GK
ACCOUNTING
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Capital ratio
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Profit and loss sharing ratio
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Their initial capital invested in the firm
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Capital which stood before dissolution of the firm
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Detailed explanation-1: -According to Garner vs. Murray rule, if the partner becomes insolvent, he is unable to pay back the amount due to him. The amount not paid is a capital loss which should be borne by the solvent partner in the ratio of their capitals standing in the balance sheet on the date of dissolution of the firm.
Detailed explanation-2: -APPLICABILITY OF GARNER VS MURRAY RULE IN INDIA Garner vs Murray is applicable only when there is no agreement between the partners for sharing the deficiency in capital account of insolvent partner. Realisation loss should be divided in the profit sharing ratio in the usual manner.
Detailed explanation-3: -According to Garner Vs. Murray, the capital a/c debit balance in an insolvent’s partners a/c is to be shared by the other solvent partners in their fixed capitals ratio(In case of fixed capital system) Or. In the ratio of their capitals standing just prior to dissolution (In case of fluctuating capital system).