Arrange the following parties in the event of dissolution of a firm. 1. Secured creditors 2. Unsecured creditors 3. Partners who have granted loans 4. Partners who have contributed over and above profit sharing ratio Select the correct answer:

The correct answer is: B. 1, 2, 3, 4

In the event of dissolution of a firm, the following parties are paid in the following order:

1. Secured creditors. Secured creditors are those who have a lien on specific assets of the firm. This means that they have a legal right to seize those assets if the firm does not repay its debts.
2. Unsecured creditors. Unsecured creditors are those who do not have a lien on any specific assets of the firm. They are paid after the secured creditors have been paid.
3. Partners who have granted loans. Partners who have granted loans to the firm are paid after the unsecured creditors have been paid.
4. Partners who have contributed over and above profit sharing ratio. Partners who have contributed over and above their profit sharing ratio are paid last.

Here is a brief explanation of each option:

• Option A: 2, 1, 3, 4. This option is incorrect because it places unsecured creditors before secured creditors. Secured creditors are paid first, followed by unsecured creditors.
• Option B: 1, 2, 3, 4. This option is correct because it places secured creditors first, followed by unsecured creditors, partners who have granted loans, and partners who have contributed over and above profit sharing ratio.
• Option C: 1, 2, 4, 3. This option is incorrect because it places partners who have granted loans before unsecured creditors. Unsecured creditors are paid first, followed by partners who have granted loans.
• Option D: 2, 1, 4, 3. This option is incorrect because it places unsecured creditors before partners who have granted loans. Partners who have granted loans are paid after the unsecured creditors have been paid.