Multiple choice

Directions: Choose the correct option for the given question.

�Maximum method' is used for

  1. piecemeal distribution

  2. revaluation of assets and liabilities

  3. adjustment of capital of partners

  4. none of these
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A Correct answer
Explanation

The Maximum Loss Method (also called Maximum Deficit or Piecemeal Distribution Method) is used to distribute cash piecemeal as it becomes available during partnership dissolution. It assumes maximum possible loss on unrealized assets and distributes cash accordingly - partners receive amounts in proportion to their ultimate capital loss risk. This ensures gradual, fair distribution.

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