{"id":19985,"date":"2021-03-08T11:15:02","date_gmt":"2021-03-08T05:45:02","guid":{"rendered":"https:\/\/ncertsolutions.guru\/?p=19985"},"modified":"2021-03-08T11:29:49","modified_gmt":"2021-03-08T05:59:49","slug":"ncert-solutions-for-class-12-accountancy-chapter-5","status":"publish","type":"post","link":"https:\/\/ncertsolutions.guru\/ncert-solutions-for-class-12-accountancy-chapter-5\/","title":{"rendered":"NCERT Solutions for Class 12 Accountancy Chapter 5 Dissolution of Partnership Firm"},"content":{"rendered":"

Detailed, Step-by-Step NCERT Solutions for 12 Accountancy<\/a> Chapter 5\u00a0Dissolution of Partnership Firm Questions and Answers were solved by Expert Teachers as per NCERT (CBSE) Book guidelines covering each topic in chapter to ensure complete preparation.<\/p>\n

Dissolution of Partnership Firm NCERT Solutions for Class 12 Accountancy Chapter 5<\/h2>\n

Dissolution of Partnership Firm Questions and Answers <\/span>Class 12 Accountancy Chapter 5<\/h3>\n

Test Your Understanding-I<\/span>
\n[Page No. 228]<\/span><\/p>\n

State giving reasons, which of the following statements are true or false:<\/p>\n

1. Dissolution of a partnership is different from dissolution of a firm.
\n2. A partnership is dissolved when there is a death of a partner.
\n3. A firm is dissolved when all partners give consent to it.
\n4. A firm is compulsorily dissolved when a partner decide to retire.
\n5. Dissolution of a firm necessarily involves dissolution of partnership.
\n6. A firm is compulsorily dissolved when all partners or when all except one partner become involvent.
\n7. Court can order a firm to be dissolved when a partner becomes insane.
\n8. Dissolution of partnership cannot take place without intervention of the court.
\nAnswer:
\n1. True
\nDissolution of partnership is merely the reconstitution of partnership. In such a case existing partnership is dissolved but the firm may continue under the same name. Whereas in dissolution of firm, business of the firm terminated and the affairs of firm are to be wound up.<\/p>\n

2. True
\nIn case of death of a partner, the firm requires reconstitution of the partnership, hence partnership is dissolved.<\/p>\n

3. True
\nThis is called dissolution by agreement, when all the partners give consent to it.<\/p>\n

\"NCERT<\/p>\n

4. False
\nA partnership is compulsorily dissolved when a partner decide to retire, not the hrm;<\/p>\n

5. True
\nWhen the dissolution of firm takes place the business of the firm comes to an end therefore there is no partnership remains.<\/p>\n

6. True
\nAccording to Section 39 of Indian Partnership Act, 1932 it is the case of compulsory dissolution.<\/p>\n

7. True
\nAccording to Section 39 of Partnership Act, a firm can be dissolved by the order of court, when a partner becomes insane.<\/p>\n

8. False
\nDissolution of partnership can take place with the constent of partners not by the intervention of the court.<\/p>\n

Test Your Understanding-II [Page No. 235]
\nTick (\u2713) the Correct Answer:<\/span><\/p>\n

Question 1.
\nOn dissolution of a firm, bank overdraft is transferred to :
\n(A) Cash Account
\n(B) Bank Account
\n(C) Realisation Account
\n(D) Partner’s capital Account
\nAnswer :
\n(C) Realisation Account<\/p>\n

Question 2.
\nOn dissolution of a firm, partner’s loan account is transferred to:
\n(A) Realisation Account .
\n(B) Partner’s Capital Account
\n(C) Partner’s Current Account
\n(D) None of the above
\nAnswer :
\n(D) None of the above<\/p>\n

Question 3.
\nAfter transferring liabilities like creditors and bills payables in the Realisation Account, in the absence of any information regarding then payment, such liabilities are treated as :
\n(A) Never paid
\n(B) Fully paid
\n(C) Partly paid
\n(D) None of the above
\nAnswer :
\n(B) Fully paid<\/p>\n

\"NCERT<\/p>\n

Question 4.
\nWhen realisation expenses are paid by the firm on behalf of a partner, such expenses are debited to :
\n(A) Realisation Account
\n(B) Partner’s Capital Account
\n(C) Partner’s Loan Account
\n(D) None of the above
\nAnswer :
\n(B) Partner’s Capital Account<\/p>\n

