CUET UG Accountancy Booster Test 3 Judicial Dissolution of Partnership Firm -

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CUET UG Accountancy Booster Test 2 Judicial Dissolution of Partnership Firm

⏱️ 30 Minutes

❓ 20 Questions

📌 Answers are locked once submitted — results and explanations appear at the end.

CUET UG Accountancy Booster Test 2 Judicial Dissolution of Partnership Firm

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QUESTION 1 OF 20

Consider the following regarding the insanity of a partner:
I. It results in compulsory dissolution without a court order.
II. It is a ground for dissolution by the court at the suit of a partner.
III. The insane partner cannot file the suit themselves; another partner must do it.

Answer Review

1 Consider the following regarding the insanity of a partner:
I. It results in compulsory dissolution without a court order.
II. It is a ground for dissolution by the court at the suit of a partner.
III. The insane partner cannot file the suit themselves; another partner must do it.

A I only

B I and II only

C II and III only

D I, II, and III

💡 Short Explanation

Insanity is a ground for dissolution by court. A partner must file the suit. It is not automatic compulsory dissolution.

✅ Correct Answer Explanation

Under the Indian Partnership Act, unsoundness of mind of a partner is a valid ground for dissolution of the firm by the court. However, dissolution does not happen automatically. A partner must file a suit before the court seeking dissolution. Therefore, Statement II is correct. Statement III is also correct because an insane partner is legally incapable of instituting the suit themselves, so another competent partner must approach the court. Statement I is incorrect because compulsory dissolution occurs in situations like illegality of business, not insanity of a partner.

❓ Why Other Options Are Incorrect

Option A → Incorrect because Statement III is also correct.
Option B → Incorrect because Statement I is wrong.
Option D → Incorrect because insanity does not cause automatic compulsory dissolution.

🎯 Strategy

Used

Elimination

Application:

�� Eliminate statements confusing court dissolution with compulsory dissolution.

Final Logic:

�� Insanity requires court intervention; therefore only II and III are correct.

🧠 Memory Trick

"Insanity = Court, not automatic."

📚 Class XII – Accountancy Part 1 – Chapter: Dissolution of Partnership Firm – Topic: Dissolution by Court – Page X

2 Partner A suffers a severe accident, leaving them permanently incapable of performing their duties. Partner B wants to dissolve the firm. How can this be executed?

A Partner B can file a suit in court for dissolution on grounds of incapacity.

B The firm dissolves automatically the moment the accident occurs.

C Partner A must give a notice in writing.

D It falls under "compulsory dissolution" without court intervention.

💡 Short Explanation

Permanent incapacity is a court ground. Court intervention is required. Dissolution is not automatic.

✅ Correct Answer Explanation

Permanent incapacity of a partner is one of the grounds under dissolution by court. Since Partner A cannot perform duties permanently, Partner B can approach the court and file a suit seeking dissolution of the firm. Hence, Option A is correct. Option B is incorrect because incapacity does not automatically dissolve the firm. Option C is incorrect because notice applies to partnership at will, not incapacity. Option D is incorrect because compulsory dissolution applies in cases like unlawful business activities.

❓ Why Other Options Are Incorrect

Option B → Dissolution is not automatic.
Option C → Written notice relates to partnership at will.
Option D → Incapacity is not compulsory dissolution.

🎯 Strategy

Used

Contextual/Tonal Matching

Application:

�� Identify the legal context related to "court-ordered dissolution."

Final Logic:

�� Permanent incapacity requires a court suit by another partner.

🧠 Memory Trick

"Incapacity → Court Capacity."

