Questions for Chapter-Dissolution of Partnership firm 

MCQ-Based Questions for CUET Accountancy chapter-Dissolution of Partnership firm 

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Practice Questions for CUET Accountancy chapter-Dissolution of Partnership firm SET-1

Accounts - MCQ on Dissolution of Partnership firm

Class XII

Q.1. Dissolution of a firm means

a. reconstitution of partnership firm.

b. retirement or death of a partner.

c. discontinuation of partnership firm.

d. treatment of losses.

Answer:

(c)

Explanation: Dissolution stands for the discontinuation of partnership firm. It implies the termination of firm’s business.

Q.2. Realisation account is a

a. personal account.

b. nominal account.

c. real account.

d. personal and nominal both.

Answer:

(b)

Explanation:Realisation account is anominal account and its purpose is to calculate profit or loss on realisation.

Q.3. The main purpose of realisation account is to

a. find the amount due to partners.

b. know the value of assets and liabilities.

c. minimize the realisation cost.

d. find the profit or loss on realisation of assets and payment of liabilities.

Answer:

(d)

Explanation: The main purpose of realisation account is to find the profit or loss on realisation of assets and payment of liabilities. It is a nominal account.

Q.4. The final closure of books of the firm is required during the

a. dissolution of partnership.

b. reconstitution of partnership.

c. dissolution of firm.

d. change in profit sharing ratio.

Answer:

(c)

Explanation: Dissolution of partnership firm requires the final closure of books of the firm, as the firm no longer exists.

Q.5. A firm may be dissolved on the orders of the court during the

a. death of a partner.

b. retirement of a partner.

c. admission of a partner.

d. dissolution of the firm.

Answer:

( d )

Explanation: A court may pass order for the dissolution of the firm on some grounds like a partner found guilty of misconduct.

Q.6. The profit or loss on realisation is transferred to the

a. partners’ capital accounts.

b. balance sheet.s

c. cash account.

d. bank account.

Answer:

( a )

Explanation: The profit or loss on realisation is directly transferred to the partners’ capital accounts.

Q.7. Assets are transferred to realisation account at their book value. The entry is

a. debit realisation and credit partners’ capital.

b. debit realisation and credit various assets.

c. debit various assets and credit realisation.

d. debit various assets and credit partners’ capital.

Answer:

(b)

Explanation: Assets are transferred to the debit side of realisation account so the entry will be debit realisation and credit various assets.

Q.8. Unrecorded liabilities are those liabilities, which are

a. transferred along with other liabilities to realisation account.

b. shown in the balance sheet.

c. not shown in the balance sheet.

d. not required to be paid on dissolution.

Answer:

(c)

Explanation: Unrecorded liabilities are those liabilities, which are not shown in the balance sheet. The claim against such liabilities arises at the time of dissolution.

Q.9. The net effect of revaluation of assets and liabilities is computed by

a. revaluation a/c.

b. realisation a/c.

c. partners’ capital accounts.

d. memorandum balance sheet.

Answer:

( a )

Explanation: Change in the value of assets and liabilities is recorded in revaluation account and profit and loss is computed in the same account.

Q.10. Realisation account is prepared at the time of

a. admission of a new partner.

b. retirement of partner.

c. death of a partner.

d. dissolution of partnership firm.

Answer:

(d)

Explanation: At the time of admission or retirement or death of a partner, revaluation account is prepared while at the time of dissolution of partnership firm realisation account is prepared to realise the assets.

Q.11. Loss on realisation is transferred to

a. old partners’ capital accounts.

b. new partners’ capital accounts.

c. all partners’ capital accounts.

d. balance sheet.

Answer:

(c)

Explanation: Realisation loss is transferred to all partners’ capital accounts as it belongs to all in their profit sharing ratio.

Q.12. Reconstitution of partnership firm excludes the

a. change in profit sharing ratio.

b. dissolution of partnership firm.

c. admission of a new partner.

d. death of a partner.

Answer:

(b)

Explanation: Reconstitution of partnership firm includes the change in profit sharing ratio, admission of a new partner, retirement or death of a partner. It excludes the dissolution of partnership firm because firm discontinues its business.

Q.13. If a partner agrees to discharge a liability, then realisation account is debited and

a. partner’s capital account is credited.

b. cash account is credited.

c. liabilities account is credited.

d. partner’s loan account is credited.

