Items reducing the deficit-liquidation of companies, Financial Accounting

Items reducing the deficit:

Items reducing the deficit would include:

(a)    Profits from trading;
(b)    Estimated profit on the realisation of assets.


(a) Where an examination question fails to give you a balance sheet at the date of the receiving order, you should draw up a "rough" balance sheet to provide the basis for agreeing the deficiency shown in the statement of affairs with that in deficiency account.

(b) Preparation of the statement of affairs and the deficiency account is based on "double entry" principles.

i. Items not in the balance sheet must have a debit and credit within the statement of affairs and deficiency account.

ii. Where the estimated realisable value of an asset differs from its book value i.e. the value at which it appears in the balance sheet given or computed as in (i) above, the difference must be reflected in the deficiency account.

  • An estimated loss is put on the right-hand side;
  • An estimated surplus is put on the left-hand side.
  • A landlord may recover by distress rent outstanding in respect of the period, not exceeding six months, prior to adjudication (date debtor declared bankrupt). If the landlord distrains he effectively removes assets to satisfy the outstanding rent and can therefore be considered in the same category as a secured creditor.  Do NOT assume distraint unless the question clearly states this course of action.  In other cases treat the rent outstanding as an ordinary creditor.
  • Deferred creditors do not become entitled to any dividend at all until the unsecured creditors have received payment in full; however include them in the unsecured creditors in the Statement of Affairs and put in a note on the Statement of Affairs.  If there is any surplus, the deferred creditors will rank against it to the full extent of their debts before any return is made to the debtor.  This point is seldom relevant to examination problems.
Posted Date: 12/13/2012 3:05:32 AM | Location : United States

Related Discussions:- Items reducing the deficit-liquidation of companies, Assignment Help, Ask Question on Items reducing the deficit-liquidation of companies, Get Answer, Expert's Help, Items reducing the deficit-liquidation of companies Discussions

Write discussion on Items reducing the deficit-liquidation of companies
Your posts are moderated
Related Questions
Q. What do you understand by Tax Court? Tax Court - U.S. Tax Court is a legislative court functioning to adjudicate controversies between taxpayers and IRS arising out of defic

Entity theory method: Golden Bells Inc. is a foreign subsidiary of Northern Bells Ltd., a Canadian company.  Northern Bells had purchased 90% of the outstanding shares of Gold

liabilities and its types

Complete the table and use the information to determine profit maximization or loss minimization. 1. Complete the table Normal 0 false false false EN-I

Determine the future value of Rs.1000 compounded continuously for 5 year on the interest rate of 12 percent per year and contrast it along with annual compounding.   Solution :

Q. Show the Expatriation Tax? Expatriation Tax - Individuals who loose or terminate their residency within 10 year period immediately preceding the close of a tax year, if term

The following question are based on above table:- Question 1 What is the change in net working capital from 2009 to 2010? Question 2 What is net capital spending for 20

The non current asset section of Aadil & Co. at December 31, 2005 is as under:- Land Rs. 1,000,000 Office equipment Rs. 5,000,000 Less: accumulated depreciation 250,000 4,75

FV of Bond 20000, CR 0.045, MR 0.059, Remaining payments 32. Answer

how do you record this transaction? May 18 Issues 30,000 additional shares of $2 common stock for $75 per share. May 25 Issue 8,000 shares of preferred stock for $125 per sha