ral CMAGINIKERMEDIATE el B Teh ele eett oy EXCLUSIVE Book for Last Day Revision GENS Hees oe ke a lwThis Book isthe Pasoport to the futures for tomorrow belongs to thove who prepare forittodayl ‘AAC has ensured that this book gives the student ‘what is required to study "and not what he wats to study! ‘This ction ofthe book has several features to name afew 1) Fully revised ection: with relevant Finance Act where wver applicable & updabey solutions, 2) Perfect Book for COMPANY ACCOUNTS as your CMA INTER is complicated Sylabus and huge Tk ocean to have aright amount of revision and cover ll concepts in least possible time ~Thisis your ONE STOP SOLUTIONIL 43) For revision purposes we have handpicked questions chaptar wise for students to summarize the whole sylbus, This wil help the student to recapitulate the chapter ineamination days, Needless to say; the compilation ofthis book would not have been possible without ‘the wholehearted support guidance and motivation of CA Akash Agarwal Sito constantly strive tc help students in every possible way, "WE SHOWER OUR ALL BEST LUCK TO OUR BELOVED CMA STUDENTS AND HAPPY STUDING,COMPANY ACCOUNT SUCCESS BATCH NOTES, INDEX PART A (PRACTICE SUMS) ane ec ea {Sc EQUUE a COMPANY RAL ACCOUNT TT al "3 COMPANY FINAL ACCOUNT, [| i eI Yo aT aw eS [I] Sse Ce as S280] [je aswectareoramnes ror | PART B (THEORY BOOKS CONTACT US: 9545879706 eo 2; So @ For moré ils oli ico > bunch of useful links »a a EE © ‘CHAPTER 1 - ACCOUNTING FOR SHARES AND DEBENTURES [at Fotowing isthe extract fromm the Balance Sheet of M/s. ¥ Lid .as at 32° March,2047: ‘ioe Gani 50,000, 10% preference share offs 10 each sono 20,000 equity shares of Rs 10 each 2omno0 lssued and Subscribed Capita: 40,000, 10% preference shares of Rs 10 ench fully pid room 180,000, equity shares of Rs 10 each, of which Rs 7.50 paid up | 1350000 Reserve and Surplus General Reserve aan Capital Reserve 1s Securities Premium 0900 Profit and Los Account oo WILLA 50 each on 180,000 equity shares The call money was received by 30" April 2017. Thereafter the company decided to capitalize is reserves by issuing bonus shares atthe rate of one share for every three shares held Securities premium of $0,000 includes a premium ofR520,000 for shares issued to vendor for purchase Rs ofa special machinery. Capital reserve includes Rs60,000 being profit on exchange of plant and machinery Show necessary Journal Entries inthe books ofthe company and prepare the extract of he Balance Sheet after bonus issue. Necessary assumption, if any should form part af your answer. (SOLUTION: ‘Assumptions: 1] According to SEBI Guideline jonly Capital Reserve and Securities Premium collated in cash can be utilized forthe purpose of ssue of bonus shares. is ‘assumed that balance of capital reserve and securities premium is collected ineash only. 2]it is also azwumed that necessary resolutions have been passed and iste legal requirements related to the issue of bonus shares have been complied with before issue of bonus shares. Working Note: (On the bass of the above assumptions, the Authorized Capital should be increased as under: Required for bonus issue Rs 6,00,000 Less Balance of authorized equity share capital available) Rs (2.00,000 Authorized capital tobe increased ‘8 4,00,000 Total authorized capital after bonus issue (Rs20,00,0004,00,000) =24,00,000, ee este Particulars 4.2017 fequty share final cal Ae 'o Equity share capital A/c Being the inal al of 2.50 per share on 180,000 OAIOIT ank Ale /.305000 9 Eauty share final call A/c ing ell money on 1,80,000 shares ee ved (0.42087 ecurtes premium Ale (50,000- 70.000) De| 30,000] apital reserve A/c (1 50,000 - 60,000) r| 30,00 jeneral reserve A/c r.| 240,000} rofitand lass Ne Dr.) 240,000 6 09,000, fo Bonus to shareholders A/e [Being utilization of reserves for bonus issue of ne share for every three shares held) AZOAT onus to equity shareholders Alc 7 [61005000 To Equity share capital Afe 6,00,200. — Extract of Balance Sheet (After bonus svg] Re Authorized Capita: 50,000, 10% Preference shares of Rs 10 each 500,000 2,40,000, Equity shares of Rs 10 each (refer W.N.) { 24.00.00 Issued and subscribed capita 40,000, 10% Preference shares of Rs 10 each fully paid 4,00,000 2,40,000, Equity shares of Rs10 each fully paid 24,00,000 JOut of the above, 60,000 equity shares of Rs 10 each have been issued by] way of bonus Reserves and Surplus: Capital reserve 60,000 Securities premium 20,000 Profit and lose Ae (2,00,000_2,40,000) 50,000 {G] DLAs has autho sed capital of 8 00,000. The company kaues 20000 equivahares GF RSIO each ata premium of Rs per share payable as: ‘On application — Rs 6 (including premium Rs 3) On allotment ~ Rs 5 including balance of premium), and balance in two cls. Applications were receive fo 35,000 sh following groups es, The applicants were divided inthe Group A—Applying for 5,000 shares alloted fully Group 8—Applving for 2,00 shares are made pro-ata allotment for 15,000 shares Group C—Applying for total 10,000 shares ae, refunded, Directors while makig allotment adjust the excess amount received on application against allotment Gs EZ‘money due, When second and fina alls were rade, shareholder sholding SOD shares Filed fo pay the final cll money. Te decors forfeited these shares. Al the forfeited shares were issued a sper share Its agreed that brokerage @ 3% and underwriting commission @3% wil be paid for tissue. Chims of brokers and under writers are satised by issuing to them additional equity shares of Rs 10 each at @ ium of Rs 5 per share (without any cash payment) ‘show Journal entries in the books of the company SOLUTION: Inthe Books of Did. journal entry Panicuars Bank Account NTEDr To Fauity Share Appiation A/c {Being Application money received on 35,000 share @ R6 per share) Equity Share Applicator A/c Dr 60,000 ToBank Ale 60,000 {Being Application money received on 10,000 shares refunded) Equity Share Applicator A Dr 1120000 ‘To Fauity Share 60,000 Capital A/c To Security 60.000 Premium A/c {Being Application money on 20,000 share transferred to Share Premium and Share Cagital. Equity Share Appliatior A/E Dr 30,000 To Fauity Share Allotment Ne 30,000 {Being Application money received on Application transferred to Share Allotment Account as per board's resolution no.. dated.) Equity share Allotment Ne Dr 34,00,000 ‘To Equity share 60,000 Capital A/c To Security 40,000 Premium A/c {Being frst and final cll made as per board resolution No..ate) Bank Ae Or. 70,000 ‘To Eauity Share Allotment A/e 70,000 {Being amount received and calls in arrears on frst and final cll) Equity Share frst Coll Ze Or. 40,000 “To Equity Share Capital A/c 40,000, {Being Call money due on 20,000 share @ Rs 2 share) Bank Alc Dr 40,000 To Eauity hares Fisteall Ae 40,000 {Being fist Call money received) Equity Share fina call A/D. To Fauity Share Capital A/c {Being call many due on20,000 share @ As 2 per share) eetBank Ac Or. 39,000 Calis in arvear A/c Or. 000 To Equity Share Final call Afe (Being Call money on 19,500 share received) ulty hare Capital Af (500 x 10)Dr. 5,000 To calls in Arrear A/c ‘To Share Forfeiture A/c (5008) Being 500 Share forfeited) nkafe Or. 4,500 tare Forfeiture A/cDr. 500 ‘To Equity Share Capital A/c Being 500 share re-issued @ Rs 9 per share) are forfeiture A/c Dr. 3,500 ‘To Capital Reserve A/c Being profit on forfeiture transferred to Capital Reserve rokerage A/c Dr. 9,000 fommission Afe Dr. 9,000 To Equity hare Capital A/c To Security Premium A/c Being Commission and Brokerage Paid by issue of equity shares at of | 10 each at a premium of Rs5) || (€.3)The following ithe Summary of asst sand lites oF Utd As at 31" “amount (RS) March, 2017 Sources of Funds [Authorized Capital 50,000 Equity shares of Rs10 each 10,000, son Preference shares of R5100 each eS Issued subscribed and pa up 30,000 Ecuity shares of Rs0 each He 5,000RedeemablesxPreferencesharesofRs100each ins | Reserves &Surplus 6.00.00 Secures Premium Gener 5000 Reserve Profit & Loss Ae 120.0] 2500, 9% Debentures of Rs100 each 2.50009 Sundry Creditors zoo % Application of Funds Feed Aces et) 2.80004 levestments (market value 580,000) 90.0Ee © Deferred Tax Assets Sundry Debtors [Cash & Bank balance Preliminary expenses iv Annual General Meeting held on 20" June 207 the company passed the following resolutions Tossplit equity share of Rs 10 each into Sequity shares of R52 each from 1* July 08, (i) To redeem 8% preference shares ata premium of 5% (i) To redeem 9% Debentures by making offeto debenture holders to convert ther holdings into equity shares at 10 per share or accept cash on redemption {h) To issue fully paid bonus shares inthe ratio of ane equity share for every 3 shares held on record date on 10° July,2017 investments were sold for 55,000 and preference shares were redeemed. 