On dissolution of a partnership firm, out of the proceeds received from the sale of assets what will be paid first of all?

Outside Creditors

The correct answer is option 2- Outside Creditors.

Outside Creditors will be paid first of all out of the proceeds received from the sale of assets On dissolution of a partnership firm.
Outside Creditors are third party so it is paid firstly.

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:
(i) In paying the debts of the firm to the third parties;
(ii) In paying each partner proportionately what is due to him/her from the firm for advances as distinguished from capital (i.e. partner’ loan);
(iii) In paying to each partner proportionately what is due to him on account of capital; and
(iv) the residue, if any, shall be divided among the partners in their profit-sharing ratio.