On the dissolution of the partnership firm the amount realised from sale of assets shall be applied in following order.
(a) Distributing the amount left among the partners in their profit sharing ratio
(b) Paying amount due to partner on account of loan advanced by him
(c) Paying amount due to the creditors
(d) Paying partners’ capital account balances
Choose the correct answer from the options given below :
Answer & explanation
Correct answer: option 2
The correct answer is Option (2) → (c), (b), (d), (a)
Section 48 of the Partnership Act fixes the order in which the money from the sale of assets is paid out. Outsiders are paid before the partners, and a partner’s loan is paid before his capital.
(c) Paying amount due to the creditors — first. Creditors are third parties, so the firm’s debts to outsiders come before anything due to the partners.
(b) Paying amount due to partner on account of loan advanced by him — second. A partner’s loan is an advance distinct from his capital, so it is repaid before the capitals.
(d) Paying partners’ capital account balances — third. Each partner gets back what is due to him on account of capital.
(a) Distributing the amount left among the partners in their profit sharing ratio — last. Only the residue left after all the above is divided among the partners.
NCERT (2026-27 edition): |