Class 12 Accountancy — Chapter 4: Dissolution of Partnership Firm

What you'll learn

• ▸Distinction between Dissolution of Partnership and Dissolution of Firm
• ▸Modes of Dissolution of a Firm
• ▸Settlement of Accounts (Section 48)
• ▸Private Debts vs. Firm's Debts (Section 49)
• ▸Preparation of Realisation Account
• ▸Accounting Entries for Dissolution
• ▸Insolvent Partner and Garner vs. Murray Rule

Chapter Summary

--- PAGE 1 --- Dissolution of Partnership Firm 4 You have learnt about the reconstitution of a partnership firm which takes place on account of admission, retirement or death of a partner. In such a situation while the existing partnership is dissolved, the firm may continue under the same name if the partners so decide. In other words, it results in the dissolution of a partnership but not that of the firm. According to Section 39 of the partnership Act 1932, the dissolution of partnership between all the partners of a firm is called the dissolution of the firm. That means the Act recognises the difference in the breaking of relationship between all the partners of a firm and between some of the partners; and it is the breaking or discontinuance of relationship between all the partners which is termed as the dissolution of partnership firm. This brings an end to the existence of firm, and no business is transacted…

Practice Questions from this Chapter

Tap "Get Solution" on any question to ask our AI tutor.

1. Explain partnership dissolution simply. Get Solution →
2. Describe why businesses legally end. Get Solution →
3. List common business agreement rules. Get Solution →
4. According to Section 39 of the Partnership Act 1932, what is the dissolution of partnership between all the partners of a firm called? Get Solution →
5. Which account is prepared to close the books of account and determine the profit or loss on the sale of assets and settlement of liabilities upon dissolution? Get Solution →
6. Which of the following is a way in which dissolution of partnership (not the firm) can take place? Get Solution →
7. In the case of a 'partnership at will', how can the firm be dissolved by a partner? Get Solution →
8. As per Section 48 of the Partnership Act 1932, what is the first priority for the application of the firm's assets during dissolution? Get Solution →

Did you know?

• 💡 Ancient Romans had specific laws for dissolving business partnerships.
• 💡 The average small business lasts only about 8.5 years before it closes.
• 💡 Some historical empires legally 'dissolved' themselves through peace treaties.
• 💡 The oldest known written law code is Hammurabi's Code, nearly 4000 years old.
• 💡 Even famous music bands sometimes 'dissolve' due to disagreements among members.

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