In case of dissolution of a firm, the firm ceases to conduct business and has to settle its accounts. The assets of the firm, including any sum contributed by the partners to make up deficiencies of capital, shall be applied in the following manner and order:

(A). In paying to each partner proportionately what is due to him on account of capital.

(B). The residue, if any, shall be divided among the partners in their profit sharing ratio.

(C). In paying the debts of the firm to third parties.

(D). In paying each partner proportionately what is due to him/her from the firm for advances as distinguished from capital (e. partner loan).

Choose the correct answer from the options given below:

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

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

The assets of the firm, including any sum contributed by the partners to make up deficiencies of capital, shall be applied in the following manner and order:
(C) In paying the debts of the firm to the third parties;
(D) In paying each partner proportionately what is due to him/her from the firm for advances as distinguished from capital (i.e. partner’ loan);
(A) In paying to each partner proportionately what is due to him on account of capital; and
(B) the residue, if any, shall be divided among the partners in their profit sharing ratio.