40% of debenture holders exercised their option to accept cash and their claims were stted on Ist August 2017 The company fixed September 2017 as record date and bonus issue was concluded by {2° September, 2017 You are requested to joumalize the above transactions including cash transactions and prepare Balance Sheet asa 30th September, 2017, ll working notes should form part of our answer SOLUTION Bika journal Dat] Particulars Dr-(is)_—_ otf) 2OIT [Equity hare Capital (Rsi0) A/c 3,00,000 uly To Equity Share Capital (Rs 2)4/c 3,00,000 {Being equity share of Rs10 each splited into 5 equity shares of 2 each) Tay 70] Bank Afe Di | 555,000 To Investment Ac 490,000 To Profit & Loss Ae 65,000 (Being investment sold out and profit on sale crested to Profit & Loss A/c) Ty 30] 8% Redeemable Pref, Share capital Ae Dr. | 500,000) Premium on redemption of Pref. Sh. A/c r.| 25,000 ‘To Preference shareholders A/c 5,25,000 {Being amount payable to preference share holcers on redemption) Tay Z0preference Shareholders Ale Br] 525000 ToBank Ae 5,25,000 Be Eas{Being amount paid to preference shareholders) Es © Tay 39 ‘General teserve A/C Br ‘To Capital Redemption Reserve A/c {Being amount equal to nominal value of preference shares transfered to Capital Redemption Reserve A/c ‘on its redemption as per the law) 500,000 5,00,000| 9% Debentures Ae De Interest on debentures A/e or. ‘To Debenture holders A/c (Being amount payable to debenture holders along with interest payable) 750,000] 7,500 2,57,000] ug. Debenture holders Ae ToCash & bank A/c (2,00,000 + 7,500) “Totquity share capital A/c ‘ToSecurities premium A/c (Being claims of debenture holders satisfied) 757,005) Sept-5 Securities premium Ae ‘ToBonus to shareholders A/c (Being securities premium capitalized to issue bonus shares) 710,000) 10,000 Septia| Bonus toshareholders Ae To Equity share capital A/c (Being 58,000 fully paid equity shares of Rs 2 each issued as bonusin ratio of 1 share for every 3 shares held) 770,000] Sept39} ‘Securities Premium Ae OF ToPremium on Redemption of Pref. Sh. Ae (Being premium on preference shares adjusted from securities premium account) 75,000 5,000 Sept] Profit & Loss Ae Br Tointerest on Debentures A/c (Being interest on debentures transferred to Profit and Loss Account) 7500 Note: For given in the balance sheet may alsa be used, Capitalization of Bonus shares and transfer to CAR account any other free reserves aut Balance Sheet as on 30th September, 2017 Equity and bits Not os z Shareholders Tana Starecaptal 1 4,4¢,000 erves and Surplus e carrer ibis ae a) Trade Payables 170.000 Total 1642500ie Ron-corrent assets Fixed assets Tangible assets Deferred tax asset Current assets 2. rade receivables [Cash and cash equivalents Toul Notes to accounts: 1. | Share Capital [Authorized share capital 2,50,000 Equity shares of Rs 2 each 410,000PreferencesharesofRs100eachissued, subs rived and paid up 2,20,000 Equity shares of Rs 2 each Reserves and Surplus Securities Premium ajc Balance as per balance sheet Add: Premium on equity shares isued fon conversion of debentures (15,000 x8) Less: Adjustment for premium an preference shares, Balance Capital Redemption Reserve (6,00,000-1,10,000} General Reserve (6,50,000-5 00,000), Profit & Loss Ae Ade: Profit on sale of investment Less Interest on debentures 00,000 1,20,000 720,000) fo,000 500 5,00,000] 6.95.00 90,000, f.50,000 b7.s00 oar fsazsoo ‘Working Notes: T._| Redemption of preference share 5,000 Preference shares of Rs 100 each Premium on redemption @ 5% JAmount Payable 5,00,000 Be ae eae) Bi Gi EEE © | Redemption of Debentures 2,500 Debentures of Rs100 each 250,000 Less: Cash option exercised by 40% holders ‘4,90,000 |Conversion option exercised by remaining 60% Equity shares issued on conversion 450,000 15,000 shares ssue ef Bonus shares Exstirg equity shares aftr split (30,000 x5) 150,000 shares Equity shares issued on conversion 15,000 shares Equity shares entitled for bonus 465,000 shares Bonus shares (1 share for every 3 shares held) to be 55,000 shares issued cash end Bank Balance Balance as per balance sheet 80,000 Add: Fealizationon sale of investment Less: Paid to 55,000 preference share holders 000 Paid to Debenture holders (7,500 + 1,00,000) 15,25,000) ncaa 2,97,500) P| interest of Rs 7,500 paid to debenture holders have been P2500 debited Profit & Loss Account, (4 Cte. cane out with an Ssue oF 45,00,000 equity shares of Re10 each at a premium of Rs2 per share, The promoter stook 20% of the isue andthe balance was offered tothe public. The issue was equally under written by A & Co ; B &Co, And C Aco, ach underwrite took fim underwriting of 100,000 shares eath, Subscriptions fo 300,000 equity hes were received wth marked forms fo the underwriter s given below: ‘ato ; 25,000 bares Beco 420000 ares Roo. 31nq00 hare fsa 575,000 bares The under writersare eligible fora commission of 5% an face value of shares. The entre amount towards svares subscription has tobe paid along with apalication, You are required to: {)_Compute the under writers labilty umber of shares){#) Compute the amounts pay able or due to under writers and (0) Pass necessary Jounal entiesin the book of Lid Relating to underarking. ‘SOLUTION: Priors Caco, co) [Gross Uabiiiy 2,000 Less: Firm {2,00,000] 11,00,0 423,10,000} Underwriting Less: Marked Application (2.10,000) 175.000 Less: Unmarked Application (In Gross Liability Ratio) (2,85,000] Less: Surplus of C& Co transfer to A & Co. & 8 & Co in 2.85,009 Gross Liability Ratio | Iuet Liabilities 1,00, Add: Firm underwriting Total Liabilities! 2,57,500H,42,500 100,000 [Q5. Alpha Lid issued a prospectus inviting applications for 2,000 shares of Rs 10 each at @ premium of Rs 2 per share, payable as follows: (On Application Rs2, On Allotment As 5 (including premium) On Fiest cal Rs 3, On Second & Final Call Rs2 Apalications were received for 3,000 shares and pro rata allotment was made on the applications for 2,400 shares. It was decided to utlse excess application money towards the amount due on allotment. Mohit, o whom 40 shares allotted, filed to pay the allotment money and on his subsequent fallure to pay the fst cll, his shares were forfeited. Jagat, the holder of 60 shares failed to pay the two calls and on his such failure, is shares were forfeited. Of the shares forfeited, 80 shares were Sold to Rishav credited as fully paid for Rs 9 per share, the whole af Mohit's shares being included. Required: Give Journal Entries to record the above transactions (including eash transactions) a mount] Amount Particala try Amen na Bank 6,000]i Gn Ee Teter Ati = eg nin ced on 30h) To Share Capital A/c 6.000) Ecer se TEE en Ne (o00@ 0) 8s eee erie = ern Seance 7 so ee 7 It Ar Ae acs 4 acsroracansa Calls in Arrear A/c Dr. — To Share Allotment A/c faaie [Being the remaining allotment money received on 1,960 9,200 [Share First Call A/c Dr. 6,000] ‘wna ve sox eran, . B (aN Ste emseden ono e038 soa SS aan nORe x = Teena cums os {Being 40 shares forfeited for non-payment of full allotment on e os [Being the second and final call received on 1,900 shares | /Share Capital A/c Or. 600 eee = ee 2 " eee ’ 0 rs tataForfeited Shares Ne To Capital Reserve A/c [Being the transfer of profit on re-issue] [On 40 @ Rs(2.40- 1.00) =56 940 @ {5.00 - 1.00 aas| 0 Working Note 1. Calculation ofthe amount due but not paid on allotment in Case of Mohit cs ‘Total No. of shares applied by Mohit (40 x 2,400/2,000) 48. ‘otal money set on application by Mohit (8 Rs 2) 936 tees polation money [Rs 96 — 40> Rs 2)) 6 Total amount due on allotment (40% R 5) 200 cr r= Giteiton of atorment money received ater on Toa alent money de (2,000 eal nde ( 10000 es) end received 8 00 (GjNatreceved is pertote a) RedBe sas ms 3 Since the question is lent as tothe uliztion of Rs 16 (received from Mohit) between share capital and securities premium, it has been assumed thatthe entire excess of Rs 16 is exclusively for share capital and hence credited to Forfeited Shares Account in full. Ge] Ondanuary 1, 2008 Vardhaman Uta alowed 20,000, 5% Debentures of Re 100 each ‘at par, the total amount having been received along with applications (1) On 4st Feb, 2005 the Company purchased in the open market 2,000 of its own debentures @ Rs 102 each and cancelled them immediately, (2) On 1st January, 2008 the Company redeemed at par debentures for Rs 3,00,000 by draw of alot, (3) Ontstlune,2010theCompanypurchaseddebenturesofthefacevalueot Rs 2,00,000 for Rs 1,97,800 in the open market, held them as investments for one year and then canceled them. (4 Finally, as per resolution ofthe Board of Directors, the remaining debentures were redeemed 3t a premium of 3% on Jet Feb, 2034 when Securities Premiven Account in the company's ledger showed a balance of Rs 50,000. Pass journal entries for the above mentioned transactions ignoring debentures redemption reserve, debenture-interest and interest on own debentures.SOLUTION: (Being Alotmentot 20,000, 9 Debentures Rs 100 ach) Date Paria DeBRTRET] Cea Toa [Bank ATE Dr | 20.00.00 To Debenture Application and Allotment A/c 20,00,000 (Geing amount received on issue of Rs 20,000, 9% debentures @ Rs 100 each). 