Which of the following does NOT happen on the dissolution of a partnership?
Answer & explanation
Correct answer: option 1
The correct answer is Option (1) → The business of the firm is terminated
The question sets the dissolution of a partnership against the dissolution of the firm. When only the partnership is dissolved (a change in the profit sharing ratio, an admission, a retirement or a death), the old agreement between the partners ends but the firm carries on its business. The business comes to an end only when the firm itself is dissolved, so its termination is the one thing that does not happen here.
Option (2) Assets and liabilities are revalued — Happens on dissolution of a partnership. The partners’ relationship changes, so assets and liabilities are revalued and the gain or loss goes to the old partners before the new arrangement begins.
Option (3) Economic relationship between the partners continues — Happens on dissolution of a partnership. The partners go on doing business together, only on changed terms, so their economic relationship continues.
Option (4) The books of account are not closed. — Happens on dissolution of a partnership. The firm keeps running, so its books are not closed; they are closed only when the firm is dissolved and its affairs are wound up.
NCERT (2026-27 edition):
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