Question 1. Dissolution of a partnership is different from dissolution of a firm.
Question 2. A partnership is dissolved when there is a death of a partner.
Question 3. A firm is dissolved when all partners give consent to it.
Question 4: A firm is compulsorily dissolved when a partner decide to retire.
Question 5. Dissolution of a firm necessarily involves dissolution of partnership.
Question 6. A firm is compulsorily dissolved when all partners or when all except one partner become involvent.
Question 7. Court can order a firm to be dissolved when a partner becomes insane.
Question 8. Dissolution of partnership can not take place without intervention of the court.
TEST YOUR UNDERSTANDING -II
• Tick the correct answer
Answer (c) Realisation account
Question 2. On dissolution of a firm, partner’s loan account is transferred to
Question 3. After transferring liabilities like creditors and bills payables in the realisation account, in the absence of any information regarding then payment, such liabilities are treated as
Question 5. Unrecorded assets when taken over by a partner are shown in
Question 6. Unrecorded liabilities when paid are shown in
Question 7. The accumulated profits reserves are transferred to
Question 8. On dissolution of the firm, partner’s capital accounts are closed through
TEST YOUR UNDERSTANDING – III
• Fill in the correct word(s)
2. All ————— (internal/external) liabilities are transferred to the ————— (Debit/Credit) side of ——————acccount (Bank/Realisation).
3. Accumulated losses are transferred to ————— (Current/Capital Accounts) in —————— (equal ratio/profit sharing ratio).
4. If a liability is assumed by a partner, such Partner’s Capital Account is ––––––– ——— (debited/credited)..
5. If a partner takes over an asset, such (Partner’s Capital Account) is ———————— (debited/credited).
6. No entry is required when a ——————— (partner/creditor) accepts a fixed asset in payment of his dues.
7. When creditor accepts an asset whose value is more than the amount due to him, he will ———————— (pay/not pay) the excess amount which will be credited ———————— Account.
8. When the firm has agreed to pay the partner a fixed amount for realisation work irrespective of the actual amount spent, such fixed amount is debited to (Realisation/Capital) Account and Credited to (Capital/Bank) Account.
9. Partner’s loan is —————— (recorded/not recorded) in the (Realisation Account).
10. Partner’s current accounts are transferred to respective ———————— Partners’ (Loan/Capital) Accounts.
DO IT YOURSELF
Question 1. For closure of assets accounts.
Question 2. For closure of liabilities accounts.
Question 3. For sale of assets.
Question 4. For settlement of a creditor by transfer of fixed assets to him.
Question 5. For expenses of realisation when actual expenses are paid by the partner on behalf of the firm.
Question 6. When a partner discharges the liability of the firm.
Question 7. For payment of partner’s loan.
Question 8. For settlement of capital accounts.
SHORT ANSWER TYPE QUESTIONS
Question 1. State the difference between dissolution of Partnership and Dissolution of Partnership firm.
Question 2. State the accounting treatment for
(b) When the unrecorded liability is taken over by a partner. The following Journal Entry will be there
Question 3. On dissolution, how will you deal with partner’s loan if it appears on the
Question 4. Distinguish between Firm’s Debts and Partner’s Private Debts.
Question 5. State the order of settlement of accounts on dissolution.
(ii) Application of Assets The assets of the firm, including any sum contributed by the partners to make up deficiencies of capital, shall be applied in the following manner and order
Question 6. On what account Realisation Account differs from Revaluation Account?
LONG ANSWER TYPE QUESTIONS
Question 1. Explain the process of dissolution of partnership firm.
(i) Dissolution by Agreement As a firm is formed with the consent of all partners with a mutual agreement. Dissolution can also be there with
Question 2. What is a Realisation Account?
The format for realisation account is as follows
Question 3. Reproduce the format of Realisation Account.
Question 4. How deficiency of creditors is paid off?
1. Journalise the following transactions regarding realisation expenses :
2. Record necessary journal entries in the following cases:
3. There was an old computer which was written-off in the books of accounts in the pervious year. The same has been taken over by a partner Nitin for Rs.3,000.
4. What journal entries will be recorded for the following transactions on the dissolution of a firm:
5. Give journal entries for the following transactions :
6. How will you deal with the realisation expenses of the firm of Rashim and Bindiya in the following cases:
7. The book value of assets (other than cash and bank) transferred to Realisation Account is Rs. 1,00,000. 50% of the assets are taken over by a partner Atul, at a discount of 20%; 40% of the remaining assets are sold at a profit of 30% on cost; 5% of the balance being obsolete, realised nothing and remaining assets
8. Record necessary journal entries to record the following unrecorded assets and liabilities in the books of Paras and Priya:
9. All partners wishes to dissolve the firm. Yastin, a partner wants that her loan of Rs. 2,00,000 must be paid off before the payment of capitals to the partners. But, Amart, another partner wants that the capitals must be paid before the payment of Yastin’s loan. You are required to settle the conflict giving reasons.
10. What journal entries would be recorded for the following transactions on the dissolution of a firm after various assets (other than cash) on the third party liabilities have been transferred to Reliasation account.
11. Rose and Lily shared profits in the ratio of 2:3. Their Balance Sheet on March 31, 2006 was as follows:
12. Shilpa, Meena and Nanda decided to dissolve their partnership on March 31,2006. Their profit sharing ratio was 3:2:1 and their Balance Sheet was as under:
13. Surjit and Rahi were sharing profits (losses) in the ratio of 3:2, their Balance Sheet as on March 31, 2004 is as follows:
14.Rita, Geeta and Ashish were partners in a firm sharing profits/losses in the ratio of 3:2:1. On March 31, 2006 their balance sheet was as follows:
15. Anup and Sumit are equal partners in a firm. They decided to dissolve the parntership on December 31, 2006. When the balance sheet is as under :
16. Ashu and Harish are partners sharing profit and losses as 3:2. They decided to dissolve the firm on December 31, 2006. Their balance sheet on the above date was: