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What is the final objective of the dissolution process of a partnership firm?

Answer and explanation

Correct answer: Realising assets and properly settling all liabilities and accounts

Dissolution brings the firm's business to an end. Its assets are realised and the proceeds are used to pay external liabilities; any remaining amount is then used to settle the partners' accounts. Therefore, the final objective is the proper settlement of all liabilities and accounts. Increasing profit or expanding production is not the purpose of dissolution. Exam tip: Remember dissolution as the closure of business followed by settlement of all claims.

Related tags

Partnership DissolutionClosing The BusinessSettlement Of AccountsRealisation Of AssetsLiabilitiesDissolution Of A Partnership FirmAccountancyClass 12 Mcq

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