Test: Dissolution of Partnership - UGC NET MCQ

At the time of dissolution of a partnership firm, if any realized value of goodwill is given in the question, it shows that goodwill is sold with other assets of the firm.

Any asset taken by a partner will be shown in the credit side of realization account and in partner’s capital account.

Unrecorded liabilities are those liabilities that are not shown in the Balance Sheet but they still exist in the business. Although these liabilities are not shown in the books, they still need to the discharged off at the time of dissolution and hence are debited to the Realisation account. 

Any asset taken over by the creditor at the time of dissolution of partnership firm, will not be shown separately or no separate entry will be recorded for the same.

Money realized from the sale of an unrecorded asset at the time of dissolution of partnership firm, should be shown in the credit side of realization account and debit side of cash account.

At the time of dissolution of a partnership firm, all assets available in the business will be realized (sold) and all liabilities will be paid off.

Contingency Reserves is a free reserve which is not transferred to the Realisation account at the time of dissolution of a partnership firm. Other reserves or funds (given in the above question) will be transferred to the Realisation account.

If realized value of any asset is not given in the question, in such a case, realized value should be assumed as nil or Zero realized value.

All liabilities will be paid at the time of dissolution of a partnership firm. Whether some information is given or not about the payment of the same. In this case nothing is mentioned about the payment of creditors but it is mandatory to pay the full amount ?20,000 to the creditors.

Calculation of the amount payable to the creditors:
Total amount payable to the creditors ?30,000
Asset taken over by creditors at market price ?8,000.
Now amount due to the creditors is ?22,000 (30,000 – 8,000)
Final payment to creditors in cash = 22,000 – 2,200 (discount) = 19,800