Question

When a partnership firm dissolves, its losses including deficiencies of capital are to be paid first out of ______.

Options

• The Capitals of the partners

• The Profits of the firm

• From the partners individually in their profit-sharing ratio

• From the proceeds from sale of assets

Answer 1

When a partnership firm dissolves, its losses including deficiencies of capital are to be paid first out of the profits of the firm.

Explanation:

According to the Partnership Act, losses are to be paid first from profits, then from the partner’s capital, and finally, if needed, from the partners individually in their profit-sharing ratio.