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Class 12AccountancyDissolution of a Partnership FirmClosing the BusinessExpert
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If A takes over an asset of ₹24,000 and a liability of ₹6,000, what will be the net effect on A’s Capital Account?

Answer and explanation

Correct answer: Debit ₹18,000

When A takes over the asset, A’s Capital Account is debited by ₹24,000. When A assumes the liability, the Capital Account is credited by ₹6,000. Therefore, the net effect is ₹24,000 debit − ₹6,000 credit = a debit of ₹18,000. Exam tip: An asset taken over by a partner is debited to the partner’s Capital Account, while a liability assumed is credited.

Related tags

Partnership DissolutionCapital AccountRealization AccountAsset TakeoverLiability AssumptionClosing 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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