Arrange the following in the correct chronological/legal order in which assets of the firm must be utilized during the settlement of accounts upon dissolution (Section 48 of Indian Partnership Act):(A) Residue shall be divided between the partners in their profit sharing ratio.(B) In paying the partners proportionately what is due to him/her on account of capital.(C) In paying the partners proportionately what is due to him/her from the firm for advances/loans.(D) In paying the debts of the firm to the third parties.Choose the correct answer from the options given below:
- A(A), (B), (C), (D)
- B(A), (C), (B), (D)
- C(B), (A), (D), (C)
- D(D), (C), (B), (A)
Solution & Step-by-step Explanation
According to Section 48 of the Indian Partnership Act, 1932, the sequence for applying the assets of the firm upon dissolution is:First, pay external liabilities/debts to third parties (D).Second, pay partners proportionately for any advances or loans given by them beyond capital (C).Third, pay partners proportionately for balancing out capital accounts (B).Finally, distribute any remaining surplus (residue) among partners in their profit-sharing ratio (A).Hence, the correct order is (D), (C), (B), (A).