Meena and Tina are partners in a firm and share profit as 3:2. They decided to dissolve their firm on March 31, 2017, when their Balance Sheet was as follows:
Balance Sheet Meena and Tina as of March 31,2017
| Liabilities | Amount (₹) | Assets | Amount (₹) |
| Capital: | Machinery | 70,000 | |
| Meena 90,000 | Investments | 50,000 | |
| Tina 80,000 | 1,70,000 | Stock | 22,000 |
| Sundry creditors | 60,000 | Sundry Debtors | 1,03,000 |
| Bills payable | 20,000 | Cash at bank | 5,000 |
| 2,50,000 | 2,50,000 |
The assets and liabilities were disposed off as follows:
a) Machinery were given to creditors in full settlement of their account and stock were given bills payable in full settlement.
b) Investment were took over by Tina at book value. Sundry debtors of book value ₹50,000 took over by Meena at 10% less and remaining debtors realised ₹51,000.
c) Realisation expenses amount to ₹2,000.
Which mode of dissolution is highlighted in the above case?
Answer & explanation
Correct answer: option 2
The correct answer is Option (2) → Dissolution by agreement
Meena and Tina decided to dissolve their firm. Nothing forced them: there is no insolvency or illegality, no court order and no expiry of a term or death. A firm closed by the will of all its partners is dissolved by agreement.
Why the other options are incorrect
Option (1) Compulsory Dissolution — Incorrect. It arises when all partners (or all but one) become insolvent or the business becomes illegal; the case has neither.
Option (3) Dissolution by court — Incorrect. The court orders dissolution only on a partner’s suit, for grounds such as insanity or misconduct.
Option (4) Dissolution on happening of contingencies — Incorrect. It follows events such as the expiry of a fixed term, completion of the venture or the death of a partner, none of which is given.
NCERT (2026-27 edition): |