Tag: dissolution of firm

Questions Related to dissolution of firm

In case of partnership at will, the firm may be dissolved if any ______ of the partners give a notice in writing to the other partners, signifying his intention of seeking dissolution of the firm.

business organisation and correspondence partnership 4 - dissolution of a partnership firm meaning of dissolution of partnership firm modes of dissolution of firm dissolution of firm difference between realisation account and revaluation account payment of firm's debts and separate debts, realisation of assets and liabilities

  1. One

  2. Two

  3. All

  4. Some

Show answer
Correct Option: A
Explanation:

Dissolution of a partnership firm may take place without the intervention of court or by the order of a court, in any of the ways specified. It may be noted that dissolution of the firm necessarily brings in dissolution of the partnership. 

Dissolution by notice is one of the ways for dissolution of a firm. In case of partnership at will, the firm may be dissolved if any one of the partner gives a notice in writing to the other partners, signifying his intention of seeking dissolution of the firm.

In dissolution of partnership, _________ account is created, whereas _________ account is prepared in dissolution of firm.

business organisation and correspondence partnership 4 - dissolution of a partnership firm meaning of dissolution of partnership firm modes of dissolution of firm dissolution of firm difference between realisation account and revaluation account payment of firm's debts and separate debts, realisation of assets and liabilities

  1. Revaluation, Realization

  2. Realization, Revaluation

  3. Revaluation, Memorandum

  4. Memorandum, Realization

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Correct Option: A
Explanation:

If a partner is retiring or any new partner is admitted, its called dissolution of partnership. In such situation all the assets and liabilities are revalued for which a revaluation account is opened. The differences of the original value and revalued amount are transferred to Revaluation Account. Surplus or deficit on revaluation is transferred to the partners capital account.

If the firm is dissolving, all the assets and liabilities accounts are transferred to Realization Account. Amount received or paid against the assets and liabilities are debited/credited to the realization account.

A partnership comes to an end due to ________. 

business organisation and correspondence partnership 4 - dissolution of a partnership firm meaning of dissolution of partnership firm modes of dissolution of firm dissolution of firm difference between realisation account and revaluation account payment of firm's debts and separate debts, realisation of assets and liabilities

  1. Insolvency of all partners

  2. Death of a partner

  3. By notice dissolution given by a partner 

  4. All of the above

Show answer
Correct Option: D
Explanation:

Partnership are come to end various reasons such as partners are insolvent , firm  suffer loss from a long time and  end of partnership deed then also partnership come to end 

In dissolution of partnership, business ________ whereas in dissolution of firm, the business is ________.

business organisation and correspondence partnership 4 - dissolution of a partnership firm meaning of dissolution of partnership firm modes of dissolution of firm dissolution of firm difference between realisation account and revaluation account payment of firm's debts and separate debts, realisation of assets and liabilities

  1. Closes, Continued

  2. Partly closes, Continued

  3. Continues, Closed

  4. Continues, Partly closed

Show answer
Correct Option: C
Explanation:

According to Section 39 of the partnership act 1932, the dissolution of partnership between all the partners  of a firm is called dissolution of the firm. 

The act that recognizes the difference in the breaking of relationship between all the partners is termed as the dissolution of partnership firm.
There are various differences between dissolution of partnership and dissolution of firm. Economic relationship is one, where the economic relationship between the partners continues though in a changed form in dissolution of partnership, whereas, economic relationship between the partners comes to an end in dissolution of firm.

Dissolution of the partnership is _________ in nature, as it is dissolved by mutual agreement. Conversely, a firm is dissolved either ________________.

business organisation and correspondence partnership 4 - dissolution of a partnership firm meaning of dissolution of partnership firm modes of dissolution of firm dissolution of firm difference between realisation account and revaluation account payment of firm's debts and separate debts, realisation of assets and liabilities

  1. Voluntary, Voluntarily or Temporarily

  2. Temporary, Voluntarily or Compulsorily

  3. Voluntary, Voluntarily or Compulsorily

  4. Unchanged, Voluntarily or Compulsorily

Show answer
Correct Option: C
Explanation:

A partnership gets terminated in case of admission, retirement, death etc. of a partner. This does not necessarily involve dissolution of firm. 