Answer:

( a )

Explanation: Liabilities are transferred on the credit side of the realisation account and their settlement is shown on the debit side of realisation account.

Q.14. The debt incurred by a partner in the individual capacity of a household and not in the capacity of a partner of a firm is called

a. firm’s debts.

b. private debts.

c. partner’s loan to the firm.

d. loan shown on the asset side.

Answer:

(b)

Explanation: Private debts are debts incurred by a partner in the individual capacity of a household and not in the capacity of a partner of a firm.

Q.15. An asset against which a provision has been created should be transferred to realisation account at

a. gross value.

b. net value.

c. realised value.

d. net value minus book value.

Answer:

(a)

Explanation: The asset should be transferred at gross value.

Q.16. The total of credit side of realisation account is Rs. 4,40,000 while the total of its debit side is Rs. 8,00,000. In this case

a. there is a profit of Rs. 3,60,000.

b. there is a loss of Rs. 3,60,000.

c. neither profit nor loss on realisation.

d. there is a profit of Rs. 4,40,000.

Answer:

(b)

Explanation: If the debit side of realisation account is more than the credit side, there is a loss on realisation.

Q.17. Partner’s loan is paid through

a. realisation account.

b. his capital account.

c. bank account.

d. other partner’s capital.

Answer:

(c)

Explanation: Partner’s loan to the firm is treated as an internal liability therefore it is not transferred to realisation account but paid through cash or bank account directly.

Q.18. When assets are taken away by any of the partners, the entry is

a. debit partner’s capital and credit realisation account.

b. debit realisation account and credit partner’s capital.

c. debit realisation account and credit bank account.

d. debit partner’s capital and credit asset account.

Answer:

( a )

Explanation: When asset is taken away by any of the partners it is shown in the credit side of realisation account hence entry will be debit partner’s capital and credit realisation account.

Q.19. When assets are sold for cash, the entry is

a. debit assets account and credit realisation account.

b. debit cash account and credit assets account.

c. debit realisation account and credit cash account.

d. debit cash account and credit realisation account.

Answer:

(d)

Explanation: The assets are sold for cash through realisation account. Hence cash is debited while realisation account is credited.

Q.20. When outside liabilities are paid, the entry is

a. debit outside liabilities and credit realisation account.

b. debit outside liabilities and credit partners’ capital.

c. debit realisation account and credit outside liabilities.

d. debit realisation account and credit bank.

Answer:

(d)

Explanation: Since Outside liabilities are paid through realisation account so realisation account is debited and bank account is credited.

Q.21. A provision for doubtful debts is transferred to the realisation account. The entry is

a. debit realisation account and credit provision for D/D account.

b. debit provision for D/D account and credit realisation account.

c. debit debtors account and credit realisation account.

d. debit realisation account and credit debtors account.

Answer:

b

Explanation: Debtors are transferred to the debit side of realisation account at its gross value while provision for doubtful debts are transferred to the credit side of the realisation account.

Q.22. In case of dissolution of a partnership firm, the goodwill is

a. treated like other assets.

b. transferred to the partners’ capitals.

c. calculated even if not given.

d. not transferred to the realisation account.

Answer:

( a )

Explanation: Goodwill does not pose any problem in case of dissolution of firm and its treatment is exactly like other assets.

Q.23. Sale of an unrecorded asset will be recorded on

a. debit side of realisation account.

b. credit side of realisation account.

c. debit side of capital accounts.

d. credit side capital accounts.

Answer:

b

Explanation: When an unrecorded asset is sold than cash account is debited while realisation account is credited.

Q.24. Payment of an unrecorded liability will be recorded on

a. debit side of realisation account.

b. credit side of realisation account.

c. debit side capital accounts.

d. credit side capital accounts.

Answer:

( a )

Explanation: When an unrecorded liability is paid then the realisation account is debited while cash account is credited.

Q.25. Realisation expenses were to be fully borne by Nitin, a partner for which he is to get a credit of Rs. 15,000. Actual expenses paid out of firm’s bank account amounted to Rs. 20,000. The amount of realisation expenses will be

a. Rs. 5,000.

b. Rs. 10,000.

c. Rs. 15,000.

d. Rs. 20,000.

