Question

Debit balance of an Insolvent Partner's Capital Account. Answer in a word / phrase / term.

Answer 1

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Debit balance of an Insolvent Partner's Capital Account➡️ Capital Defficiency.

Answer 2

The term for debit balance of an insolvent partner's capital account is termed as capital deficiency.

• Capital deficiency means that at the point of final cash distribution one or more partners have a debit balance in their capital account.
• The capital shortfall may result from liquidation losses, excessive withdrawals prior to liquidation or recurrent losses in previous periods
• Positive working capital is required to ensure that a company is able to carry out its responsibilities and has enough funds to support both the production of temporary commitments and potential operating costs