Lesson Note on Partnership Account: Dissolution Procedures and Realization Account for SSS 2

Class: Senior Secondary School 2 (SS2 / SSS2)
Term: 2nd Term
Week: 6
Age: 16 years
Duration: 45 minutes
Subject: Financial Accounting
Curriculum Theme: Accounting Principles
Previous Lesson: Partnership Account: Revaluation of Assets and New Balance Sheet.
Topic: Partnership Account
Subject Matter: Dissolution of partnership (meaning, reasons for dissolution), dissolution procedures, preparation of realization account.

Specific Objectives

By the end of the lesson, pupils should be able to:

Cognitive Domain:

• Define the term ‘dissolution of partnership’.
• State at least three reasons for the dissolution of a partnership business.
• Outline the basic procedures for dissolving a partnership.

Affective Domain:

• Appreciate the importance of following proper procedures during partnership dissolution.
• Understand the implications of dissolution on partners and the business.

Psychomotor Domain:

• Prepare a simple realization account.
• Record relevant transactions in the realization account.

Social Domain:

• Work collaboratively to identify reasons for partnership dissolution.
• Participate actively in class discussions on dissolution procedures.

Reference Materials

The following resources were used in planning this lesson:

• Senior Secondary Schools Education Curriculum
• State Unified Scheme of Work
• Financial Accounting for Senior Secondary Schools by O.A. Longe

Instructional Materials

The teacher will teach this lesson with the aid of:

• Charts illustrating the format of a realization account.
• Flashcards of key accounting terms related to dissolution.

Rationale for the Lesson

This lesson helps pupils understand the processes involved when a partnership business comes to an end. It enables them to account for the assets and liabilities during dissolution, which is an important aspect of financial reporting for partnerships.

Prerequisite/Previous Knowledge

Pupils should have prior knowledge of partnership formation, partnership agreements, and the basic principles of preparing partnership accounts.

Lesson Content/Board Summary

Dissolution of Partnership

Meaning of Dissolution of Partnership

Dissolution of partnership refers to the termination of the partnership agreement between all partners. This leads to the winding up of the business, meaning its operations cease, assets are sold, liabilities are paid, and any remaining balance is distributed among the partners.

Reasons for Dissolution of Partnership

A partnership business can be dissolved for various reasons, including:

• Expiry of the term for which the partnership was formed.
• Completion of the specific venture for which the partnership was formed.
• Mutual agreement among all partners.
• Death of a partner.
• Bankruptcy or insolvency of a partner.
• Insanity of a partner.
• Illegality of the business.
• Court order due to various circumstances (e.g., misconduct of a partner).

Procedures for Dissolving a Partnership

The general procedures for dissolving a partnership involve:

• Realization of Assets: All assets of the partnership are sold or taken over by partners.
• Payment of Liabilities: External liabilities (e.g., creditors, bank loans) are paid off.
• Payment of Realization Expenses: Costs incurred during the dissolution process are paid.
• Repayment of Partners’ Loans: Any loans provided by partners to the firm are repaid.
• Distribution of Capital: The remaining balance is distributed to partners according to their capital balances and profit-sharing ratio.

Realization Account

The realization account is a temporary account opened during the dissolution of a partnership to determine the profit or loss arising from the sale of assets and payment of liabilities. It is used to consolidate all transactions relating to the winding up of the business.

Purpose of Realization Account:

• To record the disposal of assets and settlement of liabilities.
• To ascertain the profit or loss on the realization of assets and liabilities.

Format of a Realization Account (Illustrative Example):

When preparing a realization account, follow these steps:

1. Transfer Assets: Debit the Realization Account with all assets (except cash/bank) at their book values.
2. Transfer Liabilities: Credit the Realization Account with all external liabilities at their book values.
3. Record Asset Sales: Credit the Realization Account with the cash received from the sale of assets.
4. Record Liabilities Paid: Debit the Realization Account with the cash paid to settle liabilities.
5. Record Realization Expenses: Debit the Realization Account with any expenses incurred during dissolution.
6. Calculate Profit/Loss: Balance the account. A credit balance indicates a profit on realization, which is transferred to partners’ capital accounts in their profit-sharing ratio. A debit balance indicates a loss on realization, which is also transferred to partners’ capital accounts in their profit-sharing ratio.

Example:

Assume a partnership dissolves. Book value of Furniture is N50,000, sold for N45,000. Creditors N30,000, paid N28,000. Realization expenses N2,000.

