Question

Chapter - Partnerships 1. When is a partnership dissolved? 2. There are two types of entries that use the word “bonus.” Explain each. 3. Explain what a Statement of Liquidation shows?

Answer 1

1. The following may stand as a reason for dissolution of a partnership firm,
   1. Insolvency of all but one, of the partners of the firm, which means excluding one partner all other partners are insolvent.
   2. When an order is passed by the court for dissolution, it usually happens when the firm involves any illegal activities.
   3. Firm may be dissolved by the mutual consent of all the partners of the firm.
   4. Where the firm is formed for a particular purpose and the purpose has been completed, that is expiry of term.
2. Two types of bonuses that occur in partnership are,
   1. When a new partner joins a firm and pays more than his contribution towards capital, it will be a bonus to the existing partners.
   2. In the same scenario if the newly admitting partner pays less than the requirement towards capital contribution it will be a bonus to the admitting partner, this will happen if the newly admitting partner is a value adding person.
3. Statement of liquidation shows all the values of assets and liabilities of a firm, it shows the actual realisable value of assets of the firm, and the liabilities with the breakup of secured and unsecured, so that secured will be paid from the realisable value of securitized asset.