SATHYABAMA

INSTITUTE OF SCIENCE AND TECHNOLOGY

BACHELOR OF COMMERCE
COURSE MATERIAL

SUBJECT : CORPORATE ACCOUNTING II SUBJECT CODE : SBAX1014

UNIT IV

LIQUIDATION
MEANING:

Liquidation or the winding up of a company means the termination of the legal

existence of a company. Under such circumstances, the assets of the company are disposed off
and the debts are paid, out of the amount realized from assets or from the contributions made by
the members and the surplus if any is distributed among members in proportion to their
holding.
TYPES OF WINDING UP:

There are three models of liquidation of a company.

A. Compulsory winding up by the court.
B. Voluntary winding up:
▪ Member's voluntary winding up.

▪ Creditor's voluntary winding up.

C. Voluntary winding up under the supervision of the court.

➢ In case of a compulsory winding up: an official liquidator is appointed by the court.

➢ In the case of a member's voluntary winding up: the liquidator is appointed by the
members at their general meeting.

➢ In case of a creditor's voluntary liquidation: both the creditors and the members of the
company nominate the liquidator in their respective meetings, If the creditors and the
members nominate different persons as the liquidator, the liquidator nominated by
creditors will act as liquidator.

➢ Where winding up takes place at the supervision of the court: the liquidator may be
appointed by the members or the creditors or by the court. The liquidator appointed by
the court as well as the members and creditors may together function as liquidators.

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 SATHYABAMA
INSTITUTE OF SCIENCE AND TECHNOLOGY
BACHELOR OF COMMERCE
COURSE MATERIAL

SUBJECT : CORPORATE ACCOUNTING II SUBJECT CODE : SBAX1014

FUNCTIONS OF LIQUIDATOR
The liquidator is required to perform certain functions at the time of liquidation. The main
functions are as follows:
1. The primary function of a liquidator is to realise the assets of the company.
2. He has to collect the money due from the contributories.
3. He has to distribute the amount realised from sale of assets and amount received from
contributories in the order of preference as per Rule 329 of Companies Act.
4. He has to maintain and submit the record of receipts and payments of cash to the members
in the case of voluntary winding-up and to the court in the case of compulsory winding up.
Liquidator's Final Statement of Account At the time of liquidation of a company, the
liquidator realises all the assets and discharge the liabilities and capital. The statement
prepared to record such receipts and payments is called 'Liquidator's Final Statement of
Account.' This statement is prepared after the affairs of the company are fully wound-up.
The liquidator must make payments in the following order of payment

1. Secured Creditors.
2. Legal expenses (including liquidation expenses and cost of winding up).
3. Liquidator’s remuneration.
4. Payments to debenture holders and other creditors having floating charge on the assets of
the company.
5. Payments to Preferential Creditors.
6. Payments to unsecured Creditors.
7. Calls in advance, if any.
8. Arrears of dividends on cumulative preference shares.
9. Amount due to preference shareholders.
10. Amount due to equity shareholders.

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 SATHYABAMA
INSTITUTE OF SCIENCE AND TECHNOLOGY
BACHELOR OF COMMERCE
COURSE MATERIAL

SUBJECT : CORPORATE ACCOUNTING II SUBJECT CODE : SBAX1014

The form of liquidator’s final statement of accounts is given below:

ABC Company Ltd Liquidator’s Final Statement

Receipts Rs. Payments Rs.

Cash in hand Secured creditors
Cash at bank Legal Charges
(including liquidation expenses)
Assets Realized Liquidator’s remuneration
Marketable securities Other expenses on liquidation
Bills receivable Debenture holders
Trade debtors Outstanding interest
on debenture
Loans and advances Debentures
Stock in trade Preferential creditors
Work in progress Unsecured creditors
Plant and machinery Calls in advance if any
Furniture and fixtures Arrears of dividend
Patents ,trademarks etc Preference share holders
Investments Equity share holders
Surplus realized from secured
creditors
Calls in arrears
Amount received from calls on shares
Total Total

The following important points to be borne in mind while preparing the Liquidator’s
Final Statement of Account:
1. The words 'To' and 'By' need not be used, since it is a statement and not an Account.
2. When a specific asset pledged as security is realised by the liquidator:
Where a specific asset is provided as security towards debentures or creditors, the amount
realised on that should be used by liquidator for discharge of such debentures or creditors

