Partnership

Dissolution

Easy

Arrange the following in correct order in which assets of the firm can be used in there settlement.

(A) Residue shall be divided between the partners in their profit sharing ratio.

(B) In paying the partners proportionately what is due to him/her on account of capital.

(C) In paying the partners proportionately what is due to him/her from the firm for advances/loans.

(D) In paying the debts of the firm to the third parties.

Choose the correct answer from the options given below:

(A), (B), (C), (D)

(A), (C), (B), (D)

(B), (A), (D), (C)

(D), (C), (B), (A)

✅ Correct Option: 4

During the dissolution of a partnership firm, the assets are applied in a specific sequence as per Section 48 of the Indian Partnership Act, 1932.

The correct order of settlement is:

First: External liabilities (debts to third parties) are paid → (D)

Second: Partners' loans or advances to the firm are repaid proportionately → (C)

Third: Partners' capital accounts are settled proportionately → (B)

Fourth: Any surplus remaining is distributed among partners in their profit sharing ratio → (A)

The logic behind this sequence is based on the priority of claims. Third-party creditors have the first right over the firm's assets. Among internal claims, partners in the capacity of creditors (through loans/advances) rank higher than partners as owners (capital contribution). Finally, profits are distributed only after all obligations are fulfilled.

The sequence is: (D) → (C) → (B) → (A)

Correct Option: 4

2026: 12 May Shift 1

Arrange how the losses, including deficiencies of capital, shall be paid in the correct sequence :

(A) Out of profits

(B) Out of capital of partners

Choose the correct answer from the options given below:

2025: 13 May Shift 1

The assets of the firm, including any sum contributed by the partners to make deficiencies of capital, shall be applied first for paying ...........

2023: 20 June Shift 2

Select out of the following that is not considered as one of the modes of reconstitution of a partnership firm.

2025: 13 May Shift 2

Unrecorded liabilities when paid at the time of dissolution of a partnership firm, are shown in:

2026: 21 May Shift 2

At the time of the Dissolution of the Partnership firm, "Creditors were Rs.1,00,000. They accepted buildings valued at Rs.1,20,000 and paid cash to the firm Rs.30,000". Necessary journal entry would be :

2026: 24 May Shift 1

Deferred revenue expenditure appearing in the old Balance Sheet at the time of Dissolution of partnership will be:

Solution

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