Q1. Partners may dissolve a firm by mutual agreement.

This is specified in Section ……… of the

Act.

(a) 39

(b) 40

(c) 41

(d) 42

Q2. The firm of A and B was dissolved on 31st March,2020. According to the agreement, B had
agreed to undertake the dissolution work for an agreed to undertake the dissolution work for an
agreed remuneration of ₹8,000 and bear all the realisation expenses. Dissolution expenses
were ₹ 5,000. The journal entry passed will be:

(a) Realisation A/c Dr 5,000

To Bank A/c 5,000

(b) Realisation A/c Dr 8,000

To Bank A/c 8,000

(c) Realisation A/c Dr 5,000

To B’s Capital A/c 5,000

(d) Realisation A/c Dr 8,000

To B’s Capital A/c 8,000

Q3. P and Q are partners in a firm. They decided to dissolve the firm. Assets other than cash
₹1,60,000, cash ₹25,000, total liabilities ₹1,75,000. Ondissolution, assets realised ₹1,25,000
and liabilities paid ₹1,40,000. Net profit or loss on realisation is:

(a) Profit ₹25,000

(b) Loss ₹25,000

(c) Loss ₹15,000

(d) No Profit, No Loss

Q4. On dissolution of a firm, partner’s loan account is transferred to:

(a) Realisation account

(b) Partner’s capital accounts

(c) Partner’s current account

(d) None of the above

Q5. After transferring liabilities like creditors and bills payables in the realisation account, in the
absence of any information regarding the payment, such liabilities are treated as:

(a) Never paid

(b) Fully paid

(c) Partly paid

(d) None of these

Q6. In the event of dissolution of partnership firm, where is provision for doubtful debts
transferred?

(a) Credit side of Realisation Account

(b) Debit side of Realisation Account

(c) Debit side of Partner’s Capital Account

(d) None of these

Q7. Unrecorded assets when taken over by a partner are shown in

(a) Debit side of Realisation Account

(b) Debit side of Bank Account

(c) Credit side of Realisation Account

(d) Credit side of Bank Account

Q8. Court cannot pass the order to dissolve the firm, when …...

(a) Partner has become of unsound mind.

(b) On insolvency of a partner

(c) Business of the firm cannot be carried except at a loss

(d) Partner transfer whole of its interest to a third party

Q9. In the event of dissolution of a firm, the partner’s personal assets are first applied for
payment of…........

(a) Personal Liabilities

(b) Firm’s Liabilities

(c) Both (a) and (b)

(d) Preferential Tax Liabilities

Q10. Which of the statements is/are correct?

(i) Dissolution of firm is a subset of dissolution of partnership.

(ii) If nothing is mentioned about the treatment of realisation expenses it is assumed that the
firm has met the realisation expenses.

Alternatives

(a) Only (i)

(b) Only (ii)

(c) Both (a) and (b)

(d) None of these

Q11. On the basis of the following data, how much finalpayment will be made to a partner on
firm’s dissolution?

Credit balance of capital account of the partner was ₹50,000.

Share of loss on realisation amounted to ₹10,000.

Firm’s liability taken over by him was for ₹8,000.

(a) ₹32,000

(b) ₹48,000

(c) ₹40,000

(d) ₹52,000

Q12. On the dissolution of the firm, realisation account is closed through:

(a) Bank Account

(b) Partner’s Capital Account

(c) Loan Account

(d) Drawings Account

Q13. What journal entry will be passed if remuneration expenses of ₹5,450 were to be borne by
Rajesh, however it is paid by Sanjana?

( a) Sanjana Capital A/C Dr 5450

To Bank A/c 5450

(b) Rajesh Capital A/c Dr 5450

To Sanjana’s Capital A/c 5,450

(c) Sanjana’s Capital A/c Dr 5,450

To Rajesh’s Capital A/c 5,450

(d) Rajesh’s Capital A/c Dr 5,450

To Bank A/c 5,450

Q14. Amit, Barun and Chanda are partners. They decided to dissolve the firm. There is a debit
balance of ₹27,000 in the Profit and Loss account on the date of dissolution. What journal entry
would be passed?

(a) Profit and Loss A/c Dr 27,000

To Amit’s Capital A/c 9,000

To Barun’s Capital A/c 9,000

To Chandra’s Capital A/c 9,000

(b) Amit’s Capital A/c Dr 9,000

Barun’s Capital A/c Dr 9,000

Chandra’s Capital A/c Dr 9,000

To Profit and Loss A/c 9,000

(c) No entry

(d) None of the above

Q15. When an unrecorded asset is realised at the time of dissolution of the firm, …… account is
debited and ……… account is credited.

(a) Realisation, Cash

(b) Concerned Partner Account, Cash

(c) Cash, Realisation

(d) Realisation, Concerned Partner Account

Q16. Jhunjhun, a partner paid loan of the firm of ₹1,00,000 at the time of dissolution. Pass the
journal entry for this transaction.

(a) Jhunjhun’s Capital A/c Dr 1,00,000

To Realisation A/c 1,00,000

(b) Realisation A/c Dr 1,00,000

To Loan A/c 1,00,000

(c) Realisation A/c Dr 1,00,000

To Jhunjhun’s Capital A/c 1,00,000

(d) None of the above

Q17. If the debit side of realisation account exceeds the credit side, then it signifies:

(a) Profit on Realisation

(b) Loss on Realisation

(c) Neither Profit nor Loss

(d) None of these

Q18. On firm’s dissolution, a partner A took over 50% of the stock at a discount of 20% (book
value of stock was ₹5,00,000). What will be the value of taken over stock?

(a) ₹2,50,000

(b) ₹1,00,000

(c) ₹2,00,000

(d) ₹5,00,000
Q19. Realisation Account is prepared at the time of ……… .

(a) Admission of a partner

(b) Change in profit sharing ratio

(c) Dissolution of a firm

(d) Dissolution of a partnership only

Q20. At the time of dissolution of partnership firm, journal entry for the settlement of loan
advanced by the firm to a partner would be:

(a) Bank A/c Dr

To Loan to Partner A/c

(b) Loan to Partner A/c Dr

To Bank A/c

(c) Realisation A/c Dr

To Loan to Partner A/c

(d) All of the above

Q21. Expenses on Dissolution of firm is called:

(a) Realisation Expenses

(b) Legal Expenses

(c) Loss Expenses

(d) None of these

Q22. Dissolution of a firm may take place due to ……….

(i) insolvency of a partner

(ii) retirement of a partner

(iii) change in profit sharing ratio

(iv) admission of new partner

(v) on the completion of venture

(vi) expiry of period of partnership

Alternatives

(a) (iii) (iv) (v) (vi)

(b) (i) (ii) (iii) (v) (vi)

(c) (i) (v) (vi)

(d) (i) (iii) (v) (vi)

Q23. Dissolution expenses amounting to ₹6,000 were to be borne by partner X and the balance
by the firm. Dissolution expenses amounted to ₹15,000 and the entire amount was paid by firm.
Pass necessary Journal entry for the above.

(a) Realisation A/c Dr 9,000

X’s Capital A/c Dr 6,000

To Bank A/c 15,000

(b) Realisation A/c Dr 15,000

To Bank A/c 15,000

(c) X’s Capital A/c Dr 15,000

To Bank A/c 15,000

(d) Realisation A/c Dr 9,000

To Bank A/c 9,000

Q24. On dissolution, the final balance of capital accounts are transferred to:

(a) Realisation Account

(b) Cash Account

(c) Profit and Loss Account

(d) Loan Account of Partners

Q25. Which of the following is not included in Dissolution of firm ‘On happening of an event’?

(a) Insolvency of a partner

(b) Death of a partner

(c) When business becomes unlawful

(d) On the expiry of the period for which the firm was formed

Q26. Realisation A/c is a:

(a) Nominal A/c

(b) Personal A/c

(c) Personal A/c

(d) None of these

Q45. If a partner has taken investment at ₹93,500 (being 15% less than book value) its book
value is:

(a) ₹81,300

(b) ₹79,475

(c) ₹1,10,000

(d) ₹1,07,525

Q46. 40% of the Furniture appearing in the Balance Sheet (₹2,00,000), taken by a Partner at
₹65,000, and 50% was sold at 20% less than the book value. The amount transferred to Bank
Account will be ____________.

(a) ₹80,000

(b) ₹1,85,000

(c) ₹1,45,000

(d) ₹1,20,000

Q47. Which Journal entry would be passed if Sudha, a partner agreed to pay off her husband’s
loan ₹19,000 on dissolution of partnership firm?

