CUET UG Accountancy Booster Test 3 Realisation Account and Final Settlement -

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CUET UG Accountancy Booster Test 2 Realisation Account and Final Settlement

⏱️ 30 Minutes

❓ 20 Questions

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

CUET UG Accountancy Booster Test 2 Realisation Account and Final Settlement

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QUESTION 1 OF 20

Match the following Balance Sheet items with their correct closure treatment on dissolution:

List 1	List 2
1. Fictitious Assets (e.g., P&L debit balance)	a. Debited to Partners' Capital A/c in profit ratio
2. Partner's Loan (Credit balance)	b. Paid directly from Bank A/c after outside liabilities
3. Outside Liabilities	c. Credited to Realisation A/c
4. Accumulated Profit (General Reserve)	d. Credited to Partners' Capital A/c in profit ratio

Answer Review

1 Match the following Balance Sheet items with their correct closure treatment on dissolution:

List 1	List 2
1. Fictitious Assets (e.g., P&L debit balance)	a. Debited to Partners' Capital A/c in profit ratio
2. Partner's Loan (Credit balance)	b. Paid directly from Bank A/c after outside liabilities
3. Outside Liabilities	c. Credited to Realisation A/c
4. Accumulated Profit (General Reserve)	d. Credited to Partners' Capital A/c in profit ratio

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

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

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

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

💡 Short Explanation

Fictitious assets are losses. Partner loans are repaid separately. Liabilities transferred to Realisation A/c.

✅ Correct Answer Explanation

Correct treatment: 1. Fictitious assets → Debited to Partners' Capital Accounts in profit-sharing ratio. 2. Partner's loan → Paid through Bank after outside liabilities. 3. Outside liabilities → Credited to Realisation Account. 4. General Reserve → Credited to Partners' Capital Accounts in profit-sharing ratio. Thus, Option B is correct.

❓ Why Other Options Are Incorrect

Option A → Fictitious assets are not paid from bank.
Option C → General Reserve is not transferred to Bank.
Option D → Outside liabilities are not paid directly first.

🎯 Strategy

Used

Option Grouping

Application:

�� Match each balance sheet item with dissolution treatment.

Final Logic:

�� Only Option B correctly aligns all accounting treatments.

🧠 Memory Trick

"Reserve gains, fictitious losses."

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

2 Which of the following statements about dissolution of a firm under Section 39 of the Partnership Act 1932 is correct?
1. It means the dissolution of partnership between all the partners of a firm.
2. The firm continues its normal business under a new name.
3. It brings an end to the existence of the firm.

A 1 and 3 are correct

B Only 1 is correct

C 2 and 3 are correct

D Only 2 is correct

💡 Short Explanation

Dissolution ends partnership among all partners. Firm ceases to exist. Business continuity does not occur.

✅ Correct Answer Explanation

Under Section 39, dissolution of a firm means complete termination of partnership relations among all partners and closure of the firm's existence. Thus: Statement 1 is correct. Statement 3 is correct. Statement 2 is incorrect because business does not continue after dissolution. Hence, Option A is correct.

❓ Why Other Options Are Incorrect

Option B → Statement 3 is also correct.
Option C → Statement 2 is incorrect.
Option D → Statement 2 is false.

🎯 Strategy

Used

Elimination

Application:

�� Remove statements implying continuation of dissolved firm.

Final Logic:

�� Dissolution permanently ends the firm.

🧠 Memory Trick

"Firm dissolved = existence ended."

📚 Class XII – Accountancy Part 1 – Chapter: Dissolution of Partnership Firm – Topic: Section 39 – Page X

3 Assertion (A): The Realisation Account is prepared to ascertain the net profit or loss from realizing assets and paying liabilities.
Reason (R): This account is prepared routinely every year at the end of the financial year.

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

B Both A and R are false.

C A is false, but R is true.

D A is true, but R is false.

💡 Short Explanation

Realisation Account measures dissolution result. It is not prepared annually. Prepared only during dissolution.

✅ Correct Answer Explanation

The Realisation Account is specifically prepared during dissolution to determine profit or loss arising from realization of assets and settlement of liabilities. However, it is not prepared every year. Routine yearly accounts use Trading and Profit & Loss Accounts instead. Thus: Assertion is true. Reason is false. Hence, Option D is correct.

