Q.1. Distinguish between dissolution of a partnership and dissolution
of a firm.
(CBSE 1991(Delhi) (C))
Answer: The dissolution of the partnership is not the dissolution
of a partnership firm. Any type of change in the partnership agreement
is called dissolution of partnership. A partnership may also be
dissolved at the time of admission of a new partner into the firm
or at the time of retirement or death of a partner. In this case
a new partnership agreement is formed, this is why the old partnership
comes to an end and a new partnership begins.
However, dissolution of a firm means discontinuation of the firmís
business and the relationship between the partners. According to
Sec. 39 of Indian Partnership Act 1932, " Dissolution
of firm means a dissolution of partnership between
all the partners in the firm." Therefore when a firm
is dissolved, assets of the firm are disposed off, liabilities are
paid off and the accounts of all the partners are also settled.
Q.2. Distinguish between Revaluation Account and Realisation
(DSSE 1987, AISSE 1988,1989 CBSE 1992)
(1) Revaluation account is prepared at the time of admission,
retirement of death of a partner.
This account is prepared at the time of dissolution of a
(2) Revaluation account is prepared in order to work out
the profit or loss on revaluation of assets and liabilities
at the time of admission, retirement or death of a partner.
This account is prepared to work out the profit or loss on
realisation of assets and payment to liabilities at the time
of dissolution of the firm.
(3) Revaluation profit or loss is distributed only among
the old partners of the firm in their profit sharing ratio.
Realisation profit or loss is distributed among all the partners
in their profit sharing ratio.
(4) After preparing the revaluation account the firmís business
gets going with the same set of books.
After preparation of this account the firms business comes
to an end.
Q.3. Explain the provisions of Sec. 48 of the Indian Partnership
Act 1932 dealing with settlement of accounts the time of the dissolution
of firm. (DSSE 1991,1992)
Answer: Sec. 48 of Indian Partnership Act 1932 lays
down the following rules regarding the settlement of accounts:
(i) Losses including deficiencies of capital shall be paid:
- first out of profits;
- then out of capitals; and
- lastly, if necessary by the partners individually in their profit
(ii) The amount realised from the assets of the firm including
any sums of money contributed by the partners to make up deficiencies
of capital shall be applied in the following order:
- First of all in paying the debts of the third party.
- Secondly to pay off partnerís loan.
- Then to refund partnerís capital balances.
- The surplus, if any distributed among the partners in their
profit sharing ratio.
In case a partner has provided loan to the firm has debit balance
of capital, first the debit balance of capital will be completed
by his loan, thereafter, if there is a balance in loan account,
it will be paid before the payment of other partnerís capital.