In case of dissolution of firm, the firm ceases to conduct business and has to settle its accounts. For this purpose, it disposes off all its assets for satisfying all the claims against it. Subject to agreement among the partners, rules as provided in Section 48 of the Partnership Act 1932 are applied.
(a) Treatment of losses: Losses including deficiencies of capital, shall be paid:
(i) first out of profits,
(ii) next out of capital of partners, and 
(iii) lastly, if necessary, by the partners individually in their profits sharing ratio