AHSEC Class 12 Accountancy Chapter 5 : Dissolution of Partnership Firm Question Answer can be very Valuable & useful for the Preparation of Assam Higher Secondary Education HS 2nd Year Examination . Assam Board AHSEC HS 2nd Year ACCOUNTANCY NOTES gives you the best information of Dissolution of Partnership Firm . You can find solutions to their questions at both basic and advanced levels
ACCOUNTANCY CLASS 12
CHAPTER - 5
1. What is dissolution of partnership?
Ans: Dissolution of partnership means a reconstitution of the firm due to admission of a new partner, retirement of partner, death of a partner, insolvency of a partner and the firm continues as ever before.
2. What is dissolution of partnership firm.
Ans: Dissolution of partnership firm means a complete break down of the relationship between all the partners.
3. Give two circumstances under which a partnership firm is dissolved.
Ans: (a) Dissolution by agreement (Sec 40)
(b) Compulsory dissolution (Sec 41)
4. Give distinctions between dissolution of a firm and dissolution of a partnership.
Ans: Distinction between dissolution of firm and dissolution of partnership:
5.Give distinctions between revaluation A/c and realization A/c.
Ans: Distinction between revaluation account and realization account:
6. Give one objective of preparing Realisation A/c.
Ans: (a) This account is prepared to find out the profit or loss on realization of assets ad payment liabilities.
7. Give two grounds on which a court may dissolve a firm.
Ans: (i) When a partner has become mentally disturbed or has unsound mind. (ii) When a partner has become permanently incapable of performing his duties.
Short Answer Type Questions (carrying 3 marks each) :
A. Theory part:
1. Mention three situations under which a firm may be dissolved without intervention by court.
Ans: A partnership firm stands dissolved in the following ways
(a) Dissolution by Agreement (Sec 40)
(i)Voluntary dissolution through mutual agreement among partners
(ii) In accordance with a contract between partners (b) Compulsory Dissolution (Sec 41)
(i) When the business of the firm is declared illegal.
(ii) When all the partners except one decided to retire from the firm.
(iii) When all the partners or all except one partner die.
(iv) When all the partners or all except one partner are declared involvent.
(c) Dissolution upon contingency (Sec. 42)
(i) When the firm is constituted for a fixed term, one the expiry of that term.
(ii) When a partner of the firm dies.
(iii) When a partner of the firm is declared insolvent.
2.Mention three situations when a firm is dissolved by the court.
Ans: The court may order to dissolve the firm in the following circumstances
(i) When a partner become unsound mind.
(ii) When a partner, other than the partners suing, has become permanently incapable of performing his duties as partner.
(iii) When a partner deliberately commits breach of agreements relating to the management of the firm.
3. How would you deal with firm's debt and private debt in case of dissolution of a firm.
Ans: Firm's debts are the debts incurred by the firm. The properly of the firm shall be applied in payment of the debts of the firm and the surplus (if any) is applied towards payment of partner's private debts to the extent of his share in profits of the firm.
Private debts are the debts incurred by partners under their individual capacity The private property of any partner shall be applied first in the payment of his private debts and the surplus (if any) in payment of the debts of the firm.
Long Answer Type Questions (carrying 5 marks) each
A. Theory part:
1. What is dissolution of partnership? How does it differ from dissolution of a firm?
Ans: Dissolution of partnership implies a change in the old agreement among the partners. So, it only the partnership comes to an end but the firms still exists and the partners may continue the business under the same firm's name but with a different partnership agreement.
Difference between dissolution of firm and dissolution of partnership:
2.What is Realisation A/e? What are the objectives of preparing a Realisation Account?
Ans: Realisation Account is opened on dissolution of firm to close down the books of accounts of the firm. This account is a nominal account Realisation is prepared at the time of dissolution of the firm for the objectives of disposal of the firm's assets and payment of the liabilities of the firm. It is prepared to determined the profits earned or losses incurred on dissolution of the firm.
3. How are unrecorded asets and unrecorded liabilities are dealt in when firm is dissolved?
Ans:-At the time of dissolution of the firm, some assets may be found which do appear in the balance sheet, the reason being that either these assets may have been fully written off in the books, but they still exist physically or these assets might be forgotten to be recorded. These assets may be sold either for cash or to a partner given to a creditor at the time of dissolution Similarly, there may be some liabilities, which are not recorded in the books. These unrecorded liabilities are not transferred to realisation account. But if any payment has to be made then realization account has to be debited with the amount actually paid.
Long Answer Type Questions (Carrying & marks) each
A. Theory part:
1.State the mode of settlement of accounts on dissolution of a firm.
Ans: In settling the accounts of a firm, after dissolution, te following rules shall, subject to an agreement between the partners, be observed
(a) Treatment of loss [Sec. 48(a)]: Losses should be treated in the following order.
Losses should be paid:
(i)Out of profits of the business, then
(ii) Out of capital, then and finally
(iii) By partners in their sharing ratio,
(b) Treatment of Assets [Sec.48(b)]: The assets of the firm shall be applied in the following order:
(i) Payment of the firm's debts to third parties.
(ii) Payment of partner's advances (loans)
(iii) Payment to each partner's capital.
(iv) Any amount left out after these, is to be divided among partners in their sharing ratio.
2. What are the effects of the provisions of sec. 48 of Indian partnership Act. 1932?
Ans: The following are the effects of the provisions of section 48 of Indian partnership Act. 1932:
(a) The assets of the firm and the contributions of the partners to make up deficiencies of capital must be applied first in the payment of debts of the firm. It means that the outside creditors must be the paid off first, out of the available assets of the firm.
(b) After the payment of outside liabilities, if there remains a surplus, such surplus should be applied in the payment of partner's loan reteably.
(C) If there remains still a surplus, such surplus should be compared with total of capitals of all the partners. The difference between total capital and surplus may be profit or loss and should be transferred to the partner's capital accounts in profit sharing ratio. After the adjustment of profit or loss, the total of balances of the partners' capital accounts will be equal to the cash available and then cash will be paid to each partner and it will be equal to the amount due to the partner's. Thus partners' capital accounts will be closed.
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