Question:
Write two circumstances under which a partnership firm is dissolved.
Write two circumstances under which a partnership firm is dissolved.
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A partnership firm can also be dissolved due to court orders, expiry of the term, or completion of the specific objective for which it was formed.
Updated On: Nov 5, 2025
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Solution and Explanation
Two circumstances under which a partnership firm is dissolved are:
1. Mutual agreement among partners: A firm can be dissolved if all partners agree to discontinue the business.
2. Insolvency of all partners except one: If all but one partner become insolvent, the partnership firm must be dissolved.
1. Mutual agreement among partners: A firm can be dissolved if all partners agree to discontinue the business.
2. Insolvency of all partners except one: If all but one partner become insolvent, the partnership firm must be dissolved.
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Creditors worth ₹ 46,000 accepted ₹ 9,000 cash and furniture of ₹ 32,000 in full settlement of their claim.
The firm had stock of ₹ 20,000. Ajit took over 40% of the stock at a discount of 10% while the remaining stock was sold for ₹ 18,000.
Vibha was appointed to look after dissolution work for which she was allowed a remuneration of ₹ 16,000. Vibha agreed to bear the dissolution expenses. Actual dissolution expenses ₹ 15,000 were paid by Vibha.
Ajit’s loan of ₹ 45,000 was settled at ₹ 42,000.
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On the above date, the firm was dissolved and the following transactions took place :Liabilities Amount (₹) Assets Amount (₹) Creditors 1,10,000 Cash at Bank 4,05,000 Outstanding Expenses 17,000 Stock 2,20,000 Mrs. Madhavan’s Loan 2,00,000 Debtors 95,000 Chatterjee’s Loan 1,70,000 Less: Provision for Doubtful Debts (5,000) Capitals: Madhavan – 2,00,000 Land and Building 1,82,000 Chatterjee – 1,00,000 Plant and Machinery 1,00,000 Pillai – 2,00,000 Total 9,97,000 Total 9,97,000
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