Multiple choice questions on partnership dissolution and retirement.

Here are the solutions to the multiple-choice questions:

(xvi) Suppose A, B and C are partners sharing profits in the ratio of 2:2:1 respectively. What will be the new ratio if C retires in the absence of an agreement?

• A. 2:2
  • Explanation: When a partner retires and there is no specific agreement on how the remaining partners will acquire the retiring partner's share, the remaining partners (A and B) continue to share profits in their existing ratio, which is $2:2$. This can also be simplified to $1:1$.

(xvii) Un-recorded liability when paid on dissolution of a firm is debited to:

• A. Realization account
  • Explanation: During the dissolution of a firm, all assets are realized and all liabilities (recorded or unrecorded) are paid through the Realization Account. Therefore, payment of an unrecorded liability is debited to the Realization Account.

(xviii) The balance left in the capital accounts in case of dissolution is transferred to:

• C. Bank account
  • Explanation: After all assets are realized, liabilities are paid, and the profit or loss from the Realization Account is transferred to the partners' capital accounts, the final balance in the capital accounts represents the amount due to or from each partner. This final settlement is made through the Bank (or Cash) Account.

(xix) Which of the following is the value of a share as quoted on the stock exchange?

• D. Market value
  • Explanation: The value of a share as quoted on the stock exchange is its market value, which is determined by demand and supply forces in the market.

(xx) Debenture suspense account is shown on:

• A. Asset side of balance sheet
  • Explanation: A Debenture Suspense Account is typically used when debentures are issued as collateral security. In such cases, the debentures are shown on the liability side, and an equivalent amount is shown on the asset side as "Debenture Suspense Account" to balance the entry. It can also represent a debit balance like discount on issue of debentures, which is a fictitious asset.