The business assets of an organisation amount to Rs. 50,000 but the debts that remain unpaid are Rs. 80,000. What course of action can the creditors take if (a) The organisation is a sole proprietorship firm (b) The organisation is a partnership firm with Anthony and Akbar as partners. Which of the two partners can the creditors approach for repayment of debt? Explain giving reasons

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Solution

(a) As the sole proprietor has unlimited liability in case of a sole proprietorship. Creditors can claim the personal assets of the proprietor in case of debt repayment.

(b) The creditors can approach both the partners and they need to pay as per their share in partnership. If one of the partners become insolvent then the other partner can be approached for debt repayment.

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