7108 [Debenture Application and Allotment AJe Or. | 20,00,000 To 9% Debentures Ac 20,00,000 1.2.05 |investmentin Own S¥Debentureaye Dr ‘To Bank Ale {cing own debenture purchased) = pxeDebenturea/e Dr | Loss on Cancellaton A/c Dr. Fo investment in Own 9% Debenture Ae (Being. own debenture cancelled) 2,08,000 ecbebenture/Ve Or To Debenture Redemption A/e {Being Arpount due on redemption of debentures of SOOO 3,00,000 Debenture Redemption TE OF To Bank Alc [Being, Amount paid on redemption of debentures of 300,000) 300,000 3,00,000 Te10 Tivestment 9 Own SDEbERLUTEATE Dr. FTo Bank A/c (Being, own debenture purchased, ofthe face value 3 Rs 2,00,000 for Rs 197,800), 797,800 197,800 ‘6DebenturesA/e Or To Investment in Own 9% Debenture A/e To Profit on cancellation af own Debenture ‘ae (Being cancellation of own debenture) 700/000 4.97;800 2.200 Prafton cancelation of Own Debenture NE OF To Capital Reserve Ae (Being, transfer of profit on cancellation of rein i dabonates ts copia resets) 7200 2,200 far upebenturesye Tr Premium on Redemption A/c or. ‘To Dabenture Redemption A/c (Being the amourt due on cedemption of 9% Debenture ata premium of 3%] TSDOOOT 38,000, 13,39,000 Dabnture Redemption A/c OF To Bank Alc (Being. Payment on redemption of debentures) 13,3500 413,39,000 ‘Securities Premium A/C Or To Premium on Redemption Ae (Being. utlizationof a part of securities remium Ave to write off premium paid on redemptionof debentures) 33,000 39,000 aia ED FES[No.of remaining debentures = 20,000 ~ 2,000 — 3,000 - 2,000 13,000] 10.7) The summarized Balance Sheet (draft) of Om Shanti Ltd. As on 30%h September was as under Equity & Uablives amt Teste ant [stare Capital issued and Fixed Assets 75,00,000] Fully Paid 5,000 Equity shares of Rs 100 lnvestments 95,000] leach fully paid [5% Redeemable Preference (own Debentures of [shares of Rs 100 Nominal of (calls in Arrears on 200 Rs1,00,000) shares) Reserves and Surplus: lother Securities 100,000 [share Premium ,00,000 [current Assets [capital Reserve H.00,000 |stock 00,000 |ceneral Reserve ,00,000 |Debtors h,o1,000 Profit and Loss Ale 00,000 [cash at Bank 00,000 0% Debentures 00,000 lsundry Creditors 00,000 [rotal 5,96,000 [Total 596,000 On the above date, the following were due for redemption: 1 5,000, 6% Redeemable Preference Shares at a Premium of R525 per Share. 2. 2,000, 10% Redeemable Debentures at a premium of 10%. The Redemption was, ‘made on that date or subsequently thus: (2) For the half year ending 30th September (Le. above 8/s date), the Debenture Interest and Preference Dividend were paid out of the Profits of the company. (6) On an offer made to the 10% Debenture Holders, the outsiders agreed to take new 12% Debentures at par in exchange of old Debentures, the Company also decided to assume the New Debentures, (2A Fresh Issue of 1,000 Equity Shares of Rs 100 each were made at a Premium (of Rs 50 per Share and subscribed in full. All Money due were received forth with () Redemption ofall Preference Shares were made on the above date. Assume that Securities Premium A/c is usable for providing the Premium onTedemption of Preference Shares, [SOLUTION “ournal Eniries nthe books of Om Shanti ta. You are required to show ell Journal Entries forthe above transactions Particulars [br. (Rs) fer. (Rp Profit and lors Ale Or Ho interest on Debentures A/c Ho Preference Dividend A/c (Being interest on Debentures at 10% for 6 months, and Dividend on paid up value of Preference Share Capital at 6% for 6 months) 74,85 10000 34,850 interest on Debentures A/E Dr To interest on Own Debentures Ale fro Bank ale iseing adjustment for interest on Investment in Own Debentures since 50% of the Debentures is Held by thel [Company and payment of interest to outsiders) 5,000 5,000 Preference Dividend A7e Dr Ho Bank ae (Being payment of Preference Dividend to outsiders) Tas Bank A/c OF To calls in Arrears A/c {Seng tne Calin rears on 200 Preference shares 110% Debenture Ale OF Premium on Redemption of Debentures A/c Dr, Ho Debenture holders A/c (Being the amount due on redemption of 10% Debentures [at a Premium of 10%) 200000 20,000 2,20,000 [Securities Premium AVe oF Ho Premium on Redempton of Debentures A/c (Being Premium on Redemption of Debentures are written off to Securities premium) 70,004 20,000 [Debenture holders A/c OF Ho 12 % Debentures (New Series) A/c (Being the issue of New 12 % Debentures to the Debenture| holders) 220.0 2,20,000 Investment in Own 125 Debentures (New Series) AVe Dr Ho investment A/c - for cancellation Ho Profit and Loss A/c - fer transfer of Surplus (Being the exchange of Own 10% Debentures by Own 12% T0.0 Debentures (New Series), surplus being transferred to. 25,000 15,000[Profit and Loss A/c) [s- [Bank Ae Dr | 150,00 [To Equity Share Capital A/c To Securities Premium A/c 1,00,000 Being the Fresh Issue of Equity Shares of Rs 100 each at a 50,000 Premium of Rs 50 per share made for the purpose of redemption of preference shares) 110: [General Reserve A/e Dr | _2,00,00 Profit and Less Ale Br. | 2,00,000]4,00,000 HTo Capital Redemption Reserve A/c [being the trensfer out of Reserves and Surplus an amount [equal to Nominal value of Preference Shares redeemable otherwise then out of the proceeds of Fresh fetal Rs 5,00,000 - Fresh Equity Issue Rs 100,000) TIL ]6% Redeemable Preference Share CapitalAfe Dr. | 5,00, Premium on Redemption of Preference Shares A/c Dr. | 1,28,000]6,25,000 To Preference Shareholders A/c (Being amount due to Preference Shareholders, at 2 Joremium of Rs 25 per share) a, [securities Premium Aje Dr. £25,000 To Premium on Redemption of Preference Shares A/c 1,25,000 (Being premum on redemption of Preference Shares provided out of Securities Premium) Ts [Preference shareholders Ale Dr | 625,009) HTo Bank Ae 6.25,000 (Being the amount paid to Preference Shareholders on redemption) [1a [Interest on Own Debentures A/c Dr 5 To Profit an¢ Loss A/c 5,000 (Being the transfer of Interest on Own Debenture) "GE Pipli Lea, furnishes the following summarized Balance Sheet as at 315tMarch,2016 Particulars R000 Authorised Issued and Subscribed 3,00,000, Equity Shares of 3,000 Rsideach [ 25,000, 996 Preference Shares of Rs100 each fully paid up ssued| 2,000] two months back for buy back purposes) Capital Reserve 20, Revenue Reserve 7000 Securities Premium 300) hw) Gas ESSeas Profit & Loss A/e 7.800) 10% Convertible Debentures 100 Current Liabilities a Fixed Assets (at cost less depreciation) 2760) INon-current investments 5,000 3.000 (@ The Company passed a resolution to buy back 2096 of fs equity capital @ Rs15 per share. For this purpase, it sold its investments of Rs30 lakhs for Rs25 lak. (W The company redeemed the preference shares at a premium of 10% on 1" April, 2016. (i) Included in ts investments were investments in own debentures costing Rs lakhs (face value Rs3.30 lakhs). These debentures were cancelled on 1" Apri 2016. [SOLUTION You are required to pass necessary Journal entries and prepare the Balance Sheet on Date Particulars TF] Or or Amount | Amount sco | R000 Bank Ale Dr Profit and Loss A/= br, To, Investments A/c (Going the investment sold for Buy-back) 2500 500 3,000, ‘9% Redeemable Preference Share Capital A/c Premium on redemption of Preference Share Alc Dr. To, Preference Shareholders A/c (Being the amount due to Preference Shareholders) 2000 200 2,200, Preference Shareholders A/e OF To, Bank A/c (Being the payrrent made to, Preference Shareholders) 2200 2,200 Revenue Rerarve Ale OF To Capital Redemption Reserve A/c (being the creation of Capital Redemption Reserve _to the extent of the face value of 3,000 2,000Preference Shares redeemed & equity shares bought bask as per the law) Equity