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Class 12AccountancyDissolution of a Partnership FirmClosing the BusinessEasy
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What is meant by the dissolution of a partnership firm?

Answer and explanation

Correct answer: Closure of the firm and settlement of its affairs

On dissolution of a partnership firm, the partnership among all the partners comes to an end, and the firm's assets and liabilities are settled before the business is closed. Therefore, option A is correct. Expansion or admission of a new partner does not constitute dissolution. Exam tip: A Realisation Account is generally prepared to close the firm's books on dissolution.

Related tags

PartnershipDissolutionClosing BusinessRealisation AccountAccountancyClosing The BusinessDissolution Of A Partnership FirmClass 12 Mcq
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10 more MCQs
  1. 1What is the process of permanently closing a partnership firm and ending its existence called?
  2. 2Which account is prepared at the time of dissolution of a firm to determine the profit or loss arising from the settlement of its assets and external liabilities?
  3. 3What is generally done with the assets of a partnership firm at the time of its dissolution?
  4. 4On dissolution of a partnership firm, from what are the external liabilities generally paid?
  5. 5To which account is the realisation profit transferred?
  6. 6To which account is the realisation loss transferred?
  7. 7What happens to the existence of the firm after dissolution?
  8. 8Dissolution expenses are generally debited to which account?
  9. 9At the time of dissolution, if an asset is sold for ₹10,000, what amount will be credited to the Realisation Account?
  10. 10On dissolution of a firm, to whom is the final cash balance paid after settling outside liabilities and other amounts due?
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