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JAMB Principles of Accounts 1997 Question 40

Question 40

Partnership Admission, Retirement and Dissolution

On partnership dissolution, if a partner's capital account has a debit balance and the partner is insolvent, the deficiency will, in accordance with the decision of the case of Garner v Murray, be

  1. A.borne by all the partners
  2. B.borne by the insolvent partner
  3. C.written off
  4. D.borne by the solvent partners.
Show the answer and explanation

Answer: D (borne by the solvent partners.)

Explanation

Garner v Murray: the solvent partners bear the insolvent partner's deficiency in proportion to their capitals.