Page 3 - LN DISSOLUTION OF FIRM

(4) By Notice (Sec. 43): When the duration of the partnership firm is a fixed

and it is at will of the partners. Any partner by giving notice other partners can

dissolve the firm.

(B) Dissolution by order of the court (Sec. 44): A court on application by a

partner may order the dissolution of the firm under the following

circumstances:

(1) When a partner has become of unsound mind.

(2) When a partner has become permanently incapable of performing his

duties as a partner.

(3) When a partner is found quality of misconduct that may harm the

partnership.

(4) When a partner consistently and deliberately commits breach of

partnership agreement.

(5) When a partner transfer whole of is interest in the business firm to a third

party, without the consent of existing partners.

(6) When the court is satisfied that the partnership firm cannot be carried on

except at a loss.

(7) When the court finds that the dissolution of firm is justified and equitable.

ACCOUNTING TREATMENT OF DISSOLUTION:
On dissolution of a firm, the following accounts are opened to close the
books of the firm.

· Realisation Account;

· Partner’s Loan Account;

· Partner’s Capital Accounts; and

· Cash or Bank Account.

REALISATION ACCOUNT:

• It is nominal account
• It is opened on the dissolution of a firm.