MCQs on Dissolution of Partnership Firm
What is the primary difference between dissolution of partnership and dissolution of a firm?
- (A) Business continues in both cases
- (B) Business is terminated in dissolution of the firm
- (C) Economic relationship among partners continues in both cases
- (D) Court involvement is mandatory in both cases
Answer: (B)
Which section of the Partnership Act, 1932, defines the dissolution of a firm?
- (A) Section 39
- (B) Section 48
- (C) Section 44
- (D) Section 49
Answer: (A)
Dissolution by mutual agreement of all partners is known as:
- (A) Dissolution by court
- (B) Compulsory dissolution
- (C) Dissolution by agreement
- (D) Dissolution by notice
Answer: (C)
When does a firm undergo compulsory dissolution?
- (A) When one partner retires
- (B) When all partners become insolvent
- (C) When a partner gives a notice
- (D) Upon revaluation of assets
Answer: (B)
A firm constituted for a specific venture dissolves when:
- (A) The venture is incomplete
- (B) The venture is completed
- (C) A partner retires
- (D) The firm faces losses
Answer: (B)
When can a court order the dissolution of a firm?
- (A) A partner transfers his entire interest to a third party
- (B) A partner becomes incapable of performing duties
- (C) The firm incurs continuous losses
- (D) All of the above
Answer: (D)
What is a Realisation Account used for in the dissolution of a firm?
- (A) Managing day-to-day expenses
- (B) Recording sale of assets and settlement of liabilities
- (C) Preparing new balance sheet
- (D) Estimating future profits
Answer: (B)
In case of a loss during dissolution, the loss is borne by partners:
- (A) Equally
- (B) According to their capital ratio
- (C) According to profit-sharing ratio
- (D) By the solvent partner only
Answer: (C)
What happens to unrecorded assets during dissolution?
- (A) They are written off as a loss
- (B) They are transferred to Realisation Account
- (C) They are distributed equally among partners
- (D) They are ignored
Answer: (B)
Which of the following is true for partner's private debts in relation to firm debts during dissolution?
- (A) Firm debts have priority over private debts
- (B) Private debts have priority over firm debts
- (C) Both have equal priority
- (D) Private debts are irrelevant
Answer: (A)
What happens to the books of the firm upon dissolution?
- (A) They are updated for future operations
- (B) They are kept open for legal purposes
- (C) They are closed permanently
- (D) They are transferred to the new firm
Answer: (C)
On dissolution, partner's loan account is transferred to:
- (A) Realisation Account
- (B) Partner's Capital Account
- (C) Bank Account
- (D) It remains unaffected
Answer: (D)
If a liability is assumed by a partner, the journal entry is:
- (A) Debit Partner’s Capital Account
- (B) Credit Realisation Account
- (C) Debit Realisation Account
- (D) Credit Partner’s Capital Account
Answer: (D)
Which of the following is not transferred to the Realisation Account?
- (A) Creditors
- (B) Fixed assets
- (C) Partner’s loan
- (D) Stock
Answer: (C)
Who bears the loss when a partner becomes insolvent?
- (A) All partners equally
- (B) The insolvent partner's family
- (C) Solvent partners in capital ratio
- (D) Solvent partners in profit-sharing ratio
Answer: (C)
In the absence of any agreement, the loss on realisation is borne by partners:
- (A) Equally
- (B) Based on capital ratio
- (C) Based on their profit-sharing ratio
- (D) None of the above
Answer: (C)
What happens when a partner takes over an asset during dissolution?
- (A) Debit Realisation Account and Credit Partner’s Capital Account
- (B) Debit Partner’s Capital Account and Credit Realisation Account
- (C) Debit Asset Account and Credit Partner’s Capital Account
- (D) Debit Partner’s Current Account and Credit Bank Account
Answer: (B)
Which account is credited when unrecorded liabilities are paid?
- (A) Realisation Account
- (B) Bank Account
- (C) Partner’s Capital Account
- (D) None of the above
Answer: (A)
What is the sequence of payment in case of dissolution?
- (A) Partner's private debts → Firm's debts → Partner's loans
- (B) Firm's debts → Partner's loans → Capital accounts
- (C) Firm's debts → Capital accounts → Partner's loans
- (D) Partner's loans → Firm's debts → Capital accounts
Answer: (B)
Which of these methods requires court intervention?
