Data Loading...

SYBCOM, Corporate Accounting Flipbook PDF

Liquidation of Company

121 Views
68 Downloads
FLIP PDF 562.36KB

S.K. COMMERCE CLASSES, SANGAMNER. 1. COMPANY

LIQUIDATION ACCOUNTS

Concept of Liquidation : A company is an artificial person created by law and the Law alone can dissolve it. The legal procedure by which the corporate life of a company brought to an end is known as Liquidation. The liquidation of company may be defined as "The Termination of legal existence of company by closing its business". Liquidation is also termed as winding-up a Company. The process of winding-up of a company is completed by selling all its assets and paying all creditors in preferential orders. For this purpose, a liquidator is appointed by the court to complete the liquidation process. The duties of the liquidator are to realize the assets, discharge the liabilities and distribute the surplus, if any, to the shareholders of The company. One thing here should be noted that liquidation and bankrupt of a company is not the same thing.

A company which is liquidated need not necessarily bankrupt. Sometimes even in terms of sound financial position, a company may be proposed to be liquidation. Thus, for liquidation, it is not necessary to be bankrupt. But bankrupt will certainly lead to liquidation. There are Compulsory and Voluntary reasons to company liquidation.

Reasons For Failure Of Business or Liquidation : A company may be dissolved for several reasons. Some of them are:

1. No proper management. 2. Unnecessary fictitious assets raising in accounts 3. High level competition in the market 4. Involvement of company in fraud activities 5. Exploitation of Minority shareholders 6. Day by day increasing debt and inability to pay it. 7. Frequent change in the government policies S.Y.B.Com, Corporate Accounting, Sem 1 : 2020-21

1

S.K. COMMERCE CLASSES, SANG

S.Y.B.Com, Sem 1 : 2020-21

8. Absence of profit planning control and continuity of losses for several years. Liquidation : In every mode of winding up, the liquidator is required to keep proper books to record receipt and payment which is known as Liquidator's Final Statement.

Sach!n K. Kasab, 9922500309, 9423958039

The liquidator has to submit a report along with the audited final account. The liquidator has to submit the statement to the court in the case of compulsory liquidation and to the company in a voluntary liquidation. The liquidator has to settle down the liability of company on the following priority: i. Expenses incurred in liquidating the company. ii. Salaries and wages, provident fund, gratuity and other amounts payable to employees and other workers. iii. Taxes, charges, fees, royalties etc. payable to the government or to any local autonomous body. iv. Secured loans obtained against the assets mortgaged to the extent of sum recovered by sale of assets in the market. v. Other debts. The surplus, after settling all the debts of the company as stated above, will be distributed first among the preference shareholders and then among the equity shareholders. The equity share holders are distributed the surplus in proportion to the shares held by them.

2

S.Y.B.Com, Corporate Accounting, Sem 1 : 2020-21, Book 1

S.K. COMMERCE CLASSES, SANGAMNER.

Specimen of Liquidator's Final Statement is as under:

Liquidator's Statement Of Account Receipts

To Cash/Bank To Assets Realised To Surplus from securities To calls on shares

Amt

Payments

Amt

By Legal charges By Liquidator’s Remuneration By Liquidation Expenses By Preferential creditors By Debentures By Unsecured \creditors By Preference Shareholders By Equity Shareholders

Total Rs.

Total Rs.

3 S.Y.B.Com, Corporate Accounting, Sem 1 : 2020-21

S.K. COMMERCE CLASSES, SANG

S.Y.B.Com, Sem 1 : 2020-21

Sach!n K. Kasab, 9922500309, 9423958039

COMPANY LIQUIDATION ACCOUNTS Liquidator’s Final Statement of Account \Problem No. 1 : Gajanan Co. Ltd. went into voluntary Liquidation as on 31st March 2020, The Balance Sheet was as follows : Liabilities Rs. Assets Rs. Capital Freehold 80,000 Issued and Property Subscribed 8,000, 8% 80,000 Plant and 69,000 Preference shares Machinery of Rs. 10/- each 12,000, Equity 1,20,000 Stock 75,000 Shares of Rs. 10/5% debentures 60,000 Debtors 55,000 (secured on freehold property) Income Tax 4,000 Profit and 79,000 Trade Creditors 65,000 Loss A/c Bank Overdraft 30,000 Cash in hand 1,000 Total 3,59,000 3,59,000 Additional Information : 1. The interest on debenture were paid upto 31-3-2019. 2. Preference shares dividend were in arrears for two years & to be paid. 3. The assets realised as follows : Freehold property Rs. 1,60,000, Plant and Machinery Rs. 62,000, Stock Rs. 73,000 & Debtors Rs. 50,000. 4. The expenses of liquidation amounted to Rs. 5,000 and Liquidators Remuneration was fixed at Rs. 1,500 Plus 2% on all assets realised except cash. 5. The Creditors include the preferential creditors amounted to Rs. 5,000. Prepare the Liquidator's Final Statement of Account.

