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:

E, A, B, C, D

The correct answer is Option (1) → E, A, B, C, D.

Realisation expenses are paid first. They are the necessary costs incurred to carry out the dissolution process itself, such as selling assets or legal work. These expenses are paid out of the cash realised from assets, and they are given top priority because without settling them, the process of dissolution cannot be completed. After these expenses are covered, the remaining amount is used to pay outside liabilities, then partners’ loans, and finally partners’ capital.

The assets of the firm, including any sum contributed by the partners to make up deficiencies of capital, shall be applied in the following manner and order:
A. To pay outside liabilities of the business-  In paying the debts of the firm to the third parties.
B. To pay partner's loan (if any)- In paying each partner proportionately what is due to him/her from the firm for advances as distinguished from capital (i.e. partner’ loan).
C. To utilise the amount in settlement of capital A/c-  In paying to each partner proportionately what is due to him on account of capital.
D. To distribute the amount among the partners in their profit sharing ratio- the residue, if any, shall be divided among the partners in their profit sharing ratio.