Realization Account

Details	N	Details	N
To Furniture (Book Value)	50,000	By Creditors (Book Value)	30,000
To Cash (Creditors Paid)	28,000	By Cash (Furniture Sold)	45,000
To Cash (Expenses)	2,000	By Partners’ Capital A/c (Loss on Realization)	5,000
	80,000		80,000

Note: In this example, there is a loss on realization of N5,000 (30,000 + 45,000 = 75,000; 50,000 + 28,000 + 2,000 = 80,000; 80,000 – 75,000 = 5,000). This loss would be shared among partners.

Teaching Methods/Instructional Techniques

Discussion, Lecture, Demonstration, Question and Answer, Visual Aids

Instructional Procedures

Step 1: Introduction

Time: 5 minutes

Teaching Skill: Set Induction

Teacher’s Activity: The teacher asks pupils what they understand by a “partnership” and what might cause a business to close down.

Pupils’ Activity: Pupils respond by defining partnership and giving general reasons for business closure.

Learning Point: Pupils recall prior knowledge and are introduced to the concept of business termination.

Step 2: Meaning of Dissolution of Partnership

Time: 7 minutes

Teaching Skill: Explanation

Teacher’s Activity: The teacher explains the meaning of dissolution of partnership, emphasizing that it means the termination of the partnership agreement and winding up of the business.

Pupils’ Activity: Pupils listen attentively and take notes.

Learning Point: Pupils understand the definition of dissolution of partnership.

Step 3: Reasons for Dissolution of Partnership

Time: 7 minutes

Teaching Skill: Guiding/Elicitation

Teacher’s Activity: The teacher guides pupils to identify and discuss various reasons why a partnership might be dissolved, using prompts like “What if a partner dies?” or “What if the business becomes illegal?”.

Pupils’ Activity: Pupils actively participate by giving various reasons for dissolution, such as death, bankruptcy, or mutual agreement.

Learning Point: Pupils can state different reasons for the dissolution of a partnership.

Step 4: Procedures for Dissolving a Partnership

Time: 7 minutes

Teaching Skill: Discussion/Listing

Teacher’s Activity: The teacher lists and discusses the step-by-step procedures involved in dissolving a partnership business, from realizing assets to distributing remaining capital.

Pupils’ Activity: Pupils listen, ask questions, and mention the procedures as discussed.

Learning Point: Pupils understand the sequence of actions taken during dissolution.

Step 5: Introduction to Realization Account

Time: 7 minutes

Teaching Skill: Explanation/Demonstration

Teacher’s Activity: The teacher introduces the realization account, explains its purpose, and briefly outlines the types of entries made into it, using the chart of account format.

Pupils’ Activity: Pupils pay attention to the explanation and observe the chart.

Learning Point: Pupils grasp the concept and purpose of a realization account.

Step 6: Preparation of Realization Account

Time: 5 minutes

Teaching Skill: Demonstration/Practical Application

Teacher’s Activity: The teacher demonstrates how to prepare a simple realization account using a basic example, showing how assets are transferred, liabilities settled, and profit or loss calculated.

Pupils’ Activity: Pupils observe the teacher’s demonstration and participate by suggesting entries.

Learning Point: Pupils learn the practical steps in preparing a realization account.

Step 7: Evaluation/Review

Time: 5 minutes

Teaching Skill: Questioning/Assessment

Teacher’s Activity: The teacher evaluates the learning by asking the following questions:

1. Define dissolution of partnership.
2. State three reasons why a partnership may be dissolved.
3. Outline the main steps in dissolving a partnership.
4. What is the purpose of a realization account?

Pupils’ Activity: Pupils answer orally and in writing.

Learning Point: Pupils demonstrate understanding of the lesson.

Step 8: Conclusion

Time: 2 minutes

Teaching Skill: Summarization

Teacher’s Activity: The teacher summarizes the key points of the lesson and assigns homework, which may include preparing a realization account from a given scenario.

Pupils’ Activity: Pupils listen to the summary and copy the homework assignment.

Learning Point: Pupils consolidate their learning and prepare for further practice.

Lesson Keywords

• Dissolution – The termination of a partnership agreement and winding up of the business.
• Partnership – A business owned by two or more individuals who agree to share profits or losses.
• Realization Account – A temporary account used during dissolution to ascertain profit or loss from asset disposal and liability settlement.

Differentiation

The teacher will provide additional guided examples for pupils who struggle with preparing the realization account. More advanced pupils will be challenged with complex scenarios involving revaluation or specific asset disposal terms.

Note for teachers using this lesson plan

Ensure pupils understand the distinction between dissolution and simple changes in partnership (e.g., admission or retirement of a partner). Emphasize the systematic approach to winding up the business and the importance of the realization account for determining the final profit or loss before capital distribution.