RKG INSTITUTE BY CA PARAG GUPTA

B - 193 ,SECTOR 52 , NOIDA

DISSOULTION
Class 12 - Accountancy
Time Allowed: 1 hour and 30 minutes Maximum Marks: 40

1. What is the accounting treatment of the Investment Fluctuation Fund when it is given in the Balance sheet? [1]

a) Debiting Realisation account and crediting b) Crediting Investment Fluctuation Fund A/c
Investment Fluctuation Fund account and debiting Partners Capital A/cs

c) Debiting Investment Fluctuation Fund d) Debiting Bank account and crediting

account and crediting Realisation account Realisation account
2. What should be the journal entry when A takes over loan payable to Mrs. A ₹20,000 [1]

a) Realisation A/c Dr. 20,000 b) Bank A/c Dr. 58,000

To A's Capital To A's

20,000 58,000
A/c Capital A/c

c) Realisation A/c Dr. 58,000 d) Loan A/c Dr. 58,000

To Bank A/c 58,000 To A's

58,000
Capital A/c

3. On dissolution of a firm, a liability taken over by a partner is credited to: [1]

a) Realisation Account b) Profit and Loss Adjustment Account

c) Partner's Capital Account d) Profit and Loss Account

4. In which of the following cases is the business of a firm not dissolved compulsorily? [1]

a) When there is a change in profit sharing b) When a partner who is a citizen of a country
ratio between existing partners. becomes an alien enemy because of the
declaration of war with his country and
India.

c) When the business of the firm becomes d) When all but one partner becomes insolvent.
illegal.
5. On taking responsibility of payment of a liability of ₹ 50,000 by a partner, the account credited will be: [1]

a) Cash Account b) Realisation Account

c) Liability Account d) Capital Account of the Partner

6. Assertion (A): Loan from a relative of a partner is an outside liability. [1]
Reason (R): It is not transferred to the Realisation Account.

a) Both A and R are true and R is the correct b) Both A and R are true but R is not the
explanation of A. correct explanation of A.

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 c) A is true but R is false. d) A is false but R is true.
7. Assertion (A): Sonu and Monu, who share the profit and losses in the ratio 2 : 3, are dissolving the firm. There [1]
is general reserve of ₹ 60,000 in the balance sheet. The accountant transferred ₹ 24,000 in Sonu's Capital and ₹
36,000 in Monu's Capital Accounts.
Reason (R): The undistributed profits and losses and reserves are always transferred to partners' capital accounts
in their profit sharing ratio and not to the realisation account.

a) Both A and R are true and R is the correct b) Both A and R are true but R is not the
explanation of A. correct explanation of A.

c) A is true but R is false. d) A is false but R is true.

8. L and M were partners in a firm sharing profits in the ratio of 2 : 3. On 28th February, 2023 the firm was [3]
dissolved. After transferring assets (other than cash) and outsiders' liabilities to Realisation Account you are
given the following information:
i. A creditor for ₹ 1,40,000 accepted building valued at ₹ 1,80,000 and paid to the firm ₹ 40,000.
ii. A second creditor for ₹ 30,000 accepted machinery valued at ₹ 28,000 in full settlement of his claim.
iii. A third creditor amounting to ₹ 70,000 accepted ₹ 30,000 in cash and investments of the book value of ₹
45,000 in full settlement of his claim.
iv. Loss on dissolution was ₹ 4,000.
Pass necessary Journal entries for the above transactions in the books of the firm assuming that all payments
were made by cheque.
9. Distinguish between Dissolution of Partnership and Dissolution of Partnership Firm on the basis of: [3]
i. Court's intervention
ii. Economic relationship
10. Give the necessary Journal entries for the following transactions in case of dissolution of a partnership firm after [3]
various assets (other than cash and bank) and third-party liabilities have been transferred to Realisation Account:
i. Dissolution expenses ₹ 5,000 were paid by the firm.
ii. An unrecorded computer not appearing in the books of accounts realised ₹ 2,200.
iii. A creditor for ₹ 1,40,000 accepted building valued at ₹ 1,80,000 and paid to the firm ₹ 40,000.
iv. Loss on realisation ₹ 10,000 was divided between the partners Subhi and Sudha in the ratio of 4 : 1.
11. Give the necessary journal entries for the following transactions on dissolution of the firm of Kavita and Ram on [4]
31st March 2023, after the various assets (other than cash) and the third party liabilities have been transferred to
Realisation Account. They shared profits and losses in the ratio 3 : 2.
i. Ram was to get a remuneration of ₹ 23,000 for completing the dissolution process. He also agreed to bear
realization expenses. Realisation expenses of ₹ 10,000 were paid by Ram from the firm’s cash.
ii. Amit, an old customer whose account for ₹ 60,000 was written off as bad debt in the previous year, paid
90%.
iii. Creditors of ₹ 40,000, accepted furniture valued at ₹ 38,000 in full settlement of their claim.
iv. Land and Building was sold for ₹ 3,00,000 through a broker who charged 2% commission.
v. There were 500 shares of ₹ 40 each in Sunshine Ltd., acquired at a cost of ₹ 22,000 and had been written off
completely from the books. These shares are now valued at ₹ 50 each and divided among the partners in their
profit sharing ratio.
vi. Profit on realization was ₹ 45,000.

