Question

How should assets which are taken over by a partner be recorded in the partnership books on dissolution?

Answer 1

When assets are taken over by a partner during the dissolution of a partnership firm, the accounting treatment is as follows:

• The asset is transferred to the realisation account at its book value.
• The partner’s capital account is debited with the agreed value at which the asset is taken over.
• The realisation account is credited with the same amount (agreed value).

Journal Entry:

Partner’s Capital A/c     ...Dr.
     To Realisation A/c
(Being asset taken over by the partner at agreed value)