Q.All ______ (internal/external) liabilities are transferred to the ______ (Debit/Credit) side of ______ Account (Bank/Realisation).

Showing the 12 most recent of 14 on this concept.

1. CBSE 2025Set ANNUAL1 markMCQ
   Q.When a partner takes responsibility to make payment of any outside liability of the firm, the account credited will be (A) Realisation A/c (B) Cash A/c (C) Partner's Capital A/c (D) None of these

   ›Reveal solutionSolution

   If a partner personally undertakes to pay an outside liability of the firm, the Realisation Account is debited and the paying partner's Capital Account is credited. Hence the answer is (C) Partner's Capital A/c.

   For Bihar Class-12 (BSEB Inter) commerce candidates, when a partner agrees to discharge a firm's liability out of his own pocket, the firm owes him that amount, so the entry is:

   • Realisation A/c Dr. (amount of liability taken over)
   • To Partner's Capital A/c

   The liability no longer leaves the firm's cash; instead the partner's capital is increased (credited) by the amount he has agreed to pay. Hence the account credited is the Partner's Capital A/c, option (C).

   ✓Final answer

   (C) Partner's Capital A/c.

2. CBSE 2025Set ANNUAL1 markMCQ
   Q.If a partner took asset on the dissolution of a firm, partner's capital account will be - (A) Debit (B) Credit (C) (A) and (B) both (D) None of these

   ›Reveal solutionSolution

   If a partner takes over an asset on dissolution, his capital account is debited with the agreed value of that asset.

   On dissolution, assets are transferred to the Realisation Account. When a partner personally takes over an asset, he is effectively buying it from the firm, so the agreed amount is charged against him. The entry is Partner's Capital A/c Dr. To Realisation A/c, which means the partner's capital account is debited (reducing the amount ultimately payable to him). This is a basic dissolution journal rule in the RBSE Rajasthan Class-12 Accountancy syllabus, consistent with NCERT/CBSE.

   ✓Final answer

   (A) Debit

3. CBSE 2025Set ANNUAL1 mark
   Q.Give journal entry for sale of not recorded asset on dissolution of a firm.

   ›Reveal solutionSolution

   Sale of an unrecorded asset on dissolution: Bank/Cash A/c Dr. To Realisation A/c.

   An unrecorded (not recorded) asset does not appear in the books, so it has no book value to transfer to the Realisation Account. When such an asset is sold for cash on dissolution, the whole sale proceeds are a gain to the firm and are credited to the Realisation Account:

   Bank (Cash) A/c Dr. [amount realised]

   ** To Realisation A/c**

   This is a standard dissolution journal entry in the RBSE Rajasthan Class-12 Accountancy syllabus, aligned with NCERT/CBSE.

   ✓Final answer

   Bank (Cash) A/c Dr. To Realisation A/c — with the amount realised on sale of the unrecorded asset.

4. CBSE 2025Set ANNUAL1 markMCQ
   Q.On dissolution of a firm, the final balance of Capital Account is transferred to

   (a) Realisation A/c

   (b) Profit and Loss A/c

   (c) Cash A/c

   (d) Loan A/c of partners

   ›Reveal solutionSolution

   The final balance of the Capital Account is settled through the Cash A/c - option (c).

   On dissolution, the Realisation Account (profit/loss), reserves and the loan accounts are first transferred to the partners' capital accounts. Once all these adjustments are made, the balance remaining in each partner's Capital Account represents the amount finally due to or from him, which is paid or received in cash; thus the Capital Account is closed by a transfer to the Cash/Bank Account. (The Realisation A/c receives assets and liabilities, not the final capital balance.)

   ✓Final answer

   (c) Cash A/c.

5. CBSE 2025Set ANNUAL1 markMCQ
   Q.At the time of dissolution undistributed profit and reserve are transferreed to -

   (a) Capital A/c

   (b) Bank A/c

   (c) Partners' Capital A/c

   (d) Profit / Loss A/c

   ›Reveal solutionSolution

   Correct option: (c) Partners' Capital A/c.

