While settling accounts during the dissolution of a partnership firm, what is the correct statutory order of application of the firm's assets according to Section 48 of the Indian Partnership Act, 1932?(A) In paying the debts of the firm to third parties(B) In paying to each partner proportionately what is due to him on account of capital(C) Divided among the partners in their profit sharing ratio if any surplus remains(D) In paying each partner proportionately what is due to him/her from the firm for advances/loans as distinguished from capitalChoose the correct answer from the options given below:
- A(A), (D), (C), (B)
- B(A), (D), (B), (C)
- C(B), (A), (D), (C)
- D(A), (B), (D), (C)
Solution & Step-by-step Explanation
Section 48 of the Indian Partnership Act, 1932 mandates a strict priority list for utilizing asset realization cash during dissolution:First, pay off all external liabilities and debts to third parties (A).Next, pay back any loans or advances extended by partners beyond their capital stakes (D).Then, return the capital account balances due to partners proportionately (B).Finally, any leftover surplus is distributed as profit among partners in their Profit Sharing Ratio (C).This leads to the sequence: (A), (D), (B), (C).