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What is the ultimate objective of dissolving and closing a firm?

Answer and explanation

Correct answer: Realisation of assets and complete settlement of liabilities

On dissolution, the firm’s business is discontinued, its assets are realised, and the claims of creditors and partners are settled. Therefore, the ultimate objective is the realisation of assets and complete settlement of liabilities. Expansion, fresh investment, and admission of a new partner relate to continuing the business, not dissolving it. Exam tip: Dissolution involves ending the firm’s business and making a final settlement of its accounts.

Related tags

Partnership DissolutionClosing BusinessRealisation Of AssetsSettlement Of LiabilitiesClosing The BusinessDissolution Of A Partnership FirmAccountancyClass 12 Mcq

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