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Adjustments in Partner's Capital Accounts

In settling t...

Question

In settling the accounts of a firm after its dissolution, the assets of the firm shall be applied first in paying ___________.

A

each partner proportionately what is due to him on account of loans advanced to him

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B

debts of the firm payable to third parties

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C

each partner proportionately what is issued to him on account of past profits

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D

each partner proportionately what is due to him on account of past profits

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Solution

The correct option is B debts of the firm payable to third parties
Sequence of applying the assets of the firm to pay the debts are mentioned in Section 48(b) in Indian Partnership Act, 1932. According to this Act, all assets of the firm, including any capital contributed by partners to make up deficiencies of capital shall be applied first in paying the debts of the firm to outside parties.

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Is the loan by a partner transferred to Realisation Account at the time of dissolution of a partnership firm? Why?

Q. A and B are partners in a firm sharing profits in the ratio of 3 : 2. They had advanced to the firm a sum of ₹ 30,000 as a loan in their profit-sharing ratio on 1st October, 2017. The Partnership Deed is silent on interest on loans from partners. Compute interest payable by the firm to the partners, assuming the firm closes its books every year on 31st March.

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are partners in a firm sharing profits equally. They had advanced to the firm a sum of Rs. 30,000 as a loan in their profit-sharing ratio on 1st October, 2017. The Partnership Deed is silent on the question of interest on the loan from partners. Compute the interest payable by the firm to the partners, assuming the firm closes its books on 31st March each year.

Q. Pass Journal entries for the following transactions at the time of dissolution of the firm:
(a) Loan of Rs. 10,000 advanced by a partner to the firm was refunded.
(b) X, a partner, takes over an unrecorded asset (Typewriter) at Rs. 300.
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