List of top Accountancy Questions on Dissolution of Partnership Firms

Under what circumstances partnership firm is dissolved?

What do you mean by dissolution of a partnership firm? What are the provisions of the Indian Partnership Act regarding settlement of accounts at the dissolution of a partnership firm?

What is ‘Realisation Account’?

On dissolution of a partnership firm, profit or loss on realisation is distributed among the partners:

Pass necessary journal entries for the following transactions on the dissolution of the partnership firm of Mansha and Rajiv after various assets (other than cash) and external liabilities have been transferred to Realisation Account: (i) Mansha’s loan of ₹ 18,000 was settled by giving her an unrecorded furniture of ₹ 20,000.
(ii) Machinery of the book value of ₹ 80,000 was sold at a loss of 10%.
(iii) A creditor of ₹ 40,000 accepted cash ₹ 21,000 and stock of the book value of ₹ 25,000 in full settlement of his claim.
(iv) Bank loan of ₹ 1,00,000 was paid along with interest of ₹ 10,000.
(v) Investments of the face value of ₹ 52,000 were sold in the open market for ₹ 63,000 for which a commission of ₹ 2,000 was paid to the broker.
(vi) Profit and Loss Account balance of ₹ 30,000 appeared on the asset side of the balance sheet.

Madhavan, Chatterjee and Pillai were partners in a firm sharing profits and losses in the ratio of 2 : 1 : 2. On 31stMarch, 2024, their Balance Sheet was as follows :

Balance Sheet of Madhavan, Chatterjee and Pillai as at 31^st March, 2024

 

Liabilities	Amount (₹)	Assets	Amount (₹)
Creditors	1,10,000	Cash at Bank	4,05,000
Outstanding Expenses	17,000	Stock	2,20,000
Mrs. Madhavan’s Loan	2,00,000	Debtors	95,000
Chatterjee’s Loan	1,70,000	Less: Provision for Doubtful Debts	(5,000)
Capitals:	Madhavan – 2,00,000	Land and Building	1,82,000
	Chatterjee – 1,00,000	Plant and Machinery	1,00,000
	Pillai – 2,00,000
Total	9,97,000	Total	9,97,000

On the above date, the firm was dissolved and the following transactions took place :
Debtors were taken over by the creditors in full settlement of their claim.
Madhavan agreed to pay Mrs. Madhavan’s loan.
50% of the stock was taken over by Chatterjee at 10% less than the book value. The remaining stock was sold at a profit of 20%.
Land and Building was taken over by Pillai for \(₹1,00,000\) and Plant and Machinery was sold as scrap for \(₹20,000\).
Realisation expenses \(₹17,000\) were paid by cheque.
Prepare Realisation Account.

On the dissolution of the partnership firm of Raman, Hari and Suresh, realisation expenses \(₹17,000\) were paid by a debtor of \(₹75,000\) on behalf of the firm. The remaining amount was received from him along with interest of \(₹2,000\) for delayed payment. Realisation Account will be ___________ by ___________.

White, Shaun and Todd were partners in a firm sharing profits and losses equally. Shaun’s wife had advanced a loan of ₹ 1,00,000 to the firm. The firm was dissolved. Shaun’s wife’s loan had already been transferred to Realisation account. The account credited to discharge Shaun’s wife’s loan will be :

On dissolution, Mohan's loan of ₹10,000 will be discharged by crediting:

On dissolution of a firm, there was an unrecorded asset of \(₹15,000\) which was taken over by a partner at \(₹13,000\). Partner’s capital account will be debited by :

When realisation expenses are paid by a partner on behalf of the firm, then :

Pass the necessary journal entries for the following transactions on the dissolution of a partnership firm of Vibha and Ajit after various assets (other than cash) and external liabilities have been transferred to Realisation Account:}
Creditors worth ₹ 46,000 accepted ₹ 9,000 cash and furniture of ₹ 32,000 in full settlement of their claim.

The firm had stock of ₹ 20,000. Ajit took over 40% of the stock at a discount of 10% while the remaining stock was sold for ₹ 18,000.

Vibha was appointed to look after dissolution work for which she was allowed a remuneration of ₹ 16,000. Vibha agreed to bear the dissolution expenses. Actual dissolution expenses ₹ 15,000 were paid by Vibha.

Ajit’s loan of ₹ 45,000 was settled at ₹ 42,000.

A machine which was not recorded in the books was taken over by Vibha at ₹ 23,000, whereas its expected value was ₹ 28,000.

The firm had a debit balance of ₹ 20,000 in the Profit and Loss Account on the date of dissolution.

Pass necessary Journal entries for the following transactions on the dissolution of a firm after the transfer of assets and liabilities has been made to Realisation Account:
(i) Debtors of ₹ 60,000; provision for doubtful debts ₹ 2,000. ₹ 56,000 were collected.
(ii) Creditors were ₹ 80,000; settled at ₹ 76,000.

Arushi, Vivaan and Mitali were partners in a firm. On 31st March 2024, the firm was dissolved. On that date, the firm had debtors of \( ₹ 60,000 \) and provision for doubtful debts of \( ₹ 3,000 \) were existing in the books. Debtors of \( ₹ 8,000 \) proved bad and full amount was realised from the remaining debtors. The amount realised from debtors was:

Assertion (A): In a partnership firm, the private assets of the partners can also be used to pay off the firm’s debts.
Reason (R): The liability of the partners for acts of the firm is limited.
Choose the correct option from the following: