Class 9 Accountancy Chapter 5 Dissolution of Partnership Firm MCQ: 30 Questions with Solutions
Dissolution of a partnership firm marks the end of the partnership relationship and requires careful accounting treatment. Class 9 Accountancy Chapter 5 covers the legal and financial steps involved when partners decide to part ways, including settlement of accounts, distribution of assets, and discharge of liabilities. Our curated collection of 30 MCQs with detailed solutions helps you master concepts like revaluation of assets, treatment of goodwill, and final settlement of partner accounts. Whether you're preparing for board exams or strengthening foundational knowledge, these questions align directly with NCERT standards and real exam patterns.
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What is Dissolution of Partnership Firm – Definition & Concept
Dissolution of a partnership firm refers to the discontinuation of the partnership relationship as defined in the Indian Partnership Act, 1932. According to NCERT Class 9 Accountancy Chapter 5, dissolution can occur by mutual agreement, death of a partner, or court order. It involves three critical phases: revaluation of assets and liabilities, adjustment of partners' capital accounts, and final distribution of remaining assets. Understanding the legal framework helps students grasp why accountants must follow strict procedures during wind-up.
Reasons for Dissolution – Legal & Mutual Grounds
Partnership dissolution occurs due to multiple reasons outlined in NCERT Chapter 5. Mutual agreement among all partners is the most common scenario. Other grounds include the death of any partner, insolvency of a partner, breach of partnership agreement, or court intervention. The accountancy treatment differs based on the dissolution reason. For instance, when a partner dies, their share must be calculated until the date of death. Understanding these grounds is essential for solving MCQs that test conceptual clarity beyond mere calculation.
Revaluation of Assets & Liabilities – Step-by-Step Process
Before distributing assets, partnership firms must revalue all assets and liabilities to their fair market value as per NCERT guidelines. This revaluation account is prepared to identify hidden gains or losses. These gains or losses are then distributed among partners in their profit-sharing ratio. The revaluation process affects each partner's final settlement amount significantly. MCQ questions often test students' ability to prepare revaluation accounts correctly and allocate revalued amounts to partner accounts, making this a high-frequency exam topic.
Treatment of Goodwill During Dissolution
Goodwill represents the accumulated reputation and customer base of the firm. During dissolution, goodwill must be accounted for separately as per NCERT Chapter 5 standards. If goodwill appears on the balance sheet, it is written off to partners in their old profit-sharing ratio. If goodwill doesn't appear but is valued, partners may receive compensation based on valuation. Some MCQs test whether students can distinguish between existing goodwill on books versus unrecorded goodwill that emerges during dissolution, requiring careful analysis.
Partner Capital Accounts Settlement & Final Distribution
After revaluation and goodwill adjustment, each partner's capital account is updated with their share of gains/losses and adjustments. NCERT Chapter 5 emphasizes that partners are settled in their profit-sharing ratio unless the partnership deed specifies otherwise. The final settlement involves paying off partner loans, adjusting capital balances, and distributing remaining cash. MCQs frequently test the calculation of final amounts due to each partner, including scenarios where some partners owe money back to the firm.
Insolvency of a Partner – Accounting Treatment
When a partner becomes insolvent during dissolution, their share of assets may not be fully recoverable. Per NCERT guidelines, the insolvent partner's deficiency is shared by solvent partners in their profit-sharing ratio. This creates an additional liability for continuing partners. The accounting entry involves debiting solvent partners' capital accounts and crediting the insolvent partner's account. Complex MCQs test students' understanding of this cascade effect and the final settlement calculations when insolvency occurs alongside dissolution.
CBSETUTOR.ai – Your Partner in Mastering Partnership Dissolution
CBSETUTOR.ai is India's most trusted 24x7 AI tutor for CBSE Classes 6–12, used by thousands of families across the country to ace Accountancy and other subjects. Our intelligent AI platform provides personalized MCQ practice, instant solution explanations, and adaptive learning paths aligned with NCERT 2024-25 syllabi. For Class 9 Accountancy Chapter 5, CBSETUTOR.ai offers video explanations, step-by-step problem-solving, and doubt-clearing sessions that help students move from confusion to confidence, making exam preparation faster and smarter.
