Question

At the time of dissolution of the firm, at which stage the balance of the partner’s capital accounts is paid?

Options

• After making the payment to third party’s loans.

• Before making the payment of partners in respect of their loans.

• After making the payment to third party for their loans as well as partners in respect of their loans.

• None of the above

Answer 1

After making the payment to third party for their loans as well as partners in respect of their loans.

Explanation:

At the time of dissolution, the partner’s capital accounts are paid only after the payment to outside creditors and the settlement of the partner’s loans to the firm. The order of payment is first to external creditors, then to the partner’s loans, and finally, the remaining funds are distributed to the partners in their capital accounts. This ensures that all liabilities are settled before the partners receive their share of the proceeds.