Accountancy Part ADissolution of Partnership Firm

As per Section. 48 of Partnership Act, what is the correct sequence t…

As per Section. 48 of Partnership Act, what is the correct sequence to be Followed at the time of dissolution of Partnership Firm ?

A. Payment for Partner's Loan
B. Payment for Partner's Capital Dues
C. Payment outsider's Liabilities
D. Surplus, if any distributed amongst partners

Choose the correct answer from the options given below:

Answer & explanation

Correct answer: option 3

The correct answer is Option (3) → C, A, B, D

Section 48 of the Partnership Act lays down the order in which the assets of the firm are applied on dissolution.

C. Payment outsider's Liabilities — the debts of the firm to third parties are paid first.

A. Payment for Partner's Loan — next come the advances made by partners, as distinguished from capital.

B. Payment for Partner's Capital Dues — then each partner is paid what is due to him on account of capital.

D. Surplus, if any distributed amongst partners — the residue, if any, is divided in the profit sharing ratio.

NCERT (2026-27 edition):
Settlement of Accounts – “… (b) Application of Assets 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.”