The loss of a firm when all the partners are insolvent is to be borne by ______________.

Creditors

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Government

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Debtors

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Solution

The correct option is C Partners
According to Garner vs Murray Rule: The loss on account of insolvency of a partner is a CAPITAL loss which should be borne by the solvent partners in the ratio of their capitals standing in the balance sheet on the date of dissolution of the firm.

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A firm is compulsorily dissolved when all partners or when all except one partner become insolvent. True or False.

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