Worked dissolutions

A full dissolution question closes the books with three accounts. Work them in this order:

• Realisation Account: assets on the debit, liabilities on the credit; then sales and assets taken (credit), and payments and expenses (debit). The balance is the profit or loss on realisation.
• Partners' Capital Accounts: opening balances, plus their share of reserves and realisation profit (or minus a loss), minus assets taken, plus liabilities or expenses they paid. If capitals are fixed, the current account balances are transferred in first.
• Bank (Cash) Account: opening balance, plus sales of assets, minus liabilities, expenses and the partner's loan paid, and finally the amounts paid to the partners.

A partner whose capital ends with a debit balance must bring in cash; the others are then paid their credit balances.

The check: the bank account closes at nil. If it does not, something has been missed.

Example: Ravi takes half the furniture, book value 12,000, at 10% less. 6,000 less 10% = 5,400, so Ravi's Capital Dr. To Realisation 5,400.