Arrange the following in correct order in which assets of the firm can be used in the settlement.
(A) Residue shall be divided between the partners in their profit sharing ratio.
(B) In paying the partners proportionately what is due to him/her on account of capital.
(C) In paying the partners proportionately what is due to him/her from the firm for advances/loans.
(D) In paying the debts of the firm to the third parties.
Choose the correct answer from the options given below:
Answer & explanation
Correct answer: option 4
The correct answer is Option (4) → (D), (C), (B), (A)
When a firm is dissolved, the money from its assets is paid out in a fixed order of priority under Section 48 of the Partnership Act. The rule is simple to follow: outsiders first, then partners, and among the partners, loans before capital.
(D) comes first because creditors and other outside parties have no share in the firm; their claims must be met before any partner gets anything.
(C) comes next because a partner’s loan to the firm is a debt of the firm to him, distinct from his stake as an owner.
(B) follows: only after all debts, outside and inside, are cleared is the partners’ own capital returned to them.
(A) is last: whatever is left over is surplus, and surplus is shared like profit, in the profit sharing ratio.
NCERT (2026-27 edition):
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