Gujarat Board GSEB Class 12 Commerce Accounts Important Questions Part 1 Chapter 7 Dissolution of Partnership Firm Important Questions and Answers.
GSEB Class 12 Accounts Important Questions Part 1 Chapter 7 Dissolution of Partnership Firm
Answer the following questions in one or two sentences :
Question 1.
What is the Dissolution of the firm through contract ?
Answer:
If the dissolution of partnership firm is done through the mutual consent of partners through the terms decided by the contract is known as dissolution of the firm through contract.
Question 2.
In which type of partnership, dissolution of firm is done through notice ?
Answer:
In the partnership at will, the dissolution can be done through notice.
Question 3.
Due to which incident the partnership firm is dissolved automatically ?
Answer:
Under following circumstances the partnership firm is dissolved automatically :
- If partnership is for a specific time period, then on completion of that time the firm is dissolved automatically,
- If partnership is established for a specific motive and that motive is fulfilled.
Question 4.
State the circumstances of compulsory dissolution of the firm through law.
Answer:
The circumstances of compulsory dissolution are :
- If all the partners or except one of all the partners are declared insolvent,
- If the partner dies or becomes of unsound mind,
- When a partner willfully and persistently breaches the partnership agreement.
Question 5.
If any active partner does not give public notice of his retirement, then what will be his responsibility ?
Answer:
If any active partner does not give public notice of his retirement then he is going to be held jointly responsible for the third party liability arising even after his retirement.
Question 6.
If partners capital amount is not sufficient, then how is the loss covered in dissolution of partnership firm ?
Answer:
If partners capital amount is not sufficient to cover up the losses during dissolution of firm, then the amount of loss has to be brought by partners from their personal assets in their profit-loss sharing ratio.
Question 7.
During dissolution of partnership firm, when and how is partners loan amount repaid ?
Answer:
During dissolution, first of all dissolution expense are paid, there after all third party liabilities are paid. If any amount remains after that, then partners loan is repaid. If there is more than one partners loan and the amount is not sufficient to repay all completely then they are repaid on the pro rate basis of their loan amount.
Question 8.
How is partners wife’s loan repaid during dissolution of partnership firm ?
Answer:
During dissolution of partnership firm if (i) the partners wife has given loan from her ‘stridhan’ then it is treated and paid along with other third party liabilities (ii) If partners wife has given loan from her money then it will be paid after paying all the third party liabilities.
Question 9.
Why is realisation account opened ?
Answer:
To give the accounting effects of the money realised and amount paid during dissolution of partnership firm, the realisation account is opened.
Question 10.
Give the journal entry for closing provision accounts during dissolution of partnership firm.
Answer:
Question 11.
During the dissolution of partnership firm the closing balances of which account are not transferred to Realisation account ?
Answer:
During the dissolution of partnership firm the closing balances of the following accounts are not transferred to Realisation account, (i) Cash/Bank account (ii) Partners loan account (iii) Partners capital account (iv) Partners current account (v) Accounts of Undistributed Reserves and balance of profit and loss account between parnters.
Question 12.
During dissolution of partnership firm, after paying out partners capital, if any balance remains, then what is the accounting effect of it ?
Answer:
During dissolution of partnership firm, if the balance remains after paying out partners capital then the balance amount is distributed among the partners in their profit-loss sharing ratio.
Question 13.
During dissolution of partnership firm, if no information is given regarding the value realised of a particular asset, then what would be its accounting effect ?
Answer:
During dissolution of partnership firm if there is no information of the realised value of an asset then, if it is a fixed asset, it is taken at book value and if it is intangible assets like goodwill, patents and trademark etc. it has to be considered that no value has been realised for them.
Question 14.
During dissolution of partnership firm if the recorded creditors are adjusted with recorded asset then no effect is given, why ?
Answer:
During dissolution of partnership firm the recorded creditors and recorded asset is already transferred to realisation account, so the accounting of both is already done. So no more accounting effect is needed.
Question 15.
Which expense are paid first from the money realised during the dissolution of partnership firm ?
Answer:
The dissolution expense are paid first from the money realised during the dissolution of partnership firm.
Question 16.
During dissolution of partnership firm, the workmens compensation fund account is closed and transferred to which account ?
Answer:
During dissolution of partnership firm, the workmens compensation fund account is closed and trnasferred to credit side of realisation account under the heading sundry liability.
Question 17.
By which other name Realisation Account is known ?
Answer:
Realisation Account is also known as Disposal Account.
Question 18.
After completing the accounting of dissolution of partnership firm, the cash account shows which balance ?
Answer:
After completing the accounting of dissolution of partnership firm, the closing balance of cash account is same as capital account and it is will be squared up.
State whether the following statements are True or False. If false give the correct statement.
