As per the decision in the Garner vs Murray case, when the partner’s capital accounts are fixed, any loss arising due to the capital deficiency in the insolvent partner’s capital account is to be borne by solvent partners in the ratio of . . . . . . . .

The correct answer is: C. sacrificing ratio

The Garner vs Murray case was a landmark case in partnership law that established the principle that solvent partners are liable to contribute to the losses of an insolvent partnership in the ratio of their capital contributions. This is known as the “sacrificing ratio.”

The sacrificing ratio is calculated by taking the difference between each partner’s capital contribution and the amount of their capital account balance. The partner with the largest negative balance will contribute the most to the losses, followed by the partner with the next largest negative balance, and so on.

The sacrificing ratio is used to ensure that all partners share the losses of the partnership in a fair and equitable manner. It is important to note that the sacrificing ratio is only used to calculate the contributions of solvent partners to the losses of an insolvent partnership. The contributions of insolvent partners are not taken into account when calculating the sacrificing ratio.

Here is a brief explanation of each option:

• A. profit sharing ratio The profit sharing ratio is the ratio in which partners share the profits of a partnership. It is not used to calculate the contributions of partners to the losses of a partnership.
• B. last agreed capital ratio The last agreed capital ratio is the ratio in which partners agreed to contribute capital to the partnership. It is not used to calculate the contributions of partners to the losses of a partnership.
• C. sacrificing ratio The sacrificing ratio is the ratio in which solvent partners contribute to the losses of an insolvent partnership. It is calculated by taking the difference between each partner’s capital contribution and the amount of their capital account balance. The partner with the largest negative balance will contribute the most to the losses, followed by the partner with the next largest negative balance, and so on.
• D. gaining ratio The gaining ratio is the ratio in which partners share the gains of a partnership. It is not used to calculate the contributions of partners to the losses of a partnership.