📚 Class XII – Accountancy Part 1 – Chapter: Dissolution of Partnership Firm – Topic: Dissolution by Court – Page X

3 Match the concepts related to partner misconduct:

List 1	List 2
1. Misconduct Impact	a. Adversely affects business
2. Court's Role	b. May order dissolution
3. Innocent Partner	c. Files the suit
4. Dissolution Type	d. Dissolution by Court

A 1-a, 2-b, 3-c, 4-d

B 1-b, 2-d, 3-c, 4-a

C 1-c, 2-a, 3-d, 4-b

D 1-d, 2-c, 3-b, 4-a

💡 Short Explanation

Misconduct affects business. Court may order dissolution. Innocent partner files suit.

✅ Correct Answer Explanation

Misconduct by a partner becomes a ground for dissolution when it adversely affects business operations. Therefore: Misconduct impact → adversely affects business Court's role → may order dissolution Innocent partner → files the suit Dissolution type → dissolution by court Thus, Option B is correct.

❓ Why Other Options Are Incorrect

Option A → Incorrect matching of misconduct impact and court role.
Option C → Incorrect association of innocent partner and dissolution type.
Option D → Most matches are incorrect.

🎯 Strategy

Used

Option Grouping

Application:

�� Pair logically connected legal concepts.

Final Logic:

�� Court dissolution and misconduct-related effects correctly align in Option B.

🧠 Memory Trick

"Misconduct hurts business; innocent partner sues."

📚 Class XII – Accountancy Part 1 – Chapter: Dissolution of Partnership Firm – Topic: Misconduct as Court Ground – Page X

4 Which of the following is conceptually true regarding a partner persistently committing a breach of agreement?

A It constitutes dissolution by agreement.

B It leads to the automatic bankruptcy of the firm.

C The partner must be expelled, but the firm cannot be dissolved.

D It gives grounds for the court to dissolve the firm upon a suit.

💡 Short Explanation

Persistent breach is a court ground. Innocent partner can sue. Dissolution is not automatic.

✅ Correct Answer Explanation

Persistent breach of partnership agreement adversely affects mutual trust among partners. Under the Partnership Act, such conduct gives the court authority to dissolve the firm if another partner files a suit. Therefore, Option D is correct. Option A is incorrect because dissolution by agreement requires mutual consent. Option B is incorrect because breach does not automatically bankrupt the firm. Option C is incorrect because dissolution is legally possible.

❓ Why Other Options Are Incorrect

Option A → No mutual agreement exists.
Option B → Bankruptcy is unrelated.
Option C → Court may dissolve the firm.

🎯 Strategy

Used

Elimination

Application:

�� Remove options containing "automatic" or legally unsupported outcomes.

Final Logic:

�� Persistent breach legally justifies court dissolution.

🧠 Memory Trick

"Repeated breach breaks partnership."

📚 Class XII – Accountancy Part 1 – Chapter: Dissolution of Partnership Firm – Topic: Breach of Agreement – Page X

5 Assertion (A): Transferring a partner's entire interest to a third party is a valid ground for court-ordered dissolution.
Reason (R): It introduces a stranger to the firm without the consent of other partners, altering the agreed economic relationship.

A Both A and R are true, and R is the correct explanation.

B Both A and R are true, but R is not the correct explanation.

C A is true, but R is false.

D A is false, but R is true.

💡 Short Explanation

Transfer affects partnership relationship. Outsider enters without consent. Court may dissolve the firm.

✅ Correct Answer Explanation

A partnership is based on mutual trust and agreement among partners. When a partner transfers their entire interest to an outsider, it changes the economic relationship and may force existing partners to associate with an unwanted third party. Therefore, this becomes a valid ground for dissolution by the court. The Reason correctly explains the Assertion; hence Option A is correct.

❓ Why Other Options Are Incorrect

Option B → Reason directly explains Assertion.
Option C → Reason is true.
Option D → Assertion is also true.

🎯 Strategy

Used

Contextual/Tonal Matching

Application:

�� Relate partnership principles to transfer of ownership.

Final Logic:

�� Third-party transfer disturbs mutual consent structure.

🧠 Memory Trick

"No stranger without consent."

