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Meaning of nil asset/lia under fte

Ganesh (None) (39 Points)

22 October 2014

I have searched and seen several questions and answers on this topic, but a doubt remains:

How to make assets / liab NIL? After all a co. has share capital which has to be represented by Cash or Bank balance. How to make it perfect zero? It may also have Retained Profits, again represented by cash or Bank if it was not a loss making co.

Should the profits be paid off as dividend? Even then share capital would remain? Is Bank balance considered asset? For that matter Cash is also asset right?

Any reply would be appreciated.

I wonder why the babus that thought up this scheme did not see it fit to clarify these things to help everyone.

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P C Agrawal (Registered independent director Past Chairman of Aurangabad Chapter of ICSI Practicing Company Secretary at Aurangabad) (8229 Points)
Replied 24 October 2014

Company belongs to the shareholders and at the time of dissolution whatever amount is left is shared among equity shareholders in the ratio of their shareholding. Hence all movable and immovable assets should be disposed of and the amount realised should be used to pay off all secured and unsecured liabilitie other than net worth (i.e. what is payable to the shareholders). Even Bank accounts should be closed. At the end liabilities side will show only net worth (share capital + reserves) and assets side will show Misc. Expenditure (if any) and cash balance. One cannot make payment of share capital to shareholders since it requires approval of High Court u/s 100 of CA 1956.

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Ganesh (None) (39 Points)
Replied 24 October 2014

Thanks Mr. Agarwal, that makes sense...Although I am CA I am in industry/overseas for 20+ yrs so lost touch with some rules/basics. Your kind reply is much appreciated..

Regards