Insolvency Account

Insolvency Accounts

Contents :

1. Protection to debtor ( insolvent )

2. Safeguard to creditor

3. Helpful in development of business.

4. Accounting records maintained properly.

Person Covered

(1) Individual / sole proprietor / sole trader

(2) Partnership firm

(3) Hindu undivided family

Insolvency Procedure 

1. Petition

2. Order of adjudication

3. Protection order

4. Realization of asset

IMPORTANT TERMS

1. Unsecured Creditor as per list A : For example :- Bills payable, Creditor, Trade creditor, Loan, Personal loan, Loan from wife, bank overdraft, Outstanding expense, Bill discounted “dishonored” , creditor on open a/c

2. Fully Secured Creditor as per List B

3. Partly Secured Creditor as per List C

4. Preferential Creditor as per list D : For example :- Any type of tax, any amount due to government, salary, Wages, Rent, Compensation, Retirement benefits (pension, Gratuity provident fund etc.)

5. Asset not specifically pledged as per List E : (a) cash in Hand, (b) cash at bank, (c) Stock-in-Trade, (d) Machinery, (e) Furniture, etc.

6. Debtor as per List F : (a) Good Debtors : It means those debtors form whom the full amount will be received. (b) Doubtful Debts: It means those debtors from whom the partial amount may be received. (c) Bad Debts : It means those debtors from whom nothing can be recovered

7. Bills Receivable or Bills of Exchange as per list G

8.Deficiency as per list H

Determination of preferential creditor under both insolvency Act

Statement Required

(1) Statement of Affair

(2) Deficiency Account

Deficiency Account

Insolvency Accounts

Practical and Illustration with solution for better understanding.