Short Answer Questions
Question 1.
Solution 1 Below are the circumstances under which a firm is dissolved:-
1.) When a partner has become of unsound mind.
2.) When a partner, other than the partner filing a suit, has become permanently incapable of performing his duties as a partner.
3.) When a partner, other than the partner filing a suit, is guilty of misconduct that may harm the partnership.
4.) When a partner, other than the partner filing a suit, wilfully or persistently commits breach of partnership agreement.
5.) When a partner, other than the partner filing a suit, has transferred the whole of his interests in the firm to a third party.
Question 2.
Solution 2
Question 3.
Solution 3 A ‘Realisation Account’ is opened for disposing of all the assets of the firm and making payment to all the creditors. Realisation account is a nominal account and the object of such an account is to find out the profit or loss on realisation of assets and payment of liabilities.
Question 4.
Solution 4 Amount realised from the sale of the assets of the firm shall be applied in the following manner and order:
1.) First of all, outside debts of the firm will be paid.
2.) Out of the remaining amount, the loans advanced by partners will be paid off.
3.) Thereafter the balance of Partners Capital Account will be returned.
4.) If some amount remains, it will be divided among the partners in their profit sharing ratio.
Question 5.
Solution 5
(i) When expenses are paid by the firm:
Realisation A/c Dr.
To Cash/Bank A/c
(Being Realisation expenses paid in cash)
(ii) When expenses of realisation are paid by a partner on behalf of the firm:
Realisation A/c Dr.
To Partner’s Capital A/c
(Being Remuneration expenses paid by the partner)
(iii) When the firm has agreed to pay a fixed amount to the partner towards realisation expenses and the partner has bear the expenses:
Realisation A/c Dr.
To Partner’s Capital A/c
(Being Remuneration allowed to the partner)
(iv) When realisation expenses are to be borne by the partner and the expenses are paid by the firm:
Partner’s Capital A/c Dr.
To Cash/Bank A/c
(Being Realisation expenses paid on behalf of the partner)
(v) No entry will be passed if the expenses are to be borne and paid by the partner out of his pocket.
Question 6.
Solution 6
(i) When assets are sold for cash:
Cash/ Bank A/c Dr.
To Realisation A/c
(Being Assets sold for cash)
(ii) When assets is taken away by one of the partners:
Partner’s Capital A/c Dr.
To Realisation A/c
(Being Assets taken over by partner)
(iii) If an asset is given away to a Creditor in part or full payment of his dues, the agreed amount of the asset is deducted from the claim of the creditor and the balance is paid to him. No entry is passed for the transfer of assets to the creditor.
Question 7.
Solution 7 The following accounts are opened in the order to dissolution of partnership firm:-
1.) Realisation Account
2.) Partner’s Loan Account
3.) Partner’s Capital Account
4.) Cash or Bank Account
Practical Questions
Question 1.
Solution 1
Question 2.
Solution 2
Question 3.
Solution 3
Question 4.
Solution 4
Point of Knowledge:-
(i) When expenses are paid by the firm:
Realisation A/c Dr.
To Cash/Bank A/c
(Being Realisation expenses paid in cash)
(ii) When expenses of realisation are paid by a partner on behalf of the firm:
Realisation A/c Dr.
To Partner’s Capital A/c
(Being Remuneration expenses paid by the partner)
Question 5.
Solution 5
Question 6.
Solution 6.
Question 7.
Solution 7
Question 8.
Solution 8
Question 9.
Solution 9.
Realisation Account
For the year of 31 March, 2021
Point of Knowledge:-
(i) When expenses are paid by the firm:
Realisation A/c Dr.
To Cash/Bank A/c
(Being Realisation expenses paid in cash)
(ii) When expenses of realisation are paid by a partner on behalf of the firm:
Realisation A/c Dr.
To Partner’s Capital A/c
(Being Remuneration expenses paid by the partner)
Question 10. (A)
Solution 10 (A)
Question 10. (B)
Solution 10 (B)
Point of Knowledge:-
(i) When expenses are paid by the firm:
Realisation A/c Dr.
To Cash/Bank A/c
(Being Realisation expenses paid in cash)
(ii) When expenses of realisation are paid by a partner on behalf of the firm:
Realisation A/c Dr.
To Partner’s Capital A/c
(Being Remuneration expenses paid by the partner)
Question 11.
Solution 11
Question 12.
Solution 12
Question 13.
Solution 13
Point of Knowledge:-
(i) When expenses are paid by the firm:
Realisation A/c Dr.
To Cash/Bank A/c
(Being Realisation expenses paid in cash)
(ii) When expenses of realisation are paid by a partner on behalf of the firm:
Realisation A/c Dr.
To Partner’s Capital A/c
(Being Remuneration expenses paid by the partner)
Question 14.
Solution 14
Realisation Account
as at 31 March, 2021
Question 15.
Solution 15
Question 16.
Solution 16
Question 17.
Solution 17
Point of Knowledge:-
(i) When expenses are paid by the firm:
Realisation A/c Dr.
To Cash/Bank A/c
(Being Realisation expenses paid in cash)
(ii) When expenses of realisation are paid by a partner on behalf of the firm:
Realisation A/c Dr.
To Partner’s Capital A/c
(Being Remuneration expenses paid by the partner)
Question 18.
Solution 18
Question 19.
Solution 19
Question 20.
