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 lays down the order in which losses, including deficiencies of capital, are met on dissolution.
(A) Out of Profits Correct. Losses are paid first out of profits.
(B) Out of capital of Partners Correct. If profits are not enough, the loss is met next out of the partners’ capital.
(C) By partners individually in their profit sharing ratio Correct. Any balance is paid lastly by the partners individually in their profit sharing ratio.
(D) Creditors Assets Incorrect. Creditors are outsiders to whom the firm owes money; their assets are never a source for meeting the firm’s losses.
NCERT (2026-27 edition): |