The assets of the firm, including any sum contributed by the partners to make up deficiencies of capital, shall be applied first for paying _____________.
- AEach partner proportionately for any advances made to firm.
- BDebts of the firm to the third parties
- CPaying partners proportionately for their capital balances.
- DPartners in their profit sharing ratio.
Solution & Step-by-step Explanation
As per Section 48 of the Indian Partnership Act, 1932, during the dissolution of a firm, assets are applied in the following absolute order of priority:First: Liquidation of debts of the firm to third parties (external liabilities).Second: Repayment to partners proportionately for any advances or loans made by them (internal loans).Third: Settlement of partners' capital account balances.Fourth: Distribution of any residual surplus among partners in their profit-sharing ratio.