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CMA Intermediate · Financial Accounting · Dissolution of Partnership Firms including Piecemeal Distribution

Under the Indian Partnership Act, 1932, what is meant by the 'dissolution of the firm'?

Dissolution of the firm means the dissolution of the partnership between all the partners. A change such as retirement or admission of a single partner only alters the constitution of the firm, while the business continues, so it is not dissolution of the firm under Section 39.

  1. ARetirement of any one partner from the firm
  2. BDissolution of partnership between all the partners of the firmCorrect
  3. CAdmission of a new partner with a change in profit-sharing ratio
  4. DWinding up of the firm's accounts only

Explanation

Section 39 states that the dissolution of partnership between all the partners of a firm is called the dissolution of the firm. Retirement or admission of one partner changes the constitution but the remaining partners continue, so it is not dissolution of the firm. Settling accounts follows dissolution but is not the dissolution itself.

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