# CIE Accounting Paper-2: Specimen Questions 70 - 72 of 103

## Passage

Singer and Dancer are partners sharing profit in the ratio of 3: 2. Their balance sheet on 31st March 2014 was as follows:

 Liabilities Amount Assets Amount Singer’s Capital 32500 Bank 40500 Dancer’s Capital 11500 Stock 7500 Creditors 48000 Debtors - 21500 Less: Provision for doubtful debts - 500 21000 Reserve fund 13500 Fixed Assets 36500 105500 105500

On 31st March 2014, they decided to dissolve the firm and the following information was provided by them: (i) Debtors were realized at a discount of 5%; (ii) Stock at £7000; (iii) Fixed assets at £42000; (iv) realization expenses were £1500; (v) All the creditors were fully paid.

## Question number: 70 (2 of 5 Based on Passage) Show Passage

### Write in Short

What will be the take away amount of Singer and Dancer after the firm’s dissolved?

### Explanation

The take away capital of Singer and Dancer upon dissolution of the firm is £42355 and £18070.

 Particulars Singer Dancer Particulars Singer Dancer To bank A/c 42355 18070 By balance b/d 32500 11500 Reserve fund 8100 5400 Realization profit 1755 1170 42355 18070 42355 18070

Reserve fund = 13500 in 3: 2 = 8100 and 5400

## Question number: 71 (3 of 5 Based on Passage) Show Passage

### Write in Short

Does Dissolution of firm mean the same as dissolution of partnership?

### Explanation

No, Dissolution of firm is not the same as dissolution of partnership. Two of the basic differences between the two term’s are as follows:

(i) In dissolution of partnership, the business is not terminated, but in dissolution of a firm; the business is terminated.

(ii) In dissolution of partnership; the assets and liabilities are revalued and a new balance sheet is drawn, where as in the dissolution of a firm, the assets are sold and the liabilities are paid off in full settlement.

## Question number: 72 (4 of 5 Based on Passage) Show Passage

### Write in Short

What are the reasons for dissolution of a firm?

### Explanation

Dissolution of the firm may be due to any of the following reasons:

(i) Dissolution by agreement – mutually agreement between the partners

(ii) Compulsory dissolution – When one or all partners become insolvent.

(iii) On the event of contingencies

(iv) Dissolution by notice

(v) Dissolution by court

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