Chapter 5 flashcards
The termination of a partnership as a business entity involves winding up the affairs of the partnership business and is referred to as partnership
Liquidation
the process of winding up a business which normally consists of conversion of assests into cash, payment of liabilities and distribution of remaining among the partners.
Liquidation
the process of converting non cash assets into cash
Realization
the excess of tthe selling price over the carrying amount of the non cash assets sold through realization
Gain on realization
the excess of tthe carrying amount over the selling price of the non cash assets sold through realization
Loss on realization
The excess of a partners share in loss on realization over his capital balance resulting to a debit balance in the capital account
Capital Deficiency
a partner with a debit balance in his capital account
Deficient Partner
the legal right to apply part or all of the amount owing to a partner on a loan balance against his capital deficiency
Right to offset
the sums of a partners capoital, loan balance and advances to the partnership
Partners interest
personal assets of the partner is greater than his personal liabilities
Solvent partner
personal assets of the partner are less than his personal liabilities
Insolvent partner
an accounting statement summarizing the winding up of the business affairs of the partnership
Statement of liquidation
this is used in an installment liquidation to determine what amounts may be safely distributed to partnenrs with positive capital balances
Safe payments schedule
Types of liquidation
cash distribution to partnenrs are made only after the complete realization of all assets and all liabilities to third party creditors have been settled
Lump-Sum
Types of liquidation
Cash distribution to partners are made periodically over an extended period of time. Creditors and partners receive cash under a safe payment method which ensures that all creditors are full yprotected.
Installment
