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A partnership firm A & B is dissolved. The assets are Rs. 2,00,000 and liabilities are Rs. 80,000, both settled at book values. The capital balances are A: Rs. 70,000 and B: Rs. 50,000. No goodwill is involved. What cash amount will be paid to partner B on dissolution?

easy MCQ 1 mark Class 12 · Accountancy · Dissolution of Partnership Firm
  1. Rs. 40,000
  2. Rs. 45,000
  3. Rs. 50,000
  4. Rs. 55,000
Answer
Rs. 50,000

The correct answer is Rs. 50,000 — Thus the cash paid to B is Rs. 50,000.

Step-by-step solution

  1. Calculate net assets: Assets – Liabilities = 2,00,000 – 80,000 = Rs. 1,20,000.
  2. Check that the sum of capital balances (70,000 + 50,000) equals net assets, confirming no profit or loss to distribute.
  3. Since capital balances are settled at cash, partner B receives his full capital balance of Rs. 50,000.
  4. Thus the cash paid to B is Rs. 50,000.
Common mistake: Forgetting to subtract liabilities before comparing with capital balances

Concept tested: Settlement of capital on dissolution

Published · How this solution was prepared and checked

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