Practicing Success
Which capital is considered to find out the ratio in which remaining solvent partners will bear the capital loss of the insolvent partner at the time of dissolution of partnership firm? |
Capital as on the start date of partnership firm Additional capital brought by partners Capital as on date of dissolution None of these |
Capital as on date of dissolution |
In the context of settlement of accounts among the partners there is still another important aspect to be noted, i.e., when a partner is unable to contribute towards the deficiency of his capital account (the account finally showing a debit balance), he/she is said to be insolvent, and the sum not recoverable is treated as capital loss for the firm. In the absence of any agreement, to the contrary, such a capital loss is to be borne by the remaining solvent partners in accordance with the principle laid down in Garner vs. Murray case, which states that the solvent partners have to bear such loss in the ratio of their capitals as on the date of dissolution. |