Question

When the amount realized from assets is not sufficient to pay fully the firm's
liabilities, such deficiency is borne​

Answer 1

When the amount realised from assets is insufficient to fully fulfil the firm's liabilities, the partners' profit sharing ratio bears the burden.

Why happen so?

• Simply said, this is the profit split between business partners. We've talked a lot about the Profit Sharing Ratio in this context.
• The new profit-sharing ratio is the percentage of future profits that an organization's former and new partners agree to split.
• It's vital to set a new profit-sharing ratio when a new partner joins a company since the new partner will be entitled to profits in the future.
• If this ratio is not agreed upon before a new partner is admitted, the profit will be dispersed equally among all existing and new partners.

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