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What are Case 1 and Case 2 in Garner v/s Murray Rule?

In Garner v/s Murray rule when should we use case 1 and when should we use case 2? - Ananya


When a partner's capital account shows debit balance , it means that partner is insolvent . In other words he is unable to pay his loan . This is extra loss which must be tolerated by other partners . Why ? Because the whole liabilities of partnership firm is unlimited . Now one question is arised that in which proportion or ratio , the rest partners divide this extra loss or deficiency of firm . Before the decision of Garner V/s Murray case , this extra loss deems as normal loss and it is distributed rest partners in their profit and loss sharing ratio

Decision in Garner V/S Murray Case :-

In this case , the judges decided that in the absence of any anti- agreement , insolvent partner's deficiency will be distribute in capital ratio in rest partners after bringing cash equal to their loss on the realisation .

Result of above decision :-

1) Solvent partner will bring his loss from realisation in cash form.

2) Insolvent partner's capital account's deficiency will distribute in solvent partners in their capital ratio

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Accounting ! Answers: What are Case 1 and Case 2 in Garner v/s Murray Rule?
What are Case 1 and Case 2 in Garner v/s Murray Rule?
Accounting ! Answers
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