Important Questions Class 12 Accountancy Chapter 6 Dissolution Of a Partnership Firm


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CBSE Class 12 Accountancy Important Questions Chapter 6 Dissolution Of a Partnership Firm


  1. Distinguish between Dissolution of Partnership and Dissolution of partnership firm
    Ans. 

    Dissolution of PartnershipDissolution of partnership firm
    a) The Partnership is dissolved but the business continue. The Business is not terminateda) The firm winds up the business.
    b) Assets and liabilities are revalued through revaluation account and the Balance sheet is preparedb) Assets are sold and the liabilities are paid off through Realisation account.
    c) The Books of accounts are not closed as the business is not terminated.d) The Books of accounts are closed.
  2. State the provisions of Section 48 of the Partnership Act 1932 regarding settlement of Accounts during the Dissolution of Partnership firm.
    Ans. According to section 48— 

    1. a) Losses including the deficiencies of Capitals are to be paid-
      1. First out of profits
      2. Next out of Capitals of the partners
      3. Lastly if required, by the partners individually in their profit sharing ratio (as their liability is unlimited)
    2. The Assets of the firm and the amount contributed by the partners to make up the deficiency of capital shall be applied for –
      1. First to pay the debts of the firm to the third parties.
      2. Next, Partners Loan(Partner has advanced to the firm)
      3. Partners capitals
      4. The residue, if any shall be distributed among the partners in their profit sharing ratio.
  3. Distinguish between Realisation account and Revaluation account
    Ans. 

    Realisation AccountRevaluation Account
    a) It is prepared in the case of Dissolution of Partnership firma)It is prepared in the case of Dissolution of Partnership.
    b) This account is prepared to realise the assets & pay off the liabilitiesb) This Account is prepared to revalue the assets and liabilities during Admission, Retirement and Death of the partner.
  4. A and B are partners sharing profits and losses equally. They decided to dissolve their firm. Assets and Liabilities have been transferred to Realisation Account. Pass necessary Journal entries for the following.Journal
    SNParticularsLFDebit(Rs)Credit(Rs)
    a)Realisation account -Dr
    A’s Capital account
    (Being commission given to A)
    40004000
    b)A‘s Capital account –Dr14000
    B‘s Capital account –Dr14000
    Advertisement Suspense account
    (Being Advertisement suspense written off)
    28000
    c)Realisation account –Dr13000
    Cash account13000
    (Being creditors paid off)
    d)B‘s Capital account –Dr4900
    Realisation account4900
    (Being asset taken over by the partner)
    e)A‘s Loan account –Dr15000
    Cash account15000
    (Being partners loan paid off)
    f)Realisation account — Dr12000
    Cash account12000
    (Being Bank loan paid off)
    1. A was to bear all the expenses of Realisation for which he was given a commission of Rs 4000.
    2. Advertisement suspense account appeared on the asset side of the Balance sheet amounting Rs 28000
    3. Creditors of Rs 40,000 agreed to take over the stock of Rs 30,000 at a discount of 10% and the balance in cash.
    4. B agreed to take over Investments of Rs 5000 at Rs 4900
    5. Loan of Rs 15000 advanced by A to the firm was paid off.
    6. Bank loan of Rs 12000 was paid off.
  5. X and Y are partners in the firm who decided to dissolve the firm. Assets and Liabilities are transferred to Realisation account. Pass necessary journal entries-
    1. Creditors were Rs100,000. They accepted Building valued Rs 1,40,000 and paid cash to the firm Rs 40,000
    2. Aman an old customer whose account of Rs 1000 was written off as bad in the previous
    3. year paid 40% of the amount.
    4. There were 300 shares of Rs 10 each in ABC Ltd which were acquired for Rs 2000 were now valued at Rs 6 each. These were taken over by the partners in the profit sharing ratio.
    5. Profit on Realisation Rs 42000 was divided among the partners.
    6. Land and Building (Book value Rs 1, 60,000) was sold for Rs 3,00,000 through a broker who charged 2% commission on the deal.
    7. Plant and machinery (Book value Rs 60,000) was handed over to the creditor in full settlement of his claim.
    S.NParticularsLFDebit (Rs)Credit (Rs)
    a)Cash account –Dr40000
    Realisation account40000
    (Being cash received from the creditor)
    b)Cash a/c –Dr400
    Realisation a/c400
    (Being cash received from a debtor whose account was written off earlier)
    c)X‘s Capital a/c –Dr900 
     
