Rules that govern distribution of losses and assets upon dissolution of a partnership

Explain rules that govern distribution of losses and assets upon dissolution of a partnership

Rules that govern distribution of losses and assets upon dissolution of a partnership include:

  • Losses including deficiencies of capital shall be paid first out of profits, next out of capital and lastly if necessary by the parties individually the propositions in which they were entitled to share profits.
  • The assets of the firm including any sums contributed by the partners to make up defenses of capital shall be applied as: –
    • In paying the debts of the firm to third parties.
    • In paying to each partner ratably what is due to him from the firm from advances as distinguished from capital.
    • In paying to each partner ratably what is due to him on account of capital.
    • The residue if any shall be divided among the partners in the proportions in which they were entitled to share profits.



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