Chapter Exam

Chapter 4: Dissolution of Partnership Firm — Online MCQ Test

Q: Which account is prepared to record the sale of assets and payment of liabilities on dissolution?

Answer: B. Realisation Account — Realisation Account is prepared to close assets and liabilities and determine profit or loss on dissolution.

Q: Which of the following is generally NOT transferred to the Realisation Account?

Answer: C. Cash in hand — Cash or bank balance is not transferred to Realisation Account because it is used for making final payments.

Q: Profit on realisation is transferred to partners' capital accounts in their:

Answer: B. Profit-sharing ratio — Any profit or loss on realisation is distributed among partners in their profit-sharing ratio.

Q: Assets of ₹1,00,000 and liabilities of ₹30,000 are transferred to Realisation Account. Assets realised ₹75,000, liabilities were settled for ₹28,000, and realisation expenses were ₹2,000. What is the result of realisation?

Answer: B. Loss ₹25,000 — Debit side = ₹1,00,000 + ₹28,000 + ₹2,000 = ₹1,30,000; credit side = ₹30,000 + ₹75,000 = ₹1,05,000. Hence, loss = ₹25,000.

Q: A firm has cash available of ₹90,000 after paying all outside liabilities. A and B share profits in the ratio 3:2. Their capitals are ₹60,000 and ₹40,000 respectively. There is a realisation loss of ₹25,000 and B has a loan of ₹10,000. What will be the final payments to A and B?

Answer: C. A ₹45,000; B ₹40,000 — Loss is shared as A ₹15,000 and B ₹10,000. Final capital balances are A ₹45,000 and B ₹30,000; B's loan of ₹10,000 is also paid, so B receives ₹40,000.

Q: Assets excluding cash are ₹1,50,000 and cash is ₹10,000. Creditors are ₹40,000. Capitals of A and B are ₹70,000 and ₹50,000, sharing profits equally. Assets realised ₹1,20,000, creditors were settled for ₹38,000 and realisation expenses were ₹2,000. What are the final payments to A and B?

Answer: A. A ₹55,000; B ₹35,000 — Realisation loss = ₹30,000, shared equally as ₹15,000 each. Final capitals are A ₹55,000 and B ₹35,000, matching total available cash of ₹90,000.

Q: Partner A takes over machinery at ₹60,000 and also takes over creditors at ₹45,000. Realisation expenses of ₹3,000 are paid by A on behalf of the firm. What is the net effect on A's Capital Account?

Answer: A. Debit ₹12,000 — A is debited ₹60,000 for asset taken over, credited ₹45,000 for liability taken over, and credited ₹3,000 for expenses paid. Net debit = ₹60,000 - ₹48,000 = ₹12,000.

Q: Assets of ₹2,00,000 and liabilities of ₹70,000 are transferred to Realisation Account. Assets realised ₹1,75,000; an unrecorded asset realised ₹10,000; liabilities were settled for ₹65,000; an unrecorded liability of ₹8,000 was paid; and expenses were ₹4,000. What is the profit or loss on realisation?

Answer: B. Loss ₹22,000 — Debit side = ₹2,00,000 + ₹65,000 + ₹8,000 + ₹4,000 = ₹2,77,000. Credit side = ₹70,000 + ₹1,75,000 + ₹10,000 = ₹2,55,000, so loss = ₹22,000.

ACCOUNTANCY · CLASS 12 SECOND PUC · Karnataka State Board

Practice Chapter 4: Dissolution of Partnership Firm with a free chapter-wise online MCQ test for Karnataka State Board CLASS 12 SECOND PUC ACCOUNTANCY. This chapter covers: Dissolution Realisation Account Winding up Assets Realisation Liabilities Settlement Cash Account Bank Account Partner Loan Capital Deficiency Insolvency Final Settlement. AI-generated questions from basic to board-exam level, with instant results and explanations.

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Chapter 4: Dissolution of Partnership Firm — Important Questions & Answers (FAQ)

Frequently asked questions from Karnataka State Board CLASS 12 SECOND PUC ACCOUNTANCY — Chapter 4: Dissolution of Partnership Firm, with answers and explanations. These are sample questions; the exam has its own separate question set.

Dissolution of a partnership firm means:

A. Closing down the business of the firm and ending the relationship among all partners ✓
B. Admission of a new partner without closing the business
C. Change in profit-sharing ratio among existing partners
D. Retirement of one partner while the firm continues

Answer: A. Closing down the business of the firm and ending the relationship among all partners
Dissolution of a firm means the business is wound up and the relationship among all partners comes to an end.

Which account is prepared to record the sale of assets and payment of liabilities on dissolution?

