The statement of affairs-bankruptcy accounts, Financial Accounting

The Statement of Affairs

The statement of affairs sets out:

(a) The various assets of the debtor, at the values they are expected to realise;
(b) The creditors, classified according to their "priority".

The balancing figure on the statement of affairs is the estimated deficiency  as at the date at which it was prepared.

For a sole trader, one statement of affairs will be prepared to include all assets and liabilities, whether private or business.

For a partnership, a statement of affairs is prepared in respect of the partnership assets and liabilities-called the joint estate. A separate statement is also prepared for each partner, showing his personal assets and liabilities.  Any surplus on a separate estate becomes an asset of the joint estate and vice versa.

The pro-forma statement of affairs sets out the order in which assets are shown. The order in which liabilities are discharged is:

  1. Secured creditors, out of the proceeds of their security;
  2. Costs and expenses of the bankruptcy; (these are not included in the Statement of Affairs because they have not been incurred at the date at which it is prepared);
  3. Pre-preferential creditors;
  4. Preferential creditors;
  5. Unsecured creditors;
  6. Deferred creditors;
  7. Any balance to the debtor.
Posted Date: 12/13/2012 2:59:05 AM | Location : United States







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