Question -
Answer -
Following rules are applicable on settlement of accounts after a firm is dissolute as per Section 48 of Partnership Act, 1932.
1. Amount which is received on sale of assets should be used in this sequence:
i. Paying off all external expenses and liabilities
ii. Loans and advances that are owed to partners should be cleared.
Iii.Capitals of all the partners must be paid off.
Any amount that still remains after paying off all these items must be distributed among partners of the dissolute firm in their original profit sharing ratio.
2. In case of loss and capital deficiency, the following must be paid in this order:
i. Adjust loss and capital deficiency against profits of firm
ii. Adjust against the total capital of the firm
iii. If any loss or deficiencies is present after all the adjustments, the next course of action will be to bear the loss as per individual profit sharing ratio.