In case of the dissolution of a firm, the firm ceases to conduct business and has to settle its accounts. Arrange the following steps in the correct statutory sequence according to Section 48 of the Indian Partnership Act, 1932:(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, the sequence of utilizing the assets of the firm upon dissolution is:First, pay external third-party debts (B).Next, pay each partner proportionately what is due for advances/loans separate from capital (C).Then, pay each partner what is due on account of capital balance (A).Finally, distribute any remaining surplus (residue) among partners in their profit-sharing ratio (D).Thus, the order is (B), (C), (A), (D).