Students of class 12 Accountancy should refer to MCQ Questions Class 12 Accountancy Dissolution of Partnership Firm with answers provided here which is an important chapter in Class 12 Accountancy NCERT textbook. These Multiple Choice Questions have been prepared based on the latest CBSE and NCERT syllabus and examination guidelines for Class 12 Accounts. The following MCQs can help you to practice and get better marks in the upcoming class 12 accountancy examination

Question: The modes by which a firm may be dissolved are
a) All of the options
b) By Mutual agreement
c) Compulsory Dissolution
d) By Notice

Question. The Account which is prepared on dissolution of a Partnership firm :
(a) Revaluation Account
(b) Realisation Account
(c) P&L Appropriation Account
(d) None of these 

Question. New ratio is not to be calculated on:
a. Admission of a partner
b. retirement of a partner
c. death of a partner
d. dissolution of a partnership

Question: At the time of dissolution of the firm , if goodwill appears in the balance sheet , it is transferred to
a) Capital A/c
b) Revaluation A/c
c) Realisation A/c
d) Current Account

Question: Unrecorded assets when realised is credit to
a) Partners capital A/c
b) Realisation A/c
c) Current Account
d) None of the options

Question. At the time of dissolution of partnership an unrecorded asset taken by X a partner is debited to:
a. X capital account
b. realisation account
c. cash account
d. none of the above

Question. Unrecorded liability when paid on dissolution of a firm is defined to :
(a) Realisation Account
(b) Partners’ Capital Accounts
(c) Liability Account
(d) None of these. 

Question: Which is the main right of a partner?
a) Share the Profits of the firm.
b) Stop other partners for drawings
c) Share the old profits of the firm
d) All of the options

Question. On firm’s dissolution which of the following account is prepared at the last?
a. Realisation account
b. partners capital account
c. cash account partners
d. loan account

Question: Section __ of the Indian Partnership Act provides that a new partner shall not be inducted into a firm without the consent of all existing partners
a) 40
b) 35
c) 31
d) 45

Question: Revaluation Account is also known as __
a) Profit and Loss Adjustment Account
b) Asset Account
c) Profit and Loss Account
d) None of the options

Question. On dissolution of a firm fictitious assets are transferred to:
a. credit side of partners capital account
b. debit side of realisation account 
c. debit side of partners capital account
d. credit side of realisation account

Question. General Reserve appearing in the Balance sheet transferred to :
(a) Realisation Account
(b) Partners’ Capital Accounts in profit sharing ratio
(c) Partners’ Capital Accounts in capital ratio
(d) None of these 

Question. On dissolution of a firm in which ratio profit and loss on realisation is distributed among the partners:
a. capital ratio 
b. profit sharing ratio
c. equally 
d. in the ratio of amount due to each partner.

Question: Except outgoing partner, which other partner can be credited at the time of settlement of goodwill amount?
a) None of the options
b) Gaining partner
c) All the partners
d) Sacrificing partner

Question. At the time of dissolution of firm, at which stage the balance of partner’s capital accounts is paid?
(A) After making the payment to third party’s loans
(B) Before making the payment of partners in respect of their loans
(C) After making the payment to third party for their loans as well as partners loans
(D) None of the above.

Question. On dissolution of the firm amount received from sale of unrecorded asset is credited to :
a. partner’s capital account:
b. profit and loss account 
c. cash account
d. realisation account

Question. On taking responsibility of payment of realisation expenses by a partner, the account credited will be :
(A) Realisation Account
(B) Cash Account
(C) Capital Account of the Partnei
(D) None of the Above

Question. Realisation account is a :
a. personal account 
b. real account 
c. nominal account 
d. none of the above.

Question. On dissolution of a firm, a liability taken over by a partner is credited to :
(a) Realisation Account
(b) Profit and loss Account
(c) Partners’ Capital Accounts
(d) None of these 

Question. At the time of firm’s dissolution credit balance of profit and loss account is credited to :
a. realisation account 
b. partners capital account 
c. cash account
d. profit and loss account.

Question. On payment of expenses of dissolution, account will be debited :
(A) Realisation Account
(B) Cash Account
(C) Profit & Loss Account
(D) None of the Above

Question. On dissolution of a firm Goodwill appearing in the balance sheet is transferred to: 
a. capital account of partners 
b. cash account
c. debit side of realisation account 
d. credit side of realisation account.

