• 1 Marks

FA – May 2021 – L1 – SA – Q13 – Partnership Accounts

Understand the distribution of an insolvent partner’s deficiency among solvent partners.

Which of the following is correct about the treatment of a partner with a deficiency at the end of partnership dissolution?
i. The partner may have to pay the whole deficiency
ii. Insolvent partner’s deficiency is borne by the solvent partners in the last agreed capital
iii. Insolvent partner’s deficiency is borne by the solvent partners in the profit or loss sharing ratio

A. I and II
B. II and III
C. I and III
D. I, II, and III
E. II

Answer:
A. I and II

Explanation:
When a partner has a deficiency, the partner may be required to pay the deficiency if possible. If not, the remaining partners share the deficiency based on their last agreed capital ratio.

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