Share Capital A/e OF 600 Securities Premium A/e br. 300 To, Equity Shares Buy-back A/c (Being cancellation of shares bought back) Equity Shares Buy-Back A/E co 300) To, Bank A/e 900 (Being the payment made for shares bought| back) TORDebenturesA/e Dr 330 To, Investments (Own debentures) A/c 230 To, Capital Reserve A/c (Being cancellation of own debentures and transfer of Profit on cancellation of Debentures) ‘Securities Premium A7e Dr 200 To Premium on Redemption of Preference 200 Shares A/c (Being premium on redemption of preference shares adjusted through securities premium) 900 Balance Sheet of Pipli Ltd. as at 01.04.2016 Particulars NoteNo. | Amount Rs 1. Equity and Liabilities Ty} Shareholders” Finds (a) Share Capital on {(b] Reserves and Surplus (2) Non-Current Liabilities [10% Debentures](400-330) (3) Current Liabilities Total Th Assets (2) Non-current Assets (a) Fixed Assets 70 (b) Non-current Investments [5,000 ~ 3,000 ~ 300], E70 | (2) Current Assets [4,000 + 2,500 — 2,200 — 900] ae: Total TBD | Gn ne ES qa d4i GR EEE © Particulars ‘Amount Rs 1 Share Capital ‘Authorised Capra 2,40,000 Equity Shares of R510 each 200 Issued & Subscribed Capital 2,40,000 Equity Shares of RS10 each (60,000 Equity Shares 2400) bought back) 2. Reserves and Surplus Revenue Reserve [4,000 2,000) 2,000 ‘Capital Reserve [20+30) 50) ‘Capital Redemption Reserves 2,000 Securities Premium [500-200-300] a ‘Surplus (PRL A/C[1,800 — 500) 7300 TOTAL 5.350 19. Given below are the extract from the Balance Sheet of MSM Lid. as at 31st March2017 Particulars Rin acs Equity Shares Capital Fully paid up shares of Rsi0 each) 4,800) Securities Premium 700 (General Reserve 7860 Profit and Loss Account 680 Sundry Creditors 7500 ‘Sundry Provisions 30 Machinery 72200 Furniture 308] Investments (Face Value Rs200 acs) 236 Stock 2,400 Debtors 7080 Cash at Bank 1,480 (On 1 April 2017 the company announced the buy-back of 25% af ts equity shares @ Rs15 per share. For this purpose it sold all ofits investment @ 78% and issued 4,00,000 14% preference shares of Rs100 each at par, the entire amount being payable with application The issue was fully subscribed. The company achieved the target of Buy-back. Later the company issued one fully paid up equity shares of Rs10 by way of bonus shares for every four equity shares held by the equity shareholders. Pass journal entries for all transactions including cash transactions.SOLUTION: Journal “Particulars Bank Ale Dr, To, Investments A/c (Being the investment sole Tavestments A/e ‘To Profit and Loss ae (Being the transfer of Profit on sale of Investments) Bank Ale Dr To, 14% Preference Share Application & Allotment A/c (Being the Application money received) oo hoo 114% Preference Share Application BAllotment AE To 14% Preference Share Capital A/c (Being the Allotment of Shares) oo Equity Shares Buy-back A/c Br To Bank Ale (Being the payment made to equity shareholder son buy: back) 1,800 | Equity Share Capital A/e Securities Premium A/c “To Equity Shares Buy-back A/e (Being the cancellation of share bought back) 1200 60) 1,800 General Reserve Ae De ‘To Capital Redemption Reserve Ac (Being the Buy-back out of general reserves to the extent not covered by fresh issue of share capital) a 800 Capital Redemption Reserve A/c Dr Securities Premium A/c br. To Bonus issue A/c (Being the utilities of capital redemption reserve securities premium to issue on bonus share for every four shares held) FO 100 900 Bonus isue A/e Or To Equity Share Capital A/c (Being the issue of one bonus share for every four equity shares) 307 900 as the folowing captalstrucure Particulars TinFguity Share capital SharesoF210esch) Reserves: General eserve Security Premium Profit and Loss Ne 50 port Reserve [Statutory Reserve) % [Loan Funds 800, ie share holders have on recommendation of Board of Directors approved vide spec resolution at their meeting on 20° pil 2035 a proposal to buyback maximum permissible equity shares considering the huge cash surplus fllowing A/c of one of its divisions The market price wash overing inthe range of £25 and inorder to induce existing shareholdersto offer their shares for buyback, it was decided to offer a price of 20% above market Advice the company on maximum numberof shares that can be Bought back and record journal enies for the same assuming the buyback hasbeen completed in ful within the next 3 months. If borroved funds were 21200 crores, and 1900 crores espectivly would your answer change? SOLUTION: ‘Maximum shares that can be bought back ann | Sin | Seaton otto a Shares outstanding te WHAT) 35 [35 | 75 i Resources test (WNA2), et igre |aeu € Debt Eat ati est WHFS) oe | Maximum number of shares fr buybackizasT| 6 | 3 ofthe above Panicle Saint —[— Son Debit | Cred [Debt_| Cede & [Shares bought back ATE 0 180 30 To Bank Ne 280 » b, | Ibeing purchase of shares fom publ «0 30 Share capital Ne oe 100 «| Security premium Me cs le . General reserve /ebalancing gure, «| Tosharesbousht back Ale o x0 {Being cancelation of shares bought on % 3 buyback) : General eserves Ae ov To Capital redemption reserve Ve GD ll EZ p[being transfer of reserves to capital Redemption reserve tothe extent capital is redeemed "Note: Under situation Il, the company does not qualiy the debt equity ratio test. Therefore the company cannot perform the buyback of shares. ‘Working Notes: iv 3: Shares outstanding test Particulars ‘Amount 2. No. of shares outstanding 30 crores b. 259 of shares outstanding 75 crores ‘WW 2: Resources test Particulars “anu 2. Paid up capital Ef] Free reserves [270%100+50] 20 ‘Shareholders fund (a¥b) 70 1d, 25% of shareholders fund 780 . Buyback price per share 30 Number of shares that can be bought back crores WHS: Debt Eat ratio test (incrores) Particulars Stustion| [Stustion [Staton Borrowed Funds 300 [1200 [1500 “Minimum equity tobe maintained after | 400 [600 [750 buy back nthe ratio _| Present equity 720 [720 [720 ‘d. | Maximum possible dilution inequity [320 [120 = ‘| Maximum shares that can be bought back [10.67 | z @ £30/- per shareae Ga Ge © CHAPTER 2- SCHEDULE 3 COMPANY FINAL ACCOUNT. (OI) From te folowing particulars furnished by Firs Class LU, prepare the Balance Sheet ay or 31st March 2016 as required by Pat I, Schedule Il ofthe Companies Act, 2013 Particulars Debn Rs [CRATES Equity Share Capital Face value of Rs 1ODeach) Call 00] 50,00,000) in Arrears Land & Build 3750,00] Plant & Machinery 26,25,000] Furniture 2.50000 [General Reserve 10,50,000 Loan from State Financial Corporation 750,000 Inventory Raw Materials 3,00,843 Finished Goods 10,00,000) — 13,00,843} Provision for Taxation 6,40,000 Trade receivables 10,00,000] Short tem Advances 2.13,500] Profit & Loss Account 484343] cash in Hand 150,000] Cash at Bank 1235.000] unsecured Loan 6,05,000] Trade payables (for Goods and Expenses) 8,00,009 Loans & advances from related parties 2,00,000) The following additional information is also provided (@) 10,000 Equity shares were issued for consideration other than cash (i) Trade receivables of Rs 2,60,000 are due for more than 6 months (GiyThe cost ofthe Assets were: Building Rs 30,00,000, Plant & Machinery Rs 35,00,000 and Furniture Rs 12,500 (ivyThe balance of Rs 7,50,000 in the Loan Account with Stale Finance Corporation is inclusive of Rs 37,500 for Interest Accrued but not Due. The loan is secured by hypothecation of Plant & Machinery. Balance at Bank includes Rs 10,000 with Omega Bank Ltd, which isnot a Scheduled Rank (Gv) Transfer Rs 20,000 to general reserve is proposed by Board of directors. Board of directors ha declared and paid dividend of 5¥ onthe paid-up capitl ‘SOLUTION. FirstClass Ltd, Balance Sheet as on 31st March, 2016Particulars Equity and Liabilities T Shareholders funds a Share capital 895,000] Reserves and Supls 12.33.750] Non. curren liabilities Tonge-ienn borowings EE [3 Current Hailities a Trade Payables 1b Other current labiies = Short-term provisions “d Short-term borrowings Total 1 Non-current assets Fixed assets Tangible asses 2 Current assets a Inventories 129,000 ‘Trade receivables 10,09,000 © Cash and bank balances 135,250, @ Short-tenm Toans and advances 213.500 Total 2,323,750 [Notes to Accounts 1. Share Capital Re & Equity Share Capital Issued & Subscribed & Called Up 50,000 Equity Shares of Rs 100 Each (ofthe Above 10,000 shares have been issued for Consideration] other than cash) 50,00,000 Less Calls in arears (5000) 995,000, Total 495,000 2, Reserves and Supls General Reserve ‘Ada: current year ansfer T0330,000, 20,000 10,7090 Profit & Loss balance nn