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Subjects
Class 12AccountancyDissolution of a Partnership FirmClosing the BusinessHard
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The Realisation Account is not prepared for reconstitution; in which situation is it required?

Answer and explanation

Correct answer: Dissolution of the firm

At dissolution, the Realisation Account is prepared to record the realisation of assets, settlement of liabilities, and the resulting profit or loss. In reconstitution, such as the admission of a new partner, the business continues and a Revaluation Account is generally used instead. Exam tip: reconstitution changes the partnership arrangement, whereas dissolution involves settling the firm’s assets and liabilities.

Related tags

Dissolution Of PartnershipRealisation AccountReconstitution Of PartnershipAccounting For DissolutionPartnership AccountsClosing 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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