Tag: partnership account (dissolution of partnership)

Questions Related to partnership account (dissolution of partnership)

Select the most appropriate alternative from those given below:
Drawing account is closed by transferring the balance to the ______ account.

book keeping and accountancy dissolution of firm accounting record at the time of dissolution procedure of settlement of accounts partnership account (dissolution of partnership)

  1. Drawing

  2. Liabilities

  3. Assets

  4. Capital

Show answer
Correct Option: D
Explanation:

Drawing means the goods or money withdrawn from business concern for personal use. It has two aspects : 1.  It reduces the assets of business. 2. It reduces capital of partner. So it is closed by deducting from capital account.

The journal entry for transfer of assets is ______________________.

book keeping and accountancy dissolution of firm accounting record at the time of dissolution procedure of settlement of accounts partnership account (dissolution of partnership)

  1. Realisation A/c Dr.

    To Assets (Individually) A/c

  2. Assets (Individually) A/c Dr.

    To Realisation A/c

  3. Bank A/c Dr.

    To Realisation A/c

  4. Realisation A/c Dr.

    To Revaluation A/c

Show answer
Correct Option: A
Explanation:

All asset accounts excluding cash, bank and the fictitious assets, if any are closed by transfer to the debit of Realisation account at their book values. It may be noted that sundry debtors are transferred at gross value and the provision for doubtful accounts is transferred to the credit side of Realisation account along with liabilities. The same is applied for fixed assets, if provision for depreciation account is maintained. The general entry passed for the transfer of will be: 

Realisation Account  Dr. 
        To Assets (Individually) Account 

Premium paid on the life policy of the proprietor should be debited to Insurance Premium Account.

book keeping and accountancy dissolution of firm accounting record at the time of dissolution procedure of settlement of accounts partnership account (dissolution of partnership)

  1. True

  2. False

Show answer
Correct Option: B
Explanation:
Premium paid on the life policy of the proprietor should not be debited to insurance premium account. Premium paid on life policy of proprietor is not an expense in the normal course of business. It is an expense of personal nature any any expense for personal purpose is debited to drawings A/c.

Application to court for dissolution of a firm can be made :

book keeping and accountancy dissolution of firm accounting record at the time of dissolution procedure of settlement of accounts partnership account (dissolution of partnership)

  1. Where the partnership is at will

  2. Where the partnership is not at will

  3. Where is the partnership is for a fixed duration

  4. In all cases

Show answer
Correct Option: B
Explanation:

When the partnership is not at will dissolution can be made by application to court. Any partner can file a suit in the court for dissolution. Where the partnership is at will partner in a partnership can dissolve the firm by giving notice of dissolution to other parties. Where the partnership is for a fixed period, the partnership comes to an end on a date specified in partnership deed.

_________ is created to provide funds for payment to the legal heir of the deceased partner.

book keeping and accountancy dissolution of firm accounting record at the time of dissolution procedure of settlement of accounts partnership account (dissolution of partnership)

  1. Sinking fund

  2. Joint life policy

  3. Invest in mutual fund

  4. Fixed deposit in banks

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Correct Option: B

Dissolution of partnership between all the partners of the firm is called __________.

book keeping and accountancy dissolution of firm accounting record at the time of dissolution procedure of settlement of accounts partnership account (dissolution of partnership)

  1. Dissolution of the firm

  2. Dissolution of partnership

  3. Winding up of firm

  4. Termination of firm

Show answer
Correct Option: A
Explanation:

Dissolution of partnership is different from dissolution of firm. Dissolution between partners does not lead to dissolution of firm. But if dissolution is between all the partners of a firm then it leads to dissolution of firm because if there are no partners to work then firm will automatically get dissolved. For partnership minimum two persons are required. If there are no partners then there is no partnership firm. 

Under the Partnership Act, on which of these grounds a partner of a firm may sue for dissolution of the firm :

book keeping and accountancy dissolution of firm accounting record at the time of dissolution procedure of settlement of accounts partnership account (dissolution of partnership)

  1. Insanity of a partner

  2. Misconduct of a partner

  3. In both the cases

  4. Marriage of any partner

Show answer
Correct Option: C
Explanation:

Dissolution of the firm by the court can be done in both the cases when there is insanity of a partner or if a partner misconduct according to Section 44 of the Indian Partnership Act. Section 44 provides the various grounds for dissolution of firm by court.

Which of the following will result in dissolution of firm?

book keeping and accountancy dissolution of firm accounting record at the time of dissolution procedure of settlement of accounts partnership account (dissolution of partnership)

  1. Retirement

  2. Death

  3. Explusion

  4. Dissolution

Show answer
Correct Option: D
Explanation:

Retirement, Death, Expulsion does not result in dissolution of firm. It only result in dissolution of partnership. Remaining partners can still agree to continue the business of partnership firm. But dissolution of firm resulted in a complete closure of business. All the assets are sold and liabilities are paid and business ceases to exist.

According to the Partnership Act, which of this statement about the dissolution of the partnership is true.

book keeping and accountancy dissolution of firm accounting record at the time of dissolution procedure of settlement of accounts partnership account (dissolution of partnership)

  1. Dissolution of partnership is called dissolution of the firm

  2. Dissolution between the two partners is called the dissolution of the firm

  3. On the completion of the venture of the firm is called the dissolution of the firm

  4. Dissolution between all the partners of a firm is called dissolution of the firm

Show answer
Correct Option: D
Explanation:

Dissolution of partnership is different from dissolution of firm. Dissolution between partners does not lead to dissolution of firm. But if dissolution is between all the partners of a firm then it leads to dissolution of firm because if there are no partners to work then firm will automatically get dissolved. No firm can work without partners. For partnership minimum two persons are required. If there are no partners then there is no partnership firm. 

Under section $44$ of the Partnership Act, a firm may be dissolved on happening of certain contingencies like :

book keeping and accountancy dissolution of firm accounting record at the time of dissolution procedure of settlement of accounts partnership account (dissolution of partnership)

  1. Insanity of a partner

  2. Marriage of a partner

  3. By retirement of a partner

  4. Partner joining political parties

Show answer
Correct Option: A
Explanation:

Marriage of a partner does not affect the working of partnership. Retirement and a partner joining political parties can also not be a ground for dissolution because remaining partner can continue the business of partnership. But According to Section 44 of Indian Partnership Act, When a partner becomes of unsound mind and is unable to continue further then the court may order for dissolution of firm. Insanity can be ground for dissolution.