Dissolution of Partnership Firm
Dissolution of a partnership means The act of ending of the old Partnership agreement and a reconstruction of the firm due to admission, retirement and death of a partner. It may or may not close the business.
Dissolution of a Partnership 'firm' means The firm close its business then the assets of the firm are sold and liabilities are paid off and remaining amount is distributed among the partners. Cases of Dissolution of Partnership :- 1. In case of change in profit-sharing ratio of the exiting partners 2. In case of admission of a new partner. 3. In case of retirement of a partner. 4. In case of expulsion of a partner. 5. In case of death of a partner. 6. In case of insolvency of a partner 7. In case of expiry of the period of partnership. Cases of Dissolution of Partnership firm:- *Without the intervention of the court: 1. When all partners agree to dissolve the firm.[sec.40] 2. Compulsory Dissolution [sec.41]· When all or one partner of the firm becomes insolvent.· When business of the firm becomes unlawful. 3. On the happening of any incidents:[sec.42]· Insolvency of a partner.· Fulfillment of the object for which the firm was formed.· Expiry of the period. 4. When any partner giving notice to other partners can dissolve the firm.[sec.43 ]· By order of the court [sec.44]: cases in which the court may order the dissolution of the partnership firm.
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Methods of Dissolution:
The following way the partnership firm may be dissolved
The following accounts are to be maintained when a partnership firm may be dissolved- *Realization Account * Partners Capital Account * Cash Account Exercise for trial ( with solution)
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*Difference between Dissolution of Partnership and Dissolution of firm:-
Dissolution of partnership
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Dissolution of firm
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