- (A) Dissolution by notice
- (B) Compulsory dissolution
- (C) Dissolution by court
- (D) Dissolution by agreement
Answer: (C)
Additional MCQs on Dissolution of Partnership Firm
Dissolution by mutual consent of partners requires the consent of:
- (A) Majority of partners
- (B) All partners
- (C) At least two partners
- (D) None of the above
Answer: (B)
Which of the following is not a mode of dissolution of a firm?
- (A) Dissolution by notice
- (B) Change in profit-sharing ratio
- (C) Compulsory dissolution
- (D) Dissolution by agreement
Answer: (B)
In a partnership at will, the firm is dissolved by notice if:
- (A) All partners sign the notice
- (B) A single partner gives notice in writing
- (C) Majority of partners vote in favor of dissolution
- (D) A court intervenes
Answer: (B)
The Garner vs. Murray rule is applicable when:
- (A) All partners are solvent
- (B) A partner is insolvent
- (C) The partnership is reconstituted
- (D) The firm faces legal issues
Answer: (B)
On dissolution, after paying liabilities to external parties, the balance of assets is used to pay:
- (A) Partners' capital accounts
- (B) Partners' loans
- (C) General reserve
- (D) Realisation expenses
Answer: (B)
Which of the following liabilities are paid first during dissolution?
- (A) Partner's loans
- (B) Secured external liabilities
- (C) Partner's capital
- (D) Unsecured liabilities
Answer: (B)
Which of the following statements is true?
- (A) Dissolution of a firm always leads to dissolution of partnership
- (B) Dissolution of partnership always leads to dissolution of a firm
- (C) Partnership continues even after firm dissolution
- (D) Both partnership and firm dissolution are the same
Answer: (A)
Unrecorded liabilities are accounted for during dissolution by:
- (A) Ignoring them
- (B) Recording them in the Realisation Account
- (C) Adding them to partner's capital
- (D) Writing them off as a loss
Answer: (B)
When assets are sold during dissolution, the amount received is credited to:
- (A) Realisation Account
- (B) Partner's Capital Account
- (C) Profit and Loss Account
- (D) Bank Account
Answer: (D)
Which account is prepared to ascertain the profit or loss on dissolution?
- (A) Profit and Loss Account
- (B) Realisation Account
- (C) Cash Flow Statement
- (D) Balance Sheet
Answer: (B)
Which of these is transferred to the debit side of Realisation Account?
- (A) Partner’s capital
- (B) Assets (except cash/bank)
- (C) External liabilities
- (D) General reserve
Answer: (B)
Who bears the realisation expenses if not specified otherwise?
- (A) All partners equally
- (B) A designated partner
- (C) The firm
- (D) Paid by the creditors
Answer: (C)
Accumulated profits and reserves during dissolution are:
- (A) Credited to Realisation Account
- (B) Credited to Partner’s Capital Account
- (C) Credited to Bank Account
- (D) Credited to General Reserve
Answer: (B)
An unrecorded asset taken over by a partner is:
- (A) Debited to Realisation Account
- (B) Debited to Partner’s Capital Account
- (C) Credited to Partner’s Capital Account
- (D) Credited to Realisation Account
Answer: (D)
If a creditor accepts an asset in full settlement of their account, the journal entry includes:
- (A) Debit Partner’s Capital Account
- (B) Credit Realisation Account
- (C) Debit Realisation Account
- (D) No entry is made
Answer: (D)
What happens if a partner is unable to pay their share of the firm’s loss?
- (A) The loss is written off
- (B) Other partners bear the loss in their capital ratio
- (C) The loss is distributed equally
- (D) It is ignored in the accounts
Answer: (B)
What is credited when a partner pays a liability directly on behalf of the firm?
- (A) Realisation Account
- (B) Partner’s Capital Account
- (C) Bank Account
- (D) Liability Account
Answer: (B)
Which of the following is shown on the credit side of Realisation Account?
