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After paying external liabilities and realization expenses on dissolution, on what basis is the remaining final cash distributed among the partners?

Answer and explanation

Correct answer: Amount due as per partners’ adjusted accounts

On dissolution, external liabilities and realization expenses are settled first. The remaining cash is then distributed according to the amount actually due to each partner after adjusting the partners’ capital, current and loan accounts. The number of employees, sales, or assets does not determine this distribution. Exam tip: remember that the final payment to partners is based on the balance due in their adjusted accounts.

Related tags

Partnership DissolutionFinal Cash DistributionPartners AccountsRealization ExpensesClosing The BusinessDissolution Of A Partnership FirmAccountancyClass 12 Mcq

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