In addition, each partner is personally liable for the entire debt owed, even if any given partner had only a small partnership interest in the business.
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In such a case, ,000 may come from that partner's capital account to pay that debt, while the remaining amount owed comes from partner B's capital account.
The shareholders assume any remaining company debt, becoming responsible for prioritizing and paying off that debt.You pay off creditors if there are sufficient assets to satisfy the liabilities, otherwise creditors receive payment for a percentage of the debt.Any excess proceeds can be distributed to shareholders.For example, if partner A has ,000 in his capital account and partner B has ,000 after company debt repayments, partner A will receive ,000 and partner B will receive ,000.If partner A also loaned the business ,000, though, he will receive repayment after the company pays its debts, but before the partners receive the money remaining in their capital accounts.
The company's bookkeeping record includes a total of the amount in this account adjusted for distributions the partner received, additional investments, and the partner's share of company losses.