Question

Upon the dissolution of a firm, in piecemeal distribution of cash, cash is distributed among partners in the :

• A. Sacrificing ratio
• B. Ratio of capitals
• C. Profit sharing ratio
• D. None of the above

Answer 1

The correct option is D None of the above

In piecemeal distribution of cash, there are two methods:
1. Proportionate Capital Method: The partners whose capitals are more than the proportionate to other partner's capital should first be refunded so much as to bring down their capitals to proportionate levels.
2. Maximum Loss Method: An alternative method of piecemeal distribution is to calculate the maximum possible loss on every realisation after the outside liabilities and the partner's loan has been paid.