Multiple choice

In the absence of any contract to the contractry, settlement of accounts be affected on dissolution as follows : (i) losses, including deficiencies of capital, shall be paid first out of profiles, next out of capital and lastly, if necessary, by the partner individually in the proportions in which they were entitled to share points and (ii) the assets of the firm, including any sums contributed to the partners to make up deficiencies of capital.

  1. True

  2. False

  3. Partly true

  4. Cannot say
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Section 48 of the Indian Partnership Act (not Section 12(a) as stated) lays down rules for settlement of accounts on dissolution: (1) losses are paid first out of profits, then out of capital, then by partners individually in their profit-sharing ratio; (2) assets are applied first to pay debts, then to repay capital, then to repay profits. While the section reference is wrong, the principle stated is partially correct.

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