Practicing Success
In case of dissolution of a firm, the firm ceases to conduct business and has to settle its accounts. What is the correct order of distribution of assets during the settlement process? |
Pay off outside liabilities, repay partner's loans, settle capital account balances, and distribute surplus among partners. Settle capital account balances, distribute surplus among partners, pay off outside liabilities, and repay partner's loans. Repay partner's loans, pay off outside liabilities, settle capital account balances, and distribute surplus among partners. Distribute surplus among partners, settle capital account balances, repay partner's loans, and pay off outside liabilities. |
Pay off outside liabilities, repay partner's loans, settle capital account balances, and distribute surplus among partners. |
The correct answer is option 1- Pay off outside liabilities, repay partner's loans, settle capital account balances, and distribute surplus among partners. During the dissolution of a firm, the assets, including any contributions made by the partners to address capital deficiencies, are allocated according to the following sequence: |