📚 Class XII – Accountancy Part 1 – Chapter: Dissolution of Partnership Firm – Topic: Transfer of Interest – Page X

6 When ownership changes due to court-ordered dissolution, how is the realization loss formulaically distributed?

A Transferred only to the partner who caused the dissolution.

B Capital Account Dr. to Realisation Account in equal ratio.

C Partners' Capital Accounts Dr. to Realisation Account in profit-sharing ratio.

D Realisation Account Dr. to Partners' Capital Accounts in profit-sharing ratio.

💡 Short Explanation

Realisation loss is shared by partners. Distribution occurs in profit-sharing ratio. Capital accounts are debited.

✅ Correct Answer Explanation

Loss on realization is borne by all partners according to their profit-sharing ratio unless otherwise agreed. Therefore, Partners' Capital Accounts are debited and Realisation Account is credited. Journal Entry: Partners' Capital A/c Dr. To Realisation A/c Hence, Option C is correct.

❓ Why Other Options Are Incorrect

Option A → Loss is not borne by one partner only.
Option B → Equal ratio may not match profit-sharing ratio.
Option D → This entry represents profit, not loss.

🎯 Strategy

Used

Formula-Based Elimination

Application:

�� Identify correct debit-credit treatment for realization loss.

Final Logic:

�� Loss decreases partners' capital balances.

🧠 Memory Trick

"Loss → Capital Dr."

📚 Class XII – Accountancy Part 1 – Chapter: Dissolution of Partnership Firm – Topic: Realisation Loss – Page X

7 What specifically states that a firm can be dissolved if its business cannot be carried on except at a loss?

A Section 48 Rules

B Grounds for Dissolution by Court

C Dissolution by Agreement

D Compulsory Dissolution

💡 Short Explanation

Continuous losses are court grounds. Court may order dissolution. Section 48 relates to settlement rules.

✅ Correct Answer Explanation

If a business can only continue at a loss, partners may approach the court for dissolution. This falls under "Grounds for Dissolution by Court." Therefore, Option B is correct. Section 48 only explains settlement of accounts after dissolution.

❓ Why Other Options Are Incorrect

Option A → Section 48 concerns settlement procedure.
Option C → Mutual agreement is different.
Option D → Continuous losses do not create compulsory dissolution.

🎯 Strategy

Used

Elimination

Application:

�� Remove options unrelated to court grounds.

Final Logic:

�� Continuous losses are recognized court grounds.

🧠 Memory Trick

"Losses lead to court closure."

📚 Class XII – Accountancy Part 1 – Chapter: Dissolution of Partnership Firm – Topic: Continuous Losses – Page X

8 A firm is dissolved due to business impracticality. Realisation expenses are Rs. 5,000. A partner, X, agreed to bear expenses but the firm paid the actual Rs. 5,000. What amount is debited to X's capital account?

A Rs. 1,000

B Rs. 4,000

C Rs. 0

D Rs. 5,000

💡 Short Explanation

Partner agreed to bear expenses. Firm paid expenses initially. Entire amount recovered from partner.

✅ Correct Answer Explanation

When a partner agrees to bear realization expenses personally but the firm pays them, the partner's capital account is debited with the full amount paid by the firm. Journal Entry: Partner X's Capital A/c Dr. 5,000 To Bank A/c 5,000 Therefore, Option D is correct.

❓ Why Other Options Are Incorrect

Option A → Arbitrary amount.
Option B → Partial recovery is incorrect.
Option C → Firm must recover expenses from partner.

🎯 Strategy

Used

Substitution

Application:

�� Substitute agreed liability into journal treatment.

Final Logic:

�� Partner reimburses full realization expenses.

🧠 Memory Trick

"Bearer pays fully."