Es ESa Ga Ee © Profit for the year Less: Appropriations: ‘Transfer to General reserve Dividend Payable (Refer WN) 433,500 (20,000) (2.49.350) 163.750 Total 12,33,750 3. Long-term borrowings Secured Term Loan ‘State Financial Corporation Loan (7,50,000 - 37,500) (Secured by hypothecation of Plant and Machinery) Unsecured Loan 712,500 6,08.000 Total 13,17,500 “Other current babies Toterest accrued but not dus on Toans (SFC) Tis Total 37,500 5. Short-term provisions Provision fr taxation 60,000, 6. Tangible Assets and and Building 30, 00,000 Less: Depreciation (2.50,000) 37,50,000 Plant & Machinery 35,00,000 es: Depreviation 175,000) Furniture and Fines 312500 Less: Depreciation (2500) 250,000 Total '56,25,000 7 laveniories Raw Materials 250,000 | [Finisned goods 70,00,000) | our 12,50,000 ,Tinde receivables ‘Ouistanding fora period exceeding Sx Taonths 2.5000. ‘ier Amounts 740,000 Total 10,00,000, 9. Cash and cash equivalents Cash at bank: ‘with Scheduled Banks T2250 ‘with others (Omega Bank Lid) 70,000 135,000 Cashin hand 7.50,000 Tess: Dividend paid 209,750 Total 11,35,250‘Working Note: ‘Calculation of Grossing up of divides! Tani is Dir daid yA 990 305 [ey ARC La prov ig Tl Dns eon each 207 [fully paid om rin OH fasta aa ia Tae cag oo Sa a0 E a oo fact DS =a esa sk a6 Daa 720 ears OT 00 eta Ras =a ise ara Tao sone TS fst i Sn er [cnriain oP Fad Gang ne nid [ska Bank a 2300 Tea esau] 12004 | Adltiona formation: {Closing Stock as on 31st March 2017 was Rs 350,000, (i Depreciation Rates: Motor Vehicle 10% Machinery 20% and Land & BuildingSY%(a) Mise. expenditure includes Rs 20,000 as audit es. In (0) Trade receivables include a sum of Rs 2: 1000 due from Mr (09 Create a provision for doubt (si) Provide for income tax Rs 1,50,000, insolvent and only 2S paisa ina rupee is expected tobe recoverabl ton debenture is payable quarterly and the last quane’s interest is yet to be paid X who has become Prepare a Statement of Profit and Loss forthe year ended on 31st March 2017 and Balance Sheet SOLUTION= I. Notes to Accounts: 1. Employee Benefit Expenditure Salaries Conieibaton to PF. Finance Cost Tatereston oan Outstanding terest 3 Other Expendiare Re Discount ‘Carriage Rent 30,000 ‘Advertisement 750,000, Bad Debt ‘Ault fer Mise. Exp, Provision for BD 5,750, a. Trade Receivable Re “Total Reseivable 70,00,000 (© Provision @ 2% Prowse 25000 < 0.75 + (1000000 — 25000) = 0.02 2 Fixed Anois Motor Van [Machine TAB Balance £00,000 20,00,000 72.00.0060 (© Depreciation 40,000 4.00.00) 0,000 360,000 16,00,000 T140.000)Total Fixed ASSIS Ld 31,00,000 Depreciation 5,00,000 ‘Statement of Profitand Loss forthe year ended on 31.03.2017 Particulars Nowe Be [Revere from operation (sales less returns) 57,00,009 | [lother income (income from investment) 24.000] [HE Total evemie 3724.00 iv Expenses! Purchase 32,00,009 | [changes in inventory be opening less Closing _ (50,000) Employee Benefit expenses T 8.72,000] | [Finance cost 2 30,000) Depreciation 5 500,000) Other expenses 3 445,759 O77: Profit before exceptional and extraontinary Wes and wx 726,25 [Vi Exceptional tems il [Vi Profit before extraordinary Wems and x 7726250) [Vil Extraordinary items Nil [Vill Profit before tax 726350) DX Tax (provision for tax) 7.50.00 IX. Profi after tx 5,76.250) Balance Sheet as on 31.03.2017 Equity and Labiles [Nowe & T, Shareholders Funds fay Share Capital 35;00,000 |) Reserve and Surplus (Balance of Profit) 5:76,250] 2. Share Application money pending allotment ni 5-Non-current iabilities (10% Debentures) 3.00,000] 1 Garment Liab ies [Trade Payable 300,000] [oustanding imsrest 7,500] Provision for Tax 7,30,000] [Foss 33,750 H Assets 1. Non-current Awet a) Fixed Assets (Tangible) 31-90,000] [)Non -current Investment (129s E., Govt, Securities) 2,00.000] ad ae anm ae P. Current Assets Inventories 350,000] [Trade Receivable 9,61,750] [Cash and eash equivalent 2,22,000] Tout 48,33, 750) (G5) From the following formation prepare the relevant Particulars ‘Opening Balance of Profit and Lass Statement Profit forthe period Transfer io Reserve @ 5 Taterin Dividend ‘Debenture Redenplion Reson SOLTHO? Particulars Rant ‘Opening Balance = ‘Adal Profit forthe period S00) Less: Transfer to reserve (50% sy Less Interim Dividend 0} | [Hess Debenture Redemption Reserve C001 | [Crosing Balance 7 M4) The following is the Trial Balance of Omega Limited as on 31.03.2018: (Figures in Rs_-000) Door Creat any Capial (Shares oF Rs. 10each) Plant and Wachiney T0¥% Debentares 70H Trade Resales Geren Rene faventories (31-08 D0TR) [86 [Profi & Loss Ae Bank 30 Securities Premium A dhusted Purchases sro |Sales Factory Fapemses GU Trade PayaDTES Administration Expenses_[ 0 [Provision for Deprecation Selling Expense 3n[Suspense Account DebentureInerest 0 Taterim Dividend Paid Ty TAT 770 iin wed ees and at cot 300]Additional Information: {The Authotized Share Capital ofthe Company is 40,000 shares of Rs. 10 tt) The Company on the advice of independent valuer wish f revaluc dhe land Rs, 60,000 (4) Declared final dividend 10% (over Interim Dividend of Rs. 18,000) (i Suspense account of Rs. 4,000represents cash received forthe sale of some of the machinery on 01.04.2017. The cost ofthe machinery was Rs, 10,000 and the accumulated deprecation thereon being RS.8,000 (©) Depreciation isto be provided on plane and machinery at 10% on cost Youur requited to prepare Omega Limited's Profit and Loss Statement forthe year ended 31,03,2018 and ne Balance Sheet as on that date in accordance with the Companies Act, 213 the Verte! Form slong withthe Notes on Accounts. Ignore previous years’ figures and taxation Balance sheet Omega Limited as on 3131 March, 2018 Particulars ‘Nowe No. [Amount (R000) I Baquity & Liabilities () Shareholders” Funds: (a) Share Capital T 3007 (b) Reserves & Surplus z S00 Non Current Liabilities (a) Long Term Borrowing z 200 DB) Current Liabilities (a) Trade Payable = (b) Other Current Liab a 30 “Total 1,082 TAssets ()_Non Current Assets Fixed Assets Tangible Assets 3 0 2) Current Assets: (a) Inventories [a (b) Trade Receivables 96 (c) Cash & bank balances 20 ‘Total 7082. Profit and Loss Statement forthe year ended 3184 March, 2018 Partoulars ‘Nate No, Amount (Rs. 000), Revenue from Operation 700 Other Income 6 2 Til Total Kevenue (EH 702, TV. Expenses (a) Purchases ia (b) Finance Costsoe (c) Depreciation (10% of 760*) 76 (d) Other expenses (60130188) z a0 “Total Expenses 336) TV. Profit for the year (I-IV) 166 °°770 (Plant end machinery at cost)” 10 (Cost of plant and machinery sold) Notes to accounts T Share Capital RS 00H] Equity share capital ‘Authorised 40,000 shares of RS-10 each, 0 Issued, Subscribed & called up. 30,000 shares of RS.10 each 300 Total 300] | [2 Reserves Samples | [Sccurities Premium Account a0] ‘Revaluation Reserve (360-220) 0] ‘General Reserve. 150] Profit & Loss balance ‘Opening balance 72 Profit forthe period 166 2 ‘Less: Appropriations Tnterim Dividend Ta Final Dividend (300 i 10%) rem 190] Total 500) Long Tenn Borowings 0% debentures a0] Other Current Liability Dividend =a) 5. Tangible S526 Land [Opening balan 20] ‘Add: Revaluation adjustment 140) ‘Closing balan a0 lant and machine [Opening balance, 70] Less: Disposed off 0) 760) ‘Less: Depreciation (172-8570) 240) Closing balance 320] Total 80 6, Other Income: Profit on sale of machine Sale Value of machin: 7 Less: Book value of machinery (10-8) a | 7. Finance costs ae[Debenture intorest 20 8, Other expenses! Factory expenses a ‘Selling expenses, 30 ‘Administrative expenses 30 735] Fa) The folowing is the Twal Balance of Pioneer Limied as on 31.05.21 Particulars Dae Credit Equity Capital (Face valve of #100) 70,00,000 [calls in Arrears 7,000 [| — [Land 700,000) Bailing: 3,50,000 Plant & Machinery 10 [Furniture & Fittings 30,000 [General Reserve = 210,000 [Coan from State Financial Comporation T.50,000 Inventory Finished Goods 200,000] [Raw Materials 50,000] 2,50,000 [Provision for wxation 000 Trade Receivables 300,000 | __— Advances 2 [Dividends Payable 000, [Profit & Loss Ale = 86,700 [Cash Balance: 0,000 [Cash at Bank ZA, 000 [Coans (unsecured) T3000 Trade Payables (For Goods and Expenses) = 2,00,000) Total T595,700 | 18.95.70re oa | Addltional inform (2000 equity shares (@ Trade Receivables of & issued for consideration otherthan cash (000 are due for more than six months. (i) (a) The cost of assets: 31.03.2019 (©) Depreciation tll 31.03.2019 Buildin %.4,00,000, Buildin 50,000 Plant & Machinery - %.7,00,000 Plant & Mechinery — 2.1,75,000, Furniture 262,500 Fumiture & Fittings — 250,000 (9 