Question. On dissolution of a firm, partners’ capital accounts balance was Rs.63,000; creditors balance was Rs. 12,000 and profit & loss account debit balance was Rs.6,000. Profit on realisation of assets was Rs.7,800. Total amount realised from assets was:
(A) Rs.81,000
(B) Rs.76,800
(C) Rs.70,800
(D) None

Question. On dissolution the balance of partners capital account appearing on the credit side of the balance sheet is transferred to :
a. debit side of realisation account 
b. credit side of realisation account 
c. debit side of partners capital account
d. credit side of partners capital account.

Question. On dissolution, Goodwill Account is transferred to
(a) In the Capital Accounts of Partners.
(b) On the Credit of Cash Account.
(c) On the Debit of Realisation Account
(d) On the Credit of Realisation Account.

Question. On dissolution of a firm, its Balance Sheet revealed total creditors Rs.50,000; Total Capital Rs.48,000; Cash Balance Rs.3,000. Its assets were realised at 12% less. Loss on realisation will be :
(A) Rs. 11,400
(B) Rs. 11,760
(C) Rs.6,000
(D) Rs.3,600

Question. AB and C are partners. The firm had given a loan of Rs20,000 to B. They decided to dissolve the firm. In the event of dissolution the loan will be settled by transferring it to the: 
a. debit side of realisation account 
b. transferring it to the credit side of realisation account 
c. transfer it to the debit side of B’s capital account
d. B paying A and C privately.

Question. At the time of dissolution of a firm, Debtors were Rs. 17,000 out of which Rs. 500 became bad and the rest realised 60%. Which account will be debited and by how much amount?
(a) Realisation Account by Rs. 16,500.
(b) Profit and Loss Account by Rs. 500.
(c) Debtors Account by Rs. 7,100.
(d) Cash Account by Rs. 9,900.

Question: Deceased partners share of profit is to be transferred to his account by:
a) P/L Suspense A/c
b) P/L Adjustment A/c
c) P/L Appropriation A/c
d) Revaluation Account

Question. In case of dissolution, total creditors of the firm were Rs40,000; creditors worth Rs10000 were given a piece of furniture costing Rs8000 in full and final settlement. Remaining creditors allowed a discount of 10%. What will be the the amount with which cash will be credited in the realisation account for payment to creditors:
a. 28,000
b. 27,000correct.
c. 20,000
d. 25,000

Question: When a Partner dies, amount due to him will be paid to:
a) His Executor
b) Gainer partner
c) Remaining Partners
d) None of the options

Question: Reason for preparing Profit and Loss suspense Account is to
a) Adjust the profit of deceased partner
b) Adjust the Revaluation profit
c) Adjust the capital of deceased partner
d) Adjust the Revaluation loss

Question. In case of dissolution A one of the partner was paid only RS5000 for his loan to the firm which amounted to Rs5500. Rs 500 will be recorded in which account and on which side:
a. Realisation account credit side   correct
b. Realisation account debit side 
c. loan account debit side
d. A’s capital account credit side.

Question: On dissolution of the firm , all assets are transferred to realisation account at
a) Book Value
b) Market Value
c) Cost value
d) None of the options

Question: Give circumstances under which the fixed capitals of partners may change
a) Both
b) When fresh capital is introduced by the partner
c) When a part of capital is withdrawn by the partner
d) None of the options

Question. Section 41 of partnership act 1932 deals with dissolution of a firm
a. by mutual agreement 
b. compulsory dissolution   correct
c. by notice 
d. by order of court.

Question. ………… is prepared at the time of dissolution :
(A) Revaluation Account
(B) Profit & Loss Account
(C) Profit and Loss Appropriation Account
(D) Realisation Account

Question. Settlement of accounts in case of dissolution of partnership is dealt with which section of partnership act 1932?
a. Section 45 
b. section 46
c. section 47
d. section 48 

Question. A partnership firm is compulsorily dissolved) :
(A) When the business of the firm is declared illegal
(B) When a partner of the firm dies
(C) When a partner of the firm becomes insolvent
(D) When a partner transfers his share to some other person without the consent of other partners

Question. In case of dissolution of partnership there was no workmen compensation fund and firm had to pay Rs3000 as compensation to workers where will be this Rs3000 recorded in the books of accounts?
a. debit side of realisation account
b. credit side of realisation account
c. debit side of partners capital account
d. credit side of partners capital account.

