What is the role of Accounting for Companies in Judicial Recovery or Bankruptcies

A company can go through several processes since its opening, such as bankruptcy or bankruptcy . Fact that determines that every entrepreneur understands about the subject.

Currently, accounting has played different roles within a company. However, many professionals are still unaware of the importance of their performance.

Thus, it is crucial to understand its different areas of activity. Therefore, throughout our article, we will dedicate ourselves to explain the role of accounting for companies undergoing judicial reorganization or bankruptcies.

This is because no company is unscathed from facing moments of financial instability, thus being able to resort to legislation, in order to be able to make resources feasible for its resumption in the market.

Check out the role of accounting for companies in bankruptcy or bankruptcy. Come on?

 

Judicial recovery or bankruptcies in companies

Before we understand the role of accounting in bankruptcy or bankruptcy proceedings , we need to understand what this process is, how it is done and what it is for.

Thus, follow below what are the specifics of each of the following processes.

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Judicial recovery

The Judicial Reorganization process , according to   Law No. 11,101 / 2005 , is configured as the process of legal mechanism, popularly known as “ New Bankruptcy Law” .

In other words, its main objective is to provide support for companies to overcome their financial difficulties .

Thus, its application occurs directly at the source producing a business. In short, its focus is to ensure that payment is made to its suppliers and employees, thus preserving the social function.

However, for a company to be entitled to judicial reorganization , it is necessary to file a mandatory form, in court. In this way, it becomes possible to enter into an agreement with your creditors, in addition to creating a reorganization plan .

Take the opportunity to learn more by reading: Financial restructuring: Learn how to plan finances in adverse situations

 

When to choose this process?

When it comes to bankruptcy or bankruptcy proceedings, you need to be aware of the reasons that lead an enterprise to this context.

Check below what are the main factors that can influence the operation of a company, making it need such a process:

  • The lack of working capital;
  • Lack of liquidity;
  • Lack of effective management of working capital;
  • The absence of financial or budgetary control;
  • Increased average payment terms.

Thus, it is of fundamental importance that the entrepreneur is attentive to the management of his company, in order to prevent and identify which of these aspects are impacting on the enterprise.

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And the role of accounting ?

As we said earlier, accounting has been working, daily, within companies in different ways.

Among them, the accounting professional has been working in the preparation of analysis of accounting and tax documents during the recovery of a business.

Thus, when a company chooses to prepare a request for judicial reorganization , it becomes necessary to pay attention to the following documents:

  • Balance sheet;
  • Statement of all accumulated results;
  • Income statement, counting since the last fiscal year;
  • Management Report related to cash flow and its projections.

Thus, during the reorganization process, some elements must be analyzed, such as, for example, a financial and economic analysis and accountability in a judicial administrator.

Therefore, according to article 21 of  Law 11.101 , the performance of an accounting expert is mandatory, in which he will exercise the role of judicial administrator.

The accountant is an extremely important factor within business organizations. In this way, the professional becomes responsible for preparing all the necessary documents.

In other words, your professional technical knowledge is essential for understanding financial debts and liquidity percentage .

Now that the reader already knows the role of accounting in judicial reorganization or bankruptcy processes , how about continuing to read our contents and learn:  what are the challenges of undertaking in Brazil?

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