Class 12 Accountancy Chapter - Dissolution of

Partnership Firm
TEST YOUR UNDERSTANDING -I
Question 1. Dissolution of a partnership is different from dissolution of a firm.
Answer True
In dissolution of partnership, business continues whereas in dissolution of firm, the business is
closed.
Question 2. A partnership is dissolved when there is a death of a partner.
Answer True
As a new partnership deed is to be made.
Question 3. A firm is dissolved when all partners give consent to it.
Answer True
As all partners agree to it.
Question 4: A firm is compulsorily dissolved when a partner decide to retire.
Answer False
The remaining partners may continue the business hence, it not necessary to dissolve the firm.
Question 5. Dissolution of a firm necessarily involves dissolution of partnership.
Answer True
When firm does not exist then partners have no business to do.
Question 6. A firm is compulsorily dissolved when all partners or when all except one
partner become involvent.
Answer True
As the partner becomes incompetent to sign the contract.
Question 7. Court can order a firm to be dissolved when a partner becomes insane.
Answer True
The court can order for dissolution when any partner files a suit for it.
Question 8. Dissolution of partnership can not take place without intervention of the court.
Answer False
Partnership can be dissolved with the consent of the partners also.
TEST YOUR UNDERSTANDING -II
• Tick the correct answer
Question 1. On dissolution of a firm, bank overdraft is transferred to
(a) cash account (b) bank account
(c) realisation account (d) partner’s capital account
Answer (c) Realisation account
Question 2. On dissolution of a firm, partner’s loan account is transferred to
(a) realisation account (b) partner’s capital account (c) partner’s current account (d) None
of these
Answer (d) None of these
Question 3. After transferring liabilities like creditors and bills payables in the realisation
account, in the absence of any information regarding then payment, such liabilities are
treated as
(a) never paid (b) fully paid (c) partly paid (d) None of these
Answer (b) Fully paid
Question 5. Unrecorded assets when taken over by a partner are shown in
(a) debit of realisation account
(b) debit of bank account
(c) credit of realisation account
(d) dredit of bank account
Answer (c) Credit of realisation account
Question 6. Unrecorded liabilities when paid are shown in
(a) debit of realisation account
(b) debit of bank account
(c) credit of realisation account
(d) credit of bank account
Answer (a) Debit of realisation account
Question 7. The accumulated profits reserves are transferred to
(a) realisation account (b) partners’ capital account
(c) bank account (d) None of these
Answer (b) Partners’ capital account
Question 8. On dissolution of the firm, partner’s capital accounts are closed through
(a) realisation account (b) drawings account
(c) bank account (d) loan account
Answer (c) Bank account
TEST YOUR UNDERSTANDING – III
• Fill in the correct word(s)
1. All assets (except cash/bank and fictitious assets) are transferred to the —————
(Debit/Credit) side of ——————— Account (Realisation/Capital).
Answer:Answer Debit, Realisation
2. All ————— (internal/external) liabilities are transferred to the ————— (Debit/Credit) side
of ——————acccount (Bank/Realisation).
Answer External, Credit, Realisation
3. Accumulated losses are transferred to ————— (Current/Capital Accounts) in ——————
(equal ratio/profit sharing ratio).
Answer Capital account, Profit sharing ratio
4. If a liability is assumed by a partner, such Partner’s Capital Account is ––––––– ———
(debited/credited)..
Answer Credited
5. If a partner takes over an asset, such (Partner’s Capital Account) is ————————
(debited/credited).
Answer Debited
6. No entry is required when a ——————— (partner/creditor) accepts a fixed asset in payment
of his dues.
Answer Creditor
7. When creditor accepts an asset whose value is more than the amount due to him, he will ———
————— (pay/not pay) the excess amount which will be credited ———————— Account.
Answer Pay, Realisation
8. When the firm has agreed to pay the partner a fixed amount for realisation work irrespective of
the actual amount spent, such fixed amount is debited to (Realisation/Capital) Account and
Credited to (Capital/Bank) Account.
Answer Realisation, Capital
9. Partner’s loan is —————— (recorded/not recorded) in the (Realisation Account).
Answer Not recorded
10. Partner’s current accounts are transferred to respective ———————— Partners’
(Loan/Capital) Accounts.
Answer Capital
DO IT YOURSELF
Question 1. For closure of assets accounts.
Answer
Realisation A/c Dr
To Assets A/c
Question 2. For closure of liabilities accounts.
Answer
Liabilities A/c Dr
To Realisation A/c
Question 3. For sale of assets.
Answer
Bank A/c Dr
To Realisation A/c
Question 4. For settlement of a creditor by transfer of fixed assets to him.
Answer No entry
Question 5. For expenses of realisation when actual expenses are paid by the partner on
behalf of the firm.
Answer
Realisation A/c Dr
To Partner’s Capital A/c
Question 6. When a partner discharges the liability of the firm.
Answer
Realisation A/c Dr
To Partner’s Capital A/c
Question 7. For payment of partner’s loan.
Answer Partner’s Loan A/c Dr
To Bank A/c
Question 8. For settlement of capital accounts.
Answer
Partner’s Capital A/c Dr
To Bank A/c
SHORT ANSWER TYPE QUESTIONS
Question 1. State the difference between dissolution of Partnership and Dissolution of
Partnership firm.
Answer The difference between the Dissolution’ of Partnership and Dissolution of Partnership
Firm is as follows.

Question 2. State the accounting treatment for

(i) Unrecorded assets (ii) Unrecorded liabilities.
Answer (i) Accounting Treatment for Unrecorded Assets Unrecorded asset is an asset, which
have not been shown in the books of account or which has been written off in the books of
accounts, but the asset is still available in physical condition. Sometimes it is sold outside for cash
and sometimes it is taken away by the partner. The accounting treatment for unrecorded asset will
be there according to the situation.
(a) When the unrecorded asset is sold for cash the following Journal Entry will be there
(b) When the unrecorded asset is taken over by any partner the following Journal Entry will be
there

(ii) Accounting Treatment for Unrecorded Liabilities Unrecorded liabilities are those liabilities,
which have not been shown in the books of account. But at the time of dissolution they are
required to be paid off. The following Journal Entry will be there as per situation.
(a) When the unrecorded liability is paid off the following Journal Entry will be there

(b) When the unrecorded liability is taken over by a partner. The following Journal Entry will be
there

Question 3. On dissolution, how will you deal with partner’s loan if it appears on the
(a) assets side of the balance sheet,
(b) liabilities side of balance sheet.
Answer (a) When loan amount is shown in the assets side of the balance sheet, it indicate that
the loan has been granted by the firm to the partner. In that case, at the time of dissolution the
amount of loan will be transferred to the concerned partner’s capital account. The following
Journal Entry will be passed

(b) When the amount of loan appears in the liabilities side of the balance sheet, it indicate that the
respective partner or partners have given loan to the firm. In this case, partner’s loan will be paid
off after paying all the external liabilities first. Here, it is worth mentioning that the partner’s loan
will not be transferred to the realisation account, in fact, it will be paid in cash. The following
accounting entry will be passed in this regard
Question 4. Distinguish between Firm’s Debts and Partner’s Private Debts.
Answer The difference between Firm’s Debts and Partner’s Private Debts is as follows

Question 5. State the order of settlement of accounts on dissolution.

Answer In case of dissolution of a firm, the firm ceases to conduct business and has to settle its
accounts. For this purpose, it disposes off all its assets for satisfying all the claims against it. In
this context, it should be noted that, subject to agreement among the partners, the following rules
as provided in Section 48 of the Partnership Act, 1932 shall apply. As per those rules, the
following order of settlement will be followed.
(i) Treatment of Losses
Note Losses, including deficiencies of capital, shall be paid
(a) First out of profits,
(b) Next out of capital of partners, and
(c) Lastly, if necessary, by the partners individually in their profits sharing ratio.
(ii) Application of Assets The assets of the firm, including any sum contributed by the partners to
make up deficiencies of capital, shall be applied in the following manner and order
(a) In paying the debts of the firm to the third parties;
(b) In paying each partner proportionately what is due to him/her from the firm for advances as
distinguished from capital (i.e., partner’s loan);
(c) In paying to each partner proportionately what is due to him on account of capital; and
(d) The residue, if any, shall be divided among the partners in their profit sharing ratio.
Question 6. On what account Realisation Account differs from Revaluation Account?
Answer There is the following difference between Realisation Account and Revaluation Account

LONG ANSWER TYPE QUESTIONS

Question 1. Explain the process of dissolution of partnership firm.
Answer Dissolution means breaking of relationship among the partners. As per Section 39 of the
Indian Partnership Act 1932, the dissolution of firm implies that not only partnership is dissolved
but the firm losses its existence, i.e., after dissolution the firm does not remain in business.
Dissolution of partnership firm implies discontinuation of the business of the partnership firm.
Dissolution involves winding up of business, disposal of assets and paying off the liabilities and
distribution of any surplus or borne of loss by the partners of the firm. As per the Partnership Act
1932, a partnership firm may be dissolved in the following manners.