- (A) Assets taken over by partners
- (B) External liabilities
- (C) Bank overdraft
- (D) Dissolution expenses
Answer: (A)
When a firm’s liabilities exceed its assets, the deficiency is:
- (A) Shared equally among partners
- (B) Paid by the solvent partners in profit-sharing ratio
- (C) Paid by all partners equally
- (D) Ignored as a loss
Answer: (B)
If realisation expenses exceed the agreed amount, the excess is:
- (A) Paid by the partner responsible
- (B) Paid by the firm
- (C) Added to the loss on realisation
- (D) Ignored in accounts
Answer: (A)
If a partner agrees to bear realisation expenses, the firm:
- (A) Pays the partner the agreed amount
- (B) Bears the entire cost itself
- (C) Distributes the cost among partners
- (D) Does not record the expenses
Answer: (A)
In a Realisation Account, liabilities transferred are shown on the:
- (A) Debit side
- (B) Credit side
- (C) Both debit and credit side
- (D) Bank Account
Answer: (B)
If a liability is settled by handing over an asset, the entry for cash payment includes:
- (A) Only the cash paid
- (B) The full liability value
- (C) The asset’s book value
- (D) No entry is made
Answer: (A)
Assets realized at values higher than their book value result in:
- (A) Profit on realisation
- (B) Loss on realisation
- (C) Adjustment in Capital Account
- (D) No effect on realisation
Answer: (A)
Loss on dissolution is transferred to:
- (A) Realisation Account
- (B) Partner’s Capital Account
- (C) Profit and Loss Account
- (D) None of the above
Answer: (B)
How is an insolvent partner’s capital deficiency treated?
- (A) Written off as a loss
- (B) Recovered from creditors
- (C) Borne by solvent partners in their capital ratio
- (D) Ignored
Answer: (C)
If a partner takes over a liability, the Realisation Account is:
- (A) Debited
- (B) Credited
- (C) Adjusted in the Partner’s Loan Account
- (D) Ignored
Answer: (A)
When the firm is dissolved, the amount left after paying all liabilities is distributed:
- (A) Equally among partners
- (B) As per capital balances
- (C) In profit-sharing ratio
- (D) As decided by the court
Answer: (C)
A partner’s loan appearing on the liabilities side of the balance sheet is settled by:
- (A) Crediting the loan account
- (B) Paying through Realisation Account
- (C) Direct payment from Bank Account
- (D) Transferring to Capital Account
Answer: (C)
When creditors accept an asset in full settlement, the Realisation Account is:
- (A) Credited with the asset value
- (B) Debited with the asset value
- (C) Credited with the liability amount
- (D) Ignored
Answer: (C)
What is the treatment of goodwill during dissolution if not recorded earlier?
- (A) It is written off
- (B) It is realised and transferred to Realisation Account
- (C) It is credited to Profit and Loss Account
- (D) It is distributed among partners
Answer: (B)
Which of the following is prepared to show the effect of dissolution?
- (A) Realisation Account
- (B) Profit and Loss Account
- (C) Balance Sheet
- (D) Cash Flow Statement
Answer: (A)
Unrecorded liabilities settled during dissolution are:
- (A) Credited to Partner’s Capital Account
- (B) Debited to Realisation Account
- (C) Debited to Profit and Loss Account
- (D) Ignored
Answer: (B)
Who bears the realisation expenses if the agreement is silent?
- (A) The firm
- (B) Solvent partners
- (C) Partners in profit-sharing ratio
- (D) The court appoints a responsible partner
Answer: (A)
Realisation expenses paid by a partner are:
- (A) Debited to Partner’s Capital Account
- (B) Credited to Realisation Account
- (C) Debited to Realisation Account
- (D) Credited to Partner’s Loan Account
Answer: (A)
When unrecorded assets are realised, they are:
- (A) Debited to Realisation Account
- (B) Credited to Bank Account
- (C) Credited to Realisation Account
- (D) Ignored
Answer: (C)
When a firm’s debts are more than the firm's assets, the partner's private property is used:
- (A) To pay the firm’s debts only after settling private debts
- (B) To pay firm debts directly
- (C) To pay both debts equally
- (D) Only for private debts
Answer: (A)
When a partner agrees to complete the dissolution work for a fee, the fee is:
- (A) Debited to Realisation Account
- (B) Credited to Realisation Account
- (C) Debited to Partner’s Capital Account
- (D) Ignored in accounting
Answer: (A)
If a partner’s capital account shows a debit balance on dissolution, the partner:
- (A) Pays the deficit in cash
- (B) Contributes through unrecorded assets
- (C) Recovers it from solvent partners
- (D) Does not pay anything
Answer: (A)
Which account is used to pay external liabilities after dissolution?