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 SATHYABAMA
INSTITUTE OF SCIENCE AND TECHNOLOGY
BACHELOR OF COMMERCE
COURSE MATERIAL

SUBJECT : CORPORATE ACCOUNTING II SUBJECT CODE : SBAX1014

before making any other payment. That is, on the Receipts side, the amount realised from
the assets pledged, will be recorded and on the payments side, the amount payable towards
secured creditors, will be recorded to the extent of amount due or amount realised
whichever is less, Where the amount realised on the asset pledged is less than the amount
clue towards secured creditors, the difference will be treated as unsecured creditors and paid
after making payment to preferential creditors.
3. When a specific asset pledged as security against debentures or creditors is realised
by debenture holders or creditors:
In this case, surplus if any in the hands of debenture holders or creditors must be treated as
receipts and recorded on the receipts side of the statement.
However, if the amount received on realization is less than the amount due to debenture
holder or creditors, it must he paid after making payment to preferential creditors. (i.e., they
must be treated as unsecured creditors),
4. Calls in arrears:
Calls in arrears given in the Balance Sheet must be recovered by the liquidator from the
concerned shareholders without which repayment of capital on those shares cannot be
made. If the amount is not realised, the liquidator can forfeit the shares.
5.Calls on shares:
Where the amount available is not sufficient to pay outside liabilities or preference
shareholders, any uncalled amount on equity shares must be called to the extent required at
the relevant stage of deficiency.
6. Legal charges and other expenses on liquidation:
Legal expenses includes registration expenses, stamp duty, litigation expenses etc. The
other expenses on liquidation includes cost of liquidation like auctioneers and valuers
charges, cost of possession and maintenance of estate, cost of notices in Gazette and
newspapers, establishment charges and other incidental expenses on liquidation, When
liquidation expenses" or "cost of winding up" is given, without mentioning the details,
it can be shown before liquidator's remuneration.

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 SATHYABAMA
INSTITUTE OF SCIENCE AND TECHNOLOGY
BACHELOR OF COMMERCE
COURSE MATERIAL

SUBJECT : CORPORATE ACCOUNTING II SUBJECT CODE : SBAX1014

7. Liquidator's Remuneration:
Normally a fixed amount is paid to liquidator or it is paid as a percentage on assets realised
by the liquidator and/or amount paid to unsecured creditors.
A. Where the remuneration is to be paid on assets realised: The following points must be
kept in mind.
(i) Until otherwise specified for calculating liquidator's remuneration, "assets realised"
means any assets realised by liquidator except cash in hand and cash at Bank,
because cash in hand and at bank is already in the realised form and no effort is
require for realising it.
(ii) Until otherwise specified, no remuneration should be paid to liquidator on calls-in-
arrears and call money realised.
(iii) Surplus received from secured creditors must be considered in calculating
liquidator's remuneration, since the liquidator makes an effort to realise the surplus
from secured creditors.
(iv) When the problem states that remuneration is to be paid as a percentage on a ‘Total
amount realised', then remuneration should be calculated on total Receipts (ie.,
including surplus. calls in-arrears and call money received)
B. Where the remuneration is to be paid on payments made: The following points must be
kept in mind
(i) For calculating remuneration on payment made to unsecured creditors, preferential
creditors must be considered as part of unsecured creditors.
(ii) Where the balance amount available is sufficient enough to pay unsecured creditors
calculated using the following formula:

Amount Payable to Unsecured Creditors x Percentage of commission /100

(iii) When the balance amount available is 'not sufficient' enough to pay unsecured
creditors completely, liquidator's remuneration on payment to unsecured creditors
will be calculated using the following formula:
Amount available x Percentage of commission/ 100 + Percentage of commission

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 SATHYABAMA
INSTITUTE OF SCIENCE AND TECHNOLOGY
BACHELOR OF COMMERCE
COURSE MATERIAL