4

Eq. Sh. Holders : Rs. 77,800/- Rs. 6.48 per share (P. U. Oct., 95) S.Y.B.Com, Corporate Accounting, Sem 1 : 2020-21, Book 1

S.K. COMMERCE CLASSES, SANGAMNER.

Problem No. 2 : XYZ Ltd. went into voluntary Liquidation as on 31st March 2020, The Balance Sheet was as follows : Liabilities Rs. Assets Rs. Share Capital Freehold Property 1,00,000 Issued and Plant and Machinery 75,000 Subscribed 10,000, 8% 1,00,000 Stock 95,000 Preference shares of Rs. 10/- each 9,000, Eq. Shares 90,000 Cash in hand 8,000 of Rs. 10/- each 4% debentures 80,000 Debtors 62,000 (secured on freehold property) Income Tax 5,000 Profit & Loss 47,000 Trade Creditors 77,000 A/c Bank Overdraft 35,000 Total 3,87,000 3,87,000

Additional Information : 1. The interest on debenture were paid upto 31-3-2019. 2. Preference shares dividend were in arrears for two years & to be paid. 3. The assets Realised as follows : Freehold property Rs. 1,75,000, Plant & Machinery Rs. 48,000, Stock Rs. 94,000 & Debtors Rs. 60,000. 4. The expenses of liquidation amounted to Rs. 6,500 and Liquidators Remuneration was Fixed at Rs. 2,500 Plus 2% on all assets realised except Cash. 5. The Creditors include the preferential creditors amounted to Rs. 12,000. Prepare the Liquidator's Final Statement of Account. Eq. Sh. Holders : Rs. 52,260/- Rs. 5.8 per share S.Y.B.Com, Corporate Accounting, Sem 1 : 2020-21

5

Sach!n K. Kasab, 9922500309, 9423958039

S.K. COMMERCE CLASSES, SANG

S.Y.B.Com, Sem 1 : 2020-21

Problem No. 3 : GLOBAL Ltd. went into voluntary Liquidation as on 31st March 2019, The Balance Sheet was as follows : Liabilities Rs. Assets Rs. Share Capital Freehold 1,60,000 Issued & Property Subscribed 10,000, 10% 1,00,000 Plant and Machinery 80,000 Preference shares of Rs. 10/- each 15,000, Equity 1,50,000 Stock 90,000 Shares of Rs. 10/- each Debtors 75,000 6% debentures 90,000 Profit and Loss A/c 35,000 (secured on freehold property) Income tax 5,000 Cash in hand 13,000 Trade Creditors 88,000 Bank Overdraft 20,000 Total 4,53,000 4,53,000 1. The interest on Debenture were paid up to 31-3-2018. 2. Preference shares dividend were in arrears for two years & to be paid. 3. The assets realised as follows : Freehold property Rs. 1,90,000, Plant and Machinery Rs. 72,000, Stock Rs. 75,000 and Debtors Rs. 60,000. 4. The expenses of liquidation amounted to Rs. 7,200 and Liquidators Remuneration was fixed at Rs. 2,600 Plus 2% on all assets realised except cash. 5. The Creditors include the preferential creditors amounted to Rs. 15,000/-. 6. Prepare the Liquidator's Final Statement of Account.

6

Eq. Sh. Holders : Rs.63860/- Rs. 4.25/-per share S.Y.B.Com, Corporate Accounting, Sem 1 : 2020-21, Book 1

S.K. COMMERCE CLASSES, SANGAMNER.

Problem No. 4 : PQRS Ltd. went into voluntary Liquidation as on 31st March 2019, The Balance Sheet was as follows : Liabilities Rs. Assets Rs. Share Capital Freehold Property 1,80,000 Issued and Plant and Machinery 90,000 Subscribed 20,000, 8% 2,00,000 Stock 95,000 Preference shares of Rs. 10/- each 10,000, Eq.Shares 1,00,000 Cash in hand 14,500 of Rs. 10/- each 4% debentures 75,000 Debtors 70,000 (secured on freehold property) Income Tax 5,500 Profit & Loss 28,000 Trade Creditors 62,000 A/c Bank Overdraft 35,000 Total 4,77,500 4,77,500 1. The interest on debenture were paid up to 31-3- 2018. 2. Preference shares dividend were in arrears for two years & to be paid. 3. The assets Realised as follows : Freehold property Rs. 1,62,000, Plant and Machinery Rs. 48,000, Stock Rs.@ 90% and Debtors subject to 5% bad. 4. The expenses of liquidation amounted to Rs. 8,200 and Liquidators Remuneration was fixed at Rs. 3,200 Plus 2% on all assets realised except cash. 5. The Creditors include the preferential creditors amounted to Rs. 20,000/-. Prepare the Liquidator's Final Statement of Account. Pref. Sh. Holders : Rs. 1,45,360/- Rs. 7.26/-per share

