The dissolution of partnership firm takes place in following order.
A. Outsiders' liabilities are paid out.
B. Partner's capital account is settled.
C. All assets and outside liabilities are transferred to realisation account
D. Partner's loan is repaid in proportion
E. Assets are sold and realised
Choose the correct answer from the options given below :
Answer & explanation
Correct answer: option 2
The correct answer is Option (2) → C, E, A, D, B
The assets must first be brought into the Realisation Account and turned into cash; the cash is then applied in the order laid down by Section 48 of the Partnership Act.
(C) All assets and outside liabilities are transferred to realisation account — first, to close the books.
(E) Assets are sold and realised — next, to raise cash.
(A) Outsiders' liabilities are paid out — third-party debts come first.
(D) Partner's loan is repaid in proportion — then partners’ advances, as distinct from capital.
(B) Partner's capital account is settled — last of all.
NCERT (2026-27 edition): NCERT (2026-27 edition):
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