Arrange the following in correct sequence, related to application of Assets, according to section 48 of the partnership Act, 1932 in case of dissolution of a firm:
(A) In paying the secured debts of the firm to the third parties.
(B) In paying each partner proportionately what is due to him on account of capital.
(C) In paying the unsecured debts of the firm to the third parties.
(D) In paying each partner proportionately what is due to him from the firm for advances.
(E) The residue, if any shall be divided among the partners in their profit sharing ratio
Choose the correct answer from the options given below:
Answer & explanation
Correct answer: option 2
The correct answer is Option (2) → (A), (C), (D), (B), (E)
Under section 48, assets are applied first to outsiders, then to partners' loans, then to capital, and the residue is shared.
(A) In paying the secured debts of the firm to the third parties. — first. Secured loans have precedence over unsecured loans.
(C) In paying the unsecured debts of the firm to the third parties. — second. The rest of the outside debts are paid next.
(D) In paying each partner proportionately what is due to him from the firm for advances. — third. Partners' loans rank after outside debts.
(B) In paying each partner proportionately what is due to him on account of capital. — fourth.
(E) The residue, if any shall be divided among the partners in their profit sharing ratio — last.
NCERT (2026-27 edition):
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