SUBJECT : CORPORATE ACCOUNTING II SUBJECT CODE : SBAX1014

(iv) Where the liquidator has to be paid remuneration on final amount payable to
shareholders, then the amount or remuneration must be calculated using the
following formula:
Balance amount available before making payment to shareholders x Percentage
of commission / 100 + Percentage of commission
8. When Debentures are not secured against a specific asset, it must always be treated as
secured on 'floating charge'. Hence, it must be discharged before making payment to
preferential creditors
9. Interest on Debentures:
Any outstanding interest on debentures must be paid before discharging debenture.
Interest on Debentures and other loans must be paid as follows:
(i) If the company is solvent, interest must be paid until the date or repayment of loan.
(ii) If the company is insolvent. Interest must be paid until the date of winding up
only, irrespective of when the final repayment is made.
10. Calls paid in advance
Calls paid in advance by shareholders must be paid immediately after paying
unsecured creditors.
11. Preference Dividend
(i) Preference dividend declared but not paid must be treated as "unsecured creditors" and
paid accordingly.
(ii) In case of cumulative preference shares, if dividends are in arrears for one or more
years, but not declared, then, it must be paid before paying preference share capital.
12. Where the preference shares are participating preference shares, the balance available
after paying preference share capital and equity share capital, must be
proportionately distributed to both preference shareholders and equity shareholders,
13. When share capital of the company includes fully paid shares and partly paid shares.

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 SATHYABAMA
INSTITUTE OF SCIENCE AND TECHNOLOGY
BACHELOR OF COMMERCE
COURSE MATERIAL

SUBJECT : CORPORATE ACCOUNTING II SUBJECT CODE : SBAX1014

1. The ABC Ltd., is to be liquidated. Their summarized Balance sheet as at 30thsep. 2014
appears as under:

Liabilities Rs. Assets Rs.

250000 equity shares of 25,00,000 Land & buildings 5,00,000
Rs.10 each Other fixed assets
20,00,000
secured debentures (on land &
buildings) 10,00,000 Current assets
45,00,000
Unsecured loans 20,00,000
Profit & loss Ac
Trade creditors 20,00,000
35,00,000

Total 90,00,000 Total 90,00,000

Contingent liabilities are: Rs.

For bills discounted 1,00,000
For excise duty demands 1,50,000

On investigation, it is found that the contingent liabilities are certain to devolve and the
assets are likely to be realized as follows:
Land and buildings 11,00,000
Other fixed assets 18,00,000
Current assets 35,00,000

Taking the above into account, prepare the statement of affairs.

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 SATHYABAMA
INSTITUTE OF SCIENCE AND TECHNOLOGY
BACHELOR OF COMMERCE
COURSE MATERIAL

SUBJECT : CORPORATE ACCOUNTING II SUBJECT CODE : SBAX1014

2.The following information is extracted from the books of a Drum company on june30, 2006
on which date a winding up order was made:
Equity share capital, 8000 shares of Rs.10 each 8,00,000
10% preference share capital 12000 shares of Rs.10 each 12,00,000
Calls in arrears on equity shares (estimated to produce Rs.8000) 16,000
9% first mortgage debentures, secured by a floating charge on the whole
of the assets of the company 8,00,000

Creditors fully secured (value of shares in X ltd. Rs.160000) 1,40,000

Creditors partly secured (value of shares in Y ltd. Rs.80000) 1,60,000

Preferential creditors 30,000

Bank overdraft, secured by a second charge on the whole of the assets of the
company 80,000
Unsecured creditors 10,40,000

Estimated liability on bill discounted 40,000

Cash in hand 8,100

Book debts - Good 1,50,000

- Doubtful (estimated to produce 40%) 30,000

- Bad debts 18,000

Stock in trade (estimated to produce Rs.238700) 2,88,000

Freehold land & buildings (estimated to produce Rs.782000) 6,60,000

Plant & machinery (estimated to produce Rs.212000) 3,00,000

Fixtures &fixtures (estimated to produce Rs.30000) 50,000

Prepare a statement of affairs

(a) As regards creditors and (b) As regards contributories

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 SATHYABAMA
INSTITUTE OF SCIENCE AND TECHNOLOGY
BACHELOR OF COMMERCE
COURSE MATERIAL

SUBJECT : CORPORATE ACCOUNTING II SUBJECT CODE : SBAX1014

3. Shri B. Rose is appointed liquidator of a company in voluntary liquidator on 1.7.2014

and the following balances are extracted from the books on that date:

Liabilities Rs. Assets Rs.

