Chapter MCQ Test 2 — Dissolution of a Partnership Firm
10 Questions • 12 min • Chapter MCQ
12:00
Question 1 of 10
Why is the Realisation Account fundamentally different from the Revaluation Account?
Realisation closes all assets/liabilities on dissolution; Revaluation only restates values during reconstitution
They are identical
Revaluation is used on dissolution
Realisation only revalues
Explanation: Realisation winds the firm up; Revaluation merely adjusts book values while the firm continues.
Question 2 of 10
Sundry assets (book Rs 4,00,000) realise Rs 3,50,000; creditors Rs 1,00,000 are paid at Rs 95,000; expenses Rs 5,000. The realisation result is:
Loss of Rs 50,000
Profit of Rs 50,000
Loss of Rs 60,000
Profit of Rs 5,000
Explanation: Asset loss 50,000 − creditor gain 5,000 + expenses 5,000 = net loss 50,000.
Question 3 of 10
A creditor of Rs 40,000 accepts a machine (book Rs 35,000) in full settlement. The entry is:
No cash entry — the asset and liability cancel within Realisation
Cash A/c Dr 40,000
Realisation A/c Dr 40,000; To Cash
Capital A/c Dr 35,000
Explanation: When a creditor takes an asset in settlement, no cash moves; the items net off, affecting the realisation profit/loss only.
Question 4 of 10
Order of payment under Section 48: which sequence is correct?
Outside liabilities → partner's loan → partners' capital → surplus in PSR
Capital → loan → creditors
Surplus → creditors → capital
Loan → capital → creditors
Explanation: Creditors first, then partner loans, then capital, then surplus in PSR.
Question 5 of 10
A is to bear all realisation expenses of Rs 4,000 personally but the firm pays them. The entry is:
A's Capital A/c Dr 4,000; To Cash/Bank A/c 4,000
Realisation A/c Dr 4,000
Cash A/c Dr 4,000
No entry
Explanation: Since A bears them personally, his capital (not Realisation) is charged when the firm pays.
Question 6 of 10
After all entries, B's capital shows a debit balance of Rs 12,000 and B is solvent. B must:
Bring in Rs 12,000 cash
Receive Rs 12,000
Do nothing
Take over an asset
Explanation: A solvent partner with a debit capital balance pays the firm to clear it.
Question 7 of 10
Cash/Bank is NOT transferred to the Realisation Account because it is:
The medium used to make and receive payments
Not an asset
A liability
Always nil
Explanation: Cash is the settling medium, so it stays in the Cash Account to record receipts and payments.
Question 8 of 10
An unrecorded asset of Rs 7,000 is sold for Rs 6,000 on dissolution. The realisation entry credits Realisation with:
Rs 6,000 (the cash actually received)
Rs 7,000
Rs 13,000
Nil
Explanation: Unrecorded assets have no book value; only the cash realised (6,000) is credited to Realisation.
Question 9 of 10
A partner's loan to the firm is shown:
Separately and paid after creditors but before capital — not via Realisation
In the Realisation Account as a liability
As capital
As an asset
Explanation: A partner's loan is settled through a separate loan account in the Section 48 order, not transferred to Realisation.
Question 10 of 10
If realisation yields a large profit, the partners' capital accounts will, other things equal, end with:
Larger credit balances payable to them
Debit balances
Nil before any payment
No change
Explanation: Realisation profit is credited to capitals in the PSR, increasing the amounts ultimately paid out to partners.