Answer:

c

Explanation: If any partner agrees to bear realisation expenses for an agreed amount then that agreed amount would be treated as realisation expenses and not as actual realisation expenses.

Q.26. The item, which is transferred to realisation account, is

a. cash.

b. bank.

c. accumulated losses.

d. provision for doubtful debts.

Answer:

( d )

Explanation: Provision for doubtful debts is transferred to the credit side of the realisation account.

Q.27. The item, which is transferred directly to partners’ capital accounts, is

a. cash.

b. bank.

c. reserve fund.

d. partner’s loan to the firm.

Answer:

c

Explanation: Reserve fund is transferred directly to partners’ capital accounts in their profit sharing ratio.

Q.28. Profit on realisation is transferred to

a. old partners’ capital accounts.

b. new partners’ capital accounts.

c. all partners’ capital accounts.

d. balance sheet.

Answer:

(c)

Explanation: Realisation profit is transferred to all partners’ capital accounts as it belongs to all in their profit sharing ratio.

Q.29. If a partner agrees to take over an asset, then the realisation account is credited and

a. cash account is debited.

b. asset account is debited.

c. concerned partner’s capital account is debited.

d. all partner’s capital account is debited.

Answer:

c

Explanation: The entry will be concerned partner’s capital account debit and realisation account credit.

Q.30. If debtors in the outer column of the balance sheet are given at Rs. 50,000 after deducting provision for doubtful debts of Rs. 5,000. The amount transferred to the debit side of realisation would be

a. Rs. 5,000

b. Rs. 50,000

c. Rs. 45,000

d. Rs. 55,000

Answer:

( d )

Explanation: The gross amount of debtors will be transferred to the debit side of realisation account and provision for doubtful debts will be transferred to the credit side of realisation account.

Practice Questions for CUET Accountancy chapter-Dissolution of Partnership firm SET-2

Q.31. On dissolution of the partnership firm, the partners’ capital account will be credited with

a. his/her share of goodwill.

b. goodwill of the firm.

c. share of goodwill of the remaining partners.

d. total reserve fund.

Answer:

(d)

Explanation: There is no special treatment of goodwill in the dissolution of the firm. The capitals of the partners will be credited with total reserve fund.

Q.32. If something is realised in cash for goodwill then

a. cash account is debited and realisation account is credited.

b. realisation account is debited and cash account is credited.

c. cash account is debited and partners’ capital accounts are credited.

d. goodwill account is debited and partners’ capital accounts are credited.

Answer:

( a )

Explanation: The treatment of goodwill in case of dissolution of firm is similar to the treatment of other assets.

Q.33. The item, which is transferred directly to cash account, is

a. general reserve.

b. bank loan.

c. accumulated losses.

d. partner’s loan account.

Answer:

( d )

Explanation: Partner’s loan is not transferred to the realisation account nor it is paid through capital account. It paid directly through cash account.

Q.34. The item, which is transferred to the realisation account, is

a. partner’s loan account.

b. balance in partners’ capital accounts.

c. stock.

d. cash account.

Answer:

c

Explanation: Assets (including stock) are transferred to the realisation account.

Q.35. Amit, a partner is to take over some of the sundry assets at Rs. 7,200(being book value less 10%). The book values of assets are

a. Rs. 720.

b. Rs. 6,480.

c. Rs. 7,920.

d. Rs. 8,000.

Answer:

( d )

Explanation:

Suppose the book value is Rs. x

Taken over at 7,200 being 10% less than the book value

x – 10% of x = 7,200

90/100 x = 7,200

x = 8,000.

Q.36. If the question is silent about realisation of intangible assets like goodwill, they are assumed to be realised at

a. it’s book value.

b. nil value.

c. 50% of book value.

d. 10% less than the book value.

Answer:

(b)

Explanation: If the question is silent about the realisation of intangible assets like goodwill, it is assumed that such assets have not realised any amount.

Q.37. The example of internal liabilities is

a. partner’s loan to the firm.

b. accumulated losses.

c. sundry creditor.

d. loan by the relative of a partner.

Answer:

(a)

Explanation: Partner’s loan to the firm is an internal liability.

Q.38. The example of personal account is

a. cash account.

b. partner’s capital account.

c. revaluation account.

d. realisation account.

Answer:

(b)

Explanation: Capital accounts of partners fall under the category of personal accounts, as these are the accounts of persons.