- (A) Realisation Account
- (B) Bank Account
- (C) Partner’s Capital Account
- (D) Partner’s Loan Account
Answer: (B)
Which of the following is transferred to the credit side of the Realisation Account?
- (A) All assets
- (B) All liabilities
- (C) Proceeds from the sale of assets
- (D) Capital balances
Answer: (C)
When a partner takes over stock during dissolution, the journal entry includes:
- (A) Debit Realisation Account and Credit Partner’s Capital Account
- (B) Debit Partner’s Capital Account and Credit Realisation Account
- (C) Debit Stock Account and Credit Partner’s Capital Account
- (D) Debit Stock Account and Credit Bank Account
Answer: (B)
The balance in Realisation Account represents:
- (A) Net profit/loss on realisation
- (B) Capital balances of partners
- (C) Partner’s personal liabilities
- (D) Bank overdraft
Answer: (A)
On dissolution, goodwill not shown in the books is:
- (A) Written off as a loss
- (B) Sold and transferred to Realisation Account
- (C) Distributed among partners equally
- (D) Ignored
Answer: (B)
If a liability is settled for less than its book value, the difference is treated as:
- (A) A profit on realisation
- (B) A loss on realisation
- (C) Capital adjustment
- (D) Realisation expenses
Answer: (A)
Assets taken over by creditors in full settlement are:
- (A) Debited to Partner’s Capital Account
- (B) Credited to Realisation Account
- (C) Debited to Realisation Account
- (D) Ignored in accounting
Answer: (B)
What happens to the balance of General Reserve on dissolution?
- (A) Transferred to Realisation Account
- (B) Shared among partners in profit-sharing ratio
- (C) Credited to Bank Account
- (D) Used to pay liabilities
Answer: (B)
On dissolution, unrecorded assets are:
- (A) Distributed among partners
- (B) Sold and credited to Realisation Account
- (C) Transferred to Capital Account
- (D) Ignored
Answer: (B)
Which account records the payment of liabilities during dissolution?
- (A) Realisation Account
- (B) Profit and Loss Account
- (C) Bank Account
- (D) Capital Account
Answer: (C)
When a firm is dissolved, the firm's debts are settled:
- (A) After settling partners' private debts
- (B) Before partners' private debts
- (C) Simultaneously with private debts
- (D) Only if the firm has sufficient assets
Answer: (B)
When is a Realisation Account debited during dissolution?
- (A) When assets are sold
- (B) When liabilities are paid
- (C) When partners take over liabilities
- (D) All of the above
Answer: (D)
The payment to creditors during dissolution is made through:
- (A) Bank Account
- (B) Realisation Account
- (C) Partner’s Capital Account
- (D) None of the above
Answer: (A)
Which of the following expenses is recorded in Realisation Account?
- (A) Day-to-day operational expenses
- (B) Realisation expenses
- (C) Personal expenses of partners
- (D) Office renovation expenses
Answer: (B)
What is transferred to the credit side of the Partner’s Capital Account on dissolution?
- (A) Realisation profits
- (B) Accumulated losses
- (C) Liabilities taken over
- (D) None of the above
Answer: (A)
If assets are realised at less than book value, it results in:
- (A) Profit on realisation
- (B) Loss on realisation
- (C) No effect on accounts
- (D) A gain for creditors
Answer: (B)
When a partner’s loan appears on the asset side of the balance sheet, it is:
- (A) Settled through Realisation Account
- (B) Paid through Bank Account
- (C) Adjusted with Capital Account
- (D) Ignored during dissolution
Answer: (C)
Who is paid first during dissolution?
- (A) Partners’ private creditors
- (B) Firm’s external creditors
- (C) Partners’ capital balances
- (D) Solvent partners
Answer: (B)
What is the nature of Realisation Account?
- (A) Personal account
- (B) Nominal account
- (C) Real account
- (D) None of the above
Answer: (B)
What happens to fictitious assets during dissolution?
- (A) Written off against Capital Account
- (B) Credited to Realisation Account
- (C) Sold like other assets
- (D) Ignored
Answer: (A)
Which of the following is not closed on dissolution?
