On dissolution of a partnership, which order is normally followed for settling claims from the firm's available assets?
Correct answer: B. Outside liabilities, partner loans, partners' capitals
- A. Partners' capitals, partner loans, outside liabilities
- B. Outside liabilities, partner loans, partners' capitals
- C. Partner loans, partners' capitals, outside liabilities
- D. Outside liabilities, partners' capitals, partner loans
Explanation
Firm assets are first used to pay outside creditors. Any remaining amount pays partner loans, and the balance is then applied to partners' capital accounts.
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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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