📚 Class XII – Accountancy Part 1 – Chapter: Dissolution of Partnership Firm – Topic: Realisation Expenses – Page X

9 Arrange the steps when the court dissolves a firm on just and equitable grounds:
1. Transfer of Assets to Realisation Account
2. Court passes dissolution order
3. Payment of firm's debts
4. Settlement of partners' capital accounts

A 1, 2, 3, 4

B 2, 1, 3, 4

C 2, 3, 1, 4

D 3, 1, 4, 2

💡 Short Explanation

Court order comes first. Assets transferred after dissolution. Debts settled before partner accounts.

✅ Correct Answer Explanation

The court first orders dissolution. Then assets are transferred to Realisation Account. After realization, external liabilities are paid. Finally, partners' capital accounts are settled. Thus, the correct sequence is: 2 → 1 → 3 → 4

❓ Why Other Options Are Incorrect

Option A → Court order must occur before accounting process.
Option C → Assets must transfer before payment.
Option D → Completely incorrect order.

🎯 Strategy

Used

Sequential Logic

Application:

�� Follow legal and accounting order of dissolution.

Final Logic:

�� Court order initiates dissolution process.

🧠 Memory Trick

"Court → Realise → Pay → Settle."

📚 Class XII – Accountancy Part 1 – Chapter: Dissolution of Partnership Firm – Topic: Dissolution Procedure – Page X

10 Which of the following does NOT fall under the court's discretion for dissolution?

A A partner becoming of unsound mind

B A partner's permanent incapacity

C Just and equitable grounds

D Expiry of the fixed term of partnership

💡 Short Explanation

Expiry of term causes dissolution by agreement/contingency. Court intervention is unnecessary. Other options are court grounds.

✅ Correct Answer Explanation

Expiry of the fixed term automatically dissolves the partnership according to the partnership agreement and does not require court intervention. Therefore, it is not a matter of court discretion. The other options are recognized grounds for dissolution by court.

❓ Why Other Options Are Incorrect

Option A → Valid court ground.
Option B → Valid court ground.
Option C → Valid equitable court ground.

🎯 Strategy

Used

Odd One Out

Application:

�� Identify the only non-court ground.

Final Logic:

�� Expiry of term occurs automatically.

🧠 Memory Trick

"Fixed term ends itself."

📚 Class XII – Accountancy Part 1 – Chapter: Dissolution of Partnership Firm – Topic: Dissolution by Expiry – Page X

11 On termination of business, the firm's total assets realized Rs. 2,00,000. Creditors are Rs. 90,000, Bank Overdraft is Rs. 20,000. If Realisation expenses are Rs. 5,000, what is the total cash outflow to external parties and expenses?

A Rs. 1,15,000

B Rs. 1,10,000

C Rs. 90,000

D Rs. 85,000

💡 Short Explanation

External liabilities must be paid first. Add realization expenses. Total outflow = liabilities + expenses.

✅ Correct Answer Explanation

During dissolution, all external liabilities and realization expenses are settled before distribution among partners. Calculation: Creditors = Rs. 90,000 Bank Overdraft = Rs. 20,000 Realisation Expenses = Rs. 5,000 Total Cash Outflow: [90,000 + 20,000 + 5,000 = 1,15,000] Therefore, Option A is correct.

❓ Why Other Options Are Incorrect

Option B → Excludes one expense component.
Option C → Includes only creditors.
Option D → Incorrect partial total.

🎯 Strategy

Used

Substitution

Application:

�� Substitute all external obligations into total payment formula.

Final Logic:

�� External liabilities plus realization expenses equal total outflow.

🧠 Memory Trick

"Outside claims paid first."

📚 Class XII – Accountancy Part 1 – Chapter: Dissolution of Partnership Firm – Topic: Settlement of External Liabilities – Page X

12 Which equation conceptually represents the settlement difference between firm closure and partnership reconstitution?

A Closure: Revaluation A/c is prepared; Reconstitution: Realisation A/c is prepared

B Closure: Assets = Liabilities; Reconstitution: Assets > Liabilities

C Closure: Books are closed via Realisation A/c; Reconstitution: Books continue via Revaluation A/c

D Closure: New Balance Sheet is drawn; Reconstitution: No Balance Sheet

💡 Short Explanation

Dissolution closes books. Reconstitution continues business. Different accounts are prepared.

