(A) The Assets of the firm, shall be applied, firstly for paying the debts of the firms to the third parties- This statement is true. 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:
(i) In paying the debts of the firm to the third parties.
(ii) In paying each partner proportionately what is due to him/her from the firm for advances as distinguished from capital (i.e. partner’ loan).
(iii) In paying to each partner proportionately what is due to him on account of capital.
(iv) the residue, if any, shall be divided among the partners in their profit sharing ratio.
(B) When the partner becomes insane, the partnership firm can be dissolved- This statement is true. This is the case of Dissolution by Court. At the suit of a partner, the court may order a partnership firm to be dissolved on any of the following grounds:
* when a partner becomes insane.
* when a partner becomes permanently incapable of performing his duties as a partner.
(C) The nature of Realisation Account is nominal Account- This statement is true. When the firm is dissolved, its books of account are to be closed and the profit or loss arising on realisation of its assets and discharge of liabilities is to be computed. For this purpose, a Realisation Account is prepared to ascertain the net effect (profit or loss) of realisation of assets and payment of liabilities. It is nominal account in nature, as all losses are debited and all gains are credited. Hence, all assets (other than cash in hand bank balance and fictitious assets, if any), and all external liabilities are transferred to this account. It also records the sale of assets, and payment of liabilities and realisation expenses.
(D) There is no difference in the treatment of Partner's Loan and his/her spouse loan- This statement is false. Partner's loan is paid after paying third party debts. Spouse loan is treated as third party debts as it is paid before partner's loan.
(E) Realisation Profit/Loss is distributed in the Capital Ratio when the deed is silent- This statement is false. Realisation Account is prepared to ascertain the net effect (profit or loss) of realisation of assets and payment of liabilities which may be is transferred to partner’s capital accounts in their profit sharing ratio. The balance in this account is termed as profit or loss on realisation which is transferred to partners’ capital accounts in the profit sharing ratio.
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