Partnership

Dissolution

Medium

Which of the following combination of statements are true about dissolution-

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

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

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

(D) Dissolution of a firm necessarily involves dissolution of partnership.

Choose the correct answer from the options given below:

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

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

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

(A), (C) and (D) only

✅ Correct Option: 3

Let me analyze each statement about dissolution:

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

This is incorrect. When a partner retires, it leads to dissolution of partnership (reconstitution), not dissolution of firm. The remaining partners can continue the business. The firm is dissolved only if the partners mutually decide to close the business or in certain compulsory situations.

Statement (B): Dissolution of a partnership is different from dissolution of a firm.

This is correct. These are two distinct concepts:

Dissolution of Partnership = Change in relationship among partners (due to admission, retirement, death, change in profit-sharing ratio). The firm continues with a reconstituted partnership.
Dissolution of Firm = Complete closure of business operations. The firm ceases to exist and all assets are sold off.

Statement (C): A partnership is dissolved when there is a death of a partner.

This is correct. Death of a partner causes dissolution of the existing partnership since the original partnership agreement comes to an end. However, the firm may continue with the remaining partners under a new partnership agreement.

Statement (D): Dissolution of a firm necessarily involves dissolution of partnership.

This is correct. When a firm is dissolved, the partnership automatically dissolves too. Dissolution of firm is the ultimate step where both the partnership relationship ends AND the business closes down completely. A partnership cannot exist without a firm.

The true statements are (B), (C) and (D) only.

Correct Answer: Option 3

2025: 31 May Shift 1

In the case of dissolution of a partnership firm, the accumulated profits and reserves are transferred to :

2023: 29 May Shift 2

Arrange following in a sequence in which amount realised from Assets will be utilised to pay.

A. Partner's Loan

B. Partner's Capital

C. Secured debts of the firm

D. Unsecured debts of the firm

E. Residue to partners

Choose the correct answer from the options given below:

2025: 30 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.

(C). A firm is dissolved when all partners give consent to it.

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

Choose the correct answer from the options given below:

2025: 24 May Shift 1

Which of the following statements truly makes the distinction between Dissolution of Partnership and Dissolution of Firm:

(A) In dissolution of partnership, business is not terminated, while in dissolution of firm business is terminated.

(B) The Court intervenes in dissolution of Partnership because a partnership is not dissolved by mutual agreement. A firm can not be dissolved by court order.

(C) Economic relationships between partners continue in a changed form in dissolution of partnership. Economic relationships between the partners come to an end at the dissolution of the Firm.

(D) Dissolution of Partnership doesn't require permanent closure of books, while in Dissolution of firm books are closed.

Choose the correct answer from the options given below:

2026: 11 May Shift 1

At the suit of a partner, the court may order a partnership firm to be dissolved on the following grounds :

A. When a partner becomes insane.

B. When a partner becomes permanently incapable of performing his duties as a partner.

C. When a partner is guilty of misconduct which is likely to adversely affect the business of the firm.

D. When a partner persistently commits breach of partnership agreement.

Choose the correct answer from the options given below:

2026: 29 May Shift 2

State the order of payment to be followed on the dissolution of a firm:

A. To each partner proportionately what is due to him/her from the firm for advances provided i.e. Partner's Loan A/c

B. To each partner proportionately what is due to him/her on account of capital

C. For the debts of the firm to outside parties

Choose the correct answer from the options given below:

Solution

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