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Standard XII
Accountancy
Changes in the Value of Assets and Liabilities
When business...
Question

When business of a partnership firm is sold to a company, shares and/or debentures received are distributed in:

A
The profit sharing ratio
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B
Equal ratio
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C
The ratio of their capitals standing before profit or loss on realization has been transferred
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D
The ratio of their capitals standing after profit or loss on realization has been transferred
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Solution

The correct option is D The ratio of their capitals standing after profit or loss on realization has been transferred
In this case, the business of the firm is sold to a company and the consideration is paid by the company in the form of shares and debentures. The value of such shares and debentures shall be credited to the realisation a/c along with other assets and liabilities. The profit/loss on such realisation shall be, then, transferred to the partners' capital a/c. Finally, the partners' capital a/c shall be closed by distributing the shares and debentures received in the proportion of the existing balance to the credit of their capital account.

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Q. K and A are partners in a firm. They share profits and losses in the ratio of 4:1. They decide to dissolve the firm K Capital - Rs1,60,000, A Capital - Rs1,00,000, Total assets - Rs 3,95,000, Total liabilities - Rs1,35,000. On dissolution assets realized Rs4,25,000 & liabilities settled at Rs1,10,000. Net profit or loss on realization = ?
Q. Consider the following statements :
1. At the time of admission of new partner undistributed profit or losses are distributed to all partners in new ratio.
2. Profit or loss on revaluation of assets and liabilities is transferred to old partner's capital account in old profit sharing ratio.
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Which of the above statement/s is/are true ?

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Q. Divya & Shweta are equal partners. When partnership is dissolved, their capitals are Rs. 30,000 and Rs. 40,000 respectively. After all assets are sold and liabilities paid, there is a cash balance of Rs. 60,000. What is the amount of profit or loss on realization?

Q. K and A are partners in a firm. They share profits and losses in the ratio of 4:1. They decide to dissolve the firm. K capital - Rs1,60,000, A Capital - Rs1,00,000, Total assets - Rs3,95,000, Total liabilities - Rs1,35,000. On dissolution assets realized Rs3,50,000 & liabilities including unrecorded liability settled at Rs1,50,000. What will be Net profit or loss on realization ?
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