Section 48 of the Partnership Act 1932 provides the order in which losses (including deficiencies of capital) must be dealt with:
Order of payment of losses:
First → Out of Profits (A)
Second → Out of Capital of Partners (B)
Third → By Partners individually in their Profit Sharing Ratio (C)
Analysis of options:
(A) Out of Profits - Correct. Losses are first adjusted against available profits.
(B) Out of capital of Partners - Correct. If profits are insufficient, capital is used next.
(C) By partners individually in their profit sharing ratio - Correct. If both profits and capital are exhausted, partners must bear losses personally in their profit-sharing ratio.
(D) Creditors Assets - Incorrect. Creditors' assets cannot be utilized for payment of partnership losses. Creditors are external parties whose dues must be paid by the firm, not the other way around.
The correct combination is (A), (B) and (C) only, which is Option 2.