(i) Dissolution by Agreement As a firm is formed with the consent of all partners with a mutual
agreement. Dissolution can also be there with
the help of agreement. It happens in following two ways.
A firm may be dissolved
(a) When all the partners agree to dissolve the firm.
(b) When there is any term related to dissolution of firm in the partnership agreement.
(ii) Compulsory Dissolution A firm may be dissolved compulsorily in the following condition
(a) In case, all the partners or all except one partner become insolvent or insane.
(b) If the business becomes illegal.
(c) Where all the partners except one decide to retire from the firm.
(d) Where all the partners except one die.
(iii) Dissolution by Notice When partnership is at will then the partnership firm may be dissolved,
if any partner give notice in writing to all the other partners expressing his/her intention to dissolve
the firm.
(iv) Dissolution by Court A court may order for dissolution if a suit is filed by a partner, as per
Section 44 of Indian Partnership Act, 1932. The court may order to dissolve a partnership in
following conditions
(a) A partner becomes insane.
(b) A partner commits breach of agreement wilfully.
(c) When a partner’s conduct affects the business.
(d) When a partner transfers his interest to a third party.
(e) If business cannot be continued.
(f) If a partner becomes incapable of doing business.
(g) If court thinks dissolution to be just and equitable on any ground.
Besides these, above mentioned circumstances, a partnership firm may be dissolved if the court at
any stage finds dissolution of the firm to be justified and inevitable.
Question 2. What is a Realisation Account?
Answer On dissolution of a firm, all the books of account are closed, all assets are sold and all
liabilities are paid off. In order to record the sale of assets and discharge of liabilities, a nominal
account is opened named realisation account. The main purpose to open realisation account is to
ascertain the profit or loss due to the realisation of assets and liabilities. Realisation profit (if credit
side > debit side) or realisation loss (if debit side > credit side) are transferred to the partner’s
capital account in their profit sharing ratio.
Concisely, following are the important objectives of preparing realisation account
(i) To close all the books of account.
(ii) To record transactions relating to the sale of assets and discharge of liabilities.
(iii) To determine profit or loss due to the realisation of assets and liabilities.
Features of Realisation Account
(i) In realisation account, sale of assets is recorded at their realised value.
(ii) Payment to liabilities (creditors) is recorded at their settlement value.
(iii) After all the transactions have been recorded, there will be balance, which may be profit or
loss.
(iv) Profit arises in two situations
(a) When assets are realised at more than their book value.
(b) When liabilities are settled at less than their book value.
(v) If the two conditions are vice versa, the net result will be loss.
(vi) The net profit or loss on realisation is to be transferred to the partner’s capital accounts in their
profit sharing ratio.
The format for realisation account is as follows

Question 3. Reproduce the format of Realisation Account.

Answer

Question 4. How deficiency of creditors is paid off?

Answer When a firm gets into the situation of dissolution, first of all the amount received from the
sale of firm’s assets are utilised to pay the creditors. After that, if the sale receipts of assets fall
short, then partners’ private assets are used for settling the dues of the firm’s creditors. Even if
some portion of the amount due to creditors is left unpaid, then there arises deficiency of
creditors. This deficiency is handled in the following two ways
(i) In first case, deficiency is transferred to the Deficiency Account.
(ii) In second case, the deficiency is transferred to the partner’s capital account.
In first case, a separate account is prepared for the firm’s creditors. Then in ‘ order to ascertain the
firm’s cash balance accruing from the sale of the firm’s
assets and partners’ private assets, cash account is prepared. After ascertaining the cash
availability with the firm, the creditors and the external liabilities are paid proportionately (partially).
The remaining unpaid creditors or the deficiency is transferred to the Deficiency Account.
In the second case, the creditors are paid by the cash available with the firm
including the partners’ individual contribution. The deficiency or unpaid creditors amount .is
transferred to the partner’s capital account. Thus, the deficiency of the creditors is borne by all the
partners in their profit sharing ratio. If any partner becomes insolvent and is unable to bear the
deficiency, then this will be regarded as a capital loss to the firm.
‘ If the partnership deed is silent, about such capital loss in the fact of insolvency of a partner, the
deficiency on the insolvent partner’s capital ’ account must be borne by the other solvent partners,
in proportion to their capital. In that case, we should apply Garner vs Murray decision in solving
problems in partnership.
NUMERICAL QUESTIONS
1. Journalise the following transactions regarding realisation expenses :
[a] Realisation expenses amounted to Rs.2,500.
[b] Realisation expenses amounting to Rs.3,000 were paid by Ashok, one of the partners.
[c] Realisation expenses Rs.2,300 borne by Tarun, personally.
[d] Amit, a partner was appointed to realise the assets, at a cost of Rs.4,000. The actual
amount of realisation amounted to Rs.3,000.

2. Record necessary journal entries in the following cases:

[a] Creditors worth Rs.85,000 accepted Rs.40,000 as cash and Investment worth Rs.43,000,
in full settlement of their claim.
[b] Creditors were Rs.16,000. They accepted Machinery valued at Rs.18,000 in settlement of
their claim.
[c] Creditors were Rs.90,000. They accepted Buildings valued Rs.1,20,000 and paid cash to
the firm Rs.30,000.

3. There was an old computer which was written-off in the books of accounts in the
pervious year. The same has been taken over by a partner Nitin for Rs.3,000.
Journalise the transaction, supposing. That the firm has been dissolved.

4. What journal entries will be recorded for the following transactions on the dissolution of
a firm:
[a] Payment of unrecorded liabilities of Rs.3,200.
[b] Stock worth Rs.7,500 is taken by a partner Rohit.
[c] Profit on Realisation amounting to Rs.18,000 is to be distributed between the partners
Ashish and Tarun in the ratio of 5:7.
[d] An unrecorded asset realised Rs.5,500.

5. Give journal entries for the following transactions :

1. To record the realisation of various assets and liabilities,
2. A Firm has a Stock of Rs. 1,60,000. Aziz, a partner took over 50% of the Stock at a
discount of 20%,
3. Remaining Stock was sold at a profit of 30% on cost,
4. Land and Buildging (book value Rs. 1,60,000) sold for Rs. 3,00,000 through a broker who
charged 2%, commission on the deal,
5. Plant and Machinery (book value Rs. 60,000) was handed over to a Creditor at an agreed
valuation of 10% less than the book value,
6. Investment whose face value was Rs. 4,000 was realised at 50%

6. How will you deal with the realisation expenses of the firm of Rashim and Bindiya in the
following cases:
1. Realisation expenses amounts to Rs. 1,00,000,
2. Realisation expenses amounting to Rs. 30,000 are paid by Rashim, a partner.
3. Realisation expenses are to be borne by Rashim for which he will be paid Rs. 70,000 as
remuneration for completing the dissolution process. The
actual expenses incurred by Rashim were Rs. 1,20,000.

7. The book value of assets (other than cash and bank) transferred to Realisation Account
is Rs. 1,00,000. 50% of the assets are taken over by a partner Atul, at a discount of 20%;
40% of the remaining assets are sold at a profit of 30% on cost; 5% of the balance being
obsolete, realised nothing and remaining assets
are handed over to a Creditor, in full settlement of his claim. You are required to record the
journal entries for realisation of assets.

8. Record necessary journal entries to record the following unrecorded assets and
liabilities in the books of Paras and Priya:
1. There was an old furniture in the firm which had been written-off completely in the
books. This was sold for Rs. 3,000,
2. Ashish, an old customer whose account for Rs. 1,000 was written-off as bad in the
previous year, paid 60%, of the amount,
3. Paras agreed to takeover the firm’s goodwill (not recorded in the books of the firm), at a
valuation of Rs. 30,000,
4. There was an old typewriter which had been written-off completely from the books. It was
estimated to realize Rs. 400. It was taken away by Priya at an estimated price less 25%,
5. There were 100 shares of Rs. 10 each in Star Limited acquired at a cost of Rs. 2,000
which had been written-off completely from the books. These shares are valued @ Rs. 6
each and divided among the partners in their
profit sharing ratio.

9. All partners wishes to dissolve the firm. Yastin, a partner wants that her loan of Rs.
2,00,000 must be paid off before the payment of capitals to the partners. But, Amart,
another partner wants that the capitals must be paid before the payment of Yastin’s loan.
You are required to settle the conflict giving reasons.
Answer According to Section 48 of Partnership Act 1932, their is a sequence of preferences given
which tells the priority of payment at time of dissolution. In the above condition, the loans and
advances of partner’s i.e., Rs.2,00,000 will be paid before and payment of capital is always done
at last
10. What journal entries would be recorded for the following transactions on the
dissolution of a firm after various assets (other than cash) on the third party liabilities have
been transferred to Reliasation account.
1. Arti took over the Stock worth Rs. 80,000 at Rs. 68,000.
2. There was unrecorded Bike of Rs. 40,000 which was taken over By Mr. Karim.
3. The firm paid Rs. 40,000 as compensation to employees.
4. Sundry creditors amounting to Rs. 36,000 were settled at a discount of 15%.
5. Loss on realisation Rs. 42,000 was to be distributed between Arti and Karim in the ratio
of 3:4.

11. Rose and Lily shared profits in the ratio of 2:3. Their Balance Sheet on March 31, 2006
was as follows:

Rose and Lily decided to dissolve the firm on the above date. Assets (except bills
receivables) realised Rs. 4,84,000. Bills receivable were taken over by Rose at X 30,000.
Creditors agreed to take Rs 38,000. Cost of realisation was Rs 2400. There was a Motor
Cycle in the firm which was brought out of the firm’s money, was not shown in the books of
the firm. It was now sold for Rs 10,000. There was a continigent liability in respect of
outstanding electric bill of Rs 5,000. Bill receivable taken over by Rose at Rs 33,000.
Show realisation account, partners’ capital account, loan account and cash account.

