State the sequence of payments in case of dissolution of a partnership firm.
A. To pay outside liabilities of the business
B. To pay partner's loan (if any)
C. To utilise the amount in settlement of capital A/c
D. To distribute the amount among the partners in their profit sharing ratio
E. To pay Realisation expenses
Choose the correct answer from the options given below:
Answer & explanation
Correct answer: option 1
The correct answer is Option (1) → E, A, B, C, D
On dissolution, the cash realised from the assets is used in a fixed order. The cost of winding up comes first, then the claims in the order of Section 48 of the Partnership Act.
E. To pay Realisation expenses — the expenses of realising the assets are met first, out of the amount realised.
A. To pay outside liabilities of the business — debts of the firm to third parties are paid next.
B. To pay partner’s loan (if any) — advances made by partners, as distinguished from capital, come after outsiders.
C. To utilise the amount in settlement of capital A/c — each partner is then paid what is due on account of capital.
D. To distribute the amount among the partners in their profit sharing ratio — any residue is divided last.
NCERT (2026-27 edition):
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