Share capital: Machinery 60,000
32000 shares of Rs.5 each 1,60,000 Leasehold properties 80,000
Provision for bad debts 20,000 Stock in trade 2,000
Debentures 1,00,000 Book debts 1,20,000
Bank overdraft 36,000 Investments 12,000
Liabilities for purchases 40,000 Calls in arrear 10,000
Cash in hand 2,000
Profit and loss A/c 70,000
Total 3,56,000 Total 3,56,000

The assets are revalued as under:

(i) Investments at Rs.8000

(ii) Stock in trade at Rs.4000

(iii) Machinery at Rs.120000

(iv) Leasehold properties at Rs.146000
Bad debts are Rs.4000; doubtful debts are Rs.8000, estimated to realize Rs.4000; The bank
overdraft is secured by deposit of title deeds od leasehold properties.
Preferential creditors for tax and wages Rs.2000;
Telephone rent owing is Rs.160.
You are required to prepare:
(i) statement of affairs as regards creditors and contributors and
(ii) (ii) deficiency or surplus A/c.

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 SATHYABAMA
INSTITUTE OF SCIENCE AND TECHNOLOGY
BACHELOR OF COMMERCE
COURSE MATERIAL

SUBJECT : CORPORATE ACCOUNTING II SUBJECT CODE : SBAX1014

4. The following particulars relate to limited company which went into voluntary
liquidation:

Preferential creditors
25000
Unsecured creditors 58000
6% debentures 30000

The assets realized Rs.80000. The expenses of liquidation amounted to Rs.1500 and the
liquidator’s remuneration was agreed at 2.5 % on the amount realized and 2% on the
amount paid to unsecured creditors including preferential creditors.
Show the liquidators final statement of account.

5. The following particulars relate to a limited company which has gone into voluntary
liquidation. You are required to prepare the liquidator’s final account allowing for his

remuneration @ 3% on the amount realized and 2.5% on the amount paid to the
unsecured creditors.
Share capital issued;
5000 preference shares of Rs.100 each (fully paid)
30000 equity shares of Rs.10 each fully paid.
12000 equity shares of Rs.10 each, Rs.8 paid up.
Assets realized Rs.924000 excluding amount realized by sale of securities held by the
secured creditors.
Preferential Creditors Rs.24,000
Unsecured Creditors Rs.8,51,094
Secured Creditors (security realized Rs.1,62,000) Rs.1,38,000
Expenses of liquidation amounted to Rs.9000
A call of Rs.2 per share on the partly paid equity shares was duly paid except. In case of
one shareholder owing 1200 shares.

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 SATHYABAMA
INSTITUTE OF SCIENCE AND TECHNOLOGY
BACHELOR OF COMMERCE
COURSE MATERIAL

SUBJECT : CORPORATE ACCOUNTING II SUBJECT CODE : SBAX1014

6. Sun co. ltd went into liquidation on 31.12.2013. Its capital is divided into 20000 shares
of Rs.50 each. Its assets and liabilities on this date were as follows:
Cash in hand Rs.1500; Realised from stock Rs.59200; from book debts Rs.98400;
furniture Rs.2100; Investment with bank for overdraft Rs.9800; unsecured creditors
Rs.107550; preferential creditors Rs.10590; Bank overdraft Rs.8000; 6% debentures
having a floating charge Rs.88000
Bank, after deducting its amount from investment of Rs.9800, gave the surplus to the
liquidator. Debentures were paid on 30.06.2014with interest.
Remuneration of liquidator: 3% on net amount realized (excluding the amount given to
secured creditors but including cash in hand): 2% on the amount paid to unsecured
creditors (excluding preferential creditors). Cost of liquidation is Rs.2030.
Prepare liquidators final statement of account.

7. A company went into voluntary liquidation on 31.3.2014. When the following balance
sheet was prepared:

Liabilities Rs. Assets Rs.

