Table of contents

1. Introduction to Accounting1h 21m
2. Transaction Analysis1h 13m
3. Accrual Accounting Concepts2h 38m
4. Merchandising Operations2h 30m
5. Inventory1h 55m
6. Internal Controls and Reporting Cash1h 16m
7. Receivables and Investments3h 8m
8. Long Lived Assets5h 1m
9. Current Liabilities2h 19m
10. Time Value of Money1h 23m
- Time Value of Money Equations
  35m
- Using Time Value of Money Tables
  47m
11. Long Term Liabilities2h 45m
12. Stockholders' Equity2h 15m
13. Statement of Cash Flows2h 24m
14. Financial Statement Analysis5h 25m
15. GAAP vs IFRS56m

9. Current Liabilities

Types of Liabilities

Financial Accounting

9. Current Liabilities

Types of Liabilities

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Multiple Choice

If a general partnership fails and cannot pay its debts, which of the following best describes the liability of the partners?

Partners are only liable up to the amount they invested in the partnership.

Partners are liable only for debts incurred after they joined the partnership.

Partners have unlimited personal liability for the partnership's debts.

Partners have no liability for the partnership's debts.

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Verified step by step guidance

Understand the concept of a general partnership: A general partnership is a business structure where two or more individuals agree to share ownership, profits, and liabilities of the business.

Review the liability structure in a general partnership: In a general partnership, all partners share unlimited personal liability for the debts and obligations of the partnership. This means their personal assets can be used to settle the partnership's debts if the business cannot pay them.

Clarify the difference between limited liability and unlimited liability: Unlike corporations or limited partnerships, general partnerships do not provide limited liability protection to their partners. Each partner is personally responsible for the full amount of the partnership's debts.

Examine the implications of joining a partnership: Partners are liable for debts incurred by the partnership, regardless of whether the debts were incurred before or after they joined. This is a key feature of general partnerships.

Conclude with the correct answer: Based on the explanation above, the correct description of the liability of partners in a general partnership is that partners have unlimited personal liability for the partnership's debts.