The dissolution of a firm implies the discontinuance of partnership business and separation of economic relations between the partners. In case of a dissolution of a firm, the firm closes its business altogether and realizes all its assets and pays all its liabilities. 
There are various differences between dissolution of partnership and dissolution of firm. Under dissolution of partnership, court does not intervene because partnership is dissolved by mutual agreement i.e. voluntary in nature, while in dissolution of firm it can be dissolved by the court's order i.e either voluntarily or compulsorily.

Under section $44$ of the Partnership Act, which of these cannot be a ground for dissolution of a firm.

business organisation and correspondence partnership 4 - dissolution of a partnership firm meaning of dissolution of partnership firm modes of dissolution of firm dissolution of firm difference between realisation account and revaluation account payment of firm's debts and separate debts, realisation of assets and liabilities

  1. Continued losses

  2. Persistent breach of agreement

  3. Just and Equitable

  4. Insolvency of any partner

Show answer
Correct Option: D
Explanation:

According to Section 44, continued losses, willfully or persistent breach of contract and any other reason that court may find just and equitable can be ground for dissolution of firm. 
Under section 41 of Indian Partnership Act, insolvency becomes basis of dissolution of firm in case all the partners become insolvent or all except one partner become insolvent. Insolvency of one partner does not become ground for dissolution of firm.

On sale of the goodwill after dissolution which of the following rights are available to the seller of the goodwill?

business organisation and correspondence partnership 4 - dissolution of a partnership firm meaning of dissolution of partnership firm modes of dissolution of firm dissolution of firm difference between realisation account and revaluation account payment of firm's debts and separate debts, realisation of assets and liabilities

  1. To advertise his business

  2. To use his firms name

  3. To represent himself as carrying on the business of the firm

  4. To solicit customer from those dealing with the firm

Show answer
Correct Option: A
Explanation:

When the goodwill of a firm is sold after dissolution, a partner may carry on a business competing with that of the buyer and seller has the right to advertise his business. But he can not use the firm name and represent himself as carrying on the business of the firm because it may mislead the customer. And also seller can not solicit customer. 

Which of these can be treated as just and equitable ground for dissolution of a partnership firm under the Partnership Act?

business organisation and correspondence partnership 4 - dissolution of a partnership firm meaning of dissolution of partnership firm modes of dissolution of firm dissolution of firm difference between realisation account and revaluation account payment of firm's debts and separate debts, realisation of assets and liabilities

  1. Loss of mutual confidence

  2. Dead lock amongst the partners

  3. Both

  4. None of these

Show answer
Correct Option: C
Explanation:

Partnership completely depends on trust and good faith. Partnership can not continue without trust. Dead lock situation is that situation in which no agreement can be made because no party is willing to give in and a partnership is a contractual agreement. If no contract can be made no partnership can be made. So these are treated as just and equitable ground for dissolution.

Does insolvency of a partner always result in dissolution of a firm?

business organisation and correspondence partnership 4 - dissolution of a partnership firm meaning of dissolution of partnership firm modes of dissolution of firm dissolution of firm difference between realisation account and revaluation account payment of firm's debts and separate debts, realisation of assets and liabilities

  1. Yes

  2. Not at all

  3. Not if partnership deed does not so provide

  4. Not if exemption sought from registrar of firms

Show answer
Correct Option: C
Explanation:

Partnership Deed contain all the conditions and legalities of partnership. It provide a guiding base for all future activities. So if partnership deed provides that insolvency of partner does not result in dissolution of firm then it will only be dissolution of partnership not the dissolution of partnership firm. Remaining partner can continue its operations. 

A partnership firm can be dissolved except by __________.

business organisation and correspondence partnership 4 - dissolution of a partnership firm meaning of dissolution of partnership firm modes of dissolution of firm dissolution of firm difference between realisation account and revaluation account payment of firm's debts and separate debts, realisation of assets and liabilities

  1. By mutual consent

  2. By agreement

  3. By court notice

  4. By public auction

Show answer
Correct Option: D
Explanation:

A public auction is an auction held on behalf of a government in which the property to be auctioned is owned by government. But in case of partnership, partnership firm is not owned by government. A partnership firm can be dissolved by mutual consent, by agreement, by court notice.