12. Shilpa, Meena and Nanda decided to dissolve their partnership on March 31,2006. Their
profit sharing ratio was 3:2:1 and their Balance Sheet was as under:
The stock of value of Rs. 41,660 are taken over by Shilpa for Rs. 35,000 and she agreed to
discharge bank loan. The remaining stock was sold at Rs. 14,000 and debtors amounting to
Rs. 10,000 realised Rs. 8,000. land is sold for Rs. 1,10,000. The
remaining debtors realised 50% at their book value. Cost of realisation amounted to Rs.
1,200. There was a typewriter not recorded in the books worth Rs. 6,000 which were taken
over by one of the Creditors at this value. Prepare Realisation Account
13. Surjit and Rahi were sharing profits (losses) in the ratio of 3:2, their Balance Sheet as
on March 31, 2004 is as follows:

The firm was dissolved on March 31, 2006 on the following terms:
1. Surjit agreed to take the investments at Rs. 8,000 and to pay Mrs. Surojit’s loan.
2. Other assets were realised as follows:
Stock Rs.5,000
Debtors Rs. 18,500
Furniture Rs. 4,500
Plant Rs. 25,000
3. Expenses on realisation amounted to Rs. 1,600.
4. Creditors agreed to accept Rs. 37,000 as a final settlement. You are required to prepare
Realisation account, Partner’s Capital account and Bank account
14.Rita, Geeta and Ashish were partners in a firm sharing profits/losses in the ratio of 3:2:1.
On March 31, 2006 their balance sheet was as follows:

On the date of above mentioned date the firm was dissolved:

1. Rita was appointed to realise the assets. Rita was to receive 5% commission
on the rate of assets (except cash) and was to bear all expenses of realisation,
2. Assets were realised as follows:
Rs.
Debtors 30,000
Stock 26,000
Plant 42,750
3. Investments were realised at 85% of the book value,
4. Expenses of realisation amounted to Rs. 4,100,
5. Firm had to pay Rs. 7,200 for outstanding salary not provided for earlier,
6. Contingent liability in respect of bills discounted with the bank was also materialised and
paid off Rs. 9,800, Prepare Realisation account, Capital Accounts of Partner’s and Cash
Account.

15. Anup and Sumit are equal partners in a firm. They decided to dissolve the parntership
on December 31, 2006. When the balance sheet is as under :

The Assets were realised as follows :

Rs.
Lease hold land 72,000
Furniture 22,500
Stock 40,500
Plant 48,000
Sundry Debtors 10,5000
The Creditors were paid Rs. 25,500 in full settlement. Expenses of realisation amount to Rs.
2,500. Prepare Realisation Account, Bank Account, Partners Capital Accounts to close the
books of the firm.

16. Ashu and Harish are partners sharing profit and losses as 3:2. They decided to dissolve
the firm on December 31, 2006. Their balance sheet on the above date was:
Ashu is to take over the building at Rs. 95,000 and Machinery and Furniture is take over by
Harish at value of Rs. 80,000. Ashu agreed to pay Creditor and Harish agreed to meet Bank
overdraft. Stock and Investments are taken by both partner in profit sharing ratio. Debtors
realised for Rs. 46,000, expenses
of realisation amounted to Rs. 3,000. Prepare necessary ledger account.

Dissolution of Partnership Firm – Notes

1. Dissolution Dissolution means discontinuance of existing relationship among the partners. According to
Indian Partnership Act, 1932, dissolution may be either of partnership or of a firm.
2. Dissolution of Partnership It changes the existing relationship between partners but the firm may
continue its business as before.
3. Dissolution of Partnership Firm Dissolution of firm means dissolution of partnership among all the
partners in the firm. In this case, business of the firm also comes to an end.
4. Modes of Dissolution of Partnership Firm
(i) Dissolution by mutual agreement (ii) Compulsory dissolution
(iii) Dissolution on the happening of an event (iv) Dissolution by notice
(v) Dissolution by court
5. Settlement of Accounts in Case of Dissolution of Firm
(i) Treatment of Losses
Losses shall be paid, first out of profits, then out of partner’s capital and lastly, by the partners individually
in their profit sharing ratio, if necessary.
(ii) Application of Assets
(a) Payment to outsiders/creditors
(b) Loans and advances of partners
(c) Payment of capital of partners
(d) The balance shall be divided among the partners in their profit sharing ratio
6. Treatment of Firms Debt and Private Debts
Where both the debts of the firm and private debts of a partner co-exist.
The following rules, as stated in Section 49 of the Act, shall apply
(i) Firm’s property is applied first in payment of firm’s debts and if there is any surplus, then the share of
each partner is applied in the payment of his private debts or paid to him.
(ii) Partner’s private property is applied first in payment of his private debts and the surplus (if any) in
payment of firm’s debts if the firms liabilities exceed the firm’s assets.
7. Accounting Treatment on Dissolution of Firm
On dissolution, the books of the firm are closed. The process is completed by opening the following
accounts:
(i) Realisation account (ii) Partners’ capital account
(iii) Partners’ loan account (iv) Cash/bank account
(i) Realisation Account
It is a nominal account prepared at the time of dissolution of partnership firm to show profit or loss on
realisation of assets and payment of liabilities.

NOTE: (i) Goodwill appearing in the balance sheet is treated as any other asset. In case, question is silent
about the realisation of goodwill, it is assumed the goodwill does not have any value and no amount is
realised for it.
(ii) When an asset is transferred to realisation account, its corresponding reserve or provision appearing on
the liabilities side of balance sheet is also transferred to realisation account.
(iii) In the absence of any information regarding realisation of assets (tangible or intangible) and settlement
of any outside liabilities, it should be assumed that no amount has been realised from such assets and an
amount equal to the book value of such liability has been paid off.
Format of Realisation Account

NOTE: All provisions created against any asset or liabilities/provision for doubtful debts, provision for
depreciation should be transferred to realisation account on credit or debit side as the case may be and it
should be noted that those assets or liabilities should appear in realisation account at gross value.
(ii) Partners’ Capital Account
Balance of partner’s capital and current account are recorded in this account. Any asset of the firm taken
over by the partner is recorded on the debit side and liability taken over is recorded on the credit side.
Undistributed profits and reserves are recorded on the credit side and undistributed losses or fictitious assets
are recorded on the debit side. When capital accounts are maintained following fixed capital account
method, partners have current accounts also. These current accounts may have credit or debit balance.
Current accounts are closed by transferring them to concerned partner’s fixed capital accounts.
The entries are as follows
(a) In case of debit balance in a current accounts of a partner
Concerned Partners’ Capital A/c Dr
To Concerned Partners’ Current A/c
(b) In case of credit balance in a current account of a partner
Concerned Partners’ Current A/c Dr
To Concerned Partners’ Capital A/c
The balance of partner’s capital account are closed in the following manner
(a) For making final payment to a partner (In case of credit balance)
Partner’s Capital A/c Dr
To Cash/Bank A/c
(b) When a partner is required to bring in cash (In case of a debit balance)
Cash/Bank A/c Dr
To Partner’s Capital A/c
Format of Partner’s Capital Account
(iii) Partner’s Loan Account
Partner’s loan will be paid after all outside liabilities are paid Partner’s Loan A/c Dr
To Cash/Bank A/c
(iv) Bank or Cash Account
It is a real account. On debit side, opening balance, amount realised through sale of assets and any amount
paid in by the partners are shown. On the credit side, all the payments for liabilities, realisation expenses and
final settlement made to partners are shown. In case both cash and bank balances appear in balance sheet, it
is always better to open a single account. It is a self-balancing account.
Format of Cash/Bank Account

8. Preparation of Memorandum Balance Sheet for Ascertaining Sundry Assets

Memorandum balance sheet is prepared for calculating the missing figures of sundry assets. Sometimes, the
total value of sundry assets is not given. However, the value realised from the assets is given, also the
partners capitals and other liabilities are also given. In that case, sundry assets have to be ascertained by
preparing the old balance sheet. The amount of capitals and other liabilities are added. The sum total is the
total amount of assets.

Dissolution of a Partnership Firm Important

Questions
Question 1.
Differentiate between ‘Dissolution of partnership’ and ‘Dissolution of partnership firm’ on the basis
of ‘Court’s intervention’. (Delhi 2019; All India 2014)
Answer:
Difference between dissolution of partnership firm and dissolution of partnership is:
Basis Dissolution of Partnership Firm Dissolution of Partnership
Court’s It can be either voluntarily by the partners or It is always vol#ntarily. There is no
Intervention compulsorily by the order of the court. intervention of court.
Question 2.
Distinguish between “Dissolution of partnership’ and ‘Dissolution of parthership firm’ on the basis
of’Settlement of assets and liabilities’. (All India 2019; CBSE 2018)
Answer:
Difference between dissolution of partnership firm and dissolution of partnership is
Dissolution of
Basis Dissolution of Partnership
Partnership Firm
Assets and liabilities are revalued and the gain or loss on
Settlement of Assets Assets of the firm are
revaluation is distributed among all the partners in their old
and Liabilities sold and liabilities are
profit sharing ratio.
Question 3.
State any two grounds on the basis of which court may order for the dissolution of partnership
firm. (All india 2019)
Answer:
Court may order for the dissolution of partnership firm when
• A partner becomes a person of unsound mind.
• A partner is found guilty of misconduct.
Question 4.
State any two situations when a partnership firm may be compulsorily dissolved. (All India: Delhi
2019)
Or
Identify a situation for compulsory dissolution of a partnership firm. (All India 2014)
Answer:
Situations when a partnership firm may be compulsorily dissolved are
• On insolvency of partners.
• On business becoming illegal (unlawful).
Question 5.
State any two contingencies that may result into dissolution of a partnership firm. (Delhi 2019)
Answer:
State any two contingencies that may result into dissolution of partnership firm
• on death of a partner.
• completion of worlf.
Question 6.
A, B and C were partners in a firm sharing profits and losses in the ratio of 2 : 2 : 1. On 31st March,
2018 their firm was dissolved. On that date provision for bad debts showed a balance of ₹ 4,500.
Pass necessary journal entry for the treatment of provision for bad debts on the firm’s dissolution.
(All India 2019)