(1) At the legal point of view, when the entire existence of partnership firm is wiped off, it is known as disolution.
Answer:
This statement is True.
(2) When except one, all the partners of the firm retire it is not known as dissolution.
Answer:
This statement is False. When except one, all the partners of the firm retire it is known as dissolution.
(3) When any one partner retires from the partnership firm, it is known as dissolution.
Answer:
This statement is False. When any one partner retires from the partnership firm, the firm does not get dissolved. The remaining partners can run the firm.
(4) If all the partners of the firm are declared insolvent or the business being run becomes illegal, then the firm gets dissolved.
Answer:
This statement is True.
(5) The court can interfere in the dissolution of partnership firm.
Answer:
This statement is True.
(6) In partnership firm, the liability of all the partners is limited to their capital.
Answer:
This statement is False. In partnership firm the liability of all the partners is unlimited.
(7) The workers accident fund is distributed among partners in their profit-loss sharing ratio.
Answer:
This statement is True.
(8) For payment of liabilities of partnership firms, partners personal assets can not be used.
Answer:
This statement is False. For payment of liabilities of partnership firms partners personal
assets can be used as partners have unlimited liability.
(9) During dissolution of partnership firm, the provisions accounts created against assets are not closed.
Answer:
This statement is False. During dissolution of partnership firm, the provisions accounts created against assets are closed and shown on credit side of Realisation account.
(10) During dissolution of partnership firm the goodwill shown in the balance sheet is transferred to partners capital account in their profit-loss sharing ratio.
Answer:
This statement is False. During dissolution of partnership firm the goodwill shown in balance sheet is transferred to Realisation account on debit side.
(11) The dissolution expense of firm is generally borne by the firm.
Answer:
This statement is True.
(12) During dissolution of firm, the general reserve account is closed and the balance is transferred to Realisation account.
Answer:
This statement is False. During dissolution of firm, the general reserve account is closed and the balance is transferred to partners capital account.
(13) Realisation account is also known as Disposal account.
Answer:
This statement is True.
(14) During dissolution except cash and bank all the accounts of Balance Sheet i.e. Assets, Liabilities, Reserves and Provisions are transferred to Realisation account.
Answer:
This statement is True.
(15) Realisation account is a Nominal account.
Answer:
This statement is False. The Realisation account is a real account.
(16) The dissolution expense are paid at last from the money realised from dissolution.
Answer:
This statement is False. The dissolution expense are paid first from the money realised from dissolution.
(17) It is responsibility of a partnership firm to pay the dissolution expense, but if any of the partner agrees to pay the dissolution expense, then no accounting effect is given for it.
Answer:
This statement is False. It is partnership firms responsibility to pay for the dissolution expense but if any partner decides to pay it then it will be debited to Realisation account and credited to partners capital account.
(18) The partners wife’s personal loan to the firm is paid before the third party liabilities are paid.
Answer:
This statement is False. The partners wife’s personal loan to the firm is repaid with other third
part liabilities.
(19) During dissolution, the unrecorded contingent liabilities are debited to Realisation account and then paid.
Answer:
This statement is True.
(20) During dissolution, it is not necessary to record bad debts recovered.
Answer:
This statement is False. If any bad debts are recovered then it is debited Cash/Bank account and credited to Realisation account.
(21) Workmens Profit-sharing fund is a reserve for the firm.
Answer:
This statement is False. Workmens Profit sharing fund is a liability for the firm.
(22) Realisation account is prepared to know the profit and loss of the firm.
Answer:
This statement is False. During dissolution of partnership firm, to give effect of disposal of assets and liabilities of the firm, Realisation account is prepared.
(23) If the recorded creditors are adjusted against the recorded assets, then there is no accounting effect to be given.
Answer:
This statement is Ture.
(24) During dissolution of the firm, if there is no information about the payment to the creditors then, it is assumed that they have been paid.
Answer:
This statement is True.
(25) During dissolution of the firm if there is no information regarding realised value of intangible assets of firm then it is assmed that nothing has been realised.
Answer:
this statement is True.
Select the appropriate option for each question :
Question 1.
Closing of an ongoing partnership firm known as ?
(A) Re-establishment
(B) Dissolution
(C) Regeneration
(D) Division
Answer:
(B) Dissolution
Question 2.
Which type of dissolution of partnership firm takes place with the consent of all the partners ?
(A) Sjimple Dissolution
(B) Dissolution by court
(C) Compulsory Dissolution
(D) Dissolution through agreement
Answer:
(A) Sjimple Dissolution
Question 3.
During dissolution which of the following is not included in third party liability ?
(A) Creditors
(B) Providend Fund
(C) Partners’ wiife’s loan
(D) Partners loan
Answer:
(C) Partners’ wiife’s loan
Question 4.
From the money realised during dissolution firm which of the following is paid first ?
