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 realisaton account

D. Partner's loan is repaid in proportion

E. Assets are sold and realised

Choose the correct answer from the options given below :

C, E, A, D, B

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

The correct sequence is as follows-

C. All assets and outside liabilities are transferred to realisaton account.- All assets except cash and fictitious assets and outstanding liabilities are transferred to the Realization Account to track the process of converting assets into cash and settling debts.

E. Assets are sold and realised- The assets are sold, and the proceeds are recorded in the Realization Account, effectively converting them into cash.

A. Outsiders' liabilities are paid out.- All external liabilities of the partnership are settled using the cash proceeds from the realized assets firstly. 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). 

D. Partner's loan is repaid in proportion- Partners' outstanding loans are repaid in proportion to their loan balances, using the remaining cash in the Realization Account. 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). 

B. Partner's capital account is settled.- Finally, after all debts and loans are settled, the remaining balance in the Realization Account is distributed among the partners based on their capital accounts and the agreed-upon profit-sharing ratio. This finalizes the dissolution process.