❓ Why Other Options Are Incorrect

Option A → Reason is incorrect.
Option B → Assertion is true.
Option C → Assertion is not false.

🎯 Strategy

Used

Conceptual Linking

Application:

�� Distinguish annual accounting from dissolution accounting.

Final Logic:

�� Realisation Account exists only during dissolution.

🧠 Memory Trick

"Realisation is final, not annual."

📚 Class XII – Accountancy Part 1 – Chapter: Realisation Account – Topic: Purpose of Realisation Account – Page X

4 Why is the profit on Realisation distributed in the profit sharing ratio rather than the capital ratio?

A Capital ratio is only used for solvent partners by law.

B Realisation profit is strictly a capital receipt.

C It represents the operational gains/losses of realizing the firm's assets, which is governed by the partnership agreement on profits.

D The Partnership Act explicitly prohibits the use of capital ratio.

💡 Short Explanation

Realisation profit belongs to partners jointly. Distribution follows partnership agreement. Profit ratio governs such allocation.

✅ Correct Answer Explanation

Realisation profit or loss arises from disposal of business assets and settlement of liabilities. Since these gains or losses relate to partnership operations, they are shared according to the agreed profit-sharing ratio among partners. Hence, Option C is correct.

❓ Why Other Options Are Incorrect

Option A → Capital ratio may apply in Garner vs Murray only.
Option B → Realisation profit is not merely capital receipt.
Option D → No such prohibition exists.

🎯 Strategy

Used

Contextual/Tonal Matching

Application:

�� Link realization outcome with partnership agreement.

Final Logic:

�� Profit-sharing agreement governs realization results.

🧠 Memory Trick

"Realisation follows profit ratio."

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

📄 Passage

"All asset accounts excluding cash, bank and the fictitious assets, if any are closed by transfer to the debit of Realisation Account at their book values. It may be noted that sundry debtors are transferred at gross value and the provision for doubtful debts is transferred to the credit side of Realisation Account along with liabilities. The same thing will apply to fixed assets, if provision for depreciation account is maintained."

According to the passage, how exactly are sundry debtors transferred to the Realisation Account?

A At their gross value

B At their net value (Gross - Provision)

C At their estimated realizable value

D They are not transferred to the Realisation Account

💡 Short Explanation

Debtors transferred fully. Provision transferred separately. Gross value used in Realisation A/c.

✅ Correct Answer Explanation

The passage clearly states that sundry debtors are transferred to the Realisation Account at their gross value, while provision for doubtful debts is transferred separately to the credit side. Hence, Option A is correct.

❓ Why Other Options Are Incorrect

Option B → Provision is not deducted directly.
Option C → Estimated realization is irrelevant here.
Option D → Debtors are transferred.

🎯 Strategy

Used

Contextual/Tonal Matching

Application:

�� Use exact wording from passage.

Final Logic:

�� Gross debtor value enters Realisation Account.

🧠 Memory Trick

"Debtors transfer gross, provision separate."

📚 Class XII – Accountancy Part 1 – Chapter: Transfer of Assets – Topic: Sundry Debtors – Page X

📄 Passage

Based on the passage, what is the correct treatment for a 'Provision for Depreciation' account maintained against Fixed Assets?

A Deducted from the Fixed Asset's value on the debit side of Realisation Account

B Ignored completely during dissolution

C Transferred to Partners' Capital Accounts directly

D Transferred to the credit side of Realisation Account along with liabilities

💡 Short Explanation

Provision accounts are credited separately. Fixed assets transferred at gross value. Provision moves to Realisation credit side.

✅ Correct Answer Explanation

Like provision for doubtful debts, provision for depreciation is transferred separately to the credit side of Realisation Account while fixed assets are transferred at gross book value. Hence, Option D is correct.

❓ Why Other Options Are Incorrect

Option A → Gross asset value is transferred.
Option B → Provision cannot be ignored.
Option C → No direct transfer to capitals.

🎯 Strategy

Used

Elimination

Application:

�� Apply same treatment rule as provisions.

Final Logic:

�� Provision accounts are credited separately.

🧠 Memory Trick

"Provision goes credit side."

