Dissolution of Partnership Firm (12 Accountancy)
Practise chapter-wise MCQs for Class 12 Accountancy — Dissolution of Partnership Firm. Every question comes with the correct answer and an explanation.
TL;DR: Practise chapter-wise MCQs for Class 12 Accountancy — Dissolution of Partnership Firm. Every question comes with the correct answer and an explanation…
Written & reviewed by the Syllab.in Academic Team (CBSE/NCERT subject experts) · Updated
Practise chapter-wise MCQs for Class 12 Accountancy — Dissolution of Partnership Firm. Every question comes with the correct answer and an explanation.
Dissolution of Partnership Firm MCQs with Answers & Explanations
Q1. A partner's loan will be settled:
- After all outsider's liabilities are paid ✓ (correct)
- After the capital of partners is paid
- Before any outsider's liability
- Along with the capital of partners
Explanation: According to the order of settlement of liabilities during dissolution, a partner's loan is considered a liability but is settled after all external liabilities and before the partners' capital.
Q2. Unrecorded investments of Rs. 50,000 were taken over by partner A for Rs. 60,000. In the realization account, this transaction will be recorded as:
- No entry will be made in realization account
- A credit entry of Rs. 60,000 ✓ (correct)
- A credit entry of Rs. 50,000
- A debit entry of Rs. 60,000
Explanation: When a partner takes over an unrecorded asset, it is credited to the Realization Account at the agreed takeover price.
Q3. A firm's fixed assets of Rs. 2,00,000 are sold for Rs. 1,80,000. The loss on realization will be transferred to:
- Partner's Capital Accounts in their profit-sharing ratio
- General Reserve
- Realization Account ✓ (correct)
- Profit and Loss Appropriation Account
Explanation: Loss on realization of assets is debited to the Realization Account. The ultimate profit or loss on realization is then transferred to partners' capital accounts.
Q4. When a partnership firm is dissolved, the realization account is debited with:
- Assets at their agreed realizable values
- Liabilities at their agreed payment values
- Liabilities at their book values
- Assets at their book values ✓ (correct)
Explanation: The Realization Account is debited with all assets at their book values to transfer them out of the firm's books and prepare for their sale.
Q5. Which of the following is NOT a reason for the dissolution of a partnership firm?
- Admission of a new partner ✓ (correct)
- Compulsory dissolution by court order
- Expiry of the term of partnership
- Insolvency of a partner
Explanation: Admission of a new partner leads to reconstitution of the firm, not dissolution. Dissolution implies winding up of the business.
Q6. Which account is debited when goodwill of Rs. 30,000 appears in the balance sheet at the time of dissolution?
- Profit and Loss Account
- Partner's Capital Accounts ✓ (correct)
- Goodwill Account
- Realization Account
Explanation: Goodwill appearing in the balance sheet is an unvalued asset and is written off by debiting the Partner's Capital Accounts in their profit-sharing ratio.
Q7. At the time of dissolution, 'Workmen's Compensation Reserve' which is not claimed by any employee is transferred to:
- Profit and Loss Account
- Realization Account
- Partner's Capital Accounts ✓ (correct)
- General Reserve Account
Explanation: An unclaimed Workmen's Compensation Reserve is treated as a part of the divisible profits and is transferred to the Partner's Capital Accounts in their profit-sharing ratio.
Q8. In case of dissolution, expenses on realization paid by a partner is debited to:
- Partner's Capital Account
- Profit and Loss Account
- Cash Account
- Realization Account ✓ (correct)
Explanation: When a partner agrees to bear realization expenses, his capital account is credited with the amount paid to him. The actual payment of expenses by the firm is debited to the Realization Account. If the partner bears the expense, it means the firm saves that expense, hence credited to partner's capital. However, the question asks what is debited to Realization Account for the expense paid by the firm.
Q9. If a partner is paid a commission on realization of assets, it is credited to:
- Partner's Capital Account ✓ (correct)
- Profit and Loss Appropriation Account
- Realization Account
- Cash Account
Explanation: Commission paid to a partner for realizing assets is an expense for the firm and a gain for the partner. Hence, it is debited to Realization Account and credited to the Partner's Capital Account.
Q10. If an unrecorded liability of Rs. 20,000 is paid by the firm for Rs. 15,000, the difference of Rs. 5,000 will be:
- Debited to Realization Account
- Credited to Realization Account ✓ (correct)
- Ignored in Realization Account
- Debited to Partner's Capital Account
Explanation: The unrecorded liability is debited to Realization Account at its payment value (Rs. 15,000). The gain of Rs. 5,000 (because it was paid less than its assumed value) is credited to Realization Account.
More 12 Accountancy MCQs
- Accounting for Partnership: Basic Concepts
- Goodwill: Nature and Valuation
- Reconstitution of a Partnership Firm - Change in Profit Sharing Ratio
- Reconstitution of a Partnership Firm - Admission of a Partner
- Reconstitution of a Partnership Firm - Retirement and Death of a Partner
- Accounting for Share Capital
🤖 Stuck on any of these? Ask Syllab's free AI Tutor to explain step by step →