(a) Realisation A/c Dr. 19,000

To Bank A/c 19,000

(b) Sudha’s Capital A/c Dr. 19,000

To Realisation A/c 19,000

(c) Bank A/c Dr. 19,000

To Sudha’s Capital A/c 19,000

(d) Realisation A/c Dr. 19,000

To Sudha’s Capital A/c 19,000

Q48. Which Journal entry would be passed if a debtor whose debt of ₹9,000 was written off in
the books paid ₹7,500 in full settlement?

(a) Realisation A/c Dr. 7,500

To Bank A/c 7,500

(b) Bank A/c Dr. 7,500

To Realisation A/c 7,500

(c) Bank A/c Dr. 7,500

To Debtors A/c 7,500

(d) Debtors A/c Dr. 7,500

To Realisation A/c 7,500

Q49. 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

Q50. 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

Q51. On firm's dissolution, when a partner voluntarily gives his personal asset to firm’s 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

Q52. 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

Q53. While transferring assets to realisation account……………… is omitted to be transferred.

(a) Patents

(b) Goodwill

(c) Cash

(d) Investments

Q54. 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
Q55. 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

Q56. If Opening Capitals of partners are X ₹3,00,000, Y ₹2,00,000 and Z ₹1,00,000 and their
drawings during the year are X ₹50,000, Y ₹40,000 and Z ₹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

Q57. At the time of Dissolution of a firm, Creditors are ₹70,000; Partner’s capital is ₹1,20,000;
Cash Balance is ₹10,000. Other assets realised ₹1,50,000. Profit/Loss on Realisation will be:

(a) ₹60,000 (Loss)

(b) ₹80,000 (Profit)

(c) ₹40,000 (Loss)

(d) ₹30,000 (Loss)

Directions:There are two statements marked as Assertion (A) and Reason

(R). Read the statements and choose the appropriate option from the options given below.

(a) Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of
Assertion (A)

(b) Both Assertion (A) and Reason (R) are true, but Reason (R) is not the correct explanation of
Assertion (A)

(c) Assertion (A) is true, but Reason (R) is false

(d) Assertion (A) is false, but Reason (R) is true

Q1. Assertion (A): Firm’s debts are the debts which firm owes to its outsiders.

Reason (R): Private debts are the debts which partner owes personally.

Q2. Assertion(A): Dissolution of firm means discontinuation of the firm.

Reason (R): Economic relationship between the partners comes to an end.

Q3. Assertion (A): Loan from spouse of a partner is considered as external liability.

Reason (R): It is shown on the debit side of realisation.

Q4. Assertion (A): While transferring liabilities to realisation account, it does not include
accumulated profits.

Reason (R): Reserves and accumulated profits are transferred on the credit side of partner’s
capital account in new profit sharing ratio.

Q5. Assertion (A): After dissolution, cash / bank account will have nil balance.

Reason (R): Assets whether recorded or unrecorded, are credited to realisation account when
realised.

Q6. Assertion (A): Loan from a partner is not transferred to Realisation Account.

Reason (R): Loan from a partner is not an outside liability. It is repaid prior to repayment of
Capitals of partners.

Q7. Assertion (A): On dissolution, if a partner is appointed to realise the assets and he gets a
commission on realisation of assets, he will be liable to bear the realisation expenses also.

Reason (R): In the absence of specific agreement, partner doing the dissolution work and
getting commission is not liable to bear the realisation expenses.

Q8. Assertion (A): Partner's private property can be used in paying off the firm's debts.

Reason (R): In case of partnership firm, partner's liability is unlimited.

Q9. Assertion (A): On dissolution of a firm, advertisement suspense account appearing on the
assets side of the balance sheet will not be transferred to Realisation Account.

Reason (R): Advertisement Suspense Account is a fictitious asset and hence will be transferred
to the debit side of partner's capital accounts.

Q10. Assertion (A): On dissolution, there will be no entry if creditors for ₹55,000 are given stock
worth ₹60,000 in full settlement of their debt.
Reason (R): On dissolution, there will be no entry if Partner's Loan to the firm amounting to
₹50,000 is settled by giving him stock worth ₹60,000.

Q11. Assertion (A): On dissolution of a partnership firm, bank overdraft is first transferred to the
credit side of realisation account and then paid off.

Reason (R): Bank Overdraft is a third party liability and hence transferred to Realisation
Account.