Dissolution of Firm
Dissolution of the firm means the closure of the firm and end of business relationship among all the partners. It can be either voluntary by the partners or compulsorily by order of court. Under this the business of the firm comes to an end and also the books of the firm are closed. The assets of the firm are realized and liabilities are settled. The balance amount, if any, is distributed among all the partners. The economic relationship between/among the partners come to an end. The dissolution of the firm also means dissolution of partnership.
Dissolution of Partnership
The dissolution of partnership means the change in the business relationship among the partners where the firm continues its business. It is always voluntary in nature and the books of accounts need not be closed. The assets of the firm are revalued and the liabilities are reassessed. The gain (profit) or loss due to it, is distributed among the partners in their old profit sharing ratio and the economic relationship among the partners are changed. The dissolution of partnership may or may not involve dissolution of the firm.
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