Partnership and LLP AccountsQ-1 | Partnership and LLP AccountsQuestion 5158 of 108
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What is Piecemeal payments method under Partnership Dissolution? Briefly explain the two methods followed for determining the order in which the payments are made? [CA Inter May 2010, 2 Marks]

Options

A
B
C
D
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Correct Answer

✅ Option — Correct Option

All Options:

  • A
  • B
  • C
  • D

Detailed Solution & Explanation

Generally, the assets sold upon dissolution of partnership are realized only in small instalments over a period of time. In such circumstances the choice is either to distribute whatever is collected or to wait till whole amount is collected. Usually, the first course is adopted. In order to ensure that the distributed cash amongst the partners is in proportion to their interest in the partnership concern either of the two methods described below may be followed for determining the order in which the payment should be made: (i) Maximum Loss Method: Each instalment realized is considered to be the final payment i.e. outstanding assets and claims are considered worthless and partners' accounts are adjusted on that basis each time when a deposit is made following either Garner v. Murray rule or the profit-sharing ratio rule. (ii) Highest Relative Capital Method: According to this method, the partner who has the higher relative capital, that is, whose capital is greater in proportion to his profit-sharing ratio is first paid off. This method is also called as proportionate capital method.

More Questions from Partnership and LLP Accounts

Following are the details of Assets and Liabilities of Mr. Sarthak for the year ended 31 March, 2023 and 31 March, 2024: 31.03.2023 31.03.2024 Assets Buildings Furniture Inventory Sundry debtors Cash at bank Cash in hand Liabilities: Loans Sundry Creditors 2,00,000 75,000 1,05,000 68,000 72,500 2,400 1,50,000 58,400 ? ? 1,95,000 94,000 86,800 3,800 1,25,000 79,500 It was decided to depreciate Building by 5% p.a. and Furniture by 10% p.a. On 1st June, 2023 an additional capital of 40,000 was brought in the business. Proprietor has withdrawn @ ₹ 2,500 p.m. for meeting the family expenses. Prepare Statement of Affairs as on 31 March, 2023 and 31 March, 2024. Find the profit or loss earned by Mr. Sarthak for the year ended 31st March, 2024. [Jan. 2025, 5 Marks]

What is Piecemeal payments method under Partnership Dissolution? Briefly explain the two methods followed for determining the order in which the payments are made? [CA Inter May 2010, 2 Marks]

Explain Garner v. Murray rule applicable in the case of partnership firms. State, when is this rule not applicable? [CA Inter May 2013, 4 Marks]

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