Niraj Jha

Dc chowk & Sector - 16

DISSOLUTION
Class 12 - Accountancy
Time Allowed: 1 hour Maximum Marks: 25

1. Which of the following Reserve or fund is not transferred to the Realisation Account? [1]

a) Reserve for doubtful debts b) Contingency Reserve

c) Investment Fluctuation Reserve d) Employee Provident Fund

2. What Journal Entry will be passed on dissolution of a partnership firm when a partner agreed to bear the [1]
dissolution expenses for ₹ 10,000?
Actual expenses paid by partner were ₹ 15,000.

a) Realisation A/c Dr. 15,000 b) Realisation A/c Dr. 10,000

To Partner's Capital To Partner's Capital

15,000 10,000
A/c A/c

c) No Entry d) Realisation A/c Dr. 15,000

Dissolution Exp. A/c

Dr. 10,000
Dr.

To Bank A/c 15,000

3. Assertion (A): Loan from a partner is not transferred to Realisation Account. [1]
Reason (R): Loan from a partner is not an outside liability but is paid before repayment of capital.

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.

4. Assertion (A): On dissolution, Loan by firm to a Partner is not transferred to Partner’s Capital Account but is [1]
recovered from him.
Reason (R): Such a loan is an asset of the firm and hence this amount is recovered from the partner so that it is
utilised to make payment of third party liabilities of the firm.

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.

5. 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.

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 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.
6. Read the text carefully and answer the questions: [5]
Sharma and Mishra were partners in a firm sharing profits and losses in the ratio of 7 : 3. They decided to
dissolve firm on 31st March, 2016 on that date, their books showed the following ledger account balances:

Sundry Creditors 27,000

Profit & Loss A/c (Dr.) 8,000

Cash in hand 6,000

Bank Loan 20,000

Bills Payable 5,000

Sundry Assets 1,98,000

Capital A/cs:

Sharma 1,12,000

Mishra 48,000

Additional information:
i. Bills payable falling due on 31st May, 2016 retired on the date of dissolution of the firm at a rebate of 6% per
annum.
ii. The bankers accepted the furniture (included in sundry assets) having a book value of ₹ 18,000 in full
settlement of the loan given by them.
iii. Remaining assets were sold for ₹ 1,50,000.
iv. Liability on account of outstanding salary not recorded in the books, amounting to ₹ 15,000 was met.
v. Mishra agreed to take over the responsibility of completing the dissolution work to bear all expenses of
realization at an agreed remuneration of ₹ 2,000. The actual realization expenses were ₹ 1,500 which were
paid by the firm on behalf of Mishra.
(a) The amount of Bills payable paid is:

a) ₹ 4,950 b) ₹ 5,000

c) ₹ 5,150 d) ₹ 4,500
(b) The loss on the realisation transferred to Mishra's Capital Account is:

a) ₹ 15,000 b) ₹ 13,485

c) ₹ 44,950 d) ₹ 31,465

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 (c) What will be the amount of past loss transferred to Sharma's Account?

a) ₹ 5,000 b) ₹ 2,500

c) ₹ 2,400 d) ₹ 5,600
(d) Consider the following Accounts:
i. Sharma's Capital Account
ii. Mishra's Capital Account
iii. Realisation Account
iv. Profit and Loss Account
Which account will be affected by the realisation expenses paid by Mishra?

a) (i) and (iii) b) (i) only

c) (i), (ii) and (iii) d) (ii) and (iii)

(e) The bankers accepted the furniture (included in sundry assets) having a book value of ₹ 18,000 in full
settlement of the loan given by them. Treatment should be-

a) recorded in partner's capital account b) both b and c

c) no entry d) recorded in realisation account

7. Jiya and Priya were partners sharing profits and losses equally. On 31st March, 2023, the Balance Sheet of the [6]
firm was as follows:
BALANCE SHEET
as at 31st March 2023

Liabilities ₹ Assets ₹

Sundry Creditors 60,000 Cash 25,000

Priya's Loan 15,000 Debtors 42,000

General Reserve 15,000 Less: Provision for Doubtful Debts (6,000) 36,000

Investment Fluctuation Fund 2,000 Stock 12,000

Priya's Capital 30,000 Investments 18,000

Jiya's Capital 10,000 Plant and Machinery 39,000

Jiya's Loan 2,000

1,32,000 1,32,000

Their firm was dissolved on above date and the assets and liabilities were settled as follows:
i. The creditors were paid off by giving them the plant and machinery at a discount of 10% and the balance in
cash.
ii. Priya’s loan was paid with interest of ₹ 500.
iii. Debtors realised 10% less of the amount due from them.
iv. Stock was taken over by Priya at ₹ 7,000.
v. Investments realised 80% of their book value.
vi. Realisation expenses ₹ 600 were paid by Jiya.
You are required to prepare:

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 a. Realisation Account.
b. Priya's Loan Account and Jiya’s Loan Account
c. Capital Accounts, and
d. Bank Account.
8. Naina, Uday and Tara were partners in a firm sharing profits and losses in the ratio of 5:3:2. The firm was [6]
dissolved on 31-3-2019. After transfer of assets (other than cash) and external liabilities to Realization Account,
the following transactions took place:
a. A typewriter completely written off from the books was sold for ₹ 4,000.
b. Loan of ₹ 30,000 advanced by Uday to the firm was paid back.
c. Tara was to get remuneration of ₹ 42,000 for completing the dissolution process and for bearing realization
expenses. Actual realization expenses amounted to ₹ 51,000 and were paid by the firm.
d. Creditors of ₹ 23,000 took over all the investments at ₹ 12,000. Remaining amount was paid to them in cash.
e. Uday agreed to pay loan of Mrs. Uday ₹ 45,000.
f. Profit and Loss Account balance of ₹ 20,000 appeared on the asset side of the balance sheet.
Pass necessary journal entries for the above transactions in the books of the firm.

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