When a partnership is insolvent and a partner has a deficit capital account balance, that partner should:_________

1 answer:

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When a partnership is insolvent and a partner has a deficit capital account balance, that partner should <u>contribute cash to the partnership.</u>

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For cash distributions to partners during the liquidation process, auditors must ensure that each partner has one capital balance. This is the minimum amount a partner must keep in its capital account to absorb future losses.

Payments to shareholders with an equity interest, up to the same amount after payments to shareholders with loans to other creditors and partnerships.

If the partner's equity account leads to a debit balance (a so-called capital shortfall), the shortfall can be eliminated in the following ways: If the loss-making partner is solvent, we will make additional investments. – If a defective shareholder becomes insolvent, set off the defect as additional damages to the remaining shareholders.

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