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Micheal Vaz solutions for 12th Board Exam Book Keeping and Accountancy chapter 6 - Dissolution of Partnership Firm

Micheal Vaz Class 12 Accounts - Book Keeping and Accountancy

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Micheal Vaz Micheal Vaz Class 12 Accounts - Book Keeping and Accountancy

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Chapter 6: Dissolution of Partnership Firm

ExercisePractical Problems

Chapter 6: Dissolution of Partnership Firm Exercise Exercise solutions [Page 181]

Exercise | Q 1 | Page 181

Answer in one Sentence only.
What is dissolution of partnership firm?

Exercise | Q 2 | Page 181

Answer in one Sentence only.
When is Realisation Account opened?

Exercise | Q 3 | Page 181

Answer in one Sentence only.
Which accounts are not transferred to Realisation Account?

Exercise | Q 4 | Page 181

Answer in one Sentence only.
Who is called Insolvent person?

Exercise | Q 5 | Page 181

Answer in one Sentence only.
What is Capital Deficiency?

Exercise | Q 6 | Page 181

Answer in one Sentence only.
In what proportion is the balance on Realisation Account transferred to Partner’s Capital Account?

Exercise | Q 7 | Page 181

Answer in one Sentence only.
Who should bear the capital deficiency of an insolvent partner?

Exercise | Q 8 | Page 181

Answer in one Sentence only.
Which account is debited on repayment of Partner’s Loan?

Exercise | Q 9 | Page 181

Answer in one Sentence only.
Why is Realisation Account opened?

Exercise | Q 10 | Page 181

Answer in one Sentence only.
Which account is debited on payment of dissolution expenses?

Chapter 6: Dissolution of Partnership Firm Exercise Exercise solutions [Page 181]

Exercise | Q 1 | Page 181

Write the word / term / phrase, which can substitute the following statements.
Debit balance in realisation account.

Exercise | Q 2 | Page 181

Write the word / term / phrase, which can substitute the following statements.
Winding up of partnership business.

Exercise | Q 3 | Page 181

Write the word / term / phrase, which can substitute the following statements.
An account opened to find out the Profit or Loss on Sale of Assets and Settlement of Liabilities.

Exercise | Q 4 | Page 181

Write the word / term / phrase, which can substitute the following statements.
Debit balance of an insolvent Partner’s Capital Account.

Exercise | Q 5 | Page 181

Write the word / term / phrase, which can substitute the following statements.
Credit balance in Realisation Account.

Exercise | Q 6 | Page 181

Write the word / term / phrase, which can substitute the following statements.
Conversion of assets into cash on dissolution of firm.

Exercise | Q 7 | Page 181

Write the word / term / phrase, which can substitute the following statements.
Liability likely to arise in future on happening of certain events.

Exercise | Q 8 | Page 181

Write the word / term / phrase, which can substitute the following statements.
Assets which are not recorded in the books of accounts.

Exercise | Q 9 | Page 181

Write the word / term / phrase, which can substitute the following statements.
The account which shows realisation of assets and discharge of liabilities.

Exercise | Q 10 | Page 181

Write the word / term / phrase, which can substitute the following statements.
Expenses incurred on dissolution of a firm.

Chapter 6: Dissolution of Partnership Firm Exercise Exercise solutions [Page 181]

Exercise | Q 1 | Page 181

State whether the following statements is True or False.

The firm is dissolved automatically on the retirement of a partner.

  • True

  • False

Exercise | Q 2 | Page 181

State whether the following statements is True or False.

On dissolution Cash or Bank Account is closed automatically.

  • True

  • False

Exercise | Q 3 | Page 181

State whether the following statements is True or False.

On dissolution Bank Overdraft is transferred to Realisation Account.

  • True

  • False

Exercise | Q 4 | Page 181

State whether the following statements is True or False.

A Solvent partner having debit balance to his Capital Account does not share the deficiency of Insolvent Partner’s Capital Account.

  • True

  • False

Exercise | Q 5 | Page 181

State whether the following statements is True or False.

At the time of dissolution of Partnership Firm all assets should be transferred to Realisation A/c.

