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Dissolution of Partnership Firm — Syllabus

Madhya Pradesh Board · Class 12 · Accountancy

What Dissolution of Partnership Firm covers in Madhya Pradesh Board Class 12 Accountancy: 4 topics, for the 2026-27 session.

127 questions80 flashcards3 formulas & key relations5 concepts

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A comparison chart highlighting the key differences between the dissolution of a partnership and the dissolution of a partnership firm, focusing on business termination, settlement of assets/liabiliti
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4 Topics · Madhya Pradesh Board Class 12 Accountancy · 2026-27

Topics in Dissolution of Partnership Firm

1

1. Meaning and Difference Between Dissolution of Partnership and Dissolution of Firm

  • Dissolution of partnership changes the existing relationship between partners, but the firm may continue its business as before.
  • Dissolution of partnership can happen due to change in profit sharing ratio, admission of a new partner, retirement, death, insolvency of a partner, completion of venture, or expiry of period.
  • Dissolution of partnership firm means dissolution of partnership between all the partners of a firm.
2

2. Modes of Dissolution of Firm

  • A firm can be dissolved by agreement with consent of all partners or according to the contract between partners.
  • Dissolution may happen without court intervention or by court order.
  • Compulsory dissolution occurs when all partners or all but one partner become insolvent, when the business becomes illegal, or when an event makes the business unlawful, such as a partner becoming an
3

3. Settlement of Accounts Under Section 48 and Section 49

  • Losses, including deficiencies of capital, are paid first out of profits, next out of capital of partners, and lastly by the partners individually in their profit sharing ratio.
  • The assets of the firm are applied first to debts of the firm to third parties, then to partners' advances or loans, then to partners' capital, and the residue is divided in profit sharing ratio.
  • Secured loans have precedence over unsecured loans when paying outside liabilities.
4

4. Insolvency of a Partner and Garner vs Murray Principle

  • If a partner cannot contribute towards the deficiency of his capital account, he is insolvent.
  • The sum not recoverable from an insolvent partner is treated as capital loss for the firm.
  • In the absence of agreement to the contrary, the capital loss is borne by the remaining solvent partners in the ratio of their capitals as on the date of dissolution.

Key Concepts

Central concept: Dissolution of a firm ends the business and requires settlement of assets, liabilities, and partners' claims through realisation and final accounts.

Dissolution of partnershipDissolution of partnership firmModes of dissolution of firmSettlement of accountsRealisation AccountPartner settlementInsolvency of a partnerAccounting entries on dissolution

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Frequently Asked Questions

What are the important topics in Dissolution of Partnership Firm for Madhya Pradesh Board Class 12 Accountancy?
Key topics in Dissolution of Partnership Firm include Meaning and Difference Between Dissolution of Partnership and Dissolution of Firm, Modes of Dissolution of Firm, Settlement of Accounts Under Section 48 and Section 49, Insolvency of a Partner and Garner vs Murray Principle. Study these first, then practise questions on each for the Madhya Pradesh Board Class 12 board exam.
How should I revise Dissolution of Partnership Firm for the Madhya Pradesh Board Class 12 board exam?
Learn the core ideas first, then work through the 127 practice questions on Dissolution of Partnership Firm. Revise definitions regularly and use flashcards for quick recall before the exam.

Sources & Official References

Content is aligned to the official syllabus. Refer to the board website for the latest curriculum.

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