this rule says that wen a partnership firm is dissolved... 
then first of all, all partners shall bring the realisation 
loss in cash in their profit sharing ratio... followin g 
that, if any partner is found insolvent then the solvent 
partnrs who have credit balance in their capital a/cs shall 
bear the loss of the insolvent partner in their profit 
sharing ratio

this rule says 
1. That the solvent partners should bring in cash equal to 
their respective shares of the loss on realization
2. That the solvent partners should bear the loss arising 
due to the insolvency of a partner in the ratio of their 
Last Agreed Capitals
3. that the solvent partner having a debit balance will not 
bear the loss arising due to insolvency of a partner

Last Agreed Capital means 
1. In case of Fixed Capitals - Fixed Capital (as given in 
the Balance Sheet) without any adjustment
2. In case of Fluctuating Capitals - Capital after making 
adjustments for past accumulated reserves, profits or 
losses, drawings, Interest on capital, Interest on Drawing, 
remuneration to a partner etc. to the date of dissolution 
but before making adjustment for profit or loss on 
realization

In 1930,3 persons started business in britain there names 
were GARNER,MURRAY & WILKINS they share profit & loss 
equally.On 30 June,1900 Wilkins become insolvent and 
nothing amount could be realised from his private estate 
and the firm is facing loss of 898 pond including wilkins 
drawing of 263 pond which is born by Garner & 
murray.But,they disagree with the distribution of 
loss.So,they file in the court. 
                               In 1903, chief justice 
Mr.JOES gave an important decision in this case that 
decision is known as GARNER V/S MURRAY RULE.The decision 
was as follow:-
               The rule that emerged from the Garner vs 
Murray case is applied to adjust the loss, if any, due to 
insolvency. This rule states that the loss due to 
insolvency of a partner is to be charged to the other 
solvent partners who have a credit balance in their 
accounts in the ratio of capitals just before dissolution

this rule says that when a partnership firm is dissolved... 
then first of all, all partners shall bring the realisation 
loss in cash in their profit sharing ratio... following 
that, if any partner is found insolvent then the solvent 
partners who have credit balance in their capital a/cs 
shall bear the loss of the insolvent partner in their 
profit sharing ratio

The loss on account of insolvency of a partner is a CAPITAL 
loss which should be borne by the solvent partners in the 
ratio of their capitals standing in the balance 
The loss due to the insolvency of a partner should be then 
be divided among the solvent partners in the ratio of 
capitals standing after the partners have brought in cash 
equal to their share of loss on realization.

If on dissolution there is a loss and the loss is such that 
it puts one (or more)partner(s)'s capital account into 
Debit, that partner must ring in that amount of cash from 
his own resources.  Once that is doen the amount of cah on 
hand will then be equal tot eh balances of the other 
partners.

If the partner whose capital account is in debit can not 
bring in the cash to the amount of his loss, then the other 
partners must bear the resulting loss in the ratio of their 
Capital accounts immdeiately prior to this settlement.  
This case was ruled on in 1908 by a Judge called Justice 
Joyce.  

The significant point is that this ruling is invokes only 
if the partner CAN NOT from wherevery he may own property, 
bring in the loss and is the true measue of the absence 
of "limited liabilit" which the Companies' Act provides.

I have heard that this ruling has been overruled in Canada 
but have not been able to substantiate that.  Thier jsudge 
disagreed with Justice Joyce and said that this loss was to 
be treated as any other loss among the partners.

the losss on account of insolvency of a partners is a 
capital loss which should be borne by the solvent partners 
in the ratio of their capitals standing in the balance 
shhet on the date of dissolution of the firm.

In the case the insolvent partner in the partnership, the 
liabilities of the insolvent partner shall be borne by the 
solvent partners in their capital accounts ratio but not in 
their profit and loss sharing ratioo. this ruling was 
effected to stop partners from using their profit sharing 
ratios to bear the liabilities of the insolvent partner 
because profit is not capital in nature, rather than using 
capital accounts according to justice Joes- 1903.

SIMPLY,The rule states that in the case of a partership 
being dissolved,the deficit of the insolvent partner will 
be born by the other solvent partner[s] in their last 
capital sharing ratios.

If on dissolution there is a loss and the loss is such that 
it puts one (or more)partner(s)'s capital account into 
Debit, that partner must ring in that amount of cash from 
his own resources.  Once that is doen the amount of cah on 
hand will then be equal tot eh balances of the other 
partners.

If the partner whose capital account is in debit can not 
bring in the cash to the amount of his loss, then the other 
partners must bear the resulting loss in the ratio of their 
Capital accounts immdeiately prior to this settlement.  
This case was ruled on in 1908 by a Judge called Justice 
Joyce.  

The significant point is that this ruling is invokes only 
if the partner CAN NOT from wherevery he may own property, 
bring in the loss and is the true measue of the absence 
of "limited liabilit" which the Companies' Act provides.

I have heard that this ruling has been overruled in Canada 
but have not been able to substantiate that.  Thier jsudge 
disagreed with Justice Joyce and said that this loss was to 
be treated as any other loss among the partners.