The is required to prepare an account of winding up known as Liquidator’s Final Statement of Account after the affairs of the company are fully wound up. This account takes the form of Cash Account. The main job of the liquidator is to collect the assets of the company and realize them and distribute the money realized among right claimants. For this purpose he maintains a Cash Book for recording the receipts and payments and is required to submit an abstract of the Cash Book to the court in case of compulsory winding up and to the company in ease of voluntary winding up. The following receipts are shown on the debit side of this account:
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(1) Amount realized on sale of assets.
(2) Amount received from delinquent directors and other officers of the company.
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(3) Contributions made by the contributors.
On the credit side of the account, he records the payments made in the following order:
(1) Payment of secured creditors and dues to workmen up to their claim or up to the amount of securities held by secured creditors as per section 529. The balance of secured creditors left unsatisfied (i.e., when the claims of the secured creditors are more than the amount realized by sale of. securities) will be added to unsecured creditors.
(2) Cost of winding up (i.e., legal charges).
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(3) Liquidator’s remuneration.
(4) Payment of creditors (e.g., debentures) having a floating charge on the assets of the company. Interest on debentures should be paid upto the date of actual payment to the debenture holders and not only upto the dale of liquidation provided the company is solvent. But if the company is insolvent, interest is payable upto the dale of commencement of insolvency proceedings.
(5) Payment of preferential creditors.
(6) Payment of unsecured creditors. This may also include liability in -respect of dividend declared but not paid but the payment of dividend due will be paid only after the amount due to outsiders is paid.
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(7) Amount paid to preference shareholders.
(8) Amount paid to equity shareholders.
The various claims will be satisfied by the liquidator in the order mentioned above. So, if the money available with the liquidator is exhausted after paying, say, debenture holders partly or fully, payments will not be possible to unsecured creditors, preference shareholders and equity shareholders.
In the preparation of the Liquidators Statement of Account, the principle of double entry is not involved. It is only a statement although presented in the form of an account. It is a summary of the Cash Book after the start of the liquidation.