Question 1

When a liability is assumed by a partner his capital account is ----------

Accepted Answer

When a liability is assumed by a partner, his capital account is credited because the assumption of liability reduces the obligations of the partnership, effectively increasing the partner's equity in the firm.

Question 2

When an unrecorded asset is taken over by one of the partners, his capital account is ----------------

Accepted Answer

When an unrecorded asset is taken over by a partner, the value of the asset is debited to the partner's capital account to reflect the reduction in the partner's capital due to the asset being taken over.

Question 3

The account opened to close the various assets and liabilities of the firm on dissolution is called ------------- account

Accepted Answer

The Realization account is used during the dissolution of a firm to close various assets and liabilities by converting them into cash or cash equivalents, and to handle the associated expenses and gains or losses.

Question 4

When a firm is dissolved, project or loss on realization is shared by the partner's in their ------------- ratio

Accepted Answer

Profit or loss on realization is shared by the partners in their profit-sharing ratio, as it reflects their agreed-upon basis for sharing the profits and losses of the business.

Question 5

In the event of dissolution of firm the partners personal assets are first used for payment of -------------- liabilities

Accepted Answer

In the event of dissolution of a firm, the partners' personal assets are first used to pay off their personal liabilities before addressing any liabilities of the firm.

Question 6

Goodwill appearing in the balance sheet at Rs. 10,000 proved to be valueless, is not to be recorded on the ------------------ side of realization account

Accepted Answer

The answer of Goodwill appearing in the balance sheet at...

Question 7

On dissolution, partners loan, if any, will be paid ---------

Accepted Answer

The answer of On dissolution, partners loan, if any, will...

Question 8

-----------of partnership firm means closing the business of the firm

Accepted Answer

Dissolution of a partnership firm refers to the process of closing down the business operations, settling all its debts, and ending the firm's existence legally.

Question 9

On dissolution, all assets except cash are transferred to ----------- of realization account

Accepted Answer

On dissolution, all assets except cash are transferred to the debit side of the realization account. This is because the realization account is used to record the sale of assets and settlement of liabilities during the dissolution process.

Question 10

If a partner takes over some assets for value on dissolution, realization account should be -----------

Accepted Answer

When a partner takes over some assets for value on dissolution, the realization account should be credited because it represents the sale or transfer of assets to the partner, reducing the assets held by the partnership.

Question 11

In the case of dissolution of the firm , the account opened for closing various items in the balance sheet is called ----------------

Accepted Answer

The Realization Account is used during the dissolution of a firm to close off the balance sheet items, including assets and liabilities, by recording their sale and settling the accounts.

Question 12

A partnership which can be dissolved at any time by giving notice to other partners is known as ------------------

Accepted Answer

A partnership at will is a type of partnership that does not have a fixed duration or specific undertaking and can be dissolved at any time by any partner giving notice to the other partners of their intention to leave the partnership.

Question 13

Liabilities to third parties are paid -------------

Accepted Answer

Liabilities to third parties are typically prioritized and paid first in the event of a liquidation or bankruptcy, before any distributions are made to owners or shareholders.

Question 14

The ------ has distinguished the 'dissolution of partnership' from 'dissolution of firm'.

Accepted Answer

The Indian Partnership Act of 1932 distinguishes between 'dissolution of partnership' and 'dissolution of firm', addressing the nuances of ending partnerships and the complete winding up of the firm's business activities.

Question 15

Dissolution of a firm leads to

Accepted Answer

Dissolution of a firm means the firm ceases to exist and its business operations are closed down. This involves settling debts, selling off assets, and distributing the remaining assets to the partners or owners.

Question 16

Amount advanced by partner over and above the capital is paid

Accepted Answer

Amounts advanced by a partner over and above their capital are considered as loans to the partnership and are paid after settling outside debts but before the distribution of capital to partners. This ensures that external liabilities are prioritized over internal settlements.

Question 17

The nominal account prepared to close the account of business is --------------

Accepted Answer

The Realization account is prepared to close the account of a business, especially during the dissolution of a partnership firm, to ascertain the profit or loss on the sale of assets and payment of liabilities.

Question 18

Realization account is closed by transfer of profit/loss to

Accepted Answer

Realization account profit or loss is transferred to the partners' capital accounts, reflecting their share in the business's gains or losses during dissolution or reorganization.

Question 19

Realization account Dr. To partner's capital a/c; this entry is recorded when

Accepted Answer

The entry "Realization account Dr. To partner's capital a/c" is recorded when profit is transferred to the partners after the realization of assets and payment of liabilities in the event of dissolution of a partnership firm (A), and when an unrecorded liability is discovered and settled during the dissolution process (B).

Question 20

Realization account Dr. To asset a/c, this entry is written

Accepted Answer

This entry is made to transfer the book value of assets to the realization account, effectively closing the asset account in the process of liquidation or dissolution of a partnership or company.

Quiz 6: Dissolution and Settlement of Partnership Firm