CBSE Class 12 Accountancy Dissolution of Partnership Firm Assignment

OBJECTIVE QUESTIONS 1 Mark Each

Stand Alone MCQs

Question. On the basis of the following data, how much final payment will be made to a partner on firm’s dissolution?
Credit balance of capital account of the partner was Rs 50,000. Share of loss on realisation
amounted to Rs 10,000. Firm’s liability taken over by him was for Rs 8,000.
(A) Rs 32,000
(B) Rs 48,000
(C) Rs 40,000
(D) Rs 52,000

Answer: B

Question. The account which is prepared on dissolution of a partnership firm :
(A) Revaluation Account
(B) Realisation Account
(C) P & L Appropriation Account
(D) None of the above

Answer: B

Question. On dissolution of a firm, a liability taken over by a partner is credited to :
(A) Realisation Account
(B) Profit and Loss Account
(C) Partner’s Capital Account
(D) None of the above 
Answer: C

Question. Unrecorded liability when paid on dissolution of a firm is transferred to :
(A) Realisation Account
(B) Partners’ Capital Accounts
(C) Liability Account
(D) None of the above 

Answer: A

Question. General Reserve appearing in the Balance Sheet is transferred to :
(A) Realisation Account
(B) Partners’ Capital Accounts in their profit sharing ratio
(C) Partners’ Capital Accounts in capital ratio
(D) None of the above 

Answer: B

Question. Pick the odd one out :
(A) Fixed assets
(B) Partner’s loan
(C) Partner’s brother’s loan
(D) Creditors 

Answer: B

Question. Pick the odd one out :
(A) Debtors
(B) Payment of liabilities
(C) Provision for doubtful debts
(D) Fixed assets 

Answer: C

Question. What Journal Entry will be passed on dissolution of partnership firm, when creditors of Rs 40,000 accepted investments of Rs 50,000 (Book value)?
(A) Creditors A/c Dr. 40,000
To Realisation A/c 40,000
(B) Realisation A/c Dr. 40,000
To Creditors A/c 40,000
(C) Creditors A/c Dr. 50,000
To Investments A/c 50,000
(D) No Entry A

Answer: D

Assertion and Reason Based MCQs

Question. Assertion (A): Dissolution of partnership is different from the dissolution of the partnership firm.
Reason (R): Dissolution of partnership does not mean the dissolution of the firm compulsorily but in case of dissolution, the business of the firm is compulsorily comes to an end. 

Answer: A

Question. Assertion (A): Realisation Account is prepared at the time of dissolution of the partnership firm.
Reason (R): Dissolution of partnership firm involves the partners selling the assets and settling the liabilities. Thus, various amounts are recovered or paid to partners. 

Answer: A

Question. Assertion (A): Rajiv and Vinod, who share the profits and losses in the ratio 2:3, are dissolving the firm. There is general reserve in the balance of Rs60,000 in the balance sheet. The accountant transferred Rs24,000 in Rajiv’s Capital and Rs 36,000 in Vinod’s Capital Accounts.
Reason (R): The undistributed profits and losses and reserves are always transferred to partners’ capital accounts in their profit sharing ratio and not to the realisation account. 

Answer: A

Case-based MCQs

I. Read the following information and answer the given questions:

Vibhuti, Tiwari and Happu were partners in a partnership firm sharing profits and losses in their capital ratio, i.e., 1 : 2 : 3. On 31st March, 2020, they decided to dissolve the partnership firm. The following information is given to you on the dissolution of the firm:
The firm had total assets of Rs 12,00,000 that realized Rs 10,80,000. The creditors were settled at 90% by paying them Rs 54,000. There was an unrecorded asset in the books of the firm which was taken by Vibhuti for Rs 12,000. Realisation expenses amounted to Rs 2,000 and were paid by Tiwari on behalf of the firm. There was general reserve in the books of the company of Rs 21,000. The capitals of the partners were in the proportion of their profit sharing ratio. Their balance sheet also showed a cash balance of Rs 81,000.

Question. What was the capital of Tiwari before the dissolution of the firm?
(A) Rs2,00,000
(B) Rs 4,00,000
(C) Rs 6,00,000
(D) Rs 8,00,000

Answer: B

Question. What was the loss on realization?
(A) Rs 2,00,000
(B) Rs 1,47,000
(C) Rs 1,37,000
(D) Rs 1,16,000

Answer: D

Question. __________ account will be debited for the treatment of unrecorded asset given in case study.
(A) Vibhuti’s Capital
(B) Tiwari’s Capital
(C) Happu’s Capital
(D) None of the above

Answer: A

Question. What will be the final amount to be paid to Happu?
(A) Rs6,05,000
(B) Rs52,000
(C) Rs5,52,500
(D) Rs6,08,500

