Question

Explain the provisions of Section 48 of Partnership Act, 1932 dealing with the settlement of accounts of the time of dissolution of firm

Answer 1

Section 48 : Provisions relating settlement of accounts on dissolution of a firm.

Generally, a partnership agreement provides for the settlement of accounts between the partners on the dissolution of their firm. In tyhe absence of any such agreement the provision of section 48, 49 and 55 of the Indian partnership act, 1932 are applied for settling the accounts between the partners on the dissolution. Let us consider these provisions.

1. Provision relating to losses - Losses, including deficiencies of capital, shall be paid first out of profits, next out of capital, and lastly, if necessary, by the partners individually in the proportion in which they were entitled to share profits.

2. Provision relating to application of assets - The asset of the firm, including any sums contributed by the partners to make up deficiencies of capital, shall be applied in the following manner and order.

(i) In paying the debts of the firm to third parties;

(ii) In paying to each partner rateably what is due to him from the firm for advances as distinguished from capital.

(iii) In paying to each partner rateably what is due to him on account of capital; and

(iv) The residue, if any, shall be divided among the partners in the proportion in which they were entitled to share profit.