A, B and C who are partners had a credit balance of Rs. 5,000, Rs. 10,000 and Rs. 20,000 respectively in their capital accounts when the firm was dissolved and the assets disposed off piecemeal. If in the first instalment the realisation is Rs. 10,000 and the Garner Vs. Murray rule is applicable, the distribution among the partners will be:

The correct answer is: C. Rs. 1,429, Rs. 2,857, Rs. 5,714

The Garner v. Murray rule is a rule of law that governs the distribution of assets in a partnership dissolution. The rule states that the assets of the partnership should be distributed in proportion to the partners’ capital accounts, after taking into account any advances or loans made by the partners to the partnership.

In this case, the partners’ capital accounts are as follows:

• A: Rs. 5,000
• B: Rs. 10,000
• C: Rs. 20,000

The total capital of the partnership is therefore Rs. 35,000.

The first instalment of Rs. 10,000 should be distributed in proportion to the partners’ capital accounts, as follows:

• A: Rs. 1,429
• B: Rs. 2,857
• C: Rs. 5,714

This is because A’s capital account is 14.29% of the total capital, B’s capital account is 28.57% of the total capital, and C’s capital account is 57.14% of the total capital.

The remaining Rs. 25,000 will be distributed in the same proportion, after taking into account any advances or loans made by the partners to the partnership.