Partnership

Dissolution

Medium

common

Dissolution of a partnership firm may be ordered by the court on the following grounds:

(A) when a partner becomes insane.

(B) when a partner becomes permanently incapable of performing his duties as partner.

(C) when a partner acts in good faith

(D) when it is regarded just and equitable by the court.

Choose the correct answer from the options given below:

(A) and (D) only

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

(D) only

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

✅ Correct Option: 2

Under the Indian Partnership Act, 1932, a court can order dissolution of a partnership firm on specific grounds mentioned in Section 44.

Analyzing each statement:

(A) When a partner becomes insane - This is a valid ground. Section 44(b) allows the court to dissolve a firm when a partner becomes of unsound mind.

(B) When a partner becomes permanently incapable of performing his duties as partner - This is a valid ground. Section 44(c) provides for dissolution when a partner becomes permanently incapable of performing their duties.

(C) When a partner acts in good faith - This is not a ground for dissolution. Acting in good faith is actually desirable conduct. The court orders dissolution when a partner is guilty of misconduct or acts in bad faith, not when acting in good faith.

(D) When it is regarded just and equitable by the court - This is a valid ground. Section 44(f) gives the court discretion to order dissolution when it considers it just and equitable to do so.

The valid grounds for court-ordered dissolution are (A), (B), and (D). Statement (C) is incorrect as good faith conduct is not a ground for dissolution.

Correct Option: 2 - (A), (B) and (D) only

2026: 24 May Shift 1

Sharan, Raman and Manan are partners sharing profit and losses in the ratio of 1:1:1. Due to heavy losses, they decide to close their business. At the time of dissolution, Sharan agreed to bear all realisation expenses. Realisation expenses were to be paid by the firm. For the service Sharan is paid Rs.6,000. Actual expenses on realisation paid by the firm amounted to Rs. 9,000. Realisation A/c will be:

2025: 15 May Shift 1

Match List-I with List-II

List-I	List-II
(A) Compulsory Dissolution	(I) Partner becomes insane
(B) Dissolution by notice	(II) Death of a partner
(C) Dissolution by Court	(III) Business become illegal
(D) Dissolution on certain contingencies	(IV) Partnership at will

Choose the correct answer from the options given below:

2025: 15 May Shift 1

Arrange the following in the sequence in which they shall be applied in payment at the time of dissolution of a firm:

(A) The debts of the firm to the third parties.

(B) Partner proportionately what is due to him/her from the firm for advances as distinguished from capital (i.e. partner's loan).

(D) Divided among the partners in their profit sharing ratio.

Choose the correct answer from the options given below:

2025: 13 May Shift 1

Which of the following indicate the situation of compulsory dissolution.

2026: 29 May Shift 2

Varun (partner) had given a loan to firm of Rs. 5,00,000. On dissolution, he accepted furniture of Rs. 4,50,000 against the loan. The balance Rs. 50,000 will be:

2025: 30 May Shift 1

Unrecorded liabilities when paid are shown in:

Solution

Related questions:

Keyboard Shortcuts

CUET Accountancy Past Year Questions (Topic-Wise)