Module 1 of CA Inter GR-1

CA-Inter
GROUP-1
HANDWRITTEN
NOTES
MODULE-1
(As Per New Syllabus)
For May 2021

Onwards
CA. PARVEEN JINDAL

Chapter
Particulars Page Range
No.
1 Departmental Accounts 1-38
Lecture-Part 1 1-8
Lecture-Part 2 8-10
Lecture-Part 3 11-18
2 Accounting for Bonus Issue & Right Issue 39-48
3 Redemption of Preference Shares 49-66
4 Pre Incorporation Profits 67-87
5 Hire Purchase & Installment System 88-133
6 Insurance Claims 134-170
Lecture-Part 5 152
7 Single Entry System 171-219
Lecture-Part 8 219
8 Conceptual Framework on Accounting Standard In India 220-226
9 Accounting Standard -16 { Borrowing Cost} 227-256
10 Accounting Standard -11 { Foreign Currency Transaction } 257-270
Lecture-Part 4 270
11 Branch Accounting 271-330
12 Accounting Standard -13 {Investment Accounting} 331-359
Thank You
Best of Luck…..!!!!!!
CA. Parveen Jindal
CA. PARVEEN JINDAL CLASSES
Chapter-2
Accounting for Bonus Issue & Right Issue
Thank You !!
Best of Luck
CA. Parveen Jindal
CA Inter Accounts Group I CA Parveen Jindal Classes
Lecture Part-1 Chapter-10

AS – 11 (Revised 2003)
Foreign Currency Transaction
Contents:
a) Applicability & Nature
b) Scope of AS - 11
c) Explanation on Different Concepts
d) Disclosures
e) AS v/s Ind AS -21
f) Ind AS v/s IAS
Applicability & Nature

Applicable : 1.4.2004 onwards.
Nature : Mandatory for all without any exemption
Scope of AS - 11
Coverage of AS-11
Foreign Currency Forward Contracts Foreign Currency Foreign

Transactions Loan operation
Important Definitions:
a) Meaning of Foreign Currency: AS per the provision of AS-11, foreign currency is the
currency which is other than Indian Currency.
b) Meaning of Exchange Rate: As per the provisions of A-11 an exchange rate is the rate at
which one unit of Foreign currency can be converted into the Indian Currency.
Exchange Rate = 1 unit of foreign Currency = Rs. (i.e. 1 $=Rs. etc.)
We can classify the exchange rate under the followings heads:-
i) Opening Exchange Rate: Which prevails in the beginning of year
ii) Closing Exchange Rate : Which prevails at the end of year
iii) Average Exchange Rate: Which prevails during the year
Avg Rate= Aggregation of All Rates Prevailing during the periods

Total No. of days during the period
In case Avg Rate is not given in practical Questions then we can calculate Avg. Rate as follows:-
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Avg Rate= Opening Rate + Closing Rate

2
iv) Actual Rate/ Spot Rate/ Transaction Rate/ Daily Report:-
Which prevails on daily basis in the market or which prevails on the date of
Transaction.
In Practical life, Buying Rate is considered for liability & selling price is considered for
Assets on daily basis.
Normally buying Rate remains higher than selling Rate but in this AS, we are assuming that these
Rates Shall remain same.
c) Meaning of Monetary Assets:-(Imp)

AS per AS-11 Monetary items are the Asses & Liabilities which are fixed from the point of view
of receivable or Payable in foreign currency.
(i.e. foreign currency Deb., Foreign Currency cre., F.C. Loan, F.C. Cash, F.C. Bank etc.)
d) Meaning of Non- Monetary Items:

As per the Provisions of AS-11, Non -monetary items are the Assets & Liabilities which are
not fixed in foreign currency from the point of View of Receivable and Payables.
(i.e. Fixed Assets (Tangible & Intangible), Investment, Stocks etc.)
e) Meaning of Foreign Operation:

AS per the provisions of AS-11, Foreign operation is a business which is carried by an
enterprise outside India. It may be in the farm of branch, subsidiary, Associate or JV.
Further it is classified by AS-11 under 2 different headings as follows:

1) IFO – Integral Foreign operation
2) NFO- Non -Integral foreign operation
Explanation on different concepts:-

Concept 1 Explanation on Foreign Currency transaction-
(i.e. Import, Export etc.)
Concepts
Situtaion-1 Situtaion-2
Settlement in Settlement in
same Year Next Year
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Situation 1- Settlement in same year

Step I : Initial Recognition
Step II : Settlement
Step I: Initial Recognition: Should be made at the Rate which was prevailing on the date of
Transaction.
Step II: Settlement: should be made at the Rate which was prevailing on the date of Settlement.
Step III: Step 1- Step 2 = Exchange Fluctuation
Gain Loss
Example 1: n
 Nature of Transaction : Export
 Export Value : $15000 (1.7.2016)
 Settlement date : 1.9.2016 (1$ =62)
 Transaction date : 1.7.2016 (1$ =60)
Pass Journal Entries?
Solution:
1.7.2016 Foreign Currency Debtors A/c----- Dr. ($15000* 60) 9, 00,000
To Sales 9, 00,000
(Being Goods Sold)
1.9.2016 Bank A/c ----------------------Dr. ($15000* 62) 9, 30,000

To Foreign Currency Debtors A/c 9,00,000
T0 Exchange Gain 30,000
(Being Settlement made)
Example 2:
 Nature of Transaction : Import
 Import Value : $ 10000 (1.7.2016)
 Date of Import : 1.7.2016 (1 $ =60)
 Date of payment : 1.9.2016 (1 $ =63)
Solution:
1.7.2016 Purchases A/c----- ------Dr. ($10000*60) 6,00,000
To foreign currency creditors 6,00,000
(Being Goods Purchased)
1.9.2016 Foreign Currency Creditors A/c ------Dr. 6,00,000

Exchange loss A/c-----------------------Dr. 30,000
To Bank A/c ($10 000*63) 6,30,000
(Being Settlement made)
Situation II: Settlement in Next Year

Step I : Initial Recognition
Step II: B/s date
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Step III: Settlement

Step I: Initial recognition should be made at the rate which prevails on the date of
Transaction.
Monetary Items should be reported at

Step II: Balance sheet date closing rate for True and fair
presentation
Non-monetary items should be reported

at actual rate without any change.
Step III: On Settlement date:

On the settlement date, settlement should be recorded at the rate which prevails on the date of
Settlement.
Example 1
 Nature of Transaction : Export
 Export Value : $ 10,000
 Date of Export : 1.2.2016(40)
 B/s date : 31.3.2016 (42)
 Collection date : 1.5.2016(45)
Answer:
Journal Entries
01.02.2016 Foreign Currency Debtors Account ($10,000*40) 4,00,000
To Sales 4,00,000
(Being Goods sold)
31.03.2016 Foreign Currency Debtors Account ($10,000*{42-40}) 20,000

To Sales 20,000
(Being Monetary item reported at closing rate)
01.05.2016 Bank Account ($10,000*45) 4,50,000

To Foreign Currency debtors ($10,000*42) 4.20,000
To Exchange gain (balancing figure) 30,000
(Being Collection Made from debtors)
Example 2
 Nature of Transaction : Import of goods
 Import Value : $ 2,000
 Date of Import : 1.2.2016(60)
 B/s date : 31.3.2016 (63)
 Payment date : 1.5.2016(62)
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Answer:
Journal Entries
01.02.2016 Purchases Account ($2,000*60) 1,20,000
To Creditors 1,20,000
(Being Goods Purchased)
31.03.2016 Exchange Loss Account (2,000*{63-60}) 6,000

To Creditors 6,000
01.05.2016 Creditors Account 1,26,000

To Bank (2,000*62) 1.24,000
To Exchange gain (balancing figure) 2,000
(Being payment Made to creditors)
Lecture Part-2
Concept 2: Forward Contracts
Forward Contracts
Hedge Contract Speculative Contracts

Unit 1: Hedge Contract
Example
Nature :Export of Goods
Export Value : $ 10,000
Date of Export : 1.6.2016 ( Rs.60)
Forward Rate (3m) : (Rs. 58)
Date of Settlement : 1.9.2016 (56)
Pass Journal Entries relating to Forward contracts.
Answer:
Journal Entries
1.6.2016 Debtors A/c ------------- Dr. (10,000X60) 6, 00,000
To Sales 6, 00,000
(Being Goods Sold)
1.6.2016 Forward Contracts Receivable A/c ---Dr. (58) 5, 80,000

Discount A/c„„„„„„„„„„„„„„„„„Dr. (2) 20,000(bal)
To Forward Contracts Payable (60) 6, 00.000
(Being Forward contract entered)
1.9.2016 Bank A/c -------------- Dr. ($10,000X56) 5, 60,000

Exchange Fluctuation----Dr. ($10,000X4) 40,000
To Debtors (10,000X60) 6, 00,000
(Being Collection from debtors made)
1.9.2016 F.C. Payable A/c ------------ Dr. 6, 00,000

To Bank 5, 60,000
To Exchange Fluctuation 40,000
(Being Amount collected from debtors transferred)
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1.9.2016 Bank A/c ---------------- Dr. 5, 80,000

To F.C. Receivable 5, 80,000
(Being Amount Received as per contracts)
31.3.2017 P&L A/c -------------------- Dr. 20,000

To Discount 20,000
(Being Forward discount written off)
Example
Nature of Transaction :Export of Goods
Forward Rate (3m) : (Rs.57)
Journal Entries
1.6.2016 Debtors A/c ------------- Dr. (10,000X60) 6, 00,000
To Sales 6, 00,000
(Being Goods Sold)
1.6.2016 Forward Contracts Receivable A/c ---Dr. (57) 5, 70,000

Discount A/c„„„„„„„„„„„„„„„„„Dr. (3) 30,000(bal)
(Being Forward contract entered)
1.9.2016 Bank A/c -------------- Dr. ($10,000X61) 6, 10,000

To Exchange Fluctuation----Dr. ($10,000X1) 10,000
To Debtors ($10,000X60) 6, 00,000
1.9.2016 F.C. Payable A/c ------------ Dr. 6, 00,000

Exchange Fluctuation--------Dr. 10,000
To Bank 6, 10,000
1.9.2016 Bank A/c ---------------- Dr. 5, 70,000

To F.C. Receivable 5, 70,000
(Being Amount Received as per contracts)
31.3.2017 P&L A/c -------------------- Dr. 30,000

To Discount 30,000
(Being Forward discount written off)
e.g. (settlement in next year)

Example
Nature of Transaction :Export of Goods
Transaction Date : 1.2.2016 ( Rs.40)
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Forward Contract (3m) : (Rs.38)

B/S date: 31.3.2016 :39
Journal Entries
1.2.2016 Debtors A/c ------------- Dr. (10,000X40) 4, 00,000
To Sales 4, 00,000
(Being Goods Sold)
1.2.2016 Forward Contracts Receivable A/c ----Dr. (38) 3 80,000

Discount A/c„„„„„„„„„„„„„..Dr. (2) 20,000(bal)
(Being Forward contract entered into)
31.03.2016 Exchange Fluctuation----- Dr. (10,000*{40-39}) 10,000

(b/s) To Debtors 10,000
(Being monetary items reported at closing rate)
31.3.2016 F.C. Payable A/c ------------ Dr. 10,000

(Being F.C. payable amt reduced due to decline in debtors)
31.3.2016 P&L A/c -------------------- Dr. 13,333

To forward discount {20000/3*2}-Feb & March 13,333
(Being Forward discount written off on SLM basis)
1.5.2016 Bank A/c -------------- Dr. (10,000X36) 3,60,000

Exchange Fluctuation----------------- Dr. (10,000X3) 30,000
To Debtors (10,000X39) 3, 90,000
1.5.2016 F.C. Payable A/c ------------ Dr. 3, 90,000

To Exchange Fluctuation A/c 30,000
To Bank 3,60,000
1.5.2016 Bank A/c ------------ Dr. 3, 80,000

To F.C. receivable A/c 3,80,000
(Being collection for F.C. receivable made)
31.3.2017 P&L A/c -------------------- Dr. 6667 (1m)

To forward discount 6667
(Being Forward discount written off )
e.g, If any exporter estimates in exchange rate then comment on forward contract in this case?
Solution: There is no need of hedge contract because the position is favourable for the exporter.
Example
Nature of Transaction :Import of Goods
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Date of Payment : 1.9.2016 (64)
Journal entries
1.6 Purchases A/c„„„„„„..Dr (2000*60) 1,20,000
To creditors 1,20,000
(Being goods purchased)
1.6 F.C. Receivable „„„„..Dr 1,20,000

Forward premium„„„„Dr 2,000
(61) To F.C. Payable 1,22,000
(Being forward contract entered into)
1.9 Creditors A/c/ „„„„„Dr. 1,20,000

Exchange fluctuations a/c „.Dr 8,000 (bal)
To bank 1,28,000
(Being payment made
1.9. Bank A/c „..Dr 1,28,000

To F.C. Receivable 1,20,000
To Exchange fluctuations 8,000
(Being amt paid to creditors recovered)
1.9 F.C. Payable„„„Dr 122000

To Bank 122000
(Being amt deducted as per contract)
PL a/c „„„„Dr 2000

To F premium 2000
(being premium written off)
Example:
Nature of Transaction :Import of Goods
Date of Payment : 1.9.2016 (58)
Journal entries
1.6 Purchases A/c„„„„„„..Dr (5000*60) 3,00,000
To creditors 3,00,000
(Being goods purchased)
1.6 F.C. Receivable „„„„..Dr 3,00,000

Forward premium„„„„Dr (bal) 10,000
To F.C. Payable (Fixed) 3,10,000
(Being forward contract entered into)
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1.9 Creditors A/c/ „„„„„Dr. (60) 3,00,000

To bank (58) 2,90,000
To Exchange fluctuations (2) 10,000
(Being payment made
1.9. Bank A/c „..Dr 2,90,000

Exchange fluctuations„„„Dr. 10,000
(Being amt paid to creditors recovered)
1.9 F.C. Payable„„„Dr 3,10,000

To Bank 3,10,000
(Being amt deducted as per contract)
PL a/c „„„„Dr 10,000

To F premium 10,000
e.g. (settlement in next year)

Example
Nature :Import
Value : $2,000
Date of Import : 1.2.2016 ( Rs.60)
Forward Contract (3m) : Rs.62
B/S date: 31.3.2016 :63
Journal Entries
1.2.2016 Purchases A/c ------------- Dr. (2,000X60) 1, 20,000
To Creditors 1,20,000
(Being Goods imported)
1.2.2016 Forward Contracts Receivable A/c ----Dr. 1 ,20,000

Forward premium A/c„„„„„„„„„„„„.Dr. (2) 4,000
To Forward Contracts Payable (40) 1,24,000
(Being Forward contract entered into)
31.03.2016 Exchange Fluctuation---------Dr. (2000*({63-60}) 6,000

(b/s) To Creditors 6,000
(Being monetary items reported at closing rate)
31.3.2016 F.C. Receivable A/c ------------ Dr. 6,000

To Exchange Fluctuation A/c 6,000
(Being receivable increased due to increase in creditors )
31.3.2016 P&L A/c -------------------- Dr. 2666 (4000/3)*2

To forward discount 2666
(Being premium written off over contract life on SLM basis)
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1.5.2016 creditors a/c/ -------------- Dr. (63) 1,26,000

Exchange Fluctuation----------------- Dr 2,000
To Bank (64) 1,28,000
(Being Amt paid to creditors)
1.5.2016 Bank a/c„„„„„„„„„„„„„„..Dr 1,28,000

(Being paid amt recovered)
1.5.2016 F.C payable a/c„„„„„„„„„...Dr 1,24,000

To Bank 1,24,000
(Being Amt paid as per contract)
31.3. 2017 P&L „„„„„„„„„„„„„„„„..Dr 1334

To F. premium 1334
Notes on Hedge Contract
Managing risk
As per the provisions of As-11 the following points should be considered while accounting for hedge
contract:
1. There will be no change in accounting for import & export transactions.
2. The difference between spot rate and forward rate will be recognized as discount/premium and
should be written off on S.L.M. basis over the contract period.
3. The final settlement will be made at forward rate whatever the amount is collected or paid.
Lecture Part-3
Forward Contracts for speculation:
Under Speculation contracts, there will be no accounting for debtors, creditors, forward
contract receivable or payable, forward discount or forward premium but these contracts
are accounted from the point of view of speculation profit/loss directly.
The following step should be applied to calculate profit or loss from speculative contracts.
Step 1: On Balance sheet date=Market rate on BS date- forward Rate {Profit/Loss}
Step 2: Settlement date= Market rate on settlement date- Market rate on BS date.
Example
Forward Contract (Speculation) :$10,000 (Buying)
Forward rate (3 Month) : Rs.40
Balance sheet date(Market rate) : Rs.42
Settlement date : Rs. 41
Answer:
Balance sheet = $10,000*{42-40}= 20,000 (Profit)
Settlement Date=$10,000*{41-42}=10,000 (Loss)
Example
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Forward Contract (Speculation) :$10,000 (Buying)

Forward rate (3 Month) : Rs.45
Balance sheet date(Market rate) : Rs.44
Settlement date : Rs.48
Answer:
Balance sheet = $10,000*{45-44}= 10,000 (Profit)
Settlement Date=$10,000*{48-44}=40,000 (Loss)
Overall = 30,000 (loss)
Concept -3 Accounting for foreign currency loans (v.v. Imp)-Para 46A
Foreign Loans
Short Term loans Long Term Loans
Taken for Taken for

Business needs acquisition of
Assets
Explanation on short Term Loans:
If any enterprise has taken short term loans then we shall consider the same accounting which
is done for import/export of goods;
It can also be said that there will be no difference between foreign currency creditors and short
term financers.
Example:
X Ltd has borrowed $ 25,000 on 01.01.2005 and it is repayable on 31.12.2005, but books of X Ltd are
closed on 31.03.2005. The exchange rate on 01.01.2005, 31.03.2005 and 31.12.2005 were Rs.40, Rs.42,
Rs.45 respectively. Pass necessary journal entries?
Answer:
Journal Entries
Date Particulars Dr. Amount Cr. Amount
01.01.2005 Bank Account (25,000*400) 10,00,000
To Foreign Currency Loans 10,00,000
(Being Foreign Currency loans taken)
31.03.2005 Exchange Loss Account (25,000*{40-42}) 50,000
(B/S) To Foreign Currency Loan 50,000
31.12.2005 Foreign Currency Loans Account (42) 10,50,000
Exchange loss Account (3) 75,000
To Bank (25000*45) 11,25,0000
(Being Settlement Made)
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Explanation on Long Term Loans:

