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 creditors' voluntary winding up, the copy of the resolution is sent to the registrar within _______.

  1. $10\ days$

  2. $15\ days$

  3. $30\ days$

  4. $45\ days$
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Voluntary winding up is the process in which a company is unable to carry out it operations or the period for carrying the operations expires or if it is unable to meet its financial obligations. It can carry this process either by passing special resolution or by ordinary resolution. There are two kinds of voluntary winding up. They are;

  1. Member's voluntary winding up.
  2. Creditors voluntary winding up.
Under creditors voluntary winding up declaration of solvency is not required because the company first only becomes unable to pay the liabilities. Under this, the copy of the resolution is sent to the registrar within 10 days.

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

On the dissolution of a firm, if a partner has a debit balance in his capital account then:

  1. He shall not share in the profit/loss on dissolution

  2. He need not bring cash

  3. He is required to bring in enough cash to clear off his debit balance

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

At the time of dissolution, the accounts of partners are settled. Accounts are settled by paying them the amount of capital due to them. So, if a partner has debit balance in his capital he has to bring the amount to clear off his debit balance. Suppose. there are three partners, A, B and C. Capital of partners at the time of dissolution are A Rs.30000(CR.), B Rs.10000(CR.), and C Rs. 5000(DR.). In this , Partner C will bring Rs. 5000 to clear off his balance due to him.

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

L, M, N and O are equal partners. L, M and O die together. This accident results in:

  1. Dissolution of partnership

  2. Dissolution of firm

  3. Dissolution of firm as well as dissolution of partnership

  4. Neither dissolution of firm nor dissolution of partnership
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Dissolution of partnership means termination of old partnership agreement and a reconstruction of the firm due to admission ,retirement and death. Dissolution of partnership firm means that the firm closes down its business  and comes to an end. In this case because of death partnership dissolved. 

For partnership two or more than two partners needed but in this only one partner is alive. so it resulted in dissolution of partnership firm also.

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

When a firm is dissolved, the piecemeal distribution of cash should be done in such a manner that final unpaid amount are in the:

  1. Capital ratio

  2. Profit sharing ratio

  3. Sacrificing ratio

  4. Equal Ratio
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

The rule to follow in piecemeal distribution is that the partners whose capitals are more than proportionate to other partner's capital should first be refunded so much as to bring down their capitals to proportionate levels. After this, the cash available should be distributed in the profit -sharing ratio. Each partner's position has to be compared with position of other partners. 

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

X, Y and Z are partners in the ratio of 2: 1 : 1. After distribution of realisation loss, Z's capital has a debit balance of Rs. 6,000. If Z is personally insolvent, his capital balance will cancelled by:

  1. X and Y contributing equally

  2. X and Y contributing in the ratio of 2:1

  3. X and Y contributing in the ratio of their capitals

  4. Writing off to Profit and Loss account
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

When a partner is unable to contribute towards deficiency of his capital account,he/she is said to be insolvent,and the sum not recoverable is treated as capital loss. In the absence of any agreement, such capital loss is to be borne by the solvent partners in accordance with the principle laid down in Garner vs. Murray case, which states that the solvent partners have to bear such loss in the ratio of their capitals on the date of dissolution.

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

Which of the following is not correct statement ?

  1. On dissolution of a firm, realisation account is debited with all assets to be realised.

  2. General reserve appearing in Balance Sheet is transferred to partner's capital account in profit sharing ratio.

  3. On dissolution of a firm, Cash balance in hand is transferred to realisation account.

  4. Dissolution of partnership firm and dissolution of a firm are different.
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

All those assets which can be converted into cash are transferred to realisation account such as Building, Plant and Machinery, Land etc. Because the main object of this account is to find out the profit or loss on realisation 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

In India, audit of Partnership firm is:

  1. Compulsory

  2. Optional

  3. Statutory by law

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

In India, no compulsory audit is provided by Indian Partnership Act, 1932. As per the Income Tax Act , 1961, Tax audit of Partnership Firm is mandatory if the turnover exceeds One Crore Rupees in case of business and Rupees 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

Where a partner of a firm has become of unsound mind, the suit for dissolution may be brought by:

  1. Himself

  2. A friend of that partner

  3. A relative of that partner

  4. Both B and C
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Section 44 of the Indian Partnership Act states that when a partner becomes of unsound mind,suit for dissolution can be brought by other partner, a friend of that partner and by a relative of that partner. Unsoundness of a partner can be ground for 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

A firm is dissolved when the business of the firm becomes ________.

  1. Illegal

  2. legal

  3. Partially illegal

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

Dissolution of partnership firm may take place without the intervention of court or by the order of a court, in any of the specified ways. It may be noted that dissolution of the firm necessarily brings in dissolution of partnership. Compulsory Dissolution is one of the way because of which dissolution of firm may take place. A firm is dissolved compulsorily in the following case:

(a) when all the partners or all but one partner, become insolvent, rendering them incompetent to sign a contract;
(b) when the business of the firm becomes illegal; and 
(c) when some event has taken place which makes it unlawful for the partners to carry on the business of the firm in partnership, e.g., when a partner who is a citizen of a country becomes an alien enemy because of the declaration of war with his country and India.

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

Subject to contract between the partners, a firm is dissolved by the _______ of a partner.

  1. Existence

  2. Death

  3. Retirement

  4. Insanity
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Dissolution of partnership firm may take place without the intervention of court or by the order of a court, in any of the specified ways. It may be noted that dissolution of the firm necessarily brings in dissolution of the partnership.

On the happening of certain contingencies is one way which results in dissolution of firm. Subject to contract between the partners, a firm is dissolved:
(a) if constituted for a fixed term, by the expiry of that term; 
(b) if constituted to carry out one or more ventures, by the completion thereof;
(c) by the death of a partner; 
(d) by the adjudication of a partner as an insolvent.