His statement, “before it is divided”: if it is divided, then each of them has taken his share.

For example, let us suppose that the capital was ten thousand and the profit was assessed at two thousand riyals. The capital owner and the working partner agree to divide the profit, so the working partner takes his share of the profit—one thousand riyals. We are then left with one thousand of the profit and ten thousand of the capital. We say to the capital owner: regarding this thousand, if you wish, you may treat it as capital, or, if you wish, you may take it. But if the working partner suffers a loss after taking his share, we do not say to him, “Return what you took from the profit,” because once it was divided, it became his exclusive property and was no longer part of the partnership.

His statement, “or its liquidation,” means converting it into cash. Liquidation means winding up the assets. Thus, if a loss occurs after liquidation, the loss is borne by the capital, because the assets have been converted into cash, the working partner has come to know his share, and the partnership has been settled. But so long as the assets have not been liquidated, the loss is borne by the profit; after liquidation, however, this is not the case. This is the view adopted by the author, may Allah have mercy on him.

The correct view is that if liquidation means dissolving the partnership, or it means demanding division, then it is as the author stated.

However, if the liquidation is undertaken in order to purchase other merchandise—because the working partner may sometimes consider certain goods difficult to sell and lacking demand, and so sells them and liquidates the funds in order to purchase other goods for which there is demand—then we do not say that liquidation is equivalent to division, because both the working partner and the capital owner believe that this is neither a dissolution nor a division.