Page 1 - LN DISSOLUTION OF FIRM

CLASS – XII

ACCOUNTANCY

LESSON NOTE - DISSOLUTION OF FIRMS

Meaning of Dissolution of a Partnership Firm:

• Dissolution of a firm: As per Indian Partnership Act, 1932: “Dissolution firm

means termination of partnership among all the partners of the firm”

• When a firm is dissolved, the business of the firm terminates. All the assets
the firm are disposed off and all outsiders’ liabilities and partners’ loan and

partner capital are paid.

Meaning of Dissolution of a Partnership

Dissolution of Partnership: Dissolution of Partnership refers to terminal of old partnership
agreement (i.e., Partnership Deep) and a reconstruction the firm.

It may take place on

· Change in profit sharing ratio among the existing partner:

· Admission of a partner; and

· Retirement of Death of partner.

It may or may not result into closing down of the business as the remount

partners may decide to carry on the business under a new agreement.

Difference between Dissolution of a firm and Dissolution of a Partnership

Dissolution of a
Parameters Dissolution of a Firm
Partnership

The business continues.
Continuation of
The business discontinues. However, the partnership
business
is reconstituted.