Dissolution of a Partnership Firm Class 12 MCQs Questions with Answers
MCQ On Dissolution Of Partnership Firm Class 12 Question 1.
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 ₹ 50,000. Share of loss on realisation amounted to ₹ 10.000 Firm’s liability taken over by him was for ₹ 8.000
(A) ₹ 132,000
(B) ₹ 48,000
(C) ₹ 40,000
(D) ₹ 52,000
Answer:
(A) ₹ 132,000
Explanation:
Final Payment made to Partner
= ₹ 50,000 (Capital) + ₹ 8,000 (Liabilities of firm taken over) – ₹ 10,000 (Share of loss on realisation)
= ₹ 4,8000
Account Is MCQ Class 12 Chapter 5 Question 2.
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) Realisation Account
Explanation:
When the firm is being dissolved, realisation account is prepared to know the profit made or loss incurred at the time of dissolution of a firm.
Dissolution Of Partnership Firm MCQ Class 12 Question 3.
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:
(D) None of the above
Explanation:
The liability taken over by a partner in case of dissolution is credited in their respective capital account. Realisation Account debits the transaction. Profit and loss account is not prepared during the dissolution of the firm.
MCQs On Dissolution Of Partnership Firm Class 12 Question 4.
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) Realisation Account
Explanation:
The unrecorded liabilities are not shown in the book, yet they still need to be discharged off at the time of dissolution and hence are debited to the Realisation A/c.
Dissolution Of A Firm MCQ Class 12 Chapter 5 Question 5.
General Reserve appearing in the Balance Sheet is transferred to:
(A) Realisation Account
(B) Partners’ Capital Accounts in profit sharing ratio
(C) Partners’ Capital Accounts in capital ratio
(D) None of the above
Answer:
(B) Partners’ Capital Accounts in profit sharing ratio
Explanation:
General Reserve is an appropriation out of the profits set aside for future originally belongs to the partner.
Dissolution Of Partnership MCQ Chapter 5 Class 12 Question 6.
Pick the odd one out:
(A) Employees’ provident fund
(B) Partner’s loan
(C) Partner’s brother’s loan
(D) Creditors
Answer:
(B) Partner’s loan
Explanation:
Partner’s loan is the odd one as can be settled last.
Question 7.
Pick the odd one out:
(A) Debtors
(B) Payment of liabilities
(C) Provision for doubtful debts
(D) Fixed assets
Answer:
(C) Provision for doubtful debts
Explanation:
Provision for doubtful debts is a odd one as it is only the one recorded in the credit side of the Realisation account.
Question 8.
What Journal Entry will be passed on dissolution of partnership firm, when creditors of ₹ 40,000 accepted investments of ₹ 50,000 (Book value)?
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Answer:
Option (D) is correct.
Explanation:
When a liability is settled with the help of an asset, no entry is passed in the books during dissolution as nothing is recovered or paid in term of cash and bank.
Question 9.
What Journal Entry will be passed on dissolution of a partnership firm when a partner agreed to bear the dissolution expenses for ₹ 10,000? Actual e₹penses paid by partner were ₹ 15,000.
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Answer:
Option (B) is correct.
Assertion And Reason Based MCQs
Directions: In the following questions, a statement of Assertion (A) is followed by a statement of Reason (R). Mark the correct choice as:
(A) Both Assertion (A) and Reason (R) are true, and Reason (R) is the correct e₹planation of Assertion (A).
(B) Both Assertion (A) and Reason (R) are true, but Reason (R) is not the correct e₹planation of Assertion (A).
(C) Assertion (A) is true, but Reason (R) is false.
(D) Assertion (A) is false, but Reason (R) is true.
Question 1.
Assertion (A): Dissolution of partnership is different from the dissolution of the Partnership firm.
Reason (R): Dissolution of partnership doesn’t dissolve the firm but the firm is dissolved in the partnership firm.
Answer:
(A) Both Assertion (A) and Reason (R) are true, and Reason (R) is the correct explanation of Assertion (A).
Explanation:
Dissolution of partnership means reconstitution of the firm due to change in the profit sharing ratio among existing partners, admission of a new partner, retirement of a partner, death of a partner, insolvency of a partner and the firm continues as before. However, the dissolution of partnership does not lead to the dissolution of firm.
Question 2.
Assertion (A): Realisation account is prepared in the dissolution of the firm.
Reason (R): Dissolution of partnership involves the partners selling the assets and settling the liabilities. Thus, various amounts are recovered or paid to partners.
Answer:
(A) Both Assertion (A) and Reason (R) are true, and Reason (R) is the correct explanation of Assertion (A).
Explanation:
In dissolution of the partnership firm, realisation account is prepared as the liabilities are to be settled as against the assets of the firm and to find the surplus that the partners get or the deficit they need to bring in order for the process of dissolution.
Question 3.
Assertion (A): Rajiv and Vinod, who share the profit and losses in the ratio 2 : 3, are dissolving the firm. There is general reserve in the balance of ₹ 60,000 in the balance sheet. The accountant transferred ₹ 24,000 in Rajiv’s Capital and ₹ 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) Both Assertion (A) and Reason (R) are true, and Reason (R) is the correct e₹planation of Assertion (A).
Question 4.
Assertion (A): Partner’s loan account is prepared before partners’ capital accounts.
Reason (R): At the time of dissolution, capitals are paid off, only if, any balance is left after payment of partner’s loan.
Answer:
(A) Both Assertion (A) and Reason (R) are true, and Reason (R) is the correct e₹planation of Assertion (A).
