A, B and C have capital balances of Rs. 60,000, Rs. 40,000 and Rs. 20,000 respectively. C becomes insolvent and leaves a deficiency of Rs. 30,000. Under the Garner v. Murray principle, how much of this deficiency is borne by A?
Correct answer: C. Rs. 18,000
- A. Rs. 10,000
- B. Rs. 12,000
- C. Rs. 18,000
- D. Rs. 20,000
Explanation
The solvent partners bear the insolvent partner's deficiency in the ratio of their capitals. A and B share it in the ratio 60,000:40,000, so A bears three-fifths of Rs. 30,000, or Rs. 18,000.
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About Partnership Accounts
Partnership accounts cover the partnership agreement, capital and current accounts, profit and loss appropriation, salaries, interest on capital, interest on drawings and profit-sharing ratios. They also address changes in partnership, including admission, retirement, goodwill, revaluation, dissolution and the settlement of partners’ balances.
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