Would liquidated assets be sufficient to pay liabilities in a liquidation? (Balance Sheet Test)

An apparently solvent balance sheet may include items that are overstated, such as property, stock, goodwill and work in progress, or bad debtors that are not really collectable.

After reassessing & deducting these items many balance sheets become insolvent.

You are legally required to present accounts to show a true and fair picture of the business.

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