Q.M and N were partners sharing profits in the ratio of 3:2. On the date of dissolution their capitals were - M: ₹7,650, N: ₹4,300. The creditors amounted to ₹27,500. The balance of cash was ₹760. The assets realised ₹25,430, the expenses on dissolution were ₹1,540. All partners were solvent.
Close the books of the firm, showing the Realisation Account, Capital Account and Cash Account.

Showing the 12 most recent of 40 on this concept.

1. CBSE 2026Set MARCH1 markMCQ
   Q.Which of the following amounts will be written at the credit side of realisation account, when there is balance of debtors ₹ 24,500 and bad debt reserve ₹ 2,500 in the balance sheet at the time of the dissolution of a firm?

   (a) ₹ 24,500

   (b) ₹ 2,500

   (c) ₹ 22,000

   (d) ₹ 27,000

   ›Reveal solutionSolution

   The bad debt reserve of 2,500 is credited to the Realisation A/c, so the answer is (b).

   When assets and their related provisions are transferred to the Realisation Account:

   Item	Amount	Side of Realisation A/c
   Debtors (gross)	24,500	Debit
   Bad debt reserve (provision)	2,500	Credit
   …

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2. CBSE 2026Set MARCH1 mark
   Q.Realisation account is ______ account.

   ›Reveal solutionSolution

   The Realisation Account is a Nominal Account.

   On the dissolution of a firm, a Realisation Account is prepared to record the sale of all assets and the settlement of all liabilities so that the profit or loss on realisation can be ascertained and shared among the partners in their profit-sharing ratio. Because its purpose is to determine a gain or loss (an income/expense result) rather than to track a person (personal account) or a property (real account), i …

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3. CBSE 2026Set MARCH1 markMCQ
   Q.Unrecorded liabilities, when paid are shown in

   (a) a) Debit side of Realisation A/c

   (b) b) Debit side of Bank A/c

   (c) c) Credit side of Realisation A/c

   (d) d) Debit side of Cash A/c

   ›Reveal solutionSolution

   Payment of an unrecorded liability on dissolution is shown on the debit side of the Realisation Account - option (a).

   In Karnataka 2nd PUC Accountancy, at dissolution the Realisation Account is prepared to close all assets and liabilities. When a liability that was never recorded in the books is discovered and paid, the payment represents a cash outflow of realisation; the entry is Realisation A/c Dr, To Bank A/c. Hence it appears on the debit side of the R …

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4. CBSE 2026Set ANNUAL1 markMCQ
   Q.At the time of dissolution of a firm, where is the amount of provision for bad debts on debtor is transferred? A) In Realisation A/c B) In Partners' Capital A/c C) In Partners' Loan A/c D) In Bank A/c

   ›Reveal solutionSolution

   The provision for bad debts is transferred to the Realisation Account on dissolution — option (A).

   When a firm is dissolved, a Realisation Account is opened to close all assets (at book value, debit side) and all outside liabilities and provisions against assets (credit side). The provision for bad debts is a provision created against debtors, so it is transferred to the credit side of the Realisation Account. Debtors themselves are shown on the debit side at gross book value, and the amount actually rea …

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5. CBSE 2026Set ANNUAL1 markMCQ
   Q.On dissolution of a partnership firm, profit or loss on realisation is distributed among the partners:

   (a) In Capital ratio

   (b) In profit sharing ratio

   (c) In sacrificing ratio

   (d) Equally

   ›Reveal solutionSolution

   Realisation profit/loss is shared in the profit-sharing ratio - option (b).

   On dissolution, the Realisation Account is prepared to record the sale of assets and payment of liabilities; its balance is the profit or loss on realisation. Being a profit or loss of the firm, it is transferred to the partners' capital accounts in their profit …

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6. CBSE 2026Set ANNUAL1 markMCQ
   Q.Which account is prepared for the sale of Assets?

   (a) Realization account

   (b) Revaluation account

   (c) Profit and Loss appropriation account

   (d) Partner's capital account

   ›Reveal solutionSolution

   Correct option: (a) Realisation account.

