# Simple Illustration On Partnership’s Dissolution

Earlier article regarding partnership’s summary of steps upon the dissolution of a partnership. Append below a very basic illustration on this.

Jim and John are partners sharing profits or loss in the ratio 50:50 respectively. Both agree to dissolve the partnership and their Balance Sheet at the date of dissolution 31 December 2007 is as follows:

 \$ \$ Caoital Accounts: Building 12,000 Jim 15,000 Stock 6,000 John 10,000 Debtors 9,000 Creditors 8,000 Cash 6,000 33,000 33,000

The assets other than cash were disposed for a total sum of \$30,000.

Required: Close the books of the firm.

Solution:

Realization Account

 \$ \$ 31/12/07 31/12/07 Building 12,000 Cash Account: Disposal value of assets 30,000 Stocks 6,000 Debtors 9,000 Profit on realization transferred to Capital account: Jim 50% x \$3,000 1,500 John 50% x \$3,000 1,500 30,000 30,000

Creditors Account

 \$ \$ 31/12/07 31/12/07 Cash Account 8,000 Balance b/f 8,000 8,000 8,000

Capital Account

 Jim John Jim John \$ \$ \$ \$ Cash account 16,500 11,500 31/12/07 Balance b/f 15,000 10,000 Realization Account 1,500 1,500 16,500 11,500 16,500 11,500

Cash Account

 \$ \$ 31/12/07 31/12/07 Balance b/f 6,000 Creditors 8,000 Realization account 30,000 Capital Accounts: Jim 16,500 John 11,500 36,000 36,000

At the end of the day, the balance in the cash book should equate the payment to the partners capital account