Q.39. In case of dissolution of partnership firm, the balance left in the partners’ capital accounts is transferred to

a. balance sheet.

b. realisation account.

c. cash or bank account.

d. their current accounts.

Answer:

(c)

Explanation: In case of dissolution of partnership firm, the balance in the partners’ capital accounts is transferred to cash account, as their accounts are required to be settled permanently.

Q.40. In case of dissolution of partnership firm, the balance left in the partners’ current accounts is transferred to

a. balance sheet.

b. realisation account.

c. cash or bank account.

d. their capital accounts.

Answer:

(d)

Explanation: In case of dissolution of the partnership firm, the balance in the current accounts is transferred to the partners’ capital accounts and from there the final settlement is done.

Q.41. Sometimes a partner agrees to take over his wife’s loan. The entry is

a. debit wife’s loan and credit partner’s capital.

b. debit realisation and credit partner’s capital.

c. debit partner’s capital and credit realisation.

d. debit wife’s loan and credit realisation.

Answer:

b

Explanation: Loan by the relative of a partner is transferred to the credit side of the realisation account and it is disposed off by entry in the debit side of realisation account.

Q.42. Investment given in the balance sheet amounted Rs. 50,000. Deepak, a partner took over 50% of the investment at a discount of 10%. His account will be debited with

a. Rs. 50,000.

b. Rs. 27,500.

c. Rs. 25,000.

d. Rs. 22,500.

Answer:

( d )

Explanation:

Investment taken over = Rs. 25,000

Discount 10% = Rs.2, 500.

Value at which taken over = 25,000 – 2,500 = Rs. 22,500.

Q.43. As on the date of dissolution, the partners’ capital stood at Rs 2,00,000 and cash in hand was Rs. 25,000. The amount of sundry assets will be

a. Rs. 2,25,000.

b. Rs 2,00,000.

c. Rs. 1,75,000.

d. Rs. 25,000.

Answer:

(c)

Explanation: If we prepare memorandum balance sheet, the total of liabilities side is Rs. 2,00,000 while cash is Rs. 25,000. Hence the value of sundry (or other) assets is Rs. 1,75,000.

Q.44. Debit side of realisation account contains the

a. assets realised.

b. liabilities transferred.

c. loss on realisation.

d. liabilities paid.

Answer:

(d)

Explanation: Liabilities are disposed off in the debit side of the realisation account.

Q.45. The total of credit side of realisation account is Rs. 4,40,000 while the total of its debit side is Rs. 4,00,000. In this case

a. there is a profit of Rs. 40,000.

b. there is a loss of Rs. 40,000.

c. neither profit nor loss on realisation.

d. there is a profit of Rs. 4,00,000.

Answer:

(a)

Explanation: If the credit side of realisation account is more than the debit side, there is a profit on realisation.

Q.46. Loan from the relative of a partner is transferred to

a. realisation account.

b. that partner’s capital account.

c. cash account.

d. all partners in profit sharing ratio.

Answer:

(a)

Explanation: Loan from the relative of a partner is treated as an external liability and transferred to the realisation account.

Q.47. If a partner agrees to take over the goodwill,

a. his account will be credited.

b. his account will be debited.

c. all partners’ accounts will be debited.

d. all partners’ accounts will be credited.

Answer:

(b)

Explanation: In case of dissolution of partnership firm, treatment of goodwill is similar to the other assets hence only concerned partner’s capital account will be debited.

Q.48. The entry for transferring debit balance from the partner’s current account to the partner’s capital account is

a. capital account debit to current account.

b. current account debit to capital account.

c. realisation account debit to current account.

d. current account debit to realisation account.

Answer:

(a)

Explanation: Debit balance in the current account of partners will be shown on the credit side and transferred to the debit side of partners’ capitals.

Q.49. If nothing is mentioned in the question about the payment of outside liabilities, it is assumed that

a. they are not paid at all.

b. they are paid at book value.

c. they are paid at 50%.

d. they are paid at 20% discount.

Answer:

b

Explanation: If the question is silent regarding the payment of liabilities, they are assumed to be paid at book value.

Q.50. The entry for final payments to the partners is

a. realisation debit to partners’ capitals.

b. bank account debit to partners’ account.

c. partners’ account debit to bank account .

d. partners’ account debit to realisation.

