MCQ Quiz
Question 1
In dissolution, what is the primary action regarding the firm's assets?
Revaluation
Transfer to a new entity
Sale
Donation
C
Correct Answer: Sale
Question 2
What happens to the business during dissolution?
It continues operating as usual
It merges with another firm
It is closed
It expands its operations
C
Correct Answer: It is closed
Question 3
What is the purpose of selling the firm's assets during dissolution?
To invest in new ventures
To distribute among employees
To repay liabilities
To donate to charity
C
Correct Answer: To repay liabilities
Question 4
After repaying liabilities, what happens to any surplus money?
It is kept in a reserve account
It is used for future investments
It is distributed among the partners
It is donated to charity
C
Correct Answer: It is distributed among the partners
Question 5
If there is a deficit after repaying liabilities, how is it handled?
It is written off as a loss
It is ignored
It is borne by the partners
It is covered by insurance
C
Correct Answer: It is borne by the partners
Question 6
Which of the following is NOT a typical activity during dissolution?
Selling assets
Repaying liabilities
Distributing surplus
New admission
D
Correct Answer: New admission
Question 7
Which ratio is NOT calculated during dissolution?
New Ratio
Sacrificing ratio
Gaining ratio
All of the above
D
Correct Answer: All of the above
Question 8
Are goodwill entries made during dissolution?
Yes, always
Yes, under certain circumstances
Sometimes
No
D
Correct Answer: No
Question 9
Is a new balance sheet prepared during dissolution?
Yes, always
Yes, if required
Sometimes
No
D
Correct Answer: No
Question 10
Are entries made in the partner's current account during dissolution?
Yes, always
Yes, under certain circumstances
Sometimes
No
D
Correct Answer: No
Question 11
Which account are all assets transferred to during dissolution?
Partner's Capital Account
Revaluation A/c
Realisation Account
Liabilities Account
C
Correct Answer: Realisation Account
Question 12
Which of the following assets is NOT transferred to the Realisation Account?
Tangible assets
Intangible assets
Goodwill
Fictitious Assets
D
Correct Answer: Fictitious Assets
Question 13
What is the journal entry to transfer assets to the Realisation Account?
Assets A/c Dr. to Realisation A/c
Realisation A/c Dr. to Assets A/c
Partner's Capital A/c Dr. to Realisation A/c
Cash A/c Dr. to Realisation A/c
B
Correct Answer: Realisation A/c Dr. to Assets A/c
Question 14
Where are fictitious assets transferred to?
Realisation Account
Cash Account
Partner's Capital Account
Liabilities Account
C
Correct Answer: Partner's Capital Account
Question 15
What is the journal entry for transferring fictitious assets?
Fictitious Assets A/c Dr. to Partner Capital A/c
Partner Capital A/c Dr. to Fictitious Assets A/c
Realisation A/c Dr. to Fictitious Assets A/c
Cash A/c Dr. to Fictitious Assets A/c
B
Correct Answer: Partner Capital A/c Dr. to Fictitious Assets A/c
Question 16
Which of the following is a type of fictitious asset?
Reserves
Accumulated Profits
Deferred revenue expenditure
Loan from partner
C
Correct Answer: Deferred revenue expenditure
Question 17
How is a debit balance in a partner's capital account treated?
Transferred to Realisation Account
Written off
Taken as opening balance on the debit side of Partner's Capital Account
Transferred to Cash Account
C
Correct Answer: Taken as opening balance on the debit side of Partner's Capital Account
Question 18
Where is the cash and bank balance transferred to?
Partner's Capital Account
Realisation Account
Liabilities Account
Cash/Bank account
D
Correct Answer: Cash/Bank account
Question 19
On which side of the Cash/Bank account is the opening balance transferred to?
Credit side
Debit side
Realisation side
Liabilities side
B
Correct Answer: Debit side
Question 20
Which of the following liabilities is NOT transferred to the realisation account?
Creditors
Bank Loan
Loan taken by firm from partner
Bills payable
C
Correct Answer: Loan taken by firm from partner
Question 21
Where are reserves and accumulated profits transferred to?
Realisation Account
Cash Account
Liabilities Account
Partner capital A/c
D
Correct Answer: Partner capital A/c
Question 22
What is the journal entry for transferring liabilities to the Realisation Account?
Realisation A/c Dr. to Liabilities A/c
Liabilities A/c Dr. to Realisation A/c
Partner's Capital A/c Dr. to Liabilities A/c
Cash A/c Dr. to Liabilities A/c
B
Correct Answer: Liabilities A/c Dr. to Realisation A/c
Question 23
On which side of the partner's capital account are reserves and accumulated profits transferred?
Debit side
Credit side
Realisation side
Liabilities side
B
Correct Answer: Credit side
Question 24
In what ratio are reserves and accumulated profits transferred to the partner's capital account?
New profit-sharing ratio
Sacrificing ratio
Gaining ratio
Old profit-sharing ratio
D
Correct Answer: Old profit-sharing ratio
Question 25
How is a partner's capital account balance on the liabilities side treated?
Transferred to Realisation Account
Written off
Taken as opening balance on the credit side of Partner's Capital Account
Transferred to Cash Account
C
Correct Answer: Taken as opening balance on the credit side of Partner's Capital Account
Question 26
On which side of the Realisation Account are liabilities transferred?
Debit side
Credit side
Asset side
Capital side
B
Correct Answer: Credit side
Question 27
On which side of the Realisation Account are assets transferred?
