Accounting Entries To Close The Books Of Accounts - Distribution Stage

A. For Closing Realisation Account:

1. For Transfer of Profit on Realisation Account:

Realisation A/c      ...Dr.

     To All Partners' Capital/Current A/c

(Being Profit on realisation transferred to all partners' Capital / Current Account in their profit sharing ratio)

2. For Transfer of Loss on Realisation Account:

All Partners’ Capital / Current A/c         ...Dr.

          To Realisation A/c

(Being loss on realisation transferred to all partners' Capital / Current Account in their profit sharing ratio)

B. For Closing Current Accounts:

1.If Current Account shows Credit Balance:

Partner’s Current A/c       ...Dr.

     To Partner’s Capital A/c

(Being a transfer of credit balance to the Partner’s Capital account)

2. If Current Account shows a Debit Balance:

Partner’s Capital A/c       ...Dr.

      To Partner’s Current A/c

(Being a transfer of debit balance to the Partner’s Capital account)

C. For Closing Capital Account:

1. As the Capital Accounts of the partners show a debit balance, the partner should bring in cash to settle his account with the firm. The entry is:

Cash / Bank A/c         ...Dr.

      To Partner’s Capital A/c

(Being amount due from the partner received)

2. If cash paid to Partner to settle the Capital Account:

Partner’s Capital A/c        ...Dr.

      To Cash / Bank A/c

(Being the amount due to partners paid as final settlement)