Scottish Liberal Democrats have been warned by their auditors that they may be forced out of business if they do not tackle their financial debts.

The party has been told it may be deemed, in accounting terms, to be no longer a going concern, after nearly a tenth of its expenditure last year was not met by income.

Yet the Scottish LibDems, who are used to operating on shoe-string budgets, face much lower deficits than their SNP and Labour rivals, which have not been issued with similar warnings .

The Electoral Commission recently published parties' accounts, showing the high levels of expenditure in Scotland in a year of Holyrood and council election campaigns.

In the Scottish LibDem case, expenditure reached £766,000, and the deficit ran to nearly £75,000. Liabilities exceeded assets by £22,131.

The auditor, PFF (UK), concluded that it could sign off last year's accounts as a true and fair view of the Scottish LibDem finances, but warned that the deficit conditions "indicate the existence of a material unceratinty which may cast significant doubt about the party's ability to continue as a going concern".

A party spokesman said yesterday: "The party auditors have confirmed that the party is indeed a going concern. This is an entirely manageable deficit which the party's bankers have confirmed they will support."

At the end of last year the SNP assets outstripped its liabilities by £585,000, and after raising more than £2.5m to run the party and its election campaigns, its overspend on the year was £241,000.

Scottish Labour's finances are closely tied up with Labour in London, which pays almost all the Scottish salary bill. While the Glasgow office ran a small surplus, London headquarters has debts of £18.9m - down from £25m the previous year.