A. Revaluation Account
B. Realisation Account ✓
C. Partners' Current Account
D. Profit and Loss Appropriation Account

Answer: B. Realisation Account
Realisation Account is prepared to close assets and liabilities and determine profit or loss on dissolution.

Which of the following is generally NOT transferred to the Realisation Account?

A. Stock
B. Debtors
C. Cash in hand ✓
D. Creditors

Answer: C. Cash in hand
Cash or bank balance is not transferred to Realisation Account because it is used for making final payments.

Profit on realisation is transferred to partners' capital accounts in their:

A. Capital ratio
B. Profit-sharing ratio ✓
C. Equal ratio always
D. Loan ratio

Answer: B. Profit-sharing ratio
Any profit or loss on realisation is distributed among partners in their profit-sharing ratio.

Assets of ₹1,00,000 and liabilities of ₹30,000 are transferred to Realisation Account. Assets realised ₹75,000, liabilities were settled for ₹28,000, and realisation expenses were ₹2,000. What is the result of realisation?

A. Profit ₹3,000
B. Loss ₹25,000 ✓
C. Profit ₹25,000
D. Loss ₹3,000

Answer: B. Loss ₹25,000
Debit side = ₹1,00,000 + ₹28,000 + ₹2,000 = ₹1,30,000; credit side = ₹30,000 + ₹75,000 = ₹1,05,000. Hence, loss = ₹25,000.

If a partner takes over an outside liability on dissolution, the correct journal entry is:

A. Partner's Capital Account Dr. To Realisation Account
B. Realisation Account Dr. To Partner's Capital Account ✓
C. Bank Account Dr. To Partner's Capital Account
D. Partner's Loan Account Dr. To Realisation Account

Answer: B. Realisation Account Dr. To Partner's Capital Account
When a partner takes over a liability, Realisation Account is debited and the partner's capital account is credited.

A firm has cash available of ₹90,000 after paying all outside liabilities. A and B share profits in the ratio 3:2. Their capitals are ₹60,000 and ₹40,000 respectively. There is a realisation loss of ₹25,000 and B has a loan of ₹10,000. What will be the final payments to A and B?

A. A ₹45,000; B ₹45,000
B. A ₹50,000; B ₹40,000
C. A ₹45,000; B ₹40,000 ✓
D. A ₹40,000; B ₹50,000

Answer: C. A ₹45,000; B ₹40,000
Loss is shared as A ₹15,000 and B ₹10,000. Final capital balances are A ₹45,000 and B ₹30,000; B's loan of ₹10,000 is also paid, so B receives ₹40,000.

Assets excluding cash are ₹1,50,000 and cash is ₹10,000. Creditors are ₹40,000. Capitals of A and B are ₹70,000 and ₹50,000, sharing profits equally. Assets realised ₹1,20,000, creditors were settled for ₹38,000 and realisation expenses were ₹2,000. What are the final payments to A and B?

A. A ₹55,000; B ₹35,000 ✓
B. A ₹50,000; B ₹40,000
C. A ₹60,000; B ₹30,000
D. A ₹45,000; B ₹45,000

Answer: A. A ₹55,000; B ₹35,000
Realisation loss = ₹30,000, shared equally as ₹15,000 each. Final capitals are A ₹55,000 and B ₹35,000, matching total available cash of ₹90,000.

Partner A takes over machinery at ₹60,000 and also takes over creditors at ₹45,000. Realisation expenses of ₹3,000 are paid by A on behalf of the firm. What is the net effect on A's Capital Account?

A. Debit ₹12,000 ✓
B. Credit ₹12,000
C. Debit ₹18,000
D. Credit ₹18,000

Answer: A. Debit ₹12,000
A is debited ₹60,000 for asset taken over, credited ₹45,000 for liability taken over, and credited ₹3,000 for expenses paid. Net debit = ₹60,000 - ₹48,000 = ₹12,000.

Assets of ₹2,00,000 and liabilities of ₹70,000 are transferred to Realisation Account. Assets realised ₹1,75,000; an unrecorded asset realised ₹10,000; liabilities were settled for ₹65,000; an unrecorded liability of ₹8,000 was paid; and expenses were ₹4,000. What is the profit or loss on realisation?

A. Profit ₹22,000
B. Loss ₹22,000 ✓
C. Profit ₹30,000
D. Loss ₹30,000

Answer: B. Loss ₹22,000
Debit side = ₹2,00,000 + ₹65,000 + ₹8,000 + ₹4,000 = ₹2,77,000. Credit side = ₹70,000 + ₹1,75,000 + ₹10,000 = ₹2,55,000, so loss = ₹22,000.

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Chapter 5: Accounting for Share Capital