Question : In the event of dissolution of a firm, the partner’s personal assets are first applied for payment of:
Option 1: The personal liabilities
Option 2: The firm’s liabilities
Option 3: Both the personal & firm’s liabilities
Option 4: The preferential & tax liabilities
Correct Answer: The personal liabilities
Solution : A firm's operations come to an end in a condition known as a dissolution. Eventually, the liabilities are paid off and the assets are sold.
Sec. 49 of the Indian Partnership Act, 1932 states that a partner's private assets must be utilised to pay off their personal debt before any excess, if any, can be used for the firm's liabilities.
Hence the correct answer is option 1.
