wat is DEFICIENCY ACCOUNT ? wwhen it is created and why it is created??
and does it is shown under balance sheet?? if yes then where??
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Can anyone explain this
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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,
REASON OF PREPARING A DEFICIENCY ACCOUNT
Parties preparing a Statement of affairs should consider preparing a deficiency account to accompany the supporting documentation for the figures being included in the Statement of Affairs
The purpose of preparing the deficiency account is to identify if there are any anomalies within the statement of affairs that does not conform to expectations. In particular within liquidations a deficiency account often highlights significant losses in the final periods of trading and sometimes this may be due to factors that should be included within the Statement of Affairs.
Its preparation also enables explanations to be considered, thought through and corroborative evidence obtained at the time rather than having to deal with questions months later without access to company records.
No it will be not shown in Balance Sheet as this account is the statement of simple calculations
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