    1800
    Y‘s Capital a/c –Dr900
    Realisation a/c
    (Being Investments taken over by the partners)
    d)Realisation a/c –Dr42000
    X‘s Capital a/c21000
    Y‘s capital a/c21000
    (Being profit on Realisation distributed among the partners)
    e)Cash a/c—Dr294000
    Realisation a/c294000
    (Being Land and Building realized)
    f)NO JOURNAL ENTRY

LONG QUESTIONS—6-8 Marks

  1. Following is the Balance sheet of Karan and Sandeep who share profits and losses equally as on 31st march 2010
    LiabilitiesRsAssetsRs
    Capitals–Bank40,000
    Karan1,00,000Debtors25,000
    Sandeep50,000Stock35,000
    Creditors30,000Machinery60,000
    Workmen compensation fund15,000Furniture40,000
    Bank loan5000
    2,00,0002,00,000

    The firm was dissolved on the above date.

    1. Karan agreed to take over 50% of the stock at 10% less on its book value, the remaining stock was sold at a gain of 15%. Furniture and machinery realized for Rs 30,000 and 50,000 respectively.
    2. There was unrecorded Investments which was sold for Rs 25,000.
    3. Debtors realized Rs 31,500 (with interest) and Rs 1200 was recovered for bad debts written off last year.
    4. There was an outstanding bill for repairs which had to be paid Rs 2000.
      Prepare necessary Ledger accounts to close the books of the firm.

    Ans. Realsation account

    ParticularsRsParticularsRs
    Sundry assetsLiabilities:
    Debtors-25000Creditors : 30,000
    Stock-35,000Bank loan : 500035000
    Furniture-40,000
    Machinery-60,0001,60,000
    Bank2000Karan‘s Capital a/c15750
    a/c(outstanding repair bill)
    Bank(Creditors &Bank a/c(stock)20125
    Bank loan)35,000
    Capital accountsBank a/c(Assets80,000
    Karan : 5787.5realized)
    Sandeep: 5787.5
    11575Bank a/c(Debtors)32700
    Bank a/c(Investments)25,000
    208575208575

    Partners Capital accounts

    ParticularKaranSandeepParticularsKaranSandeep
    Realisation a/c(stock)15750Balance b/d1,00,00050,000
    Workmen‘s compensation fund75007500
    Bank account97537.563287.5Realisation a/c5787.55787.5
    113287.563287.5113287.563287.5

    Bank account

    ParticularsAmountParticularAmount
    Balance b/d40,000Realisation a/c 
    (repair bill, creditors and bank loan)
    37000
    Realisation a/c( stock)20125Karan‘s capital97537.5
    Realisation a/c(Machinery & furniture)80,000Sandeep‘s capital632875.5
    Realisation a/c(Debtors)32700
    Bank(Investments)25,000
    197825197825
  1. Following is the Balance sheet of X and Y who share profits in the ratio of 4:1 as on 31st march 2010Balance Sheet
    LiabilitiesRsAssetsRs
    Sundry Creditors8,000Bank20,000
    Bank overdraft6,000Debtors 17,00015,000
    Less provision 2000
    X‘s Brother‘s loan8,000Stock15,000
    Y‘s Loan3,000Investments25,000
    Investment 
    Fluctuation fund
    5,000Building25,000
    Capitals-
    X-50,000 
    y-40,000
    90,000Goodwill10,000
    Profit and Loss a/c10,000
    1,20,0001,20,000

    The firm was dissolved on the above date and the following was decided—

    1. X agreed to pay off his brother‘s loan
    2. Debtors of Rs 5000 proved bad.
    3. Other assets realized as follows—Investments 20% less, and Goodwill at 60%.
    4. One of the creditors for Rs 5000 was paid only Rs 3000.
    5. Building was auctioned for Rs 30,000 and the auctioneer‘s commission amounted to Rs 1000.
    6. Y took over part of the stock at Rs 4000(being 20% less than the book value)Balance stock realized 50%
    7. Realisation expenses amounted to Rs 2000.