Question 7.
Pass the necessary journal entry for treatment of Partners’ loan appearing on the asset side of the
balance sheet in case of dissolution of a partnership firm. (All India 2019; Compartment 2018)
Answer:
Partner’s loan a/c Dr
To cash Bamk a/c
Question 8.
B, C and D were partners in a firm sharing profits and losses in the ratio of 1: 4 : 5. On 31st March,
2018 the firm was dissolved and on that date the balance sheet of the firm showed a loan of?
10,000 given by C’s brother F. C agreed to pay his brother’s loan. Pass necessary journal entry for
the above on the firm’s dissolution. (All india 2019)
Answer:

Question 9.
Distinguish between ‘Reconstitution of partnership’ and ‘Dissolution of partnership firm’ on the
basis of ‘Closure of books.’ (All Indio 2019)
Or
Distinguish between ‘Dissolution of partnership’ and ‘Dissolution of partnership firm’ on the basis
of ‘Closure of books’ Delhi 2014
Answer:
Difference between dissolution of partnership firm and dissolution of partnership is
Basis Dissolution of Partnership Firm Dissolution of Partnership
Closure of Books of accounts of the firm are Books of accounts of the firm need not be
Books closed. closed.
Question 10.
Distinguish between ‘Dissolution of partnership’ and “Dissolution of partnership firm’ on the basis
of‘Economic relationship’. (Delhi: All India 2016)
Answer:
Difference between dissolution of partnership and dissolution of partnership firm is
Basis Dissolution of Partnership Dissolution of Partnership Firm
Economic Economic relationship between the partners Economic relationship between the
Relationship continues though in a changed form. partners comes to an end.
Question 11.
Identify a situation, under which court may order for dissolution of a partnership firm. (All India (C)
2014)
Answer:
A court may order for dissolution of a partnership firm on insanity of a partner.
Question 12.
Name the asset that is not transferred to the debit side of realisation account, but brings certain
amount of cash against its disposal at the time of dissolution of the firm. (Delhi 2014)
Answes:
Unrecorded asset
Question 13.
Name the liability which is not shown in the balance sheet, but paid at the time of dissolution of
the firm. (Delhi (C) 2014)
Answer:
Unrecorded liability
Question 14.
When an asset is taken over by a partner, why is his capital account debited? (Delhi 2012)
Answer:
When an asset is taken over by a partner, his capital account is debited because the Partners’
claim over the firm is decreased by the amount of asset taken over by him, thus his capital
account is decreased.
Question 15.
When a liability is to be discharged by a partner, why is his capital account credited? (All India (C)
2011)
Answer:
When a liability is to be discharged by a partner, his capital account is credited because the
Partners’ claim is increased over the firm by the amount of liability discharged by him, thus his
capital account is increased.
Question 16.
In case of dissolution of a firm, which liabilities are to be paid first? (Delhi to 2011)
Answer:
According to Section 48 (b), the debts of the firm to the third parties are to be paid first.
Question 17.
In case of dissolution of a firm, which item on the liabilities side is to be paid last? (Delhi (C) 2011)
Answer:
According to Section 48 (b), in case of dissolution of a firm, partners’ capital is paid at last after all
external liabilities are paid and all profits and losses are adjusted in capital account.
Question 18.
A and B are partners in a firm sharing profits in the ratio of 3 : 2. Mrs A has given a loan of ₹
20,000 to the firm and the firm also obtained a loan of ₹ 10,000 from B. The firm was dissolved
and its assets were realised for ₹ 25,000. State the order of payment of Mrs A’s loan and B’s loan
with reason, if there were no creditor of the firm. (Delhi (C) 2010)
Answer:
According to Section 48 of the Indian Partnership Act, 1932, first of all the payment of ₹ 20,000 will
be made for Mrs A’s loan as she is an outsider, then remaining ₹ 5,000 will be paid to B against his
loan of ₹ 10,000.
Question 19.
J, K and L were partners in a firm sharing profits in the ratio of 4 : 5 : 1. On 31st March, 2018 their
firm was dissolved. On this date the, balance sheet showed a balance of
₹ 1,34,000 in debtors account and a balance of ₹ 14,000 in provision for bad debts account. Both
the accounts were closed by transferring their balances to realisation account. ₹ 4,000 of the
debtors became bad and nothing could be realised from them on dissolution. K agreed to look
after the dissolution work for which he was allowed a remuneration of 116,000. K also agreed to
bear dissolution expenses for which he was allowed a lumpsum payment of ₹ 4,000. Actual
dissolution expenses were ₹ 6,500 and the same were paid from the firm’s cash. Less on
dissolution amounted to ₹ 37,000.
Pass necessary journal entries for the above transactions in the books of tlie firm on its
dissolution. (All India 2019)
Answer:

Question 20.
The firm of Manjeet, Sujeet and Jagjeet was dissolved on 31st March, 2018. It was agreed that
Sujeet will take care of the dissolution related activities and will get 10% of the value of assets
realised, Sujeet agreed to bear the realisation expenses. Assets realised ₹ 10,00,750 and
realisation expensed were ₹ 90,000, which were paid from the firm’s cash. ₹ 4,50,000 were paid to
the creditors in full settlement of their claim.
Pass necessary journal entries for the above transactions in the books of the firm. (All India 2019)
Answer:

Question 21.
Jain, Sharma and Verma were partners in a firm sharing profits in the ratio of 1 : 2 : 1. On 31st
March, 2018 their firm was dissolved. It was agreed that Sharma will look after the dissolution
work and will be paid ₹ 15,000 as remuneration. The dissolution expenses were ₹ 5,000. ₹ 2,84,000
were paid to the creditors in full settlement of their claim of ₹ 3,00,000. Dissolution of the firm
resulted into a loss of ₹ 18,000. Pass necessary journal entries for the above transactions. (All
India 2019)
Answer:

Question 22.
Ravi, Shankar and Madhur were partner in a firm sharing profits in the ratio of 7 : 2 : 1. On 31st
March, 2018, the firm was dissolved, after transferring sundry assets (other than cash in hand and
cash at bank) and third party liabilities in the realisation accounts the following transactions took
place
(i) Debtors amounting to ₹ 1,40,000 were handed over to a debt collection agency which charged
5% commision. The remaining debtors were ₹ 47,000 out of which debtors of ₹ 17,000 could not
be recovered because the same become insolvent.
(ii) Creditors amounting to ₹ 5,000 were paid ₹ 3,500 in full settlement of their claim and balance
creditors were handed over stock of ₹ 90,000 in full settlement of their claim of ₹ 95,000.
(iii) A bills receivable ₹ 2,000 discounted with the bank was dishonoured by its acceptor and the
same had to be met by the firm.
(iv) Profit on realisation amounted to ₹ 6,000. Pass necessary journal entries for the above
transactions in the books of Ravi, Shankar and Madhur. (Delhi 2019)
Answer:

Question 23.
Gaurav, Saurabh and Vaibhav were partners in a firm sharing profits and losses in the ratio of 2 : 2
: 1. They decided to dissolve the firm on 31st March, 2018. After transferring sundry assets (other
than cash in hand and cash at bank) and third party liabilities to realisation account, the assets
were realised and liabilities were paid-off as follows
(i) A machinery with a book value of ₹ 6,00,000 was taken over by Gaurav at 50% and stock worth
₹ 5,000 was taken over by a creditor of ₹ 9,000 in full settlement of his claim.
(ii) Land and building (book value ₹ 3,00,000) was sold for ₹ 4,00,000 through a broker who
charged 2% commission.
(iii) The remaining creditors were paid ₹ 76,000 in full settlement of their claim and the remaining
assets were taken over by Vaibhav for ₹ 17,000.
(iv) Bank loan of? 3,00,000 was paid alongwith interest of ₹ 21,000.
Pass necessary journal entries for the above transactions in the books of the firm. (Delhi 2019)
Answer:

Question 24.
Ankit, Bobby and Kartik were partners in a firm sharing profits in the ratio 4 : 3 : 3. The firm was
dissolved on 31-3-2018. Pass the necessary journal entries for the following transactions after
various assets (other than cash and bank) and third party liabilities had been transferred to
realisation account
(i) The firm had stock of ₹ 80,000. Ankit took over 50% of the stock at a discount of 20% while the
remaining stock was sold off at a profit of 30% on cost.
(ii) A liability under a suit for damages included in creditors was settled at ₹ 32,000 as against only
₹ 13,000 provided in the books. Total creditors of the firm were ₹ 50,000.
(iii) Bobby’s sister’s loan of ₹ 20,000 was paid-off alongwith interest of ₹ 2,000.
(iv) Kartik’s loan of ₹ 12,000 was settled at ₹ 12.500.Delhi 2019
Answer:
Working Note:

Question 25.
A, B and C were partners sharing profits and losses in the ratio of 2 : 2 : 1. Their balance Sheet as
at 31st March, 2018 was as follows

On the above date, they dissolved the firm and following amounts were realised:
Fixed Assets ₹ 6,75,000; Stock ₹ 3,39,000; Debtors ₹ 1,35,000; Creditors were paid ₹ 1,85,000 in full
settlement of their claim. Expanses on realisation amounted to ₹ 19,000.
Pass the necessary journal entries on the dissolution of the firm. (All India 2019)
Answer:
Question 26.
Ashish and Kanav were partners in a firm sharing profits and losses in the ratio of 3 : 2. On 31st
March, 2018 their balance sheet was as follows

On the above date, they decided to dissolve the firm.

