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Byju's Answer
Standard XII
Accountancy
Introduction to Dissolution
When a firm i...
Question

When a firm is dissolved, the books of the firm are to be closed. this is done by preparing an account called ___________.

A
Realisation account
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B
Revaluation account
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C
Bank account
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D
Capital account
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Solution

The correct option is D Realisation account
Realisation account is made at the time of dissolution of partnership firm. It is prepared to find the profit or loss generated by selling all the assets and liabilities of the firm. It is prepared on the closure of the books after dissolution of the partership firm.

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Q. The management of a firm is remarkably incompetent, but the firms accountants cannot take this into account while preparing book of accounts because of ____________concept.
Q. A and B are partners in a firm sharing profits and losses in the ratio of 2 : 1 . On 31st March, 2018 , their Balance Sheet was:

Liabilities

₹

Assets

₹

Bank Overdraft

30,000

Cash in Hand

 6,000
General Reserve 56,000 Bank Balance 10,000
Investments Fluctuation Reserve 20,000 Sundry Debtors 26,000
A's Loan 34,000 Less: Provision for Doubtful Debtors 2,000 24,000
Capital A/c: Investments 40,000
A
 50,000 Stock

10,000
Furniture 10,000
Building 60,000
B's Capital 30,000

1,90,000

1,90,000


On that date , the partners decide to dissolve the firm . A took over Investments at an agreed valuation of ₹ 35,000. Other assets were realised as follows:
Sundry Debtors: Full amount . The firm could realise Stock at 15% less and Furniture at 20% less than the book value . Building was sold at ₹ 1,00,000.
Compensation to employees paid by the firm amounted to ₹ 10,000. This liability was not provided for in the above Balance Sheet.
You are required to close the books of the firm by preparing Realisation Account , Partners' Capital Accounts and Bank Account .
Q. A and B are partners in a firm sharing profits and losses in the ratio of 2 : 1. On 31st March, 2019, their Balance Sheet was:
Liabilities Amount
(₹)		 Assets Amount
(₹)
Bank Overdraft 30,000 Cash in Hand 6,000
General Reserve 56,000 Bank Balance 10,000
Investments Fluctuation Reserve 20,000 Sundry Debtors 26,000
A's Loan 34,000 Less: Provision for Doubtful Debtors 2,000 24,000
Capital A/c:
A 50,000 Investments 40,000
Stock 10,000
Furniture 10,000
Building 60,000
B's Capital 30,000
1,90,000 1,90,000

On that date, the partners decide to dissolve the firm. A took over Investments at an agreed valuation of ₹ 35,000. Other assets were realised as follows:
Sundry Debtors: Full amount. The firm could realise Stock at 15% less and Furniture at 20% less than the book value. Building was sold at ₹ 1,00,000.
Compensation to employees paid by the firm amounted to ₹ 10,000. This liability was not provided for in the above Balance Sheet.
You are required to close the books of the firm by preparing Realisation Account, Partners' Capital Accounts and Bank Account.
Q. When a firm is dissolved, Goodwill a/c is closed by transferring to:

Q.

Complete the following work sheet:

(i)

If a firm believes that some of its debtors may ′default′, it should act on this by making sure that all possible losses are recorded in the books. This is an example of the ___________ concept.

(ii)

The fact that a business is separate and distinguishable from its owner is best exemplified by the ___________ concept.

(iii)

Everything a firm owns, it also owns out to somebody. This co-incidence is explained by the ___________ concept.

(iv)

The ___________ concept states that if straight line method of depreciation is used in one year, then it should also be used in the next year.

(v)

A firm may hold stock which is heavily in demand. Consequently, the market value of this stock may be increased. Normal accounting procedure is to ignore this because of the ___________.

(vi)

If a firm receives an order for goods, it would not be included in the sales figure owing to the ___________.

(vii)

The management of a firm is remarkably incompetent, but the firms accountants can not take this into account while preparing book of accounts because of ________ concept.
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