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Changes in the Value of Assets and Liabilities

State whether...

Question

State whether the following statements are True or False.

The insolvency loss at the time of dissolution of the firm is shared by the Solvent Partner’s in their Profit-sharing ratio.

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Solution

True

Explanation: Insolvency loss, i.e. capital deficiency (debit balance in the capital account of an insolvent partner) is shared among the solvent partners in their profit sharing ratio.

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