GK
ACCOUNTING
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Profit-sharing ratio
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Equal proportion
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Proportion to assets realised
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Proportion to closing capital at the time of dissolution
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Detailed explanation-1: -In such situation, piecemeal distribution system is adopted. As per this system first, all creditors/outside liabilities are paid, then loans given by the partners are returned and then if cash is realized further it would be distributed immediately among partners without waiting for the completion of all realizations.
Detailed explanation-2: -The rule to follow in piecemeal distribution is that the partners whose capitals are more than proportionate to other partner’s capital should first be refunded so much as to bring down their capitals to proportionate levels. After this, the cash available should be distributed in the profit-sharing ratio.
Detailed explanation-3: -PARTNERSHIP ACCOUNTS – PIECEMEAL DISTRIBUTION On a gradual realisation of assets, the cash is distributed in the following order: 1. The debts of the firm to the third parties (outside liabilities) must be paid first. 2. After the creditors, have been paid off, the amount due to a partner as loan should be paid.