State the order of settlement of accounts on dissolution.
On dissolution, the firm ceases to conduct business and settles its accounts by disposing of assets to satisfy claims against it. Subject to agreement among partners, the rules under Section 48 of the Partnership Act 1932 apply regarding the settlement.
Specifically, for the Treatment of Losses, including deficiencies of capital, the amount is paid first out of profits, next out of capital of partners, and lastly by the partners individually in their profit sharing ratio.
Explanation
The provided text under 'Settlement of Accounts' explicitly details the rules from Section 48 of the Partnership Act 1932. While the full NCERT text typically includes 'Application of Assets', the provided context strictly limits the rules to the 'Treatment of Losses'. Therefore, the answer focuses on the sequence provided in the text: profits first, then capital, and finally partners' individual contributions.
Solution Steps
Step 1: Identify the relevant section in the text, which is '4.3 Settlement of Accounts'.
Step 2: Note the rule for 'Treatment of Losses' under Section 48 of the Partnership Act 1932.
Step 3: List the order of payment for losses as stated: first out of profits, next out of capital, and lastly by partners individually in their profit sharing ratio.