(A) Dissolution expense
(B) Third party liabilities
(C) Partner’s wife’s loan
(D) Partner’s loan
Answer:
(A) Dissolution expense
Question 5.
From the money realised during dissolution of partnership firm, which of the following is paid at the end ?
(A) Dissolution expense
(B) Partner’s wife’s loan
(C) Partner’s loan
(D) Excess of capital account
Answer:
(D) Excess of capital account
Question 6.
To give effect of dissolution of partnership firm, which account is prepared ?
(A) Revaluation account
(B) Profit and loss account
(C) Disposal account
(D) Memorandum Revaluation account
Answer:
(C) Disposal account
Question 7.
By which other name is Realisation account known ?
(A) Disposal account
(B) Revaluation account
(C) Profit and loss account
(D) Memorandum Revaluation account
Answer:
(A) Disposal account
Question 8.
When is the loan given partner’s wife repaid in dissolution of partnership firm ?
(A) Before normal liabilities
(B) After normal liabilities
(C) With normal liabilities
(D) After all the liabilities
Answer:
(C) With normal liabilities
Question 9.
The closing balance of which of the following account is not taken to Realisation account on the date of dissolution of the firm ?
(A) Bad debts reserve account
(B) Debtors account
(C) Investment account
(D) Bank account
Answer:
(D) Bank account
Question 10.
Where are the closing balances of Depreciation fund, Investment fluctuation fund and Bad debts reserve shown while dissolution ?
(A) Credit side of Partners capital account
(B) Credit side of Assets account
(C) Credit side of Realisation account
(D) Liability side of Balance Sheet
Answer:
(C) Credit side of Realisation account
Question 11.
During the dissolution of partnershuip firm the closing balance of Investment fluctuation fund shown in Balance sheet is transferred to which account ?
(A) To Investment account
(B) To Realisation account
(C) To Partners capital account
(D) To Partners current account
Answer:
(B) To Realisation account
Question 12.
What will be the effect if any creditors is given any asset of the firm ?
(A) Debit side of Realisation account
(B) Credit side of Realisation account
(C) Credit side of Cash account
(D) No effect
Answer:
(D) No effect
Question 13.
There is no value mentioned of goodwill in the books of accounts, but while dissolution ? 12,000 has been realised towards goodwill. What will be its accounting effect ?
(A) Credited to Cash/Bank account
(B) Credited to Realisation account
(C) Credited to Goodwill account
(D) No effect
Answer:
(B) Credited to Realisation account
Question 14.
It has been decided to give salary of ₹ 15,000 to a partner named Parth Shah for woking on dissolution procedure of firm, but Parth Shah pays ₹ 12,000 towards dissolution expense so what amount will be recorded in Realisation account.
(A) ₹ 15,000
(B) ₹ 27,000
(C) ₹ 12,000
(D) ₹ 3,000
Answer:
(A) ₹ 15,000
Question 15.
During dissolution of firm, after deducting BDR of X3,000 the Debtors remain at ₹ 45,000. At which amount debtors will be shown on debit side of Realisation account ?
(A) ₹ 42,000
(B) ₹ 45,000
(C) ₹ 48,000
(D) ₹ 3,000
Answer:
(B) ₹ 45,000
Question 16.
The creditors of ₹ 25,000 were paid with the unrecorded investment of ₹ 22,000. What will be its effect on dissolution of partnership firm ?
(A) Debited to Realisation account
(B) Credited to Realisation account
(C) Credited to Partners capital account
(D) No effect
Answer:
(D) No effect
Question 17.
During dissolution, Creditors of ₹ 60,000 were given for unrecorded investments of ₹ 45,000 so by which amount cash account is credited ?
(A) ₹ 1,05,000
(B) ₹ 45,000
(C) ₹ 60,000
(D) ₹ 15,000
Answer:
(D) ₹ 15,000
Question 18.
During dissolution the value of goodwill ₹ 50,000, but there is no clarity regarding its realised value. What will be its accounting effect ?
(A) Debited to Cash account
(B) Credited to Realisation account
(C) Credited to Partners Capital account
(D) No effect
Answer:
(D) No effect
Question 19.
During dissolution of partnership firm the book value of furniture is ₹ 60,000, but there is no information of its realised value. What will be its accounting effect ?
(A) Credited to Cash account
(B) Credited to Realisation account
(C) Credited to Partner’s capital account
(D) No effect
Answer:
(B) Credited to Realisation account
Question 20.
By what amount will the cash account be credited during dissolution if non-recorded creditors of ₹ 50,000 are adjusted against unrecorded investment of ₹ 35,000 ?
(A) ₹ 85,000
(B) ₹ 50,000
(C) ₹ 15,000
(D) ₹ 35,000
Answer:
(C) ₹ 15,000