Question

Under Section 48 of the Partnership Act, 1932, the residue remaining after payment of debts, advances, and capital shall be divided among partners in their:

• A. Capital ratio
• B. Equal ratio
• C. Sacrificing ratio
• D. Profit sharing ratio

Hint:

Under Section 48: \[ \mathrm{Residue} \rightarrow \mathrm{Shared\ in\ Profit\ Sharing\ Ratio} \]

Answer 1

The Correct Option is D

Step 1: Understanding the Concept:
Section 48 of the Indian Partnership Act, 1932, prescribes the sequence of settlement of accounts during the dissolution of a firm.
Step 2: Detailed Explanation:
The order of payment upon dissolution is as follows:
1. Payment of debts to third parties (outside liabilities).
2. Payment to partners for advances/loans made by them (other than capital).
3. Payment to partners on account of capital.
4. Distribution of the residue (surplus).
The Act explicitly states that if any surplus remains after all the above stages, it must be distributed among the partners in the ratio in which they were entitled to share profits.
Step 3: Final Answer:
The final residue is divided in the Profit sharing ratio.