1st Case Business Needs)
As per provisions of AS-11, the following steps should be applied while accounting for long
tern loans:
Step 1: It should be a long term loan. It means that it should be repayable after 12 months.
Step 2: On Balance sheet date, it should be reported at closing rate, but exchange fluctuation
due to disclosures of loan at closing rate should be transferred to FCMITDA
(Foreign currency monetary items Translation Difference Account).
Step 3: The O/S Balance in FCMITDA should be amortized over the period of loan on S.L.M.
basis in profit and loss account whether it is favourable or unfavourable.
Step 4: The unamortized balance in FCMITDA should be disclosed in balance sheet under the heading
of Reserves & surplus. If it represents exchange gain then it will increase Reserves & surplus,
but in case it represent loss then it will reduce Reserve & surplus.
Example:
Foreign loan : $10,000 (01.01.2006)
Repayable : 31.12.2008
Exchange rates : 01.01.2006 =Rs.40
: 31.12.2006 =Rs.43
: 31.12.2007 =Rs.42
: 31.12.2008 =Rs.45
Prepare foreign currency loan & FCMITDA ?
Answer:
Foreign Currency Loan Account
Date Particulars Amount Date Particulars Amount
31.12.2006 To Balance c/d 4,30,000 01.01.2006 By Bank 4,00,000
($10,000*40)
31.12.2006 By FCMITDA 30,000
($10,000*{43-40})
4,30,000 4,30,000
31.12.2007 To FCMITDA 10,000 01.01.2007 By Balance b/d 4,30,000
($10,000*{42-43})
31.12.2008 To Balance c/d 4,20,000
4,30,000 4,30,000
31.12.2008 To Bank 4,50,000 01.01.2008 By Balance b/d 4,20,000

31.12.2008 By FCMITDA 30,000
($10,000*{45-42})
4,50,000 4,50,000
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Foreign currency monetary items Translation Difference Account

31.12.2006 To Foreign 30,000 31.12.2006 By P&L A/c 10,000
Currency Loan (30,000/3)
31.12.2006 By Balance c/d 20,000
30,000 30,000
01.01.2007 To Balance b/d 20,000 31.12.2007 By Foreign Currency 10,000
Loan
31.12.2007 By P&L A/c 5,000
(10,000/2)
31.12.2007 By Balance c/d 5,000
20,000 20,000
01.01.2008 To Balance b/d 5,000 31.12.2008 By P&L A/c 35,000

31.12.2008 To Foreign 30,000
Currency Loan
35,000 35,000
Explanation on Long Term Loans: (vv imp)

(2nd Case Taken for fixed Assets & Qualifying Assets)
If any Foreign loan has been taken for acquisition of Assets then the exchange
fluctuation in foreign currency loan at each balance sheet should be transferred to
respective assets for which loan has been taken, It can also be said that cost of fixed
assets shall also fluctuate due to change in foreign currency loan.
Example:
Foreign loan :$20,000
Loan taken for fixed Assets
Depreciation on fixed assets : 15% WDV
Assets purchased on : 01.04.2008
Exchange rates : 01.04.2008 =Rs.45
: 31.03.2009 =Rs.46
: 31.03.2010 =Rs.48
Prepare Fixed Assets account & foreign currency loan?
Answer:
Foreign Currency Loan Account
31.03.2009 To Balance c/d 9,20,000 01.04.2008 By Fixed Asset 9,00,000
($20,000*45)
31.03.2009 By Fixed Assets 20,000
9,20,000 9,20,000
31.12.2010 To Balance c/d 9,60,000 01.04.2009 By Balance b/d 9,20,000
31.03.2010 By Fixed Assets 40,000
($20,000*2)
9,60,000 9,60,000
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Fixed Assets Account

01.04.2008 To Foreign 9,00,000 31.03.2009 By Depreciation (15%) 1,38,000
Currency Loan
($20,000*45)
31.03.2009 To Foreign 20,000 31.03.2009 By Balance c/d 7,82,000
Currency Loan
9,20,000 9,20,000
01.04.2009 To Balance b/d 7,82,000 31.03.2010 By Depreciation (15%) 1,23,300
31.03.2010 To Foreign 40,000 31.03.2010 By Balance c/d 6,98,700
Currency Loan
8,22,000 8,22,000
Important Note:
As per notification issued byt MCA in 2012, benefit under 46A can be availed only, if the company is
not taken benefit under “PARA 4e in AS-16” (i.e. only one benefit can be taken out of 46A & 4e.
Disclosure under AS-11:-

a) The accounting policy shoud be disclosed which has been applied for the accounting for
foreign currency transactions.
b) Treatment of balance in FCMITDA
c) It should also be reported that benefit of 46A has been taken or not
d) Accounting policy for forward contracts.
AS-11 v/s Ind As 21

No Major carve out
Lecture Part-4
Only Discussion
Thank You
Best of Luck„..!!!!!!
CA. Parveen Jindal
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Chapter 12: Branch Accounting (8-10Marks)

(V.V.Imp)
*Part I*
Coverage
Domestic Branch Foreign Branch

(Indian)
Independent only
Dependent Independent
Accounting Coverage
Unit I: Unit II: Unit III:

Dependent Independent Foreign
Branch Branch Branch
Unit I: Dependent Branch
Practically, Branch is a Unit of Business which is opened by Companies to increase

Sales & Profits. It is opened under Expansion programme to approach New Customers
at different locations. If any Branch is operated as a “Dependent Branch” then the
following features can be identified:
a) All the Goods shall be transferred by Head Office to Branch which are required by
Branch for Sale.
(Note: It means that Branch is not free to Buy Goods from Market)
b) All of Branch Expenses shall be paid by Head Office.
(Note: It means that Branch can not utilise its Cash)
c) Accounting Records of Branch shall be maintained by Head Office.
(Note: It means that Branch cannot maintain its Accounting Records itself)
Concept I: Methods for Accounting
There are 3 methods for the Accounting of Dependent Branches. These are as follows:
Method I- Stock & Debtors Method
Method II- Debtors Method
Method III- Final Accounts Methods
Note: Any method can be applied in the absence of any specific requirement because
answer will be same under all methods
If any Method is specifically required then required method should be applied.
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Concept II: Stock & Debtors Method
Required Accounts:
i) Branch Stock A/c
ii) Branch Debtors A/c
iii) Branch Cash A/c These A/cs are prepared for Branch
iv) Branch Expenses A/c
v) Branch P&L A/c
vi) Goods sent to Branch A/c (GSTB) These A/cs are prepared for Branch
In the Books of H.O.

Branch Stock A/c
Particulars Rs. Particulars Rs.
To GSTB xxxx By GSTB (Returns) xxxx
To Branch Sales Return: By Branch Sales:
Cash xxxx Cash xxxx
Credit xxxx xxxx Credit xxxx xxxx
To Gross Profit (Bal.fig) xxxx* By Bal c/d (Closing Stock) xxxx
xxxx xxxx
Next year
To Bal b/d (Opening Stock) xxxx
Branch Debtors A/c

To Branch Sales (Credit) xxxx By Branch Sales Return xxxx
By Branch Cash (Collection) xxxx
By Bad Debts xxxx
By Discount/ Allowances xxxx
By Bal c/d Xxxx*
xxxx xxxx
Next year
To Bal b/d xxxx
Branch Cash A/c

To Branch Sales xxxx By Branch Sales Return xxxx
To Branch Debtors xxxx By Branch Expenses xxxx
(Collection) By H.O Cash (Remitted) xxxx
To H.O Cash (Received) xxxx
By Bal c/d xxxx
xxxx xxxx
Next year
To Bal b/d xxxx
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Branch Expenses A/c

To Bad Debts xxxx
To Discount/ Allowances xxxx
To Branch Cash xxxx
To H.O Cash xxxx By Branch P&L (Ba.fig) xxxx
xxxx xxxx
Branch P&L A/c

To Branch Expenses xxxx By Gross Profit xxxxx
To Net Profit xxxx
xxxx xxxx
Goods sent to Branch A/c (GSTB) A/c

To Branch Stock xxxx By Branch Stock xxxx
To Trading a/c (H.O)

(Bal.fig)
xxxx xxxx
Accounting Steps-
Step I: Goods Sent by HO to Branch

Branch Stock a/c„„....Dr xxxx
To GSTB xxxx
(Being Goods sent to Branch)
Step II: Goods Returned by Branch to HO

GSTB a/c„„....Dr xxxx
To Branch Stock a/c xxxx
(Being Goods returned by Branch)
Step III: Goods sold by Branch on Cash & Credit

a) Branch Cash a/c„„.Dr xxxx
Branch Debtors a/c„„Dr xxxx
To Branch Sales xxxx
(Being Goods sold by Branch)
b) Branch Sales a/c„„Dr xxxx

To Branch Stock xxxx
(Being Sales transferred)
273 | P a g e
Step IV: If goods return by Customer to Branch

a) Branch Sales Return a/c„„Dr xxxx
To Branch Cash xxxx
(Being Returns recorded)
b) Branch Stock a/c„„.Dr xxxx
To Branch Sales Return xxxx
(Being Goods transferred to Stock)
Step V: Collection made by Branch from its Debtors

Branch Cash a/c„.„..Dr xxxx
To Branch Debtors xxxx
(Being collection made)
Step VI: Bad Debts, Discounts, Allowances etc. related with Debtors
a) Bad Debts a/c„„„„Dr xxxx
Discount a/c„„„„.Dr xxxx
Allowances a/c„„„.Dr xxxx
To Branch Debtors xxxx
(Being Expenses debited)
b) Branch Expenses a/c„„„Dr xxxx

To Bad Debts xxxx
To Discounts xxxx
To Allowances xxxx
(Being Expenses transferred)
Step VII: Branch Expenses paid by Branch

Branch Expenses a/c„„„..Dr xxxx
To Branch Cash xxxx
(Being Expenses paid by Cash)
Step VIII: Branch Expenses paid by H.O

Branch Expenses a/c„„„..Dr xxxx
To H.O Cash xxxx
(Being Expenses paid by H.O)
Step IX: Cash Remitted by Branch to H.O

H.O Cash „„.Dr xxxxx
To Branch Cash xxxxx
(Being Cash Remitted)
Cash transferred by H.O to Branch

Branch Cash a/c„„.Dr xxxx
To H.O Cash xxxx
(Being Cash Received from H.O)
274 | P a g e
*Part II*
Concept III: Additional points under Stock & Debtors Method
Point 1: Daily Remittances by Branch to Head Office
If Daily Remittances are mentioned in Questions then the following 3 points should
be considered:-
a) There will be no Opening or Closing Balance in Branch Cash A/c.
b) Total Collections = Total Remittances
c) The payment for Branch Expenses will be made by H.O due to NIL balance in Branch
Cash A/c.
Point 2: Petty Cash A/c

Branch Petty Cash A/c
To Bal b/d xxxx By Branch Petty Expenses xxxx*
To H.O Cash A/c xxxx (Bal.fig)
(Cash Received from H.O for
Petty expenses) By Bal c/d xxxx
xxxx xxxx
“These expenses shall be transferred to Branch Expenses A/c”
Q.2 (Concept Building Ques)

Solution:
In the Books of Bombay Trading Co.
Delhi Stock A/c

To Bal b/d 7,000 By GSTB a/c 1,000
To GSTB a/c 26,000 By Delhi Sales:
To Delhi Sales Return 500 Cash 17,500
Credit 28,400
To Gross Profit (bal.fig) 19,900* By Bal c/d 6,500
53,400 53,400
Delhi Debtors A/c

To Bal b/d 12,600 By Allowances 200
To Delhi Sales 28,400 By Discount 1,400
By Bad Debts 600
By Delhi Sales Return 500
By Delhi Cash 28,500
By Bal c/d 9,800

41,000 41,000
275 | P a g e
Delhi Cash A/c

To Bal b/d 0 By H.O Cash (bal.fig) 46,000*
To Delhi Sales 17,500
To Delhi Debtors 28,500
To Bal c/d 0
46,000 46,000
Delhi Expenses A/c

To Allowances 200 By Delhi P&L (Bal.fig) 10,500*
To Discount 1,400
To Bad Debts 600
To H.O Cash (Total) 8,200
To Branch Petty Cash 100
10,500 10,500
Delhi P&L A/c

To Delhi Expenses 10,500 By Gross profit 19,900
To Net Profit (bal.fig) 9,400
19,900 19,900
GSTB A/c
To Delhi Stock 1,000 By Delhi Stock 26,000
To H.O Trading A/c 25,000*
(Bal.fig)
26,000 26,000
Delhi Petty Cash A/c

To Bal b/d 200 By Delhi Expense(ba.fig) 100*
By Bal c/d 100
200 200
Point 3: If Goods are sent by Head Office to Branch at “Invoice Price”
Step I: At the time of goods sent by Head Office at Invoice Price(IP)
a) Branch Stock a/c„„„.Dr xxxx (IP)

To GSTB xxxx (IP)
(Being goods sent to Branch)
b) GSTB a/c„„„„Dr xxxx

To Branch Adjustment xxxx
(Being Loading in Stock transferred)
276 | P a g e
Step II: If goods returned by Branch to H.O
a) GSTB a/c„„..Dr xxxx (IP)

To Branch Stock xxxx (IP)
(Being Goods returned)
b) Branch Adjustment a/c„„..Dr xxxx

To GSTB xxxx
(Being loading reversed)
Step III: Calculate OSR & CSR because Branch Stock is maintained at Invoice Price in
Adjustment A/c
Branch Stock a/c (IP)
TO Bal b/d xxxx By GSTB xxxx
To GSTB xxxx By Branch Sales: Cash xxxx
To Branch Sales Return xxxx Credit xxxx
To Gross Profit xxxx By Bal c/d xxxx
Nil or Nominal xxxx xxxx
GSTB A/c
To Branch Adjustment xxxx By Branch Stock xxxx
To Branch Stock (Returns) xxxx
To H.O Trading a/c xxxx By Branch Adjustment xxxx
(Bal.fig)
xxxx xxxx
Loading
Branch Adjustment
To GSTB (Returns) xxxx By GSTB (Loading) xxxx
To Stock Reserve (CSR) xxxx By Stock Reserve (OSR) xxxx
To Gross Profit (total) xxxx By Gross Profit (Nominal) xxxx

xxxx xxxx
277 | P a g e
Q.5 (Concept Building Ques)

Solution:
In the Books of H.O
Coaching Stock A/c (Invoice Price)

To Bal b/d 60,000 By GSTB (Return) 12,000
By Coaching Sales: Cash 2,00,000
To GSTB 6,00,000 Credit 3,60,000
To Coaching Sales Return 8,000
To Gross Profit (Nominal) 24,000* By Bal c/d 1,20,000

(bal.fig)
6,92,000 6,92,000
Coaching Debtors A/c

To Bal b/d 72,000 By Coaching Cash 3,20,000
To Coaching Sales 3,60,000 By Discount 6,000
By Bad debts 4,000
By Coaching Sales Return 8,000
By Bal c/d (bal.fig) 94,000*
4,32,000 4,32,000
Coaching Cash A/c

To Bal b/d 0 By H.O Cash (bal.fig) 5,20,000*
To Coaching Sales 2,00,000
To Coaching Debtors 3,20,000 By Bal c/d 0
5,20,000 5,20,000
Coaching Expenses A/c

To Discount 6,000 By Coaching P&L (bal.fig) 94,000
To Bad debts 4,000
To H.O Cash (total expenses) 84,000
94,000 94,000
Coaching P&L A/c

To Coaching Expenses 94,000 By Gross Profit(total) 1,29,600
To Net Profit 35,600*
1,29,600 1,29,600
GSTB A/c
To Coaching Adjustment 1,20,000 By Coaching Stock (IP) 6,00,000
(6lacs x 25/125)
To Coaching Stock (Return) 12,000 By Coaching Adj. (Returns) 2,400
278 | P a g e
(12,000 x 25/125)
To H.O Trading a/c (bal.fig) 4,70,400*
6,02,400 6,02,400
Coaching Adjustment A/c

To GSTB (Return) 2,400 By GSTB a/c 1,20,000
To Stock Reserve (Closing) 24,000 By Stock Reserve (Opening) 12,000
(1,20,000 x 25/125) (60,000 x 25/125)
To Gross Profit (Total) 1,29,600* By Gross Profit (Stock) 24,000
1,56,000 1,56,000
Q.4
Solution:
In the Books of Sell Well Ltd
Branch Stock A/c (Invoice Price)
To Bal b/d - By Branch Sales (Credit) 1,35,000
To GSTB (1,50,000 + 10%) 1,65,000 By GSTB (Returns) 4,200
By Bal c/d 53,400
To Gross Profit (bal.fig) 27,600*
1,92,600 1,92,600
Branch Debtors A/c

To Bal b/d - By Branch Cash 1,06,000
To Branch Sales 1,35,000 By Bal c/d 29,000
1,35,000 1,35,000
Branch Cash A/c

To Bal b/d - By H.O Cash 1,06,000
To Branch Debtors 1,06,000 By Bal c/d -

1,06,000 1,06,000
GSTB A/c
To Branch Adjustment 15,000 By Branch Stock 1,65,000
To Branch Stock 4,200 By Branch Adjustment 382
To H.O Trading (ba.fig) 1,46,182* (4,200 x 10/110)
1,65,382 1,65,382
Branch Adjustment A/c

To GSTB (Return) 382 By GSTB 15,000
To Stock Reserve
(53,400 x 10/110)
To Gross Profit (total) 37,363* By Gross Profit (Stock) 27,600
42,600 42,600
279 | P a g e
*Part III*
Q.3 (Imp) [8 marks]
Solution:
In the Books of Harrison Ltd
To Bal b/d (25,000 + 20%) 30,000 By Branch Sales: Cash 59,000
To GSTB (2 lacs +20%) 2,40,000 Credit 1,65,000
To Gross Profit (bal.fig) 2,000* By Bal c/d:

In transit 20,000
In hand 28,000 48,000
2,72,000 2,72,000
Branch Debtors A/c

To bal b/d 32,750 By Bad Debts 750
To Branch Sales 1,65,000 By Branch Cash (bal.fig) 1,71,000*
By Bal c/d 26,000
1,97,750 1,97,750
Branch Cash A/c

To bal b/d 5,000 By H.O Cash (Remittance) 2,22,500
To Branch Sales 59,000 By Branch Expenses (bal.fig) 10,000*
To Branch Debtors 1,71,000 By Bal c/d 2,500
2,35,000 2,35,000
Branch Expenses A/c

To Bad Debts 750 By Branch P&L (bal.fig) 22,750*
To HO Cash 12,000
To Branch Cash 10,000
Branch P&L A/c

To Branch Expenses 22,750 By Gross Profit 39,000
39,000 39,000
GSTB A/c
To Branch Adj. (loading) 40,000 By Branch Stock 2,40,000
To HO Trading (bal.fig) 2,00,000*
2,40,000 2,40,000
280 | P a g e

