Question

Please answer each question clearly and accurately according to what is required. Also, each question must contain a maximum of 300 words......

a. Differentiate between dissolution of a partnership and withdrawal of a partner? With examples?

b. Identify the various types of creditors as they are labeled during a bankruptcy.

Answer 1

Dissolution of partnership vs withdrawal of Partner       i)Dissolution refers to closure of business whereas withdrawal of parter refers to retiring of parter however business may be running by partners left. ii) In dissolution all assets are sold or distributed whereas in withdrawal only capital related to retiring Partner shall be paid in cash or kind. iii)In dissolution old partnership agreement shall be ended and there will be no new Partnership agreement however in withdrawal old partnership agreement may or may not gets ended. Example for withdrawal of partner assume that several years after the formation of "A,B, & C" partnership Partner C decided to retire. The partners agreed to the withdrawal of cash equal to the amount of Partner C's equity in the assets of the partnership. Assume that the partners' capital accounts had credit balances as follows: · Partner A $60,000 · Partner B $40,000 · Partner C $30,000 If Partner C withdraws $30,000 in cash, the entry on the books is as follows: Debit Credit Partner C, Capital 30,000 Cash 30,000 Example of Dissolution of Partnership assume that several years after the formation of "A,B, & C" partnership ,Firm get dissolved . The partners agreed to the withdrawal of cash equal to the amount of Partner's equity in the assets of the partnership. Assume that the partners' capital accounts had credit balances as follows: · Partner A $60,000 · Partner B $40,000 · Partner C $30,000 the entry on the books is as follows: Debit Credit Partner A, Capital Partner B, Capital Partner C, Capital 60,000 40,000 30,000 Cash 1,30,000

There are two types of creditor during Bankruptcy

i)Secured Creditor

A secured creditor is a person or business that loaned you money with the condition that if you failed to repay the debt they had a right to one (or some) of your possessions or property – this can be referred to as a mortgage, hypothec, pledge, charge, or lien on the property. It is important to understand that by their very nature, a secured creditor may have a right to the items listed as their security.

ii)Unsecured Creditors

An unsecured creditor is a person or company that does not have a direct claim on the debtor’s property. Unsecured creditors may be able to register an execution or judgment against an asset, but usually these registrations can be removed once the debtor has been discharged from bankruptcy or upon completion of their consumer proposal.

Further there are 3 types of unsecured creditors

• preferred,
• deferred, and
• ordinary.

A preferred creditor is one that has a claim or a partial claim that is entitled to receive a dividend before any of the other unsecured creditors in a personal bankruptcy or a consumer proposal. Some examples of preferred claims are employee wages, traveling salespersons expense accounts and court order support agreements.

Deferred creditors are persons or companies that are not entitled to receive any money from a trustee administering a personal bankruptcy or consumer proposal until all of the other creditors have been paid in full. Family members and other related parties often are classified as deferred creditors.

If a debt does not fall into the deferred or preferred subclasses then it is deemed to be an ordinary unsecured creditor. These debts include things like credit cards, bank loans, income taxes,. Most unsecured creditors fall into the ordinary subgroup.