Solution 20
Point of Knowledge:-
(i) When expenses are paid by the firm:
Realisation A/c Dr.
To Cash/Bank A/c
(Being Realisation expenses paid in cash)
(ii) When expenses of realisation are paid by a partner on behalf of the firm:
Realisation A/c Dr.
To Partner’s Capital A/c
(Being Remuneration expenses paid by the partner)
Question 21.
Solution 21
Question 22.
Solution 22
Question 23.
Solution 23
Point of Knowledge:-
(i) When expenses are paid by the firm:
Realisation A/c Dr.
To Cash/Bank A/c
(Being Realisation expenses paid in cash)
(ii) When expenses of realisation are paid by a partner on behalf of the firm:
Realisation A/c Dr.
To Partner’s Capital A/c
(Being Remuneration expenses paid by the partner)
Question 24.
Solution 24
Question 25.
Solution 25
Question 26. (A)
Solution 26 (A)
Question 26. (B)
Solution 26 (B)
Point of Knowledge:-
(i) When expenses are paid by the firm:
Realisation A/c Dr.
To Cash/Bank A/c
(Being Realisation expenses paid in cash)
(ii) When expenses of realisation are paid by a partner on behalf of the firm:
Realisation A/c Dr.
To Partner’s Capital A/c
(Being Remuneration expenses paid by the partner)
Question 27.
Solution 27
Question 28. (A)
Solution 28 (A)
Point of Knowledge:-
(i) When expenses are paid by the firm:
Realisation A/c Dr.
To Cash/Bank A/c
(Being Realisation expenses paid in cash)
(ii) When expenses of realisation are paid by a partner on behalf of the firm:
Realisation A/c Dr.
To Partner’s Capital A/c
(Being Remuneration expenses paid by the partner)
Question 28. (B)
Solution 28 (B)
Point of Knowledge:-
(i) When expenses are paid by the firm:
Realisation A/c Dr.
To Cash/Bank A/c
(Being Realisation expenses paid in cash)
(ii) When expenses of realisation are paid by a partner on behalf of the firm:
Realisation A/c Dr.
To Partner’s Capital A/c
(Being Remuneration expenses paid by the partner)
Question 29.
Solution 29
Question 30.
Solution 30
Question 31.
Solution 31
Question 32.
Solution 32
Question 33.
Solution 33
Point of Knowledge:-
(i) When expenses are paid by the firm:
Realisation A/c Dr.
To Cash/Bank A/c
(Being Realisation expenses paid in cash)
(ii) When expenses of realisation are paid by a partner on behalf of the firm:
Realisation A/c Dr.
To Partner’s Capital A/c
(Being Remuneration expenses paid by the partner)
Question 34.
Solution 34
Question 35.
Solution 35
Question 36.
Solution 36
Point of Knowledge:-
(i) When expenses are paid by the firm:
Realisation A/c Dr.
To Cash/Bank A/c
(Being Realisation expenses paid in cash)
(ii) When expenses of realisation are paid by a partner on behalf of the firm:
Realisation A/c Dr.
To Partner’s Capital A/c
(Being Remuneration expenses paid by the partner)
Question 37.
Solution 37
Question 38.
Solution 38
Question 39.
Solution 39
Question 40 (new).
Solution 40 (new). 
Question 40.
Solution 40
Question 41.
Solution 41
Loss on realisation can be easily calculated by preparing a realisation account:
Question 42.
Solution 42
Question 43.
Solution 43
Question 44.
Solution 44
Question 45.
Solution 45
Question 46.
Solution 46
Question 47.
Solution 47
Question 48.
Solution 48
Question 49.
Solution 49
Question 50.
Solution 50
Question 51.
Solution 51
Question 52.
Solution 52
Question 53.
Solution 53
Question 54.
Solution 54
Question 55.
Solution 55
Question 56.
Solution 56
Question 57.
Solution 57.
Working Note:-
Realisation Account
as at 31st March, 2021
Question 58.
Solution 58
Question 59.
Solution 59
Question 60.
Solution 60
Question 61 .
Solution ( 61).
Realisation Account
As at 31st March, 2021
Point of Knowledge:-
(i) When expenses are paid by the firm:
Realisation A/c Dr.
To Cash/Bank A/c
(Being Realisation expenses paid in cash)
(ii) When expenses of realisation are paid by a partner on behalf of the firm:
Realisation A/c Dr.
To Partner’s Capital A/c
(Being Remuneration expenses paid by the partner)
Question 62.
Solution 62
Question 63 (new).
Solution 63 (new).
Question 63.
Solution 63
Point of Knowledge:-
(i) When expenses are paid by the firm:
Realisation A/c Dr.
To Cash/Bank A/c
(Being Realisation expenses paid in cash)
(ii) When expenses of realisation are paid by a partner on behalf of the firm:
Realisation A/c Dr.
To Partner’s Capital A/c
(Being Remuneration expenses paid by the partner)
Question 64 (new).
Solution 64 (new).
Question 64.
Solution 64
Question 65 (new).
Solution 65 (new).
Question 65.
Solution 65
Point of Knowledge:-
(i) When expenses are paid by the firm:
Realisation A/c Dr.
To Cash/Bank A/c
(Being Realisation expenses paid in cash)
(ii) When expenses of realisation are paid by a partner on behalf of the firm:
Realisation A/c Dr.
To Partner’s Capital A/c
(Being Remuneration expenses paid by the partner)