✅ Correct Answer Explanation

In dissolution of a firm, business operations end permanently and Realisation Account is prepared to close books and settle assets and liabilities. In reconstitution, the firm continues operating, so Revaluation Account is prepared only to adjust asset and liability values without closing books. Hence, Option C is correct.

❓ Why Other Options Are Incorrect

Option A → Realisation and Revaluation are reversed.
Option B → Equation is conceptually irrelevant.
Option D → New Balance Sheet is also prepared after reconstitution.

🎯 Strategy

Used

Odd One Out

Application:

�� Distinguish continuation from closure.

Final Logic:

�� Dissolution closes books; reconstitution continues them.

🧠 Memory Trick

"Realisation closes, Revaluation continues."

📚 Class XII – Accountancy Part 1 – Chapter: Dissolution of Partnership Firm – Topic: Dissolution vs Reconstitution – Page X

13 In the context of asset treatment, why are assets sold rather than revalued upon dissolution of a firm?

A Because revaluation is strictly prohibited by law.

B To increase the capital balances of the partners.

C Because the partners are starting a new business.

D Because the firm ceases to exist and must settle claims in cash.

💡 Short Explanation

Dissolution ends the firm. Assets must be converted into cash. Claims are settled through realization.

✅ Correct Answer Explanation

When a firm dissolves, it ceases to exist. Therefore, its assets are sold to generate cash required for payment of creditors, liabilities, and settlement among partners. Revaluation alone is insufficient because actual cash realization is necessary. Hence, Option D is correct.

❓ Why Other Options Are Incorrect

Option A → Revaluation is not prohibited.
Option B → Purpose is settlement, not increasing capital.
Option C → New business formation is unrelated.

🎯 Strategy

Used

Contextual/Tonal Matching

Application:

�� Identify the purpose of dissolution accounting.

Final Logic:

�� Dissolution requires conversion of assets into cash.

🧠 Memory Trick

"End of firm = Sell assets."

📚 Class XII – Accountancy Part 1 – Chapter: Dissolution of Partnership Firm – Topic: Realisation of Assets – Page X

14 Assertion (A): Secured loans have precedence over unsecured loans during liability settlement on dissolution.
Reason (R): Section 48 dictates the exact priority of external liabilities being paid before partner loans and capital.

A Both A and R are true, and R is the correct explanation.

B Both A and R are true, but R is not the correct explanation.

C A is true, but R is false.

D A is false, but R is true.

💡 Short Explanation

Secured liabilities get priority. Section 48 defines payment order. External liabilities are settled first.

✅ Correct Answer Explanation

Section 48 of the Indian Partnership Act specifies the order of settlement during dissolution. External liabilities are paid before partner loans and capitals. Among external liabilities, secured creditors are given priority over unsecured creditors because their claims are backed by assets. Therefore, both Assertion and Reason are true, and the Reason correctly explains the Assertion.

❓ Why Other Options Are Incorrect

Option B → Reason directly explains the Assertion.
Option C → Reason is true.
Option D → Assertion is also true.

🎯 Strategy

Used

Conceptual Linking

Application:

�� Connect statutory rules with settlement priority.

Final Logic:

�� Section 48 establishes payment hierarchy.

🧠 Memory Trick

"Secured first, partners last."

📚 Class XII – Accountancy Part 1 – Chapter: Dissolution of Partnership Firm – Topic: Section 48 Settlement Rules – Page X

15 In a "no intervention case" (dissolution by agreement/notice):
I. The court appoints a liquidator.
II. Partners can mutually agree to dissolve at any time.
III. In a partnership at will, written notice by one partner suffices.

