What is the difference between Realisation Account and Revaluation Account?

Revaluation Account is prepared at the time of reconstitution (admission, retirement) to adjust asset/liability values — business continues. Realisation Account is prepared at dissolution — all assets are sold and liabilities are paid off; business stops.

What is the Garner vs Murray rule?

When a partner is insolvent and cannot pay their share of capital deficiency, the loss is borne by the solvent partners in the ratio of their capitals (not profit ratio). This applies in the absence of a contrary agreement.

What is the order of payment when a firm is dissolved?

As per Section 48 of Indian Partnership Act: (1) Outside creditors (third-party liabilities) → (2) Partner's loans to the firm → (3) Partners' capital accounts → (4) Surplus distributed in profit-sharing ratio.

Dissolution of Partnership Firm

Dissolution of Partnership Firm • Class 12 Accountancy • NCERT • CBSE

Dissolution: termination of partnership and winding up of business. Realisation A/c: close all assets and liabilities. Garner vs Murray: insolvent partner's deficiency borne by solvent partners in capital ratio. Order of payment: outside creditors → partner loans → capitals.

Key Formulas

Realisation Profit/Loss → Partners' Capital A/c in profit ratio
Garner vs Murray: Insolvent partner's deficiency → solvent partners in capital ratio

Frequently Asked Questions

What is the difference between Realisation Account and Revaluation Account?: Revaluation Account is prepared at the time of reconstitution (admission, retirement) to adjust asset/liability values — business continues. Realisation Account is prepared at dissolution — all assets are sold and liabilities are paid off; business stops.
What is the Garner vs Murray rule?: When a partner is insolvent and cannot pay their share of capital deficiency, the loss is borne by the solvent partners in the ratio of their capitals (not profit ratio). This applies in the absence of a contrary agreement.
What is the order of payment when a firm is dissolved?: As per Section 48 of Indian Partnership Act: (1) Outside creditors (third-party liabilities) → (2) Partner's loans to the firm → (3) Partners' capital accounts → (4) Surplus distributed in profit-sharing ratio.

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