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 are reassessed
Choose the correct answer from the options given below :
Answer & explanation
Correct answer: option 4
The correct answer is Option (4) → (A), (B) and (C) only
On dissolution of a firm the business itself comes to an end and its accounts are wound up. On dissolution of partnership only the agreement changes and the business goes on.
(A) Assets are sold and liabilities are paid off — True. The assets are realised and the outside liabilities are settled.
(B) The business of the firm is closed — True. Dissolution of the firm ends the business.
(C) The books of account are closed — True. All accounts are closed through the Realisation Account and the partners’ accounts.
(D) Economic relationship between the partners continues. — False. This is a feature of dissolution of partnership; on dissolution of the firm the economic relationship comes to an end.
(E) Assets are revalued and liabilities are reassessed — False. Revaluation and a new balance sheet belong to dissolution of partnership (reconstitution), not to dissolution of the firm.
NCERT (2026-27 edition):
|
