Partnership—Insolvency, Piecemeal Distribution, Sale of a Firm and Amalgamation of Firms
The Capital Account of a partner may show a debit balance after making all adjustments (including the share of any profit or loss on realisation and the receipts from his private estate, if any). It may be noted that the private estate of each partner is applied first to pay off his private debts and the surplus (i.e., excess of private estate over private debts), if any, is applied to pay off the firm’s debts. If a partner having a debit balance in his Capital Account is unable to bring in the necessary cash to make up the deficiency, he is said to be an insolvent partner. The irrecovered debit balance is called the loss arising ...