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12. Amit and Yogesh were partners in a firm. They decided to dissolve their firm. Pass necessary journal entries for [4]
the following after various assets (other than Cash and Bank) and third party liabilities have been transferred to
Realisation A/c.
i. There was furniture worth ₹ 50,000. Amit took over 50% of the furniture at 10% discount and the remaining
furniture was sold at 30% profit on book value.
ii. Profit and Loss Account was showing a credit balance of ₹ 15,000 which was distributed between the
partners.
iii. Yogesh’s loan of ₹ 6,000 was discharged at ₹ 6,200.
iv. The firm paid realization expenses amounting to ₹ 5,000 on behalf of Yogesh who had to bear these
expenses.
v. There was a bill for ₹ 1,200 under discount. The bill was received from Suraj who proved insolvent and a
first and final dividend of 25% was received from his estate.
vi. Creditors, to whom the firm owed ₹ 6,000, accepted stock of ₹ 5,000 at a discount of 5% and the balance in
cash.
vii. The loss on dissolution was ₹ 8,000.
13. A and B decided to dissolve their firm on 1st January 2023. From the information given below complete the [4]
Realisation A/c, Capital A/c and the Bank A/c:
REALISATION ACCOUNT

Dr. Cr.

Particulars ₹ Particulars ₹

To Sundry Assets: By Sundry Liabilities:

Stock A/c 6,000 Creditors A/c 38,00

Debtors A/c 19,000 Mrs. A's Loan A/c 10,000

Furniture A/c 4,000 Mrs. B's Loan A/c 15,000 63,000

By A’s Capital A/c (Investments

Plant A/c 28,000 ____
taken over)

Investments A/c 10,000 67,000 By Bank (Assets realised)

To A's Capital A/c (Mrs. A's loan

10,000 Stock 5,000
taken over)

To ____ Debtors 18,500

To ____ Furniture 4,500

Plant 25,000 53,000

By Loss on realisation transferred to:

A's Capital A/c 3

5
____

B's Capital A/c ____ ____

2

____ ____

CAPITAL ACCOUNTS

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 Dr. Cr.

Particulars A B Particulars A B

₹ ₹ ₹ ₹

To Profit & Loss A/c 4,500 ____ By ____ ____

To Realisation A/c 8,000 By Reserve 3,000 ____

To Realisation A/c (Loss) ____ ____ By ____

To 6,540 ____

____ 10,000 ____ ____

BANK ACCOUNTS

Dr. Cr.

Particulars ₹ Particulars ₹

To ____ By Realisation A/c (Creditors and B's Loan) 52,000

To ____ By Realisation A/c (Expenses of realisation) 1,600

By ____

By ____

____ ____

14. Manoj and Abhay are partners, sharing profits and losses in ratio of the capitals. They decided to dissolve their [6]
firm on 31 st March, 2023, the date on which the Balance Sheet stood as under:

Liabilities ₹ Assets ₹

Capital A/cs: Sundry Assets 16,30,000

Manoj 6,00,000 Cash 70,000

Abhay 4,00,000 10,00,000

Workmen Compensation Reserve 1,00,000

Creditors 2,00,000

Bills Payable 60,000

Others 3,40,000

17,00,000 17,00,000

Following additional information is given:

Sundry assets realised ₹ 14,00,000 and the liabilities were discharged as follows:
i. Creditors due on 31st May, 2023, were paid at a discount of 3% per annum.
ii. Bills Payable were discharged at a rebate of ₹ 1,000.
iii. Workmen Compensation Claim of ₹ 40,000 was met.
iv. Expenses of dissolution amounting to ₹ 30,000 were paid.
You are required to prepare:

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 a. Realisation Account.
b. Partners' Capital Accounts.
15. The partnership between A and B was dissolved on 31st March, 2023. On that date the respective credits to the [6]
capitals were A-₹ 1,70,000 and B-₹ 30,000. ₹ 20,000 were owed by B to the firm; ₹ 1,00,000 were owed by the
firm to A and ₹ 2,00,000 were due to the Trade Creditors. Profits and losses were shared in the proportions of
2

to A, to B.
1

The assets represented by the above stated net liabilities realised ₹ 4,50,000 exclusive of ₹ 20,000 owed by B.
The liabilities were settled at book figures. Prepare Realisation Account, Partners' Capital Accounts and Cash
Account showing the distribution to the partners.

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