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Subjects
Class 12AccountancyDissolution of a Partnership FirmClosing the BusinessMedium
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At the time of dissolution, which ratio is mainly used to distribute the profit or loss arising from realisation?

Answer and explanation

Correct answer: Old profit-sharing ratio

On dissolution, the profit or loss on realisation arising from the sale of assets and settlement of liabilities is shared by the partners in their old profit-sharing ratio. The new profit-sharing ratio is generally relevant when the partnership is reconstituted, not when it is dissolved. Exam tip: Transfer the final balance of the Realisation Account to partners’ capital accounts in the old profit-sharing ratio.

Related tags

Partnership DissolutionRealisation AccountOld Profit Sharing RatioClass 12 AccountancyClosing The BusinessDissolution Of A Partnership FirmAccountancyClass 12 Mcq
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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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