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Class 12AccountancyDissolution of a Partnership FirmClosing the BusinessEasy
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What generally happens to the business when a partnership firm is dissolved?

Answer and explanation

Correct answer: The business is discontinued

On dissolution of a firm, the relationship among the partners ends and the firm discontinues its business. Its assets are then realised and its liabilities are paid. Therefore, option A is correct; the other options are not consequences of dissolution. Exam tip: associate dissolution with closing the firm's business and settling its assets and liabilities.

Related tags

Partnership DissolutionFirm ClosureRealisation Of AssetsSettlement Of LiabilitiesClosing 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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