Practicing Success
What happens if the balance amount from the assets is not sufficient to repay loans and advances made by the partners to the firm during the dissolution process? |
The loans and advances are paid off from the capital of the partners. The loans and advances are paid off from the profits of the firm. The loans and advances are paid off proportionately among the partners. The loans and advances are written off and the partners bear the loss individually. |
The loans and advances are paid off proportionately among the partners. |
The correct answer is option 3- The loans and advances are paid off proportionately among the partners. If the balance amount from the assets is not sufficient to repay loans and advances made by the partners to the firm during the dissolution process, each partner is entitled to receive their respective share from the firm for advances, distinct from capital, in a proportional manner. Upon dissolution of a firm, the firm's assets shall be applied in the following order: |