Practicing Success

Target Exam

CUET

Subject

Accountancy

Chapter

Dissolution of Partnership Firm

Question:

If some event has taken place which makes it unlawful for the partners to carry on the business of the firm in partnership, then firm is dissolved by which mode?

Options:

Dissolution by Agreement

Compulsory Dissolution

Dissolution on the happening of certain contingencies

Dissolution by Court

Correct Answer:

Compulsory Dissolution

Explanation:

Compulsory Dissolution: A firm is dissolved compulsorily in the following cases:
(a) when all the partners or all but one partner, become insolvent, rendering them incompetent to sign a contract;
(b) when the business of the firm becomes illegal; or
(c) when some event has taken place which makes it unlawful for the partners to carry on the business of the firm in partnership, e.g., when a partner who is a citizen of a country becomes an alien enemy because of the declaration of war with his country and India