Which of the following is true of capital deficiency in the liquidation of a partnership?
A)It refers to a partnership's claim against a partner.
B)It occurs when a partner's capital account has a credit balance.
C)It refers to the partnership's inability to find capital.
D)It occurs when a partner cannot find positive NPV projects.

Question

Quizplus · Accepted Answer

Capital deficiency in a partnership liquidation occurs when a partner's capital account has a debit balance, meaning the partner owes money to the partnership. This creates a claim by the partnership against the partner to cover the deficiency.

Which of the Following Is True of Capital Deficiency in the Liquidation