Partnership

Dissolution

Medium

common

When a firm is dissolved, Provision for Bad and Doubtful Debt Account :-

Is transferred into Realisation Account and paid out.

Is transferred into Realisation Account but not paid out.

Is not transferred into Realisation Account.

Is not transferred into Realisation Account and also not paid out.

✅ Correct Option: 2

Provision for Bad and Doubtful Debts is not an actual liability but merely an adjustment against debtors to show their realizable value.

During dissolution, debtors are transferred to Realisation Account at their gross value (original book value). To balance this, the Provision for Bad and Doubtful Debts is also transferred to the credit side of Realisation Account.

Journal Entry:

Realisation A/c ... Dr

$\quad$ To Sundry Debtors A/c

Provision for Bad and Doubtful Debts A/c ... Dr

$\quad$ To Realisation A/c

The provision is transferred to Realisation Account because it represents an expected loss on debtors that needs to be accounted for when realizing the asset.

However, it is not paid out because:

It is not a liability owed to any outside party
It is simply an internal adjustment to arrive at the net realizable value of debtors
Only actual liabilities (creditors, loans, etc.) are paid out during dissolution

The actual amount realized from debtors may be more or less than the net amount (Debtors - Provision), and the resulting profit or loss on realization is captured in the Realisation Account.

Correct Option: 2

2025: 13 May Shift 2

Unrecorded liabilities when paid at the time of dissolution of a partnership firm, are shown in:

2026: 21 May Shift 1

Match List-I with List-II

List-I	List-II
(A) At the time of dissolution, unrecorded assets when taken over by a partner are shown in	(I) Debit of Realisation Account
(B) At the time of dissolution, unrecorded liabilities when paid are shown in	(II) Credit of Partners' capital Account
(C) At the time of admission of a partner, General Reserve will be shown in	(III) Debit of Partners' capital Account
(D) At the time of admission of a partner, Debit balance of Profit & Loss A/c will be shown in	(IV) Credit of Realisation Account

Choose the correct answer from the options given below:

2025: 29 May Shift 2

In which of the following case court can order dissolution of a partnership firm.

2025: 22 May Shift 1

The assets of the firm, including any sum contributed by the partners to make up deficiencies of capital, shall be utilized in which sequence? Arrange the following in proper sequence

(A) In paying the debts of the firm to the third parties

(B) In paying each partner proportionately what is due to him/her from the firm for advances as distinguished from capital (i.e. partner's loan)

(D) The residue, if any, shall be divided among the partners in their profit sharing ratio

Choose the correct answer from the options given below:

2026: 11 May Shift 2

At the time of dissolution of firm, the following information is provided

	Rs.
Sundry debtors	21,500
Less: Provision for doubtful debts	500
	21,000

Debtors realised at a discount of 5%,

Journal entry for realisation of debtors would be :

2025: 4 June Shift 2

Which of the following combination of statements are true about dissolution-

(A). A firm is compulsorily dissolved when a partner decide to retire.

(B). Dissolution of a partnership is different from dissolution of a firm.

(C). A partnership is dissolved when there is a death of a partner.

(D). Dissolution of a firm necessarily involves dissolution of partnership.

Choose the correct answer from the options given below:

When a firm is dissolved, Provision for Bad and Doubtful Debt Account :-

Solution

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