Question

Assertion (A): Dissolution of partnership refers to a change in the existing agreement among the partners.

Reason (R): In case of dissolution of partnership the firm continues its business and books of accounts need not be closed.

In the context of the above two statements, which of the following is correct?

Options

• (A) and (R) both are correct and (R) correctly explains (A).

• Both (A) and (R) are correct but (R) does not correctly explain (A).

• Both (A) and (R) are incorrect.

• (A) is correct but (R) is incorrect.

Answer 1

(A) is correct but (R) is incorrect.

Explanation:

Dissolution of partnership means a change in the existing agreement among the partners, such as admission, retirement, or death of a partner. However, in case of dissolution of partnership, the firm may continue its business and the books of accounts need not be closed only if the firm is not dissolved. The reason statement wrongly says the firm continues and books need not be closed always, which is incorrect as dissolution of firm (different concept) involves closing business and accounts.