Multiple choice

The principle evolved in the case of Garner v. Murray (1904) is

  1. deficiencies in the capital of the insolvent partner are distributed among the solvent partners in the ratio of their capital

  2. partners have a fiduciary relationship with each other

  3. partners liability is unlimited

  4. partners can make supernatural profits, provided proper disclosures are made in this regard

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A Correct answer
Explanation

Garner v. Murray (1904) established that when a partner becomes insolvent, their capital deficiency is borne by solvent partners in proportion to their capital contributions. This is the 'Garner v. Murray rule' in partnership accounting. It doesn't relate to fiduciary duties, unlimited liability, or profit disclosures.