Question 5.
\nUnrecorded assets when taken over by a partner are shown in:
\n(A) Debit of Realisation Account
\n(B) Debit of Bank Account
\n(C) Credit of Realisation Account
\n(D) Credit of Bank Account
\nAnswer :
\n(C) Credit of Realisation Account<\/p>\n

Question 6.
\nUnrecorded liabilities when paid are shown in :
\n(A) Debit of Realisation Account
\n(B) Debit of Bank Account
\n(C) Credit of Realisation Account
\n(D) Credit of Bank Account
\nAnswer :
\n(A) Debit of Realisation Account<\/p>\n

Question 7.
\nThe accumulated profits and reserves are transferred to :
\n(A) Realisation Account
\n(B) Partner’s Capital Accounts
\n(C) Bank Account
\n(D) None of the above
\nAnswer :
\n(B) Partner’s Capital Account<\/p>\n

Question 8.
\nOn dissolution of the firm, partner’s capital accounts are closed through:
\n(A) Realisation Account
\n(B) Drawings Account
\n(C) Bank Account
\n(D) Loan Account
\nAnswer :
\n(C) Bank Account<\/p>\n

Test Your Understanding-Ill<\/span>
\n[Page No. 240]<\/span><\/p>\n

Fill in the Correct Word(s):<\/p>\n

1. All assets (except cash\/bank and fictitious assets) are transferred to the …………… (Debit\/Credit) side of Account ………….. (Realisation\/ Capital).
\nAnswer:
\nDebit, Realisation<\/p>\n

2. All ……….. (internal\/external) liabilities are transferred to the …………… (Debit\/Credit) side of Account ……….. (Bank\/ Realisation).
\nAnswer:
\nexternal, Credit, Realisation<\/p>\n

3. Accumulated losses are transferred to …….. (Current\/ Capital Accounts) in ……………. (equal ratio\/profit sharing ratio).
\nAnswer:
\nCapital Accounts, profit sharing ratio<\/p>\n

\"NCERT<\/p>\n

4. If liability is assumed by a partner, such Partner’s Capital Account is ……….. (debited\/credited).
\nAnswer:
\ncredited<\/p>\n

5. If a partner takes over an asset, such (Partner’s Capital Account) is ………….. (debited\/credited).
\nAnswer:
\ndebited<\/p>\n

6. No entry is required when a ………. (partner\/creditor) accepts a fixed asset in payment of his dues.
\nAnswer:
\ncreditor<\/p>\n

7. When creditor accepts an asset whose value is more than the amount due to him, he will ……….. (pay\/not pay) the excess amount which will be credited Account.
\nAnswer:
\npay, Realisation<\/p>\n

8. When the firm has agreed to pay the partner a fixed amount for realisation work irrespective of the actual amount spent, such fixed amount is debited to …………. (Realisation\/Capital) . Account and credited to ………. (Capital\/Bank) Account.
\nAnswer:
\nRealisation, Capital<\/p>\n

9. Partner’s loan is ……….. (recorded\/not recorded) in the ……. (Realisation Account).
\nAnswer:
\nnot recorded<\/p>\n

10. Partner\u2019s Current Accounts .are transferred to respective ……………. Partner’s (Loan\/Capital) Accounts.
\nAnswer:
\nCapital<\/p>\n

Do it Yourself [Page No. 242]<\/span><\/p>\n

Give the journal entry(ies) to be recorded for the following, in case of the dissolution of a partnership firm.<\/p>\n

1. For closure of assets accounts.
\n2. For closure of liabilities accounts.
\n3. For sale of assets.
\n4. For settlement of a creditor by transfer of fixed assets to him.
\n5 For expenses of realisation when actual expenses are paid by the partner on behalf of the firm.
\n6. When a partner discharges the liability of the firm.
\n7. For payment of partner’s loan.
\n8. For settlement of capital accounts.
\nAnswer:
\n1. For closure of assets accounts
\n\"NCERT
\nAll assets transferred to realisation account at their book value and its corresponding provisions or reserve appearing on the balance sheet is also transferred to credit side of realisation account. Balance of cash account, bank account and fictitious assets are not transferred to realisation account.
\n\"NCERT
\n\"NCERT<\/p>\n

\"NCERT<\/p>\n

Short Answer Type Questions<\/span><\/p>\n

Question 1.
\nState the difference between dissolution of partnership and dissolution of partnership firm.
\nAnswer:
\nDifference between dissolution of partnership and dissolution of partnership firm.
\n\"NCERT
\n\"NCERT<\/p>\n

