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Subjects
Class 12AccountancyDissolution of a Partnership FirmClosing the BusinessEasy
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In the dissolution of a partnership firm, what does closing the business mean?

Answer and explanation

Correct answer: Cease its regular business operations

On dissolution, the firm stops carrying on its regular business. It then realizes its assets, pays its liabilities, and settles the partners’ accounts as part of the winding-up process. Therefore, option A is correct; the other options describe continuation or expansion of business. Exam tip: after dissolution, the firm undertakes winding-up activities instead of normal trading.

Related tags

Partnership DissolutionClosing BusinessFirm Winding UpAccountancy Class 12Closing The BusinessDissolution Of A Partnership FirmAccountancyClass 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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