Answer:

(c)

Explanation: While making final payments to partners’ cash/bank a/c will be credited and partners’ account will be debited.

Practice Questions for CUET Accountancy chapter-Dissolution of Partnership firm SET-3

Q.51. In case of the dissolution of partnership firm, the account, which is the proof of the arithmetical accuracy of books of accounts, is

a. realisation account.

b. partner’s capital account.

c. loan account of the partners.

d. cash or bank account.

Answer:

(d)

Explanation: Cash or bank account is the proof of the arithmetical accuracy of the books of accounts as there should be no balance in this account.

Q.52. The item, which may be transferred to the realisation account, is

a. general reserve.

b. reserve fund.

c. reserve.

d. JLP reserve.

Answer:

(d)

Explanation: JPL reserve is transferred to the realisation account. Reserve or reserve fund or general reserves are directly transferred to the partner’s capitals.

Q.53. The example of an external liability is

a. workmen’s compensation fund.

b. investment fluctuation fund.

c. general reserve.

d. employees’ provident fund.

Answer:

(d)

Explanation: It is not the company’s fund but it belongs to the employees of the organisation.

Q.54. The example of an internal liability is

a. loan by relative of a partner.

b. loan by a partner.

c. employees’ provident fund.

d. creditors.

Answer:

(b)

Explanation: Loan by a partner to the firm is not transferred to the realisation account because it is an internal liability.

Q.55. The item, which is shown on the debit side of the cash account, is

a. payment to creditors.

b. final payment to the partners.

c. amount realised from the sale of assets.

d. realisation expenses.

Answer:

(c)

Explanation: Debit side of cash account shows receipts of cash. Amount realised from the sale of assets shows the receipts.

Q.56. Unrecorded assets are those assets, which are

a. transferred along with other assets to realisation account.

b. shown in the balance sheet.

c. not shown in the balance sheet.

d. not realised for any value.

Answer:

(c)

Explanation: Unrecorded assets are those assets, which are not shown in the balance sheet. Physically assets may exist but its value is zero.

Q.57. Outside liabilities are transferred to realisation account. The entry

a. debit outside liabilities and credit realisation account.

b. debit outside liabilities and credit partners’ capital.

c. debit realisation account and credit outside liabilities.

d. debit realisation account and credit partners’ capital.

Answer:

( a )

Explanation: Outside liabilities are transferred to credit side of the realisation account hence the entry is debit outside liabilities and credit realisation account.

Q.58. Workmen compensation fund shown in the liabilities side of a balance sheet are Rs. 3,00,000. Claim on account of workmen compensation is Rs. 30,000. A, B and C are equal partners. It will be divided among them as

a. Rs. 60,000 each.

b. Rs. 90,000 each.

c. Rs. 1,00,000 each.

d. Rs. 1,80,000 each.

Answer:

(b)

Explanation: Total compensation left after deducting the claim is Rs. 2,70,000 (3,00,000 – 30,000). This amount will be divided equally among all the partners.

Q.59. Creditors amounting to Rs. 1,00,000 are transferred to realisation account and no information regarding its payment is given in the question.

It is assumed that

a. it is not paid at all.

b. it is paid at book value.

c. it is paid at 10% discount.

d. any partner has taken over it.

Answer:

(b)

Explanation: When the question is silent about the payment of any liability already transferred to the realisation account, it is assumed to be paid at book value.

Q.60. All the assets are transferred to realisation account except

a. sundry debtors.

b. bills receivable.

c. provision for doubtful debts.

d. profit and loss- Dr. balance.

Answer:

(d)

Explanation: Accumulated losses are not transferred to the realisation account.

Q.61. Any liability taken over by a partner is credited to

a. realisation account.

b. his capital account.

c. cash account.

d. his loan account.

Answer:

(b)

Explanation: If a partner takes over any liability, it will be debited to the realisation account and credited to his capital account.

Q.62. Payment of unrecorded liability is credited to

a. cash account.

b. realisation account.

c. partner’s capital account.

d. liability account.

Answer:

(a)

Explanation: Since the payment is made, the cash or bank account will be credited. The liability is transferred to the realisation account so realisation account will be debited.

Q.63. Payment of unrecorded liability is debited to

a. cash account.

b. realisation account.

c. partner’s capital account.

d. liability account.

