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What do you mean by Dissolution of Partnership Firm ? Differentiate between Dissolution of Partnership and Dissolution of Partnership Firm.

Answer»

Dissolution means Discontinuance of Existing relationship among the Partners. According to Section 39 of the Indian Partnership Act, 1932, “Dissolution of the firm means dissolution of partnership among all the partners in the firm.” Dissolution of the firm means that the business is discontinued and the firm is wound up, i.e., dissolved. When the firm is dissolved, all assets are realized and liabilities are paid. The balance is paid to the partners in settlement of their Accounts.

DISTINCTION BETWEEN DISSOLUTION OF PARTNERSHIP AND PARTNERSHIP FIRM 

Bases of DifferenceDissolution of PartnershipDissolution of Partnership
MeaningDissolution of partnership is only a change in the partnership agreement. The firm may continue.Dissolution of the firm is the discontinuance of all the business activities of firm.
Books of AccountsIn this situation, books of accounts may not be closed.Books of accounts are necessarily closed.
DissolutionDissolution of partnership does not mean dissolution of firm. The firm may not be discontinued.Dissolution of the firm is necessarily in case of the dissolution of partnership.
Nature Dissolution of the partnership is voluntary. It emerges out of the agreement.Dissolution of the firm may be both voluntary and compulsory
Assets and LiabilitiesAssets and Liabilities are Revalued and New Balance Sheet is Drawn .Assets are Sold and Realized and Liabilities are Paid Off .
ImplicationIt does not Imply Dissolution of the Firm .It Implies Dissolution of the Partnership and the Firm.



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