Arrange the following in a sequence, in which they will be utilize for the payment of losses:

(A) Out of capital of partners.

(B) Out of profits.

(C) By the partners individually in their profit sharing ratio.

Choose the correct answer from the options given below:

The correct answer is (B), (A), (C).

Under partnership accounting and legal provisions (such as Section 48 of the Indian Partnership Act, 1932), when a partnership firm dissolves or faces losses, there is a specific legal order of priority in which losses, including deficiencies of capital, must be paid or settled. This sequence ensures a systematic write-off of liabilities using the firm's available resources first before calling upon the personal assets of the partners.

The step-by-step sequence is explained below:

1. First, Out of Profits (B):
Any losses incurred by the partnership firm are first adjusted and paid out of the accumulated profits of the business. If the firm has any current profits or reserves, they are utilized first to absorb the loss.

2. Next, Out of Capital of Partners (A):
If the profits are insufficient to cover the entire loss, the remaining loss is met out of the capital contributions of the partners. The capital accounts of the partners are debited (reduced) to cover the deficiency.

3. Lastly, By the Partners Individually (C):
If the losses still persist after exhausting both the profits and the partners' capital, the remaining deficiency must be borne by the partners individually. They must contribute from their personal resources in their agreed profit-sharing ratio to settle the remaining liabilities.

Therefore, the correct chronological sequence for utilizing resources to pay off losses is (B) → (A) → (C).