Dissolution of Partnership Test

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Dissolution of Partnership Test - 18

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Weekly Quiz Competition

Question 1
1 / -0

If creditors given in the balance sheet ₹30,000. Stock costing ₹10,000 taken over by creditors at market price of ₹8,000 at the time of dissolution of partnership firm and balance amount paid in cash after deducting a discount of 10%. How much amount is paid in cash?

A
22,000

B
18,000

C
30,000

D
19,800

Solution

Calculation of the amount payable to the creditors:
Total amount payable to the creditors ₹30,000
Asset taken over by creditors at market price ₹8,000.
Now amount due to the creditors is ₹22,000 (30,000 – 8,000)
Final payment to creditors in cash = 22,000 – 2,200 (discount) = 19,800
Question 2
1 / -0

All _____ liabilities are transferred to the ____ side of Realisation account

A
External , Credit

B
Internal , Credit

C
Internal , Debit

D
Capitals of the partner, Credit

Solution

A company can sell its shares only through stock exchange. Company should be listed in the stock exchange to sell its shares.
Question 3
1 / -0

Following accounts will be shown on debit side of Realisation Account except

A
Realization Expenses

B
Cash Payments of Liabilities

C
Cash Received from Sale of Assets

D
If any partner has taken over any liability,

Solution

Cash received from the sale of assets will be shown in the credit side of realization account. Following items will be shown in the debit side:
•Cash Payments of Liabilities
•If any partner has taken over any liability
•Realization Expenses
Question 4
1 / -0

If a partner agreed to pay the unrecorded liability then ______

A
Only Realization account is credited

B
Concerned partner’s account is debited

C
Realization account is debited and concerned partner’s capital account is credited.

D
Realization account is credited and concerned partner’s account debited

Solution

When a partner agreed to pay any unrecorded liability since payment has to be made it is recorded on the debit side because of nominal nature of realization account and partner's liability on the business is increased so partners capital is credited.
Question 5
1 / -0

Compulsory dissolution takes place when:

A
Retirement of an Active partner

B
Death of a partner takes place

C
When there is loss in the current year

D
When all partners become insolvent

Solution

When all partners of the firm become insolvent, in such a case it is compulsory to dissolve the firm. It means, this is the end of the partnership firm and end of the partnership among the partners.
Question 6
1 / -0

At the time of dissolution, how would you treat the loss shown by Profit and Loss A/c in the Balance Sheet?

A
Credit side of partners’ capital account

B
Dr. Side of Partners capital account

C
Cash Account

D
Realization Account

Solution

Profit and Loss (Dr. balance) given in the balance sheet will be transferred to the debit side of partners capital account in their respective profit sharing ratio. It should not be transferred to the realization account as it is free reserve.
Question 7
1 / -0

Bank Loan ₹29,000 was paid at the time of dissolution. What journal entry will be recorded for the same?

A
Bank Loan A/c Dr. 29000
To Bank A/c 29000

B
Realization A/c Dr. 29000
To Bank A/c 29000

C
Bank A/c Dr. 29000
To Realization A/c 29000

D
Bank Loan A/c Dr. 29000
To Bank Loan A/c 29000

Solution

Repayment of bank loan will take place in debit side of realization account. This transaction will effect only two accounts i.e. Realisation Account and Bank Account.
Question 8
1 / -0

What journal entry will take place when loan of partner ₹60,000 is paid at the time of dissolution?

A
Realization A/c Dr.
To Cash/Bank A/c

B
Partner’s Capital A/c Dr.
To Cash/Bank A/c

C
Cash/Bank A/c Dr
To Realization A/c

D
Partner’s Loan A/c Dr.
To Cash/Bank A/c

Solution

When full amount is paid back to the partner for his loan, liability is decreasing so it is debited and asset is decreasing so it is credited.
Question 9
1 / -0

When Asset is taken over by a creditor:

A
Credit side of Realization A/c

B
Debit side of Realization A/c

C
No Entry in this case

D
Only in Cash A/c

Solution

Any asset taken over by a liability at the time of dissolution of partnership firm, will not be shown separately or no separate entry will be recorded for the same.
Question 10
1 / -0

How would you treat investment fluctuation reserve given in the balance sheet at the time of dissolution?

A
Debit side of partners’ capital account

B
Cash Account credit side

C
Debit side of Realization Account

D
Credit side of Realization Account

Solution

At the time of dissolution, investment fluctuation reserve should be transferred to the credit side of revaluation account. It should not be distributed as free reserve.it is transferred only if investments are there in the question.
Question 11
1 / -0

Compulsory dissolution will take place when _______

A
Business of the firm becomes unlawful

B
A partner retires

C
There is change in profit sharing ratio

D
A partner dies

Solution

Compulsory dissolution is when some event has taken place which makes it unlawful for the partners to carry on the business of the firm in partnership, e.g., when a partner who is a citizen of a country becomes an alien enemy because of the declaration of war with his country and India.
Question 12
1 / -0

A and B share profits and losses in the ratio of 5:2. They have decided to dissolve the firm. Assets and external liabilities have been transferred to Realisation A/c. It is found that an unrecorded Computer was realized ₹7,000. How would you record it?

