Accountancy Part ADissolution of Partnership Firm

In case of dissolution of a firm, Losses including deficiencies of ca…

In case of dissolution of a firm, Losses including deficiencies of capital, shall be paid first out of...............

Answer & explanation

Correct answer: option 3

The correct answer is Option (3) → Profit

Section 48 of the Partnership Act lays down the order in which losses on dissolution are met: first out of profits, then out of the partners’ capitals, and lastly by the partners individually in their profit sharing ratio.

NCERT (2026-27 edition):
Settlement of Accounts – “… (a) Treatment of 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.”