As per Section 48 of the Partnership Act 1932, which of the following will be utilized for payment of losses, including deficiencies of capital:
(A) Out of Profits
(B) Out of capital of Partners
(C) By partners individually in their profit sharing ratio
(D) Creditors Assets
Choose the correct answer from the options given below:
Answer & explanation
Correct answer: option 2
The correct answer is Option (2) → (A), (B) and (C) only
Section 48 of the Partnership Act, 1932 sets the order in which losses on dissolution, including deficiencies of capital, are met: first out of profits, next out of the partners’ capital, and lastly by the partners individually in their profit sharing ratio.
(A) Out of Profits Correct. Profits are used first.
(B) Out of capital of Partners Correct. If profits are not enough, the capital is used next.
(C) By partners individually in their profit sharing ratio Correct. Any loss still left is made good by the partners from their own pockets.
(D) Creditors Assets Incorrect. Creditors are outsiders to whom the firm owes money; their assets are never used to meet the firm’s losses. They are the first to be paid out of the firm’s assets.
NCERT (2026-27 edition):
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