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Under Garner v Murray rule, the deficiency of an insolvent partner is borne by solvent partners in
AProfit-sharing ratio (typical)
BCapital ratio (last agreed capitals)
CEqual ratio (typical) (typical)
DSacrificing ratio (typical) (typical)
Answer & Solution
Correct answer: B. Capital ratio (last agreed capitals)
1. The Garner v Murray principle (1904) addresses insolvency of a partner during dissolution.
2. Deficiency of the insolvent's capital is shared by solvent partners in proportion to their LAST AGREED capitals (not PSR).
3. The realisation loss continues to be shared in PSR; only the further deficiency follows capital ratio.
4. Hence (B) is the rule.
_Source: Maharashtra Balbharati Std XII Book-Keeping & Accountancy, Ch 6 "Dissolution of Partnership Firm", §6.4 ¶§6.4_