These days , partnership firms are converting into limited companies for getting the benefit of limited liabilities . At this time firms book is closed just like dissolution of firms .
In the books of firms , the following journal entries are passed :
1) For closing the accounts of assets
Realisation account Debit
Assets Account Credit ( At book value )
2) For sale of assets and amount received
Cash /Bank Account Debit
Assets Account Credit
Realisation Account Credit
3) For closing the account of liabilities
Liabilities Account Debit
Realisation Account Credit
4) For Payment of liabilities
Realisation Account Debit ( Loss of payment )
Liabilities Account Debit
Cash / Bank account credit
5 ) For Assets and liabilities are taken over by new company
New Company Account Debit ( Purchase price = Agreed value of assets - agreed value of liabilities )
Realisation account Credit
6) For Payment of expenses of realisation
a) If pay by partner
Realisation Account Debit
Cash / Bank Account Credit
b) If pay by new company
New company Account Debit
Cash /Bank account Credit
7) Closing of Realisation account
If profit
Realisation account Debit
partner's capital Account Credit
8 ) Receipt of purchase price
Cash / Bank /Shares / Debentures Account Debit
Purchasing company Account Credit
9 ) On distribution of shares / debenture and cash from purchasing company
Partner's capital account Debit ( dividing in adjusted capital ratio )
Cash/Bank/ Shares /Debenture Account
After journal entry , you can transfer into ledger for making realisation account , company account , partner's capital account
See Also
Accounting treatment at the time of Dissolution of Firm
In the books of firms , the following journal entries are passed :
1) For closing the accounts of assets
Realisation account Debit
Assets Account Credit ( At book value )
2) For sale of assets and amount received
Cash /Bank Account Debit
Assets Account Credit
Realisation Account Credit
3) For closing the account of liabilities
Liabilities Account Debit
Realisation Account Credit
4) For Payment of liabilities
Realisation Account Debit ( Loss of payment )
Liabilities Account Debit
Cash / Bank account credit
5 ) For Assets and liabilities are taken over by new company
New Company Account Debit ( Purchase price = Agreed value of assets - agreed value of liabilities )
Realisation account Credit
6) For Payment of expenses of realisation
a) If pay by partner
Realisation Account Debit
Cash / Bank Account Credit
b) If pay by new company
New company Account Debit
Cash /Bank account Credit
7) Closing of Realisation account
If profit
Realisation account Debit
partner's capital Account Credit
8 ) Receipt of purchase price
Cash / Bank /Shares / Debentures Account Debit
Purchasing company Account Credit
9 ) On distribution of shares / debenture and cash from purchasing company
Partner's capital account Debit ( dividing in adjusted capital ratio )
Cash/Bank/ Shares /Debenture Account
After journal entry , you can transfer into ledger for making realisation account , company account , partner's capital account
See Also
Accounting treatment at the time of Dissolution of Firm
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