From where the losses are covered at the time of dissolution of firm,if profits are not enough to cover the losses?
Answer & explanation
Correct answer: option 1
The correct answer is option 1- Capital of partners.
From the Capital of partner, losses are covered at the time of dissolution of firm, if profits are not enough to cover the losses .
Losses, including deficiencies of capital, shall be paid :
(i) first out of profits,
(ii) next out of capital of partners, and
(iii) lastly, if necessary, by the partners individually in their profit sharing ratio.