In case of the dissolution of a firm, the firm ceases to conduct business and has to settle its accounts. Arrange in the correct manner and order the assets of the firm, including any sum contributed by the partners to make up for deficiencies of capital:(A) In paying to each partner proportionately what is due to him on account of capital(B) In paying the debts of the firm to the third parties(C) In paying each partner proportionately what is due to him/her from the firm for advances as distinguished from capital (i.e. partner's loan)(D) The residue, if any, shall be divided among the partners in their profit sharing ratioChoose the correct answer from the options given below:
- A(B), (C), (A), (D)
- B(A), (B), (C), (D)
- C(B), (A), (D), (C)
- D(C), (B), (D), (A)
Solution & Step-by-step Explanation
According to Section 48 of the Indian Partnership Act, 1932, during the dissolution of a firm, assets are applied in the following sequence:First, pay off all external debts and liabilities to third parties (B).Next, pay back to each partner proportionately any loans or advances given by them beyond their capital contribution (C).Then, repay the capital balances due to the partners proportionately (A).Lastly, any remaining surplus/residue is shared among partners in their profit-sharing ratio (D).The correct structural sequence is (B), (C), (A), (D).