Which of the following is TRUE of a 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

A capital deficiency occurs when a partner's share of the partnership's losses exceeds the balance in their capital account, resulting in a debit balance. This situation creates a claim by the partnership against the partner for the amount of the deficiency.

Which of the Following Is TRUE of a Capital Deficiency