Account of insolvency cost

Abstract

The account of the insolvency cost is a modern tool for management accounting, enabling to satisfy the creditors of the insolvent company to the largest extent, by minimizing and controlling the costs incurred by an entity. In addition, it allows the application of appropriate actions and measures preventing from bankruptcy in the occurrence of a unit being in financial difficulty, and it demonstrates the capacity to improve performance.

The application of the insolvency cost account permits a bankruptcy cost reduction, whose amount depends on a particular industry, value of company assets, insolvency forms, and the insolvency process duration. In practice, it permits to minimize the incurred insolvency costs to essential and necessary costs for the proper conduct of the insolvency proceedings.