Dissolution of Partnership Test

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Dissolution of Partnership Test - 1

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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.

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Dissolution of Partnership Test - 1

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Dissolution of Partnership Test - 1

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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. 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

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 Dr To 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

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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