Question. Sundry Creditors amounted to Rs.8,000. These were paid at a discount of 5%. Realisation account will be debited by
(A) Rs.8,000
(B) Rs.7,600
(C) Rs.400
(D) Rs. 8,400

Question. At the time of dissolution^ partner gives his personal asset to firm’s creditor in settlement, the account credited will be
(a) Realisation A/c.
(b) Partner’s Capital A/c.
(c) Cash A/c.
(d) Creditor’s A/c.

Question. Court may order dissolution of partnership firm 
a. when a partner has become of unsound mind
b. when a partner is permanently incapacitated 
c. when a partner is found guilty of misconduct
d. all of the above.

Question. P, a partner, is to bear all expenses of realisation for which he is to be paid Rs.2,000. P had to pay realisation expenses of Rs.2,500. How much amount will be debited to Realisation Account?
(A) Rs.500
(B) Rs.2,500
(C) Rs.4,500
(D) Rs.2,000

Question. Which of the following is paid first in case of dissolution of partnership firm?
a. Realisation expenses
b. External liabilities
c. Secured loan
d. Partner’s loan

Question. On dissolution of the firm, amount received from sale of unrecorded asset is credited to :
(A) Partner’s Capital Accounts
(B) Profit and Loss Account
(C) Realisation Account
(D) Cash Account

Question. In case of dissolution, assets are transferred to Realisation Account:
(A) At Book Value
(B) At Market Value
(C) Cost or Market Value, whichever is lower
(D) None of the Above

Question. At the time of dissolution total assets are worth Rs3,00,000 and external liabilities are worth Rs1,20,000. If assets realised 120% and realisation expenses paid were Rs4,000, then profit/loss on realisation will be:
a. Profit Rs60,000
b. Loss Rs60,000
c. Loss Rs56,000
d. Profit Rs56,000

Question: After 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
a) Fully paid
b) Partly paid
c) Never Paid
d) None of the options

Question: On dissolution of the firm, partners capital accounts are closed through
a) Drawings account
b) Bank account
c) Realisation account
d) Partners capital account

Question. When realisation expenses are to be borne by a partner, actual realisation expense is credited to:
a. Partners capital a/c
b. Cash a/c
c. Realisation a/c
d. None of the above

Question: W, X, Y and Z are equal partners, W, X and Z died together in plane crash, this accidents results in
a) None of the options
b) Dissolution of partnership
c) Dissolution of firm
d) Dissolution of partnership as well as firm

Question: Anukalp and Karan are partners with the capital of Rs. 25000 and 15000 respectively, Interest payable on capital is 10% P.A, find the Interest on capital for both the partners when the profits earned by the firm is Rs 2400
a) None of the options
b) 2500 and 1500
c) 1200 and 1500
d) 1500 and 900

Question: Calculate on interest on drawing @ 12% p.a for Abhishek if he withdraw Rs. 2000 once in month
a) 1440
b) 1220
c) 1320
d) 1300

Question. On firm’s dissolution, a partner undertook firm’s creditors at Rs. 17,000. In this case the account will be credited :
(A) Creditors A/c
(B) Cash A/c
(C) Realisation A/c
(D) Partner’s Capital A/c

Question. Change in the existing agreement between the partners is called :
(A) Dissolution of Firm
(B) Dissolution of Partnership
(C) Dissolution of Business
(D) All of the Above

Question. There was an Unrecorded asset of Rs.2,000 which was taken over by a partner at Rs. 1,500. Partner’s Capital Account will be debited by …………
(A) Rs.2,000
(B) Rs. 1,500
(C) Rs.500
(D) Rs.3,500

Question. On dissolution of a firm, a partner’s capital account has a credit balance of Rs.42,000. His share of profit in realisation account is Rs. 9,000. He has paid firm’s realisation expenses Rs.3,000. He will finally get a payment of:
(A) Rs.39,000
(B) Rs.42,000
(C) Rs.54,000
(D) Rs.48,000

