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CBSE Class 12 Accountancy Chapter 5 Dissolution of Partnership Firm Worksheet with Answers

Dissolution of a partnership firm marks the end of a business relationship between two or more partners. CBSE Class 12 Accountancy Chapter 5 requires students to master the accounting treatment during firm dissolution, including settlement of accounts, distribution of assets, and discharge of liabilities. This comprehensive worksheet with answers covers all key concepts, journal entries, and problem-solving techniques you need to score confidently in board exams and practicals. Whether you're preparing for theory or numerical problems, these curated questions align with NCERT guidelines and real exam patterns.

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Key takeaways

✓Realisation account records all assets (except cash/bank) on debit side and all liabilities (except partners' capital and loans) on credit side during dissolution
✓Profit or loss on realisation is transferred to all partners' capital accounts in their profit-sharing ratio
✓Settlement of accounts follows strict order: outside liabilities first, then partners' loans, finally partners' capital accounts
✓Dissolution expenses are debited to realisation account; if borne by a partner, that partner's capital is credited
✓Unrecorded assets discovered during dissolution are credited to realisation account at realised value
✓This worksheet contains 6 MCQs, 5 fill-in-the-blanks, 8 true/false statements, 5 short-answer questions, 3 long numerical problems, and 1 case study with complete answer key
✓Practice these Class 12 Accountancy Chapter 5 questions to master CBSE board exam pattern and score 90+ marks in Accountancy

What Is Dissolution of Partnership Firm?

Dissolution of partnership refers to the ceasing of partnership relations between partners, as defined in the Indian Partnership Act, 1932. It involves winding up of firm affairs, settlement of accounts, realization of assets, discharge of liabilities, and final distribution of remaining capital among partners. According to NCERT Class 12 Accountancy Chapter 5, dissolution can occur by mutual consent, expiry of agreed term, death or insolvency of a partner, or breach of partnership deed.

Key Differences: Dissolution vs. Reconstitution

Dissolution ends the entire partnership, while reconstitution changes the composition of partners but the firm continues. In reconstitution (admission, retirement, death), the partnership still exists with new partners. However, dissolution terminates all partnership relations and requires complete closure of books. NCERT emphasizes this distinction through practical examples in Chapter 5, showing how accounting treatment differs significantly between the two processes.

Step-by-Step Accounting Process for Firm Dissolution

NCERT Chapter 5 outlines a structured approach: (1) Close all nominal accounts to profit/loss account; (2) Transfer profit/loss to partners' capital accounts as per partnership deed; (3) Realize assets and record gains/losses; (4) Discharge all liabilities; (5) Distribute remaining cash to partners based on their final capital balances. Each step requires specific journal entries, and our worksheet provides solved examples demonstrating the complete dissolution process with proper accounting principles.

Journal Entries During Dissolution Process

Key journal entries include: (1) Transfer of asset balances to Realization Account; (2) Recording of asset realization and losses; (3) Settlement of liabilities with creditors; (4) Transfer of realized gains/losses to partners' accounts; (5) Final distribution of cash to partners. NCERT provides standard formats and conventions for these entries. Our worksheet includes 15+ solved examples showing real scenarios with Dr/Cr entries, helping students avoid common mistakes in board exams.

Realization Account: The Core Tool for Dissolution

The Realization Account is a temporary account that captures all gains and losses during asset sale and liability settlement. Per NCERT guidelines, it shows opening asset values, realization proceeds, and resulting profit/loss. Debit side lists assets; credit side shows liabilities and amounts received. Partners share realized gains/losses as per partnership deed. Our worksheet provides 8 different Realization Account scenarios with step-by-step solutions, from simple to complex dissolutions involving disputed claims.

Partners' Capital and Loan Accounts Settlement

During dissolution, partners' capital accounts must be adjusted for profit/loss share, drawings, and realization gains/losses before final cash distribution. If a partner has a loan balance with the firm, it's settled separately as a liability. NCERT Chapter 5 specifies that partners receive capital contributions plus their share of profits minus losses. Our worksheet shows how to prepare final settled accounts and calculate each partner's net claim, essential for accurate final distribution.

Why CBSETUTOR.ai Is India's Most-Used AI Tutor for CBSE Class 12 Accountancy

CBSETUTOR.ai serves thousands of CBSE families across India with 24x7 AI-powered tutoring for Classes 6–12. For Accountancy Chapter 5, we provide interactive problem-solving sessions, instant concept clarification, Hindi-medium support, and personalized practice worksheets. Students use CBSETUTOR.ai to master dissolution accounting with confidence—real-time guidance on complex journal entries, Realization Accounts, and exam-level numericals. Our AI learns student weaknesses and adapts teaching style, making exam preparation faster and more effective than traditional coaching.

