CORPORATE

LIQUIDATION

Corporation in Financial
Difficulty
Insolvency-when it is unable to
pay its debts as they come due.
This may be initiated by the
company by filing a voluntary
petition with the SEC. The
corporation is given three years
from the date of approval within
which to wind up its affairs.

Financial Report
Statement of Affairs- initial report
shows the available asset values
and debts of the corporation.
Statement of Realization and
Liquidation- this shows how the
receiver managed the assets of
the corporation n behalf of the
creditors.

Statement of Affairs

Classifications of assets

Assets pledged to fully secured creditors

Assets pledged to partially secured creditors
Free Assets

Classifications of liabilities

Unsecured liabilities with priority

Fully secured creditors
Partially secured creditors
Unsecured creditors

Statement of Realization & Liquidation

This statement shows a complete
record of the transactions of the
receiver for a period of time. Its
structure is similar to a T account, and
it is composed of three elements:
asset
transactions,
liabilities
transactions
and
income/loss
transactions.

Asset Account
Assets to be realized
Assets
acquired/increases

Assets realized
Assets not
realized

Liability Account
Liabilities
liquidated
Liabilities not
liquidated

Liabilities to be
liquidated
Liabilities
incurred/increase

Income & Loss Account

Expenses &
Losses

Revenues & Gains

Traditional format
ASSETS
Assets to be realized

XX Assets realized

XX

Assets acquired (new)

XX Assets not realized

XX

LIABILITIES
Liabilities liquidated

XX Liabilities to be liquidated

XX

Liabilities not liquidated

XX Liabilities incurred (new)

XX

INCOME/LOSS AND SUPPLEMENTAL ITEMS

Expenses & Losses

XX Revenues & Gains

XX

JOINT VENTURES

Joint Venture
Is
a
contractual
arrangement
whereby two or more parties
undertake an economic activity
which is subject to joint control.
Control is the power to govern the
financial and operating policies of an
economic entity.
Joint
control is the contractually
agreed sharing of control over an
economic activity.

Forms of Joint Venture

Jointly controlled operations
a separate entity is not established. Each venturer
uses their own assets, incurs own expenses and
liabilities and raises its own financing.

Jointly controlled assets

this type involves the joint control and ownership by
the venturers of one or more assets contributed to,
or acquired for the purpose the venture is organized.

Jointly controlled entities

it involves the setting up of a company or
partnership or other entity in which each of the
venturers has an interest.

Accounting for Joint

Ventures
SEPARATE SET OF BOOKS
A venturer is appointed as operator
or manager of the joint venture. The
manager is usually paid a management
fee, and this is treated as expense.

Books of the Joint Venture

Books of the Venturers

Books of the Venturers

Each venturer maintains an
investment account Investment
in Joint Venture on its books for
its share of the joint venture
capital.
Two accounting treatments:
1. Proportionate Consolidation
2. Equity Method

Accounting for Joint Venture

NO SEPARATE SET OF BOOKS
The computation and distribution of income to
the venturers are made only upon the completion
of the venture and not at regular or periodic
intervals except under specific circumstances.
Under this method, all the joint venture costs,
expenses and income transactions are recorded
in the books of the venture using a Joint
Venture Account. This is DEBITED for all costs
and expenses and CREDITED for all revenues.

THANK YOU