   Undistributed profits and reserves (e.g. General Reserve, credit balance of P&L A/c) are not transferred to the Realisation Account; they are distributed among the partners by crediting their Capital Accounts in the profit-sharing ratio before closing the books on dissolution.

   ✓Final answer

   (c) Partners' Capital A/c.

6. CBSE 2024Set MARCH1 markMCQ
   Q.To which account credit balance of Profit and Loss account is transferred at the time of the dissolution of a firm?

   (a) Realisation A/c

   (b) Cash A/c

   (c) Profit and Loss A/c

   (d) Partner's Capital A/c

   ›Reveal solutionSolution

   The credit balance of the Profit and Loss Account is transferred to Partners' Capital Accounts, so option (d) is correct.

   In this GSEB Class-12 Commerce dissolution topic, accumulated profits/reserves (such as a credit balance of Profit and Loss A/c) belong to the partners. On dissolution they are distributed directly to the partners' capital accounts in their profit-loss sharing ratio. Only assets and liabilities being realised/paid pass through the Realisation Account - not accumulated profits.

   Entry: Profit and Loss A/c ... Dr; To Partners' Capital A/c (in ratio).

   ✓Final answer

   (d) Partner's Capital A/c.

7. CBSE 2023Set ANNUAL1 markMCQ
   Q.On dissolution of a firm, Bank overdraft is transferred to (A) Cash account (B) Bank account (C) Realisation account (D) Partners' Capital account

   ›Reveal solutionSolution

   A bank overdraft is an external liability, so on dissolution it is transferred to the Realisation Account (Bank Overdraft A/c Dr., To Realisation A/c).

   On dissolution, all external/third-party liabilities (creditors, bills payable, bank loan, bank overdraft) are transferred to the credit side of the Realisation Account, because the firm must pay them off as part of realisation. The entry is: Bank Overdraft A/c Dr., To Realisation A/c. Transferring it to the Cash or Bank Account would be wrong (overdraft is a liability, not cash), and it is not a partner's capital item. Therefore the correct destination is the Realisation Account.

   ✓Final answer

   (C) Realisation account

8. CBSE 2023Set ANNUAL1 mark
   Q.At the time of dissolution of firm, the goodwill of the firm is taken over by a partner, what will be the journal entry?

   ›Reveal solutionSolution

   Goodwill taken over by a partner on dissolution: Partner's Capital A/c Dr., To Realisation A/c.

   During dissolution, all assets (including goodwill, if appearing or agreed) stand in the Realisation Account. When a partner takes over an asset such as goodwill, he becomes liable to the firm for its agreed value, so:

   Date	Particulars	L.F.	Dr. (₹)	Cr. (₹)
   	Partner's Capital A/c Dr.		xxx
   	To Realisation A/c			xxx
   	(Being goodwill taken over by the partner at agreed value)

   ✓Final answer

   Partner's Capital A/c Dr. — To Realisation A/c.

9. CBSE 2022Set ANNUAL1 markMCQ
   Q.Which account is debited with interest payable on partner's loan account on dissolution of a partnership firm?

   (a) Realisation account

   (b) Partners' Capital account

   (c) Cash/Bank account

   (d) Partner's loan account

   ›Reveal solutionSolution

   Interest accrued on a partner's loan at dissolution is routed through the Realisation Account, like any other winding-up cost.

   A partner's loan to the firm is a liability distinct from their capital, and on dissolution it is settled directly (not transferred into the Realisation Account itself, unlike other assets/liabilities) by paying it off from the firm's Cash/Bank Account. However, if interest has accrued on that loan but has not yet been paid or recorded by the date of dissolution, this interest is an additional cost of winding up that the firm must now recognise. Since the Realisation Account is where every dissolution-related gain, loss and expense is finally gathered before being shared among the partners, the interest due is debited there (Realisation A/c Dr., To Partner's Loan A/c), increasing the balance that will then actually be paid out of Cash/Bank.

