Deficiency Account (Bankruptcy of Company)

When any company becomes bankrupt, at that time, deficiency account is prepared. This account shows the reasons of company's deficiency. Company's deficiency may be happened due to high level of losses, decrease the value of assets or any other reason.  This account is not made on double entry system. But this account is the statement of simple calculations. First of all, we make the list of items which either contribute the deficiency or increase the deficiency. After this, we deduct the items which either reduce the deficiency or contribute the surplus. Following is its proforma:

Particular	Amount
{A} Items contributing to deficiency or reducing surplus
1. Excess of capital and liabilities over assets as shown by balance sheet	XXXXX
2. Net dividend and bonus declared during the period from end of financial year to the date of statement of affair.	XXXXX
3. Net Trading losses	XXXXX
4. Losses other than trading losses written off or for which provision has been made in the books during the same period.	XXXXX
5. Estimated losses now written off or for which provision has been made for purpose of preparing the statement	XXXXX
6. Other items contributing to deficiency or reducing surplus	XXXXX
{B} Less Item reducing deficiency or contributing surplus	XXXXX
1. Excess of assets over capital and liabilities	XXXXX
2. Net trading profit	XXXXX
3. Profit and income other than trading profit during the same period.	XXXXX
4. Other Item reducing deficiency or contributing surplus	XXXXX
Deficiency or Surplus as per statement of Affairs	XXXXX

{ Important Note : From examination point of view matching of deficiency as per statement of affair and deficiency as per deficiency account is one of good sign of your correct answer. }

Related : Statement of Affairs