The Balance Sheet of a company is as follows: Liabilities Rs. Assets Rs. : : : : Equity Share Capital of Rs.100 each 400,000 Land & Building 300,000 10% Preference Share Capital of Rs.100 each…

Liquidator’s Final Statement of Account

Step 1: Determine the Realization of Assets

The company’s assets (excluding cash) were realized for Rs. 650,000, including:

• Plant & Machinery (mortgaged): Rs. 300,000 (realized)
• Other assets (Land & Building, Inventory, Account Receivable): Rs. 350,000 (realized)

Cash in hand: Rs. 20,000 Total realization: Rs. 650,000 + Rs. 20,000 = Rs. 670,000

Step 2: Calculate Liquidator’s Remuneration

The liquidator is entitled to:

1. 5% on assets realized (Rs. 650,000): $650,000\times \frac{5}{100}=\text{Rs. 32,500}$
2. 2% on amount paid to equity shareholders (to be calculated later).

Step 3: Deduct Liquidation Costs

• Cost of liquidation: Rs. 15,000

Step 4: Determine Order of Distribution

In voluntary liquidation, the following priorities apply:

1. Secured creditors (12% Debenture holders): Rs. 200,000 (mortgaged against Plant & Machinery)
2. Preference shareholders (dividend due): Rs. 12,000
3. Equity shareholders: Remaining amount

Step 5: Prepare Liquidator’s Final Statement of Account

Distribution:

1. 12% Debenture holders (secured creditors):

   • Mortgaged amount: Rs. 200,000 (fully paid from realization of Plant & Machinery)
   • Amount paid: Rs. 200,000

2. Preference shareholders (dividend due):

   • Amount due: Rs. 12,000
   • Amount paid: Rs. 12,000

3. Equity shareholders:

   • Remaining amount: Rs. 622,500 - Rs. 200,000 - Rs. 12,000 = Rs. 410,500
   • Liquidator’s additional remuneration (2% on equity payment): $410,500\times \frac{2}{100}=\text{Rs. 8,210}$
   • Final amount for equity shareholders: Rs. 410,500 - Rs. 8,210 = Rs. 402,290

Verification of Total Distribution:

• Total paid out: Rs. 200,000 (debenture) + Rs. 12,000 (preference dividend) + Rs. 402,290 (equity) + Rs. 32,500 (5% remuneration) + Rs. 8,210 (2% remuneration) + Rs. 15,000 (liquidation cost) = Rs. 670,000 (matches total realization)

Final Liquidator’s Statement of Account

"**2. Deductions:**",
"- Liquidator’s remuneration (5% on Rs. 650,000): Rs. 32,500",
"- Cost of liquidation: Rs. 15,000",
"**Amount available for distribution:** Rs. 622,500",

"**3. Distribution:**",
"- **12% Debenture holders (secured):** Rs. 200,000",
"- **Preference shareholders (dividend due):** Rs. 12,000",
"- **Equity shareholders (after 2% remuneration):** Rs. 402,290",
"- **Liquidator’s additional remuneration (2% on equity):** Rs. 8,210",

"**4. Final Distribution Summary:**",
"| **Particulars**               | **Amount (Rs.)** |",
"|--------------------------------|------------------|",
"| **12% Debenture holders**      | 200,000          |",
"| **Preference shareholders**    | 12,000           |",
"| **Equity shareholders**        | **402,290**      |",
"| **Total distributed**          | 614,290          |",
"| **Liquidator’s fees & costs**  | 57,710           |",
"| **Total**                      | **670,000**      |"

] }

Key Notes:

• The 12% debenture holders are paid first as secured creditors.
• The preference shareholders receive their dividend before equity shareholders.
• The equity shareholders receive the remaining amount after deducting liquidator’s fees and costs.
• The final amount distributed to equity shareholders is Rs. 402,290.