Multiple choice questions

1. The word d stands for __________ a) duration b) disagreement c) dissolution d) death

2. A partnership firm may be dissolved by __________a) dissolution by agreement b) dissolution by

notice c) both a & b d) none of the above

3. If the business of the firm is opposed to public interest, the modes of dissolution is __________ a)
compulsory dissolution b) may not be compulsory dissolution c) none of the above d) with no
compulsory dissolution

4. When the partner becomes of unsound mind it is __________ a) dissolution by agreement b)

dissolution by court c) dissolution by law d) dissolution by partnership

5. Which year does they laid down the following rules under settlement of accounts is done
__________ a) 1942 b) 1952 c) 1932 d) 1962

6. _________ account is mainly prepared to show the profit or loss on realisation of assets and
payment of liabilities a) revaluation a/c b) capital a/c c) memorandum revaluation a/c d) realisation
a/c

7. For discharge liabilities when one of the partners discharge the liabilities __________ is debited and
__________ is credited a) partners capital or current a/c, realisation a/c b) realisation a/c, cash a/c
c) cash a/c, realisation a/c d) realisation a/c, partners capital or current a/c

8. The value of asset taken away by creditor should be __________ from the claim of creditor and rest
of the payment is made to him a) added b) deducted c) multiplicated d) may be added or
multiplicated

9. The personal property shall be applied first in payment of personal __________ and of there is any
surplus a) assets b) capital c) debts d) liabilities

10. __________ and __________ balances will be transferred to realisation a/c a) cash, capital b)
cash, bank c) capital, bank d) profit or loss

11. Garner vs murray decision may be safely be applied in __________ a) china b) america c) india
d) russia

12. The available assets will be distributed in proportion to their __________ a) liabilities b) capital
c) debts d) creditors

13. The entry for meeting the deficiency is solvent partners capital a/c is __________ insolvent
partners capital a/c __________ a) debited, credited b) credited, debited c) debited, debited d)
credited, credited

14. The capital ratio will be depend on whether the capital accounts are maintain under __________
a) fluctuating b) fixed c) fixed or fluctuating d) fixed and fluctuating
15. All the solvent partners should bring cash equal to the share of __________ or realisation a) profit
b) loss c) both a & b d) none

16. If goodwill appears in balance sheet before dissolution treated like anyother assets. It is
transferred to realisation account at __________ value a) cost b) book c) market d) cost & market

17. For treatement of free reserves, profit and loss a/c __________ balance is shown a) credit b)
debit c) both a & b d) none of the above

18. Under compulsory dissolution under modes of dissolution, the number of partner should exceed
__________ a) less than 20 b) 10 - 20 c) 20 d) 5

19. Proportionate capital method is also known as __________ a) surplus capital b) highest relative
capital c) both a& b d) maximum loss method

20. The lowest capital after this division constitutes the _________ from which the remaining
hypothetical capitals are calculated a) basis capital b) surplus capital c) proportionate capital d)
basic capital

21. Dissolution on happening of certain events indeeds __________ a) on the expiry of the period b)
on the retirement of partners c) on the death of the partners d) both a & c

22. Compulsory dissolution is done under following cases: a) when the number of partners exceeds
20 b) when the citizen of a friend country becomes a partner c) when the business of the firm is not
opposed to public interest d) none of the above

23. In the word dissolution i stands for __________ a) incapacity b) inefficiency c) information d)
indemnity

24. The profit or loss shown by realisation account is transferred to the capital accounts of the
partners in the __________ a) profit sharing ratio b) share of capital c) income sharing ratio d)
equally

25. Assets against which a provision are reserves had been created should be transferred to
__________ a/c a) revaluation b) realisation c) partners capital d) partners current a/c

True of false

1. The dissolution of partnership between all partners of firm is called the dissolution of the firm. (t/f)

2. Under compulsory dissolution, if all the partners except one or all of them are declared solvent.
(t/f)

3. No special treatment is given to goodwill.(t/f)

4. N stands for notice given by partners.(t/f)

5. Under dissolution by court, a partner becomes of unsound mind.(t/f)

6. Under piecemeal distribution, the three methods are adopted.(t/f)

7. Proportionate capital method is also called as surplus capital method.(t/f)

8. In maximum loss method each stage of realisation of assets remaining unrealised assets are
worthless.(t/f)

9. Insolvency of all partners only sundry assets are transferred to capital account.(t/f)

10. Any balance remaining unpaid to creditors will be transferred to deficiency account.(t/f)

Part-a [2 marks]

1.what is dissolution of firm ?

2.mention any 3 modes of dissolution ?
3.expalin modes of dissolution under dissolution of court ?
4.what is realisation account ? Why it is prepared ?
5. In which cases the firm becomes illegal and stands dissolve ?
6.explain about garner vs murray rule ?
7.what are the two effects of this rule under garner vs murray ?
8.explain capital ratio under fluctuating capital method ?
9.what are the two methods adopted for piecemeal distribution ?
10.explain the order of payment under piecemeal distribution ?
11.what constitute the basic capital ?
12.write journal entry for dissolution under closing assets account ?
13.write entries for closing the provision under dissolution ?
14.how unrecorded assets are taken away by a partner? Under dissolution ?
15.give journal entries for treatment for free reserves ?
16.mention the treament of goodwill under dissolution ?
17.write a short note on proportionate capitl method ?
18.give definition of application of garner vs murray rule in of india ?
19.how realisation acconut is closed ? Give journal entry ?
20.what are all assets should be transferred durng dissolution ?

Part-b(3 marks)

1. Explain dissolution under goyal and arora?

2. Explain settlement of accounts under dissolution?

3. Write the journal entry for treatment of unrecorded assets and liabilities?
4. Explain accounting procedure under fixed capital method of a insolvency of a partner?

5. What are the criticism of above decision of garner vs murray?

6. Briefly explain the application of garner vs murray rule in india?

7. What are the journals applied for realisation account?

8. Write journal entries for closing of capital and current accounts?

9. Explain any 3 modes of dissolution?

10. Explain insolvency of all partners?

Part-c(5 marks)

1. Explain the modes and settlements of accounts under dissolution?

2. What is dissolution of firm and explain the goyal and aroras meaning of dissolution?

3. Explain the journal entries of dissolution

I. For closing assets account

II. For closing liabilities account

III. For realising assets

IV. Discharging liabilities

V. Treatment of free reserves

4. Explain the following questions

I. Capital ration under fluctuating capital method

II. Dissolution by court

III. Insolvency of all the partners

5. What is piecemeal distribution? Explain the order of payments and methods to be adopted?

6. Explain proportionate capital method?

7. Explain maximum loss method?

8. Write journal entries for opening and closing realisation partners capital account?

9. Explain treatement of goodwill on dissolution and unrecorded assets and liabilities?

10. Explain the accounting treatement incase all partners of a firm are insolvent?