The debit balance of an insolvent partner’s Capital Account is known as a capital deficiency

Question

State whether the following statements are True or False with reasons.

The debit balance of an insolvent partner’s Capital Account is known as a capital deficiency

Answer 1

This statement is True.

Debit balance of Partners’ Capital Account means the excess of drawings than the capital credit balance. In the case of an insolvent partner, the debit balance of the Capital Account means liabilities which he cannot pay. It means capital deficiency.