Question

Select the most appropriate alternative from those given below :

Partnership is compulsorily dissolved when the partners of the firm become ____________
a) Solvent
b) Insolvent
c) Creditor
d) None of these

Answer 1

Partnership is compulsorily dissolved when the partners of the firm become insolvent.

Explanation: When the partners of a firm become insolvent, it implies that the assets of the firm have decreased in comparison to the liabilities. Moreover, the partners do not have enough funds to make payment to the creditors; hence, the partnership is compulsorily dissolved as per the order of a court of justice.