Deficiency Account

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.

A deficiency is the numerical difference between the amount of tax that a taxpayer, or taxpaying entity, reports on a tax return and the amount that the Revenue Service (IRS) determines is actually owed. The term only applies to shortfalls and not to surpluses. Taxpayers are notified of deficiencies via deficiency letters.

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
1. Excess of assets over capital and liabilities
2. Net trading profit
3. Profit and income other than trading profit during the same period.
4. Other Item reducing deficiency or contributing surplus

Deficiency or Surplus as per statement of Affairs

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