To Stock Reserve (Closing) 8,000 By GSTB (loading) 40,000
(48,000 x 20/120) By Stock Reserve (Opening) 5,000
To Gross Profit (total) 39,000* By Gross Profit(Stock) 2,000
47,000 47,000
Q.20 & 21
Solution: Homework
Point 4: Treatment of Abnormal Losses of Stock at Branch

(i.e; Loss by fire, loss by theft, loss by pilferage etc.)
a) Abnormal Losses a/c„„..Dr xxxx (IP)
To Branch Stock xxxx (IP)
(Being Abnormal Losses recorded)
b) Branch P&L a/c„„„„„„„Dr xxxx (Upto Cost)

Branch Adjustment a/c„..Dr xxxx (loading)
To Abnormal Loss xxxx (IP)
(Being Losses w/off)
Treatment of Insurance Claim if received for Abnormal Loss

a) Branch Cash a/c„„..Dr xxxx
To Insurance Claim xxxx
(Being Claim received)
b) Insurance Claim a/c„„„.Dr xxxx

To Branch P&L xxxx
(Being Income transferred)
Q.7 (Imp)
Solution:
In the Books of Bombay Traders Ltd
To Bal b/d 80,000 By Abnormal Loss 21,000
To GSTB 12,00,000 (pilferage + loss in transit)
By Branch Sales 12,19,000
By Bal b/d 40,000

12,80,000 12,80,000

To Abnormal Loss 4,200 By Stock Reserve (Opening) 16,000
(21,000 x 25/125) (80,000 x 25/125)
To Stock Reserve (Closing) 8,000 By GSTB 2,40,000
(40,000 x 25/125)
To Gross Profit (bal.fig) 2,43,800*
281 | P a g e
2,56,000 2,56,000
Branch P&L A/c

To Abnormal Loss 16,800 By Insurance Claim 10,000
(21,000-4,200)
To Branch Expenses 60,000 By Gross Profit 2,43,800
To Net Profit (bal.fig) 1,77,000*

2,53,800 2,53,800
GSTB A/c
To Branch Adjustment 2,40,000 By Branch Stock 12,00,000
(12 lacs x 25/125)
Q.16
Solution:
In the Books of X & Co.
To Bal b/d 2,250 By Branch Sales: Credit 27,600
To GSTB a/c (1,00,000 + ½) 1,50,000 Cash 1,21,050
To Branch Sales Return 300 By GSTB Return 780
By Abnormal Loss 1,260
To Gross Profit (bal.fig) 840* By Bal c/d 2,700
1,53,390 1,53,390
Branch Debtors A/c

To Bal b/d 1,320 By Branch Cash (Collection) 26,390
To Branch Sales 27,600 By Branch Sales Return 300
By Bal c/d 2,230

28,920 28,920
Branch Cash A/c

To Branch Debtors 26,390 By H.O Cash (Remittance) 26,390
(Collection)
To Branch Sales 1,21,050
To Insurance Claim 730 By Bal c/d (bal.fig) 1,21,780*
1,48,170 1,48,170
Branch Expenses A/c

To H.O Cash (Expenses) 36,780 By Branch P&L 36,780*
36,780 36,780
282 | P a g e
Branch P&L A/c

To Abnormal Loss (1,260-420) 840 By Insurance Claim 730
To Net Profit (bal.fig) 13,120*
50,740 50,740
GSTB A/c
To Branch Adjustment 50,000 By Branch Stock 1,50,000
(1,50,000 x 1/3)
To Branch Stock (Return) 780 By Branch Adj. (780 x 1/3) 260
To H.O Trading (bal.fig) 99,480*
1,50,260 1,50,260

To GSTB a/c (Return) 260 By GSTB a/c (loading) 50,000
To Stock Reserve (Closing) 900 By Stock Reserve (Opening) 750
(2,700 x 1/3) (2,250 x 1/3)
To Abnormal Loss 420
(1,260 x 1/3) By Gross profit (Stock) 840
To Gross Profit (Total) 50,010
51,590 51,590
Point 5: Treatment of Normal Loss

(i.e; Leakage, Shortage etc.)
There will be No Accounting for Normal loss as it is adjusted in Closing Stock
Valuation. It can also be said that Impact of Normal Loss can be taken on Gross
Profit by reduction in Closing Stock. (Just ignore Normal Loss if given in Ques)
Q.17
Solution:
In the Books of Atlantic Papers
Branch Stock A/c
To Bal b/d 5,000 By Abnormal Loss (Loss +Theft) 3,500
To GSTB 20,000 By Branch sales 25,500
35,000 35,000

To Abnormal Loss 583 By Stock Reserve(5,000 x 20/120) 833
(3,500 x 20/120) By GSTB (20,000 x 20/120) 3,333
To Stock Reserve 1,000
(6,000 x 20/120) By Gross Profit 10,000
283 | P a g e
To Gross Profit(total) 12,583

14,166 14,166
Branch P&L A/c

To Abnormal Loss 2,917 By Insurance Claim 2,000
(3,500-583)
14,583 14,583
Q.15
Solution:
In the Books of Empire Store Ltd
Branch Stock A/c
To Bal b/d 15,000 By GSTR (Return) 700
To GSTB a/c 50,800 By Branch Sales: Cash 33,500
To Branch Sales Return 580 Credit 60,000
By Abnormal Loss 3,000
1,11,100 1,11,100
Branch Debtors A/c

To bal b/d 26,200 By Allowances 320
To Branch Sales 60,000 By Branch Sales Return 580
By Discount 2,400
By Bad debts 600
By Bal c/d 31,100
By Branch Cash (bal.fig) 51,200*
86,200 86,200
Branch Cash A/c

To Bal b/d 300 By H.O Cash 74,900
To H.O Cash (Received) 1,500 By Branch Expenses(total) 9,100
To Branch Sales 33,500
To Branch Debtors 51,200 By Bal c/d (bal.fig) 2,500
86,500 86,500
Branch Expenses A/c

To Allowances 320 By Branch P&L (bal.fig) 12,420*
To Discount 2,400
To Bad debts 600
To Branch Expenses(total) 9,100
12,420 12,420
284 | P a g e
Branch P&L a/c

To Abnormal Loss 3,000 By Gross Profit 44,720
To Branch Expenses 12,420

44,720 44,720
GSTB A/c
To Branch Stock (Return) 700 By Branch Stock 50,800
To H.O Trading (bal.fig) 50,100*
50,800 50,800
*Part IV*
Point 6: Inter Branch Transfer (IBT)
If there are same transaction between the Branches then these transactions are
Called Inter Branch Transactions. These transactions are recorded as these are
Undertaken by Branches with H.O. It can also be said that there will be No Accounting
Between branches.
Ex: Cash sent by 1 branch to other
In the Books of H.O
Sending Branch Receiving Branch

Cash (H.O) a/c„„„.Dr Branch Cash a/c„„..Dr
To Branch Cash To Cash (H.O)
Ex: Goods sent by 1 Branch to other

In the Books of H.O
Sending Branch Receiving Branch

GSTB a/c„„„.Dr xxx Branch Stock a/c„„..Dr xxx
To Branch Stock xxx To GSTB xxx
Branch Adjustment a/c„„..Dr xxxx GSTB a/c„„„Dr xxx

To GSTB xxxx To Branch Adjustment xxx
285 | P a g e
Q.12 (V.V.Imp)
Solution:
In the Books of Sell Well Ltd
Particular Cochin Bang. Particular Cochin Bang.
To bal b/d 10,000 10,000 By GSTB (Returns) 3,000 -
To GSTB By GSTB (ITB) 6,000 -
(50k + 20%) 60,000 (5,000 + 20%)
(40k + 25%) 50,000 By Branch Sales 76,000 73,500
To Branch Sale. Ret. 5,000 4,000 By Bal c/d 24,000 -
To GSTB (IBT) - 6,250
(5,000 + 25%)
To Gross Profit 34,000* 3,250*
1,09,000 73,500 1,09,000 73,500
Branch Cash A/c

TO Bal b/d 2,000 1,000 By H.O Cash 80,000 80,000
To H.O Cash 15,000 15,000 (Remittance)
(Received) By Branch Sale Return 5,000 4,000
To H.O Cash (IBT) 2,000 - By Branch Expenses 9,000 3,000
By H.O Cash (IBT) - 2,000
To Branch Sales 76,000* 73,500* By Bal c/d 1,000 500
95,000 89,500 95,000 89,500
Branch Expenses A/c

To Branch Cash 9,000 3,000 By Branch Fixed Asset 4,000 -
By Branch P&L 5,000* 3,000*
9,000 3,000 9,000 3,000
Branch P&L a/c

To Branch Expenses 5,000 3,000 By Gross Profit 41,000 16,500
To Net Profit 36,000* 13,500*
41,000 16,500 41,000 16,500
GSTB A/c
To Branch Adj. 10,000 10,000 By Branch Stock 60,000 50,000
To Branch Stock 3,000 - By Branch Adj. 500 -
(return) (3,000 x20/120)
To Branch Stock 6,000 - By Branch Adj. (IBT) 1,000 -
(IBT) By Branch Stock(IBT) - 6,250
To Branch Adj. - 1,250
(IBT)
To H.O Trading 42,500* 45,000*
286 | P a g e
61,500 61,500 61,500 61,500

To GSTB (return) 500 - By Stock Reserve(op.) 2,500 2,000
To GSTB (IBT) 1,000 - By GSTB 10,000 10,000
By GSTB (IBT) - 1,250
To Stock Res.(Cl.) 4,000 -
(24,000 x 20/120) By Gross Profit 34,000 3,250
To Gross Profit 41,000* 16,500*
(Total)
46,500 16,500 46,500 16,500
Point 7: If Branches are open for Purchase of Goods instead of selling the goods
In the given case, the following changes may be observed:-

a) Branch Debtors a/c will be replaced by Branch Creditors a/c.
b) GSTB will be replaced by Goods sent to H.O (GSTH)
c) There will be no Branch P&L a/c & all the expenses on Branch shall be transferred
to H.O. P&L a/c.
Q.10 (Imp)
Solution:
In the Books of H.O
To bal b/d 1,80,000 By Goods sent to HO 12,30,000
To Purchases 12,00,000
By bal c/d 1,50,000
13,80,000 13,80,000
Branch Creditors A/c

To bal b/d (Advance) 5,00,000 By bal b/d 3,00,000
To Branch Bank 9,50,000 By Purchases 12,00,000
To H.O Bank 3,50,000
To bal c/d (bal.fig) 1,50,000* By bal c/d (Advance) 4,50,000
19,50,000 19,50,000
Branch Bank A/c

To bal b/d 75,000 By Branch Expenses 25,000
To H.O Bank a/c (Received) 10,00,000 By Branch Creditors 9,50,000
By bal c/d 1,00,000
10,75,000 10,75,000
287 | P a g e
Branch Expenses A/c

To bal b/d (prepaid) 10,000 By bal b/d (Outstanding) 13,000
To Branch Bank 25,000 By H.O P&L (bal.fig) 21,000*
To bal c/d(Outstanding) 11,000 By bal c/d(prepaid) 12,000
46,000 46,000
Point 8: Accounting for Retail Branch (V.V.Imp)
In case Retail Branch is given in question then the following points should be
considered:-
 Branch Stock a/c will be maintained at Wholesale Price.
 GSTB a/c will also be maintained at Wholesale Price. It means that GSTB will be
credited in H.O Trading at Wholesale Price.
 We will not open Branch Adjustment a/c as there is no concept of loading in Retail
Branch. We will give credit to Branch only for Retail Profits.
 The Calculation of OSR/CSR on Branch Stock will be made by H.O in its P&L due to
which we do not have to show anything in questions.
Q.8
Solution:
Cost= 100
(+)Profit= 20
WSP= 120
(+)Profit= 12(10%)
RSP= 132
In the Books of New Textile Ltd

Branch Stock A/c (Wholesale Price)
To bal b/d 15,000 By Branch Sales 1,54,770
To GSTB 1,40,000 By Abnormal Loss 600
To Gross Profit 14,070 (660 x 120/132)
(1,54,770 x 12/132) By bal c/d (bal.fig) 13,700*
1,69,070 1,69,070
Branch P&L A/c

To Abnormal Loss 600 By Gross Profit 14,070
To Branch Expenses 7,200
To Net Profit (Bal.fig) 6,270*
14,070 14,070
288 | P a g e
*Part V*
Q.14
Solution:
Cost= 100
(+)Profit= 25
WSP= 125
(+)Profit= 25(20%)
RSP= 150
In the Books of Rahul Ltd
To bal b/d 30,000 By Sales 3,60,000
To GSTB 3,24,000 (60,000 x 150/25)
By Abnormal Loss (bal.fig) 18,000*
To Gross Profit 60,000*
By bal c/d 36,000
4,14,000 4,14,000
Branch P&L A/c

To Abnormal Loss 18,000 By Gross Profit 60,000
To Expenses 20,000

60,000 60,000
Q.22
Solution:
Cost= 100
(+)Profit= 20
WSP= 120
(+)Profit= 30* [Bal.fig]
RSP= 150(100+50%)
In the Books of
To bal b/d 2,20,000 By Sales 12,00,000
To GSTB 11,00,000
By Closing Stock (bal.fig) 3,60,000*
To Gross Profit 2,40,000
(12 lacs x 30/150)
15,60,000 15,60,000
Branch P&L A/c

To Branch Expenses 45,000 By Gross Profit 2,40,000

2,40,000 2,40,000
289 | P a g e
Stock Reserve= 1) OSR = 2,20,000 x 20/120= 36,667

2) CSR= 3,60,000 x 20/120= 60,000
H.O P&L
Q.19
Solution: Homework (Assume= Abnormal Loss as shortage)
Q.18
Solution: Homework (Answer: Branch Stock: Gross Loss= Rs.800)
Concept IV: Debtors Method (V.V.Imp)

(Net Effect of Stock & Debtors)
Under Debtors Method, we prepare Branch Account only. We do not prepare Multiple
accounts, but we prepare Single A/c on behalf of all a/c. The following Net effect will
remain in Branch A/c after eliminating Contra Entries:-
(1) Branch Stock A/c: Opening Bal., Closing Bal., GSTB, GSTB Return.
(2) Branch Debtors: Opening & Closing Balances.
(3) Branch Cash: Opening Bal., Closing Bal., Cash received from H.O, Remittances.
(4) Branch Expenses: Paid by H.O only.
(5) Branch P&L: Net Profits
(6) Branch Adjustment: Loading in GSTB & Return, OSR, CSR
(7) Branch Petty Cash: Opening bal., Closing bal., Cash received from H.O
Branch A/c
To bal b/d:
Stock xxxx By GSTB (Return) xxxx
Debtors xxxx By H.O Cash (Remit) xxxx
Cash xxxx By OSR xxxx
Petty Cash xxxx By Loading in GSTB xxx(Net)
To GSTB a/c xxxx By bal c/d:

To CSR xxxx Stock xxxx
To H.O Cash (Received) xxxx Debtors xxxx
To H.O Cash (Expenses) Cash xxxx
To H.O Cash (Received) petty Petty Cash xxxx
To Net Profit xxxx*

xxxxx xxxxx
Note: The specified method is not suitable for Accounting of Branch, but It is
suitable for Reconciliation of Profit at year end. It is suitable to verify
mistakes/errors in A/c.
290 | P a g e
Q.2
Solution:
In the Books of H.O
Branch A/c
To bal b/d: By H.O Cash (W.N.1) 46,000
Stock 7,000 (Remittances)
Debtors 12,600
Petty Cash 200
To GSTB (net) 25,000

To H.O Cash (Expenses) 8,200
To Net Profit (bal.fig) 9,400* By bal c/d:
Stock 6,500
Debtors 9,800
Petty Cash 100
62,400 62,400
W.N.1
Branch Cash a/c
To bal b/d - By H.O Cash (Bal.fig) 46,000*
To Branch Cash 17,500
To Branch Debtors 28,500
By bal c/d -
46,000 46,000
Q.6 (Imp)
Solution:
In the Books of H.O
Branch A/c
Particulars Kanpur Lucknow Particulars Kanpur Lucknow
To bal b/d - - By Loading in 30,000 25,000
GSTB (25/125)
To GSTB 1,50,000 1,25,000 By H.O Cash 1,61,000 1,70,400
Remit. (W.N.1)
To H.O Cash Exp:
Rent 3,200 4,500
Salary 16,000 18,000
General Expenses 2,600 1,500
Advertisement 7,500 5,200 By bal c/d:
Debtors 34,500 23,600
To Cl. Res (25/125) 9,000 7,000 Stock 45,000 35,000
To Net Profit 82,200* 92,800*
2,70,500 2,54,000 2,70,500 2,54,000
W.N.1
Branch Cash a/c
To bal b/d - - By H.O Cash 1,61,000 1,70,400
291 | P a g e
To Branch Sales 78,600 85,200 (bal.fig)

To Branch Debtors 82,400 85,200
(W.N.2) To bal c/d - -
1,61,000 1,70,400 1,61,000 1,70,400
W.N.2
Branch Debtors a/c
To bal b/d By Bad Debts 6,000 -
To Branch Sales 1,25,200 1,10,000 By Discount - -
By Branch Sales 2,300 1,200
Return
By Branch Cash 82,400* 85,200*
(bal.fig)
By bal c/d 34,500 23,600
1,25,200 1,10,000 1,25,200 1,10,000
Q.11 (Imp)
Solution:
In the Books of Widespread
Branch A/c
To bal b/d: By Op. Stock Res. 1,80,000
Cash 10,000 (10,80,000 x 20/120)
Debtors 3,84,00 By Loading in GSTB 21,88,000
Stock 10,80,000 (1,31,28,000 x 20/120)
Furniture 5,00,000 By H.O Cash (Remit) 1,17,00,000
(W.N.3)
To GSTB 1,31,28,000
(1,32,00,000 – 72,000) By bal c/d:
To H.O Cash (furniture) 1,00,000 Cash 10,000
Debtors (W.N.1) 4,85,000
To Cl. Stock Res. 2,45,000 Stock (W.N.4) 14,70,000
(14,70,000 x 20/120) Furniture (W.N.2) 5,16,000
To bal c/d: O/s Exp 6,000

1,65,49,000 1,65,49,000
W.N.1
Branch Debtors A/c
To bal b/d 3,84,000 By Branch Cash 28,42,000
To Branch Sales 31,40,000 By Bad Debts 37,000
By Discount 58,000
By Branch Sales return 1,02,000
By bal c/d (bal.fig) 4,85,000*
35,24,000 35,24,000
W.N.2
Branch Furniture A/c
To bal b/d 5,00,000 By Depreciation: 84,000
292 | P a g e
To H.O Cash 1,00,000 (5lacx16%)+(1lacx16%x3/12)
By bal c/d (bal.fig) 5,16,000*

