Page 232 - DCOM205_ACCOUNTING_FOR_COMPANIES_II

Unit 10: Liquidation of Companies: Preparation of Accounts

Liquidation: It refers to the winding up of the affairs of the partnership. This leads to sale of all notes
non-cash and payment to creditors and to partners.
Liquidator: A liquidator is a person who is entrusted the duty of winding up of a company. He
is appointed to administer and to take control of the company.
Preferences: This is where a creditor has had his position improved in the time leading up to the
liquidation simply because the directors wished to achieve that effect.
Voluntary Liquidation: A Voluntary Liquidation is one which has been instigated by the passing
of a resolution by the shareholders, as opposed to a winding up order made by the court, generally
at the behest of an unpaid creditor.
Wrongful Trading: This is where a point is reached where the directors knew or ought to have
known that the company could not realistically avoid insolvent liquidation.

10.8 review Questions

1. Explain the liquidator’s final statement of account.
2. What do you mean by ‘B’ List of Contributories?
3. Describe the order of payment adopted by a liquidator.

4. Explain the various methods of computing the liquidator’s remuneration.
5. Explain the preferential creditors under the Indian Companies Act.
6. Shashi Ltd. went into voluntary liquidation on January 1, 2010. The following was the
position of the company:
`

Shares Capital 1,56,000
Liabilities:
Preferential Creditors 19,600
Partly Secured Creditors (with a charge on Leasehold Property) 44,000
Unsecured Creditors 72,000
Assets Realised:
Leasehold Property 40,000

Other Assets 1,12,000
Cost of liquidation amounted to ` 3,328. The liquidator is entitled to a remuneration of
` 2,000 and a commission of 2% on the amount realised and 2% on the amount paid to
unsecured creditors and preferential creditors. Prepare Liquidator’s Final Statement of
Account.
7. The following particulars relate to Zebra Limited which has gone into voluntary liquidation.
You are required to prepare the Liquidator’s Final Account, allowing for his remuneration
@ 2% on the amount realised and 2% on the amount distributed among unsecured creditors
other than Preferential Creditors:
`
Preferential Creditors 20,000
Unsecured Creditors 64,000
Debentures 20,000

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