Question

Which of the following statement is/are correct?

1. Dissolution of partnership firm does not result into reconstitution of a firm.
2. At the time of dissolution of partnership firm, assets are realised and liabilities are paid.
3. At the time of dissolution of firm, provision against debtors are transferred to Partners’ Capital Accounts in their profit-sharing ratio.
4. Final payments of the partners on their Capital Accounts are to be paid first at the time of dissolution of firm.

Choose the correct option:

Options

• Only (i) and (ii)

• Only (ii) and (iii)

• Only (iii) and (iv)

• Only (i) and (iii)

Answer 1

Only (i) and (ii)

Explanation:

Statements (i) and (ii) are true because dissolving a firm closes the entire business, meaning assets are sold and liabilities are paid off. Statement (iii) is false because provisions against debtors go to the Realisation Account, not to Capital Accounts. Statement (iv) is false because outside debts and partner loans must be paid completely before any money goes to a partner’s capital account.