Authorized capital: Good will 6,960
4000 shares of Rs.10 each 40,000 Freehold property 5,000
Issued capital: Machinery 7,480
3000 shares of Rs.10 each 30,000 Stock 11,710
Unsecured creditors 15,432 Debtors 9,244
Partly secured creditors 5,836 Cash 100
Preferential creditors 810 Profit & loss A/c 11,816
Bank overdraft (unsecured) 232
Total 52,310 Total 52,310

The liquidator realized the assets as follows:

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INSTITUTE OF SCIENCE AND TECHNOLOGY
BACHELOR OF COMMERCE
COURSE MATERIAL

SUBJECT : CORPORATE ACCOUNTING II SUBJECT CODE : SBAX1014

Freehold property which was used in the first instance to pay the partly secured creditors
pro-rate Rs.3600; Machinery Rs.5000; Stock Rs.6200; debtors Rs.8700; cash Rs.100.
The expenses of liquidation amounted to Rs.100 and the liquidator remuneration was
agreed at 2.5% on the amount realized including cash and 2% on the amount paid to
unsecured creditors.
Prepare the liquidator final statement of account.
8. The following is the summarized Balance sheet of HarPreet Ltd., as at 31.12.2013

Liabilities Rs. Assets Rs.

Share capital: Land & buildings 2,60,000
3000 6% cumulative preference Plant & machinery 1,75,000
shares of Rs.100 each, fully paid
3,00,000 Stock 37,250
1000 equity shares of Debtors 15,000
Rs.100 each fully paid 1,00,000 Cash in hand 250
1000 equity shares of Profit & loss A/c 37,500
Rs.100 each, Rs.50 paid up 50,000
Bank loan (secured on stock
& debtors) 25,000
Current liabilities
Pref. dividend arrears 50,000
Rs.36000

Total 5,25,000 Total 5,25,000

Under the Articles of Association of the company, the preference shares are preferential
as to dividend (whether declared or not) and capital.

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 SATHYABAMA
INSTITUTE OF SCIENCE AND TECHNOLOGY
BACHELOR OF COMMERCE
COURSE MATERIAL

SUBJECT : CORPORATE ACCOUNTING II SUBJECT CODE : SBAX1014

The company went into voluntary liquidation and sold the fixed assets, stock and debtors
for a sum of Rs.375000 payable in cash. The expenses of liquidation were Rs.250. A
call of Rs.50 per share is made by the liquidator on 1000 equity shares which are partly
paid up. The money called is fully paid up.
You are required to prepare the liquidator’s final statement of account.

9. From the data relating to a company (in voluntary liquidation), you are asked to prepare
liquidator final statement of account.
(i) Cash with liquidator (after all assets are realized and secured creditors and
debenture holders are paid) is Rs.673800.
(ii) Preferential creditors to be paid Rs.30000
(iii) Other unsecured creditors Rs.215000
(iv) 4000 6% preference shares of Rs.100 each fully paid.
(v) 2000 equity shares of Rs.100 each, Rs.75 per share paid up.
(vi) 6000 equity shares of Rs.100 each, Rs.60 per share paid up.
(vii) Liquidator remuneration 2% on preferential and other unsecured creditors.
(viii) Preference dividends were in arrears for 2 years.

10. A liquidator is entitled to receive remuneration @ 2% of the assets realized and 3% on

the amount distributed among the unsecured creditors.
The assets realized Rs.7000000 against which payment was made as follows:
Liquidation expenses Rs.50000
Preferential creditors Rs.150000
Secured creditors Rs.4000000
Unsecured creditors: Rs.3000000
Calculate the total remuneration payable to the liquidator.

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 SATHYABAMA
INSTITUTE OF SCIENCE AND TECHNOLOGY
BACHELOR OF COMMERCE
COURSE MATERIAL

SUBJECT : CORPORATE ACCOUNTING II SUBJECT CODE : SBAX1014

11. Knight co. ltd went into voluntary liquidation on 31/12/2013 when their Balance sheet
read as follows:

Liabilities Rs. Assets Rs.