   On dissolution of a firm, a Realisation Account is opened to record the sale/realisation of all assets and the payment of all liabilities. (A Revaluation Account is prepared only on reconstitution - admission/retirement/death - when the firm continues, not when …

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7. CBSE 2026Set ANNUAL1 mark
   Q.Answer in one word/sentence: On dissolution, Bank overdraft is transferred to which account?

   ›Reveal solutionSolution

   Answer: Realisation Account.

   A bank overdraft is an external liability of the firm. On dissolution all outside liabilities are transferred to the Realisation Account, so a bank overdraft is also transfe …

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8. CBSE 2025Set MARCH1 markMCQ
   Q.Which of the following amounts will be written at the credit side of realisation account, when there is balance of debtors ₹ 49,000 and bad-debt reserve of ₹ 5,000 in the balance sheet at the time of dissolution of a firm.

   (a) ₹ 49,000

   (b) ₹ 5,000

   (c) ₹ 44,000

   (d) ₹ 54,000

   ›Reveal solutionSolution

   Debtors ₹49,000 go to the debit side (gross); the bad-debt reserve ₹5,000 is a provision transferred to the credit side of the realisation account. Correct option: (b) ₹5,000.

   In GSEB Class-12 Commerce Accountancy (dissolution):

   • All assets are transferred to the debit of the Realisation Account at book value — so Debtors ₹49,000 are debited. …

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9. CBSE 2025Set MARCH1 mark
   Q.Explain the meaning of realisation account.

   ›Reveal solutionSolution

   The realisation account is prepared at the dissolution of a firm to close all assets and liabilities, record their realisation and payment, and ascertain the net profit or loss on realisation, which is then shared among partners in their profit-sharing ratio.

   In GSEB Class-12 Commerce Accountancy (Dissolution of a Firm):

   • On dissolution, all assets (except cash/bank) are transferred to the debit side and all outside liabilities to the credit side of the realisation account at book value.
   • Amounts actually realised from assets are credited, and amounts paid to settle liabilities and realisation expenses are debited. …

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10. CBSE 2025Set MARCH1 markMCQ
    Q.Choose the correct option after considering the given statements (I & II) : Statement I : The amount realized from the sale of assets on dissolution of firm is divided among the partners in the profit sharing ratio. Statement II : The profit or loss on realization is shared among the partners in their profit sharing ratio. Options :

    (a) Statements I & II are true.

    (b) Statements I & II are false.

    (c) Statement I is true & II is false.

    (d) Statement I is false & II is true.

    ›Reveal solutionSolution

    Statement I is false, Statement II is true. Correct option: (d).

    …

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11. CBSE 2025Set MARCH1 mark
    Q.Partner's loan is ______ to the realisation account.

    ›Reveal solutionSolution

    A partner's loan is NOT transferred to the Realisation Account; it is paid through a separate Partner's Loan Account.

    When a firm is dissolved, all external assets (except cash/bank) and all outside (third-party) liabilities are transferred to the Realisation Account to find the profit or loss on realisation. A loan given by a partner to the firm is different from his capital and different from an outside creditor; it is therefore kept out of the Realisation Account and discharged through its own Partn …

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12. CBSE 2025Set ANNUAL1 markMCQ
    Q.At the time of dissolution of firm, book value of assets is recorded in which side of Realisation Account ? (A) Debit (B) Credit (C) Liability (D) None of these

    ›Reveal solutionSolution

    On dissolution, all assets (except cash/bank and fictitious assets) are closed by transferring them at book value to the debit side of the Realisation Account. Hence the answer is (A) Debit.

    For Bihar Class-12 (BSEB Inter) commerce candidates, when a firm is dissolved the Realisation Account is opened to record the disposal of assets and settlement of liabilities:

    • Assets have a debit balance in the books, so to close them they are credited in their own accounts and debited to the Realisation Account:
      • Realisation A/c Dr. (book value of assets) …

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