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:
Answer & explanation
Correct answer: option 2
The correct answer is Option (2) → (A), (C) and (D) only
Dissolution of a partnership only changes the relationship among the partners and the business goes on; dissolution of the firm ends the relationship among all of them and closes the business.
(A) Business not terminated in dissolution of partnership, terminated in dissolution of firm. Correct. The firm carries on after a change in the partnership, but closes down when the firm itself is dissolved.
(B) Court intervenes in dissolution of partnership; a firm cannot be dissolved by court order. Incorrect. It is the other way round: a partnership changes by mutual agreement without the court, while a firm can be dissolved by the court’s order.
(C) Economic relationship continues in a changed form, or comes to an end. Correct. After a change in the partnership the partners still do business together; on dissolution of the firm that ends.
(D) No permanent closure of books in dissolution of partnership; books closed in dissolution of firm. Correct. Only the end of the business calls for closing the books.
NCERT (2026-27 edition):
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