Capital Deficiency
Accounting glossary · Understand, connect, apply
In partnership accounting, a capital deficiency is a debit balance in a partner’s capital account, often arising after losses or liquidation adjustments.
Example
A partner with $2,000 capital is allocated a $2,500 loss, leaving a $500 capital deficiency.
Remember the difference
Whether the partner must contribute cash, and how an uncollectible deficiency is allocated, depend on the agreement and applicable law.
Examples are simplified for learning. Where a term depends on US law, IFRS, US GAAP or a historical rule, check the context explained above and the requirements relevant to your course.
Study references: OpenStax financial accounting and managerial accounting. For reporting requirements, consult the applicable IFRS Standards or FASB guidance. US tax terms should be checked against the relevant tax-year IRS instructions.
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