📚 Class XII – Accountancy Part 1 – Chapter: Transfer of Assets – Topic: Provision for Depreciation – Page X

7 Arrange the statutory order of payment on dissolution (as per Section 48) correctly:
1. Paying each partner's capital
2. Paying firm's debts to third parties
3. Paying each partner's loan/advances

A 3 -> 2 -> 1

B 2 -> 3 -> 1

C 1 -> 2 -> 3

D 2 -> 1 -> 3

💡 Short Explanation

Outside liabilities first. Partner loans next. Capitals repaid afterward.

✅ Correct Answer Explanation

Section 48 requires settlement in this order: 1. Third-party debts 2. Partner loans 3. Partner capitals Thus: 2 → 3 → 1 Hence, Option B is correct.

❓ Why Other Options Are Incorrect

Option A → Partner loans cannot precede outside debts.
Option C → Capitals are settled later.
Option D → Partner loans come before capital repayment.

🎯 Strategy

Used

Sequential Logic

Application:

�� Apply statutory payment hierarchy.

Final Logic:

�� Outsiders always receive first priority.

🧠 Memory Trick

"Outside → Loans → Capital."

📚 Class XII – Accountancy Part 1 – Chapter: Section 48 – Topic: Order of Payment – Page X

8 What is the formula/journal entry for treating a Workmen Compensation Reserve when no corresponding liability exists at the time of dissolution?

A Realisation A/c Dr. To Workmen Compensation Reserve A/c

B Workmen Compensation Reserve A/c Dr. To Realisation A/c

C Workmen Compensation Reserve A/c Dr. To Partners' Capital A/c

D Partners' Capital A/c Dr. To Workmen Compensation Reserve A/c

💡 Short Explanation

No liability means reserve becomes profit. Distributed among partners. Capital accounts credited.

✅ Correct Answer Explanation

When no workmen compensation liability exists, the reserve becomes an accumulated profit. Therefore, it is distributed among partners in their profit-sharing ratio. Journal Entry: Workmen Compensation Reserve A/c Dr. To Partners' Capital A/c Hence, Option C is correct.

❓ Why Other Options Are Incorrect

Option A → Realisation Account not involved.
Option B → Reserve is not transferred to Realisation.
Option D → Reverse entry incorrect.

🎯 Strategy

Used

Formula-Based Elimination

Application:

�� Identify treatment of unused reserve.

Final Logic:

�� Unused reserve belongs to partners.

🧠 Memory Trick

"Unused reserve becomes partner gain."

📚 Class XII – Accountancy Part 1 – Chapter: Reserves on Dissolution – Topic: Workmen Compensation Reserve – Page X

9 Debtors were Rs. 25,000. They realised 90% of their value. Also, Rs. 1,200 was recovered for bad debts written-off last year. What is the total cash received debited to the Bank Account?

A Rs. 25,000

B Rs. 22,500

C Rs. 21,300

D Rs. 23,700

💡 Short Explanation

90% realization calculated. Add bad debts recovered. Total cash received determined.

✅ Correct Answer Explanation

Debtors realized: [25,000 \times 90% = 22,500] Bad debts recovered: [1,200] Total cash received: [22,500 + 1,200 = 23,700] Hence, Option D is correct.

❓ Why Other Options Are Incorrect

Option A → Ignores 10% loss.
Option B → Excludes bad debts recovered.
Option C → Incorrect calculation.

🎯 Strategy

Used

Substitution

Application:

�� Calculate realization amount and add recovery.

Final Logic:

�� Total bank receipt includes all recoveries.

🧠 Memory Trick

"Recoveries add to realization."

📚 Class XII – Accountancy Part 1 – Chapter: Sale of Assets – Topic: Debtors Realisation – Page X

10 If a partner takes over a recorded asset at a value lower than the book value, what is the effect on the Realisation Account?

A Realisation Account is debited with the book value

B Realisation Account is credited with the agreed (lower) value

C Realisation Account is credited with the book value

D The difference is debited to Profit and Loss A/c directly

💡 Short Explanation

Asset takeover treated like realization. Agreed value credited. Difference affects realization profit/loss.

✅ Correct Answer Explanation

When a partner takes over an asset, the Realisation Account is credited with the agreed takeover value, not necessarily the book value. If the agreed value is lower than book value, the difference contributes to realization loss. Hence, Option B is correct.

❓ Why Other Options Are Incorrect

Option A → Debit entry incorrect.
Option C → Book value not used for takeover.
Option D → Difference passes through Realisation A/c.