6,00,000 6,00,000
W.N.3
Branch Cash A/c
To bal b/d 10,000 By Branch Expenses 8,42,000
To Branch Debtors 28,42,000 By H.O Cash (Remit) 1,17,00,000
To Branch Sales 97,00,000
By bal c/d 10,000*
1,25,52,000 1,25,52,000
W.N.4
Branch Stock A/c (IP) *
To bal b/d 10,80,000 By GSTB (Return) 72,000
To GSTB 1,32,00,000 By Branch Sales: Cash 97,00,000
To Branch Sales Return 1,02,000 Credit 31,40,000
By Bal c/d (bal.fig) 14,70,000*
1,43,82,000 1,43,82,000
*Assumption: 100% of profit is hidden
Q.9 (V.V.Imp)
Solution:
In the Books of Arnold Bros
Branch A/c
To Bal b/d: By H.O Cash (Remit) 6,13,250
Stock 44,000
Debtors 75,750
Cash 7,540
Furniture 6,250 By Bal c/d:
To GSTB: Stock 58,000
Ghee (25x1000x12) 3,00,000 Debtors (W.N.1) 86,900
Oil (15x1000x150) 2,70,000 Cash 12,350
Furniture 5,625
To Commission (58,335 x 10/110) 5,303
7,76,125 7,76,125
W.N.1
Branch Debtors A/c
To bal b/d 75,750 By Branch Cash 6,47,330
To Branch Sales 6,58,480 (Incl. Cash Sales)
(Incl. Cash Sales) By bal c/d (bal.fig) 86,900*
7,34,230 7,34,230
293 | P a g e
Trading & P&L for Arnold Bros. (Excluding Branch Transactions)

To Opening Stock 5,00,000 By Sales (total) 45,87,600
To Purchases (total) 44,07,000 By GSTB 5,70,000
To Direct Expenses 3,83,275
By Closing Stock 7,29,750
To Gross Profit 5,97,075*
58,87,350 58,87,350
To Depreciation on Furniture 2,150 By Gross Profit 5,97,075

(21,500 x 100%) By Branch Profit 53,035
To Depreciation on P&M 1,36,500
(3,07,250 + 6,02,750) x 15%
To G. Manager Salary 24,000
To Commission 42,133
(4,63,460x10/110)
To Net Profit 4,21,327*
6,50,110 6,50,110
Q.23, 24 & 25
Solution: Homework
*Part VI*
Q.1
Solution:
In the Books of Buckingham Bros
Branch A/c
To Bal b/d: By H.O Cash (Remittances) 1,70,000
Imprest Cash 2,000
Debtors 25,000
Stock 40,000
By Bal c/d:
To H.O Cash (Purchases) 45,000 Stock 25,000
To GSTB 60,000 Imprest Cash 2,000
To H.O Cash (Received) 4,000 Debtors (W.N.1) 24,000

2,21,000 2,21,000
W.N.1
Branch Debtors A/c
To bal b/d 25,000 By Bad Debts 1,000
By Discount 2,000
To Branch Sales 1,30,000 By Branch Sales Return 3,000
By Branch Cash (W.N.2) 1,25,000
294 | P a g e
1,55,000 1,55,000
W.N.2
Branch Cash A/c
To Bal b/d - By H.O Cash 1,70,000
To Branch Sales 45,000
To Branch Debtors 1,25,000* By Bal c/d -
1,70,000 1,70,000
Concept V: Final Accounts Method
Under this method, Branch Trading & P&L a/c is prepared. It should be applied in
Questions only if it is required in questions.
Important Note
Whenever we prepare Branch Trading & P&L a/c, it should be prepared at Cost Only. It
can not be prepared & disclosed at Invoice Price.
Q.2
Solution:
In the Books of H.O
Branch Trading & P&L A/c
To Opening Stock 7,000 By Sales: Cash 17,500
To GSTB (Net) 25,000 Credit 28,400
Return (500) 45,400
By Closing Stock 6,500
51,900 51,900
To Allowances 200 By Gross Profit 19,900

To Discounts 1,400
To Bad Debts 600
To Salaries 6,200
To Rent 1,200
To Sundry Expenses 800
To Petty Cash Expenses 100
To Net Profit 9,400
19,900 19,900
295 | P a g e
Q.13 (Imp)
Solution:
Cost= 100
(+)Profit= 50
List Price 150
(-)(20%)= (30)
IP = 120
In the Books of Bright & Co.

To Opening Stock 10,000 By Sales: Cash 46,000
(12,000 x 100/120) Credit 1,00,000 1,46,000
To Goods from H.O 1,10,000
(1,32,000 x 100/120) By Abnormal Loss (Bal.fig) 2,500
To Gross Profit 41,000 By Closing Stock 12,500

[(46,000 x 20/120)+ (15,000 x 100/120)
(1,00,000 x 50/150)]
1,61,000 1,61,000
To Discount 13,365 By Gross Profit 41,000

To Expenses 6,000
To Abnormal Loss 2,500
To Provision for Discount 1,485
(W.N.2)
To Net Profit (Bal.fig) 17,650*
41,000 41,000
W.N.1-Calculation on Current Year Trend of Prompt Payment
a) Prompt Collection(C.Y)= 13,365/15% = Rs.89,100

b) Total Dues in C.Y = 10,000 + 1,00,000 – 11,000= Rs.99,000
c) C.Y % of prompt collection = 89,100 x 100/99,000 = 90%
W.N.2- Provision for Expected Discount= 11,000 x 90% x 15% = 1,485
296 | P a g e
*Part VII*
Departmental Mark Up Concept:
If any Entity doesn’t want to disclose its profit to Departmental Manager then it
can maintain Departmental Stock & Mark Up A/cs. The Presentation is quite similar as
we learnt in Dependent Branch under Branch Stock a/c & Branch Adjustment a/c.
Except Concept of Mark Down. The following points should be considered in relation
to Mark Down:-
1) If price is reduced for some goods then reduction will be considered as Mark Down
and It will be credited in Departmental Stock a/c, but will be debited in
Departmental Mark Up a/c.
2) If reduced goods remain unsold at the year end then we should reverse mark down
closing stock. So that calculation of Normal Stock Reserve can be made by Normal
Ratio on Closing Stock. “Reversal of Mark Down in Closing Stock will be debited in
Stock a/c, but will be credited in Mark up a/c.”
Q.15 [Mark Up a/c] (Imp)

Solution:
Departmental Stock a/c (Invoice Price)
To bal b/s (80,000 + 40%) 1,12,000 By Sales 3,20,000
To Mark Up (40%) 72,000 By Abnormal Loss 1,680
To Reversal of Mark down on 350 (1,200 + 40%)
Stock (14,000 x 4,000/16,000) By Mark down in Op. Stock 740
By Mark down on Purchases 1,400
3,64,350 3,64,350
Departmental Mark Up a/c

To Abnormal Loss 480 By Op. Stock Reserve 32,000
To Mark down in Op. Stock 740 By Departmental Stock a/c 72,000
To Mark down on Purchases 1,400 To Reversal of Mark down on 350
Stock
To Closing Stk Reserve 11,580
(40,530 x 40/140)
To Gross Profit (bal.fig) 90,150*
1,04,350 1,04,350
Departmental Trading a/c (H.O Books) [At cost]

To Opening Stock 80,000 By Sales 3,20,000
To Purchases 1,80,000 By Abnormal Loss 1,200
297 | P a g e
To Gross Profit 90,150* (40,530 – 11,580)
3,50,150 3,50,150
Q.6 [Mark Up a/c] (V.V.Imp)

Solution:
Departmental Stock a/c (Invoice Price)
Particulars Y Dept Z Dept Particulars Y Dept Z Dept
To bal b/d 32,000 54,000 By Sales 2,10,000 2,85,000
(24,000 + 1/3) By Mark down in Op. 510 -
(36,000 + 1/2) Stock
To Purchases 1,62,000 1,90,000 By Abnormal Loss 320 -
To Mark Up a/c 54,000 95,000 (240 + 1/3rd)
rd
(1/3 ) (1/2) By Inter Dept Trf. 3,600 -
To Inter Dept Trf. - 4,050 (2,700 + 1/3rd)
(2,700 + ½) By Mark Down in 800 4,100
To Reversal of Mark - 344 Purchases
Down**
By bal c/d 32,770 54,294*
2,48,000 3,43,394 2,48,000 3,43,394
Departmental Mark Up a/c

Particulars Y Dept Z Dept Particulars Y Dept Z Dept
To Mark down in Op. 510 - By Op. Stock Res. 8,000 18,000
Stock By Dept. Stock a/c 54,000 95,000
To Abnormal loss 80 - By Inter. Dept Trf - 1,350
To Inter. Dept Trf 900 -
To Mark Down in 800 4,100 To Reversal of - 344
Purchases Mark Down
To Cl. Stock Reserve
Y (32,770 x ¼) 8,193 -
Z (54,294 x 1/3) - 18,098
To Gross profit 51,517* 92,496*
62,000 1,14,694 62,000 1,14,694
**Calculation of Reversal of Mark Down: Department Z.
Cost for Reduced Goods 21,000
Normal Profit (1/2) 10,500
Net Selling Price 31,500
Reduction in Price (4,100)
Reduced Price 27,400
Reversal of Mark Down= 4,100 x 2,300/27,400 = Rs.344
Departmental Trading a/c (H.O Books) [At cost]

To Purchases 3,52,000 By Abnormal Loss 240
By Closing Stock
To Gross Profit (bal.fig) 1,44,013* Y (32,770 – 8,193) 24,577
Z (54,294 – 18,098) 36,196
298 | P a g e
5,56,013 5,56,013
Q.32 & 33
Solution: Homework
*Part VIII*
Unit II: Independent Branch
Concept I: Journal Entries
Particulars H.O Books Branch Books

1. Purchases made by Branch for Purchase„..Dr
Cash & Credit No Entry To Cash
To Credit
(Being purchases
made)
2. Payment made by Branch to its Creditor„„Dr

Creditors No Entry To Bank
3. Sales made by Branch on Cash„„Dr

Cash & Credit No Entry Debtors„.Dr
To Sales
4. Collection made by Branch Bank„„..Dr

From its Debtors No Entry To Debtors
5. Expenses paid by Branch Expense„„Dr

No Entry To Bank
6. Expenses of Branch paid Branch „„Dr Expense„„Dr

by H.O To Cash To H.O
7. Remittances made by Branch to Cash„„Dr H.O„„„Dr

H.O To Branch To Cash
8. Cash remitted by H.O to Branch Branch „„Dr Cash„„Dr

To Cash To H.O
9. Collection from Branch Cash„„Dr H.O„„„Dr

Debtors made by H.O To Branch To Debtors
10. Payment by H.O to Branch Branch„„..Dr Creditors„„Dr

Creditors To Cash To H.O
11. H.O expenses paid by Branch Expense„„Dr H.O„„„Dr

To Branch To Cash
299 | P a g e
12. Collection made by Branch from Branch „„Dr Cash„„Dr

H.O Debtors To Debtors To H.O
13. Payment made by Branch to H.O Creditor„„„.Dr H.O„„..Dr

Creditors To Branch To Cash
Concept II: Journal Entries related with Specific Cases
Case I: Goods sent by H.O to Branch

1. Goods sent by H.O to Branch Branch„„„Dr Goods from H.O„„„.Dr
To GSTB (Sales) (purchase)
To H.O
2. Goods returned by Branch to GSTB„„„„„Dr H.O„„„„„Dr

H.O To Branch To Goods from H.O
(Reversal of above) (Reversal of above)
Case II: Goods sent by H.O to Branch

Particulars H.O Books Sending Branch Receiving Branch
Books (S.B) Books (R.B)
1. Sending Branch i)Cash„„Dr H.O„„Dr No Entry
Transfers cash to To S.B To Cash
receiving Branch
ii)R.B„„..Dr No Entry Cash„„.Dr
To Cash To H.O
Net:-
R.B„„..Dr
To S.B
2. Sending Branch i)GSTB„„Dr H.O„„„Dr

Transfer goods to To S.B To GFH No Entry
Receiving Branch
ii)R.B„„..Dr GFH„„„„Dr
To GSTB No Entry To H.O
Net:-
R.B„„..Dr
To S.B
300 | P a g e
Q.32
Solution:
Statement showing Net Position of Branches
Particulars Bombay Madras Calcutta Patna
Bombay Branch:
i) Received Goods 10,000 Dr - 6,000 Cr 4,000 Cr
ii) Sent Goods 18,000 Cr - 8,000 Dr 10,000 Dr
iii) Received B/R 6,000 Dr - - 6,000 Cr
iv) Sent B/R 6,000 Cr - 4,000 Dr 2,000 Dr
Madras Branch:
i) Received Goods 4,000 Cr 14,000 Dr 10,000 Cr -
ii) Sent Cash 6,000 Dr 8,000 Cr 2,000 Dr -
Calcutta Branch:
i) Sent Goods - - 6,000 Cr 6,000 Dr
ii) Paid B/P & sent - - 8,000 Cr 8,000 Dr
cash
Net Position 6,000 Cr 6,000 Dr 16,000 Cr 16,000 Dr
Journal Entries:
(In the Books of H.O at the end of month)
Madras Branch„„„„„Dr 6,000

Patna Branch„„„„„..Dr 16,000
To Bombay Branch 6,000
To Calcutta Branch 16,000
(Being adjustment entry passed)
Q.35
Solution:
Statement showing Net Position of Branches
Particulars Delhi Kanpur Nagpur Ahemdabad
Delhi Branch:
i) Received Goods 15,000 Dr - 9,000 Cr 6,000 Cr
ii) Sent Goods 27,000 Cr - 12,000 Dr 15,000 Dr
iii) Received B/R 9,000 Dr 9,000 Cr
iv) Sent B/R 9,000 Cr 6,000 Dr 3,000 Dr
Kanpur Branch:
i) Received Goods 6,000 Cr 21,000 Dr 15,000 Cr -
ii) Sent Cash 6,000 Dr 9,000 Cr 3,000 Dr
Nagpur Branch:
Sent Goods - - 9,000 Cr 9,000 Dr
Received B/R - - 9,000 Dr 9,000 Cr
Received Cash 5,000 Dr 5,000 Cr
Net Position 12,000 Cr 12,000 Dr 2,000 Dr 2,000 Cr
301 | P a g e
Journal Entries:
(In the Books of H.O at the end of month)
Kanpur Branch„„„„„Dr 12,000

Nagpur Branch„„„„„..Dr 2,000
To Delhi Branch 12,000
To Ahemdabad Branch 2,000
(Being adjustment entry passed)
Q.40 & 59
Solution: Homework
Case III: Accounting for Branch Fixed Assets

1. Branch Fixed Assets purchased No Entry Fixed Assets„„„.Dr
by Branch To Bank
Depreciation on above No Entry Depreciation„„„..Dr

To Fixed Assets
2. Branch Fixed Assets Branch„„„.Dr Fixed Assets„„„.Dr

purchased by H.O To Cash To H.O
Depreciation on above No Entry Depreciation„„„..Dr

To Fixed Assets
3. Branch Fixed Assets Fixed Assets„„„.Dr H.O„„„Dr

purchased by Branch but To Branch To Cash
Fixed Assets a/c will be
maintained by H.O
Depreciation on above Branch„„„.Dr Depreciation„„„„.Dr

To Cash To H.O
4. Branch Fixed Assets Fixed Assets„„„.Dr

purchased by H.O, but Fixed To Cash No Entry
Assets a/c are maintained
by
H.O
Depreciation on above Branch„„„.Dr Depreciation„„„„.Dr

To Fixed Asset To H.O
Case IV: Accounting entries for Transit Items

There may be 2 types on Transit Items & Adjustment for Transit Items shall be
always be made in the Books of Receiving Party.
a) If Cash is remitted by Branch, but it is not received by H.O then will record the
following entry:-
Cash in Transit„„„„.Dr xxxx
302 | P a g e
To Branch xxxx
b) If goods are sent by H.O, but not received by Branch then Branch will adjust the
following entry:-
Goods in Transit„„„„„„„Dr xxxx
To H.O xxxx
Q.39
Solution: Discussed in Lecture
Q.47
Solution:
In the Books of Branch
1) H.O a/c„„„„..„..Dr 2,800

To Incomes 2,800
(Being Income allocated by H.O to Branch)
2) P&L a/c„„„„„..Dr 1,000

To H.O 1,000
(Being Provision created)
3) H.O a/c„„„„„„.Dr 3,000

To Salaries 3,000
(Being rectification made)
4) H.O a/c„„„„„„Dr 5,000

To Cash 5,000
(Being expenses paid on behalf of other branch)
5) No Entry
(Transit items are recorded in Receiving parties book)
6) Expenses a/c„„„„..Dr 7,500

To H.O 7,500
(Being expenses paid by H.O)
7) H.O a/c„„„„„„Dr 30,000

To Debtors 30,000
(Being Collection of Debtors made by H.O)
8) GIT a/c„„„„„.Dr 10,000

To H.O 10,000
(Being transit item adjusted)
Q.48, 49
Solution: Homework
303 | P a g e
*Part IX*
Concept III: Branch Final Accounts
Requirement: i) Branch Trading & P&L A/c

ii)Branch Balance Sheet
Q.34 (Imp) [Branch Final Accounts]

Solution:
To Opening Stock 8,200 By Sales 34,950
To Purchases (Net) 12,500 By Closing Stock 14,350
To Wages 6,550
To Manufacturing Exp 3,400
To Goods from H.O 7,200

49,300 49,300
To Rent (1,700 + 150) 1,850 By Gross Profit 11,450
To Salaries 5,500 By Discount 150
To General Expenses 2,000
To Depreciation 2,650 By Net Loss (Bal.fig) 400*
12,000 12,000
Branch Balance Sheet

Liabilities Rs. Assets Rs.
H.O A/c (14,000 + 2,650) 16,650 Fixed Assets -
Creditors 2,700 Debtors 4,000
Rent Outstanding 150 Cash 750
Closing Stock 14,350
P&L (Dr.) 400
19,500 19,500
304 | P a g e
Q.36 [Branch Final Accounts]

Solution:
In the Books of Branch
Trading & P&L A/c
To Opening Stock - By Sales: Credit 2,50,500
To Goods from H.O 2,00,000 Cash 46,000 2,96,500
To Purchases: Credit 1,55,500
Cash 30,000 1,85,500 By Closing Stock 1,20,000

