Which of the following is/are fact(s) about dissolution of the partnership firm?
(A) The business of the firm is closed.
(B) Assets are sold and liabilities are paid off.
(C) A firm can be dissolved by the court's order.
(D) The books of account are closed.
(E) Economic relationship between the partners continues though in a changed form.
Choose the correct answer from the options given below.
Answer & explanation
Correct answer: option 1
The correct answer is Option (1) → (A), (B), (C) and (D) only
On dissolution of a firm the business itself comes to an end, so its accounts are wound up; on dissolution of partnership only the agreement changes and the business goes on.
(A) The business of the firm is closed. — True. Dissolution of a firm ends the business.
(B) Assets are sold and liabilities are paid off. — True. The assets are realised and the outside liabilities are paid.
(C) A firm can be dissolved by the court’s order. — True. The court may order dissolution, for example when a partner becomes insane.
(D) The books of account are closed. — True. All accounts are closed through the Realisation Account and the partners’ accounts.
(E) Economic relationship between the partners continues though in a changed form. — False. This is true of dissolution of partnership; on dissolution of the firm the economic relationship comes to an end.
NCERT (2026-27 edition):
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