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Why is the existence of a firm considered terminated after dissolution?

Answer and explanation

Correct answer: Because the partnership among all partners ends and the business is wound up

Dissolution of a firm ends the partnership relationship among all the partners and initiates the winding-up of the business. Therefore, the firm is considered to have ceased to exist as a going concern. However, certain activities continue until assets are realised and liabilities are discharged; liabilities do not disappear immediately on dissolution. Exam tip: retirement of one partner generally results in reconstitution of the firm, not its dissolution.

Related tags

Dissolution Of FirmPartnership AccountsWinding UpClosing BusinessRealisation Of AssetsSettlement Of LiabilitiesClosing The BusinessDissolution Of A Partnership Firm

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