Accountancy Part ADissolution of Partnership Firm

Which of the following are the ways in which a partnership firm can b…

Which of the following are the ways in which a partnership firm can be dissolved?

A. Dissolution by Agreement

B. Dissolution by Court

C. Compulsory Dissolution

D. Dissolution on retirement of a partner

E. Dissolution by Notice

Choose the correct answer from the options given below :

Answer & explanation

Correct answer: option 2

The correct answer is Option (2) → A, B, C and E only

The Partnership Act gives five ways in which a firm is dissolved:

(A) Dissolution by Agreement – with the consent of all the partners or under a contract between them.

(B) Dissolution by Court – on a partner’s suit, on grounds such as insanity, misconduct or continuing losses.

(C) Compulsory Dissolution – when all (or all but one) partners become insolvent or the business becomes illegal.

(E) Dissolution by Notice – in a partnership at will, by a written notice of any partner.

(D) Dissolution on retirement of a partner – not a way of dissolving the firm. Retirement only dissolves the partnership; the firm continues with the remaining partners.

NCERT (2026-27 edition):
Dissolution of a Firm

Extract from the NCERT textbook

NCERT (2026-27 edition):
Dissolution of Partnership – “As stated earlier dissolution of partnership changes the existing relationship between partners but the firm may continue its business as before. The dissolution of partnership may take place in any of the following ways: (1) Change in existing profit sharing ratio among partners; (2) Admission of a new partner; (3) Retirement of a partner; (4) Death of a partner; (5) Insolvency of a partner; (6) Completion of the venture, if partnership is formed for that; and (7) Expiry of the period of partnership, if partnership is for a specific period of time; …”