Bankruptcy

Bankruptcy Definition:

A legal state of insolvency. A company deemed to be in this condition may choose protection under the law to allow a chance to reorganize (Chapter 11) or liquidate in an orderly fashion (Chapter 7).

A company deemed to be bankrupt may choose protection under the law to allow a chance to reorganize (Chapter 11) or liquidate in an orderly fashion (Chapter 7). In the past few years, the improper use of the Bankruptcy Code's Chapter 11 provisions by larger corporations has put companies in similar situations under strict scrutiny. For this reason, it's recommended that you consult a competent bankruptcy attorney in order to understand just what's involved and to ensure you file all proper paperwork. Additionally, you should plan on taking from two to four years to complete the judicial cycle of Chapter 11 proceedings.

More from Accounting

Cash Flow

The difference between the available cash at the beginning of an accounting period and that at the end of the period. Cash comes in from sales, loan proceeds, investments and the sale of assets and goes out to pay for operating and direct expenses, principal debt service, and the purchase of asset

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Cash Flow Statement

A financial statement that reflects the inflow of revenue vs. the outflow of expenses resulting from operating, investing and financing activities during a specific time period

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Cash-Basis Accounting

An accounting system that doesn't record accruals but instead recognizes income (or revenue) only when payment is received and expenses only when payment is made. There's no match of revenue against expenses in a fixed accounting period, so comparisons of previous periods aren't possible.

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Accountant

A person whose work it is to inspect, keep or adjust accounts

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