  • True

  • False

Exercise | Q 6 | Page 181

State whether the following statements is True or False.

Debit balance of insolvent Partner’s Capital A/c is known as Capital Deficiency.

  • True

  • False

Exercise | Q 7 | Page 181

State whether the following statements is True or False.

At the time of dissolution loan from partner will be transferred to Realisation Account.

  • True

  • False

Exercise | Q 8 | Page 181

State whether the following statements is True or False.

Dissolution takes place when the relation among the partner’s comes to an end.

  • True

  • False

Exercise | Q 9 | Page 181

State whether the following statements is True or False.

The insolvency loss at the time of dissolution of the firm is shared by the Solvent Partner’s in their Profit-sharing ratio.

  • True

  • False

Exercise | Q 10 | Page 181

State whether the following statements is True or False.

Realisation loss is not transferred to insolvent partner’s Capital Account.

  • True

  • False

Chapter 6: Dissolution of Partnership Firm Exercise Exercise solutions [Page 182]

Exercise | Q 1 | Page 182

Select the most appropriate alternative from those given below :

In case of dissolution assets and liabilities are transferred to _____________A/c.

  • Bank A/c

  • Partner’s capital A/c

  • Realisation A/c

  • Partner’s current A/c

Exercise | Q 2 | Page 182

Select the most appropriate alternative from those given below :

Dissolution expenses are credited to _____________A/c.

  • Realisation A/c

  • Cash/Bank A/c

  • Partner’s Capital A/c

  • Partner’s Loan A/c

Exercise | Q 3 | Page 182

Select the most appropriate alternative from those given below :

Deficiency of Insolvent partner will be suffered by solvent partners in their ___________ ratio.

  • capital ratio

  • profit-sharing ratio

  • sale ratio

  • liquidity ratio

Exercise | Q 4 | Page 182

Select the most appropriate alternative from those given below :

If any asset is taken over by partner from firm his Capital A/c will be____________.

  • credited

  • debited

  • added

  • none of these

Exercise | Q 5 | Page 182

Select the most appropriate alternative from those given below :

If any unrecorded liability is paid on dissolution of the firm____________ account is debited.

  • Cash/Bank A/c

  • Realisation A/c

  • Partner’s Capital A/c

  • Loan A/c

Exercise | Q 6 | Page 182

Select the most appropriate alternative from those given below :

Partnership is compulsorily dissolved when the partners of the firm become ____________

  • Solvent

  • Insolvent

  • Creditor

  • None of these

Exercise | Q 7 | Page 182

Select the most appropriate alternative from those given below :

Assets and liabilities are transferred to Realisation Account at their ____________values.

  • Market

  • purchase

  • sale

  • book

Exercise | Q 8 | Page 182

Select the most appropriate alternative from those given below :

If the number of partners in a firm falls below two, the firm stands____________

  • dissolved

  • established

  • realisation

  • None of these

Exercise | Q 9 | Page 182

Select the most appropriate alternative from those given below :

Realisation Account is __________on realisation of assets.

  • debited

  • credited

  • deducted

  • None of these

Exercise | Q 10 | Page 182

Select the most appropriate alternative from those given below :

All activities of the partnership firm cease (stop) on ____________ of firm.

  • dissolution

  • admission

  • retirement

  • None of these

Chapter 6: Dissolution of Partnership Firm Exercise Practical Problems solutions [Pages 182 - 188]

Practical Problems | Q 1 | Page 182

Sushil and Sumit were in partnership sharing profits and losses in the proportion of 3/5 and 2/5 respectively. On 31st March, 2005 they decide to dissolve the firm when their Balance Sheet was as under:

Balance Sheet as on 31st March, 2005

Liabilities Amount (Rs) Assets Amount (Rs)

Sushil’s Capital

20,000 Plant and Machinery 15,000
Sumit's Capital 18,000 Stock 15,000
General Reserve 5,000

Sundry Debtors

22,000
Sumit’s Loan A/c 2,000 Bank

3,000

Sundry Creditors 10,000    
  55,000   55,000

The Assets realised as follows: Stock Rs 14,000, Plant and Machinery Rs 12,000 and Debtors Rs 20,000. The Sundry Creditors were paid Rs 9,000 in full settlement.

