Asked by Laura Ramos on May 11, 2024
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In a partnership liquidation, if a partner has a debit capital balance in his or her capital account, he or she is responsible for contributing personal assets sufficient to eliminate the deficit.
Debit Capital Balance
Occurs when the sum of debits in a capital account exceeds the sum of credits, indicating the amount invested by the owners into the business.
Partnership Liquidation
The process of closing a partnership business, including selling off assets, paying off debts, and distributing the remaining assets to the partners.
Personal Assets
Assets owned by an individual as opposed to assets owned by businesses or corporations, including properties, account balances, and personal belongings.
- Digest the sequence of activities in partnership dissolution, focusing on the distribution of cash proceeds and the onus on partners to cover any capital balance shortages.
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Learning Objectives
- Digest the sequence of activities in partnership dissolution, focusing on the distribution of cash proceeds and the onus on partners to cover any capital balance shortages.
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