- (A) Realisation Account
- (B) Partner’s Capital Account
- (C) Partner’s Loan Account
- (D) Bank Account
Answer: (D)
What is transferred to the debit side of Realisation Account?
- (A) Assets and liabilities
- (B) Assets only
- (C) Liabilities only
- (D) None of the above
Answer: (B)
Accumulated losses on dissolution are:
- (A) Transferred to Realisation Account
- (B) Shared among partners in profit-sharing ratio
- (C) Ignored as they are already written off
- (D) Written off using bank balance
Answer: (B)
Which of the following is true for contingent liabilities during dissolution?
- (A) They are ignored
- (B) They are settled if they materialize
- (C) They are shown in the Balance Sheet
- (D) They are transferred to Capital Account
Answer: (B)
If a partner takes over an asset, the corresponding entry is made in:
- (A) Realisation Account and Partner’s Capital Account
- (B) Bank Account and Partner’s Capital Account
- (C) Profit and Loss Account and Realisation Account
- (D) None of the above
Answer: (A)
On dissolution, who settles the firm’s debts first?
- (A) Partners
- (B) External creditors
- (C) Employees
- (D) The court
Answer: (B)
When an unrecorded liability is identified during dissolution, it is:
- (A) Paid and debited to Realisation Account
- (B) Transferred to Partner’s Loan Account
- (C) Shared among partners equally
- (D) Ignored
Answer: (A)
Which of the following is credited to the Partner’s Capital Account during dissolution?
- (A) Realisation profit
- (B) Accumulated losses
- (C) Fictitious assets
- (D) None of the above
Answer: (A)
Realisation expenses agreed upon with a partner are:
- (A) Credited to Realisation Account
- (B) Debited to Partner’s Capital Account
- (C) Paid directly by Bank Account
- (D) Debited to Realisation Account
Answer: (D)
Unrealized assets during dissolution are:
- (A) Written off as a loss
- (B) Transferred to Partner’s Capital Account
- (C) Adjusted with creditors’ payments
- (D) Ignored
Answer: (A)
Realisation Account is finally closed by transferring its balance to:
- (A) Bank Account
- (B) Partner’s Capital Accounts
- (C) Partner’s Current Accounts
- (D) Profit and Loss Account
Answer: (B)
Who bears the loss of a partner unable to contribute due to insolvency?
- (A) Remaining solvent partners in their profit-sharing ratio
- (B) Creditors of the firm
- (C) The court-appointed arbitrator
- (D) Firm’s bank account
Answer: (A)
If dissolution expenses exceed the agreed amount, the excess is borne by:
- (A) The partner managing dissolution
- (B) All partners in profit-sharing ratio
- (C) Credited to Realisation Account
- (D) Written off
Answer: (A)
Which type of liability is settled after external creditors?
- (A) Partners’ loans
- (B) Bank overdrafts
- (C) Contingent liabilities
- (D) Partner’s private debts
Answer: (A)
If creditors accept an asset valued more than the debt, the excess is:
- (A) Credited to Realisation Account
- (B) Credited to Bank Account
- (C) Written off as a loss
- (D) Paid back to the firm
Answer: (D)
When partners agree to dissolve the firm, the mode is called:
- (A) Dissolution by court
- (B) Dissolution by agreement
- (C) Compulsory dissolution
- (D) Dissolution by contingency
Answer: (B)
When unrecorded assets are realized, they are:
- (A) Credited to Realisation Account
- (B) Debited to Partner’s Capital Account
- (C) Debited to Bank Account
- (D) Written off
Answer: (A)
The Realisation Account is credited when:
- (A) Assets are realized
- (B) Liabilities are transferred
- (C) Partners take over liabilities
- (D) Realisation expenses are incurred
Answer: (A)
The last payment in dissolution is made to:
- (A) External creditors
- (B) Partners' loan accounts
- (C) Partners' capital accounts
- (D) Unrecorded liabilities
Answer: (C)
Realisation profit or loss is divided among partners based on:
- (A) Capital ratio
- (B) Profit-sharing ratio
- (C) Equal ratio
- (D) Solvent partner’s ratio
Answer: (B)
What is the key objective of Realisation Account?
- (A) Prepare a new balance sheet
- (B) Record profit-sharing changes
- (C) Ascertain profit or loss on dissolution
- (D) Record liabilities taken over by partners
Answer: (C)
No comments:
Post a Comment