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mediumMCQCUET Accountancy 2025 22 May Shift 22026Accountancy
1 mark

Which of the following indicates a situation of compulsory dissolution?

  1. A
    When a partner becomes insane.
  2. B
    On the death of a partner
  3. C
    When the business of the firm becomes illegal.
  4. D
    When a partner becomes permanently incapable of performing his duties as a partner

Solution & Step-by-step Explanation

According to Section 41 of the Indian Partnership Act, 1932, a firm is dissolved compulsorily:By the happening of any event which makes it unlawful for the business of the firm to be carried on or for the partners to carry it on in partnership.When all partners or all except one partner become insolvent.Insanity and permanent incapacity are grounds for dissolution by the court (Section 44), while death generally leads to dissolution unless otherwise agreed.

Practice this question

Try it yourself before checking the explanation above.

Which of the following indicates a situation of compulsory dissolution?
A
When a partner becomes insane.
B
On the death of a partner
C
When the business of the firm becomes illegal.
D
When a partner becomes permanently incapable of performing his duties as a partner

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