Dissolution of Partnership Firm quiz

On dissolution of a firm, assets are transferred to the Realisation Account at:

A firm is compulsorily dissolved when:

Under Section 48, the first payment out of the proceeds of assets is made for:

An unrecorded asset sold on dissolution is credited to:

When a partner takes over an asset on dissolution, the account debited is:

Realisation expenses paid by the firm are debited to:

A creditor accepts an asset of book value Rs 30,000 in full settlement of his claim of Rs 30,000. The journal entry is:

General Reserve on dissolution is:

Dissolution by notice is possible only in a:

Loss on realisation is:

Why is dissolution of a firm necessarily dissolution of partnership, but not vice versa? (2 marks)

State two contingencies on whose happening a firm is dissolved. (2 marks)

Why is a partner's loan account not transferred to the Realisation Account? (2 marks)

Give the journal entry for payment of realisation expenses when they are borne by a partner but paid by the firm. (2 marks)

How is an unrecorded liability settled on dissolution recorded? Give the entry. (2 marks)

Why are cash and bank balances not transferred to the Realisation Account? (2 marks)

Distinguish between the Realisation Account and the Revaluation Account on two bases. (2 marks)

Pass the entry for transfer of accumulated loss of Rs 9,000 to partners A and B sharing 2:1. (2 marks)

What happens to a provision for doubtful debts on dissolution? (2 marks)

State the rule regarding private debts and firm debts of partners under Section 49. (2 marks)

Assets (other than cash) of book value Rs 2,40,000 realised Rs 2,10,000. Creditors of Rs 60,000 were paid Rs 58,000, and realisation expenses were Rs 4,000. Calculate the profit or loss on realisation. (3 marks)

Stock of book value Rs 40,000 was taken over by a creditor in full settlement of his claim of Rs 38,000. The remaining creditors of Rs 52,000 were paid at a discount of 5%. Calculate the amounts debited and credited to the Realisation Account for these items. (3 marks)

P and Q share profits 2:1. On dissolution, capitals are P Rs 50,000 and Q Rs 30,000, P's loan is Rs 20,000, and the cash available after paying outside liabilities is Rs 1,12,000. Calculate the profit on realisation and the amount paid to each partner (all realisation transactions are complete). (3 marks)

A firm had trade receivables of Rs 50,000 with a provision for doubtful debts of Rs 4,000. Receivables of Rs 5,000 proved bad and the rest realised at 90%. Calculate the amount realised and show the entries in the Realisation Account. (3 marks)

An old typewriter, completely written off, realised Rs 1,500, and an investment of book value Rs 20,000 was taken over by partner R at Rs 22,000. A liability for damages of Rs 6,000, not recorded, was paid. Calculate the net effect of these on the Realisation Account. (3 marks)

Read the passage and answer the questions. Anil, Binod and Chirag ran a travel agency in Jaipur. After a long dispute, Chirag filed a suit, and the court found that Anil had been persistently breaching the partnership agreement and that the business could only be carried on at a loss. (i) Under which mode will the firm be dissolved? (ii) State two grounds mentioned in the passage that justify this mode. (iii) State two other grounds on which a court may order dissolution. (5 marks)

Read the passage and answer the questions. On dissolution of the firm of Dev and Esha, the following happened: machinery (book value Rs 80,000) was sold for Rs 72,000; furniture (book value Rs 20,000) was taken over by Esha at Rs 15,000; creditors of Rs 40,000 were paid Rs 38,500; realisation expenses of Rs 2,500 were paid by Dev. (i) Pass the journal entry for furniture taken over by Esha. (ii) Pass the journal entry for expenses paid by Dev. (iii) Calculate the profit or loss on realisation. (5 marks)

Read the passage and answer the questions. Gopal and Hari agreed to dissolve their firm. The firm's creditors were Rs 75,000, Gopal's loan was Rs 25,000, Gopal's capital was Rs 60,000 and Hari's capital Rs 40,000. Assets realised Rs 1,90,000 in cash after expenses. They share profits equally. (i) In what order will the payments be made? (ii) Calculate the profit or loss on realisation, assuming total capital and liabilities equal total assets of Rs 2,00,000 at book value. (iii) Calculate the final payment to each partner. (5 marks)

Read the passage and answer the questions. Neeta and Om dissolved their firm. A bill of Rs 15,000 discounted earlier with the bank was dishonoured and the firm had to pay it. A creditor of Rs 20,000 took over a vehicle of book value Rs 25,000 and paid the difference to the firm in cash. Om took over the firm's goodwill at Rs 10,000, which was not recorded in the books. (i) Pass the entry for payment of the dishonoured bill. (ii) Pass the entry for the creditor's transaction. (iii) Pass the entry for goodwill taken over by Om. (5 marks)

Read the passage and answer the questions. Kabir and Laila were partners in a firm with a fixed term of five years ending on 31 March 2026. They did not continue the business beyond that date, and the firm was dissolved. The deed gave Kabir the responsibility of completing the dissolution for a commission of Rs 4,000. (i) Which mode of dissolution applies here? (ii) Pass the journal entry for Kabir's commission. (iii) How would the dissolution be different if the term had not expired and Laila had become insolvent? (5 marks)

Explain the various modes of dissolution of a partnership firm with examples. Draw a flowchart showing the modes and the sub-grounds under court dissolution. (6 marks)

Prepare the Realisation Account, Partners' Capital Accounts and Bank Account in prose form: R and S share profits 3:2. Book values: bank Rs 20,000, inventory Rs 60,000, machinery Rs 1,20,000, creditors Rs 40,000, capitals R Rs 1,00,000 and S Rs 60,000. Inventory realised Rs 54,000, machinery Rs 1,10,000, creditors paid in full and expenses Rs 3,000. (6 marks)

Explain the treatment of the following on dissolution with journal entries: (i) assets taken over by a partner (ii) liabilities taken over by a partner (iii) unrecorded assets (iv) unrecorded liabilities (v) realisation expenses paid by a partner and borne by the firm (vi) accumulated profits. Draw a chart showing debit and credit for each. (6 marks)

Discuss the provisions of Section 48 regarding settlement of accounts and Section 49 regarding private and firm debts. Draw a flowchart showing the application of firm property and private property. (6 marks)

Explain why a Realisation Account is prepared, list the items that appear on its two sides, and illustrate with a complete example of your own having at least three assets, two liabilities and realisation expenses. (6 marks)