Dissolution of Partnership Firm Means :

(A) Assets are sold and liabilities are paid off
(B) The business of the firm is closed
(C) The books of account are closed
(D) Economic relationship between the partners continues.
(E) Assets are revalued and liabilities and reassessed

Choose the correct answer from the options given below :

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

The correct answer is Option (4) - (A), (B) and (C) only.

In case of dissolution of a firm, the firm stopped conducting business and has to settle its accounts. For this purpose, it disposes off all its assets by preparing realisation account for satisfying all the claims against it.

* Assets are sold, and liabilities are paid off- This statement is true as all the assets are sold by preparing realisation account and with that amount all the outsider liabilities are paid off.

* The business of the firm is closed- This statement is true. Business of the firm is closed as the partnership firm is dissolving not continuing.

* The books of account are closed. This statement is true. The business of the firm is closed means all the books of the firm are closed as the partnership firm is dissolving.

* Economic relationship between the partners continues- This statement is false. Economic relationships are end in case of dissolution of firm whereas it is changed in case of dissolution of partnership.

* Assets are revalued and liabilities and reassessed- This statement is false as there is no reassessment of assets and liabilities as all the assets are sold by preparing realisation account. Assets are revalued in case of reconstitution of the firm not dissolution of the firm.