The balance of €1,50,000 inthe loan account with State Financial Corporation is inclusive of 87,500 for interest acerued but not doe, The loar is secured by hypothecation ofthe Plant & Machinery (6) Balance at bank inchides 22,000 with Perfeet Bank Lid, which is not a Scheduled Bank {sh The company had contrat forthe erection of machinery at 1,S0,000 whichis stil You are required to prepare Pioneer Limited's Balance Sheet as at 31.03.2019 as per Schedule Hin ordance with the Companies Act, 2015 in the Vertical For al Ignore previous year’ Figures ng with the Notes to Accounts, SE Altsmative If Depreciation on Furitr is considered as #50,000 the solution willbe as follows: Balance Sheet of Pioneer Limited as on 318t March, 2019 Paras Nowe Arnonat WOO) No. [gui & abies [c) Shareholders Funds (a) Share Capital 1 393.000, (Reserves & Surphas 2 253.200 [2) Non-Cument Libiites (a) Long Term Bortowin x ZS 3) Curent Lisbilies: (ay “ade Payable Zp. [() Other Current Labi z 500 [c) Shor-tenn provisions = 68.000 ‘oral 1557200] Asset 1 Non-Cunrent AS Fined Aes “Tangible Asse TESTS (2. Curent Asses (allaventories 250,000 (b, Trade ReceTabies 700,000 {(c} Cash & hank balanoee 27,000 (Shorr Hoan and anes 2.700Notes wo Accounts Share Capital = z [Equity Shore Capital Issued, Subscribed & called up 10,000 equity shares of € 100 each (OF the above 2,000 shares | 10,00,000| Ihave been issued for consideration other than cash) [Less Cals in arrears C00) 333,000 Total 9,99,000] Iz Reserves & Surplus [General Reserve 2,10,000] [Surplus (Profit & Loss ATS) 9,200) Total 2,59,200| [5 Cong Term Borrowings: [Secured Ferm foans [Loan from State Financial Corporation (150,000 7,300) T300| [Secured by hypothecation of Plant & Machinery) [Unsecured Loan 721,000] Total 2,63,500| Ia Other Current Labiites interest accrued but not due on Toans (SFC) 7.500 [Dividend Payable 60,000] Total 67,500 5. Short-term provisions [Provision for taxation 000] Total 68,000 [6 Tangible assets [Land 2,00,000, [Buildings 00,00 Less: Depreciation (50,000) 350,000 [Plant and Machinery 700,00 Less: Depreciation 11.75,000| 525,000) [Furniture & Fiings 62,500] [Less: Depreci (0,000)| 12.500 Total 10387,500 [7 Inventories [Raw Materials 30,000 [Finished Goods 200,000, Total 2,50,000 IS Trade Receivables [Debt outstanding fora period exceeding six months 32,000 [Other Debis 748,000 ffollows: ‘Total 2,00,00 [5 Cash and Bank balances: [Cash and cash equivalents [Cash at bank With scheduled banks 245,000] With othors (Perfect Bank Lal) 2.000 2.47.00 [Cash in hand 50,000 [Other bank balances Nil Total 2.77,00 mn on Furniture is considered as 212.500, the solution will be as Balance Shoot of Pioneer Limited as on 315¢ March, 2019 Parca "Nate No, ‘Amount OOO] TEauity & Dias [C7 Stareholders Funds (a) Share Capital aa] iby Reserves & Sumplas 2.96 70 (2) Non-Current Liabilities (@) Long Term Borrowing T5300] 3) Current Liabilities! (a) Trade Payable 70,000] (b) Other Current Listes 750 (c) Shorvterm provisions 00 “Total 18,94,700 Assets T Non-Current Assats Fixed Asses [Tangible Asses [2) Curent Assets a) Inventories Ico) Trade Receivables [ey Cash & bank balances [a Stor-tenm loans and advances Total Notes 9 Accounts T, Share Capital gui: Share Capital Issuec, Subscribed & called up 10,000 equity shares of € 100 each (OF the above 2,000 shares nave been issued for consideration thee than cash) TODOPeres (10007 9.99:000 Ex) [. Reserves & Sumpiiw [General Reserve 2,10,000] Surplus (Profit & Loss A) 36,700 Total 796,700) 5, Long Term Borrowings Secured Term loans oan from State Financial Corporation (130,000 - 7.500) 12.300 [Secured by hypothecation of Plant & Machinery) [Unsecured Loan 721,000] Total 2,63,500] &, Other Convent Dailies interest accrued but not due on Toans (SFO) 7300] Dividend Payable 60,000] Total 67,500) 5. Short-term provisions [Provision for taxation “a n00| Total 68,000 6. Tangible assets Hand 2,00,000, Buildings 400,000, hess: Depreciation (50,000) 350,000] Plant and Machinery 700,00, Ness: Depreciation 15,000 525000 [Fuminue & Fittings 62,500 Noess: Depreciation (12.500) 50,000 Total 17,25,000 [7 Inventories [Raw Materials I] Finished Goods 700,000] “Total 2,50,000 Is, Trade Reveivables [Debi outstanding fora period exceeding sik months 32,000 [Oder Debs 728,000] Total 2,00,000| Ib. Cash and Bank balanoos [Cash and eash equivalents [Cash at bank vith scheduled banks 55,000 hn Gi EE[With others Perfect Banke Ld) 247,900 [Casiin-hane 30,300) [Other bank talances ‘il [Total 2,7,000) ‘Note: Estimated amount of contract remaining to be executed on capital account and not provided for % 1,50,000, It has been assumed that the company had given contract for purchase of machinery ine ee el Es ©gaa PS ses CHAPTER 3 — CASH FLOW STATEMENT. 7 From the following information provided, prepare 4 Cash Flow Statement ss perAS.3 ialance Sheet of POR Lid Paricutars Aeon] _Ason 3103.16 | 31.03.15 Equity and Liabies Shareholders’ ind [ay Share Capital 3o,o0;000| —30,00,000) I) Reserves and Sumpas 70,00,000] — §,70,000] Share application money pending lomment nil Nil [Non-Current Liability Nil Nil [Current Liabilites EA_000] — a,p0,000] Total 36,50,000] 36,70, 000] Assets INon-current Agsate [ay Fixed Assets (Tangible 730,000] —15,00,000] (o) Non-current Investment 700.000) — 8,00,000] [Current Assets [a Inventories 7sap00] 700,000] Wo) Trade Resenables 0,000] 3.00000] [c) Cash and Cash Equivalent 6.000] 74,000] Ed) Shor erm loan and advances (Prepard 34.000, 96,000] Expenses 3a smo] _5e70,000] Notes io Assouts Share Capital gully Share Capital Zo_pDp00] 15,00,000) [Redeemable Preference Share Capital of R100, Nill 5.00,00] R550 paid Sane] ooo Reserve and Suphas Balance of Poi EXOD MRETNOT [General Reserve 2,00,000) —4,00,000 [capital redemption reserve 5.00,009 Nil Secures Premium Nill 20,000] Toon, noo] —¥.70.000] i ne EAAdaltional information: the year the company got income from investment Rs80,000, (During successful cal of Rs $0 per share to make the shares flly paid 1,80,000 (W Company paid Rs1,50,000 as equity dividend and Rs 76,000 as preference dividend, (i The company redeemed the reference shares ata premium of $% after making a (09 During the year one machine was sold for Rs 50,000 and the profit on sale of Rs 6,000 wastakentoProfitandl ossA le Depreciationfortheyearonfixedassetswas LUTION: Pariioulars in Re Cash Flow Wom Operating Activities: [Fund from Operation 3,00,000] [1 inerease in Invent 0.000 [G2) Decrease in Trade ReveWvables 50.000 [c-) Decrease in Prepaid Expenses 72,000) [C) Decrease in Current Liability 7.50.000] [Cash Flow ffom operating activities 3320 Cash Flow from Investing Activites Income received from investment Tap00] [Machinery sold 50,00] Sele ofirvestment 0,000] Purchase of machine 15.75,000)| (144,000) f-Cash Flow from Financing Activities Dividend Paid (1,50,00076,000) Tza.000y [Call rece ved on Preference shares 00,000 Preference shares redeemed at prewiam 710.50,000) Equity share ised 5.0,000| 76,000) (65.000) [Opening cash and cash equivalent 74,000) (Closing cash and cash equivalent 6 Profit & Lows Account De : fFo Dividend 2,26, 000)By Balance BE £50,000) [To Prem. on redemption 30,000] By Profit on Sale of Machine 6,000 [To Cap. Red. Reserve 3,00,000[By Income from Investnent 70,000] [To Depreciation 1,80,000]By Fund from Operation 5,00,0 (bal fig) fo Balance ot 300,000) 10,36,000] 10,36,000Fined Assets Assets De ci [fo Balance bP 15,00,000[By Bank S000} [To Profit and Lass 6,000|By Depreciation 30,000] [To Bank (bal fig 3.74, 000)By Balance of 76,50,000 130,000 18,80.000) De Equity Share Capital Account ce By Balance oF T0000] By Bank 3.0,000] [To Balance ot 20,00,000 20,00.000) 70,00,000 Dr Preference Share Capital Accom cr [Te Bank 10,50,000)By Pref. Sh. Capital 70,0700 [By Promium on Redemption 30.000 10;50000| 150,000) Dr ‘General Reserve Account & [roCRR 2,00,000)By Balance DF 00,000] [To Balance oF 2.00.00 4,00.000 500,000 De Capital Redemption Reser. [fo Balance off §,00,(00]By Balance BE Nil IBy General Resewve 2:00.000) By Profit ae Loss 3.00, EET 50,000) ‘Securities Premium Account Dr. ce fro Premium on 20,000]By Balance BF 720,000] Redemption fTo Balance oF Nil 20,000] 20,000] Premium on Redompiion Acsount De ce [To Securities Premium | 20,000[By PSI 30,000] Fo Profit and Loss. 30,000) 50,00 30000 Tavestment Account Yr. ce fTo Balance Wit 0,000 [By Bank 700,000 [By Balance oT 700,006)8,00,000 §,00,000] Sin he cashflow from Operating acne T0320 ARS PSTOSION] 3082018 1 | S00) S00]and & Buding 0 200] 160) Machinery 