🎯 Strategy

Used

Elimination

Application:

�� Identify correct realization treatment.

Final Logic:

�� Agreed takeover value determines credit.

🧠 Memory Trick

Questions 11–20

11 A firm had unrecorded investments worth Rs. 10,000. These were accepted by a creditor of Rs. 10,000 in full settlement of his claim. What will be the journal entry in the firm's books?

A Debit Realisation, Credit Bank Rs. 10,000

B Debit Creditor, Credit Investment Rs. 10,000

C No entry is required

D Debit Investment, Credit Realisation Rs. 10,000

💡 Short Explanation

Both asset and liability are unrecorded. Settlement occurs outside books. Net accounting effect is nil.

✅ Correct Answer Explanation

Since both: the investment (asset) and the creditor (liability) are unrecorded, their settlement does not affect the books of accounts. One unrecorded item offsets the other completely. Therefore, no journal entry is passed. Hence, Option C is correct.

❓ Why Other Options Are Incorrect

Option A → No bank transaction occurs.
Option B → Unrecorded items are not individually recorded here.
Option D → Incorrect treatment of unrecorded investment.

🎯 Strategy

Used

Elimination

Application:

�� Identify that both items are already outside accounting records.

Final Logic:

�� Equal unrecorded asset and liability cancel out.

🧠 Memory Trick

"Unrecorded settles unrecorded = no entry."

📚 Class XII – Accountancy Part 1 – Chapter: Unrecorded Assets and Liabilities – Topic: Settlement of Unrecorded Items – Page X

12 Consider the following regarding creditor settlement:
1. If creditors are paid at a discount, Realisation A/c is debited with the actual cash amount paid.
2. The discount amount must be separately credited to the Realisation A/c to balance the books.
Which statement is true?

A Only 1

B Only 2

C Both 1 and 2

D Neither 1 nor 2

💡 Short Explanation

Realisation Account records actual payment. Discount automatically increases realization profit. Separate credit unnecessary.

✅ Correct Answer Explanation

When creditors are paid at a discount, only the actual amount paid is debited to the Realisation Account. The unpaid discount portion automatically contributes to realization profit. Therefore: Statement 1 is correct. Statement 2 is incorrect because no separate credit entry is needed. Hence, Option A is correct.

❓ Why Other Options Are Incorrect

Option B → Statement 1 is true.
Option C → Separate discount credit unnecessary.
Option D → Statement 1 is valid.

🎯 Strategy

Used

Conceptual Linking

Application:

�� Relate creditor discount treatment to realization profit.

Final Logic:

�� Reduced payment itself creates gain.

🧠 Memory Trick

"Less paid = automatic gain."

📚 Class XII – Accountancy Part 1 – Chapter: Payment of Liabilities – Topic: Creditors Paid at Discount – Page X

13 If a partner is given a fixed remuneration to bear all realisation expenses, and the firm accidentally pays the actual expenses on his behalf, what is the entry for the actual expenses paid by the firm?

A Debit Realisation A/c, Credit Bank A/c

B Debit Partner's Capital A/c, Credit Bank A/c

C Debit Realisation A/c, Credit Partner's Capital A/c

D No entry

💡 Short Explanation

Partner agreed to bear expenses personally. Firm paid on behalf of partner. Amount recoverable from partner.

✅ Correct Answer Explanation

Since the partner had agreed to bear realization expenses personally, any amount paid by the firm on his behalf becomes recoverable from that partner. Journal Entry: Partner's Capital A/c Dr. To Bank A/c Hence, Option B is correct.

❓ Why Other Options Are Incorrect

Option A → Firm should not bear the expense ultimately.
Option C → No Realisation Account impact here.
Option D → Payment requires adjustment.

🎯 Strategy

Used

Formula-Based Elimination

Application:

�� Apply reimbursement principle.

Final Logic:

�� Firm recovers wrongly paid expenses from partner.

🧠 Memory Trick

"Partner promised → Partner pays."

📚 Class XII – Accountancy Part 1 – Chapter: Realisation Expenses – Topic: Expenses Paid by Firm on Partner's Behalf – Page X

14 When a partner formally agrees to bear the realisation expenses, and he personally pays the realisation expenses out of his own private funds, what journal entry is passed in the firm's books for this payment?

