A & B were partners in a partnership firm. Due to the ill health of B they decided to dissolve the firm. The position of assets and liabilities on the date of dissolution was:
| LIABILITIES | AMOUNT (₹) | ASSETS | AMOUNT (₹) |
| Loan by B | 20,000 | Goodwill | 30,000 |
| Capitals | Furniture | 40,000 | |
| A 1,00,000 | Building | 90,000 | |
| B 1,40,000 | 2,40,000 | Debtors | 50,000 |
| Cash | 50,000 | ||
| 2,60,000 | 2,60,000 |
It was agreed that following transactions will take place:
a) A wanted to start the business in sole proprietorship so he took building and furniture at 10% less than book value.
b) All the debtors proved good except a person C who did not pay ₹10,000
Due to ill health of B, they decided to dissolve the firm. It comes under.................form of dissolution.
Answer & explanation
Correct answer: option 4
The correct answer is Option (4) → Dissolution by agreement
Because of B’s ill health, A and B decided to dissolve the firm. A firm dissolved with the consent of all the partners is dissolved by agreement; no notice, contingency or court order is involved.
Why the other options are incorrect
Option (1) Dissolution by notice — Incorrect. This applies to a partnership at will, where one partner gives written notice of his intention to dissolve; here both partners decided together.
Option (2) On happening of certain contingencies — Incorrect. These are expiry of a fixed term, completion of the venture, death or insolvency of a partner; ill health is not one of them.
Option (3) Dissolution by court — Incorrect. Permanent incapacity of a partner is a ground on which the court may order dissolution, but no court is involved here; the partners decided it themselves.
NCERT (2026-27 edition): |