Issued & subscribed capital: Land & buildings 7,50,000
15000 10% preference shares of Plant & machinery 18,75,000
Rs.100 each fully paid 15,00,000 Patents 3,00,000
7500 equity shares of Stock 4,02,500
Rs.100 each, Rs.75 paid 5,62,500 Sundry debtors 8,25,000
22500 equity shares of Cash at bank 2,25,000
Rs.100 each, Rs.60 paid 13,50,000 Profit & loss A/c 8,53,750
15% debenture secured by a
floating charge 7,50,000
Interest outstanding on debentures 1,12,500
Creditors 9,56,250

Total 52,31,250 Total 52,31,250

Preference dividends were in arrear for 2 years and the creditors include preferential creditors
of Rs. 380000.
The assets were realised as follows:
Land and buildings RS 9,00,0000; Plant and Machinery Rs 15,00,0000; Patents Rs2,25000;
Stock Rs 4,50,000;Sundry Debtors Rs 6,00,000.
The expenses of liquidation amounted to Rs 27,250.
The liquidator is entitled to a commission of 3% on assets realised except cash.
Assuming the final payments including those on debentures was made on 30.6.2014.
Show liquidator final statement of accounts.

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 SATHYABAMA
INSTITUTE OF SCIENCE AND TECHNOLOGY
BACHELOR OF COMMERCE
COURSE MATERIAL

SUBJECT : CORPORATE ACCOUNTING II SUBJECT CODE : SBAX1014

PART A
1. Define Liquidation.
2. Who is called Liquidator?
3. Write Short note on Winding Up.
4. State the functions of a liquidator of a company.
5. Who is a contributory?
6. Give a list of different items which are included under unsecured creditors.
7. State the order of payment.
8. Who is secured creditors?
9. Who is a preferential creditor?
10. What do you mean by creditors voluntary winding up?
PART B
11. Explain the various methods of winding up of a company.
12. What is liquidation? Explain in detail the various modes of liquidating a company.
13. Explain in detail about each item in order of payment.
14.What is statement of Affairs? Give a Performa of statement of affairs and deficiency
account.
15. Explain in detail about liquidators final statement of account and also give the form
of liquidator’s final statement of accounts.
16. ‘A’ Ltd went into liquidation with the following liabilities:
Secured creditors Rs.20000(securities realized Rs.25000)
Preferential creditors Rs.600
Unsecured creditors Rs.30500
Liquidation expenses are Rs. 252. Liquidator is entitled to a remuneration of 3% on
the amounts realized (including securities with creditors) and 1.5% on the amount
distributed to unsecured creditors. The various assets realized Rs.26000 (excluding
securities in the hands of secured creditors) Prepare the liquidation’s final statement of
account.

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INSTITUTE OF SCIENCE AND TECHNOLOGY
BACHELOR OF COMMERCE
COURSE MATERIAL

SUBJECT : CORPORATE ACCOUNTING II SUBJECT CODE : SBAX1014

17. K Ltd went into voluntary liquidation on 30.10.2013. The below given is its balance
sheet on that date.

Liabilities Rs. Assets Rs.

2000 equity shares of Rs.100 each 2,00,000 Land and buildings 1,40,000
6% Debentures 1,00,000 Machinery 60,000
Mortgage loan (secured on 50,000 Stock 1,22,500
machinery
Sundry Creditors 1,50,000 Debtors 1,10,000
Cash 2,500
P & L A/c 65,000

Total 5,00,000 Total 5,00,000

Sundry creditors include Rs.6000 payable as preferential creditors’ Assets realized as

follows: Land and buildings Rs.60000, Machinery Rs.63500, Stock Rs.90000, Debtors 40%
of book value. Liquidation expenses amounted to Rs.1800, Liquidators remuneration 3% on
assets realized including cash and 2% on the amount paid to unsecured creditors including
preferential creditors. Debenture holders were repaid on 31.12.13 along with two months
interest. Prepare liquidator’s final statement of account.

18. A liquidator is entitled to receive remuneration @ 2% of the assets realized and 3% on

the amount distributed among the unsecured creditors.
The assets realized Rs.7000000 against which payment was made as follows:
Liquidation expenses Rs.50000
Preferential creditors Rs.150000
Secured creditors Rs.4000000
Unsecured creditors: Rs.3000000
Calculate the total remuneration payable to the liquidator.

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 SATHYABAMA
INSTITUTE OF SCIENCE AND TECHNOLOGY
BACHELOR OF COMMERCE
COURSE MATERIAL

SUBJECT : CORPORATE ACCOUNTING II SUBJECT CODE : SBAX1014

19. Knight co. ltd went into voluntary liquidation on 31/12/2013 when their Balance sheet
read as follows:

Liabilities Rs. Assets Rs.

