The order of payment/receipt of cash on dissolution of partnership firm is :

(A) Paying each partner his due on account of capital
(B) Paying debt of firm to third parties.
(C) Paying each partner what is due to him as advance
(D) Paying the partner the residue in profit sharing ratio

Choose the correct answer from the options given below :

(B), (C), (A), (D)

The correct answer is Option (1) → (B), (C), (A), (D).

(B) Paying debt of firm to third parties.- The assets of the firm, including any sum contributed by the partners to make up deficiencies of capital, shall be applied in paying the debts of the firm to the third parties.

(C) Paying each partner what is due to him as advance- Next it is used in paying each partner proportionately what is due to him/her from the firm for advances as distinguished from capital (i.e. partner’ loan).

(A) Paying each partner his due on account of capital-  Next it is used in paying to each partner proportionately what is due to him on account of capital.

(D) Paying the partner the residue in profit sharing ratio-  At last, the residue, if any, shall be divided among the partners in their profit sharing ratio.