Answer:

(b)

Explanation: Since the payment is made, the cash or bank account will be credited. The liability is transferred to the realisation account so realisation account will be debited.

Q.64. Payment of realisation expenses is debited to

a. realisation expenses account.

b. realisation account.

c. cash account.

d. loan account of the partner.

Answer:

(b)

Explanation: Payment of realisation expenses are debited to the realisation account and credited to cash or bank account.

Q.65. Dissolution of partnership among all the partners of a firm is called

a. reconstitution of the partnership.

b. reconstitution of the firm.

c. dissolution of the partnership.

d. dissolution of the firm.

Answer:

(d)

Explanation: As per partnership act 1932, dissolution of the partnership among all the partners is called as the dissolution of the partnership firm.

Q.66. The court may interfere in case of

a. change in profit sharing ratio.

b. valuation of goodwill.

c. treatment of goodwill.

d. dissolution of partnership firm.

Answer:

(d)

Explanation: The court may interfere in case of dissolution of partnership firm.

Q.67. Memorandum balance sheet is prepared to ascertain

a. cash balance.

b. sundry assets.

c. capitals of the partners.

d. profit or loss on realisation.

Answer:

(b)

Explanation: If the figure of sundry assets is missing in the question, the memorandum balance sheet is prepared.

Q.68. In case of dissolution of the partnership firm, the account, which does not have any closing balance, is

a. realisation account.

b. capital accounts of the partners.

c. partners’ loan account.

d. cash or bank account.

Answer:

(d)

Explanation: Cash or bank account does not show any balance.

Q.69. Creditors amounting to Rs. 50,000 accepted furniture for Rs. 8,000. Remaining creditors were paid at a discount of 10%. Amount paid to creditors will be

a. Rs. 50,000.

b. Rs. 42,000.

c. Rs. 37,800.

d. Rs. 37,000.

Answer:

(c)

Explanation: Remaining creditors amounted to Rs. 42,000 (50,000 – 8,000) and they are paid at 42,000 – 10% of 42,000.

Q.70. Book value of sundry assets is Rs. 10,000. Amit, a partner took over sundry assets at 60% of the book value. Amit’s account will be debited with

a. Rs. 10,000.

b. Rs. 6,000.

c. Rs. 4,000.

d. Rs. 2,000.

Answer:

(b)

Explanation:

Amit has taken it for 10,000 x 60/100.

Q.71. An unrecorded liability taken over by a partner will be recorded on the

a. credit side of his capital.

b. credit side of realisation account.

c. cash or bank account.

d. balance sheet.

Answer:

(a)

Explanation: An unrecorded liability will be paid/disposed off on the debit side of the realisation along with the other liabilities. From there, it is transferred to the credit side of the respective partner’s capital account.

Q.72. The item, which is transferred to the credit side of the realisation account, is

a. sundry debtors.

b. cash account.

c. provision for doubtful debts.

d. stock.

Answer:

(c)

Explanation: Provision for doubtful debts are transferred on the credit side of the realisation account, while gross debtors are transferred on the debit side of the realisation account.

Q.73. The item, which is shown on the debit side of the partner’s capital account, is

a. reserve fund.

b. profit on realisation.

c. liability assumed.

d. asset taken over.

Answer:

(d)

Explanation: Assets taken over by a partner are shown on the credit side of the realisation account and from there it is transferred to the debit side of his capital account.

Q.74. If debtors in the outer column of the balance sheet are given at Rs. 72,000 after deducting provision for doubtful debts of Rs. 7,000. The amount transferred to the credit side of realisation is

a. Rs. 7,000.

b. Rs. 65,000.

c. Rs. 72,000.

d. Rs. 79,000.

Answer:

( a )

Explanation: The gross amount of debtors will be transferred to the debit side of realisation account and provision for doubtful debts will be transferred to the credit side of realisation account.

Q.75. Bank overdraft on the liabilities side of the balance sheet is transferred to the

a. debit side bank account.

b. credit side bank account.

c. debit side realisation account.

d. credit side realisation account.

Answer:

( d )

Explanation: All external liabilities (including bank overdraft) are transferred to the credit side of the realisation account.

Q.76. A journal entry is passed in all the following cases except

a. realisation expenses.

b. assets taken over by a partner.

c. an asset taken over by a creditor.

d. liability assumed by a partner.