A Debit Realisation A/c, Credit Bank A/c

B Debit Realisation A/c, Credit Partner's Capital A/c

C Debit Partner's Capital A/c, Credit Bank A/c

D No entry is required

💡 Short Explanation

Firm neither pays nor reimburses. Transaction occurs privately. No accounting impact on firm.

✅ Correct Answer Explanation

If a partner personally bears realization expenses from private funds according to agreement, the firm is unaffected because: no firm asset is used no liability arises for the firm Therefore, no journal entry is passed. Hence, Option D is correct.

❓ Why Other Options Are Incorrect

Option A → Firm bank not involved.
Option B → Firm does not owe reimbursement.
Option C → No payment from firm.

🎯 Strategy

Used

Elimination

Application:

�� Check whether firm books are affected.

Final Logic:

�� Purely personal transaction requires no entry.

🧠 Memory Trick

"Private payment = no firm entry."

📚 Class XII – Accountancy Part 1 – Chapter: Realisation Expenses – Topic: Partner Bearing Expenses – Page X

15 The correct formula/journal entry for the cash realisation of an unrecorded asset during dissolution is:

A Bank A/c Dr. To Realisation A/c

B Realisation A/c Dr. To Asset A/c

C Unrecorded Asset A/c Dr. To Realisation A/c

D Partner's Capital A/c Dr. To Unrecorded Asset A/c

💡 Short Explanation

Unrecorded asset generates cash. Realisation Account receives credit. Bank balance increases.

✅ Correct Answer Explanation

When an unrecorded asset is realized in cash, the firm receives money although the asset was not previously recorded. Journal Entry: Bank A/c Dr. To Realisation A/c Hence, Option A is correct.

❓ Why Other Options Are Incorrect

Option B → Asset account does not exist in books.
Option C → Incorrect entry structure.
Option D → Capital account unrelated.

🎯 Strategy

Used

Formula-Based Elimination

Application:

�� Apply journal entry for realization of unrecorded asset.

Final Logic:

�� Cash receipt increases Bank and realization gain.

🧠 Memory Trick

"Unrecorded asset brings cash."

📚 Class XII – Accountancy Part 1 – Chapter: Unrecorded Assets – Topic: Cash Realisation – Page X

16 Assertion (A): Payment of an unrecorded liability reduces the ultimate profit (or increases the loss) on realisation.
Reason (R): Payment of an unrecorded liability is debited to the Realisation Account, increasing the total debits.

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

B A is true, but R is false.

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

D A is false, but R is true.

💡 Short Explanation

Unrecorded liability creates extra expense. Realisation Account debit increases. Profit decreases accordingly.

✅ Correct Answer Explanation

Payment of an unrecorded liability is recorded as: Realisation A/c Dr. To Bank A/c This increases the debit side of Realisation Account, thereby reducing realization profit or increasing realization loss. Thus: Assertion is true. Reason is true. Reason correctly explains Assertion. Hence, Option C is correct.

❓ Why Other Options Are Incorrect

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

🎯 Strategy

Used

Conceptual Linking

Application:

�� Relate debit increase to reduction in realization profit.

Final Logic:

�� Higher debits reduce net realization outcome.

🧠 Memory Trick

"Extra liability = extra loss."

📚 Class XII – Accountancy Part 1 – Chapter: Unrecorded Liabilities – Topic: Effect on Realisation – Page X

17 What is the correct sequence for distributing accumulated profits (like General Reserve) on dissolution?
1. Identify the profit sharing ratio
2. Credit Partners' Capital Accounts
3. Debit General Reserve Account

A 2 -> 3 -> 1

B 1 -> 2 -> 3

C 2 -> 1 -> 3

D 1 -> 3 -> 2

💡 Short Explanation

Ratio identified first. Reserve account debited. Capitals credited afterward.

✅ Correct Answer Explanation

Procedure: 1. Identify partners' profit-sharing ratio. 2. Debit General Reserve Account. 3. Credit Partners' Capital Accounts accordingly. Journal Entry: General Reserve A/c Dr. To Partners' Capital A/c Thus, correct sequence: 1 → 3 → 2 Hence, Option D is correct.

❓ Why Other Options Are Incorrect

Option A → Capitals cannot be credited first.
Option B → Debit step omitted in order.
Option C → Incorrect accounting sequence.

🎯 Strategy

Used

Sequential Logic

Application:

�� Follow proper journal-entry order.