Explanation:
Capital is the investment done by the partner’s themselves and thus at the time of dissolution of the partner the firm pays off the capital to the partners only after the settlement of the other liabilities including the loan given by any partner in proportion to their capital.
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 ₹ 12,00,000 that realized ₹ 10,80,000. The creditors were settled at 90% by paying them ₹ 54,000.
There was an unrecorded asset in the books of the firm which was taken by Vibhuti for ₹ 12,000. Realisation e₹penses amounted to ₹ 2,000 and were paid by Tiwari on behalf of the firm. There was general reserve in the books of the company of ₹ 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 ₹ 81,000.
Question 1.
What was the capital of Tiwari before the dissolution of the firm?
(A) ₹ 2,00,000
(B) ₹ 4,00,000
(C) ₹ 6,00,000
(D) ₹ 8,00,000
Answer:
(B) ₹ 4,00,000
Explanation:
In a balance sheet:
Total of Assets side = Total of liabilities side
As per the case, total of assets side = ₹ 12,00,000 + ₹ 81,000 = ₹ 12,81,000
Total of Liabilities side = Creditors + General reserve + Capitals of partners (as per the given question)
₹ 12,81,000 = ₹ 60,000 + 21,000 + Capital of partners
Capitals of partners = ₹ 12,81,000 – ₹ 81,000
= ₹ 12,00,000
Capital of Tiwari =12,00,000 x \(\frac {2}{6}\) = ₹ 4,00,000
Question 2.
What was the loss on realization?
(A) ₹ 2,00,000
(B) ₹ 1,47,000
(C) ₹ 1,37,000
(D) ₹ 1,16,000
Answer:
(D) ₹ 1,16,000
Explanation:
Question 3.
…………… 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) Vibhuti’s Capital
Question 4.
What will be the final amount to be paid to Happu?
(A) ₹ 6,05,000
(B) ₹ 52,000
(C) ₹ 5,52,500
(D) ₹ 6,08,500
Answer:
(C) ₹ 5,52,500
Explanation:
Amount paid to Happu = Capital + Share in General Reserve – Loss on Realization
= ₹ 6,00,000 + ₹ 10,500 – ₹ 58,000 = ₹ 5,52,500
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:
| ₹ | |
| Raina’s Capital | 40,000 (Dr.) |
| 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:
(a) Raina’s loan was repaid by the firm along with interest of ₹ 500.
(b) The dissolution expenses of ₹ 1,000 were paid by the firm on behalf of Raina who had to bear these expenses.
(c) An unrecorded asset of ₹ 2,000 was taken over by Meena while Raina discharged an unrecorded liability of ₹ 3,000.
(d) The dissolution resulted in a loss of ₹ 60,000 from the realization of assets and settlement of liabilities.
Question 1.
The amount of Profit and Loss Account to be transferred to the Partner’s Capital Account is:
(A) ₹ 5,000 each
(B) ₹ 6,000 Raina and ₹ 4,000 Meena
(C) ₹ 4,000 Raina and ₹ 6,000 Meena
(D) Insufficient data
Answer:
(A) ₹ 5,000 each
Explanation:
As they share profit and losses equally so the undistributed loss will be debited to their capital account equally.
Question 2.
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) Partners’ Capital Account
Explanation:
Contingency fund will be credited to Partners’ Capital Account in the profit sharing ratio.
Question 3.
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) Both (A) and (B)
Question 4.
How much loan amount will be paid to the Raina₹
(A) ₹ 15,000
(B) ₹ 15,500
(C) ₹ 500
(D) None of the above
Answer:
(B) ₹ 15,500
Explanation:
Loan amount paid = ₹ 15,000 + ₹ 500 = ₹ 15,500
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 firm on 31st March, 2016 on that date, their books showed the following ledger account balances:
| ₹ | |
| 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:
- Bills payable falling due on 31st May, 2016 retired on the date of dissolution of the firm at a rebate of 6% per annum.
- The bankers accepted the furniture (included in sundry assets) having a book value of ₹ 18,000 in full settlement of the loan given by them.
- Remaining assets were sold for ₹ 1,50,000.
- Liability on account of outstanding salary not recorded in the books, amounting to ₹ 15,000 was met.
- Menon agreed to take over the responsibility of completing the dissolution work to bear all e₹penses of realization at an agreed remuneration of ₹ 2,000. The actual realization e₹penses were ₹ 1,500 which were paid by the firm on behalf of Menon.
Question 1.
The amount of Bills payable paid is:
(A) ₹ 5,000
(B) ₹ 4,950
(C) ₹ 4,500
(D) ₹ 5,150
Answer:
(B) ₹ 4,950
Explanation:
₹ 5,000 x \(\frac{6}{100} \times \frac{2}{12}\) = ₹ 4,950
Question 2.
The loss on the realisation transferred to Menon’s Capital Account is:
(A) ₹ 31,465
(B) ₹ 13,485
(C) ₹ 44,950
(D) ₹ 5,000
Answer:
(B) ₹ 13,485
Explanation:
Question 3.
What will be the amount of past loss transferred to Mehta’s Account?
(A) ₹ 5,600
(B) ₹ 2,400.
(C) ₹ 2,500
(D) ₹ 5,000
Answer:
(A) ₹ 5,600
Explanation:
\(\frac {7}{10}\) x 8,000 = ₹ 5,600
Question 4.
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 e₹penses paid by Menon?
(A) (i) only
(B) (ii) and (iii)
(C) (i) and (iii)
(D) (i), (ii) and (iii)
Answer:
(B) (ii) and (iii)
Explanation:
Realisation A/c Dr. 5,600
To Menon’s Capital A/c 5,600