A
Bank A/c Dr. 7000
To Computer A/c 7000

B
Computer A/c Dr.7000
To Realisation A/c 7000

C
Bank A/c Dr. 700
To Capital A/c 700

D
Bank A/c Dr. 7000
To Realisation A/c 7000

Solution

Unrecorded assets are directly realized i e sold off so it is recorded on credit side of realization account
Question 13
1 / -0

According to Indian Partnership Act 1932 Dissolution of firm means:

A
Change in the ratio of partners

B
End of the personal relationship among the partners

C
Dissolution of partnership between the main partners

D
Dissolution of Partnership between all the partners

Solution

According to the Indian Partnership Act, 1932 dissolution of firm means dissolution of partnership between all the partners and end of the business. All accounts will be closed and all assets will be realized and liabilities will be paid off.
Question 14
1 / -0

When realized value of goodwill is given in adjustment, it indicates that ________

A
Goodwill is written off by the old partners

B
Goodwill is taken over by creditors.

C
Goodwill is purchased

D
Goodwill is sold

Solution

At the time of dissolution of a partnership firm, if any realized value of goodwill is given in the question, it shows that goodwill is sold with other assets of the firm.Goodwill can be sold only at the time of dissolution.
Question 15
1 / -0

Which of the following Reserve or fund is not transferred to the Realisation Account?

A
Contingency Reserve

B
Reserve for doubtful debts

C
Employee Provident Fund

D
Investment Fluctuation Reserve

Solution

Contingency Reserves is a free reserve which is not transferred to the Realisation account at the time of dissolution of a partnership firm. Other reserves or funds (given in the above question) will be transferred to the Realisation account.

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Dissolution of Partnership Test - 18

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Dissolution of Partnership Test - 18

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SHARING IS CARING

Question 1

22,000

18,000

30,000

19,800

Solution

Question 2

External , Credit

Internal , Credit

Internal , Debit

Capitals of the partner, Credit

Solution

Question 3

Realization Expenses

Cash Payments of Liabilities

Cash Received from Sale of Assets

If any partner has taken over any liability,

Solution

Question 4

Only Realization account is credited

Concerned partner’s account is debited

Realization account is debited and concerned partner’s capital account is credited.

Realization account is credited and concerned partner’s account debited

Solution

Question 5

Retirement of an Active partner

Death of a partner takes place

When there is loss in the current year

When all partners become insolvent

Solution

Question 6

Credit side of partners’ capital account

Dr. Side of Partners capital account

Cash Account

Realization Account

Solution

Question 7

Bank Loan A/c Dr. 29000To Bank A/c 29000

Realization A/c Dr. 29000To Bank A/c 29000

Bank A/c Dr. 29000To Realization A/c 29000

Bank Loan A/c Dr. 29000To Bank Loan A/c 29000

Solution

Question 8

Realization A/c Dr.To Cash/Bank A/c

Partner’s Capital A/c Dr.To Cash/Bank A/c

Cash/Bank A/c DrTo Realization A/c

Partner’s Loan A/c Dr.To Cash/Bank A/c

Solution

Question 9

Credit side of Realization A/c

Debit side of Realization A/c

No Entry in this case

Only in Cash A/c

Solution

Question 10

Debit side of partners’ capital account

Cash Account credit side

Debit side of Realization Account

Credit side of Realization Account

Solution

Question 11

Business of the firm becomes unlawful

A partner retires

There is change in profit sharing ratio

A partner dies

Solution

Question 12

Bank A/c Dr. 7000To Computer A/c 7000

Computer A/c Dr.7000To Realisation A/c 7000

Bank A/c Dr. 700To Capital A/c 700

Bank A/c Dr. 7000To Realisation A/c 7000

Solution

Bank Loan A/c Dr. 29000
To Bank A/c 29000

Realization A/c Dr. 29000
To Bank A/c 29000

Bank A/c Dr. 29000
To Realization A/c 29000

Bank Loan A/c Dr. 29000
To Bank Loan A/c 29000

Realization A/c Dr.
To Cash/Bank A/c

Partner’s Capital A/c Dr.
To Cash/Bank A/c

Cash/Bank A/c Dr
To Realization A/c

Partner’s Loan A/c Dr.
To Cash/Bank A/c

Bank A/c Dr. 7000
To Computer A/c 7000

Computer A/c Dr.7000
To Realisation A/c 7000

Bank A/c Dr. 700
To Capital A/c 700

Bank A/c Dr. 7000
To Realisation A/c 7000