4,16,500 4,16,500
To Expenses 89,500 By Gross Profit 31,000*

To Depreciation 1,750 By Net Loss (bal.fig) 60,250*
91,250 91,250
Balance Sheet
H.O A/c (W.N.1) 96,750 Fixed Assets -
Closing Stock 1,20,000
Creditors (W.N.2) 13,000 Cash & Bank (W.N.3) 18,500
Creditors for Furniture 35,000
Advance from Debtors 54,000 P&L Dr bal 60,250
(W.N.4)
1,98,750 1,98,750
W.N.1
H.O A/c
To Creditors (Fixed Asset) 35,000 By Bal b/d -
To Cash 1,10,000 By Goods from H.O 2,00,000
By Depreciation (35,000x 5%) 1,750
To Bal c/d (bal.fig) 96,750* By Cash 40,000
2,41,750 2,41,750
W.N.2
Creditors A/c
To Cash 1,42,500 By Bal b/d -
By Purchases 1,55,500
To Bal c/d (bal.fig) 13,000*
1,55,500 1,55,500
W.N.3
Cash A/c
305 | P a g e
To bal b/d - By Purchases 30,000

To Sales 46,000 By Creditors 1,42,500
To Debtors 3,04,500 By Expenses 89,500
To H.O a/c 40,000 By H.O A/c 1,10,000
By Bal b/d (bal.fig) 18,500*
3,90,500 3,90,500
W.N.4
Debtors A/c
To Bal b/d - By Cash 3,04,500
To Sales 2,50,500
To Advance from Debtors 54,000*
3,04,500 3,04,500
Incorporation of Trial Balance

H.O Books Branch Books
Stock„„.Dr 1,20,000 H.O„„„„„..Dr 1,98,750
Cash„„„.Dr 18,500 To Stock 1,20,000
P&L„„„.Dr 60,250 To Cash 18,500
To Branch 1,98,750 To P&L 60,250
(Being Assets & Losses Incorporation) (Being Assets Closed)
Branch„„..................Dr 1,02,000 Creditors (Goods)„„Dr 13,000

To Creditors (Goods) 13,000 Creditors (Furniture)„.Dr 35,000
To Creditors (Furniture) 35,000 Advances„„„„„„„„„.Dr 54,000
To Advances 54,000 To H.O 1,02,000
(Being liability Incorporation) (Being liability closed)
Branch A/c
To Bal b/d 96,750 By Stock 1,20,000
To Creditors (Goods) 13,000 By Cash 18,500
To Creditors (Furniture) 35,000 By P&L 60,250
To Advances 54,000
1,98,750 1,98,750
306 | P a g e
Q.33 (Imp)
Solution:
Adjustment Entries
a) Goods in Transit a/c„„Dr 10 lacs
To H.O a/c 10 lacs
(Being Goods in Transit recorded)
b) Expenses a/c„„„Dr 1 lac

To H.O a/c 1 lac
(Being Expenses charged by H.O to Branch)
Trading & P&L A/c (Rs. in lacs)

To Opening Stock 60 By Sales 360
To Goods from H.O (Net) 283
To Carriage 7 By Closing Stock (in Hands) 62
To Gross Profit 72*

422 422
To Expenses (paid by H.O) 1 By Gross Profit 72
To Depreciation 2
To Salaries 25
To Rent 10
To Advertisement 6
To Telephone 3
To Sundry Expenses 1
To Net Profit 24*

72 72
Balance Sheet
H.O A/c (80 + 10 + 1) 91 Furniture 18
P&L A/c 24 Debtors 20
Outstanding Expenses 3 Cash & Bank 8
Goods in Transit 10
Stock in Hand 62
118 118
Incorporation of Trial Balance is Homework(Same as prepared in Q.36)
307 | P a g e
Q.30 (Imp) [6-8 marks]

Solution:
H.O A/c
To Cash 38,400 By Bal b/d 1,68,000
To Building 4,000
To bal c/d (bal.fig) 1,25,600*

1,68,000 1,68,000
Balance Sheet
H.O A/c 1,25,600 Fixed Assets -
Creditors (W.N.2) 26,800 Debtors (W.N.2) 2,72,000
P&L a/c 1,52,800 Prepaid Salaries 2,000
Prepaid Insurance 1,600
Cash & Bank 29,600
3,05,200 3,05,200
W.N.1
Trading & P&L A/c
To Purchases 48,000 By Sales 2,40,000
To Wages 20,000
TO Gross Profit 1,72,000*
2,40,000 2,40,000
To Discount 8,000 By Gross Profit 1,72,000
To Salaries (6,400-2,000) 4,400 By Discount 1,200
To General Expenses 1,600
To Insurance 1,600
To Manager Salaries 4,800

1,73,200 1,73,200
W.N.2
Debtors A/c
To bal b/d 2,00,000 By Cash 1,60,000
To Sales 2,40,000 By Discount 8,000
By Bal c/d (bal.fig) 2,72,000*
4,40,000 4,40,000
W.N.3
Creditors A/c
To Cash 60,000 By bal b/d 40,000
To Discount 1,200 By Purchases 48,000
To Bal b/d (bal.fig) 26,800*
88,000 88,000
308 | P a g e
W.N.4
Cash A/c
To Bal b/d 8,000 By Creditors 60,000
To Debtors 1,60,000 By Wages 20,000
By Salaries 6,400
By General Expenses 1,600
By Insurance 3,200
By H.O a/c 38,400
By Building 4,000
By Manager Salary 4,800
By Bal c/d 29,600
1,68,000 1,68,000
Incorporation of Trial Balance is Homework(Same as prepared in Q.36)
309 | P a g e
Q.41
Solution:
Trading & P&L A/c
To Goods From H.O (Net) 30,000 By Closing Stock 27,000

4,07,000 4,07,000
To Salaries 15,000 By Gross Profit 1,39,000
To Rent 9,600
To Expenses 4,700

1,39,000 1,39,000
Balance Sheet
P&L a/c 1,09,700 Furniture 14,000
H.O a/c (32,400 -25,000) 7,400
Creditors 18,500 Cash 17,800
Debtors 37,000
Goods in Transit 25,000
1,28,200 1,28,200
310 | P a g e
*Part X*
Concept IV: Consolidation of Final Accounts
Requirement: i)Consolidated Balance Sheet

ii)Consolidated P&L
Consolidated A/c = H.O Final A/c + Branch Final A/c
Company Final A/c

Format
Consolidated Balance Sheet (H.O + Branch)-> Total B/S at Business Level
Capital:- Fixed Assets:-
Opening Balance xxxx H.O xxxx
Profit: H.O xxxx Branch xxxx xxxx
Branch xxxx
Drawings (xxxx) xxxx Investments (H.O) xxxx
Loans: H.O xxxx Current Assets:-

Branch xxxx xxxx H.O xxxx
Branch xxxx xxxx
Current Liabilities: H.O xxxx
Branch xxxx xxxx
xxxx xxxx
Important Points to be considered prior to Consolidation:-

Step I: Reconciliation of H.O A/c & Branch A/c
In case the given Balances in respective Trial Balances are not equal then we should
reconcile the given Balances. These may be 2 reasons for difference in A/c as follows:
 Reason I: Transit Items

 Reason II: Unrecorded Items
i. Adjust Transit Items in the Books of receiving party (i.e; GIT, CIT etc)
ii. Adjustment of unrecorded Items shall be made in the Books of Respective parties
in which such transactions remains unrecorded.
Step II: Incorporation of Branch Trial Balance in the Books of H.O:-

(It will be disclosed in solution only if It is required)
Assets „..Dr xxx i) H.O a/c„„„„Dr xxxx
To Branch xxxx To Assets xxxxx
(Being Assets incorporated) (Being Assets closed to H.O)
311 | P a g e
ii)Branch a/c„..Dr xxxx ii) Liabilities a/c„„„..Dr xxxx

To Liabilities a/c xxxx P&L a/c„„„„„„„.Dr xxxx
To P&L a/c xxxx To H.O xxx
(Being liabilities & profit incorporated) (Being liabilities & profit transferred)
All Entries are reversed in the beginning of Next Year
Step III: Stock Reserve on Branch Stock if GSTB was made at Selling Price:-
If GSTB was made by H.O at Selling Price then H.O should create OSR/CSR (in H.O P&L
a/c) on Branch Stock to show inventory in Balance Sheet at Cost.
Q.26 (Imp) [16 marks]

Solution:
Incorporation of Branch Trial Balance
Fixed Assets a/c„„„.Dr 95,000 H.O a/c „„„.Dr 1,71,110
Stock „„„„„„„„„„Dr 50,460 To Fixed Assets 95,000
Debtors„„„„„„.Dr 19,100 To Stock 50,460
Cash „„„„„„„„Dr 6,550 To Debtors 19,100
To Branch 1,71,110 To Cash 6,500
(Being Assets Incorporated) (Being Assets Closed)
Branch„„„Dr 42,100 Creditors„„„.Dr 10,400

To Creditors 10,400 P&L „„„„„„..Dr 31,700
To P&L 31,700 To H.O 42,100
(Being liabilities & P&L Incorporated) (Being liabilities & P&L closed)
Branch A/c (After Reconciliation)

To Bal b/d 1,29,010 By Fixed Asset 95,000
To Creditors 10,400 By Stock 50,460
To P&L 31,700 By Debtors 19,100
By Cash 6,550
1,71,110 1,71,110
H.O A/c
To Fixed Asset 95,000 By Bal b/d 1,29,010
To Stock 50,460 By Creditors 10,400
To Debtors 19,100 By P&L 31,700
To Cash 6,550
1,71,110 1,71,110
312 | P a g e
Consolidated Balance Sheet of Ring Bell Ltd

Particulars Notes Rs.
Shareholders Funds:
Share Capital - 8,00,000
Reserves & Surplus 1 2,07,510
Non Current Liabilities -
Current Liabilities: Trade Payables 2 32,300

10,39,810
Non-Current Assets: P.P.E 3 6,25,000

Current Assets: Inventory 4 2,72,930
Trade Receivables 5 69,600
Cash & Cash Equivalent 6 72,280
10,39,810
W.N.1
Reconciliation of A/c
CIT a/c„„Dr 3,000
To Branch 3,000 No Entry
(Being CIT recorded)
Loss in Transit „„..Dr 1,700

(Being Loss in Transit debited as Branch
manager declined to admit any liability)
Branch A/c
To Bal b/d 1,33,710 By Cash in Transit 3,000
By Loss in Transit 1,700
By Bal c/d 1,29,010*
H.O A/c
By Bal b/d 1,29,010
To Bal c/d 1,29,010*
W.N.2
Notes to A/cs:
Note 1: Reserves & Surplus:
General Reserves 1,00,000
P&L: Op bal 25,310
C.Y : H.O 82,200
LIT (1,700)
313 | P a g e
Branch 31,700
Interim Dividend (30,000) 1,07,510
2,07,510
Note 2: Trade Payables:
Creditors: H.O 21,900
Branch 10,400
32,300
Note 3: P.P.E
H.O 5,30,000
Branch 95,000
6,25,000
Note 4: Current Assets

Inventory: H.O 2,22,470
Branch 50,460
2,72,930
Cash & Cash Equivalent: H.O 62,730
Branch 6,550
CIT 3,000
72,280
Q.38 (V.V.Imp)
Solution:
Trading & P&L A/c

Particulars H.O Branch Particulars H.O Branch
To Op. Stock 40,000 1,00,000 By Sales 42,50,000 21,85,000
To GFH - 18,75,000 By GSTB 19,00,000 -
To Purchases 45,70,000 - By Closing Stock 60,000 75,000
To Gross 16,00,000* 28,5,000*

Profit
6210000 2260000 62,10,000 22,60,000
To Cl. Stk Res. 20,000 - 16,00,000 28,5,000
To Depn @10% 15,000 50,000 20,000 -
To Prov for Bad - 2,500 30,000 -
Debts
To Expenses 14,02,500 1,07,500
To Net Profit 52,500* 1,25,000*

16,50,000 2,85,000 16,50,000 2,85,000
Consolidated Balance Sheet

Capital: Fixed Assets:
Op. Bal 20,50,000 H.O 17,50,000
Profits: H.O 52,500 Branch 5,00,000
Branch 1,25,000 Prov for Depn:
Drawings (2,00,000) 20,27,500 H.O (8,75,000)
314 | P a g e
Creditors (H.O) 2,50,000 Branch (2,00,000) 11,75,000
Cash & Bank:

H.O 77,500
Branch 65,000
CIT 2,50,000 3,92,500
Stock:
H.O 60,000
Branch 75,000
GIT 25,000
Stock Reserve (20,000) 1,40,000
(1 lac x 25/125)
Debtors:
H.O 3,00,000
Branch 3,00,000
PFDD:
H.O (1,50,000)
Branch (1,50,000) 5,70,000
22,77,500 22,77,500
W.N.1
No Entry Goods in Transit„„„Dr 25,000

To H.O 25,000
(Being Goods in Transit adjusted)
Cash in Transit„„„„.Dr 2,50,000 No Entry

To Branch 2,50,000
Branch A/c
To Bal b/d 87,500 By Cash in transit 2,50,000
By Bal c/d 6,25,000*
H.O A/c
By Bal b/d 6,00,000
By Goods in Transit 25,000
To Bal c/d 6,25,000*
315 | P a g e
Q.37
Solution:
Trading & P&L A/c
To OP. Stock 30,000 40,000 By Sales (Net) 3,00,000 3,50,000
To Purchase 1,70,000 2,60,000 By Transfers 50,000 70,000
(net) By Closing Stock 46,000 54,000
To Transfers 65,000 48,000
To Gross profit 1,31,000* 1,26,000*
3,96,000 4,74,000 3,96,000 4,74,000
To Expenses 25,200 41,800 By Gross profit 1,31,000 1,26,000

To Depreciation 5,000 8,000
@10%
To Net Profit 1,08,000* 76,200*
1,31,000 1,26,000 1,31,000 1,26,000

Anil Capital 1,81,230 Fixed Assets:
Sunil Capital 1,59,770 H.O 50,000
Branch 80,000
Depreciation (13,000) 1,17,000
Cash & Bank:

H.O 70,000
Bank Overdraft (Branch) 6,000 Branch -
CIT 5,000 75,000
Advance from Debtors:
H.O 4,000 Stock:
Branch 3,000 7,000 H.O 46,000
Branch 54,000
Creditors: GIT 7,000 1,07,000
H.O 32,000
Branch 51,000 83,000 Debtors:
H.O 64,000
Branch 71,000 1,35,000
Advance to Creditors:
H.O 2,000
Branch 1,000 3,000
4,37,000 4,37,000
No Entry Cash in Transit a/c„„„.Dr 5,000

To H.O 5,000
316 | P a g e
(Being CIT Received)
Branch a/c„„„„„Dr 2,800 Expenses a/c„„„„„..Dr 2,800

To Expenses 2,800 To H.O 2,800
(Being Expenses charged to Branch) (Being Expenses transferred from H.O)
GIT a/c„„„„..Dr 5,000 GIT a/c„„„„„Dr 2,000
To Branch 5,000 To H.O 2,000
(Being GIT recorded) (Being GIT recorded)
Branch A/c
To Expenses 2,800 By Bal b/d 5,000
To Bal c/d 7,200* By GIT 5,000
H.O A/c
To Bal b/d 17,000 By CIT 5,000
By Expenses 2,800
By GIT 2,000
By Bal c/d 7,200*
W.N.1
Calculation of Closing Balance in Capital Account
Particulars Anil Sunil

Capital : H.O 83,000 40,000
Branch 35,000 70,000
Drawings: H.O (30,000) (5,000)

Branch (4,000) (25,000)
Profit @40%/30% 40,320 22,860

(1,00,800 x 40%) (76,200 x 30%)
PSR (1:1) 56,910 56,910

(1,00,800 + 76,200 -40,320- 22,860)
1,81,230 1,59,770
317 | P a g e
*Part XI*
Q.27 (V.V.Imp) [16 Marks]
Solution:
Trading & P&L A/c

To Op. Stock - - By Sales 14,20,000 6,40,000
To Manufact. 18,48,000 - By GSTB 6,51,200 -
A/c (FG)
To GFH - 6,40,200 By Abnormal Loss - 4,000
(5,000 x110/137.5)
To Gross profit 3,43,200* 1,28,000* By Closing Stock 1,20,000 1,24,200
21,91,200 7,68,200 21,91,200 7,68,200
To Selling Exp 2,24,000 27,000
To Abnormal - 4,000 To Gross profit 3,43,200 1,28,000
Loss
To CSR 12,291 -
To Net Profit 1,06,909* 97,000*
3,43,200 1,28,000 3,43,200 1,28,000

Capital: Fixed Asset -
Op.Bal 2,20,000
Profits: H.O 1,06,909 Cash & Bank:
Branch 97,000 H.O 1,62,000
Drawings (25,000) 3,98,909 Branch 34,000
CIT 43,750 2,39,750
Creditors:
H.O 5,83,350 Stock:
Branch 2,400 5,85,750 H.O 1,20,000
Branch 1,24,200
GIT 11,000
CSR (12,291) 2,42,909
(13,52,000 x 10/110)
Stock of Raw Material 1,80,000
Debtors:
H.O 2,30,000
Branch 92,000 3,22,000
9,84,659 9,84,659
W.N.1
CIT a/c„„„„Dr 43,750 GIT a/c„„„„„„..Dr 11,000
(Being CIT recorded) (Being GIT recorded)
318 | P a g e
Branch A/c
To bal b/d 2,05,550 By CIT 43,750
By bal c/d 1,61,800
H.O A/c
By bal b/d 1,50,800
To bal c/d 1,61,800 By GIT 11,000
W.N.2
Manufacturing A/c
To Op. Stock (RM) -
To Purchases 19,93,350 By Trading a/c (bal.fig) 18,48,000
To Cost of Proc. 34,650
By Closing Stock 1,80,000
20,28,000 20,28,000
W.N.3
Calculation of Closing Stock
a) H.O:
COGS= Op.Stk + Purch. -Cl. Stk
Sales – GP = OS + Pur. -CS
i)Sales 14,20,000
GSTB 6,51,200
Total Sales 20,71,200
G.P:
1)14.20 lac x 25/125 (2,84,000)
2)6.512 lac x 10/110 (59,200)
COGS 17,28,000
2)COGS = OS + Purc + CS
17,28,000 = Nil + 18,48,000 – CS
CS = 1,20,000
b) Branch
(6,40,000 – 27.5/137.5) = Nil + 6,40,200 - CS
5,12,000 = 6,40,200 – CS
CS= 1,28,200
Net Closing Stock= 1,28,200 – 4,000(Abnormal loss) = 1,24,200
319 | P a g e
Q.29 (V.V.Imp)
Solution:
P&L Statement of K Ltd
Particular H.O Branch Consolidated
Revenues:
Sales 2,00,000 65,200 2,65,200
GSTB 46,000 - 46,000
Other Incomes - - -
Total (a) 2,46,000 65,200 3,11,200
Expenses:
Purchases (W.N.2) 1,82,000 - 1,82,000
Goods from H.O - 44,500 44,500
Changes in Stock-
Opening Stock 13,000 9,200 22,200
Closing Stock (15,000) (8,060) (23,060)
Employees Cost (W.N.4) 36,400 10,356 46,756
Finance Cost - - -
Depreciation - - -
Other Expenses (W.N.4) 12,547 2,300 14,847
Total (b) 2,28,947 58,296 2,87,243
(a-b) Net Profit 17,053 6,904 23,957
Balance Sheet of K Ltd

