Upon dissolution of a partnership firm, which of the following claims is settled last out of the amount realised from the firm’s assets?

Correct answer: Partners’ capital

On dissolution, the amount realised is generally used first to settle outside liabilities, then partners’ loans, and finally partners’ capital. Hence, partners’ capital is settled last. Employees’ outstanding wages are treated as an outside liability, so they are paid before the partners’ capital is returned. Exam tip: remember the order—outside liabilities → partners’ loans → partners’ capital.