A I and II only

B I and III only

C II and III only

D I, II, and III

💡 Short Explanation

Mutual agreement can dissolve firm. Notice works in partnership at will. Court intervention is absent.

✅ Correct Answer Explanation

In dissolution by agreement or notice, court intervention is unnecessary. Partners may mutually decide to dissolve the firm at any time. In partnership at will, written notice by any partner is sufficient. Statement I is incorrect because no liquidator is appointed by the court in such cases. Thus, only Statements II and III are correct.

❓ Why Other Options Are Incorrect

Option A → Statement I is false.
Option B → Statement II is also correct.
Option D → Court-appointed liquidator is incorrect.

🎯 Strategy

Used

Elimination

Application:

�� Remove court-related statement from non-court dissolution.

Final Logic:

�� No intervention means no court appointment.

🧠 Memory Trick

"Agreement needs no judge."

📚 Class XII – Accountancy Part 1 – Chapter: Dissolution of Partnership Firm – Topic: Dissolution by Agreement and Notice – Page X

16 The court orders dissolution of XYZ firm. The firm has an unrecorded liability of Rs. 10,000 which is paid. How is this recorded in the books?

A Credited to Realisation Account

B Debited to Realisation Account and Credited to Bank

C Debited to Partners' Capital Account directly

D Ignored as it was unrecorded

💡 Short Explanation

Unrecorded liabilities are recognized during dissolution. Payment is made through bank. Realisation Account records settlement.

✅ Correct Answer Explanation

During dissolution, all liabilities must be settled, including previously unrecorded liabilities. When payment is made: Realisation A/c Dr. 10,000 To Bank A/c 10,000 Thus, Option B is correct.

❓ Why Other Options Are Incorrect

Option A → Payment entry is incomplete.
Option C → Liability is not directly adjusted to capital.
Option D → Unrecorded liabilities cannot be ignored.

🎯 Strategy

Used

Formula-Based Elimination

Application:

�� Apply journal entry rules for dissolution accounting.

Final Logic:

�� Realisation Account records liability settlement.

🧠 Memory Trick

"Hidden liability enters Realisation."

📚 Class XII – Accountancy Part 1 – Chapter: Dissolution of Partnership Firm – Topic: Unrecorded Liabilities – Page X

17 Arrange the accounting steps when there is continuity in partnership (reconstitution) compared to dissolution:
1. Revaluation of Assets
2. Adjustment of Goodwill
3. Preparation of New Balance Sheet
4. Distribution of Accumulated Profits

A 1, 3, 2, 4

B 4, 3, 1, 2

C 2, 1, 4, 3

D 1, 4, 2, 3

💡 Short Explanation

Assets are revalued first. Profits are distributed. Goodwill adjusted before new balance sheet.

✅ Correct Answer Explanation

In reconstitution: 1. Assets and liabilities are revalued. 2. Accumulated profits/losses are distributed. 3. Goodwill adjustment is made. 4. A new Balance Sheet is prepared. Thus, correct order: 1 → 4 → 2 → 3 Hence, Option D is correct.

❓ Why Other Options Are Incorrect

Option A → Goodwill adjustment timing incorrect.
Option B → New Balance Sheet cannot come early.
Option C → Sequence mismatch.

🎯 Strategy

Used

Sequential Logic

Application:

�� Follow standard reconstitution procedure.

Final Logic:

�� Adjustments occur before preparing new Balance Sheet.

🧠 Memory Trick

"Revalue → Share → Goodwill → Balance."

📚 Class XII – Accountancy Part 1 – Chapter: Reconstitution of Partnership – Topic: Accounting Procedure – Page X

18 Match the journal entries to the treatments when the firm ends:

List 1	List 2
1. Unrecorded Asset Sold	a. Bank Dr. to Realisation
2. Partner Takes Over Liability	b. Realisation Dr. to Partner's Capital A/c
3. Asset Taken by Partner	c. Partner's Capital A/c Dr. to Realisation
4. Expense Paid by Firm	d. Realisation Dr. to Bank

A 1-b, 2-a, 3-c, 4-d

B 1-d, 2-b, 3-a, 4-c

C 1-a, 2-c, 3-d, 4-b

D 1-c, 2-d, 3-b, 4-a

💡 Short Explanation

Asset sold increases bank. Liability takeover reduces realization burden. Expenses reduce bank balance.

