Question

How are debts of the firm and private debts dealt with in case of dissolution of partnership?

Answer 1

As per Section 49 of the Partnership Act, the settlement of firm and personal debts is done in the following manner:

1. The firm’s assets are first used to settle the firm’s liabilities. Any surplus remaining is distributed among the partners, and their respective shares may then be used to pay off their personal debts.
2. Similarly, a partner’s personal assets are first applied to clear their individual debts. If any surplus remains, it can be used to contribute toward the firm’s outstanding liabilities.