Q.As per Section 48 of the Indian Partnership Act, 1932, in applying the assets of a dissolved firm, which of the following is paid FIRST?

Section 48(b) fixes a strict order for applying a dissolved firm's assets, and outside parties always rank ahead of the partners themselves.

Option (c) is correct. Section 48(b) of the Indian Partnership Act, 1932 requires the firm's assets to be applied, in strict order: first, in paying the debts of the firm to third (outside) parties; second, in paying each partner rateably what is due for advances/loans; third, in paying each partner rateably what is due on capital; and fourth, any residue is divided among the partners in their profit-sharing ratio. Option (a), partners' loans, rank second — after outside debts but before capital. Option (b), partners' capital, ranks third. Option (d), the residue, is what is left over only after all three prior categories are fully paid, so it ranks last, not first.

Assuming a partner's loan and capital are paid together, or before outside creditors; forgetting that a partner's loan ranks strictly ahead of that same partner's capital.