Question 2.
\nState the accounting treatment for:
\n1. Unrecorded assets
\n2. Unrecorded liabilities.
\nAnswer:
\nUnrecorded Assets
\nSometimes at the time of dissolution of the firm there are some assets in the business, which do not appear in the books. These may have been written off completely in the past but physically they still exist. These assets are known as unrecorded assets. On dissolution these assets might be either sold or taken over by any partner or a creditor at agreed prices. The following accounting treatment is given to the unrecorded assets :
\n\"NCERT<\/p>\n

(c) When unrecorded assets taken over by a creditor in full settlement of his claim
\n[No entry required]<\/p>\n

\"NCERT<\/p>\n

Important:
\nIt must be kept in mind that unrecorded assets would never be transferred to Realisation Account because the amount realised from its sale is in the nature of a gain and the Realisation Account is only credited accordingly.
\nFor example, at time of dissolution, firm had a Motor Car which was not shown in the books. Journal entries in following cases are given below :
\n(a) It is sold for Rs. 35,000.
\n(b) It is taken over by the partner at an agreed price of Rs. 32,300.
\n(c) It is taken over by creditors in full settlement of his claim.
\n\"NCERT
\nUnrecorded Liabilities
\nIt may sometimes happen at the time of dissolution of firm that there are certain liabilities which do not appear in the books. These liabilities are called unrecorded liabilities. The accouting treatment of unrecorded liability is :
\n\"NCERT
\n\"NCERT
\nImportant:
\nIt must be kept in mind that the unrecorded liability is never transferred to Realisation Account. Because its payment is in the nature of loss and Realisation Account is only debited with the actual payment. And, they do not have account in the books also.
\nFor example, at the time of dissolution of firm, compensation paid to employees by the firm amounted to Rs. 5,000. This liability was not provided in the books. Journal entries in following cases are given below :
\n(a) If cash payment is made for unrecorded liability,
\n(b) If unrecorded liability taken over by a partners.<\/p>\n

\"NCERT<\/p>\n

Question 3.
\nOn dissolution, how will you deal with partner’s loan if it appears on the
\n(a) assets side of the balance sheet
\n(b) liabilities side of the balance sheet.
\nAnswer:
\n(a) Partner’s loan appearing on the assets sideline balance sheet: If partner’s loan appears on the assets side of the balance sheet at the time of dissolution, it shows that partner has been taken loan from the firm and he has not paid back yet.<\/p>\n

\"NCERT<\/p>\n

Accounting Treatment: The loan amount should transfer to his capital account. Following entry will required :
\nPartner’s Capital A\/c – Dr.
\nTo Partner’s Loan A\/c<\/p>\n

(b) Partner’s loan appearing on the liabilities side of the balance sheet: If a partner has given any loan to the firm, his loan will be paid off after all the outside liabilities are paid in full. Therefore, partner’s loan account is not transferred to the realisation account and his loan account is prepared separately and paid off by passing the following entry :<\/p>\n

For payment of Partner’s loan :
\nPartner’s loan A\/c – Dr.
\nTo Cash\/ Bank A\/c (For the partner’s loan paid-off)<\/p>\n

Question 4.
\nDistinguish between firm’s debts and partner’s private debts.
\nAnswer:
\nWhere both the debts of the firm and private debts of a partner co-exists, the following rules, as stated is section 49 of the Indian Partnership) Act, 1932, shall apply.<\/p>\n

(a) The property of the firm shall be applied first in the payment of debts of the firm and then the surplus, if any shall be divided among the partners as per their claims, which can be utilised for payment of their private liabilities.<\/p>\n

(b) The private property of any partner shall be applied first in payment of his private debts and the surplus, if any may be utilised for payment of the firm’s debts, in case the firm’s liabilities exceeds the firm’s assets.
\nIn nutshell, private property shall be first used to settle private debts and business property shall be first used to settle business debts and the surplus if any can be transferred.\"NCERT
\n\"NCERT<\/p>\n

\"NCERT<\/p>\n

Question 5.
\nState the order of settlement of accounts on dissolution.
\nAnswer:
\nIn case of dissolution of a firm, the firm ceases to conduct business and has to settle its accounts. For this purpose, it disposes of all its assets for satisfying all the claims against it. Section 48 of the Indian Partnership Act, 1932, provides the following rules for the settlement of accounts between the partners :<\/p>\n

(a) Treatment of Losses: Losses, including deficiencies of capital, shall be paid :<\/p>\n