When a partner is unable to pay a capital deficiency:
A)The partner must take out a loan to cover the deficient balance.
B)The deficiency is absorbed by the remaining partners.
C)The partnership ends.
D)The deficient partner has no personal liability to pay the deficiency.
E)The partnership must be liquidated.

Question

Quizplus · Accepted Answer

In a general partnership, the partners have unlimited liability, which means that they are responsible for any debts or obligations of the partnership. Therefore, if a partner is unable to pay a capital deficiency, the remaining partners must absorb the deficiency and contribute additional funds to cover the shortfall. This is because each partner is considered to be a co-owner of the partnership, and they share in both the profits and losses of the business. Choosing options A or D is not feasible, as it would violate the concept of unlimited liability. Option C is not necessarily true, as the partnership can continue to operate even if one partner has a deficiency. Option E may be necessary in certain situations, but it is not the best overall choice, as it would result in the dissolution of the partnership. Therefore, option B is the best choice, as it aligns with the principle of shared responsibility in a general partnership.

When a Partner Is Unable to Pay a Capital Deficiency