Book- Keeping and Accountancy
STANDARD XII
Chapter 6. Dissolution of Partnership Firm
Page No. in book (243)
Answer in one sentence only.
1. What is dissolution of partnership firm?
Ans. When one or more partner/partners take decision to close the Partnership Firm, it is known as Dissolution of Partnership firm.
2. When is Realisation Account opened?
Ans. Realisation account refers to an account opened by the firm when it goes to dissolution to record the profit made from the sale of assets and loss suffered on the settlement of liabilities.
3. Which accounts are not transferred to Realisation account?
Ans. The following accounts cannot be transferred to realisation account:
1.Cash account.
2.Partner's loan account.
3.Partner's capital accounts.
4.Reserve fund.
5.Bank overdraft.
4. Who is called Insolvent person?
Ans. A person is considered to be insolvent when the party has ceased to pay its debts in the ordinary course of business, or cannot pay its debts as they become due, or is insolvent within the meaning of the Bankruptcy Code.
5. What is capital deficiency?
Ans. Capital deficiency refers to a debit balance in a partner's capital account after allocation after allocation of gain or loss. No capital deficiency. All partners have credit balance after allocation of gain or loss.
6. In what proportion is the balance on Realisation A/c transferred to Partners capital / Current Account?
Ans. The realisation a/c is closed by transferring the gain (profit) or loss on realisation to Partners Capital/Current Account in their profit sharing ratio.
7. Who should bear the capital deficiency of insolvent partner?
Ans. When a partner is not in a position to pay deficiency of capital due to insolvency, the remaining partners with credit balances shall absorb such partner's debt according to their income and loss sharing ratio.
8. Which account is debited on repayment of Partner’s Loan?
Ans. Capital/Current Account is debited on repayment of Partner's Loan.
9. Which account is debited on payment of dissolution expenses?
Ans. On payment of dissolution expenses, Realisation Account is to be debited.