Game 3: Liquidation of Partnership
Liquidation, Settlement or Winding Up of Partnership True or False Statements
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Topics of this game:
- Liquidation of a partnership is the winding up of its business activities characterized by sale of all non-cash assets, settlement of all liabilities and distribution of the remaining cash to the partners.
- Liquidation of a partnership is the process of ending the business.
- If liquidation of a partnership results in a negative balance in a partner's account, the partner must pay into the partnership the amount of the negative balance.
- In partnership liquidation, one partner may have to make up for the deficit in another partner's account.
- Gains and losses on the sale of assets in liquidation are divided equally among partners.
- In liquidation, partners are given back the assets that they originally invested.
- Partnership liquidation is the same as partnership dissolution.
- A partner's inability to meet his obligations at the time of liquidation relieves that individual of his liabilities to the other partners.
- The cash settlement of all liabilities is referred to as realization.
- A partnership may be dissolved without being liquidated but liquidation is always preceded by dissolution.
- A partnership is said to be dissolved when the business is terminated.
- When a partnership goes out of business, all the remaining non-cash assets will be declared as a total loss. This loss on liquidation shall be divided among the partners in their profit and loss ratio.
- A partner's interest can be obtained by simply adding the partner's capital account balance plus loans to and from the partnership business.
- Partnership outside creditors will be prioritized first and next will be the inside creditors as to payment of partnership assets in case of liquidation.
- The right of offset is the legal right of a partner to apply part or all of his loan account balance against a capital deficiency resulting from losses in the realization of the partnership assets.
- The creditors of the partnership shall have priority in payments over those of the partners' separate creditors as regards the partnership properties.
- The creditors of each partner shall be preferred to those of the partnership as regards the partnership property.
- Partnership creditors shall have priority in payments than those of the partners' separate creditors as regards the separate properties of the partners themselves.
- The creditors of the partnership are preferred with respect to the separate or personal properties of each of the partners.
- Under the installment method of partnership liquidation, realization of non-cash assets is accomplished over an extended period of time. When cash is available, creditors may be partially or fully paid. Any excess may be distributed to the partners in accordance with a program of safe payments.
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