Accountancy Part ADissolution of Partnership Firm

Arrange the following in a sequence, in which they will be utilize fo…

Arrange the following in a sequence, in which they will be utilize for the payment of losses:

(A) Out of capital of partners

(B) Out of profits

Choose the correct answer from the options given below:

Answer & explanation

Correct answer: option 3

The correct answer is Option (3) → (B), (A), (C)

Section 48 of the Partnership Act lays down the order in which losses on dissolution, including deficiencies of capital, are met:

(B) Out of profits.
(A) Out of capital of partners.
(C) By the partners individually in their profit sharing ratio.

NCERT (2026-27 edition):
Settlement of Accounts – “… (a) Treatment of Losses Losses, including deficiencies of capital, shall be paid : (i) first out of profits, (ii) next out of capital of partners, and (iii) lastly, if necessary, by the partners individually in their profit sharing ratio.”