3
Question
State whether the following statements are True or False.
The firm is dissolved automatically on the retirement of a partner.
The firm is dissolved automatically on the retirement of a partner.
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Solution
False
Explanation: Change in profit sharing ratio among the existing partners, admission of a new partner, retirement or death of a partner, result in dissolution of partnership. In such instances, the existing partnership deed gets dissolved and it is replaced by a new partnership deed. However, the partnership firm continues to operate. On the other hand, in case of dissolution of a partnership firm, the whole firm is put to an end (along with the partnership deed).
Therefore, it is incorrect to say that a firm dissolves on the retirement of a partner.
Explanation: Change in profit sharing ratio among the existing partners, admission of a new partner, retirement or death of a partner, result in dissolution of partnership. In such instances, the existing partnership deed gets dissolved and it is replaced by a new partnership deed. However, the partnership firm continues to operate. On the other hand, in case of dissolution of a partnership firm, the whole firm is put to an end (along with the partnership deed).
Therefore, it is incorrect to say that a firm dissolves on the retirement of a partner.
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