Question

During a liquidation, capital deficiency means that at least one partner has a (debit/credit) balance in his or her capital account at the point of final cash distribution.

Answer 1

During a liquidation, capital deficiency means that at least one partner has a (debit/credit) balance in his or her capital account at the point of final cash distribution, which means that debit ( deficiency means partner has debit in capital).

What is liquidation of capital ?

• In the fields of finance and economics, liquidation refers to the process of closing down a firm and distributing its assets among claimants.
• It is an occurrence that typically takes place when a business is bankrupt, or unable to make its debt payments on time.
• As business activities come to an end, the residual assets are distributed to shareholders and creditors according to the order of priority of their claims. General partners might be dissolved.
• The sale of subpar goods at a price below what it would cost the company to produce them or below what the company would want to charge is referred to as "liquidation."

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