Answer:

(c)

Explanation: When an asset is taken over by a creditor no entry is passed. However the payment to the creditor is made by lesser amount.

Q.77. The assets, which are transferred to the debit side of realisation account, are

a. cash or bank balance.

b. fixed assets.

c. fictitious assets.

d. current account balances of the partners.

Answer:

(b)

Explanation: Fixed assets are transferred to the debit side of the realisation account.

Q.78. A journal entry is not required when

a. dissolution expenses are paid by a partner who has to bear such expenses.

b. paid in cash by any partner.

c. paid out of firm’s account.

d. actual expenses are different from the agreed dissolution expenses.

Answer:

(a)

Explanation: No entry is made when dissolution expenses are paid by a partner who has to bear such expenses.

Q.79. In case of dissolution of partnership firm, the account, which is prepared, last of all is

a. balance sheet.

b. realisation account.

c. cash or bank account.

d. loan account of the partner.

Answer:

(c)

Explanation: Cash or bank account is prepared at last. It is the proof of arithmetical accuracy of books of accounts.

Q.80. Cash or bank account is not transferred to realisation account because

a. it is not an asset.

b. it is a current asset.

c. it is assumed to be sold at book value.

d. it is already a realised asset.

Answer:

(d)

Explanation: Cash or bank account is not transferred to the realisation account because it is already a realised asset.

Q.81. Creditors amounting to Rs. 30,000 accepted furniture having book value of Rs. 25,000 for Rs. 28,000. Remaining creditors were paid at a discount of 25%. Amount paid to creditors will be

a. Rs. 1,500.

b. Rs. 2,000.

c. Rs. 3,000.

d. Rs. 5,000.

Answer:

(a)

Explanation: Creditors need to be paid Rs. 2,000 (30,000 –28,000). They are paid at a discount of 25%.

Q.82. Assets given in the balance sheet are stock Rs. 10,000, machinery Rs. 20,000, debtors 15,000 less provision Rs. 2,000. The amount of sundry assets transferred to the debit side of realisation account will be

a. Rs. 43,000.

b. Rs. 45,000.

c. Rs. 47,000.

d. Rs. 50,000.

Answer:

(b)

Explanation: Assets transferred to the realisation account are stock Rs. 10,000, machinery Rs. 20,000, debtors Rs. 15,000.

Q.83. Realisation account is debited when

a. liabilities are transferred.

b. assets are realised.

c. an asset is taken over by a partner.

d. liabilities are paid off.

Answer:

(d)

Explanation: Realisation account is debited when liabilities are paid off. The entry is realisation account debit to cash or bank account.

Q.84. In case of the dissolution of firm, the account closed by transferring to cash or bank account is

a. realisation account.

b. revaluation account.

c. partner’s capital and loan account.

d. memorandum balance sheet.

Answer:

(c)

Explanation: Partners’ capital and loan account are prepared separately and transferring them to cash or bank account closes both the accounts.

Q.85. The firm had a joint life policy of Rs. 5,00,000 with a surrender value of Rs. 1,00,000. The policy was surrendered at its surrender value. The amount received from JLP will be

a. Rs. 1,00,000.

b. Rs. 2,00,000.

c. Rs. 4,00,000.

d. Rs. 5,00,000.

Answer:

(a)

Explanation: Surrender value is the amount received from JLP.

Q.86. The amount of creditors was Rs. 38,000. Creditors and bill payable were due on an average basis of one month after 31^st March but they were paid immediately on 31^st March at 6 % discount per annum. The amount paid to them will be

a. Rs. 47,810.

b. Rs. 38,000.

c. Rs. 37,810.

d. Rs. 35,720.

Answer:

(c)

Explanation:

Calculation of discount on creditors and bills payable

Creditors = 38,000 x 6/100 x 1/12 = Rs. 190.

Hence creditors will be paid Rs. 38,000 – 190.

Q.87. In case of dissolution, partners’ current accounts are closed by transferring them to

a. realisation account.

b. cash or bank account.

c. partners’ loan account.

d. partners’ capital account.

Answer:

(d)

Explanation: Partners’ current accounts are transferred to their capital accounts and from there the final payment is made.

