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Dissolution and Retirement

The document covers the concepts of retirement and dissolution of partners in a partnership, defining key terms such as retiring partner, gaining ratio, joint life policy, and the process of dissolution. It outlines the circumstances under which a partnership or firm may be dissolved, including mutual consent, insolvency, and legal issues. Additionally, it discusses the realization account, solvent and insolvent partners, and the Garner vs. Murray rule regarding the sharing of losses among partners.

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3 views

Dissolution and Retirement

The document covers the concepts of retirement and dissolution of partners in a partnership, defining key terms such as retiring partner, gaining ratio, joint life policy, and the process of dissolution. It outlines the circumstances under which a partnership or firm may be dissolved, including mutual consent, insolvency, and legal issues. Additionally, it discusses the realization account, solvent and insolvent partners, and the Garner vs. Murray rule regarding the sharing of losses among partners.

Uploaded by

yousafsohail012
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
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Retirement and Death of a partner Ch 8

Q.1 Define retired partner or outgoing partner.


When any partner leaves the firm, he is called retiring or outgoing partner.

Q.2 What is meant by retirement of a partner from partnership?


The process of leaving the partnership business by any partner is called retirement of a partner.

Q.3 What is meant by Gaining ratio and how it is calculated?


The ratio in which share of retiring or deceased partner is taken by remaining partner is called
gaining ratio.
Gaining Ratio = New Ratio – Old ratio

Q.4 Describe matters which are settled at the time of retirement of a partner.
1. Calculation of amount due to retiring partner.
2. Calculation of new profit sharing ratio of remaining partners.
3. Revaluation of assets and liabilities.
4. Mode of payment for retiring partner.

Q.5 What is meant by Joint Life Policy?


The policy taken on the joint lives of all the partners is called joint life policy. The insurance
company pays total amount of the policy on the death of any partner.

Q.6 What is meant by Surrender value of insurance policy?


If insurance policy is discontinued after payment of premium for some years, the insurance
company pays in cash certain amount, this amount is called surrender value.

Dissolution of partnership Ch 9

Q.1 What is meant by dissolution of partnership?


According to partnership Act 1932, dissolution of partnership means end of partnership among the
partners.

Q.2 Define dissolution of firm.


Dissolution of firm means end of business. Dissolution of partnership does not involve the dissolution of
firm, whereas the dissolution of firm involves dissolution of partnership also.

Q.3 Describe the circumstances or reasons under which dissolution of firm takes place.
1. If all partners decide to dissolve the firm.
2. If any partner has become insolvent.
3. If any partner gives notice for dissolution of firm.
4. If firm is doing some illegal business.

Q.4 What is dissolution by agreement?


If partnership is dissolved with the consent of all the partners, it is called dissolution by agreement.

Punjab College of Commerce 1


Tariq Hanif
Q.5 What is meant by dissolution of partnership by notice?
If the partnership is at will, it may be dissolved by any partner giving 14 days notice to all other
partners.

Q.6 Describe four contingencies on the happening of which partnership can be dissolved.
1. If firm was formed for a specific period.
2. If firm was formed for a particular project.
3. If any partner died.
4. If any partner is declared insolvent.

Q.7 How partnership can be dissolved with the help of court?


1. If partnership business is not running according to partnership deed.
2. If any partner cannot perform his duties.
3. If any partner become unsound mind.
4. If the business of firm goes on losses years after years.

Q.8 Define realization account.


Realization account is an account which is prepared at the time of dissolution of firm to calculate
the gain or loss on sale of assets and payment of liabilities.

Q.9 Define solvent partner.


Solvent partner is a partner who is able to pay all his business debts is called solvent partner.

Q.10 Define insolvent partner.


The partner who is not able to pay all his business debts is called insolvent partner.

Q.11 What is meant by insolvency?


If any partner is not able to pay all his business debts, this situation is called insolvency of partner.

Q.12 What is meant by contra assets?


The accounts which are shown as deduction from assets in Balance sheet are called contra assets.
Such as reserve for bad debts and accumulated depreciation.

Q.13 What is Garner Vs Murray rule? Or What are the implication of the Garner vs. Murray rule?
1. The solvent partners should bring cash equal to their share of loss on realization.
2. Deficiency of insolvent partner will be shared by remaining partners in the ratio of their capitals.

Punjab College of Commerce 2


Tariq Hanif

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