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CMA Intermediate · Financial Accounting · Dissolution of Partnership Firms including Piecemeal Distribution

On dissolution of a firm, the realised assets amount to ₹5,60,000. Outside liabilities are ₹1,40,000. Partner A's loan to the firm is ₹60,000. Capitals are A ₹1,00,000 and B ₹1,00,000, and profit ratio is equal. Assume no agreement to the contrary and no realisation expenses. How much is available for payment to partners towards capital and residual surplus after settling outside creditors and A's loan?

₹3,60,000 remains. Assets of ₹5,60,000 first pay outside creditors of ₹1,40,000, leaving ₹4,20,000, and then partner A's loan of ₹60,000 is paid before capital, as advances rank ahead of capital under Section 48. The balance of ₹3,60,000 goes to capital and the residue.

  1. A₹3,60,000Correct
  2. B₹4,20,000
  3. C₹3,00,000
  4. D₹4,80,000

Explanation

Under Section 48(b), assets are applied first to outside debts and then to partners' advances (loans) before capital. 5,60,000 - 1,40,000 = 4,20,000; less A's loan 60,000 = 3,60,000 remains for capital and the residue. Option ₹4,20,000 wrongly ignores A's loan priority, which must be paid before capital.

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