A capital deficiency means that:
A) The partnership has a loss.
B) The partnership has more liabilities than assets.
C) At least one partner has a debit balance in his/her capital account.
D) At least one partner has a credit balance in his/her capital account.
E) The partnership has been sold at a loss.

Question

Quizplus · Accepted Answer

A capital deficiency occurs when a partner has a debit balance in their capital account, meaning that they have taken out more from the partnership than they have contributed. It does not necessarily mean that the partnership as a whole has a loss or more liabilities than assets.

A Capital Deficiency Means That