Answer: C

II. Read the following information and answer the questions that follow:

Raina and Meena were partners in a firm sharing profits and losses equally. They dissolved their firm on 31st March, 2018.
On this date, the Balance Sheet of the firm,apart from realizable assets and outside liabilities showed the following:
                                                         Rs
Raina's Capital                                40,000 (Cr.)
Meena's Capital                              20,000 (Dr.)
Profit & Loss Account                      10,000 (Dr.)
Raina’s loan to the firm                   15,000
Contingency Reserve                      7,000
On the date of dissolution of the firm:
(i) Raina’s loan was repaid by the firm along with interest of Rs 500.
(ii) The dissolution expenses of Rs 1,000 were paid by the firm on behalf of Raina who had to bear these expenses.
(iii) An unrecorded asset of Rs 2,000 was taken over by Meena while Raina discharged an unrecorded liability of Rs 3,000.
(iv) The dissolution resulted in a loss of Rs 60,000 from the realization of assets and settlement of liabilities.

Question. The amount of Profit and Loss Account to be transferred to the Partner’s Capital Account is:
(A) Rs5,000 each
(B) Rs6,000 Raina and Rs4,000 Meena
(C) Rs4,000 Raina and Rs6,000 Meena
(D) Insufficient data

Answer: A

Question. The contingency fund will be debited or credited to which account?
(A) Partners’ Capital Account
(B) Realisation Account
(C) Profit and Loss Account
(D) None of the above

Answer: A

Question. The unrecorded asset taken by Meena will be:
(A) Debited to Meena’s Capital Account
(B) Credited to Realisation Account
(C) Both (A) and (B)
(D) In the balance sheet

Answer: C

Question. How much loan amount will be paid to the Raina?
(A) Rs15,000
(B) Rs15,500
(C) Rs500
(D) None of the above

Answer. B

III. Read the following information and answer the questions that follows:

Mehta and Menon were partners in a firm sharing profits and losses in the ratio of 7 : 3. They decided to dissolve the firm on 31st March, 2016. On that date, their books showed the following ledger account balances :
                                         Rs
Sundry Creditors               27,000
Profit & Loss A/c (Dr.)         8,000
Cash in hand                     6,000
Bank Loan                         20,000
Bills Payable                      5,000
Sundry Assets                  1,98,000
Capital A/cs :
Mehta 1,12,000
Menon 48,000
Additional information :
(i) Bills payable falling due on 31st May, 2016 retired on the date of dissolution of the firm at a rebate of 6% per annum.
(ii) The bankers accepted the furniture (included in sundry assets) having a book value of Rs18,000 in full settlement of the loan given by them.
(iii) Remaining assets were sold for Rs 1,50,000.
(iv) Liability on account of outstanding salary not recorded in the books, amounting to Rs 15,000 was met.
(v) Menon agreed to take over the responsibility of completing the dissolution work to bear all expenses of realization at an agreed remuneration of Rs 2,000. The actual realization expenses were Rs 1,500 which were paid by the firm on behalf of Menon.

Question. The amount of bills payable paid is:
(A) Rs5,000
(B) Rs4,950
(C) Rs4,500
(D) Rs5,150

Answer: B

Question. The loss on the realisation transferred to Menon’s Capital Account is:
(A) Rs31,465
(B) Rs13,485
(C) Rs44,950
(D) Rs15,000

Answer: B

Question. What will be the amount of profit and loss balance transferred to Mehta’s Account?
(A) Rs5,600
(B) Rs 2,400
(C) Rs 2,500
(D) Rs5,000

Answer: A

Question. Consider the following Accounts:
(i) Mehta’s Capital Account
(ii) Menon’s Capital Account
(iii) Realisation Account
(iv) Profit and Loss Account
Which account will be affected by the realisation expenses paid by Menon?
(A) (i) only
(B) (ii) and (iii)
(C) (i) and (iii)
(D) (i), (ii) and (iii)

Answer: B

Very Short Answer Type Questions

Question. In case of dissolution of a firm, which item on the liabilities side is to be paid first ?
Answer: Outsider’s liability or debts from third parties.

Question. In case of dissolution of a firm, which item on the liabilities side is to be paid last ?
Answer: Partners’ capital

Question. Name the liability which is not shown in Balance Sheet, but paid at the time of dissolution of the firm ?
Answer: Unrecorded liability

Question. If Goodwill already appears in the books of account on dissolution of a partnership firm, in what ratio it will be debited to Partners’ Capital Accounts ? 
Answer: It will not be debited to the capital accounts of the partners while it will be transferred to the realisation account.

Question. On dissolution of a partnership firm, partners decided to pay for their capital account before any payment made to third parties. Were they correct in doing so ?
Answer: No, as debt of the firm from the third party is to be paid first.