Subject to agreement by partners, state the rules that should be observed by the partners in settling the accounts of the firm after dissolution…

(a) (i) Mode of Settlement of partnership accounts: As per Section 48 of the Indian Partnership Act,1932, in settling the accounts of a firm after dissolution, the following rules shall, subject to agreement by the partners, be observed: - (i) Losses, including deficiencies of capital, shall be paid first out of profits, next out of capital, and, lastly, if necessary, by the partners individually in the proportions in which they were entitled to share profits; (ii) The assets of the firm, including any sums contributed by the partners to make up deficiencies of capital, must be applied in the following manner and order: (a) in paying the debts of the firm to third parties; (b) in paying to each partner rateably what is due to him from capital; (c) in paying to each partner rateably what is due to him on account of capital; and (d) the residue, if any, shall be divided among the partners in the proportions in which they were entitled to share profits. (ii) (A) When he becomes partner: If the minor becomes a partner on his own willingness or by his failure to give the public notice within specified time, his rights and liabilities as given in Section 30 (7) of the Indian Partnership Act,1932, are as follows: (a) He becomes personally liable to third parties for all acts of the firm done since he was admitted to the benefits of partnership. (b) His share in the property and the profits of the firm remains the same to which he was entitled as a minor. (B) When he elects not to become a partner: (a) His rights and liabilities continue to be those of a minor up to the date of giving public notice. (b) His share shall not be liable for any acts of the firm done after the date of the notice. (c) He shall be entitled to sue the partners for his share of the property and profits. It may be noted that such minor shall give notice to the Registrar that he has or has not become a partner.