Prepare: Realisation Account, Partners Capital Accounts and Bank Account.

Practical Problems | Q 2 | Page 183

Ganesh and Chandan were partners sharing profits and losses in the proportion of 3:2. They dissolve the partnership firm on 31st March, 2011 when their position was as follows:

               Balance Sheet as on 31st March, 2011

Liabilities Amount
(Rs)
Assets Amount (Rs)
Sundry Creditors 25000 Debtors 112500 100000
Bank overdraft 20000 Less : R.D.D 12500
Reserve Fund 30000 Stock 225000
Capital Accounts:   Furniture 50000
Ganesh 230000 Motor Car 75000
Chandan 150000 Cash in hand 5000
  455000   455000

The Assets realised as follows: Debtors Rs 90,000, Stock Rs 2,00,000, and Goodwill Rs 25,000, Motor Car was taken over by Ganesh for Rs 70,000 and Furniture by Chandan for Rs 60,000.
The Creditors were paid Rs 22,500 in full settlement. The expenses of realisation amounted to Rs 10,000.

Pass necessary journal entries in the books of the firm.

Practical Problems | Q 3 | Page 183

Anil and Sunil were partners sharing profits and losses in the ratio of 3:2. Their Balance Sheet as on 31st March, 2009.

                Balance Sheet as on 31st March, 2009

Liabilities Amount (Rs) Assets Amount (Rs)
Capital Account   Bank 30000
Anil 50000 Stock 25000
Sunil 30000 Debtors 70000
Current Account   Plant 45000
Anil 15000 Building 35000
Sunil 10000    
Creditors 87000  
Bills payable 13000  
  205000   205000

The firm was dissolved on the above date and the assets realised as under:

1) Stock Rs 20,000, Debtors Rs 60,000, Plant Rs 40,000 and Building Rs 30,000.

2) Anil agreed to pay off the bills payable.

3) Creditors were paid in full.

4) Dissolution expenses were Rs 7,000. 
Prepare:
(i) Realisation Account
(ii) Bank Account
(iii) Current Account and Capital Account of the partners.

Practical Problems | Q 4 | Page 184

X, Y and Z were carrying on business. They share profits and losses in the ratio of 5:3:2 respectively. Their Balance Sheet as on 31st March, 2010 was as under:

              Balance Sheet as on 31st March, 2010

Liabilities Amount (Rs) Assets Amount (Rs)
Sundry Creditors 21000 Plant and Machinery 20000
Y’s loan 5000 Investment 8000
Reserve fund 20000 Stock  
Capital Account:   Debtors 18000 17000
X 20000 Less : R.D.D 1000
Y 10000 Cash in hand 2000
Z 4000 Cash at Bank 3000
  80000   80000

On the above date the firm was dissolved and the assets realised as under:

1) Investment Rs 5,000, Stock Rs 24,000 and Debtors Rs 15,000.

2) The Plant and Machinery was taken over by Mr. ‘X’ at book value.

3) Sundry Creditors and Mr. ‘Y’ loan were paid in full.

4) Realisation expenses incurred Rs 1,000.

Prepare Realisation Account, Partner’s Capital Account and Bank Account

Practical Problems | Q 5 | Page 184

A, B and C were partners sharing profits and losses in the ratio of 3:2:1. On 31st March, 2010. Their Balance Sheet was as follows:

              Balance Sheet as on 31st March, 2010

Liabilities Amount (Rs) Assets Amount (Rs)
Sundry Creditors 15400 Cash at Bank 3500
Bills payable 3600 Stock 19800
A’s loan A/c 10000 Debtors 15000 14000
Capital Account:   Less : Provision 1000
A 20000 Join Life Policy 4000
B 16000 Plant and Machinery 43700
C 8000    
Reserve Fund 12000  
  85000   85000

The firm was dissolved on 31st March, 2010 and the assets realised as follows:

1) Join Life Policy was taken over by Mr. A at Rs 5,000.

2) Stock realised Rs 18,000, Debtors realised Rs 14,500, Plant and Machinery was sold for Rs 36,000.