Particular Notes Rs.
Shareholders Funds:
Share Capital - 50,000
Reserves & Surplus:
P&L Bal. - 23,957
Non Current Liabilities - -
Current Liabilities:
Trade Payable - 13,000
Other Current Liab. (Bonus Outstanding) - 156
Total 87,113
Non-Currrent Assets -
Current Assets:
Inventory W.N.4 25,613
Trade Receivables - 37,000
Cash & Cash Equivalent W.N.4 24,500
Total 87,113
W.N.1
Cash in transit„„„„.Dr 1,500 Goods in transit„„„„.Dr 1,500
(Being CIT recorded) (Being GIT recorded)
320 | P a g e
Branch A/c
To bal b/d 5,000 By CIT 1,500
By bal c/d 3,500*
H.O A/c
By bal b/d 2,000
To bal c/d 3,500* By GIT 1,500
W.N.2
Manufacturing A/c
To Op. Stock (RM) 1,800 By Trading (bal.fig) 1,82,000*
To Purchases 35,000 By Closing Stock 2,300
To Wages 1,08,500
To Fixed Ohds 39,000
1,84,300 1,84,300
W.N.3
Calculation of Closing Stock
H.O Branch
a) COGS
Sales 2,00,000 65,200
GSTB 46,000 -
2,46,000 65,200
Gross Profit:
Sales @ 30% (60,000) (19,560)
GSTB @15/115 (6,000) -
COGS 1,80,000 45,640
b) Closing Stock
Opening Stock 13,000 9,200
Production 1,82,000 -
Goods from H.O - 44,500
Total Goods 1,95,000 53,700
COGS (1,80,000) (45,640)
Closing Stock 15,000 8,060
W.N.4: Notes to Accounts
Particulars H.O Branch

1.Employees Cost:
Admin Salaries 13,900 4,000
Salesman Salaries 22,500 6,200
Bonus - 156
36,400 10,356
321 | P a g e
2.Other Expenses:
Other Admin Ohds 12,500 2,300
Op.Stk Res (1,200) -
Cl.Stk Res (8,060 + 1,500)x 15/115 1,247 -
12,547 2,300
3.Inventory
H.O (FG) 15,000
Branch (FG) 8,060
Goods in transit 1,500
Stock Reserves (1,247) 23,313
Stock of Raw Material 2,300
25,613
4.Cash & Cash Equivalent

H.O 22,000
Branch 1,000
Cash in Transit 1,500
24,500
Q.31
Solution:
Balance Sheet
Particular Notes Rs.
Shareholders Funds:
Share Capital - 1,50,000
Reserves & Surplus 4 53407
Non Current Liabilities - -
Current Liabilities 3 44,288
Total 2,47,695
Non-Currrent Assets: PPE 1 96,526

Current Assets 2 1,51,169
Total 2,47,695
II Reconciliation of Accounts
Goods in Transit„„„..Dr 3,641
No Entry To H.O 3,641
(Being GIT recorded)
Cash in Transit„„„„Dr 3,500
322 | P a g e

(Being CIT recorded)
H.O„„„..Dr 750
No Entry To Debtors 750
(Being collection from Debtors made
By H.O)
Fixed Assets„„„Dr 2,500

No Entry To H.O 2,500
(Being Branch Assets purchases by H.O)
Branch A/c
To Bal b/d 31,536 By CIT 3,500
By Bal c/d 28,036*
H.O A/c
To Debtors 750 By Bal b/d 22,645
By GIT 3,641
To Bal c/d 28,036* By Fixed Asset 2,500
W.N.2: Notes to A/c:-
1.PPE: H.O 75,125

Branch 18,901
Lorry 2,500
96,526
2.Current Assets: H.O 1,21,809

Branch 23,715
Cash in transit 3,500
Goods in transit 3,641
Collection from Debtors (750)
Cl. Stk Reserve (4,565 + 3,641)x10/110 (746)
1,51,169
3.Current Liabilities: H.O 34,567

Branch 9,721
44,288
4.Revenue A/c: H.O 43,210

Branch 10,250
Cl. Stk Reserve (746)
Op. Stk Reserve 693
53,407
323 | P a g e
Unit III: Foreign Branch (AS-11)
Concept I: Meaning of Foreign Operation
As per the provisions of AS-11, Foreign Operation is a Branch which is operated by an

Entity outside India. It can be operated in 2 forms:-
a) IFO (Integral Foreign Operations)
b) NIFO (Non Integral Foreign Operations)
Concept II: Meaning of Integral Foreign Operation
If Separate Entity is not established outside India and All the transactions are
undertaken in the name of H.O then All transactions are considered as a Part of
Business of Head Office. At Balance Sheet Date, Consolidation of Foreign Branch with
Head Office can be made only after translation of Trial Balance from Foreign Currency
into Indian Currency.
Translation Rules
Particulars Debit Credit Working
Fixed Assets xxxx - Actual Rate
(Date of Acquisition
Of Fixed Assets)
Current Assets xxxx - Closing Rate
Current Liabilities xxxx - Closing Rate
Loans xxxx - Closing Rate
Head Office A/c - xxxx No Conversion

(It will be equal to
Branch a/c Balance
in H.O Books)
Incomes - xxxx Average Rate
Expenses xxxx - Average Rate

Except:
i) Depreciation xxxx - Actual Rate
(Fixed Asset)
ii) Opening Stock xxxx - Opening Rate
iii) Goods from H.O xxxx - No Conversion

(It will be equal to
GSTB in H.O Books)
iv) Specific Expenses xxxx - Spot Rate on the
Date of Transaction
xxxx xxxx
Exchange Loss xxxx - (Bal.fig)
324 | P a g e
Exchange Gain - xxxx

xxxx xxxx
Closing Stock = Closing Rate
Q.52
Solution:
Conversion of Trial Balance from Dollar into Indian Rupees
Plant & Machinery 41,04,000 - $1,08,000 x 38
Depreciation on Plant & Mach. 4,56,000 - $12,000 x 38
Furniture 2,73,600 - $7,200 x 38
Depreciation on Furniture 30,400 - $800 x 38
Opening Stock 21,84,000 - $56,000 x 39
Purchases 96,00,000 - $2,40,000 x 40
Sales - 1,66,40,000 $4,16,000 x 40
Goods from H.O 39,40,000 - Equal to GSTB
Wages 1,21,000 - (2,000 x 40)
+ (1,000 x 41)
Outstanding Wages - 41,000 $1,000 x 41
Carriage 40,000 - $1,000 x 40
Salaries 2,40,000 - $6,000 x 40
Rent 80,000 - $2,000 x 40
Insurance 40,000 - $1,000 x 40
Trade Expenses 40,000 - $1,000 x 40
H.O a/c - 43,00,000 Equal to Branch a/c
In H.O Books
Debtors 98,40,000 - $24,000 x 41
Creditors - 6,97,000 $17,000 x 41
Cash & Bank 2,46,000 - $6,000 x 41
2,23,79,000 2,16,78,000
Exchange Gain - 7,01,000
2,23,79,000 2,23,79,000
Closing Stock= $52,000 x 41= Rs.21,32,000
Branch Trading & P&L a/c

To Opening Stock 21,84,000 By Sales 1,66,40,000
To Purchases 96,00,000 By Closing Stock 21,32,000
To Wages 1,21,000
To Carriage Inward 40,000

1,87,72,000 1,87,72,000
To Depreciation on P&Mach. 4,56,000 By Gross Profit 28,87,000

To Depreciation on Fur. 30,400 By Exchange Gain 7,01,000
To Salaries 2,40,000
325 | P a g e
To Rent 80,000
To Insurance 40,000
To Trade Expenses 40,000

35,88,000 35,88,000
Balance Sheet
H.O a/c 43,00,000 Plant & Machinery 41,04,000
P&L a/c 27,01,600 Furniture 2,73,600
Creditors 6,97,000 Stock 21,32,000
Outstanding Wages 41,000 Debtors 9,84,000
Cash & Bank 2,46,000
77,39,600 77,39,600
Q.53 (Imp)
Solution:
Conversion of Trial Balance from Rs into $
Opening Stock (Trading) 7,500 - Rs.3,00,000/40
Purchases (Trading) 19,512.19 - Rs.8,00,000/41
Sales (Trading) - 29,268.29 Rs.12,00,000/41
Debtors (Balance Sheet) 9,523.81 - Rs.40,00,000/42
Creditors (Balance Sheet) - 7,142.86 Rs.30,00,000/42
Bills Rec. (Balance Sheet) 2,857.14 - Rs.1,20,000/42
Bills Payable (Balance Sheet) - 5,714.28 Rs.2,40,000/42
Wages (Trading) 13,658.54 - Rs.5,60,000/41
Rent (P&L) 8,780.49 - Rs.3,60,000/41
Sundry Charges (P&L) 3,902.44 - Rs.1,60,000/41
Computers (P&L) 2,400 - 6,000 x 40%
Depn on Computers (P&L) 3,600 - 6,000 x 60%
Bank (Balance Sheet) 10,000 - Rs.4,20,000/42
H.O a/c (Balance Sheet) - 39,609.18 Given
81,734.61 81,734.61
Closing Stock= Rs.4,20,000/42 = 10,000 (Balance Sheet) & (Trading)
Totalling of Books of Accounts- Homework

(Solution: Gross Loss= 1,402.44, Net Loss =17,685.37, Balance sheet total= 52,466.32)
326 | P a g e
*Part XII*
Q.50 (Imp)
Solution:
Note: In the given Question, Closing Stock & Branch Manager Commission is missing.
We should not calculate the missing items of a Foreign Branch into Indian Currency
Directly. We should calculate the missing items of a Foreign Branch into Foreign
Currency first then we should translate it into Indian Currency.
Conversion of Trial Balance from $ into Rs

Fixed Assets 4,10,400 - 1,08,000 x 3.8
Depreciation on Fixed Asset 45,600 - 12,000 x 3.8
Opening Stock 4,25,600 - 56,000 x 7.6
Goods from H.O 24,63,000 - GSTB Return
Sales - 31,50,000 4,20,000 x 7.5
Expenses 1,87,500 - 25,000 x 7.5
Debtors 1,84,800 - 24,000 x 7.7
Creditors - 1,30,900 17,000 x 7.7
Cash 46,200 - 6,000 x 7.7
H.O A/c - 8,60,000 Branch Balance given
Commission 18,095 - 2,350 (W.N.2) x 7.7
Outstanding Commission - 18,095 2,350 (W.N.2) x 7.7
37,81,195 41,58,995
Exchange Loss (Bal.fig) 3,77,800 -
41,58,995 41,58,995
.
Closing Stock = $40,000 x 7.7 = Rs.3,08,000
Branch Trading & P&L a/c
To Opening Stock 4,25,600 By Sales 31,50,000
By Closing Stock (W.N.1) 3,08,000
34,58,000 34,58,000
To Depreciation 45,600 By Gross Profit 5,69,400

To Expenses 1,87,500
To Commission (W.N.2) 18,095 By Net Loss 59,595*
To Exchange Loss 3,77,800
6,28,995 6,28,995
Balance Sheet
H.O A/c 8,60,000 Fixed Assets 4,10,400
Debtors 1,84,800
Creditors 1,30,900 Cash 46,200
327 | P a g e
Outstanding Commission 18,095 Stock (W.N.1) 3,08,000

P&L Dr 59,595
10,08,995 10,08,995
W.N.1
Calculation of Closing Stock (in $)
Opening Stock 56,000

Goods from H.O 3,20,000
Total Goods 3,76,000
COGS (4,20,000 – 27.5/13.5) (3,36,000)
(Sales – Gross Profit)
W.N.2
Branch Trading & P&L a/c (In $)
4,60,000 4,60,000
To Expenses 25,000 By Gross Profit 84,000
To Depreciation 12,000
To Net Profit (Before 47,000*

Commission)
84,000 84,000
Commission= 47,000 x 5% = $2,350
Q.51 (V.V.Imp)
Solution:
I Branch Loan A/c
31.12.x1 01.01.x1
To Bank 1,81,656 By Fixed Assets 5,61,000
[(3,000 x 26.10) + 1,03,356] (22,000 x 25.50)
31.12.x1
To Bal c/d (19,000 x 26.10) 4,95,900* By Exchange Loss 13,200
(26.10 - 25.5) x 22,000
By Interest 1,03,356
(22,000 x 18% x 26.10)
6,77,556 6,77,556
31.12.x2 01.01.x2
To Bank 1,69,488 By Bal b/d (19,000) 4,95,900
[(26.40 x 3,000) + 90,288] 31.12.x2
By Exchange Loss 5,700
To Bal c/d (16,000 x 26.40) 4,22,400* (26.40 – 26.10) x 19,000
328 | P a g e
By Interest 90,288
(19,000 x 18% x 26.40)
5,91,888 5,91,888
31.12.x3 01.01.x3
To Bank 2,48,136 By Bal b/d (16,000) 4,22,400
[(42.20 x 3,000) + 1,21,536] 31.12.x3
By Exchange Loss 2,52,800
To Bal c/d (13,000 x 42.20) 5,48,600* (42.20 – 26.40) x 16,000
By Interest 1,21,536
(16,000 x 18% x 42.20)
7,96,736 7,96,736
Fixed Assets A/c

01.01.x1 31.12.x1
To Bank (3,000 x 25.5) 76,500 By Depreciation (1/10) 65,070
To Loan (22,000 x 25.5) 5,61,000 By Bal c/d 5,85,630
31.12.x1
To Exchange Loss 13,200
6,50,700 6,50,700
01.01.x2 31.12.x2
To Bal b/d 5,85,630 By Depreciation (1/8) 65,703
31.12.x2 By Bal c/d 5,25,627
To Exchange Loss 5,700
5,91,330 5,91,330
01.01.x3 31.12.x3
To Bal b/d 5,25,627 By Depreciation (1/9) 97,303
31.12.x3 By Bal c/d 6,81,124
To Exchange Loss 2,52,800
7,78,427 7,78,427
Conversion of Trial Balance

Fixed Assets (Balance Sheet) 6,81,124 - Refer Fixed Asset ac
Depreciation (P&L) 97,303 Refer Fixed Asset ac
Loan (Balance Sheet) 5,48,600 Refer Loan a/c
Interest (P&L) 1,21,536 - Refer Loan a/c
Opening Stock (Trading) 1,16,840 - 8,200 x 26.40
Goods from H.O(Trading) 21,46,200 - GSTB given
Sales (Trading) - 38,39,800 1,05,200 x 36.50
Salaries (P&L) 5,54,800 - 15,200 x 36.50
Cash (Balance Sheet) 71,740 - 1,700 x 42.20
Debtors (Balance Sheet) 8,94,640 - 21,200 x 42.20
H.O a/c (Balance Sheet) - 4,12,716 Given
47,83,823 48,01,116
Exchange Loss 17,293 -
329 | P a g e
48,01,116 48,01,116
Closing Stock = 2,400 x 42.20 = 1,01,280 (Balance Sheet) & (Trading)
Totalling of Books of Accounts- Homework
Concept III: Non-Integral Foreign Operation (NIFO)
If any Foreign Branch is operated as Separate Entity outside India then there shall
be 2 major changes as follows:-
A) Fixed Asset shall be converted at Closing Rate instead of Actual Rate.
B) Difference in Trial Balance will be transferred to “FCTR” (Foreign Currency
Translation Reserve)
[It will be disclosed separately in Balance Sheet]
Q.54, 55, 56
Solution: Homework
Thank You �
CA. Parveen Jindal
330 | P a g e
Chapter 12: Investment Accounting (AS-13)

(10-16 Marks)
*Part I*
Contents:
I) Meaning of Investments
II) Classification of Investments
III) Cost of Investments
IV) Disposal of Investments
V) Valuation of Investments
VI) Concepts related to Shares:-
1. Bonus Shares
2. Right Shares
3. Dividends
VII) Investment in Debentures/ Bonds
VIII) Practical Questions
Concept I: Meaning of Investments (Imp)
As per the Provisions of AS-13, Investments are the Assets which are held by an
Investor for Earning Income by way of Interest, Dividend, Rental or for Capital
Appreciation.
Income
Interest Dividend Rental Appreciation
Invt in F.D, Investment in Investment in Investment in

Invt in Loans, Shares Properties Gold, Silver, Real
Invt in Debentures, (ie Equity or (i.e; Land & Estate etc.
Invt in Bonds etc Preference) Building only)
Concept II: Classification of Investments
Classification
Short Term Investments Long Term Investments

(Current Investments) (Permanent Investments)
a) Short Term Investments: If any Investment is expected to be sold within the

period of 12 Months from the date of its acquisition then It will be considered as
a Short Term Investment.
b) Long Term Investments: If any Investment is expected to be sold after 12
months from the date of its acquisition then It will be consider as a Long Term
331 | P a g e
Investment.
After Classifying the Investments under the heading of Short Term & Long Term the
following presentation should also be made:
i) Investment in Debentures
ii) Investment in Bonds
iii) Investment in Shares
iv) Investment in Gold etc.
Concept III: Cost of Investments
As per the provisions of AS-13, Cost of investments should include following items:-
Particulars Rs.
Purchase Price xxxxx
Stamp Duty xxxxx
Brokerage/Commissions xxxxx
S.T.Tax xxxxx
Any other expenses which is related to acquisition of Invest xxxxx
Cost of Investment xxxxx
Journal:
Investment a/c„„„„„Dr xxxxx

To Bank xxxxx
(Being Investments acquired)
Concept IV: Disposal of Investments
If Investments are sold by an Investor then Profit/Loss on Sale of Investment

Should be transferred to P&L A/c.
Note:-If a part of Investments is sold then cost for sold portion should be
calculated by Weighted Average Method. We should ignore the application of FIFO, LIFO
or any other Method.
Q.20
Solution:
I) Calculation of Cost of Investment
Particulars 15.12.1999 25.12.1999
Purchase Price 8,00,000 14,40,000
(10,000 x 80) (15,000 x 96)
Brokerage @1.5% 12,000 21,600
Stamp Duty 8,000 14,400
Cost of Investment 8,20,000 14,76,000
332 | P a g e
II) Calculation of Profit/Loss on Sale of Investments

Particulars Rs.
Gross Selling Price (12,000 x 105) 12,60,000
Brokerage @1.5% (18,900)
Net Selling Price 12,41,100
Cost for sold portion (11,02,080)

[(8,20,000+14,76,000)x 12,000/(10,000+15,000)]
Profit 1,39,020
Investment in Shares of X Ltd.

