Identify the correct sequence or order of application of assets including any sum contributed by the partners, in case of dissolution of partnership firm to makeup deficiencies of capital.
A. In paying each partner proportionately what is due to him form the firm for advances distinguished from capital
B. In paying to each partner proportionately what is due to him on account of capital
C. In paying the debts of the firm to the third parties
D. The residue, if any, shall be divided among the partners in their profit sharing ratio
Choose the correct answer from the options given below:
Answer & explanation
Correct answer: option 2
The correct answer is Option (2) → C, A, B, D
Section 48 of the Partnership Act fixes the order: outsiders are paid before the partners, and among the partners loans come before capital.
C. In paying the debts of the firm to the third parties — first, because outside creditors have the first claim on the firm’s assets.
A. In paying each partner proportionately what is due to him form the firm for advances distinguished from capital — second, because a partner’s loan to the firm ranks before his capital.
B. In paying to each partner proportionately what is due to him on account of capital — third, the return of each partner’s capital.
D. The residue, if any, shall be divided among the partners in their profit sharing ratio — last, whatever is left over.
NCERT (2026-27 edition):
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