Partnership

Dissolution

Medium

common

On the happening of certain contingencies, Subject to contract between the partners, a firm is dissolved ,

(A) if constituted for a fixed term, by the expiry of that term.

(B) if constituted to carry out one or more ventures, by the completion thereof.

(C) by the death of a partner

(D) by the adjudication of a partner as an insolvent

Choose the correct answer from the options given below:

(A), (B) and (C) only

(A), (B) and (D) only

(A), (B), (C) and (D)

(B), (C) and (D) only

✅ Correct Option: 3

According to the Indian Partnership Act, 1932 (Section 42), a partnership firm dissolves on the happening of certain contingencies, subject to contract between partners. Let's verify each statement:

(A) Expiry of fixed term: When a partnership is formed for a fixed period, it automatically dissolves upon expiry of that term unless partners agree to continue. Correct.

(B) Completion of venture: When a partnership is constituted to carry out specific ventures, it dissolves upon completion of those ventures. Correct.

(C) Death of a partner: Death of a partner leads to dissolution of the firm, though partners may agree in the partnership deed to continue the firm with remaining partners. Correct.

(D) Adjudication of insolvency: When a partner is declared insolvent by a court, the firm dissolves as the insolvent partner cannot continue as a partner. Correct.

The key phrase "subject to contract between partners" means that partners can agree in their partnership deed to continue the firm despite these events (except in case of insolvency, where continuation requires reconstitution without the insolvent partner).

All four statements represent valid grounds for dissolution of a partnership firm under contingencies.

Answer: Option 3 - (A), (B), (C) and (D)

2025: 14 May Shift 2

Which combination of statements is true about dissolution-

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

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

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

Choose the correct answer from the options given below:

2025: 3 June Shift 1

Match List-I with List-II

List–I (Events)	List–II (Result)
(A) Termination of business.	(I) Not possible in dissolution of partnership.
(B) Continuation of Business	(II) Not possible in the dissolution of a firm.
(C) Intervention of court.	(III) Dissolution of firm
(D) Continuation of books of accounts.	(IV) Dissolution of partnership.

Choose the correct answer from the options given below:

2025: 31 May Shift 1

After transferring liabilities like creditors and bills payables in the Realisation Account, in the absence of any information regarding their payment, such liabilities are treated as:

2023: 20 June Shift 2

Unrecorded assets when taken over by a partner on dissolution are shown in:

2022: 20 Aug Shift 2

Raman and Naman were in partnership sharing profit and losses as 3 : 2. Their partnership firm was dissolved on 31 March 2022. On the date of dissolution, Naman's loan was Rs. 20,000. Naman agreed to take stock (already transferred to Realisation A/c) of Rs. 15,000 at Rs. 18,000 and balance in cash for the settlement of loan. Journal Entry for above transaction is:

2025: 22 May Shift 1

In case of the dissolution of a firm, the firm ceases to conduct business and has to settle its accounts. Losses, including deficiencies of capital, shall be paid in the following manner and order:

(A) Out of capital of partners.

(B) By the partners individually in their profit sharing ratio.

Choose the correct answer from the options given below:

Solution

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