Particulars Nos. Rs. Inc. Particulars Nos. Rs. Income
15.12.99 15.12.99
To Bank 10,000 820000 - By Bank 12k 1241100 -
25.12.99 31.3.00
To Bank 15,000 1476000 - By Bal c/d 13k* 1193920* -
(bal.fig)
15.2.00
To P&L - 139020
(Profit)
25,000 2435020 - 25k 2435020 -
*Part II*
Concept V: Valuation of Investments
As per the AS-13, Valuation of Investments should be made at each Balance Sheet date
For True & Fair Presentation. The following presentation may be considered:-
a) Valuation of Short Term Investment-
Valuation Rule = Cost or Net Realisable Value*
Whichever is LOWER
*NRV = Market Value of Investments (-) Expected Expenses to be paid at the time
At Balance Sheet date of disposal of Investments
Note: If NRV becomes higher than Cost of Investments at Balance Sheet then there
will be No Accounting for expected appreciation as a matter of Prudence.
If NRV becomes lower than Cost of Investments then we should provide for
decline in Investments with the help of following Entries:-
Journal Entries: i)Valuation Loss a/c„„..Dr xxxx
To Short Term Investment xxxx
(Being Loss Provided)
ii)P&L a/c„„„Dr xxxx
To Valuation Loss xxxx
333 | P a g e
b) Valuation of Long-Term Investments:-
Valuation Rule = At Cost Only (Except in Case of Permanent Decline)
Assumption of Investment:
In the absence of any specific information we should always assume that given
investments are Short Term Investment.
Q.25
Solution:
Statement showing Valuation of Investments (31.03.2009)
Particular Rs.
A) Cost of Investments:
Purchase Price (200 x 105) 21,000
Expenses 200
Cost of Investment 21,200
B) Market Value as at 31.03.2009 (200 x 110) = Rs.22,000
Valuation = A) or B) whichever is LOWER = Rs.21,200
Q.26
Solution:
Journal Entries
a) Valuation Loss a/c„„„.Dr 300 lakhs

To Investment in Nose Ltd. 300 lakhs
(Being Loss provided)
b) P&L a/c„„„..Dr 300 lakhs

To Valuation Loss 300 lakhs
334 | P a g e
Concept VI: Accounting for Bonus Shares (V.V.Imp)
If Bonus Shares are issued by a Company to its Shareholders then there will be no
entry in the Books of Investors because these shares are provided by Companies to
its members without any further payment. It can also be said that these shares are
received by Investors from Companies as a Gift/Free of Cost.
Note: After accepting Bonus shares, Total number of shares shall be increased in the
Books of Investor due to which Average cost per share will be reducing at the time of
sale of Investments.
Q.21 (Imp)
Solution:
Calculation of Profit/Loss on Sale of Investments
Particular Rs.
Gross Selling Price (12,000 x 105) 12,60,000
Brokerage @1.5% (18,900)
Cost for Sold Portion (7,34,720)
[(8,20,000+14,76,000+0)x12,000/(10,000+15,000+12,500)]
Profit 5,06,380
(25,000 x 1)/2
Investment in X Ltd
Particulars Nos. Rs. Inc. Particulars Nos. Rs. Inc.
15.12.99 15.02.00
To Bank 10k 820000 - By Bank 12k 1241100 -
25.12.99 31.03.00
To Bank 15k 1476000 - By Bal c/d 25.5k* 1561280 -
(Bal.fig)
02.01.00
To Bonus 12.5k - -
shares
15.02.00
To Profit - 506380 -
On Sale
37.5k 2802380 - 37.5k 2802380 -
335 | P a g e
Q.12
Solution:
In the Books of Mr. X
Investment a/c
To bal b/d 500 62,500 - By Bank 500 45,000 -
To Bonus 500 - -
Shares(1:1)
By Bal c/d 500* 31,250* -
To Profit - 13,750 - (bal.fig)
On Sale
(W.N.1)
1,000 76,250 - 1,000 76,250 -
W.N.1
Calculation of Profit or Loss on Sale of Investment
Particular Rs.
Selling Price 45,000
Cost for Sold Portion (31,250)
[(62,500+0) x 500/ (500+500)]
Profit 13,750
Q.11
Solution:
In the Books of Krishna Murthy
Investment a/c
01.04.14 31.3.15
To Bank 1000 1,23,000 - By Bank 500 44,100 -
(W.N.1) (W.N.2)
31.3.15
To Bonus By Bal c/d 1000 82,000 -
Shares 500 - - (W.N.3)
(1000 x ½)
To Profit - 3,100 -
On sale
(W.N.2)
1,500 1,26,100 - 1,500 1,26,100 -
W.N.1
Calculation of Cost of Investment
Particular Rs.
Purchase Price (1,000 x 120) 1,20,000
Brokerage @2% 2,400
Stamp Duty (1,20,000 x 0.5)/100 600
1,23,000
336 | P a g e
W.N.2
Calculation of Profit/Loss on Sale of Investment
Particular Rs.
Selling Price (500 x 90[assumed]) 45,000
Brokerage @2% (900)
Cost for Sold Portion (1,23,000 x 500)/1,500 (41,000)
Profit 3,100
W.N.3
Valuation of Investments
Particular Rs.
Cost of Investments (Nos= 1000) 82,000
(As a bal.fig in A/c)
OR
Market Value (1,000 x 88.20[90-2%]) 88,200
Whichever is LOWER 82,000
Q.7 & 32
Solution: Homework
Concept VII: Treatment of Right Shares

Right Shares
Situation I Situation II
If Right Shares are If Right Shares are sold
Acquired to second person
*Part III*
Situation I: If Right Shares are acquired by the Investor
In case Right Shares are acquired by Investor at Right Issue Price then Investor
Party should record the following Journal Entry:
Investment A/c„„„„.Dr xxxx

To Bank xxxx
(Being Investments made)
Note:- These shares are purchased by Investor directly from Company (Primary
Market) due to which there will be No Expenses on acquisition of Right Shares such as
Brokerage, Stamp Duty, S.T.T etc.
337 | P a g e
Situation II: Sale of Rights
If any Investor transfers his right shares in the favour of any other person in
consideration of some nominal charge then It will be considered as “Sale of Rights”.
The following entries should be recorded in the Books of Accounts:-
a) Bank a/c„„„„„Dr xxxx
To Sale of Rights xxxx
(Being Income realised)
b) Sale of Rights a/c„„„Dr xxxx

To P&L xxxx
(Being Income transferred to P&L)
Exceptions to above Rule:

If shares are acquired on Cum Right Basis then Sale of Right should not be treated as
an Income but It will be treated as Recovery of Cost. The following entries should be
recorded:-
i) Bank a/c„„..Dr xxxx

To Sale of Right xxx
(Being Amount realised)
ii) Sale of Right a/c„„Dr xxxx

To Investments xxxx
(Being Cost recovered)
Note:- As per the provisions of AS-13, we can not consider Sale of Right as Recovery
of Cost if It is higher than decline in Actual wealth.
(Market Price Pre-Right (-) Market Price Post-Right)
In the specified case, Excess amount of Recovery which is above than decline in
wealth, should be transferred to P&L a/c.
Note:- If question remains silent on decline in wealth then Accounting will be done on
the basis of Cum-Right/ Ex-Right basis.
Q.22
Solution:
In the Books of Mr.X
Investment in Omega Ltd
To Bank 500 62,500 - By Sale of - 2500* -
To Bank @80 250 20,000 - Right
(250x10)
By Bal c/d 750* 80,000*
(Bal.fig)
750 82,500 - 750 82,500 -
*Calculation of decline in wealth due to Right Issue:

Decline= (110-92.5) x 500shares = Rs.8,750/-
338 | P a g e
Comment: We have recovered Rs.2,500 which is less than decline in wealth. So we can
adjust the entire amount against Cost of Investment.
Concept VIII: Accounting for Dividends on Shares (Post-Acquisition

Dividends)
If any dividend is received by Investor from company on Investment in Shares then

It will be considered as an Income & the following entries will be recorded:-
i) Bank a/c„„.Dr xxxx

To Dividends xxxx
(Being Income from Dividends realised)
ii) Dividends a/c„„..Dr xxxx

To P&L xxxx
(Being Income transferred to P&L)
Exceptions to above Rule(V.V.Important)

“Pre-Acquisition Dividend”
As per the provisions of AS-13, Pre-acquisition* Dividend should not be considered as

an Income but It will be considered as a Recovery of Cost & It will be transferred to
Investment A/c as follows:-
a) Bank a/c„„„..Dr xxxx

To Pre-acquisition Dividend* xxxx
(Being Dividend Received)
b) Pre-acquisition Dividend„„„.Dr xxxx

To Investment xxxx
(Being dividend adjusted against Cost)
*Meaning of Pre-acquisition Dividend: If any dividend is received by Investor for the

previous year but Investment is acquired in Current Year then such dividend should
be considered as Pre-acquisition Dividend.
Q.23
Solution:
In the Books of Mr. Sharma
Investment A/c
01.04.03 30.9.03
To Bank 1,000 35,000 - By Pre-Acq. - 2,600 -
Dividend
01.07.03 (1,300 x 2)
To Bank 300 9,600 -
01.11.03
01.11.03 By Bank 500 19,000 -
To Profit - 2,846 -
339 | P a g e
On Sale 31.03.04
(W.N.1) By Bal c/d 800* 25,846*
(bal.fig)
1,300 47,446 - 1,300 47,446 -
W.N.1
Particulars Rs.
Selling Price 19,000
[(35,000 + 9,600 – 2,600) x 500/1,300]
Profit 2,846
Comments: We have ignored the given Market Value at Balance Sheet date because
Investments are Permanent Investments.
Q.19
Solution:
Investment A/c
15.4 30.5
To Bank 25,000 30,75,000 - By Sale of - 6,00,000 -
Right
25.5 (20000x30)
To Bank 30,000 43,05,000 -
30.05 By Pre-Acq. - 2,20,000 -

To Bank 35,000 28,00,000 - Dividend
(55000x10x
15.11.99 40%)
To Profit - 65,250 -
On Sale 15.11.99
By Bank 15,000 16,25,250 -
(W.N.2)
31.3.00
By bal c/d 75,000 7800000 -
(bal.fig)
90,000 1,02,45,250 - 90,000 10245250 -
W.N.1
Particular 15.04.99 25.05.99 30.05.99
(25,000) (30,000) (35,000)
Purchase Price 30,00,000 42,00,000 28,00,000
(@120) (@140) (@80)
Brokerage (1.5%) 45,000 63,000 -
Stamp Duty (1%) 30,000 42,000 -
340 | P a g e
30,75,000 43,05,000 28,00,000
W.N.2
Calculation of Profit/Loss on Sale of Investments
Particular Rs.
Selling Price (15,000 x 110) 16,50,000
Brokerage @1.5% (24,750)
(3075000+4305000+2800000-600000-220000)x15000
90,000
Profit 65,250
Q.2 & 6
Solution: Homework
*Part IV*
Q.10 (Imp) [16 Marks]

Solution:
In the Books of Sunder
Investment A/c
01.4.14 30.9.14
To Bal b/d 25,000 3,75,000 - By Bank - - 10,000
(Sale of
20.6.14 Right)
To Bank 5,000 80,000 - [(35k x 3/7
X 1/3)@2]
16.8.14
To Bonus 5,000 - - 31.10.14
Shares By Bank - - 50,000
(30000x1/6) (25k x 10
X20%)
30.9.14
To Bank 10,000 1,50,000 - By Pre-acq - 10,000 -
[(35k x 3/7) Dividend
-1/3@Rs.15] (5k x 10
X20%)
15.11.14
To Profit - 44,444 - 15.11.14
On Sale By Bank 25,000 3,75,000 -
(W.N.1) @Rs.15/-
31.12.14
To P&L - - 60,000 31.12.14
(bal.fig) By Bal c/d 20,000 2,64,444
(bal.fig)
45,000 6,49,444 - 45,000 6,49,444 60,000
341 | P a g e
P&L A/c [Extract]

Particular Rs. Particular Rs.
By Income on Investment 60,000
By Profit on Sale of 44,444

Investment
W.N.1
Particular Rs.
Selling Price (25,000 x 15) 3,75,000
Cost for Sold portion (3,30,556)

(3,75,000+80,000+0+1,50,000-10,000) x25,000
(25,000+5,000+5,000+10,000)
Profit 44,444
Q.13
Solution:
In the Books of Mr. Singh
Investment A/c
01.1.14 30.9.14
To Bal b/d 20,000 3,20,000 - By Bank - - 22,500
(Sale of
01.6.14 Right)
To Bank 5,000 70,000 -
20.10.14
02.8.14 By Bank - - 30,000
To Bonus 5,000 - - (20000x10
Shares X15%)
(25,000x1/5)
By Pre-Acq - 7,500 -
30.9.14 Dividend
To Bank 15,000 2,25,000 - (5000x10
X15%)
31.12.14
To P&L a/c - - 52,500* 01.11.14
(Bal.fig) By Bank 20,000 2,60,000 -
By Loss on - 10,000 -
Sale (W.N.1)
31.12.14
By Bal c/d 25,000 3,37,500 -
(W.N.2)
45,000 6,15,000 52,500 45,000 6,15,000 52,500
342 | P a g e
W.N.1
Particular Rs.
Selling Price (20,000 x 13) 2,60,000

(3,20,000+70,000+0+22,500-7,500) x 20,000
45,000
Loss 10,000
.
W.N.2
Particular Rs.
Cost of Investment (Bal.fig in A/c) 3,37,500
OR
Market Value at Balance Sheet date (25,000 x 14) 3,50,000
Whichever is LOWER 3,37,500
343 | P a g e
Accounting for Debentures & Bonds (V.V.Imp)

[16 Marks]
Example 1: (Ex-Interest)
i. No. of 10% Debentures acquired= 100
ii. Face Value per Debentures= Rs.100
iii. Purchase Price per Debenture= Rs.99(ex-interest)
iv. Brokerage @2% on Cost
v. Stamp Duty= Rs.150
vi. Date of Transaction= 01.03.2015
vii. Company makes Payment of Interest= 30.06/31.12
Prepare Investment A/c. Assuming Books are closed on 31.12.2015.
Solution:
W.N.1
Particular Rs.
Brokerage @2% 198
Stamp Duty 150
Ex Int= 100 x 100 x 10% x 2/12= Rs.167
Jan Feb
Investment in Debentures A/c

Particulars Nos. Rs. Int. Particulars Nos. Rs. Int.
01.3.15 30.6.15
To Bank 100 10,248 167 By Bank - - 500
(W.N.1) (100x100x10%
X6/12)
31.12.15
To P&L a/c - - 833* 31.12.15
(Bal.fig) By Bank - - 500
(100x100x10%
X6/12)
By Bal c/d 100 10,248* -

(bal.fig)
100 10,248 1,000 100 10,248 1,000
Example 2: With the help of given information in above example, Prepare Investment
a/c. Assuming given transaction is on the basis of Cum-Interest.
Solution:
344 | P a g e

Particular Rs.
Interest (100 x 100 x 10% x 2/12) (167)
Cost 9,733
Brokerage @2% on Cost 195
(If Brokerage is given on Purchase Price then It will be as follows:
Brokerage= 9,900 x 2%
Stamp Duty 150
10,078

01.3.15 30.6.15
To Bank 100 10,078 167 By Bank - - 500
31.12.15
31.12.15 By Bank - - 500
To P&L - - 833*
(bal.fig) By Bal c/d 100* 10,018* -
(bal.fig)
100 10,078 1,000 100 10,078 1,000
Example 3:
i. No. of Debentures= 200 (Ex-Int)
ii. No. of Debentures= 200 (Cum-Int)
iii. Rate of Interest= 10% p.a
iv. Purchase Price : 01.4.2015 @ 99
01.8.2015@ 96 Cum-Int
v. Interest Payable= 30.6/31.12
vi. Face Value= Rs.100 per debenture
Prepare Investment A/c for 2015.
Solution:
01.4.15 30.6.15
To Bank 200 19,800 500 By Bank - - 1,000
(200x100x10% (J,F,M) (200x100
X3/12) X10%x6/12)
01.8.15 31.12.15
To Bank 200 19,033 167 By Bank - - 2,000
(W.N.1) (400x100
X10%x6/12)
31.12.15
To P&L - - 2,333* By Bal c/d 400 38,833*
(bal.fig) (bal.fig)
400 38,833 3,000 40 38,833 3,000
345 | P a g e
W.N.1
Particular Rs.
Interest (200 x 100 x 10% x 1/12) (167)
Cost 19,033
Example 4: (V.V.Imp)
i. No. of Debentures acquired: 01.2.15 (200@98)

01.9.15 (150@97)
ii. No. of Debentures Sold: 01.5.15 (100@105)
01.10.15 (100@104)
iii. Interest Payable= 30.6/31.12
iv. Interest rate= 12% p.a
Prepare Investment a/c for 2015.
Solution:
Investment A/c
01.2.15 01.05.15
To Bank 200 19,600 200 By Bank 100 10,500 400
(200x100 (W.N.1)
X12%x1/12)
30.6.15
01.5.15 By Bank - - 600
To Profit - 700 - (100x100
On Sale X12%x6/12)
(W.N.1)
01.10.15
01.9.15 By Bank 100 10,400 300
To Bank 150 14,550 300 (W.N.2)
(150x100
X12%x2/12)
31.12.15
01.10.15 By Bank - - 900
To Profit - 660 - (150x100
On Sale X12%x6/12)
(W.N.2)
By Bal c/d 150* 14,610* -
31.12.15 (bal.fig)
To P&L - - 1,700*
(bal.fig)
350 35,510 2,200 350 35,510 2,200
W.N.1
Calculation of Profit/Loss on Sale of Investment (01.05.2015)
346 | P a g e
Particular Rs.
Selling Price (100 x 105) 10,500
Cost for sold portion (9,800)
(19,600 x 100/200)
Profit 700
Ex-Int= 100 x 100 x 12% x 4/12= Rs.400
W.N.2
Calculation of Profit/Loss on Sale of Investment (01.10.2015)
Particular Rs.
Cost for sold portion (9,740)

(19,600 + 700 + 14,550 – 10,500) x 100
(200 + 150 – 100)
Profit 660
Ex-Int= 100 x 100 x 12% x 3/12= Rs.300
*Part V*
Q.17
Solution:
In the books of Mr. A
01.03 31.03
To Bank 240 21542 500 By Bank - - 600
(W.N.1) (240x100
X5%x6/12)
01.09
To Profit - 40 - 01.9
on sale By Bank 100 9016 208
(W.N.2) (W.N.2)
30.09 30.09
To Bank 80 7436 - By Bank - - 350
(W.N.3) (140x100x5%
X6/12)
01.12
To Profit - 23 - 01.12
on sale By Bank 60 5478 50
(W.N.4) (W.N.4)
31.12 31.12
To P&L - - 908 By Accrued - - 200
(Bal.fig) Int
(160x100x5%
X3/12)
347 | P a g e
By Bal c/d 160 14547 -

