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Accounting in case of strike off companies

25 May 2021

Suppose co. X is going for strike off. All the liabilities have been paid. The balance sheet stands as follow

Equity Share Capital - 100000
Misc exp not written off - 82500
Bank Balance - 15000
The bank balance of 15000 will be utilised for mca striking off charges. how will we close the books of company as well as shareholder? Can the company go for strike off?

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6 Replies

yasaswi gomes (My grammar is 💯 good I) (7296 Points)
Replied 27 May 2021

I’m not using strike off accounting precisely, but a general theory suggests that, your balance sheet is wrong. If you have equity 100000, the bank balance also will be the same. If you have cleared off all obligations using bank including strike off charges, then you owe money to shareholders. Use realisation accounting treatment.

SMRITI SHARMA (23 Points)
Replied 27 May 2021

I have not cleared all the obligations the bank balance is 17500. in the question 15000 is incorrect. Misc exp not wriiten off is 82500 whic h makes my a

yasaswi gomes (My grammar is 💯 good I) (7296 Points)
Replied 28 May 2021

Then your realising a loss.

SMRITI SHARMA (23 Points)
Replied 28 May 2021

I have not cleared all the obligations the bank balance is 17500. in the question 15000 is incorrect. Misc exp not written off is 82500 which makes my asset side total - 100000 . Now if I go for strike off 17500 is kept in bank for mca charges, so my question is my if I go by realisation method then the entries will be
esc a/c ... dr 100000
to realisation a/c 100000

realisation a/c .. dr 100000
to misc exp not written off 82500
to pnl ac (mca charges) 17500

mca charges a/c. 17500
to bank 17500

yasaswi gomes (My grammar is 💯 good I) (7296 Points)
Replied 28 May 2021

This is fine because the owner did not realise gain or loss from striking off this company. By the way misc expenses must be on liability side- payables.

yasaswi gomes (My grammar is 💯 good I) (7296 Points)
Replied 28 May 2021

Please low this: https://commerceiets.com/realisation-account/

To be more accurately in determining true profit or loss, the capitalisation must stop and that amount should be taken to debit side of realisation account. (Outstanding expenses)

then you have excess of debit balance, which is a nominal balance- debit all expenses and losses.

So the owner is at a loss.