Insolvency Account

              Accounting insolvency

Total liabilities exceed total assets . A firm with a negative
net worth is insolvent on the books .
Accounting Insolvency
A situation in which a firm or individual has a negative
net worth . That is, accounting insolvency occurs when
total liabilities exceed total assets on a firm's or
individual's balance sheet . Accounting insolvency does
not automatically equate to bankruptcy because the
individual or organization may still be able to make
monthly payments . This is what differentiates accounting
insolvency from standard insolvency, which involves the
inability to service debts. Nevertheless, creditors may
force corporations with accounting insolvency to
restructure payments or declare bankruptcy, depending
on the specific situation.