(i) Ashish agreed to take over funriture at ₹ 38,000 and pay-off Mrs Ashish’s loan.
(ii) Debtors realised ₹ 18,500 and plant realised 10% more.
(iii) Kanav took over 40% of the stock at 20% less than the book value. Remaining stock was sold
at a gain of 10%.
(iv) Trade creditors took over investments in full settlement.
(v) Kanav agreed to take over the responsibility of completing dissolution at an agreed
remuneration of ₹ 12,000 and to bear realisation expenses. Actual expenses of realisation
amounted to ₹ 8,000.
Prepare realisation account. (All India 2019)
Answer:
Working Notes:

Question 27.
Girija and Ganesh were partners in a firm sharing profits and losses in the ratio of 2 : 3. On 31st
March, 2018 their balance sheet was as follows

On the above date, the firm was dissolved. The assets were realised and the liabilities were paid-
off as follows
(i) Debtors of ₹ 6,000 were proved bad.
(ii) Girija agreed to pay-off her brother’s loan.
(iii) One of the creditors for ₹ 10,000 was paid only ₹ 3,000 in full settlement of his account.
(iv) Buildings were auctioned for ₹ 1,80,000 and the auctioneer’s commission amounted to ₹
1,80,000 and the auctioneer’s commission amounted to ₹ 8,000.
(v) Ganesh took over part of stock at ₹ 4,000 (being 20% less than the book value). Balance of the
stock was handed over to the remaining creditors in full settlement of their account.
(vi) Investments realised ₹ 9,000 less.
(vii) Realisation expenses amounted to ₹ 17,000 and were paid by Ganesh.
Prepare realisation account, partners’ capital accounts and bank account. (compartment 2018)
Answer:
Solve as Q. no. 46 on page 261 and 262.
Loss on Realisation-Girija = ₹ 36,000
Ganesh = ₹ 54,000
Parmer’s Capital A/c-Cash paid to Girija = ₹ 1,87,000
Cash paid to Ganesh = ₹ 53,000
Bank A/c- ₹ 3,21,000
Question 28.
Pass necessary journal entries on the dissolution of a partnership firm in the following cases
(i) Dissolution expenses were ₹ 800.
(ii) Dissolution expenses ₹ 800 were paid by Prabhu, a partner.
(iii) Geeta, a partner, was appointed to look after the dissolution work, for which she was allowed a
remuneration of ₹ 10,000. Geeta agreed to bear the dissolution expenses. Actual dissolution
expenses ₹ 9,500 were paid by Geeta.
(iv) Janki, a partner, agreed to look after the dissolution work for a commission of ₹ 5,000. Janki
agreed to bear the dissolution expenses. Actual dissolution expenses ₹ 5,500 were paid by Mohan,
another partner, on behalf of Janki.
(v) A partner, Kavita, agreed to look after the dissolution process for a commission of ₹ 9,000. She
also agreed to bear the dissolution expenses. Kavita took over furniture of ₹ 9,000 for her
commission. Furniture had already been transferred to realisation account.
(vi) A debtor, Ravinder, for ₹ 19,000 agreed to pay the dissolution expenses which were ₹ 18,000 in
full settlement of his debt. (All India 2017)
Answer:

Question 29.
Pass necessary journal entries on the dissolution of a partnership firm in the following cases
(i) L, a partner, was appointed to look after the dissolution process for which he was given a
remuneration of ₹ 10,000.
(ii) Dissolution expenses ₹ 8,000 were paid by the partner M.
(iii) Dissolution expenses were ₹ 5,000.
(iv) P, a partner, was appointed to look after the process of dissolution for which he was allowed a
remuneration of ₹ 7,000. P agreed to bear the dissolution expenses. Actual dissolution expenses ₹
4,000 were paid by P.
(v) N, a partner, was appointed to look after the process of dissolution for which he was allowed a
remuneration of ₹ 9,000. N agreed to bear the dissolution expenses. Actual
dissolution expenses ₹ 4,000 were paid by the firm.
(vi) Q, a partner, was appointed to look after the process of dissolution for which he was allowed a
remuneration of ₹ 18,000. Q agreed to take over stock worth ₹ 18,000 as his remuneration. The
stock had already been transferred to realisation account. (Delhi 2017)
Ans.
For points (ii), (in), (iv) and (vi). Solve as Q no. 28 on page 240.

Question 30.
Lai and Pal were partners in a firm sharing profits in the ratio of 3 : 7. On 1st April, 2015, their firm
was dissolved. After transferring assets (other than cash) and outsider’s liabilities to realisation
account, you are given the following information.
(i) A creditor of ₹ 3,60,000 accepted machinery valued at ₹ 5,00,000 and paid to the firm ₹
1,40,000.
(ii) A second creditor for ₹ 50,000 accepted stock at ₹ 45,000 in full settlement of his claim.
(iii) A third creditor amounting to ₹ 90,000 accepted ₹ 45,000 in cash and investments worth ₹
43,000 in full settlement of his claim.
(iv) Loss on dissolution was ₹ 15,000.
Pass necessary journal entries for the above transactions in the books of firm assuming that all
payments were made by cheque. (All India 2016)
Answer:

Question 31.
L and M were partners in a firm sharing profits in the ratio of 2 : 3. On 28th February, 2016, the firm
was dissolved. After transferring assets (other than cash) and outsiders’ liabilities to realisation
account you are given the following information.
(i) A creditor for ₹ 1,40,000 accepted building valued at ₹ 1,80,000 and paid to the firm ₹ 40,000.
(ii) A second creditor for ₹ 30,000 accepted machinery valued at ₹ 28,000 in full settlement of his
claim.
(iii) A third creditor amounting to ₹ 70,000 accepted ₹ 30,000 in cash and investments of the book
value of ₹ 45,000 in full settlement of his claim.
(iv) Loss on dissolution was ₹ 4,000.
Pass necessary journal entries for the above transactions in the books of the firm assuming that
all payments were made by cheque. (Delhi 2016)
Answer:
Solve as Q no. 28 on page 240.
Question 32.
Mala, Neela and Kala were partners sharing profits in the ratio of 3 : 2 : 1. On 1st March, 2015, their
firm was dissolved. The assets were realised and liabilities were paid-off. The accountant
prepared realisation account, partners’ capital account and cash account, but forgot to post few
amounts in these accounts.
You are required to complete these below given accounts by posting correct amounts.
Answer:

Question 33.
Bora, Singh and Ibrahim were partners in a firm sharing profits in the ratio 5 : 3 : 1. On 2nd March,
2015, their firm was dissolved. The assets were realised and the liabilities were paid-off. Given
below are the realisation account, partners’ capital accounts and bank account of the firm. The
accountant of the firm left a few amounts unposted in these accounts. You are required to
complete these accounts by posting the correct amounts.
Answer:
Solve as Q no. 32 on page 242 and 243.
Loss on Realisation : Bora = ₹ 5,000, Singh = ₹ 3,000, Ibrahim = ₹ 1,000; Total of Bank Account = ₹
80,920.

Question 34.
Bhuvan, Suraj and Ibrahim were partners in a firm sharing profits in the ratio of 3 : 2 : 1. On 30th
June, 2014, they decided to dissolve the firm. Following was the balance sheet of the firm on that
date.
The assets were realised and the liabilities were paid-off as follows
(i) Investments were taken over by Bhuvan for ₹ 18,000.
(ii) Stock was taken over by Suraj for ₹ 17,500 and furniture was taken over by Ibrahim at book
value.
(iii) ₹ 60,500 were realised from the debtors.
(iv) Creditors were settled in full and realisation expenses were ₹ 4,500.
Prepare realisation account, cash account and partners’ capital accounts. (All Indio (C) 2015)
Answer:

Question 35.
Parth and Shivika were partners in a firm sharing profits in the ratio of 3 : 2. The balance sheet of
the firm on 31st March, 2014, was as follows
On the above date, the firm was dissolved. The assets were realised and the liabilities were paid-
off as follows
(i) 50% of the furniture was taken over by Parth at 20% less than book value. The remaining
furniture was sold for ₹ 1,05,000.
(ii) Debtors realised ₹ 26,000.
(iii) Stock was taken over by Shivika for ₹ 29,000.
(iv) Shivika’s sister’s loan was paid-off alongwith an interest of ₹ 2,000.
(a) Expenses on realisation amounted to ₹ 5,000.
Prepare realisation account, partners’ capital accounts and bank account. (Delhi 2015)
Answer:

Question 36.
Hanif and Jubed were partners in a firm sharing profits in the ratio of their capitals. On 31st
March, 2013, their balance sheet was as follows
On the above date, the firm was dissolved
(i) Debtors were realised at a discount of 5%. 50% of the stock was taken over by Hanif at 10% less
than the book value. Remaining stock was sold for ₹ 65,000.
(ii) Furniture was taken over by Jubed for ₹ 1,35,000. Machinery was sold as scrap for ₹ 74,000.
(iii) Creditors were paid in full.
(iv) Expenses on realisation ₹ 8,000 were paid by Hanif. Prepare realisation account. (All India
2014)
Answer:

Question 37.
Shanti and Satya were partners in a firm sharing profits in the ratio of 4 : 1. On 31st March, 2013,
their balance sheet was as follows
On the above date, the firm was dissolved
(i) Shanti took over 40% of the stock at 10% less than its book value and the remaining stock was
sold for ₹ 40,000. Furniture realised ₹ 80,000.
(ii) All unrecorded investment was sold for ₹ 20,000. Machinery was sold at a loss of ₹ 60,000.
(iii) Debtors realised ₹ 55,000.
(iv) There was an outstanding bill for repairs for which ₹ 19,000 were paid.
Prepare realisation account. (Delhi 2014)
Answer:

Question 38.
Verma and Sharma were partners sharing profits in the ratio of 3 : 1. On 31st March, 2011, their
balance sheet was as follows
The firm was dissolved on 1st April, 2011 and the assets and liabilities were settled as follows
(i) Creditors of ₹ 50,000 took over land and building in full settlement of their claim.
(ii) Remaining creditors were paid in cash.
(iii) Machinery was sold at a depreciation of 30%.
(iv) Debtors were collected at a cost of ₹ 500.
(v) Expenses on realisation were ₹ 1,700.
Pass necessary journal entries for dissolution of the firm. (Delhi 2012)
Answer:
3. No entry is required for adjustment (i), since creditors have accepted the asset (land and
Building) in full and final settlement.
Question 39.
A and B were partners in a firm sharing profits in the ratio of 3 : 2. On 31st March, 2011, the
balance sheet of the firm was as follows