3) Liabilities were paid in full. In addition one bill for Rs 700 under discount was dishonoured and had to be taken up by the firm.

4) There were no realisation expenses.

Give the Journal entries and necessary Ledger Accounts to close the books of the firm.

Practical Problems | Q 6 | Page 185

Pannalal, Babulal and Hiralal were partners sharing profits and losses in the proportion of 2:2:1, following is their Balance Sheet as on 31st March, 2008.

             Balance Sheet as on 31st March, 2008

Liabilities Amount (Rs) Assets Amount (Rs)
Capital Accounts:   Machinery 25000
Pannalal 30000 Stock 10000
Babulal 10000 Debtors 27500 26000
Hiralal 10000 Less : R.D.D 1500
General Reserve 3000

Investment

12000
Creditors 20000 Profit and Loss A/c 9000
Pannalal’s Loan A/c 4000 Bank 2000
Bills payable 7000    
  84000   84000

On the above date the partners decided to dissolve the firm:

1) Assets were realised: Machinery Rs 22,500, Stock Rs 9,000, Investment Rs 10,500, Debtors Rs 22,500.

2) Dissolution expenses were Rs 1,500.

3) Goodwill of the firm realised Rs 12,000

Pass the necessary Journal entries in the books of the firm.

Practical Problems | Q 7 | Page 185

Mahesh, Suresh and Jayesh were partners of the firm. They decided to dissolve the firm on 31st March, 2012. Their Balance Sheet as on that date was as under:

        Balance Sheet as on 31st March, 2012

Liabilities Amount (Rs) Assets Amount (Rs)
Creditors 18000 Cash at Bank 9600
Loan 4500 Sundry Assets 51000
Capitals   Debtors 72600 69000
Mahesh 82500 Less : R.D.D. 3600
Suresh 30000 Stock 23400
Jayesh 21000 Furniture 3000
  156000   156000

The firm was dissolved as follows:

1) Mahesh will accept furniture for Rs 2,000 and agreed accept the debtors of book value of Rs 60,000 at on agreed value of Rs 51,000.

2) Suresh will accept stock at an agreed value Rs 20,000, and Sundry Assets of Book value Rs 24,000 at Rs 23,500.

3) Jayesh will accept remaining Sundry Assets for Rs 25,000 He will further accept the liability of loan along with due interest at 12% p.a.

    Interest for three months on this loan was outstanding and was not recorded in the books.

4) Expenses of dissolution were Rs 1,000 and outstanding expenses of Rs 1,200 were to be paid from the firm.

5) The remaining debtors were realised Rs 7,000. 
Prepare:
1) Realisation A/c
2) Partner’s Capital A/c
3) Bank A/c

Practical Problems | Q 8 | Page 186

Gautam, Viral and Ashwin were Partners sharing profits and losses equally. Their Balance sheet as on 31st December, 2011 was as follows:

          Balance Sheet as on 31st December, 2011

Liabilities Amount (Rs) Assets Amount (Rs)
Capital Accounts:   Building 73,900
Gautam 75000 Furniture 44,100
Virat 45000 Stock 25,400
Reserve Fund 27,000

Debtors

33,600
Creditors 48,500 Cash 15,000
Bank Loan 11,500 Ashwin’s Capital 15,000
  207000   207000

The firm was dissolved due to insolvency of Ashwin and the following was the result.

(i) The realisation of Assets were as follows:

a) The stock was completely damaged and could realise worth Rs 16,500 only.

b) Building was sold for Rs 49,800.

c) Furniture was realised by the firm at Rs 23,100 less than the book value.

d) A Customer who owes Rs 14,400 became insolvent and nothing could be recovered from his private estate.

(ii) Creditors were paid for Rs 36,900 in full settlement and Bank Loan was discharged fully.

(iii) The expenses of realisation Rs 4,100

(iv) Ashwin became insolvent and the firm could recover only Rs 4,000 from his private estate.

Prepare Realisation A/c, Partner’s Capital A/c and cash A/c to close the books of the firm.

