Which combination of statements is true about dissolution?
(A). Dissolution of a partnership is different from dissolution of a firm.
(B). A partnership is dissolved when there is a death of a partner.
(C). A firm is dissolved when all partners give consent to it.
(D). A firm is compulsorily dissolved when a partner decides to retire.
Choose the correct answer from the options given below:
Answer & explanation
Correct answer: option 2
The correct answer is Option (2) → (A), (B) and (C) only
Dissolution of a partnership only changes the relationship among the partners, and the firm may go on; dissolution of the firm ends the relationship among all the partners and closes the business.
(A) Dissolution of a partnership is different from dissolution of a firm. Correct. On admission, retirement or death the old partnership ends but the firm can continue; on dissolution of the firm its business is wound up.
(B) A partnership is dissolved when there is a death of a partner. Correct. The death of a partner ends the existing agreement, so the partnership is dissolved, even if the others carry on the firm.
(C) A firm is dissolved when all partners give consent to it. Correct. This is dissolution by agreement, with the consent of all the partners.
(D) A firm is compulsorily dissolved when a partner decides to retire. Incorrect. Retirement only reconstitutes the firm; compulsory dissolution happens when all or all but one partner become insolvent or the business becomes illegal.
NCERT (2026-27 edition):
|
