LIQUIDATION Flashcards
The process of winding up a business
LIQUIDATION
The liquidation ratios will always be equal to the profit and loss ratio of the partners
FALSE
A deficient partner is automatically an insolvent partner
FALSE
The account credited for loans made by the partners to the partnership
Loan Payable
The excess of a partner’s share on losses over his capital
Addition in Capital
Personal creditors of individual partners have priority over partnership creditor in the order of claims against the personal assets of a partner
TRUE
A partner whose personal liabilities exceed his personal assets
Insolvent Partner
The process of converting non-cash assets into cash
Realization
A partner with a loan to the partnership may never become a deficient partner
FALSE
Partnership dissolution will always be followed by liquidation
FALSE
In a statement of liquidation, the accounting equation is observed throughout te liquidation process
TRUE
The excess of the selling price over the cost or book value of the assets disposed or sold through realization
Gain on Realization
The manner of dividing gains and losses on the realization of non-cash assets in liquidation
Profit and Loss ratio
It includes the capital balance and the partner’s loan to the partnership
Partner’s Interest
Expenses incurred in order to facilitate the immediate realization of non-cash assets
Liquidation Expenses
They have priority over the personal assets of a partner
Personal Creditor
An accounting statement summarizing the winding up of the affairs of the partnership
Statement of Liquidation
The order of partnership liquidation process is
Sell Assets, Pay Liabilities, Disburse Cash to partners
The manner of eliminating the capital deficiency of an insolvent partner; after exercising the right of offset when applicable
Loss to the other partner
The principle that allows a partner to apply his receivable from the partnership against a debit balance in his account
Right of Offset
The manner of eliminating the capital deficiency of a solvent partner who does not have loans to the partnership
Additional Investment
A capital deficiency in a partner’s capital that is uncollectible is
A loss to the other partners
The order of creditors’ rights against the partnership’s assets and the personal assets of individual partners
Marshalling of Assets
A partner with a debit balance in his capital account after the transfer of the loss on realization
Deficient Partner
The proper treatment of a credit balance in a partner’s drawing account in the statement of liquidation
Addition to Capital
In a partnership liquidation, a loss from sale of non-cash assets is allocated to the
Partners based on the profit and loss sharing ratio
The basis for the final distribution of cash to partners in case of liquidation
Capital Balance
A liquidation in which the proceeds from all assets into cash
Lump-sum Liquidation
Amount of money advanced by the partner to the partners
Loan Receivable from Partner
A liquidation that is spread over a long period and the partners distribute cash as it becomes available without waiting until all assets are realized
Installment Liquidation