The firm was dissolved on 1st April, 2011 and the assets and liabilities were settled as follows
(i) Building was taken over by creditors as their full and final payment.
(ii) Furniture was taken over by B for cash payment at 5% less than the book value.
(iii) Debtors were collected by a debt collection agency at a cost of f5,000.
(iv) Stock realised ₹ 70,500.
(v) B agreed to bear all realisation expenses. For this service, B is paid ₹ 500. Actual expense on
realisation amounted to ₹ 1,000.
Pass necessary journal entries for dissolution of the firm. (Delhi 2012)
Answer:
3. No entry is required for adjustment (i), since creditors have accepted the asset (Building) in full
and final settlement.
Question 40.
Sanjay and Sameer were partners in a firm sharing profits in the ratio of 2 : 3. On 31st March,
2011, the balance sheet of the firm was as follows

The firm was dissolved on 1st April, 2011 and the assets and liabilities were settled as follows
(i) Sanjay agrees to take over land and building at ₹ 3,50,000 by paying cash.
(ii) Stock was sold for ₹ 90,000.
(iii) Creditors accepted debtors in full settlement of their claim.
Pass necessary journal entries for dissolution of the firm. (All India 2012)
Answer:
3. No entry is required for adjustment (iii), since creditors have accepted debtors in full and final
settlement
Question 41.
Achal and Vichal were partners in a firm sharing profits in the ratio of 3 : 5. On 31st March, 2011,
their balance sheet was as follows

The firm was dissolved on 1st April, 2011 and the assets and liabilities were settled as follows
(i) Land and building realised ₹ 4,30,000.
(ii) Debtors realised ₹ 2,25,000 (with interest) and ₹ 1,000 were recovered for bad debts written-off
last year.
(iii) There was an unrecorded investment which was sold for ₹ 25,000.
(iv) Vichal took over machinery at ₹ 2,80,000 for cash.
(v) 50% of the creditors were paid ₹ 4,000 less in full settlement and the remaining creditors were
paid full amount.
Pass necessary journal entries for dissolution of the firm. (All India 2012) Answer:

Question 42.
Pass the necessary journal entries for the following transactions on the dissolution of the firm of P
and Q after the various assets (other than cash) and outside liabilities have been transferred to
realisation account.
(i) Bank loan ₹ 12,000 was paid.
(ii) Stock worth ₹ 16,000 was taken over by a partner Q.
(iii) Partner P paid a creditor ₹ 4,000.
(iv) An asset not appearing in the books of accounts realised ₹ 1,200.
(v) Expenses of realisation ₹ 2,000 were paid by partner Q.
(vi) Profit on realisation ₹ 36,000 was distributed between P and Q in 5 : 4 ratio. Delhi 2011
Answer:

Question 43.
Pass the necessary journal entries for the following transactions on the dissolution of the firm of
James and Haider who were sharing profits and losses in the ratio of 2 : 1. The various assets
(other than cash) and outside liabilities have been transferred to realisation account.
(i) James agreed to pay off his brother’s loan ₹ 10,000.
(ii) Debtors realised ₹ 12,000.
(iii) Haider took over all investment at ₹ 12,000.
(iv) Sundry creditors ₹ 20,000 were paid at 5% discount.
(v) Realisation expenses amounted to ₹ 2,000.
(vi) Loss on realisation was ₹ 10,200. (All India 2011)
Answer:
Question 44.
Srijan, Raman and Manan were partners in a firm sharing profits and losses in the ratio of 2 : 2 : 1.
On 31st March, 2017 their balance sheet was as follows

On the above date, they decided to dissolve the firm.

(i) Srijan was appointed to realise the assets and discharge the liabilities. Srijan was to receive 5%
commission on sale of assets (except cash) and was to bear all expenses of realisation.
(ii) Assets were realised as follows
Plant – 85,000
Stock – 33,000
Debtors – 47,000
(iii) Investments were realised at 95% of the book value.
(iv) The firm had to pay ₹ 7,500 for an outstanding repair bill not provided for earlier.
(v) A contingent liability in respect of bills receivable, discounted with the bank had also
materialised and had to be discharged for ₹ 15,000.
(vi) Expenses of realisation amounting to ₹ 3,000 were paid by Srijan.
Prepare realisation account, partners’ capital accounts and bank account. (CBSE 2018)
Answer:
Working Note:
Commission payable to Srijan = 2,31,500 × 5100 = ₹ 11,575
Question 45.
Arnab, Ragini and Dhrupad are partners sharing profits in the ratio of 3 : 1 : 1. On 31st March, 2015
they decided to dissolve their firm. On that date, their balance sheet was as under
The assets were realised and the liabilities were paid as under
(i) Arnab agreed to pay his brother’s loan.
(ii) Investments realised 20% less.
(iii) Creditors were paid at 10% less.
(iv) Building was auctioned for ₹ 3,55,000. Commission on auction was ₹ 5,000.
(v) 50% of the stock was taken over by Ragini at market price which was 20% less than the book
value and the remaining was sold at market price.
(vi) Dissolution expenses were ₹ 8,000. ₹ 3,000 were to be borne by the firm and the balance by
Dhrupad. The expenses were paid by him.
Prepare realisation account, bank account and partners’ capital accounts. (All India 2016)
Answer:

Question 46.
Following is the balance sheet of Vinit and Yogesh as on 31st March, 2015.
The firm was dissolved on 31st March, 2015. The assets were realised and the liabilities were paid
as under
(i) Vinit promised to pay-off Mrs Vinit’s loan and took away stock at 20% discount.
(ii) Yogesh took away 90% of the investments at 10% discount.
(iii) Sunil, a debtor of ₹ 50,000 had to pay the amount due 3 months after the date of dissolution.
He was allowed a discount of 5% for making payment immediately. The remaining debtors were
collected in full.
(iv) Creditors were paid ₹ 3,50,000 in full settlement of their claim.
(v) Fixed assets realised ₹ 2,82,000 and remaining investment realised ₹ 7,500.
(vi) There was an old furniture which had been written-off completely from the books. Yogesh took
away the same for ₹ 4,000.
(vii) Realisation expenses ₹ 2,000 were paid by Vinit.
Prepare realisation account, bank account and partners’ capital accounts. (Delhi (C) 2016)
Answer:
Question 47.
Kumar, Shyam and Ratan were partners in a firm sharing profits in the ratio of 5 : 3 : 2 respectively.
They decided to dissolve the firm with effect from 1st April, 2013. On that date, the balance sheet
of the firm was as follows

The dissolution resulted in the following

(i) Plant of ₹ 40,000 was taken over by Kumar at an agreed value of? 45,000 and remaining plant
realised ₹ 50,000.
(ii) Furniture realised ₹ 40,000.
(iii) Motor van was taken over by Shyam for ₹ 30,000.
(iv) Debtors realised ₹ 1,000 less.
(v) Creditors for ₹ 20,000 were untraceable and the remaining creditors were paid in full.
(vi) Realisation expenses amounted to ₹ 5,000.
Prepare the realisation account, capital accounts of partners and bank account of the firm. (All
India (C) 2014)
Answer:
NOTE; In the absence of any information, it has been assumed that nothing is realised from stock.

Question 48.
………… refers to the change in the existing relationship between partners but the firm may continue
its business as before.
(a) Dissolution of partnership
(b) Dissolution of firm
(c) Either (a) or (b)
(d) None of the above
Answer:
(a) Dissolution of partnership
Question 49.
According to …………… of the Indian Partnership Act, 1932, dissolution of the firm means dissolution
of partnership among all the partners in the firm.
(a) Section 38
(b) Section 40
(c) Section 39
(d) Section 42
Answer:
(c) Section 39
Question 50.
In case of dissolution Of a firm, which item on the liabilities side is to be paid last?
(a) Creditors
(b) Bank loan
(c) Partners loan
(d) Partners capital
Answer:
(d) Partners capital
Question 51.
According to Section 49 of the Indian Partnership Act, 1932, “Firm’s property is first applied for the
…………… and if surplus is left then it is utilised for the payment of partners’ private debts.”
(a) payment of firm’s debt
(b) personal expenses
(c) Partners share
(d) None of the above
Answer:
(a) payment of firm’s debt
Question 52.
Profit/Loss on realisation is transferred to the
(a) profit and loss adjustment account
(b) partners’ capital account
(c) Both (a) and (b)
(d) None of the above
Answer:
(b) partners’ capital account
Question 53.
Realisation account is a
(a) nominal account
(b) real account
(c) personal account
(d) None of these
Answer:
(a) nominal account
Question 54.
In the books of XY firm, there was an unrecorded asset of ₹ 10,000. This asset realised for ₹
12,000. In the realisation account
(a) cash account will be credited by ₹ 10,000
(b) cash account will be credited by ₹ 12,000
(c) cash account will be debited by ₹ 2,000
(d) None of the above
Answer:
(b) cash account will be credited by ₹ 12,000
Question 55.
Which account is prepared only once during the life of a partnership firm?
(a) Revaluation account
(b) Realisation account
(c) Partners capital account
(d) Profit and loss appropriation account
Answer:
(b) Realisation account
Question 56.
‘E’ and ‘F’ were partners sharing profits equally. They decided to dissolve the firm. The goodwill
was taken over by ‘E’ at an agreed value of ₹ 54,000. The required journal entry will be
(a) Cash A/c Dr
To Realisation A/c
(b) ‘E’s’ Capital A/c Dr
To Realisation A/c
(c) Realisation A/c Dr
To ‘E’s’ Capital A/c
(d) None of the above
Answer:
(b) ‘E’s’ Capital A/c Dr
To Realisation A/c
Question 57.
The amount of sundry assets transferred to realisation account was ₹ 80,000, 60% of them were
sold at a profit of ₹ 2000. 20% of the remaining were sold at a discount of 30% and remaining were
taken over by ‘Z’ at book value. The amount realised from assets is
(a) ₹ 54,480
(b) ₹ 25,600
(c) ₹ 80,000
(d) ₹ 80,080
Answer:
(d) ₹ 80,080
Question 58.
Loan from partner is deemed to be an …………. liability at the time of dissolution.
(a) external
(b) internal
(c) not a liability
(d) None of these
Answer:
(b) internal
Question 59.
Rohit, a partner agreed to take over the responsibility of completing dissolution at an agreed
remuneration of ₹ 4,000 and to bear all realisation expenses. Actual realisation expenses of ₹
3,200 were paid by Rohit out of his private funds. In realisation account, Rohit’s capital account
will be
(a) debited with ₹ 4,000
(b) debited with ₹ 3,200
(c) credited with ₹ 4,000
(d) credited With ₹ 3,200
Answer:
(a) debited with ₹ 4,000

