In case of the dissolution of a firm, the firm ceases to conduct business and has to settle its accounts. Losses, including deficiencies of capital, shall be paid in the following manner and order:(A) Out of capital of partners.
(B) By the partners individually in their profit sharing ratio.
(C) Profits.Choose the correct answer from the options given below:
- A(B), (A), (C)
- B(C), (A), (B)
- C(B), (C), (A)
- D(C), (B), (A)
Solution & Step-by-step Explanation
In accordance with Section 48 of the Indian Partnership Act, 1932, losses (including capital deficiencies) are liquidated step-by-step out of the following sources in strict priority order:First, out of accumulated Profits (C).Next, out of Capital of the partners (A).Last, if deficiencies remain, by the Partners individually in their specific profit-sharing ratio (B).Thus, the proper sequence is (C), (A), (B).