In case of the dissolution of a firm, the firm ceases to conduct business and has to settle its accounts. Arrange the following in the correct sequence:

(A) In paying to each partner proportionately what is due to him on account of capital
(B) In paying the debts of the firm to the third parties
(C) In paying each partner proportionately what is due to him/her from the firm for advances as distinguished from capital (i.e. partner's loan)
(D) The residue, if any, shall be divided among the partners in their profit sharing ratio

Choose the correct answer from the options given below:

(B), (C), (A), (D)

On dissolution of a firm, the settlement of accounts is done in the following order:

1. (B) In paying the debts of the firm to the third parties. External liabilities are given first priority.

2. (C) In paying each partner proportionately what is due to him/her from the firm for advances (partner’s loan).  Loans/advances from partners are repaid next.

3. (A) In paying to each partner proportionately what is due to him on account of capital. Partners’ capital is returned after paying external debts and loans.

4. (D) The residue, if any, shall be divided among the partners in their profit-sharing ratio.  Remaining balance (if any) is distributed as profit.