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Subjects
Class 12AccountancyDissolution of a Partnership FirmClosing the BusinessMedium
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When a creditor accepts the firm's stock in settlement of the amount due, which process does this form part of?

Answer and explanation

Correct answer: Realisation

On dissolution, the process of disposing of assets and settling or compromising liabilities is called realisation. Therefore, transferring stock to a creditor in settlement of the amount due is a realisation transaction. Revaluation only records changes in the values of assets and liabilities; it does not represent the final settlement of a liability. Exam tip: At dissolution, link the settlement of assets and liabilities with the Realisation Account.

Related tags

Partnership DissolutionRealisation AccountSettlement Of LiabilitiesStock TransferAccountancy Class 12Closing The BusinessDissolution Of A Partnership FirmAccountancy
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10 more MCQs
  1. 1What is the process of permanently closing a partnership firm and ending its existence called?
  2. 2Which account is prepared at the time of dissolution of a firm to determine the profit or loss arising from the settlement of its assets and external liabilities?
  3. 3What is generally done with the assets of a partnership firm at the time of its dissolution?
  4. 4On dissolution of a partnership firm, from what are the external liabilities generally paid?
  5. 5To which account is the realisation profit transferred?
  6. 6To which account is the realisation loss transferred?
  7. 7What happens to the existence of the firm after dissolution?
  8. 8Dissolution expenses are generally debited to which account?
  9. 9At the time of dissolution, if an asset is sold for ₹10,000, what amount will be credited to the Realisation Account?
  10. 10On dissolution of a firm, to whom is the final cash balance paid after settling outside liabilities and other amounts due?
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