Sample MCQ Patterns – What to Expect in Exams
Class 9 and board exam MCQs on dissolution typically fall into four categories: definition-based questions, numerical problems on revaluation, goodwill treatment scenarios, and settlement calculations. Direct NCERT questions test recall of key terms and legal requirements. Application-based MCQs require preparing revaluation accounts or calculating final partner balances. Our curated 30-question set mirrors actual exam patterns, including single-correct, multiple-select, and assertion-reason formats, ensuring you're never surprised on exam day.
Common Mistakes Students Make – Avoid These Errors
Students often confuse 'revaluation of assets' with 'sale of assets' during dissolution, leading to wrong journal entries. Another frequent error is forgetting to adjust partner loan accounts separately from capital accounts as per NCERT standards. Many learners fail to allocate goodwill gains/losses correctly to old profit-sharing ratios. Mishandling insolvent partner deficiencies is another pitfall. Our MCQ solutions explicitly highlight these common errors and provide corrected approaches, helping you build stronger conceptual foundations and avoid marks loss in exams.
Step-by-Step Approach to Solving Dissolution MCQs
Start by identifying the dissolution scenario and reason from the MCQ stem. Next, determine what accounting steps apply: revaluation, goodwill adjustment, capital settlement, or insolvency handling. Prepare a systematic solution chart showing opening balances, adjustments, and final amounts. Cross-check that all partner accounts are settled correctly and total debits equal total credits. Use NCERT Chapter 5 definitions to confirm your terminology is accurate. This structured approach, practiced through our 30-question set, significantly improves MCQ accuracy and speed during actual exams.
Frequently asked questions
What is the difference between dissolution and winding up of a partnership firm?+
Dissolution ends the partnership relationship legally, while winding up refers to the actual process of settling accounts and distributing assets afterward. NCERT Chapter 5 treats dissolution as the trigger event and winding up as the subsequent accounting process.
How is goodwill treated if it does not appear in the partnership balance sheet?+
If goodwill does not appear on books but is valued during dissolution, it is credited to partners in their old profit-sharing ratio as a gain. This unrecorded goodwill must be distributed before final asset distribution occurs.
Can I access CBSETUTOR.ai's complete MCQ solutions in Hindi medium as well?+
Yes, CBSETUTOR.ai offers bilingual support including Hindi-medium explanations for all Class 9 Accountancy chapters. Our AI tutor provides solutions, video walkthroughs, and doubt-clearing in both English and Hindi for seamless learning.
What happens to the insolvent partner's deficiency in a partnership dissolution?+
An insolvent partner's deficiency (shortfall in their account) is shared by solvent partners in their profit-sharing ratio. This increases the final settlement liability borne by continuing partners as per NCERT guidelines.
Does CBSETUTOR.ai offer free trial or flexible subscription for Accountancy MCQ practice?+
CBSETUTOR.ai provides flexible learning options with free trial access to sample MCQs and detailed solutions. Our subscription plans are designed for different learning needs, allowing you to practice at your own pace.
How do I prepare a revaluation account during partnership dissolution?+
Debit the revaluation account with decreases in asset values and liabilities. Credit it with asset increases. Net gain or loss from the account is then transferred to partners' capital accounts in their profit-sharing ratio.
Are these 30 MCQs sufficient to score well in board exams?+
Our 30-question set covers all major concepts from NCERT Chapter 5 and mirrors board exam patterns. Combined with CBSETUTOR.ai's adaptive learning, these MCQs build strong foundations and significantly improve exam confidence and scores.
What is the role of partner loan accounts during dissolution settlement?+
Partner loan accounts are settled separately and independently from capital accounts. Loans are repaid before distributing remaining assets. Interest accrued on loans until dissolution date must also be accounted for and paid alongside the principal amount.
Related resources
Class 9 Accountancy Chapter 3: Recording of Transactions — I Previous Year Questions (2020–2025)Class 9 Accountancy Chapter 8 Bills of Exchange Previous Year Questions (2020–2025)Class 9 Accountancy Chapter 10 Previous Year Questions: Computers in Accounting & SpreadsheetsClass 9 Accountancy Chapter 7 Depreciation, Provisions and Reserves — Previous Year Questions (2020–2025)Class 9 Accountancy Chapter 1: Introduction to Accounting Previous Year Questions (2020–2025) with SolutionsClass 9 Accountancy Chapter 2: Theory Base of Accounting Previous Year Questions (2020–2025)Class 9 Accountancy Chapter 4: Recording of Transactions — II Previous Year Questions (2020–2025)Class 9 Mathematics Chapter 1: Orienting Yourself – The Use of Coordinates MCQ Quiz with Answers
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