(W.N.5)
320 29041 1408 320 29041 1408
W.N.1
Particular Rs.
Interest (240 x 100 x 5% x 5/12) ( 500)
21,100
Stamp Duty 20
Brokerage@2% on cost 422
Cost 21,542
W.N.2
Calculation of profit/loss on sale of Investments (1.9)
Particular Rs.
Selling Price (100*92) 92,000
Brokerage @2% 184
Cost for Sold Portion (21,542x100/240) (8,976)
Profit 40
Ex-Interest =100 x 100 x 5% x 5/12=208
W.N.3
Particular Rs.
Brokerage @2% 146
Stamp Duty 10
W.N.4
Calculation of profit/loss on sale of Investments (1.12)
Particular Rs.
Interest (60x100x5%x2/12) (50)
5,590
Brokerage @2% 112
(21542+40+7436-9016)x 60
(240-100+80)
Profit 23
W.N.5
Particular Rs.
Cost of Investments(Bal. Fig) 14,547
OR
Market value (91 x 160) 14,560
348 | P a g e
Whichever is LOWER 14,547
Q.18 (V.V.Imp)
Solution:
In the books of Tee Ltd
Investment in Dee Ltd
01.5.97 30.09.97
To Bank 5000 525000 5625 By Bank - - 50625
(500000x13.5% (7500x100
X1/12) X13.5%x6/12)
01.8.97 1.10.97
To Bank 2500 256250 11250 By Bank 2000 206000 -
(W.N.1) By Loss on - 2333 -
To P&L - - 52313 Sale (W.N.2)
(Bal.fig)
31.12.97
By Accrued - - 18563
Int
(5500x100
X13.5%x3/12)
By Invt in 1100 114583 -

Shares
(W.N.3)
By Bal c/d 4400 458334 -
(W.N.4)
7500 781250 69188 7500 781250 69188
Investment in Shares A/c

To Invest in 10000 114583 - By Bal c/d 10000 114583 -
Debentures (W.N.4)
W.N.1
Calculation of Cost of Investment (1.08.97)
Particular Rs.
Purchase price (2500 x 107) 267500
Interest (250000 x 13.5% x 4/12) (11250)
Cost of Investment 256250
W.N.2
Calculation of profit/loss on sale of Investments (1.10.97)
Particular Rs.
Selling price (2000 x 103) 206000
Cost for sold Portion (52500+256250/7500) x 2000 (208333)
Loss 2333
349 | P a g e
W.N.3
Calculation of Cost of shares
Date Transaction No. Amount
1.5 Purchases 5000 525000
1.8 Purchases 2500 256250
1.10 Sold (2000) (208333)
Balance 5500 572917
Conversion@20% (1100) (114583)
Net Bal. 4400 458334
W.N.4
Valuation of Debentures
Particular Rs.
Cost (W.N.3) 458334
OR
MV (4400 x 106) 466400
Whichever is LOWER 458334
W.N.5
Valuation of Shares
Particular Rs.
Cost of shares 114583
OR
MV (10000 x 15) 150000
Q.16 (Imp) [16 Marks]

Solution:
In the books of Bonanzaa Ltd
Investment A/c
01.4.93 01.6.93
To Bal b/d 2,000 1,90,000 - By Bank 600 56,400 2,250
To Accrued - - 4,500 By Loss on - 600 -
Int SOI(W.N.2)
(200000x9%
X3/12) 30.6.93
By Bank - - 9,900
31.5.93 (2200x100
To Bank 800 73,000 3,000 X9%x6/12)
(W.N.1)
30.11.93
01.12.93 By Bank 400 37,300 1,500
To Bank 100 10,000 375 By Loss on - 700 -
(10000x9% SOI
X5/12) (W.N.3)
31.12.93
By Bank - - 8,550
(1900x9%
X6/12)
350 | P a g e
01.3.94
31.3.94 By Bank 100 9,500 150
To P&L - - 18,525 (W.N.4)
(Bal.fig)
31.3.94
By Accrued - - 4,050
Interest
(1800x100
X9%x3/12)
By Bal c/d 1,800 1,68,500 -
(W.N.5)
2,900 2,73,000 26400 2,900 2,73,000 26400
W.N.1
Calculation of Cost of Investment (31.5)
Particular Rs.
Interest (80,000 x 9% x 5/12) (3,000)
W.N.2
Particular Rs.
Cost for Sold Portion 57,000
(19,000 x 600)
2,000
Loss 600
Ex-Interest= 600 x 100 x 9% x 5/12= Rs.2,250
W.N.3
Particular Rs.
Interest (40,000 x 9% x 5/12) (1,500)
37,300
(1,90,000 x 400)
2,000
Loss 700
W.N.4
Particular Rs.
Cost for Sold portion (9,500)
(1,90,000 x 100)
2,000
Profit -
Ex-Interest = 10,000 x 9% x 2/12= Rs.150
W.N.5
351 | P a g e
Particular Rs.
Cost of Investment (As a bal.fig) 1,68,500
OR
Market Value (1,800 x 96) 1,72,800
Whichever is LOWER 1,68,500
Q.27 [12 Marks]

Solution:
In the books of Gamma Ltd
Investment A/c
01.4.09 30.6.09
To Bal b/d 1,000 1,05,000 - By Bank - - 11,250
To Accrued - - 3,750 (1500x100
Interest X15%x6/12)
(1000x100x15%
X3/12) 01.11.09
By Bank 600 57,300 3,000
01.5.09 By Loss - 5,700 -
To Bank 500 51,000 2,500 (W.N.2)
(W.N.1)
31.12.09
30.11.09 By Bank - - 9,750
To Bank 400 38,400 2,500 (1300x100
(40000x15% X15x6/12)
X5/12) By Bank 400 55,000 -
31.12.09 31.3.10
To Profit on - 13,000 - By Accrued - - 3,375
SOI (W.N.3) Interest
(1100x100
To P&L - - 18,625* X15%x3/12)
(Bal.fig)
By Bal c/d 900* 89,400 -
(bal.fig)
1,900 2,07,400 27,375 1,900 207400 27,375
W.N.1
Particular Rs.
Purchase Price (Nos= 500) 53,500
Interest (50,000 x 15% x 4/12) (2,500)
W.N.2
Particular Rs.
Selling Price (Nos= 600) 57,300
(1,05,000 x 600)
352 | P a g e
1,000
Loss 5,700
Ex-Interest= 60,000 x 15% x 4/12 = Rs.3,000
W.N.3
Particular Rs.
Selling Price (Nos= 400) 55,000
(1,05,000 x 400)
1,000
Profit 13,000
Q.1, 3, 4 & 8
Solution: Homework
*Part VI*
Important Points to be Considered
Concept I: Calculation of Brokerage
Brokerage
@On Cost @On Purchase Price If Question

Remains silent
Ex Interest =PP*%
I) On Cost: Purchase Price
Cum Int= [PP-Interest] x %
Ex Interest = PP x %
II) On Purchase Price
Cum Int= PP x %
III) If Question remains silent: a) As per ICAI answers=PP*%

b) we can calculate it by the following alternatively
by giving assumptions in exam = [PP-Int]x%-Cum
Int.
Concept II: If transaction date is same as the date of payment of interest

by company
In the given case, we should ignore interest on transaction date, because it will be
353 | P a g e
assumed that the Company will pay the due interest to seller profit. It can also be
said that these will be no payment for interest from buyer to seller.
(Ignore cum interest/ex-interest in this case)
Concept 3: Treatment of interim Dividend in the Book of Investor (Imp)
If any company makes payment for dividend “in current year for current year” then
it will be considered as a quarterly n dividend and it is also known as “Interim
Dividend”.
The following entries will be recorded in the Books of investor at the time of receipt
of Interim Dividend:-
i) Bank a/c----------------Dr. xxxx

To Interim Dividend xxxx
(Being dividend income received)
ii) Interim Dividend * a/c----Dr. xxxx

To P&L xxxx
(Being Income recognized)
*Interim dividend = No of shares held by X Face Value X % of dividend
investor on the date
of Interim dividend
Paid-up value
Concept 4: Reclassification of Investment (V.V.Imp)
1st Case: Short Term To Long Term

If any Short Term Investment is re-classified as long term investment then we
should apply valuation rule on the date of re-classification as follows:-
Rule= Cost or MV/NRV, whichever is LOWER

In case MV become lower than cost then we should provide for decline in investments
on the same Date.
In case market value improves after such decline then reversal of loss can be made
but to the extent of original cost:
1. Investment A//c------Dr xxx

To Reversal of loss xxx
2. Reversal of loss A//c------Dr xxx

To P&L xxx
2nd Case: Long term to Short term

Reclassification should be made directly at cost.
Concept 5: Investments which are out of scope of AS-13

The following investments are not covered by AS-13
1) Investment in lease Agreement (AS-19)
2) Investment in retirement benefit of employees (AS-15)
354 | P a g e
3) Banks, NBFC and Mutual Funds
*Part VII*
Q.8
Solution:
In the books of Mr. Chatur
Investment A/c
1.4.2014 30.6.2014
To Bal b/d 4000 392000 12000 By Bank - - 36000
(4000x100x (6000x100
X12%x3/12) X12%x6/12)
1.6.2014 1.9.2014
To Bank 2000 234800 10000 By Bank 3000 317400 6000
(W.N.1) (W.N.2)
1.9.2014 1.12.2014
To P&L - 23400 - By Bank 2000 205800 10000
(W.N.2) By P&L - 9600 -
(W.N.3)
31.1.2015
To Bank 3000 306000 3000 31.12.2014
(W.N.4) By Bank - - 6000
(1000x100
31.3.2015 X12%x6/12)
To P&L - - 45000
(bal.fig) 31.3.2015
By Accrued - - 12000
Int
(4000x100
X12%x3/12)
By Valn. - 3400 -
loss
By Bal c/d 4000 420000 -
(W.N.5)
9,000 9,56,200 70,000 9,000 9,56,200 70,000
W.N.1
Particular Rs.
Purchase Price (2000 x 120) 2,40,000
Interest (2000 x 100 x 12% x 5/12) (10,000)
Purchase Price Net of Interest 2,30,000
Brokerage (2,40,000 x 2% [We assumed it on P.P]) 4,800
Cost 2,34,800
355 | P a g e
W.N.2
Particular Rs.
Selling Price (3000*110) 3,30,000
Interest (3000*100*12%*2/12) (6,000)
S.P. net of Interest 3,24,000
Brokerage (3,30,000*2%) 6,600
NSP 3,17,400
Cost for Sold Portion (392000/4000*3000) (2,94,000)
Profit 23,400
W.N.3
Particular Rs.
Selling Price (2000*105) 2,10,000
Brokerage (2,10,000*2%) 4,200
NSP 2,05,800
Cost for Sold Portion
O.B.=(392000/4000*1000} =(98,000)
Next Lot= (234800/2000*1000} =117400 2,15,400
Loss (9,600)
Ex-Interest=2000*100*12%*5/12 =10,000
W.N.4
Calculation of Cost of Investment (31.12014)
Particular Rs.
Purchase Price (3000*100) 3,00,000
Brokerage @2% 6,000
3,06,000
Ex-Interest=3000*100*12%*1/12 = 3,000
W.N.5
Valuation of Investments as on 31.03.2015
Particular Rs.
Cost of 4000 Debenture as a Bal. Fig 423400
OR
Market value for 4000 Debentures@105 420000
356 | P a g e
Q.15
Solution:
In the books of Smart Investments
Investment in Bonds A/c
1.4.2013 30.06.13
To Bal c/d 1200 126000 3600 By Bank - - 19200
(1200*100 (3200*100
*12%*3/12) *12%*6/12)
2.5.2013 30.09.2013
To Bank 2000 192000 8000 By Bank 1500 157500 4500
(W.N.1) (W.N.2)
30.09.2013 31.12.2013
To P&L - 8437 - By Bank - - 10200
(W.N.2) (1700*100
*12%*6/12)
31.3.2014
To P&L - - 27400 31.3.2014
(bal.fig) By Accrued - - 5100
Int.
By Bal c/d 1700 168937 -

(bal.fig)
3200 326437 39000 3200 326437 39000
W.N.1
Particular Rs.
Purchase price (2000*100) 200000
Interest (2000*100*12%*4/12) (8000)
192000
W.N.2
Calculation of profit/loss on sale of Debenture (30.09.2013)
Particular Rs.
Selling price (1500*105) 157500
Cost for sold Portion (126000+192000/3200*1500) (149063)
Profit 8437
Ex-Interest =1500*100*12%*3/12 = Rs.4500
Investments in Shares A/c

15.4.2013 22.8.2013
To Bank 5000 1010000 - By SOR - 12000* -
(W.N.1) (7000*1/7)
*20%*60
3.6.2013
To Bonus 2000 - - 16.9.2013
357 | P a g e
Shares By Pre-acq - 7500 -

(5000*2/5) Dividend
(5000*10
3.6.2013 *15%)
To Bank 800 200000 -
(7000*1/7) 15.12.2013
*80%@250 By Bank 3000 891000 -
(W.N.2)
15.12.2013
To P&L - 433115 - 31.3.2014
(W.N.2) By Bal c/d 4800 732615 -
(W.N.3)
31.3.2014
To P&L - - 4800
(bal.fig)
7800 1643115 4800 7800 1643115 4800
W.N.1
Particular Rs.
Purchase price (5000*200) 10,00,000
Brokerage @1% (10000)
10,10,000
W.N.2
Calculation of profit/loss on sale of Investment (15.12.2013)
Particular Rs.
Selling price (3000*300) 900000
Brokerage@ 1% (9000)
NSP 891000
Cost for Sold Portion (457885)
(10,10,000+0+2,00,000-12,000-7,500) x 3,000
(5000+2000+800)
Profit 433115
W.N.3
Valuation of shares
Particular Rs.
Cost as a Bal Fig 732615
OR
Market Value (4800*220) 1056000
358 | P a g e
Q.9
Solution:
Investments A/c
1.4.2014 15.5.2014
To Bank 5000 525000 - By Pre-Acq - 10000 0
Dividend
30.06.2014 (5000*100
To Bonus 1000 - - *2%)
Shares
(5000*1/5) 01.10.2014
By SOR - - 1250
1.10.2014 (6000*1/12)
To Bank 250 11250 - *50%*5
(6000*1/12)
*50%@45 30.11.2014
By Bank - - 6000
31.12.2014
To P&L - 21660 - 31.12.2014
To P&L - - 7250 By Bank 3000 279300 -
(bal.fig)
By Bal c/d 3250 279110 -
(bal.fig)
6250 568410 7250 6250 568410 7250
Calculation of profit/loss on sale of Investment

Particular Rs.
Selling Price (3000*95) 2,85,000
Brokerage @2% 5,700
NSP 2,79,300
(535500+Nil+11250-10000) * 3000
(5000+1000+250)
Profit (21,660)
Thank You �
CA. Parveen Jindal
359 | P a g e

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CA-Inter

For May 2021

CA. PARVEEN JINDAL

Lecture Part-1 Chapter-10

Applicability & Nature

Foreign Currency Forward Contracts Foreign Currency Foreign

Avg Rate= Aggregation of All Rates Prevailing during the periods

Avg Rate= Opening Rate + Closing Rate

c) Meaning of Monetary Assets:-(Imp)

d) Meaning of Non- Monetary Items:

e) Meaning of Foreign Operation:

Further it is classified by AS-11 under 2 different headings as follows:

Explanation on different concepts:-

Situation 1- Settlement in same year

Step III: Step 1- Step 2 = Exchange Fluctuation

1.9.2016 Bank A/c ----------------------Dr. ($15000* 62) 9, 30,000

1.9.2016 Foreign Currency Creditors A/c ------Dr. 6,00,000

Situation II: Settlement in Next Year

Step III: Settlement

Monetary Items should be reported at

Non-monetary items should be reported

Step III: On Settlement date:

31.03.2016 Foreign Currency Debtors Account ($10,000*{42-40}) 20,000

01.05.2016 Bank Account ($10,000*45) 4,50,000

31.03.2016 Exchange Loss Account (2,000*{63-60}) 6,000

01.05.2016 Creditors Account 1,26,000

Hedge Contract Speculative Contracts

1.6.2016 Forward Contracts Receivable A/c ---Dr. (58) 5, 80,000

1.9.2016 Bank A/c -------------- Dr. ($10,000X56) 5, 60,000

1.9.2016 F.C. Payable A/c ------------ Dr. 6, 00,000

1.9.2016 Bank A/c ---------------- Dr. 5, 80,000

31.3.2017 P&L A/c -------------------- Dr. 20,000

1.6.2016 Forward Contracts Receivable A/c ---Dr. (57) 5, 70,000

1.9.2016 Bank A/c -------------- Dr. ($10,000X61) 6, 10,000

1.9.2016 F.C. Payable A/c ------------ Dr. 6, 00,000

1.9.2016 Bank A/c ---------------- Dr. 5, 70,000

31.3.2017 P&L A/c -------------------- Dr. 30,000

e.g. (settlement in next year)

Forward Contract (3m) : (Rs.38)

1.2.2016 Forward Contracts Receivable A/c ----Dr. (38) 3 80,000

31.03.2016 Exchange Fluctuation----- Dr. (10,000*{40-39}) 10,000

31.3.2016 F.C. Payable A/c ------------ Dr. 10,000

31.3.2016 P&L A/c -------------------- Dr. 13,333

1.5.2016 Bank A/c -------------- Dr. (10,000X36) 3,60,000

1.5.2016 F.C. Payable A/c ------------ Dr. 3, 90,000

1.5.2016 Bank A/c ------------ Dr. 3, 80,000

31.3.2017 P&L A/c -------------------- Dr. 6667 (1m)

Export Value : $ 2,000

1.6 F.C. Receivable „„„„..Dr 1,20,000

1.9 Creditors A/c/ „„„„„Dr. 1,20,000

1.9. Bank A/c „..Dr 1,28,000

1.9 F.C. Payable„„„Dr 122000

PL a/c „„„„Dr 2000

1.6 F.C. Receivable „„„„..Dr 3,00,000

1.9 Creditors A/c/ „„„„„Dr. (60) 3,00,000

1.9. Bank A/c „..Dr 2,90,000

1.9 F.C. Payable„„„Dr 3,10,000

PL a/c „„„„Dr 10,000

e.g. (settlement in next year)

1.2.2016 Forward Contracts Receivable A/c ----Dr. 1 ,20,000

31.03.2016 Exchange Fluctuation---------Dr. (2000*({63-60}) 6,000

31.3.2016 F.C. Receivable A/c ------------ Dr. 6,000

31.3.2016 P&L A/c -------------------- Dr. 2666 (4000/3)*2