180 230] 216fstock in Trade 228} 40] safSundry Debors 163] Depreciation Fund so] 8}Cash and Bank 300 Balances Contingency Reserve 40] 110)re-Paid Expenses , Outstanding Fxpenses sof 48] Tol 32) 176} Toad 7220] TAT ‘One old Machinery which has Orginal Cost oF Rs30,000 was sold for Rs10000, The Accumulated Depreciation in respect of the said Machinery anwounts to Rs16,000, One new Machinery was acquired for Rs46,000, 9% Debentures were redeemed at a discount of 4% on their Face Value (Redemption. was made at the beginning of the year) Dividend at 12% was declared and paid inCash IncomeTaxLiabilityoRRs30,000paidwasdebitedinContingeneyRe. SOLUTION ee (Cash Flow Slaiement of K Limited for th year ended 31 March 20X2 Indirect Method siculars Bs OW] Rs (0005) ‘Cash Flow from Operating Activities Profit before Taxation [(S4 40) + Dividend distbuted Rs 60] 7a Adjustment fo: “Transfer to Depreciation Fund Zin Loss on Sale of Machin 4.0 Discount on Redemption of Debentures 40x40) Ta Debenture Interest (160 x 9%) -Assumed Redemption made at 144 bbevinning ofthe vear ‘Gperating Profit before Working Capital Changes Ta ‘Adjustment for: Decrease in Sundry Creditors (30-216) 0 Tncrease in Outstanding Expenses (48 30) 18.0]Decrease in Debtors (170-162), Tnerease in Stock (228-200), Gen Increase Prepaid Expenses (6-4) 20) Cash Generated from Operations 36a Tess Income Taxes paid Gon ‘Net Cash Flow from ! (used in) Operating Activities GR Working Note: DR. Machinery Account cR Pariculars “Amount Particulars “Amount as) Rs) To Balance bd Tq] By Accumulated ra Depreciation ~for Machinery sold ‘To Bank Ale ~ Purchase of 4 New Machinery By Bank A/c Sale Proceeds X By Profit & Loss Ave ~ Loss ‘on Sale of OM Machinery 4 By Balance eld 1 i 2I De ‘Accumulated Depreciation Account & Particulars ‘Amount Particulars “Rimoune es) as) [To MachineryAle — ti for fio iy Balance BE 0 fachinery sold 'y Profit and Loss Ale [To Balance eid 8 4 los hoa Qa MMY Lia's Comparative halance Sheet for ane 201 and Tune 2015 and me Companys Income Statement forthe year June 30, 2016 are as follows: XYZ Ld, Comparative Balance Sheet June 2015 and June 2016, Sources of funds ‘Shareholders Funds ‘Share Capital“Application of funds Fixed Assets Plant and Equipment Less + Accumulated depreciation Investments Current Assets Inventory ‘Accounts receivable Pre-paid expenses Cash “Less Current labiliies and provisions Accounts payable Accrued liabilities Deferred income-tax provision ss Cost of goods sold ‘Gross margin Less : Operati ‘Net operating income. ‘Non-operating items Loss on sale of equipment Income before taxes Less : Income-taxes Netincome 1,000[Adaitional information (Dividends of RS 48 crores were paid in2016, The loss on sale of equipment of RS 4 erore reflects a transaction in which equipment with an original cost of Rs 12 crore and accumulated depreciation of Rs 5 crore were sold for Rs 3 crore in enah: Required: Using the indirect method, determine the net eash provided by operating activities for 2010 and construct a statement of eash flows, SOLUTION: ‘Statement of nei cash flows provided by operating activities by using indirect method forthe vear ended June 30,2016 Particular ‘Amount Operating Activities Net Income 66 Adjustment to convert net income to a cash basis Depreciation and amortization charges (218 ~ 194 1 5) 29 ‘Decrease in accounts receivable (270 — 180) 0 Increase in inventory (205 — 160) as) Decrease in pre-paid expenses (20 — 17) 3 Decrease in accounts payable (230 ~ 310) 80) Increase in accrued liabilities (70 — 60) 10 Increase in deferred income tax (15 ~ 8) 7 Loss on sale of equipment 4 [Net cash flow from operating activities & ‘Cash Flow from Investing Activities Additions i property, building & equipment (430 ~ 309 +12) (33) ‘Decrease in long term investments (75 — 60) 1s Proceeds fiom sale of equipment a ‘Net cash used in investing activities (sy (Cash Flows from Financing Activities Increase in bonds payable (135 ~ 40) 95 ‘Cash dividends paid as)Net cash used in financing activities a ‘Not increase in cash & cash equivalents 16 ‘Cash & cash equivalents atthe beginning of year 10 ‘Cash & cash equivalents atthe end of year 26 2) Following weihe oT Ragin CO Litas on Mah alas on MaRIT OTe LIABILITIES 1 Eoualty apd Ubi (a) Equity Share eaptal (6) Pret share Capital (c) Capital Re (Pro. TH Now: Curent shies (2) 8% Debentures TL Come Libis (4) Credivors (4) Proposed Dividend Toul ISIS Ik Non-Cusrent Assis 10) Land &Building at Cost {) Plant &Mactin 16) Goodwill Non-Cureot investment Investment Curent Ase {@) Stock 18) Debrors {Bills Receivable {6 Cashat bask ©) Cash in ban ED nn EZ »Adina information 4. One pice of land was aold at a prot and the profit was transferred to Capital Reserv 2. OneMachinewassoldforRs15,000(weitten down value on th date of sale wasRs18,000,) 1. DeprecitionchargedonPlant&MachineryamountedtoRs 16,000. a. Dividend of R,000 Preliminary Exp. received from Investment od fom pre-aoqusivon profit }&. ActualamountoftaxespaidwereRs38,000. ea ash How Statement forthe year ending on March 312018 Youste required 10 pre which RS2,00 was credited Investment Ale being SOLUTO’ Particulars ‘Amount RS) ‘Arount RS) Cash flow from Operating Activities ‘Operating Profit before working changes (WN2) isn 213,005] “Add: Doorease in current assets and Increase in ‘Current Liabilities Creditors (83,000-$5,000) 2000) Test Increase in current assets and Decrease in current liabilitios Stock (10,000 = 77,000) 000) ‘Debtors (170,000 = 140,000) (30,00) Bills Receivable 20,000 — 20,000), 10.00) Bills payable (20,000 — 16,000) 0) | 7.74,000 Less Tax Paid 38,000] 736,000, ‘Net cash flow from operating activities Cash flows from Invesing Activities Sale of land & Building 30,000, Sale of Plant & Machires 15,000] Dividend received 9,000 Tess: Purchase & Plan & Machine $4000) Investments 00 Tmo ‘Net cash flow from Investing Activities TIE Cash Flows from Finaicing Activites Tssue of share including premio 35,000 ‘Less: Redemption of reference share ‘sn.000) idend Paid 142.000) Tnrerest on Debemre (400)2 Loo ‘Net cash flow from Financing Activilies (cs. o00| ‘Decrease in cash over the year [Add: Opening balance of cash & cash equivalent oan Rs (16000-0000) ‘Closing cash & cash equivafent Rs (11000+7000) Ts.000 ‘Working Now: ‘Gondwil AG Land & ulldings AIC Fre tal] 1,00,000]By Pi] 11,000. [To Bal 0,000] By, Banke 30,0007 By Bal To, Cap. | 20.000 Sold By Bal 89,000_} °°" 2,20,000, 5,00,000] *1.00.900 27,00,000, 2.70.00 Plant & Veoh Ale Tnvesimen! AG To, Bal '80,000] By, Bank] 15,000) To, Bal] 20,000] By, Dividend Bank Purchase | 1,54,000] By.P/L. | 3,000/To, Bank | 17,000] By, Bal 2,000) (Loss) By, PiL | 16,000] Purchase 35,000 (Depry By. Bal | 2.00.00 0 234,000 3400 37,000 37000 Prolininany Exp Ale Equity Share Capital Ae To, | 35004py, Pa By, [5.000 [To By, Bal 300,00 Bal Bal 30,000 |», | 3,sop0qBy, Bank Bal Isste 50.00 35,000. 35,000 3,50,000) 350,000, Pref Stare Capital AS ‘Stare Premium Ae "To, Bank 50,000] By. | 1,50000/To, | 25,000 /By, Bal By, 20,000 Redan 10000) 8" Bal Bank 5,000 Pp 1,50,000 130,000 25,000 25,000 ‘Capital Prov. For Taxation Ale Res Ac By, Te, 35000 Ty, Bal 10.000 To, Bal | 20.000] ‘Lena a |_20.000] panic 50,000 _|p. Pi 48,000 720,000] Builiine [20,000] ro, 88,000 88,000 Bal Proposed Dividend Are ‘Gon Reserve AE ie) Bee SS42,000 By, Bal By, 40,000 50,000_|To,| 75.000] p71, 35,000 '85,000 | al| 75,000] 75,000 Adjusted Profit Loss Ale To, Goodwill 11,000 ]By, Bala O,000) Plant & Mach 000 Dividend on 2,000] (oss) Plant & 6.000 lnvestment 2.13.000| Mach (Dep! 000 Operating Profit Preliminary (exp) 8,000 Bal Figure Prov. For ex 0,000 Proposed 5000 Dividend General 000 Reserve [3000 Debenture Interest 2,45,000 2,45,000 Bal Closing e/d (OS) Calculate Ne Cash Flow from Operating Activites fo Be own in Cosh Fow Satomen (CFS) for th yeu 2016-17 (sing bot direct an indirect method) Income Stafement forthe year 2016-17 ing Exp (ex. Dep) (24000) ation Ines olan (10,00) Provision for ax Pat 15000 Balanoes lating o caren Heme ae 31-45-16 sou Debtors 000 io lnventory 6510 00 Creditors 9.0 8510 08 Fxpanses oa so Included in operating expenses iss loss onsale of machinery - Rs 2,000, Actual ax paid in espct of 2016-17: Rs 9.000, ‘SOLUTION: ‘Cash fom Operation Greet melhod) (Collection from Sales: Sales |Add: Decrease in Debtors [add, Opening & less. Closing] 80,000 2,000 | $2,000] Payment for Purchases & Fxpenses“Total operating expenses exe. loss, i. purchases & Others 42,000] ‘Addr Increase in Inventory (add. Closing & less. Opening] 500 ‘Ada: Decrease in Craitors [add Opening & less. Closing] 500 Less Increase in O/S expenses [ald. Opening & less. Closing] soo] 2.501, [CASH FLOW FROM ORDINARY ACTIVITIES 39.500 Extraordinary Income. 