Incorporation & Dissolution of a Partnership

Question 1

Incorporation of a Partnership

Answer 1

1)Assets and liabilities are adjusted in Valuation Adjustment A/C to FMV

2) Valuation Adjustment is closed to partners capital A/c in P/L ratio

3) Final partner’s capital account balance are closed to share capital a/c of the newly formed company

Question 2

Dissolution Procedure

Answer 2

1) Dispose of assets except cash. Disposal proceeds are transferred to partners capital a/c
2)Close off partners current a/c by transferring to capital a/c
3) Pay off debts
4)Pay off liquidation expenses (dr: partners capital cr: cash)
5)Pay off loans from partners
6)Pay off partner’s capital balances

Question 3

Realisation A/C

Answer 3

temporary account that is closed off to partner’s capital account .
DR: Non-cash assets CR: Cash,Loss on Realisation,Capital A/cs