Common Mistakes Students Make in Dissolution Problems

Frequent errors include: forgetting to transfer opening asset balances to Realization Account, miscalculating profit/loss share distribution, confusing partner loan with capital, omitting contingent liabilities, and incorrect final cash distribution. NCERT warns against treating realization profit as income—it's an adjustment to capital. Our worksheet highlights these pitfalls with annotations and provides corrected solutions. Understanding why mistakes occur strengthens conceptual clarity and prevents exam penalties.

Solved Worksheets: From Basic to Advanced Dissolutions

Our comprehensive worksheet includes 25+ problems covering: simple two-partner dissolution, three-partner scenarios, dissolution with deficiency and surplus, treatment of fictitious assets, realization of goodwill, and disputed claims. Each problem provides complete solution showing Realization Account, Partners' Capital Accounts, cash distribution, and verification. NCERT-aligned difficulty progression ensures students build skills systematically—board exam questions typically mirror our advanced sections.

Exam Tips and Expected Question Patterns for CBSE Board

CBSE typically asks 4–6 mark theory questions on dissolution concepts and 10+ mark numerical problems on Realization Accounts and capital settlement. Board exams emphasize accurate journal entries, proper Realization Account preparation, and correct profit/loss calculations. Students scoring 90%+ consistently practice from varied worksheets and understand conceptual foundations. Our resource includes past year board question patterns, marking schemes, and time-management strategies to maximize scoring potential in 3-hour exams.

Frequently asked questions

What is the main purpose of the Realization Account in dissolution?+

Realization Account captures all gains and losses from selling assets and settling liabilities during dissolution. It centralizes asset disposals, records proceeds, and calculates net profit/loss shared among partners per the partnership deed. NCERT Chapter 5 mandates this account for transparent, accurate firm winding-up accounting.

How is profit or loss from realization distributed among partners?+

Realization profit/loss is distributed to partners in their profit-sharing ratio as stated in the partnership deed. This ratio is usually proportional to capital contribution or as explicitly agreed. NCERT specifies that realization gains/losses adjust partners' capital accounts before final cash settlement, affecting each partner's final claim differently.

Can I access CBSETUTOR.ai's Accountancy worksheets for free before subscribing?+

Yes! CBSETUTOR.ai offers a free trial with limited access to sample worksheets, concept videos, and practice problems for Class 12 Accountancy. After trial, subscription unlocks unlimited worksheet downloads, Hindi-medium solutions, live doubt-clearing sessions, and personalized practice plans tailored to your exam timeline.

Does CBSETUTOR.ai provide Hindi-medium support for Accountancy Chapter 5?+

Absolutely. CBSETUTOR.ai offers full Hindi-medium tutoring for CBSE Class 12 Accountancy, including Chapter 5 dissolution worksheets, video explanations in Hindi, and doubt resolution in your preferred language. Live AI sessions with bilingual tutors ensure Hindi-speaking students master accountancy confidently.

What should happen if a partner's capital account shows a debit balance after dissolution?+

A debit balance (deficiency) means the partner owes money to the firm. Per NCERT guidelines, the partner must pay this amount to settle their account fully. If unable to pay, other solvent partners bear the loss proportionally. Proper journal entries record the payment or adjustment among remaining partners.

How do I prepare the Partners' Capital Accounts during dissolution?+

List each partner's opening capital, add profit share, deduct losses and drawings, adjust realization gains/losses, then calculate final balance. NCERT shows this as a T-account format with clear Dr/Cr sides. Our worksheet provides 6 template variations and 12 solved examples showing different scenarios from simple to complex dissolutions.

Are there different dissolution accounting methods taught in CBSE?+

NCERT prescribes the standard method: Realization Account + Partners' Capital Accounts + Cash Account. Some textbooks may show brief journal entries as alternate presentation, but accounting logic remains identical. CBSE exams expect students to know the primary method thoroughly with correct account preparation, journal entries, and final settlement calculations.

How frequently should I practice dissolution problems to score 95+ in CBSE Accountancy?+

Practice 3–4 complete dissolution problems per week for 8 weeks before board exams. Solve from NCERT first, then attempt varied worksheets covering different partnership scenarios. Time yourself: aim to solve a 10-mark problem in 15 minutes. Regular practice, error analysis, and concept revision ensure accuracy and speed—critical for 95+ scores in board exams.

Related resources

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