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Question
Ajay and Vijay were partners sharing profits and losses in the ratio of 3 : 2. The firm was dissolved on 31st March, 2026 and the following balances were appearing in the books of the firm:
- Ajay’s Loan – ₹ 2,00,000; Om’s Loan – ₹ 1,25,000.
- Creditors – ₹ 2,50,000.
- Capital balances after all adjustments - Ajay: ₹ 4,00,000 and Vijay: ₹ 3,50,000;
Assets of the firm realised ₹ 15,00,000.
You are required to show the amounts and order of payment as per Section 48 of the Indian Partnership Act, 1932 on dissolution of the firm.
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Solution
| Cash Settlement | ||
| Particulars | Amount (₹) | Cash Balance (₹) |
| Total Cash Realised from Assets | 15,00,000 | |
| Less: First Priority (Outside Liabilities) | (3,75,000) | |
| Creditors Paid Fully | (2,50,000) | |
| Om’s Loan Paid Fully | (1,25,000) | |
| Balance Cash Remaining | 11,25,000 | |
|
Less: Second Priority (Partner’s Loan) |
||
| Ajay’s Loan Paid Fully | (2,00,000) | |
| Balance Cash Remaining | 9,25,000 | |
|
Less: Third Priority (Partners’ Capital) |
(7,50,000) | |
|
Ajay’s Capital Returned |
(4,00,000) | |
| Vijay’s Capital Returned | (3,50,000) | |
| Surplus Cash Available | 1,75,000 | |
The remaining surplus of ₹ 1,75,000 represents profit on dissolution and will be distributed between Ajay and Vijay in their profit-sharing ratio of 3 : 2:
Ajay’s Share = `1,75,000 xx 3/5`
= ₹ 1,05,000
Vijay’s Share = `1,75,000 xx 2/5`
= ₹ 70,000
Total Payments to Partners:
Ajay receives = ₹ 2,00,000 (Loan) + ₹ 4,00,000 (Capital) + ₹ 1,05,000 (Surplus)
= ₹ 7,05,000
Vijay receives = ₹ 3,50,000 (Capital) + ₹ 70,000 (Surplus)
= ₹ 4,20,000
