Final answer:
During liquidation, the gain/loss from the sale of non-cash assets for cash is allocated to partners based on their capital balances.
Step-by-step explanation:
During liquidation, when you record the sale of non-cash assets for cash, any gain/loss from liquidation is allocated to partners based on the capital balances method.
The capital balances method allocates the gain/loss based on the partners' ownership stake in the partnership. The partners' capital accounts are adjusted to reflect their share of the gain/loss.
For example, if partner A has a 60% ownership interest and partner B has a 40% ownership interest, any gain/loss from the liquidation would be allocated accordingly.