Items reducing the deficit-liquidation of companies, Financial Accounting

Assignment Help:

Items reducing the deficit:

Items reducing the deficit would include:

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

Notes:

(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.

Related Discussions:- Items reducing the deficit-liquidation of companies

PB7-1 Analyzing the Effects of Four Alternative Inventory Me, Mojo Industri...

Mojo Industries tracks the number of units purchased and sold throughout each accounting period but applies its inventory costing method at the end of each period, as if it uses a

Application of discharge-discharge of bankrupt, Application of discharge ...

Application of discharge Application may be made at any time after adjudication, but cannot be heard until the conclusion of the public examination. Notice of the hearing must

Associate companies , ASSOCIATE COMPANIES (IAS 28) An associate company i...

ASSOCIATE COMPANIES (IAS 28) An associate company is a company in which the investing company owns more than 20% but less than 50% of the voting rights.  This means that the inve

Protection of trustee against claims, PROTECTION AGAINST CLAIMS The tru...

PROTECTION AGAINST CLAIMS The trustees may protect themselves against claims after discharge in the following ways:   1. As regards liability for rent and other obligations und

Show the audit documentation, Q. Show the Audit Documentation? Audit Do...

Q. Show the Audit Documentation? Audit Documentation -Written record of the basis for AUDITOR's conclusions which provides the support for auditor's representations, whether th

Deferred tax assets and deferred tax liability, Below are excerpts from Saf...

Below are excerpts from Safeway's 2010 Annual Report, including its Consolidated Balance Sheets, a portion of Note E, Lease Obligations, and Note H, Taxes on Income, from the Notes

What is the expected interest rate, You are the Genesis accountant and have...

You are the Genesis accountant and have taken a class recently in financing. You agree to prepare a PowerPoint presentation of approximately 6-8 minutes using the examples and info

What type of an asset is goodwill, What kinds of risks does a firm like Ama...

What kinds of risks does a firm like Amazon.com face with respect to safeguarding its assets? What types of controls do you think it already has in place to minimize these risks? G

Calculate the var, An investment has a 92% chance of making a profit of $10...

An investment has a 92% chance of making a profit of $10 million, a 1.5% chance of losing $4 million, a 3% of losing $6 million, and a 3.5% chance of losing $16 million. A)    W

Determine the accounting aspects of business, Determine the accounting aspe...

Determine the accounting aspects of business Accounting scandals can have a profound effect on all those connected with business. Enron scandal, for instance, ultimately led t

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd