In Order to Avoid Inequalities in the Liquidation Process the Legal

question 41

Multiple Choice

In order to avoid inequalities in the liquidation process the legal doctrine of setoff effectively treats loans from partners to the partnership as:

• A)outside debt that can offset a deficit capital account balance.
• B)inside debt that can offset a deficit capital account balance.
• C)additional capital investments that can offset a deficit capital account balance.
• D)additional capital investments that can offset a partnership loss.

---

Definitions:

Journalizing

The process of recording a transaction entry into the journal.

Business Transactions

Financial activities or exchanges involving the transfer of value between entities or parties, affecting the financial position of a business.

Journal

A listing of business transactions in chronological order. The journal links on one page the debit and credit parts of transactions. Alternatively known as general journal.

Posting

The transferring, copying, or recording of information from a journal to a ledger.