Issued & subscribed capital: Land & buildings 7,50,000

15000 10% cumulative Plant & machinery 18,75,000

preference shares of Rs.100 each 15,00,000 Patents 3,00,000
fully paid Stock 4,02,500
7500 equity shares of Sundry debtors 8,25,000
Rs.100 each, Rs.75 paid Cash at bank 2,25,000
5,62,500
22500 equity shares of Profit & loss A/c 8,53,750
Rs.100 each, Rs.60 paid 13,50,000
15% debenture secured by a
floating charge 7,50,000
Interest outstanding on
debentures 1,12,500
Creditors 9,56,250

Total 52,31,250 Total 52,31,250

Preference dividends were in arrears for 2 years and the creditors include preferential
creditors of rs 380000.The assets were realised as follows : Land and buildings RS 9,00,0000;
Plant and Machinery Rs 15,00,0000; Patents Rs2,25000; Stock Rs 4,50,000;Sundry Debtors Rs
6,00,000. The expenses of liquidation amounted to Rs 27,250.The liquidator is entitled to a
commission of 3% on assets realised except cash. Assuming the final payments including
those on debentures was made on 30.6.2014.
Show liquidator final statement of accounts.

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 SATHYABAMA
INSTITUTE OF SCIENCE AND TECHNOLOGY
BACHELOR OF COMMERCE
COURSE MATERIAL

SUBJECT : CORPORATE ACCOUNTING II SUBJECT CODE : SBAX1014

20. The following is the summarized Balance sheet of HarPreet Ltd., as at 31.12.2013

Liabilities Rs. Assets Rs.

Share capital: Land & buildings 2,60,000
3000 6% cumulative preference Plant & machinery 1,75,000
shares of Rs.100 each, fully paid 3,00,000 Stock 37,250
1000 equity shares of Debtors 15,000
Rs.100 each fully paid 1,00,000 Cash in hand 250
1000 equity shares of Profit & loss A/c 37,500
Rs.100 each, Rs.50 paid up 50,000
Bank loan (secured on stock
25,000
& debtors)
Current liabilities 50,000
Pref. dividend arrears
Rs.36000

Total 5,25,000 Total 5,25,000

Under the Articles of Association of the company, the preference shares are preferential
as to dividend (whether declared or not) and capital.
The company went into voluntary liquidation and sold the fixed assets, stock and debtors for a
sum of Rs.3,75,000 payable in cash.
The expenses of liquidation were Rs.250. A call of Rs.50 per share is made by the liquidator
on 1000 equity shares which are partly paid up. The money called is fully paid up.
You are required to prepare the liquidator’s final statement of account.

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 SATHYABAMA
INSTITUTE OF SCIENCE AND TECHNOLOGY
BACHELOR OF COMMERCE
COURSE MATERIAL

SUBJECT : CORPORATE ACCOUNTING II SUBJECT CODE : SBAX1014

21. The following is the balance sheet of M/unfortunate Ltd. As on 31.12.2013

Particulars Rs. Particulars Rs.

1000 6% preference shares 4,00,000 Land and buildings 2,00,000
of Rs.100 each fully paid up
2000 equity shares of 1,50,000 Plant and machinery 5,00,000
Rs.100 each, Rs.75 per share paid up
6000 equity shares of 3,60,000 Patents 80,000
Rs.100 eachRs.60 per share paid up
5% debentures (having 2,00,000 Stock at cost 1,10,000
floating charge on all assets)
Interest outstanding on 10,000 Sundry Debtors 2,20,000
debentures (also secured as above)
Creditors Cash at bank 60,000
Profit and loss account 2,40,000

On that date, the company went into liquidation. The dividends on preference shares were in
arrear for two years. Creditors include a loan of Rs.100000 on mortgage of land and building.
The assets realized were as under: Land and buildings – 240000, plant and machinery –
400000, patents – 60000, Stock – 120000, sundry debtors – 160000. The expenses of
liquidation amounted to Rs.21800. The liquidator is entitled to a commission of 3% on all
assets realized (except cash at bank) and commission of 2% on amounts distributed among
unsecured creditors. Preferential creditors amount to Rs. 30000.
All payments were made on 30th June 2014. Prepare the liquidators final statement of account.

SCHOOL OF MANAGEMENT STUDIES Page 98