According to Indian Partnership Act, 1932, when the firm is dissolved, cash received on sale of assets are applied in following order:

(A) Paying to each partner proportionately what is due to him/her on account of capital
(B) In paying the secured debts of the firm to the third parties
(C) In paying each partner proportionately what is due to him/her from the firm for advances as distinguished from capital
(D) The residue, if any shall be divided among the partner's in their profit sharing ratio
(E) In paying unsecured debt of firm to third parties

Choose the correct answer from the options given below:

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

The correct answer is option 2- (B), (E), (C), (A), (D).

According to the Indian Partnership Act, 1932, when a firm is dissolved, the cash received from the sale of assets is applied in the following order:

B and E. Paying the firm's debts to third parties (secured debts first, followed by unsecured debts).

C. Paying each partner proportionately what is due to him/her from the firm for advances (advances made by the partners).

A. Paying each partner proportionately what is due to him/her on account of capital (capital invested by the partners).

D. The residue, if any, shall be divided among the partners in their profit-sharing ratio.

Upon dissolution of a firm, the firm's assets shall be applied in the following order:

* Pay off all debts owed to third parties.
* Repay each partner's loan to the firm, in proportion to the amount loaned.
* Return each partner's capital contribution, in proportion to the amount contributed.
* Any remaining assets (surplus) shall be distributed among the partners in their profit-sharing ratio.
So, The amount realized from assets along with contribution from partners, if required, shall be utilized first to pay off the outside liabilities of the firm such as creditors, loans, bank overdraft, bill payables, etc. (it may be noted that secured loans have precedence over the unsecured loans); the balance should be applied to repay loans made by the partners to the firm. (in case the balance amount is not adequate enough to pay off such loans and advances, they are to be paid proportionately). The amount left thereafter is utilized in settlement of capital account balances. Then the surplus if any is divided among partners in their profit sharing ratio.