Practical Problems | Q 9 | Page 186

(When one partner becomes insolvent)
Rahul, Rohit and Ramesh were partners in a firm sharing profit and losses in the ratio of 2:2:1 respectively.The Balance Sheet as on 31st March, 2012 was as follows:
          Balance Sheet as on 31st December, 2011

Liabilities Amount (Rs) Assets Amount (Rs)
Sundry Creditors 20000 Cash at Bank 8000
Bills payable 5000 Stock 20000
General Reserve 6000 Debtors 16000 15000
Rahul’s Loan A/c 16000 Less : R.D.D 1000
Capital Account   Plant and Machinery 30000
Rahul 25000 Furniture 6000
Rohit 10000 Ramesh’s Capital A/c 3000
  82000   82000

The firm was dissolved on the above date:

1) The Assets realised as follows:

    Debtors Rs 9,000, Plant and Machinery Rs 26,000, Stock Rs 14,000 and Furniture Rs 3,000.

2) The Creditors were paid Rs 18,000 in full settlement and the bills payable were paid in full.

3) The realisation expenses amounted to Rs 3,000.

4) Ramesh become insolvent and was able to bring in only Rs 1,800 from his private estate. 
Prepare:
1) Realisation A/c
2) Bank A/c and
3) Partner’s Capital A/c

Practical Problems | Q 10 | Page 187

(When all partners become insolvent)

Shiv, Sadashiv and Sadanand are Partners in a firm sharing Profit and Losses equally whose Balance-sheet as on 31st December, 2011 stood as follows:

      Balance Sheet as on 31st December, 2011

Liabilities Amount (Rs) Assets Amount (Rs)
Capital Accounts   Sadanand’s Capital A/c 2000
Shiv 6000 Buildings 18300
Sadashiv 4000

Machinery

12700
Parvati’s Loan 10000

Debtors

9100
Sundry Creditors 30000

Bank

7900
  50000   50000

Shiv, Sadashiv and Sadanand were declared bankrupt and hence the firm was dissolved as on that date:

(i) The sundry Assets realised as follows:

     Building Rs 10,900, Machinery Rs 8,200, Debtors Rs 6,800.

(ii) Realisation expenses amounted to Rs 1,300.

(iii) Sadanand was unable to contribute anything-

Whereas Rs 1,100 and Rs 900 were recovered from the realisation of private estate of Shiv and Sadashiv respectively.

You are required to close the books of the firm.

Practical Problems | Q 11 | Page 188

Ganga, Yamuna and Godavari are in Partnership sharing profits and losses equally. Their Balance sheet as on 31st December, 2011 was as follows:

           Balance Sheet as on 31st December, 2011

Liabilities Amount (Rs) Assets Amount (Rs)
Capital Accounts   Currnet Accounts  
Ganga 25000 Yamuna 20000
Yamuna 10000 Godavari 4000
Godavari 5000 Premises 17200
Ganga’s Currnet A/c 3000 Machinery 10800
Sundry Creditors 4000 Debtors 9600
Bank loan 3000 Cash 6400
  50000   50000

Godavari was declared insolvent and hence the firm was dissolved as on that date. Premises was sold at Rs 14,800, Machinery realised Rs 6,400. Bad debts and discount allowed to Debtors amounted to Rs 1,600. Sundry creditors agreed to receive 80 paise in a rupee (Rs) in full satisfaction of their claim. Bank Loan was settled at 60% of book value. During the course of dissolution a liability under an action for damages was settled for Rs 1,400 against Rs 2,100 provided in the books of the firm. The expenses of realisation amounted to Rs 900. Goodwill contributed Rs 1,900 from her private Property.

Prepare necessary ledger accounts in the books of the firm.

Chapter 6: Dissolution of Partnership Firm

ExercisePractical Problems

Micheal Vaz Micheal Vaz Class 12 Accounts - Book Keeping and Accountancy

Micheal Vaz Class 12 Accounts - Book Keeping and Accountancy - Shaalaa.com

Micheal Vaz solutions for 12th Board Exam Book Keeping and Accountancy chapter 6 - Dissolution of Partnership Firm

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Concepts covered in 12th Board Exam Book Keeping and Accountancy chapter 6 Dissolution of Partnership Firm are Dissolution of Partnership Firm.

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