Question. On dissolution, if a partner pays firm’s liability which ofthe following account is debited?
(a) Profit and Loss Account
(b) Realisation Account.
(c) Partner’s Capital Account
(d) Cash Account

Question. Investments of Rs. 2,00,000 were not shown in the books. One of the creditors took these investments in settlement of his debt of Rs. 2,20,000. How much amount will be payable to that creditor?
(a) Rs. 20,000
(b) Rs. 2,20,000
(c) Rs. 4,20,000
(d) Nil

Question. Which of the following is transferred to Realisation Account :
(A) Balance of Cash Account
(B) Balance of Profit & Loss Account
(C) Amount realised on sale of assets
(D) Reserves

Question. On dissolution, if a partner undertakes to make payment of a liability of the firm, the account to be debited is:
(a) profit & Loss Account
(b) Realisation Account
(c) Partner’s Capital Account
(d) Cash Account

Question. Unrecorded liabilities when paid are shown in :
(a) Debit side of Realisation Account
(b) Debit side of Bank Account
(c) Credit side of Realisation Account
(d) Credit side of Bank Account

Question. Sundry creditors amounted to ₹ 8,000. They were paid at a discount of 5 %. Realisation A/c will be debited by :
(a) ₹ 8,000
(b) ₹ 7,600
(c) ₹ 400
(d) ₹ 8,400

One Word/Sentence Answers :

Question. At the time of dissolution of the firm, how undistributed profits, such as General Reserve, Credit Balance of P & L A/c are dealt with ?

 Question. In case of dissolution of a firm, which item on the liabilities side are to be paid last?

Question. Mohan and Kanwar are partners in a firm. Their firm was dissolved on 1.1.2013. Mohan was assigned the work of dissolution. For this work, Mohan was to be paid ₹500. Mohan paid dissolution expenses of ₹400 from his own pocket. Will any Journal Entry be passed for ₹400 paid by Mohan ? If yes, pass the entry, if no, give reason.

Question. On dissolution of a partnership firm, Goodwill if appearing in the Balance sheet, is transferred to the______ Account. 

Question. Name the asset that is not transferred to the debit side of Realisation Account, but brings certain amount of cash against its disposal at the time of dissolution of the firm.

Question. The gain / loss on Realisation is transferred to

Question. Reserves and Surplus Accounts are transferred to

Question. No entry is required when a ______ accepts a fixed asset in payment of his dues.

Question. In case of dissolution of a firm, which liabilities are to be paid first? 

Question. Name the liability which is not shown in the Balance Sheet, but paid at the time of dissolution of the firm. 

Question. When a liability is to be discharged by a partner, why is his capital account credited?

Question. When an asset is taken over by a partner, why is his capital account debited? 

Question. Bank Loan is transferred to ______ Account.

Question. A and B are partners in a firm sharing profits in the ratio of 3 : 2. Mrs. A has given a loan of ₹20,000 to the firm and the firm also obtained a loan of ₹10,000 from B. The firm was dissolved and its assets were realised for ₹25,000. State the order of payment of Mrs. A’s loan and B’s loan with reason, if there were no creditors of the firm.

FILL IN THE BLANKS:

Question. At the time of admission partnership firm is dissolved if business is _____________.

Question. All the accounts are settled among partners and creditors at the time of ______________of a business.

Question. First of all____________ of the firms will be settled out of sources of the business.

Question. Admission of a partner is termination of _____________and not a dissolution of ____________ .

Question. Court may also dissolve a firm, if a partner ______________a suit, that one of the partners is of___________ mind .

Question. Partners are liable to settle the account of accounts payable even from their ___________sources, if they are solvent.

Question. ______________of partner will be paid off, before the settlement of partner’s capital.

Question. If all partners mutually decide for the dissolution, it will be dissolution of the__________ .

We hope the above multiple choice questions for Class 12 Accountancy for Chapter 5 Dissolution of Partnership Firm provided above with answers based on the latest syllabus and examination guidelines issued by CBSE, NCERT and KVS are really useful for you. Dissolution of Partnership Firm is an important chapter in Class 12 as it provides very strong understanding about this topic. Students should go through the answers provided for the MCQs after they have themselves solved the questions. All MCQs have been provided with four options for the students to solve. These questions are really useful for benefit of class 12 commerce students. Please go though these and let us know if you have any feedback in the comments section.