Accountancy Part ADissolution of Partnership Firm

As per the provisions of Section 48 of Indian Partnership Act, firm's…

As per the provisions of Section 48 of Indian Partnership Act, firm's assets are to be used in the prescribed order in case of dissolution of a firm. Arrange the following in order.

(A) In paying partner's loan

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

(D) In paying the debts of the firm to the third parties

Choose the correct answer from the options given below:

Answer & explanation

Correct answer: option 4

The correct answer is Option (4) → (D), (A), (C), (B)

Section 48 of the Indian Partnership Act lays down the order in which the firm’s assets are applied on dissolution:

(D) In paying the debts of the firm to the third parties

(A) In paying partner’s loan

(C) 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

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.”