Dissolution of a Partnership Firm Class 12

Accountancy MCQs
Select the Best Alternate and tally your answer with the Answers given at the end of the book:
1. In which condition a partnership firm is deemed to be dissolved?
(A) On a partner’s admission
(B) On retirement of a partner
(C) On expiry of the period of partnership
(D) On loss in partnership
Answer: C
2. Court can make an order to dissolve the firm when :
(A) Some partner has become fully mad
(B) Partnership deed is fully followed
(C) Continued future profits are expected
(D) Firm is running legal business
Answer: A
3. On dissolution of a firm, realisation account is debited with
(A) All assets to be realised
(B) All outside liabilities of the firm
(C) Cash received on sale of assets
(D) Any asset taken over by one of the partners
Answer: A
4. On dissolution of a firm, out of the proceeds received from the sale of assets will be paid first of
all
(A) Partner’s Capital
(B) Partner’s Loan to Firm
(C) Partner’s additional capital
(D) Outside Creditors
Answer: D
5. At the time of dissolution of firm, “Loan of partners” (Loans given by partners to the firm) is paid
out of the amount realised on sale of assets :
(A) After making the payment of loans given by third party
(B) After making the payment of balance of Capital Accounts of partners
(C) After making the payment of above (A) and (B)
(D) Before the payment of loans given by third party
Answer: A
6. At the time of dissolution of firm, at which stage the balance of partner’s capital accounts is
paid?
(A) After making the payment to third party’s loans
(B) Before making the payment of partners in respect of their loans
(C) After making the payment to third party for their loans as well as partners loans
(D) None of the above.
Answer: C
7. On firm’s dissolution, which one of the following account should be prepared at the last?
(A) Realisation Account
(B) Partner’s Capital Accounts
(C) Cash Account
(D) Partner’s Loan Account
Answer: C
8. In the event of dissolution of a partnership firm, the provision for doubtful debts is transferred to
:
(A) Realisation Account
(B) Partners Capital Accounts
(C) Sundry Debtors Account
(D) None of the above
Answer: A
9. On dissolution, if a partner undertakes to make payment of a liability of the firm is debited)
(A) Profit & Loss Account
(B) Realisation Account
(C) Partner’s Capital Account
(D) Cash Account
Answer: B
10. Unrecorded liability, when paid on dissolution of a firm is debited to :
(A) Partner’s Capital A/’cs
(B) Realisation A/c
(C) Liabilities A/c
(D) Asset A/c
Answer: B
11. On dissolution of a partnership firm, profit or loss on realisation is distributed among the
partners
(A) In capital ratio
(B) In Profit sharing ratio
(C) Equally
(D) None of the above
Answer: B
12. On dissolution of the firm, amount received from sale of unrecorded asset is credited to :
(A) Partner’s Capital Accounts
(B) Profit and Loss Account
(C) Realisation Account
(D) Cash Account
Answer: C
13. Realisation A/c is a :
(A) Nominal A/c
(B) Real A/c
(C) Personal A/c
(D) Real A/c as well as Personal A/c
Answer: A
14. In the event of dissolution of firm, the partner’s personal assets are first used for payment of
the :
(A) Firm’s liabilities
(B) The personal liabilites
(C) None of the two
(D) Any of the two
Answer: B
15. A partnership firm is compulsorily dissolved :
(A) When the business of the firm is declared illegal
(B) When a partner of the firm dies
(C) When a partner of the firm becomes insolvent
(D) When a partner transfers his share to some other person without the consent of other partners
Answer: A
16. At the time of firm’s dissolution, Balance of General Reserve shown in the Balance Sheet is
credited to :
(A) Realisation Account
(B) Creditor’s Account
(C) Partner’s Capital Account
(D) Profit & Loss Account
Answer: C
17. On dissolution, goodwill account is transferred to):
(A) In the Capital Accounts of Partners
(B) On the credit of Cash Account
(C) On the Debit of Realisation Account
(D) On the Credit of Realisation Account
Answer: C
18. At the time of dissolution of partnership firm, fictitious assets are transferred to :
(A) Capital Accounts of Partners
(B) Realisation Account
(C) Cash Account
(D) Partners’ Loan Account
Answer: A
19. At time of dissolution of partnership firm, the balance of profit and loss account shown in the
assets side of Balance sheet of the firm is transferred to:
(A) Realisation Account
(B) Cash Account
(C) Capital Accounts of partners
(D) Loan Accounts of partners
Answer: C
20. At the time of dissolution of partnership firm, the amount of ‘Bills Payable’ shown in the liability
side of Balance Sheet is transferred to :
(A) Capital Accounts of Partners
(B) Realisation Account
(C) Cash Account
(D) Loan Account of Partners
Answer: B
21. On dissolution, the final balance of capital accounts are transferred to :
(A) Realisation Account
(B) Cash Account
(C) Profit & Loss Account
(D) Loan Accounts of Partners
Answer: B
22. Change in the existing agreement between the partners is called :
(A) Dissolution of Firm
(B) Dissolution of Partnership
(C) Dissolution of Business
(D) All of the Above
Answer: B
23. On dissolution, the balance of ‘Profit & Loss Account’ appearing on the assets side of a
Balance Sheet is transferred to :
(A) On the debit of Realisation Account
(B) On the credit of Realisation Account
(C) On the debit of Partner’s Capital Accounts
(D) On the credit of Partner’s Capital Accounts
Answer: C
24. On dissolution of a firm, a partner paid ₹700 for firm’s realisation expenses. Which account will
be debited?
(A) Cash Account
(B) Realisation Account
(C) Capital Account of the Partner
(D) Profit & Loss A/c
Answer: B
25. On taking responsibility of payment of realisation expenses by a partner, the account credited
will be :
(A) Realisation Account
(B) Cash Account
(C) Capital Account of the Partne
(D) None of the Above
Answer: C
26. On dissolution of firm, loss calculate in realisation account is debited/credited to which
account?
(A) Cash Account (Credit)
(B) Partners’ Capital Accoimts (Debit)
(C) Partners’ Capital Accounts (Credit)
(D) Realisation Account (Debit)
Answer: B
27. Profit or loss of realisation account is transferred to :
(A) Profit & Loss Account
(B) Capital Accounts of Partners
(C) Balance Sheet
(D) None of the Above
Answer: B
28. Which of the following is transferred to Realisation Account:
(A) Balance of Cash Account
(B) Balance of Profit & Loss Account
(C) Amount realised on sale of assets
(D) Reserves
Answer: C
29. Which of the following is not transferred to Realisation Account:
(A) Balance of Cash Account
(B) Balance of Reserves
(C) Balance of Profit & Loss Account
(D) All of the Above
Answer: D
30. On taking responsibility of payment of a liability of ₹50,000 by a partner, the account credited
will be :
(A) Realisation Account
(B) Cash Account
(C) Capital Account of the Partner
(D) Liability Account
Answer: C
31. Cash balance shown in the Balance Sheet is shown on dissolution of firm in :
(A) Realisation Account
(B) Cash Account
(C) Capital Account
(D) None of the Account
Answer: B
32. On firm’s dissolution, on realisation of goodwill (which was shown in Balance Sheet) will be
credited to :
(A) Cash A/c
(B) Realisation A/c
(C) Profit & Loss A/
(D) None of the A/c
Answer: B
33. On dissolution of a firm, its Balance Sheet revealed total creditors ₹50,000; Total Capital
₹48,000; Cash Balance ₹3,000. Its assets were realised at 12% less. Loss on realisation will be :
(A) ₹6,000
(B) ₹11,760
(C) ₹11,400
(D) ₹3,600
Answer: C
34. On firm’s dissolution, when a partner voluntarily gives his personal asset to firms’ creditor as
payment, the account credited will be :
(A) Realisation A/c
(B) Partner’s Capital A/c
(C) Cash A/c
(D) None of the A/c
Answer: B
35. On dissolution, when a partner takes over an unrecorded asset, is credited :
(A) Capital Account of the Partner
(B) Cash Accoun
(C) Asset Account
(D) Realisation Account
Answer: D
36. On dissolution, when a partner takes over an asset is debited
(A) Realisation Account
(B) Partner’s Capital Account
(C) Cash Account
(D) Asset Account
Answer: B
37. In case of dissolution, assets are transferred to Realisation Account:
(A) At Book Value
(B) At Market Value
(C) Cost or Market Value, whichever is lower
(D) None of the Above
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Answer: A
