Arrange how the losses, including deficiencies of capital, shall be paid in the correct sequence :

(A) Out of profits

(B) Out of capital of partners

(C) In their profit sharing ratio (Individually by partners)

Choose the correct answer from the options given below:

(A), (B), (C)

Correct answer: Option (1) → (A), (B), (C)

Concept: Settlement of accounts on dissolution – treatment of losses under Section 48 of the Indian Partnership Act, 1932, from Dissolution of Partnership Firm.

Losses, including deficiencies of capital, are paid: (A) first out of profits, (B) next out of the capital of partners, and (C) lastly, if necessary, by the partners individually in their profit sharing ratio. Hence the order is A, B, C.