   ✓Final answer

   Realisation Account is debited with the interest payable on the partner's loan.

10. CBSE 2022Set ANNUAL1 markMCQ
    Q.Which account is prepared for final settlement of outside liabilities and Partners on dissolution of a firm?

    (a) Realisation account

    (b) Partner's Capital account

    (c) Cash/Bank account

    (d) Partners' loan account

    ›Reveal solutionSolution

    Realisation Account calculates the profit/loss on winding up; the Cash/Bank Account is where the actual final payments happen.

    On dissolution, several accounts work together, but each has a distinct role: the Realisation Account records the book values of assets/liabilities transferred and the amounts actually realised/paid, to arrive at an overall profit or loss on realisation. The Partners' Capital Accounts show what each partner is ultimately owed (or owes) after all adjustments. But the actual, physical settlement — receiving the sale proceeds of assets and then paying, strictly in order, the firm's outside creditors, then partners' loans, and finally partners' capital balances — happens through the Cash/Bank Account. It is effectively the 'final common account' through which every real cash movement passes before the firm's books are closed for good.

    ✓Final answer

    Cash/Bank Account.

11. CBSE 2022Set ANNUAL1 markMCQ
    Q.At the time of dissolution of the firm, an unrecorded Bills Payable of Rs. 1,20,000 was taken over by a partner at Rs. 1,08,000. What will be the accounting treatment in partner's capital account?

    (a) Rs. 1,08,000 debited

    (b) Rs. 1,08,000 credited

    (c) Rs. 1,20,000 debited

    (d) Rs. 1,20,000 credited

    ›Reveal solutionSolution

    An unrecorded liability taken over by a partner is credited to their Capital Account at the AGREED (takeover) value, not the original book figure.

    Because this Bills Payable was 'unrecorded', it simply did not exist in the firm's books at all — there is no earlier entry to reverse. When a partner personally agrees to take over and settle this liability on the firm's behalf, it is treated as the partner doing the firm a service worth the AMOUNT THEY AGREE TO SETTLE IT FOR (here, Rs. 1,08,000 — not the original Rs. 1,20,000 face value, since that figure never appeared in the accounts in the first place). The entry is: Realisation A/c Dr. Rs. 1,08,000, To Partner's Capital A/c Rs. 1,08,000 — crediting the partner's capital, since the firm now owes them for discharging this liability.

    ✓Final answer

    Rs. 1,08,000 is credited to the partner's Capital Account.

12. CBSE 2022Set ANNUAL1 markMCQ
    Q.On dissolution of a firm, creditors having book value of Rs. 2,50,000 were settled partly by giving unrecorded investment worth Rs. 80,000 and the remaining creditors were paid at 5% discount. What will be the amount paid to the creditors?

    (a) Rs. 1,61,500

    (b) Rs. 1,70,000

    (c) Rs. 2,37,500

    (d) Rs. 3,13,500

    ›Reveal solutionSolution

    Settle the part paid via the investment first, then apply the discount only to what's actually paid in cash — answer: Rs. 1,61,500.

    Total creditors (book value) = Rs. 2,50,000.

    Step 1: Rs. 80,000 of this is settled by giving the creditors an unrecorded investment (worth exactly Rs. 80,000) — no cash changes hands for this part, and it is treated at its full Rs. 80,000 value since that is what it is worth.

    Step 2: Remaining creditors = Rs. 2,50,000 − Rs. 80,000 = Rs. 1,70,000, to be paid in cash at a 5% discount: Amount actually paid = Rs. 1,70,000 × (100% − 5%) = Rs. 1,70,000 × 95% = Rs. 1,61,500.

    The Rs. 8,500 discount received (5% of Rs. 1,70,000) is a gain credited to the Realisation Account.

    ✓Final answer

    Rs. 1,61,500 is paid (in cash) to the creditors.