Q.88. An example of internal liability is

a. loan by relative of partner.

b. employees’ provident fund.

c. loan by partner.

d. bank overdraft.

Answer:

(c)

Explanation: Loan by the partner to the firm is an example of internal liability because it is the liability towards the partner of the firm.

Q.89. Amount received from Anil, a partner, in final settlement will be recorded on

a. debit side of his account.

b.credit side of his account.

c.debit side of realisation account.

d. credit side of realisation account.

Answer:

b

Explanation: In case of amount received, cash account will be debited and partner’s capital account will be credited.

Q.90. Rohan who undertakes to carry out the dissolution proceedings is paid Rs. 5,000 for the same. Actual expenses amounted to Rs. 6,000. The drawing of the partner may be taken as

a. Rs. 1,000.

Rs. 5,000.

Rs. 6,000.

Rs. 11,000.

Answer:

(c)

Explanation: If actual expenses of realisation are assumed to be paid out of firm’s account, it will be treated as drawings.

Q.91. The information given in the assets side of the balance sheet is Plant and machinery Rs. 10,000 less depreciation Rs. 4,000 and on outer column the amount is Rs. 6,000. The amount transferred to the credit side of realisation account will be

a. Rs. 4,000.

b. Rs. 6,000.

c. Rs. 10,000.

d. Rs. 14,000.

Answer:

(a)

Explanation: Gross amount, i.e., Rs. 10,000 will be transferred to the debit side of the realisation account and Rs. 4,000 will be transferred to the credit side of realisation account.

Q.92. Under fluctuating capital method, we prepare

a. partner’s capital account only.

b. partner’s current account only.

c. both capital and current accounts for each partner.

d. partner’s capital account or current account.

Answer:

(a)

Explanation: Partner’s capital account only, because we make all the entries in that account only.

Q.93. Amount withdrawn by a partner for personal use reduces

a. profits.

b. drawings.

c. capital.

d. interest on drawings

Answer:

(c)

Explanation: Amount withdrawn by a partner for personal use reduces the existing capital of the partner.

Q.94. Undistributed profit appearing in the balance sheet at the time of dissolution of partnership firm is transferred to

a. old partners in old profit sharing ratio.

b. old partners in new profit sharing ratio.

c. all the partners in their profit sharing ratio.

d. old partners in sacrificing ratio.

Answer:

(a)

Explanation: All reserves and undistributed profits are transferred to the credit side of all partners’ capitals in their profit sharing ratio.

Q.95. Realisation account is similar to

a. cash account.

b. revaluation account.

c. capital accounts.

d. loan account of the partners.

Answer:

b

Explanation: Both realisation account and revaluation account are nominal accounts.

Q.96. Reconstitution of a partnership firm, means

a. any change in the existing agreement of partnership.

b. new partner is admitted.

c. old partner has retired.

d. the partnership firm is no more.

Answer:

( a )

Explanation: Reconstitution of partnership firm, mean any change in the existing agreement of partnership.

Q.97. If the question is silent about the realisation of tangible assets, they are assumed to be realised at

a. book value.

b. nil value.

c. 50% of book value.

d. 10% less than the book value.

Answer:

(b)

Explanation: If the question is silent about the realisation of tangible assets, it is assumed that such assets have been realised at book value.

Q.98. As on the date of the dissolution, the partners’ capital stood at Rs 5,00,000 and cash in hand was Rs. 50,000. The amount of sundry assets will be

a. Rs. 5,50,000.

b. Rs 5,00,000.

c. Rs. 4,50,000.

d. Rs. 50,000.

Answer:

(c)

Explanation: If we prepare memorandum balance sheet, the total of liabilities side is Rs. 5,00,000 while cash is Rs. 50,000. Hence the value of sundry (or other) assets is Rs. 4,50,000.

Q.99. If assets are sold then cash account is debited and realisation account is credited at

a. book value.

b. market value.

c. actual sale price.

d. profit value.

Answer:

c

Explanation: The entry for sale of asset is made at the actual sale price.

Q.100. The entry for transferring credit balance from the partner’s current account to the partner’s capital account is

a. capital account debit to current account.

b. current account debit to capital account.

c. realisation account debit to current account.

d. current account debit to realisation account.

Answer:

(b)

Explanation: Credit balance in the current account of partners will be shown on the debit side and transferred to the credit side of partners’ capitals.