What is Dissolution of Partnership Firm?
Dissolution of a Partnership Firm. For a partnership firm to cease to exist, it needs to be dissolved. The process, known as dissolution of a partnership firm, involves the sale or disposal of all assets of the enterprise, final agreement of all of its liabilities and settling the accounts.
The act identifies the distinction in the breaking of the association between all the partners of an enterprise and between a few partners; and it is the breaking or adjournment of the association between the partners which is known as the dissolution of partnership firm. This puts an end to the presence of an enterprise and no business concern is carried out after the dissolution apart from the pursuits associated to winding up of the enterprise as the financial affairs of the enterprise are to be affected by selling enterprise’s assets.
In the previous concept, we had learnt and understood about the reconstitution of a partnership enterprise which takes place on the account of :
- Death of a partner
What is Dissolution of the Firm?
In such a scenario, when the current partnership is dissolved, the enterprise may go on under the same name if the partners determine. To put it in other words, it outcomes in the dissolution of a partnership however, not that of the enterprise. Section 39 of the partnership Act 1932 says, the dissolution of partnership between all the partners of an enterprise is known as the dissolution of the firm.
The above mentioned is the concept that is explained in detail about Dissolution of Partnership Firm for the class 12 Commerce students. To know more, stay tuned to BYJU’S.