Name the person who meets that part of the firms liabilities which is in excess of its total assets?
Answers
Explanation:
The fundamental accounting equation is reproduced below:
Owner’s Capital + Liabilities = Assets
No matter what happens, this equation will always hold true.
When the Liabilities exceed Assets, it means that the Owner's Capital has become negative as it is equal to (Assets — Liabilities). It means that if the business is closed today, the capital being negative, the liabilities could not be paid in full and the owner will not be able to get back even the amount that he had invested in the business (he will not get anything because amount is not enough to even pay back liabilities).
This can happen, for example, when business is running in huge losses (maybe due to high expenditures and minimal income) which have wiped off the capital of the owner. Huge losses can occur due to various reasons like bad management, inefficient production operations, feeble demand for products, unforseen circumstances like natural calamities, continuous losses in successive years, unproductive costly project investments etc.
Answer:
The partners meet the firm's liabilities which is in excess of its total assets.
Explanation: