On dissolution of a firm, out of the proceeds received from the sale of assets will be paid first of all to whom?

Outside Creditors

The correct answer is option 4- Outside Creditors.

On dissolution of a firm, out of the proceeds received from the sale of assets will be paid first of all to third party debts and the outside creditors is third party debt to which a partnership firm has to pay.

The amount realised from assets along with contribution from partners, if required, shall be utilised first to pay off the outside liabilities of the firm such as creditors, loans, bank overdraft, bill payables, etc. (it may be noted that secured loans have precedence over the unsecured loans); the balance should be applied to repay loans made by the partners to the firm. (in case the balance amount is not adequate enough to pay off such loans and advances, they are to be paid proportionately). The amount left thereafter is utilised in the settlement of capital account balances. Then the surplus if any is divided among partners in their profit sharing ratio