Class 12 Dissolution of Partnership Firm Mock Test (CBSE)

Topics in Dissolution of Partnership Firm

• Dissolution of partnership
• Dissolution of a firm
• Settlement of accounts
• Accounting treatment
• Realisation account
• Partners' capital accounts on dissolution
• Bank or cash account on dissolution

Dissolution of Partnership Firm practice questions with answers

1. Q1Multiple choice·1 mark
   In the event of dissolution of a partnership firm, how are the losses, including deficiencies of capital, to be handled according to Section 48 of the Indian Partnership Act, 1932?

   1. (a)First out of the partners' private assets, then out of their capital, and lastly out of the firm's profits
   2. (b)By the partners equally, irrespective of their agreed profit-sharing ratio
   3. (c)First out of profits, next out of capital, and lastly by partners in their profit-sharing ratio
   4. (d)First out of capital, then out of profits, and lastly by the partners in their capital ratio
   Show answer and step marks

   1. Correct option: (c) First out of profits, next out of capital, and lastly by partners in their profit-sharing ratio. Under Section 48(a) of the Indian Partnership Act, 1932, subject to any agreement between the partners, losses including deficiencies of capital are paid first out of profits, next out of capital, and lastly by the partners individually in their profit-sharing ratio.+1

   Answer: (c)
2. Q2Multiple choice·1 mark
   On the dissolution of a partnership firm, partner A agreed to pay off a firm's loan of $\text{Rs. } 50,000$. Which account will be credited in the books of the firm?

   1. (a)$\text{Realisation Account}$
   2. (b)$\text{Bank Account}$
   3. (c)$\text{Cash Account}$
   4. (d)$\text{A's Capital Account}$
   Show answer and step marks

   1. Correct option: (d) $\text{A's Capital Account}$. When a partner agrees to pay off a liability of the firm, the Realisation Account is debited and the partner's capital account is credited with the agreed amount.+1

   Answer: (d)
3. Q3Short answer·3 marks
   On the dissolution of a firm, the balance of Bank Account was $\text{Rs. } 20,000$. Sundry assets (except cash) realised $\text{Rs. } 1,50,000$ and realisation expenses paid were $\text{Rs. } 6,000$. Liabilities paid off amounted to $\text{Rs. } 50,000$. Prepare the Bank Account to close the books of the firm.
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   1. Debit: To Balance b/d $\text{Rs. } 20,000$.+0.5
   2. Debit: To Realisation A/c (assets realised) $\text{Rs. } 1,50,000$.+0.5
   3. Credit: By Realisation A/c (liabilities paid) $\text{Rs. } 50,000$.+0.5
   4. Credit: By Realisation A/c (realisation expenses) $\text{Rs. } 6,000$.+0.5
   5. Credit: By Partners' Capital A/cs (balancing figure) $\text{Rs. } 1,70,000 - 56,000 = \text{Rs. } 1,14,000$, closing the account with totals of $\text{Rs. } 1,70,000$.+1

   Answer: Bank Account — Dr: To Balance b/d Rs. 20,000; To Realisation A/c Rs. 1,50,000 (total Rs. 1,70,000). Cr: By Realisation A/c (liabilities) Rs. 50,000; By Realisation A/c (expenses) Rs. 6,000; By Partners' Capital A/cs Rs. 1,14,000 (total Rs. 1,70,000).
4. Q4Short answer·3 marks
   X and Y were partners sharing profits and losses in the ratio of $3:2$. On the date of dissolution of the firm, X's capital account showed a credit balance of $\text{Rs. } 60,000$ and Y's capital account showed a credit balance of $\text{Rs. } 40,000$. Realisation account showed a loss of $\text{Rs. } 15,000$. There was a debit balance of Profit and Loss Account appearing in the Balance Sheet at $\text{Rs. } 10,000$. Pass necessary journal entries for the final settlement of partners' capital accounts.
   Show answer and step marks

   1. Pass entry for distribution of Realisation loss: X's Capital A/c Dr. $\text{Rs. } 9,000$, Y's Capital A/c Dr. $\text{Rs. } 6,000$ To Realisation A/c $\text{Rs. } 15,000$+1
   2. Pass entry for writing off Profit and Loss debit balance: X's Capital A/c Dr. $\text{Rs. } 6,000$, Y's Capital A/c Dr. $\text{Rs. } 4,000$ To Profit and Loss A/c $\text{Rs. } 10,000$+1
   3. Pass entry for final payment to partners: X's Capital A/c Dr. $\text{Rs. } 45,000$, Y's Capital A/c Dr. $\text{Rs. } 30,000$ To Bank/Cash A/c $\text{Rs. } 75,000$+1

   Answer: (1) X's Capital A/c Dr. Rs. 9,000; Y's Capital A/c Dr. Rs. 6,000; To Realisation A/c Rs. 15,000. (2) X's Capital A/c Dr. Rs. 6,000; Y's Capital A/c Dr. Rs. 4,000; To Profit and Loss A/c Rs. 10,000. (3) X's Capital A/c Dr. Rs. 45,000; Y's Capital A/c Dr. Rs. 30,000; To Bank A/c Rs. 75,000.

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