    Prepare Realisation account, Partners capital accounts and Bank account.
    Ans.
    Realisation account

    ParticularsAmt(Rs)ParticularsAmt(Rs)
    Sundry AssetsSundry Liabilities
    Debtors 17,000Creditors – 8000
    Stock 15,000Bank overdraft – 6000
    Investments 25,000X‘s Brothers loan- 8000
    Building 25,00092,000Investment Fluctuation
    Goodwill 10,000fund – 5,00029,000
    Provision for doubtful 
    debts – 2000
    72,000
    X‘s Capital(Brothers 
    loan)
    8000Bank a/c (Assets realized)72,000
    Bank(Liabilities paid 
    off)
    Creditors- 6000
    Bank overdraft 6000
    12000Y‘s Capital(stock) 
    Loss transferred to capitals
    X- 7200
    Y- 1800
    4000 
    9000
    Bank (Realisation 
    expenses)
    2000
    1,140001,14,000

    Partner’s Capital Accounts

    ParticularsXYParticularsXY
    Profit & Loss a/c8,0002,000Balance b/d50,00040,000
    Realisation a/c4,000Realisation a/c8,000
    Realisation 
    a/c(loss)
    7,2001,800
    Bank a/c42,80032,200
    58,00040,00058,00040,000

    Bank account

    ParticularsAmt (Rs)ParticularsAmt (Rs)
    Balance b/d20,000Y‘s loan a/c3,000
    Realisation a/c (assets realized)72,000Realisation 
    a/c(liabilities paid off)
    12,000
    Realisation 
    a/c(expenses)
    2,000
    X‘s Capital a/c42,800
    Y‘s capital a/c32,200
    92,00092,000
  2. A, B and C commenced business on 1st January 2008 with capitals of Rs 50,000, 40,000 and Rs 30,000 respectively. Profits and losses are shared in the ratio of 4:3:3. During 2008 and 2009 they made profit of Rs 20,000 and Rs 25000 respectively. Each partner withdrew Rs 5000 per year.
    Ans.On 31st December 2009, they decided to dissolve the firm. Creditors and cash on that date were Rs 12,000 and Rs 2000 respectively. The Assets realized Rs 1,50,000. Creditors were settled for Rs 11,500 and realization expenses were Rs 500.
    Prepare Realisation a/c, Capital accounts and Cash account.
    Realisation account 

    ParticularsRsParticularsRs
    Sundry Assets1,45,000Creditors12,000
    Cash a/c(Creditors)11,500Cash a/c(Assets 
    realized)
    1,50,000
    Cash a/c(Expenses)500
    Capital Accounts
    A- 2,000 
    B- 1,500
    C- 1,5005,000
    1,62,0001,62,000

    Partners Capital Accounts

    ParticularsABCParticularsABC
    Cash a/c60,00045,00035,000Balance 
    b/d
    58,00043,50033,500
    Realisation 
    a/c
    2,0001,5001,500
    60,00045,00035,00060,00045,00035,000

    Cash account

    ParticularsRsParticularsRs
    Balance b/d2,000Realisation(Creditors)11,500
    Realisation a/c1,50,000Realisation a/c(expenses)500
    A‘s Capital a/c60,000
    B‘s Capital a/c45,000
    C‘s Capital a/c35,000
    1,52,0001,52,000

    Working Note: Calculation of Closing capital (Capital as on 31/12/2009)

    ParticularsABC
    Opening Capital50,00040,00030,000
    Add Profits(of two yrs)18,00013,50013,500
    Less Drawings(of 2 yrs)10,00010,00010,000
    Closing Capital58,00043,50033,500

    Memorandum Balance sheet as on 31/12/2009

    LiabilitiesRsAssetsRs
    CapitalsX- 
    58000
    Y-43500
    Z-33500
    1,35,000Cash2000
    Creditors12,000Sundry 
    Assets(Balancing fig)
    1,45,000
    1,47,0001,47,000