✅ Correct Answer Explanation

Correct journal treatments are: 1. Unrecorded asset sold → Bank Dr. to Realisation 2. Partner takes over liability → Realisation Dr. to Partner's Capital 3. Asset taken by partner → Partner's Capital Dr. to Realisation 4. Expense paid by firm → Realisation Dr. to Bank Therefore, Option A is correct.

❓ Why Other Options Are Incorrect

Option B → Journal entries mismatched.
Option C → Asset and liability treatments incorrect.
Option D → Multiple incorrect pairings.

🎯 Strategy

Used

Option Grouping

Application:

�� Match journal logic with transaction type.

Final Logic:

�� Debit-credit rules align only in Option A.

🧠 Memory Trick

"Sale brings Bank; expense drains Bank."

📚 Class XII – Accountancy Part 1 – Chapter: Dissolution of Partnership Firm – Topic: Journal Entries on Dissolution – Page X

📄 Passage

"When the firm is dissolved, its books of account are to be closed and the profit or loss arising on realisation of its assets and discharge of liabilities is to be computed. For this purpose, a Realisation Account is prepared... Hence, all assets (other than cash in hand... and fictitious assets) and all external liabilities are transferred to this account."

Based on the passage, if books are NOT closed (meaning it is NOT a dissolution of the firm), which account is typically used instead of Realisation Account for asset changes?

A Realisation Account

B Revaluation Account

C Cash Account

D Drawings Account

💡 Short Explanation

Revaluation is used during continuation. Realisation is used only in dissolution. Books remain open in reconstitution.

✅ Correct Answer Explanation

When the firm is not dissolved and books are not closed, changes in asset and liability values are recorded through Revaluation Account. Realisation Account is specifically used during dissolution. Therefore, Option B is correct.

❓ Why Other Options Are Incorrect

Option A → Used only during dissolution.
Option C → Cash Account is unrelated.
Option D → Drawings Account is personal.

🎯 Strategy

Used

Contextual/Tonal Matching

Application:

�� Identify account based on continuity vs closure.

Final Logic:

�� Revaluation applies when business continues.

🧠 Memory Trick

"Continue = Revalue."

📚 Class XII – Accountancy Part 1 – Chapter: Dissolution of Partnership Firm – Topic: Revaluation vs Realisation – Page X

📄 Passage

According to the passage, which assets are NOT transferred to the Realisation Account during closure?

A Plant and Machinery

B Sundry Debtors

C Cash in hand, bank balance, and fictitious assets

D Investments

💡 Short Explanation

Cash and bank already represent liquid funds. Fictitious assets are not realizable. Therefore, they are excluded.

✅ Correct Answer Explanation

During dissolution, all realizable assets are transferred to the Realisation Account. However: Cash in hand Bank balance Fictitious assets are not transferred. Cash and bank already exist in liquid form, while fictitious assets cannot be realized. Hence, Option C is correct.

❓ Why Other Options Are Incorrect

Option A → Plant and machinery are realizable assets.
Option B → Debtors are transferred for realization.
Option D → Investments are realizable assets.

🎯 Strategy

Used

Elimination

Application:

�� Remove all realizable assets.

Final Logic:

�� Only non-realizable/liquid items are excluded.

🧠 Memory Trick

"Cash stays; fictitious fades."

📚 Class XII – Accountancy Part 1 – Chapter: Dissolution of Partnership Firm – Topic: Transfer to Realisation Account – Page X

CUET UG Accountancy Booster Test 2 Judicial Dissolution of Partnership Firm

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