7 S.Y.B.Com, Corporate Accounting, Sem 1 : 2020-21

Sach!n K. Kasab, 9922500309, 9423958039

S.K. COMMERCE CLASSES, SANG

S.Y.B.Com, Sem 1 : 2020-21

Problem No. 5 : GOLDEN Co. Ltd., went Into voluntary liquidation on 31.3.2015 when its Balance Sheet was as follows : Liabilities Rs. Assets Rs. Paid-up-Capital Goodwill 55,000 25,000 Equity Property 78,000 shares of Rs. 10 each 2,50,000 Machinery 1,42,000 Bank Overdraft 75,000 Vehicles 80,000 (unsecured) Sundry Creditors: Stock 82,000 Preferential 10,500 Debtors 60,000 Partly Secured 78,500 Cash 20,000 Unsecured 1,32,500 P & L A/c 29,500 5,46,500 5,46,500 The liquidator realised the assets as follows Property which was used to pay partly secured creditors Rs. 60,000. Machinery 1,10,000, Vehicles 50,000, Stock 85,000, Debtors 55,000. The expenses of Liquidation amounted to Rs. 4,800/- and liquidator's remuneration was fixed at 2 ½ % on the all assets realised excluding cash. You are required to prepare the Liquidator's final-statement of accounts. Ans : Eq.Sh Holders : 69,700/- Rs. 2.78/- per share

8

S.Y.B.Com, Corporate Accounting, Sem 1 : 2020-21, Book 1

S.K. COMMERCE CLASSES, SANGAMNER.

Problem No. 6 : Usha Co. Ltd. passed a resolution to wind up voluntarily on 30th June 2012 when its Balance Sheet as under Liabilities Share Capital Authorised & Subscribed 2,000,7% pref.share of Rs. 100 each 1,000 Eq. shares of Rs. 100 each, Rs. 80 paid up. 2,000 Equity Shares of Rs. 100 each Rs. 60 paid. 8% Debentures (Floating charge on all assets) Interest on Debentures Creditors Income Tax

Rs.

Assets

Land 2,00,000 Plant & Machinery

Rs. 80,000 1,00,000

Patents 80,000 Stock at cost Sundry Debtors

52,000 90,000 1,15,000

1,20,000 Cash at Bank

22,000

60,000 Profit & Loss 80,000 3,500 A/c 70,000 5,500 5,39,000 5,39,000 1. The pref. dividends were in arrears for two years. The arrears are payable on liquidation as per Articles. 2. Creditors include a loan of Rs. 40,000/- on the mortgage of Patents. 3. The Assets realised as follows : Plant & Machinery Rs. 95,500/-, Land Rs. 90,000/-, Patents Rs. 45,000/Stock Rs. 70,500/-, & Sundry Debtors Rs. 1,00,000/-, 4. The Expenses of Liquidation amounted to Rs. 3,000/5. The liquidator is entitled to a Commission of 2% on all assets realised and 5% on amounts distributed among unsecured creditors. 6. All payments were made on 31st December, 2012,You are required to prepare liquidator's statement of A/c Ans : Eq. Share Holders : 40,805/- Rs. 26.935/- Rs. 6.935/-per share . S.Y.B.Com, Corporate Accounting, Sem 1 : 2020-21

9

Sach!n K. Kasab, 9922500309, 9423958039

S.K. COMMERCE CLASSES, SANG

S.Y.B.Com, Sem 1 : 2020-21

Problem No. 7 : Babita Co. Ltd., went into voluntary liquidation on 31.3.2018 when Balance Sheet was as follows : Liabilities Rs. Assets Rs. Paid-up-Capital Goodwill 40,000 18,800 Equity 1,88,000 Property 54,000 shares of Rs. 10 Machinery 1,52,000 each Bank Overdraft 90,000 Vehicles 30,000 (unsecured) Sundry Stock 82,000 Creditors: Preferential 7,400 Debtors 74,000 Partly Secured 60,800 Cash 14,000 Unsecured 1,41,800 P & L A/c 42,000 4,88,000 4,88,000 Additional Information : 1. The liquidator realised the assets as follows : 2. Property which was used to pay partly secured Creditors Rs. 44,000/-, Machinery 1,28,000/-, Vehicles 20,000/-, Stock 1,20,000/-, Debtors 70,000/3. The expenses of Liquidation amounted to Rs. 3,800/and liquidator's remuneration was fixed at 3% on the all assets realised excluding cash. You are required to prepare the liquidator's final-statement of accounts. Ans : Eq.Sh Holders : 80,740/-, Rs. 4.29 per share (Oct.,-97)

10

S.Y.B.Com, Corporate Accounting, Sem 1 : 2020-21, Book 1

S.K. COMMERCE CLASSES, SANGAMNER.

11 S.Y.B.Com, Corporate Accounting, Sem 1 : 2020-21