#2 "TYBCOM Exam Booster 🚀 | Liquidation of Companies | One Shot Revision" Siraj Shaikh

📌 What is Liquidation?

Liquidation (or Winding Up) is the process of closing down a company by selling its assets and paying off liabilities.
After liquidation, the company ceases to exist.
📌 Types of Liquidation:

Voluntary Liquidation – Initiated by the company’s members when they decide to close the business.
Compulsory Liquidation – Ordered by the court when the company is unable to pay debts.
Creditors’ Voluntary Liquidation – When creditors take action due to unpaid debts.
📌 Process of Liquidation:

Appointment of Liquidator – A person who handles the liquidation process.
Selling Assets – Company assets are sold to generate cash.
Paying Liabilities – Creditors, employees, and other liabilities are paid in order of priority.
Distribution to Shareholders – If any money is left after liabilities, it is given to shareholders.
Dissolution of the Company – The company is officially closed.
📌 Accounting Treatment in Liquidation:

Liquidator’s Final Statement of Account is prepared, showing:
Assets sold & cash received.
Payments made to creditors, debenture holders, and shareholders.
Balance left after liquidation (if any).
📌 Why is Liquidation Important?
✅ Ensures fair distribution of assets among creditors and shareholders.
✅ Protects creditors from non-payment of dues.
✅ Legally closes down a failed business.
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