Debit side
Credit side
Liabilities side
Capital side
A
Correct Answer: Debit side
Question 28
How are Partner Current Account balances transferred during dissolution?
To Realisation Account
To Cash Account
Directly written off
To Partner Capital A/c
D
Correct Answer: To Partner Capital A/c
Question 29
What is the journal entry if there is a debit balance in the Partner Current Account?
Partner Current A/c Dr. to Partner Capital A/c
Partner Capital A/c Dr. to Partner Current A/c
Realisation A/c Dr. to Partner Current A/c
Cash A/c Dr. to Partner Current A/c
B
Correct Answer: Partner Capital A/c Dr. to Partner Current A/c
Question 30
What is the journal entry if there is a credit balance in the Partner Current Account?
Partner Current A/c Dr. to Partner Capital A/c
Partner Capital A/c Dr. to Partner Current A/c
Realisation A/c Dr. to Partner Current A/c
Cash A/c Dr. to Partner Current A/c
A
Correct Answer: Partner Current A/c Dr. to Partner Capital A/c
Question 31
Which of the following is a possible treatment of assets on dissolution?
Sold in the market
Taken over by a partner
Given to a creditor
All of the above
D
Correct Answer: All of the above
Question 32
Which of the following is a possible treatment of liabilities on dissolution?
Paid by the firm
Paid by any partner
Settled against an asset
All of the above
D
Correct Answer: All of the above
Question 33
What is the journal entry for assets sold in the market?
Realisation A/c Dr. to Cash/Bank A/c
Cash/Bank A/c Dr. to Realisation A/c
Partner Capital A/c Dr. to Realisation A/c
No entry is required
B
Correct Answer: Cash/Bank A/c Dr. to Realisation A/c
Question 34
What is the journal entry when a partner takes over an asset?
Cash/Bank A/c Dr. to Realisation A/c
Realisation A/c Dr. to Partner Capital A/c
Partner Capital A/c Dr. to Realisation A/c
No entry is required
C
Correct Answer: Partner Capital A/c Dr. to Realisation A/c
Question 35
What happens when an asset is settled against a liability?
Cash is paid
The asset is sold
There will be no entry
The liability is transferred to a partner
C
Correct Answer: There will be no entry
Question 36
What is the journal entry for a liability paid by the firm?
Cash/Bank A/c Dr. to Realisation A/c
Realisation A/c Dr. to Cash/ Bank A/c
Realisation A/c Dr. to Partner Capital A/c
No entry is required
B
Correct Answer: Realisation A/c Dr. to Cash/ Bank A/c
Question 37
What is the journal entry for a liability paid by a partner?
Cash/Bank A/c Dr. to Realisation A/c
Realisation A/c Dr. to Partner capital A/c
Realisation A/c Dr. to Cash/Bank A/c
No entry is required
B
Correct Answer: Realisation A/c Dr. to Partner capital A/c
Question 38
What is the first step in the dissolution process out of the following?
Distributing surplus to partners
Repaying liabilities
Recover partner loan
Selling assets
D
Correct Answer: Selling assets
Question 39
What is the final step in the dissolution process out of the following?
Selling assets
Repaying liabilities
Transfer balances to realisation A/c
Distributing surplus to partners
D
Correct Answer: Distributing surplus to partners
Question 40
Which account is used to record the sale of assets during dissolution?
Partner's Capital Account
Cash Account
Realisation Account
Liabilities Account
C
Correct Answer: Realisation Account
Question 41
What happens to accumulated losses during dissolution?
They are transferred to Realisation Account
They are written off as a loss
They are transferred to the debit side of Partner's Capital Account
They are kept in a reserve account
C
Correct Answer: They are transferred to the debit side of Partner's Capital Account
Question 42
How are accumulated profits distributed among partners?
Equally
Based on their capital contribution
In the old profit-sharing ratio
As decided by the partners
C
Correct Answer: In the old profit-sharing ratio
Question 43
If a partner takes over an asset, how is it recorded?
As a sale in the Cash Account
As a gain in the Realisation Account
As a debit to the Partner's Capital Account and a credit to the Realisation Account
No entry is required
C
Correct Answer: As a debit to the Partner's Capital Account and a credit to the Realisation Account
Question 44
If the firm pays a liability, which account is debited?
Cash Account
Partner's Capital Account
Liabilities Account
Realisation Account
D
Correct Answer: Realisation Account
Question 45
If a partner pays a liability, which account is credited?
Cash Account
Partner's Capital Account
Liabilities Account
Realisation Account
B
Correct Answer: Partner's Capital Account
Question 46
What is the purpose of preparing a Realisation Account during dissolution?
To determine the profit or loss on the sale of assets and settlement of liabilities
To determine the profit or loss on revaluation
Find the capital balance payable to partners
Find the loan amount payable to partners
A
Correct Answer: To determine the profit or loss on the sale of assets and settlement of liabilities
Question 47
How is the profit or loss on realisation distributed among the partners?
Equally
Based on their capital contribution
In the old profit-sharing ratio
As decided by the partners
C
Correct Answer: In the old profit-sharing ratio
Question 48
What is the significance of closing all books of accounts during dissolution?
To prevent future transactions
To finalise the dissolution process
To comply with legal requirements
To prepare for liquidation
B
Correct Answer: To finalise the dissolution process
Question 49
When liabilities are paid by firm then In realization A/c it is written on
Debit Side
Credit side
Not written
None of the above
A
Correct Answer: Debit Side
Question 50
When assets are paid by firm then In realization A/c it is written on
Debit Side
Credit side
Not written
None of the above
B
Correct Answer: Credit side
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