In which order losses are paid including deficiencies of capital at the time of settlement of account when the partnership firm is dissolved:
a) Out of Capital
b) If necessary, brought by partners
c) Out of profit
Answer & explanation
Correct answer: option 4
Losses, including deficiencies of capital, shall be paid :
(i) first out of profits,
(ii) next out of capital of partners, and
(iii) lastly, if necessary, by the partners individually in their profit sharing ratio