Tag: dissolution of firm

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Questions Related to dissolution of firm

Multiple choice business organisation and correspondence partnership 4 - dissolution of a partnership firm meaning of dissolution of partnership firm modes of dissolution of firm dissolution of firm difference between realisation account and revaluation account payment of firm's debts and separate debts, realisation of assets and liabilities

Under _________ there have been made rules regarding the dissolution of firm.

  1. Indian Partnership Act, 1932

  2. Indian Partnership Act section 45

  3. Companies Act section 48

  4. Companies Act section 45
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

In India, Partnership is one of the most practiced form of organisation. So to control partnership business Indian partnership Act was framed. It came into force on 1st October, 1932. It extends to the whole of India except Jammu and Kashmir. Section 40 to 44 of Indian Partnership Act contains provisions regarding dissolution of partnership firm. 

Multiple choice business organisation and correspondence partnership 4 - dissolution of a partnership firm meaning of dissolution of partnership firm modes of dissolution of firm dissolution of firm difference between realisation account and revaluation account payment of firm's debts and separate debts, realisation of assets and liabilities

Distribution of loss in case of insolvency is to be charged ____________.

  1. From solvent partners first

  2. From insolvent partner

  3. In insolvency debts cannot be cleaned as one partner is insolvent

  4. No solvent partner is responsible for the debts due for insolvent partner
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

According to Garner vs. Murray rule, if the partner becomes insolvent, he is unable to pay back the amount due to him. The amount not paid is a capital loss which should be charged from the solvent partner in the ratio of their capitals standing in the balance sheet on the date of dissolution of the firm. . 

Multiple choice business organisation and correspondence partnership 4 - dissolution of a partnership firm meaning of dissolution of partnership firm modes of dissolution of firm dissolution of firm difference between realisation account and revaluation account payment of firm's debts and separate debts, realisation of assets and liabilities

In a partnership firm one partner is solvent and rest all partner becomes insolvent. What will be the effect on partnership firm?

  1. Dissolution of firm

  2. Dissolution of partnership

  3. Firm will continue to exist

  4. Both a & c
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

According to Section 41 of Indian partnership act, 1932, If in a partnership one partner is solvent and rest all partner becomes insolvent then it leads to compulsory dissolution of firm. The court orders in this case to dissolve the firm. 

Multiple choice business organisation and correspondence partnership 4 - dissolution of a partnership firm meaning of dissolution of partnership firm modes of dissolution of firm dissolution of firm difference between realisation account and revaluation account payment of firm's debts and separate debts, realisation of assets and liabilities

Correct sequence of payment after the dissolution of firm will be :

  1. Debt to parties, advances given by partners, each partner account of capital residue to be divided amongst partners in profit sharing ratio

  2. Debt to parties, account of capital of each partner, advances given by partners, residue to be divided amongst partners in profit sharing ratio

  3. Debt to parties, balance from P&L account amongst partners in their profit sharing ration

  4. All of the above
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Option A is correct. After the dissolution of firm, first of all loan given by any partner is paid because loan and advances are liability for the firm. After paying all the liabilities any amount left is divided divided among partners in their profit sharing ratio. If this sequence is not followed debt could not be paid because amount available has already been taken by partner. 

Multiple choice business organisation and correspondence partnership 4 - dissolution of a partnership firm meaning of dissolution of partnership firm modes of dissolution of firm dissolution of firm difference between realisation account and revaluation account payment of firm's debts and separate debts, realisation of assets and liabilities

Garner vs. Murray gave accounting treatment regarding 

  1. Insolvent of a partner

  2. Death of partner

  3. Admission of a new partner

  4. Dissolution at will
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

According to Garner vs. Murray rule, if the partner becomes insolvent, he is unable to pay back the amount due to him. The amount not paid is a capital loss which should be borne by the solvent partner in the ratio of their capitals standing in the balance sheet on the date of dissolution of the firm. 

Multiple choice business organisation and correspondence partnership 4 - dissolution of a partnership firm meaning of dissolution of partnership firm modes of dissolution of firm dissolution of firm difference between realisation account and revaluation account payment of firm's debts and separate debts, realisation of assets and liabilities

Under following conditions the court may declare for the dissolution of firm:

  1. A partner is guilty of misconduct.

  2. It is just and equitable to dissolve the firm.

  3. Business can only be carried on loss.

  4. All of the above
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

When a partner is guilty of misconduct, the other partners can move to the court for dissolution because the misconduct of one partner brings bad name to the firm. When court has just and equitable reason to dissolve then court may order for dissolution. If the firm is suffering from continuous loss, then the court may order for dissolution if there is no capital available for further growth.  

Multiple choice business organisation and correspondence partnership 4 - dissolution of a partnership firm meaning of dissolution of partnership firm modes of dissolution of firm dissolution of firm difference between realisation account and revaluation account payment of firm's debts and separate debts, realisation of assets and liabilities

Under ________ company sells all its assets.

  1. Liquidation

  2. Bankruptcy

  3. Turnaround

  4. Disinvestment
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Liquidation is the process in which company stops operating and sell its assets so that cash can be arranged to pay its debts. It is an event that occurs when a company is insolvent and can not pay its obligations when due. The business is no longer in existence once the liquidation process is complete.

Multiple choice business organisation and correspondence partnership 4 - dissolution of a partnership firm meaning of dissolution of partnership firm modes of dissolution of firm dissolution of firm difference between realisation account and revaluation account payment of firm's debts and separate debts, realisation of assets and liabilities

__________ are not legally required to get their financial statements audited.

  1. Companies

  2. Banks

  3. Partnership firms

  4. Insurance companies
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

No compulsory audit is provided by the Indian Partnership Act, 1932. But as per the Indian Taxation Act, 1961 Tax audit of partnership firm is mandatory if the turnover exceeds Rs. one crore in case of business and Rs. Twenty Five lakhs in case of profession. 

Multiple choice business organisation and correspondence partnership 4 - dissolution of a partnership firm meaning of dissolution of partnership firm modes of dissolution of firm dissolution of firm difference between realisation account and revaluation account payment of firm's debts and separate debts, realisation of assets and liabilities

The main account for dealing with partnership dissolution would be:

  1. Realization

  2. Dissolution

  3. Appropriation

  4. Revaluation
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Dissolution of partnership firm means that the firm closes down its business and comes to an end. A realization account is opened for disposing off all the assets of the firm and making payment of all the liabilities. It is a nominal account. The object of such an account is to find out the profit or loss on realization of assets and payment of liabilities. 

Multiple choice business organisation and correspondence partnership 4 - dissolution of a partnership firm meaning of dissolution of partnership firm modes of dissolution of firm dissolution of firm difference between realisation account and revaluation account payment of firm's debts and separate debts, realisation of assets and liabilities

Choose the correct answer from the alternatives given.
A minor together with two major persons:

  1. Can form a partnership

  2. Can form a partnership subject to provision that minor shall not share the losses

  3. Can not form a partnership at all

  4. None of these
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Indian Contract Act clearly states that no person less than the age of 18 years can be a party to contract and a partnership is a contract between the partners. Hence a minor together with two major persons can not form a partnership. A minor can only be admitted to the benefits of partnership.