.
Journal Entry 10:
- Debit: Amit's Capital - 3,000
- Credit: Cash - 3,000
This journal entry records the final settlement of Amit's capital account.

Conclusion

The dissolution of a partnership firm requires specific journal entries to record the transactions accurately. The journal entries for the dissolution of Amit, Mohit, and Charu's partnership firm have been discussed in detail. The revaluation of assets and liabilities, distribution of assets and liabilities, settlement of partners' capital accounts, and final settlement are all recorded in the journal entries.
Q&A: Partnership Dissolution Journal Entries

Understanding Partnership Dissolution Journal Entries

Q&A: Partnership Dissolution Journal Entries

Q1: What is the purpose of revaluation of assets and liabilities in partnership dissolution?

A1: The purpose of revaluation of assets and liabilities in partnership dissolution is to determine the current market value of the assets and liabilities of the firm. This helps in distributing the assets and liabilities among the partners according to their share of profits and losses.

Q2: How are assets and liabilities distributed among partners in partnership dissolution?

A2: Assets and liabilities are distributed among partners in partnership dissolution according to their share of profits and losses. In this scenario, Amit, Mohit, and Charu are partners in a firm sharing profits and losses in the ratio 7:2:1. Therefore, assets and liabilities will be distributed among them in the same ratio.

Q3: What is the purpose of settlement of partners' capital accounts in partnership dissolution?

A3: The purpose of settlement of partners' capital accounts in partnership dissolution is to settle the capital accounts of the partners according to their share of profits and losses. This helps in finalizing the distribution of assets and liabilities among the partners.

Q4: How are final settlements made in partnership dissolution?

A4: Final settlements are made in partnership dissolution by distributing the remaining assets and liabilities among the partners according to their share of profits and losses. In this scenario, Amit, Mohit, and Charu will receive the remaining assets and liabilities in the ratio 7:2:1.

Q5: What are the journal entries for partnership dissolution?

A5: The journal entries for partnership dissolution include revaluation of assets and liabilities, distribution of assets and liabilities, settlement of partners' capital accounts, and final settlement. The journal entries are as follows:
- Journal Entry 1: Revaluation Reserve (Asset) - 100,000
  - Credit: Revaluation Reserve (Liability) - 100,000
- Journal Entry 2: Mohit's Capital - 14,000
  - Credit: Cash - 14,000
- Journal Entry 3: Charu's Capital - 7,000
  - Credit: Cash - 7,000
- Journal Entry 4: Amit's Capital - 42,000
  - Credit: Cash - 42,000
- Journal Entry 5: Mohit's Capital - 28,000
  - Credit: Charu's Capital - 28,000
- Journal Entry 6: Charu's Capital - 14,000
  - Credit: Amit's Capital - 14,000
- Journal Entry 7: Amit's Capital - 18,000
  - Credit: Mohit's Capital - 18,000
- Journal Entry 8: Mohit's Capital - 2,000
  - Credit: Cash - 2,000
- Journal Entry 9: Charu's Capital - 1,000
  - Credit: Cash - 1,000
- Journal Entry 10: Amit's Capital - 3,000
  - Credit: Cash - 3,000

Conclusion