From where the losses are covered if the profits and capital of partners are not enough to pay the loss, including deficiencies of capital, at the time of dissolution of the firm?
Answer & explanation
Correct answer: option 4
The correct answer is option 4- Brought by partners in their profit-sharing ratio.
If the profits and capital of partners are not enough to pay the loss, including deficiencies of capital, at the time of dissolution of the firm then it is brought by partners in their profit-sharing ratio.
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.