A situation that arises when the total liabilities of a company to its creditors exceed its total assets. A firm in accounting insolvency is said to be with a negative net worth. However, accounting insolvency is determined by looking at a company’s books, i.e. by comparing the two sides of its balance sheet. Therefore, this type of insolvency differs from regular insolvency which refers to a company’s inability to repay its creditors.
January 9, 2025
