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JAMB Principles of Accounts 2002 Question 49

Question 49

Partnership Admission, Retirement and Dissolution

Upon the dissolution of a partnership, the Partnership Act provides that the amount realized should be

  1. A.used to pay all taxes due to government
  2. B.used to start a new partnership business by members who are willing
  3. C.shared equally by the existing partners
  4. D.used in paying the debts and liabilities of the firm to persons who are not partners.
Show the answer and explanation

Answer: D (used in paying the debts and liabilities of the firm to persons who are not partners.)

Explanation

On dissolution, money realised is first used to pay outside creditors, then partners' loans and capital.