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DEPARTMENT OF TECHNICAL EDUCATION

ANDHRA PRADESH

Name : R.Dasharatham
Designation : Lecturer
Branch : D.C.C.P.
Institute : GPW, Warangal
Year : I year
Subject : Business Organization
Subject code : CCP-104
Topic : Forms of Business Organization-Sole
Trading and Partnership
Duration : 50 mts
Sub topic : Dissolution of Partnership
Teaching Aids: :P.P.T., Animation, Photos.

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Objectives
On completion of this period you would be
able to know:
What is Dissolution of Partnership and
Partnership Firm

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Do you know the meaning of dissolution?

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Soon after a spoon of sugar is poured in a
glass of water, what happens?

 It will dissolve.
 There will not be any sugar particle seen.
 It will lose its identity.

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Dissolution of Partnership
 A partnership is a relation between persons who
have agreed to share the profits or losses arising
out of business

 The “relation” which is essential for a partnership


will disappear or dissolve in dissolution

 If relationship comes to an end between partners,


it is dissoluation of partnership

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Dissolution of Partnership
A partnership is dissolved :
 On death of a partner
 Retirement of a partner
 Insolvency of a partner
 On expiry of the term
 Completion of particular venture

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Dissolution of Partnership Firm
 Dissolution of partnership firm puts an end to all
activities of a firm
 Dissolution of firm includes dissolution of
partnership

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Circumstances Of Dissolution Of
Partnership Firm
 When the partners decide that firm should be
dissolved

 On the death, insolvency or insanity of all or one


partner

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Dissolution of Partnership Firm

 When the business is illegal.


Ex. Manufacturing black jaggary, transporting live-
stock in RTC buses etc., production of liquor during
prohibition

 When a partner gives notice of dissolution in case


of partnership at will

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Dissolution of Partnership Firm

 When the firm is constituted for a fixed term, on the


expiry of that time

 When the court orders that firm should be dissolved

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Dissolution of Partnership Firm
The following are the circumstances when the
Court may order the dissolution of the firm :

a) When a partner becomes of unsound mind;


b) Becomes permanently incapacitated;

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Dissolution of Partnership Firm

 Guilty of misconduct affecting the business

 Disregard the partnership agreement

 Transfers or assigns his interest or share in the firm


to a third person

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Dissolution of Partnership Firm

 When the business cannot be carried on save at


a loss

 When it appears just and equitable to the Court

NOTE: The Court has the option to refuse to order


dissolution

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Winding Up And Settlement Of
Accounts
Assets are disposed off and the amount so
realized is utilized in paying off:
a) the debts of the firm to the third parties.

b) the loans from the partners.


c) if there is sufficient amount, capital of each partner.

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Winding Up And Settlement Of Accounts
 Remaining balance distributed to partners in
sharing ratio
 If amount not sufficient to pay liabilities
 Partners contribute deficiency in sharing ratio

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Summary

We have discussed about:


Meaning of:
A) Dissolution of Partnership
B) Dissolution of Partnership Firm
 Circumstances of Dissolution of Partnership Firm.
 Dissolution by Court
 Winding up and settlement of account

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Quiz:
1.The Partnership firm will be dissolved:

a) On the death of a partner


b) On the retirement of a partner
c) On the insanity of a partner
d) When the business is illegal.

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Contd..

Quiz:
2.Which is the first preference in paying off the debts
when a firm is dissolved:

a) the loans from the partners


b) in returning the capital amount of partner
c) the debts of the firm to the third parties
d) None of the above.

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Frequently asked questions :
1. What is dissolution of a firm?

2. What are the circumstances that take place in


dissolution of a firm?

3. List out various circumstances for dissolution of a


firm by the Court?

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Assignment
1. Differentiate between a) Dissolution of a
Partnership and; b) Dissolution of Partnership
Firm?

2. How the funds are utilized in paying off the debts


while disposing off the debts in case of
dissolution of a firm?

3. List out various circumstances for dissolution of a


partnership firm?

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