Final Logic:

�� Source account debited before distribution.

🧠 Memory Trick

"Find ratio → Debit reserve → Credit capitals."

📚 Class XII – Accountancy Part 1 – Chapter: Profit Distribution – Topic: General Reserve – Page X

18 The total debit of Realisation A/c is Rs. 1,50,000 and total credit is Rs. 1,20,000. Partners A and B share profits equally. What is the exact loss transferred to A's Capital Account?

A Rs. 30,000

B Rs. 15,000

C Rs. 20,000

D Rs. 10,000

💡 Short Explanation

Realisation loss = debit minus credit. Total loss shared equally. A bears half.

✅ Correct Answer Explanation

Realisation Loss: 1,50,000 − 1,20,000 = 30,000 Partners share equally: 30,000 ÷ 2 = 15,000 Thus, A's capital account is debited by Rs. 15,000. Hence, Option B is correct.

❓ Why Other Options Are Incorrect

Option A → Represents total loss.
Option C → Incorrect division.
Option D → Understated share.

🎯 Strategy

Used

Substitution

Application:

�� Calculate total loss and divide equally.

Final Logic:

�� Equal sharing means half of realization loss.

🧠 Memory Trick

"Loss split equally."

📚 Class XII – Accountancy Part 1 – Chapter: Realisation Profit/Loss – Topic: Loss Allocation – Page X

19 Match the following scenarios with their corresponding journal entries upon final settlement:

List 1	List 2
1. Final Debit Balance in Capital	a. Debit Capital A/c, Credit Bank A/c
2. Final Credit Balance in Capital	b. Debit Bank A/c, Credit Capital A/c
3. Unrecorded Asset Realised in Cash	c. Debit Bank A/c, Credit Realisation A/c
4. Realisation Expenses Paid by Firm	d. Debit Realisation A/c, Credit Bank A/c

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

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

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

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

💡 Short Explanation

Debit balance requires partner contribution. Credit balance means payment to partner. Unrecorded asset realization increases bank.

✅ Correct Answer Explanation

Correct matching: 1. Final debit balance → Bank Dr. To Capital 2. Final credit balance → Capital Dr. To Bank 3. Unrecorded asset realized → Bank Dr. To Realisation 4. Realisation expenses paid → Realisation Dr. To Bank Thus, Option C is correct.

❓ Why Other Options Are Incorrect

Option A → Capital entries mismatched.
Option B → Unrecorded asset entry incorrect.
Option D → Multiple incorrect treatments.

🎯 Strategy

Used

Option Grouping

Application:

�� Match dissolution situations with journal entries.

Final Logic:

�� Only Option C aligns all accounting effects correctly.

🧠 Memory Trick

"Debit capital brings cash; credit capital takes cash."

📚 Class XII – Accountancy Part 1 – Chapter: Final Settlement – Topic: Journal Entries – Page X

20 Consider the following statements regarding the Bank Account on dissolution:
1. All cash receipts from the sale of assets are debited to it.
2. Payments for liabilities and expenses are credited to it.
3. It should have a closing balance carried forward to the next year.
Which statement(s) is/are correct?

A 1 and 2

B 2 and 3

C 1 and 3

D Only 1

💡 Short Explanation

Cash receipts increase Bank Account. Payments reduce Bank Account. Bank account closes after dissolution.

✅ Correct Answer Explanation

During dissolution: Cash received from asset realization is debited to Bank Account. Payments for liabilities and expenses are credited to Bank Account. However, no closing balance is carried forward because books are closed permanently. Thus: Statement 1 is correct. Statement 2 is correct. Statement 3 is incorrect. Hence, Option A is correct.

❓ Why Other Options Are Incorrect

Option B → Statement 3 is false.
Option C → Statement 3 incorrect.
Option D → Statement 2 is also correct.

🎯 Strategy

Used

Elimination

Application:

�� Apply normal bank accounting rules during dissolution.

Final Logic:

�� Dissolution closes the Bank Account completely.

🧠 Memory Trick

"Dissolution ends bank balance."

📚 Class XII – Accountancy Part 1 – Chapter: Bank Account on Dissolution – Topic: Settlement Entries – Page X

CUET UG Accountancy Booster Test 2 Realisation Account and Final Settlement

Test Complete!

Answer Review