Z, Y and W formed Z and Y Partnership Ltd. Z and Y are general partners who contributed P45,000 each; and W, the limited partner contributed P60,000. The partners share profits and losses equally. The total assets consisting of cash upon dissolution is P430,000 and the liabilities are the following:Z (general partner) P20,000; W (limited partner) P50,000; G (outside creditor) P100,000; and M (outside creditor) P50,000. Liquidation of partnership commenced in close observance of the step-by-step distribution of the P430,000 cash.

1. In the liquidation process, the limited partner will be given preference together with outside creditors in satisfaction of respective credits
2. General partner Z, aside from profit and capital will receive the P20,000 owed to him by the partnership ahead of what is owed in profit and capital to W, their limited partner.
3. The capital of general partners will be returned first before the profit they are to receive from the distribution.
4. Limited partners are entitled to receive their share in partnership profit before the return of their capital contribution.
5. Z will enjoy the same preference as W, G and M in the payment of their respective credits.