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Question
When the partners capital accounts are fixed, then as per the decision in the Garner vs. Murray case, any loss arising due to the capital deficiency in the insolvent partners' capital accounts is to be borne by solvent partners in __________ .
When the partners capital accounts are fixed, then as per the decision in the Garner vs. Murray case, any loss arising due to the capital deficiency in the insolvent partners' capital accounts is to be borne by solvent partners in __________ .
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Solution
The correct option is B Last agreed capital ratio
When a partner's capital account shows a debit balance on dissolution of firm, he has to pay the debit balance to the firm to settle his account. If the partner becomes insolvent, he is unable to pay back the amount owed by him to the firm. The amount not paid is a loss to the firm which under the Garner vs. Murray rule should be borne by the solvent partners in the ratio of their capitals standing in the balance sheet on the date of dissolution.
When a partner's capital account shows a debit balance on dissolution of firm, he has to pay the debit balance to the firm to settle his account. If the partner becomes insolvent, he is unable to pay back the amount owed by him to the firm. The amount not paid is a loss to the firm which under the Garner vs. Murray rule should be borne by the solvent partners in the ratio of their capitals standing in the balance sheet on the date of dissolution.
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