Explain the process dissolution of partnership firm?
Dissolution means breaking of relationship among the partners. As per Section 39 of the Indian Partnership Act 1932 the dissolution of firm implies that not only partnership is dissolved but the firm losses its existence i.e. after dissolution the firm does not remain in business. Dissolution of partnership firm implies discontinuation of the business of the partnership firm. Dissolution involves winding up of business disposal of assets and paying off the liabilities and distribution of any surplus or borne of loss by the partners of the firm. As per thePartnership Act 1932 a partnership firm may be dissolved in the following manners.
i) Dissolution by Agreement: As a firm is formed with the consent of all partners with a mutual agreement. Dissolution can also be there with the help of agreement. It happens in following two ways. A firm may be dissolved a When all the partners 10 agree to dissolve the firm. b When there is any term related to dissolution of firm in the partnership agreement.
ii) Compulsory Dissolution: A firm may be dissolved compulsorily in the following condition a In case all the partners or all except one partner become insolvent or insane. b If the business becomes illegal. c Where all the partners except one decide to retire from the firm. d Where all the partners except one die.
iii) Dissolution by Notice: When partnership is at will then the partnership firm
may be dissolved if any partner give notice in writing to all the other partners expressing his/her intention to dissolve the firm.
iv) Dissolution by Court: A court may order for dissolution if a suit is filed by a
partner as per Section 44 of Indian Partnership Act 1932. The court may order to
dissolve a partnership in following conditions:
a) A partner becomes insane.
b) A partner commits breach of agreement wilfully.
c) When a partner’s conduct affects the business.
d) When a partner transfers his interest to a third party.
e) If business cannot be continued.
f) If a partner becomes incapable of doing business.
g) If court thinks dissolution to be just and equitable on any ground. Besides these above mentioned circumstances a partnership firm may be dissolved if the court at any stage finds dissolution of the firm to be justified and inevitable.
What is Capital Fund? How is it calculated?
What is sacrificing ratio? Why is it calculated?
If a fixed amount is withdrawn on the first day of every quarter, for what period the interest on total amount withdrawn will be calculated?
Why there is need for the revaluation of assets and liabilities on the admission of a partner?
What is subscription? How is it calculated?
List the items which may be debited or credited in capital accounts of the partners when:
(i) Capitals are fixed.
(ii) Capital are fluctuating.
Why is Profit and Loss Adjustment Account prepared? Explain.
If some goodwill already exists in the books and the new partner brings in his share of goodwill in cash, how will you deal with existing amount of goodwill?
Why it is considered desirable to make the partnership agreement in writing.
On what occasions sacrificing ratio is used?
Identify various matters that need adjustments at the time of admission of a new partner.
Reproduce the format of Realisation Account.
Why there is need for the revaluation of assets and liabilities on the admission of a partner?
State the meaning of Receipt and Payment Account.
What is sacrificing ratio? Why is it calculated?
Why is Profit and Loss Adjustment Account prepared? Explain.
If some goodwill already exists in the books and the new partner brings in his share of goodwill in cash, how will you deal with existing amount of goodwill?
Give two circumstances under which the fixed capitals of partners may change.
State the meaning of ‘Not- for- Profit’ Organisations.
On what occasions sacrificing ratio is used?