Arrange the following steps in the correct sequence for the application of assets during the settlement of accounts upon the dissolution of a partnership firm (as per Section 48 of the Indian Partnership Act, 1932):(A) The balance should be applied to repay loans made by partners to the firm.(B) The assets of the firm should be used in paying the debts of the firm to third parties.(C) The balance assets may be used for paying partners proportionately on account of capital.(D) The asset residue, if any, shall be divided among the partners in their profit-sharing ratio.Choose the correct answer from the options given below:
- A(C), (B), (A), (D)
- B(B), (A), (D), (C)
- C(B), (A), (C), (D)
- D(C), (B), (D), (A)
Solution & Step-by-step Explanation
Section 48 of the Indian Partnership Act, 1932, outlines a strict priority order for applying firm assets during dissolution:First Priority (B): Liquidating debts owed to external third parties.Second Priority (A): Repaying loans or advances extended by any partner to the firm.Third Priority (C): Returning the capital balances due to partners.Final Step (D): If any surplus/residue remains, it is distributed among partners according to their profit-sharing ratio.This forms the sequential order: (B), (A), (C), (D).