38. On dissolution, the balance of a partner’s capital account appearing on the assets side of a
balance sheet is transferred to :
(A) On the Debit of Realisation Account
(B) On the Credit of Realisation Account
(C) On the Debit of Partner’s Capital Account
(D) On the Credit of Cash Account
Answer: C
39. On dissolution, partner’s loan is transferred to :
(A) Partner’s Capital Account
(B) Realisation Account
(C) Partner’s Loan Account
(D) Revaluation Account
Answer: C
40. Sundry Creditors amounted to ?8,000. These were paid at a discount of 5%. Realisation
account will be debited by
(A) ₹8,000
(B) ₹7,600
(C) ₹400
(D) ₹8,400
Answer: B
41. There was an Unrecorded asset of ?2,000 which was taken over by a partner at ? 1,500.
Partner’s Capital Account will be debited by
(A) ₹2,000
(B) ₹1,500
(C) ₹500
(D) ₹3,500
Answer: B
42. On dissolution of a firm, an unrecorded furniture of the value of ₹5,000 was taken up by a
partner for ₹4,300. Which Account will be credited and by how much amount? :
(A) Cash Account by ₹4,300
(B) Realisation Account by ₹700
(C) Partner’s Capital Account by ₹5,000
(D) Realisation Account by ₹4,300
Answer: D
43. On the basis of following data, final payment to a partner on firm’s dissolution ‘ will be made :
Debit balance of Capital Account ₹14,000; Share of his profit on realisation ₹43,000; Firm’s asset
taken over by him for ₹17,000.
(A) ₹31,000
(B) ₹29,000
(C) ₹12,000
(D) ₹60,000
Answer: C
44. On payment of expenses of dissolution, account will be debited :
(A) Realisation Account
(B) Cash Account
(C) Profit & Loss Account
(D) None of the Above
Answer: A
45. An unrecorded asset was valued at ₹1,00,000. On firm’s dissolution, it was sold for 52%.
Realisation account will be credited with :
(A) ₹52,000
(B) ₹48,000
(C) ₹1,00,000
(D) None of the Above
Answer: A
46. On firm’s dissolution, a partner undertook firm’s creditors at ? 17,000. In this case the account
will be credited :
(A) Creditors A/c
(B) Cash A/c
(C) Realisation A/c
(D) Partner’s Capital A/c
Answer: D
47. On dissolution, losses are first of all met:
(A) Out of Capital
(B) Out of Profits
(C) Out of private assets of partners
(D) Out of loan from Bank
Answer: B
48. …………… is prepared at the time of dissolution :
(A) Revaluation Account
(B) Profit & Loss Account
(C) Profit and Loss Appropriation Account
(D) Realisation Account
Answer: D
49. While transferring assets to realisation account is omitted to be transferred :
(A) Patents
(B) Goodwill
(C) Cash
(D) Investments
Answer: C
50. If total assets are ₹2,00,000; total liabilities are ₹40,000; amount realised on sale of assets is
₹1,75,000 and realisation expenses are ₹3,000, the profit or loss on realisation will be :
(A) Profit ₹12,000
(B) Loss ₹68,000
(C) Loss ₹28,000
(D) Loss ₹25,000
Answer: C
51. On dissolution of a firm, debtors were ₹17,000. Of these ₹500 became bad and the rest
realised 60%. Which account will be debited and by how much amount?
(A) Realisation Account by ₹16,500
(B) Profit & Loss Account by ₹500
(C) Cash Account by ₹9,900
(D) Debtors Account by ₹7,100
Answer: C
52. In the Balance Sheet Total Debtors appear at ₹50,000 and Provision for Doubtful Debts appear
at ₹1,500. How much amount will be realised from Debtors, if bad debts amount to ₹10,000 and
remaining debtors are realised at a discount of 5%
(A) ₹38,000
(B) ₹36,500
(C) ₹36,575
(D) ₹39,500
Answer: A
53. How much amount will be paid to Creditors for ₹25,000 if ₹5,000 of the creditors are not to be
paid and the remaining creditors agreed to accept 5% less amount?
(A) ₹18,750
(B) ₹19,000
(C) ₹19,750
(D) ₹20,000
Answer: B
54. P, a partner, is to bear all expenses of realisation for which he is to be paid ₹2,000. P had to
pay realisation expenses of ₹2,500. How much amount will be debited to Realisation Account?
(A) ₹500
(B) ₹2,500
(C) ₹4,500
(D) ₹2,000
Answer: D
55. How much amount will be paid to A, if his opening capital is ₹2,00,000 and his share of
realisation profit amounts to ₹10,000 and he has taken over assets valuing ₹25,000 from the firm?
(A) ₹2,35,000
(B) ₹1,65,000
(C) ₹2,15,000
(D) ₹1,85,000
Answer: D
56. Investments valued ₹2,00,000 were not shown in the books. One of the creditors took over
these investments in full satisfaction of his debt of ₹2,20,000. How much amount will be deducted
from creditors?
(A) ₹20,000
(B) ₹2,20,000
(C) ₹4,20,000
(D) ₹2,00,000
Answer: B
57. If creditors are ?25,000, capital is ?1,50,000 and cash balance is ?10,000, what will be the
amount of sundry assets?
(A) ₹1,75,000
(B) ₹1,85,000
(C) ₹1,65,000
(D) ₹1,40,000
Answer: C
58. If opening capitals of partners are A ₹3,00,000, B ₹2,00,000 and C ₹1,00,000 and their drawings
during the year are A ₹50,000, B ₹40,000 and C ₹30,000 and creditors are ₹60,000, what will be the
amount of assets of the firm?
(A) ₹5,40,000
(B) ₹4,20,000
(C) ₹4,80,000
(D) ₹6,60,000
Answer: A
59. If total assets of a firm are ₹12,00,000 and total liabilities are ₹2,40,000, what will be the
capitals of P, Q and R if they share profits in the ratio of their capitals and profit sharing ratio is 1 :
2:3:
(A) P ₹4,80,000; Q ₹3,20,000; R ₹1,60,000
(B) P ₹1,60,000; Q ₹3,20,000; R ₹4,80,000
(C) P ₹2,00,000; Q ₹4,00,000; R ₹6,00,000
(D) P ₹6,00,000; Q ₹4,00,000; R ₹2,00,000
Answer: B
60. On dissolution of a firm, a partner’s capital account has a credit balance of ₹42,000. His share
of profit in realisation account is ?9,000. He has paid firm’s realisation expenses ₹3,000. He will
finally get a payment of:
(A) ₹39,000
(B) ₹42,000
(C) ₹54,000
(D) ₹48,000
Answer: C
61. On dissolution of a firm, a partner took over ₹17,000 investments for ₹14,000. Which one of the
following account will be debited/credited with how much amount?
(A) Partner’s Capital Account Debit with ₹14,000
(B) Partner’s Capital Account Credit with ₹17,000
(C) Realisation Account Credit with ₹17,000
(D) Realisation Account Credit with ₹3,000
Answer: A
62. On dissolution of firm, which item is debited to the realisation account?:
(A) Realisation expenses paid by partnert
(B) Balance of reserve fund
(C) Amount of unrecorded asset
(D) Creditor’s balance shown in the Balance Sheet
Answer: A
63. At the time of dissolution of a firm, Creditors are ₹70,000; Partners’ capital is ₹1,20,000; Cash
Balance is ₹10,000. Other assets realised ₹1,50,000. Profit/Loss in the realisation account will be :
(A) ₹60,000 (Loss)
(B) ₹80,000 (Profit)
(C) ₹40,000 (Loss)
(D) ₹30,000 (Loss)
Answer: D
64. On dissolution of a firm, debtors ₹17,000 were shown in the Balance Sheet. Out of this ₹2,000
became bad. One debtor became insolvent. 70% were recovered from him out of ₹5,000. Full
amount was recovered from the balance debtors. On account of this item, loss in realisation
account will be :
(A) ₹5,100
(B) ₹1,500
(C) ₹3,500
(D) ₹2,000
Answer: C
65. X, Yand Z are partners in a firm in the ratio of 4 : 3 : 2. On firm’s dissolution, firm’s total assets
are 7₹70,000, creditors are ₹15,000. Realisation expenses are ₹2,100. Assets realised 15% more
than the book-value. Creditors were . paid 2% more. For profit/loss on realisation, Fs capital
account will be debited/credited with :
(A) Credit ₹8,100
(B) Credit ₹2,700
(C) Debit ₹2,700
(D) Debit ₹2,400
Answer: B
66. On dissolution of a firm, firm’s Balance Sheet total is ₹77,000. On the assets side of the
Balance Sheet items were shown preliminary expenses ₹2,000; Profit & Loss Account (Debit)
Balance ₹4,000 and Cash Balance ₹1,800. Loss on realisation was ₹6,300. Total assets (including
cash balance) realised will be :
(A) ₹69,200
(B) ₹71,000
(C) ₹64,700
(D) ₹62,900
Answer: C
67. On dissolution of a firm, partners’ capital accounts balance was ₹63,000; creditors balance
was ₹12,000 and profit & loss account debit balance was ₹6,000. Profit on realisation of assets
was ₹7,800. Total amount realised from assets was:
(A) ₹81,000
(B) ₹76,800
(C) ₹70,800
(D) ₹None
Answer: B
68. On dissolution of a firm, a partner took-over the investments of ₹15,000 at ₹19,000. By how
much amount the Realisation Account will be credited?
(A) ₹4,000
(B) ₹19,000
(C) Nil
(D) ₹23,000
Answer: B
69. Anu, Bina and Charan are partners. The firm had given a loan of ₹20,000 to Bina. On the event
of dissolution, the loan will be settled by : (C.B.S.E. Sample Paper, 2015)
(A) Transferring it to debit side of Realization Account.
(B) Transferring it to credit side of Realization Account.
(C) Transferring it to debit side of Bina’s Capital Account.
(D) Bina paying Anu and Charan privately.
Answer: C