Which statement best describes winding up in a partnership?

• A. Continuing business operations.
• B. Admitting new partners.
• C. Paying debts only.
• D. Winding up includes selling assets, paying debts, distributing surplus, then terminating.

Answer: (D)

Winding up a partnership means liquidating its affairs after dissolution. The process starts with converting the partnership’s assets into cash by selling them, then using that money to pay off all debts and liabilities. Once debts are satisfied, any remaining assets (surplus) are distributed to the partners according to their rights or capital accounts, and only then is the partnership formally terminated. This sequence—selling assets, paying debts, distributing surplus, then terminating—best describes the winding-up process. Continuing operations or admitting new partners would mean the business hasn’t ceased; paying debts alone is incomplete because it omits asset realization and final termination.