A & B are partners sharing profits in ratio of 3:2. Mrs. A has given a loan of ₹20000 to the firm and the firm has also taken a loan from B of ₹15000. The firm was resolved and its assets were realised for ₹30000. To whom the company will repay first if there were no other creditors of the firm?

First repay ₹20000 to Mrs. A

The correct answer is option 2- First repay ₹20000 to Mrs. A.

Mrs. A loan is outsider liability so it is paid before B's loan.

The assets of the firm, including any sum contributed by the partners to make up deficiencies of capital, shall be applied in the following manner and order:
(i) In paying the debts of the firm to the third parties;
(ii) In paying each partner proportionately what is due to him/her from the firm for advances as distinguished from capital (i.e. partner’ loan);
(iii) In paying to each partner proportionately what is due to him on account of capital.
(iv) The residue, if any, shall be divided among the partners in their profit sharing ratio.
So, Mrs A's loan is a debt from an outsider or third party which should be paid first.