Dissolution of Partnership Firm

Topics in this chapter

• Dissolution Modes and Law
• Realisation Account and Adjustments
• Dissolution Journal Entries
• Final Settlement of Partner Accounts
• Insolvent Partner and Deficiency

Cheat sheet

Practice questions

1. Question 1Q-E4018C

   On dissolution of a partnership firm, which journal entry is passed for transferring an asset to the Realisation Account at its book value?

   1. A.Realisation Account Dr. To Asset Account
   2. B.Asset Account Dr. To Realisation Account
   3. C.Partner’s Capital Account Dr. To Asset Account
   4. D.Cash Account Dr. To Asset Account
   See the answer and solution
2. Question 2Q-425527

   An unrecorded liability of ₹12,000 is paid by the firm on dissolution. Which account will be debited and for what amount?

   1. A.Cash Account, ₹12,000
   2. B.Realisation Account, ₹12,000
   3. C.Unrecorded Liability Account, ₹12,000
   4. D.Partners’ Capital Accounts, ₹12,000
   See the answer and solution
3. Question 3Q-584CF2

   In the settlement of accounts on dissolution, which sequence correctly states the order in which the firm’s liabilities and partners’ claims are paid?

   1. A.Partners’ capitals, partners’ loans, external liabilities
   2. B.External liabilities, partners’ loans, partners’ capitals
   3. C.Partners’ loans, external liabilities, partners’ capitals
   4. D.External liabilities, partners’ capitals, partners’ loans
   See the answer and solution
4. Question 4Q-FA8D8A

   Explain the treatment of General Reserve and the debit balance of the Profit and Loss Account at the time of dissolution of a partnership firm.

   See the answer and solution
5. Question 5Q-5D72E3

   At the time of dissolution, a partner takes over machinery of the firm at an agreed value of ₹25,000. Which journal entry should be passed?

   1. A.Realisation A/c Dr. ₹25,000; To Partner’s Capital A/c ₹25,000
   2. B.Partner’s Capital A/c Dr. ₹25,000; To Realisation A/c ₹25,000
   3. C.Machinery A/c Dr. ₹25,000; To Partner’s Capital A/c ₹25,000
   4. D.Partner’s Capital A/c Dr. ₹25,000; To Machinery A/c ₹25,000
   See the answer and solution