5.000] 4,500 Less: Tax Paid 9,000] /NETCASHFLOWFROMOPERATINGACTIVITIES (To be shown in 35.500 CES) Cash fom Operation (naire method) PBT 25,000 Less, Extmoedinary Income 6:00) ‘Add. Tnverest on Loan 6,000) ‘Add, Depreciation 10,000, ‘Add. Loss on Sale of Machinery 2,000) ‘Operating Profit before working capital changes 38,000 ‘Add. Decrease in Debtors 2,000 Less Increase in Inventory (500) Less, Decrease in Creditors 500) ‘Add. Increase in OFS expenses 500 ‘CASH FLOW FROM ORDINARY ACTIVITIES 500 ‘Extraordinary Income 3,00) #4500 Tess Tax Paid 9.000) NET CASH FLOW FROM OPERATING ACTIVITIES (To be 35,500 shown in CFS)Gn GES © “CHAPTER 4— BANKING [at) Following is an extract from Trial Balance of Ohanyabaad Bank Ltd, as at 315¢ March, 2017 Particulars Dri(Rs)_[_ Cr. (Rs) Bills Discounted 31,50,000 Rebate on bills dccounted not yet due, March 31,2016 20501 Discount received 745,500 An analysis of the bills discounted as shown above shows the following: Date of ‘Amount (Rs) Period months Rate of discount pa. 31012017, 750,000 a a 17.02.2017 6,00,000 3 10 06.03.2017, 4,00,000 a i 16.03.2017 200,000, 2 10 Find oUt the amount of discount received to be eredited to Profit and Loss Account and pass appropriate Journal Entries for the same. How the relevant items will appear in the Bank"s Balance Sheet? SOLUTION: Cakeuation of Unexpired Dscount or Rebate on Sie Dacounted Pate ofbit Pateof | Wo.of [Amount | Rateof | Total | Proportionate faturity days (Rs) | Discount] Amount | Discount of days ater %pa.| of | after3i.03.2017 1.03200 Discount () (Rs) TROLPIT] Teas OAT] ae] 750900 | 12 | — 90,000 BOAOOAEsES= Tsar TGERAT] POUBAOIT| 5 [BOOED | 10 | — e000 | SODROROREE ES wos RaIT| WOTDOTT] Too | oo | TT | —ae000 | anon TMTaEs 2055a © 16.03.2017] 19.05.2017] 49 | 2,00,000 | 10 720,000 | 20,000 49/365: 2685 Unexpired Dicrounte on aan 31.03.2017, Dr. Discount Account cr Date Particulars] (Rs.) Date Particulars | (RS.) 31.03.2017 | To Rebate on 34,301 [ 01.04.2018 | By Rebate on 30,501 Bils Discounted Bills Disccunted as To Profit & Loss| 1,41,700 on 14.2016 145,500 Ale By Sundries 1,76,001| 1,76,001 Journal Particulars Le [Dr (Rs) [Cr (Rs) Rebate on Bills Discounted A/c Or. 30,501 To Discount A/c 30,501 (Unexpired discount brought forwaed) Discount Ale Dr. 34307 To Rebate on Bills Discounted A/c 34,301 {(Provsion for unexpired discount) Discount Ale or T4700 To Profit & Loss A/c 1,41,700 (Discount earned for the year) feaytrom the following information of Poisn I Polss Dank Utd, colculete the amount OF interest earned (as per Schedule 13), Other income (as per Schedule 14), Other Liabilities as Provisions (as per Schedule 5) and provisions and Contingencies: Particulars A000 Taterest and Discount 2045 Tncome from investments nz Interest on balance wth RBI aT Commission, Exchange & Brokerage 7a Profit on Sale of Investments 1 Interest on Deposits 822 Interest to RBI 187, ‘The following wems are already adjusted with interest and discount (cr) T5000 Tax Provision 148) Provision for Doublul Debts 2‘Loss on Sale of Investments, 2 Rebate on sls Discounted 55 ‘SOUUTION: Schedule 13 — Interest Earned Particulars TR: 000) Taterest/Discount [2045 148+92+12] 2.297 Income on Investment 2 Interest on Balance with RBI 17, 2.586 | Schedule 14 — interest Earned Particulars (Rs,000)[ (Rs, ‘Commission, Exchange and Brokerage 72 Profit on Sale of investments wi Less: Loss on Sale of Investments 2 aS Provisions and Contingencies Particulars (8: 000] Provision for Tax 148. TL. Provision for Doubtful Debts 2 240, Schedule 5 — Other lables & Provisions Particulars (Rs 000] Provision for Tax 148. Ti Provision for Doubtful debts ‘2 Ti Rebate on Bills Discounted 55 295 "Qa) Following are the details of interest an advance of Patta Commercial Bank as on 31st March, 2017 (Rs in crore) Particulars [interest Earned frterest received ine [performing Assets lrerms oan kcash Credit and Overdraft bits Purchased and Discounted Iwon-Performing Assets [Term Loan Icash Credit and Overdraft ait Purchased and Discounted Re ew eye aa BDFind out the income to be recognized for the year ended 31st March, 201: [on Acerval Bass [SOLUTION :- As per RBI Circular, Interest on non-performing assets are [considered on Cash Basis whereas interest on performingassets are considered ‘Statement Showing the Recognition of income Parieais Jamount (Rs in Parount Rei ore) roe) terest on Term Loans 0 erfoming sets fo fon prlorming Assets f20 terest on Caah Credit and Overdraft erforming Assets 500 jon Performing Assets 560 [rterest on Bis Purchased and Discounted Performing Assets 00 fuon-Pertorming Assets ho fo ncome to be Assets 430 [Q4) Given below are detals of interest on advance of 8 [Commercial Bank as on 31.03,2017: Particulars interes Taterest Received] Earned (Rsin | —(Rsin Crore) Crore) Performing Assets Frerm Loan 29] aa) [Cash Credit and Overdraft 750] G20] Bis Purchased and Discounted 750] 159) [Non-Performing Assets [Term Loan, zs J [cash credit and Overdraft 70] a Bills Purchased and Discounted 100] Fi Find out the income to be recognized forthe year ended 31st March, 2017,‘As per Ral Circular, Interest on non performing assets are considered on Cash ‘Basis whereas interest on performing assets are considered on Accrual Bass Statement Showing the Recognition of income: (ein Gore) Particulars “Amount(s)_] Amount) Li tnterest on TermLoans Ui} Performing Asses i ll] Non-performing Assets Ei aa [a taterest on Cash Credit and Overdraft Performing Assets Ta li] Non-perorming Assets a 7a 5 Taterest on Bs Purchased and Discounted i Performing Assets 7 li Non-perorming Assets 2 = Fi ineame tobe reragnied 7057 fas) From the following information find out the amount of provisions required to be made In the Profit & Loss Account of a Commercial Bank for the year ended 3ist March, 2019: a, Credit outstanding for 2 80 lakhs against which the Bank holds securities worth 2 20 lakhs. 50% of the above advance Is covered by ECGC. The above advance has remained| doubtful for more than 3 years. b,_Other advances: [asses classification Tina [standard 2.504] sub-standard 1,309 [boubetu For one year 730) For two years Em For three years Ei For more than 3years 359] oss assets 600] SOLUTION: ‘a)Calculation of provision on credit partly secured by ECGC.Ghee fra Sane Particulars in lakh [credit outstanding 20.00) ess: Realisable value of securities 20.00] 60.00] [ress CCC cover (SOR) 30.00] [Net Unsecured balance 30.00] [Provision on unsecured portion (100%) 30.00] [Provision on secured portion (100%6 of 20:00), 20.00] [Total provision 50.00) Calculation of provision on other advances. ‘Assels Amount (fin | %oh Provision (im Lakh) Provision Lakh) [standard 2500] 020] 30 [sub-standard 1800] 15 270) [Doubt For 1 year 750] 25 157.5 For vears 600] 40 240] For 3 vears 500] 20 200] For More than 350] 10 350] lyears loss Assets 500] 70) 600) 355750] “Total provision tobe made = $0.00 + 1857.50) 1907.50 bias. Reet‘CHAPTER 5 ~ ELECTRICITY [a1) From the folowing information Calculate Return on Equity as per Regulation 21 of the Central Electricity Regulatory Commission (Terms and Concltons of Tarif) Regulations, 2008 1 Date of Commercial Operation of COD = 1st April2010 2. Approved Opening Capital Costas on Ist April 2010 = Rs 15,00,000 & Details of allowed Additional Capital Expenditure. Repayment of Loan and Weighted Average Rate of Interest on Loan s as Follows ist year 100,000 2nd year Svdyear —Athyear 30,000 20.000 10,000 [Additional Capital Expenditure SOLUTION: Computation of Return of Equity Particulars ‘styear | 2ndyear Brd year [eth year [A Opening Equity (20%) 50,000] 480,000] 4,89,000]495,000 |B. Additional Equity 30%) 30,000] 9,000/ 6,000] 3,000) c- Closing Equity (A+ 8) 4,30,000] | 4,89,000)_4,95,000} 498,000] D. average Equity [A + €)/2] 465,000] 4,84,500|_4,92,000]496,500 E.Raturn on Equity (0 149%) 65,100) 67,830, 68,880) 69,510 22) From the following information of VIDYUT ELECTRICITY CO. LTD,, an Electricity generation Project, Calculate: Depreciation and ‘Advance against Depreciation upto the year 2014-15 as per Regulation 21 of the Central Electricity Regulatory Commission (Terms and Condltions of Tariff) Regulations 2004 Date of Commercial Operation of COD: 1st Apri, 2012 Approved Opening Capital Costas on 1st April, 2012: Rs10,00,000 ‘Weighted average Rate of Depreciation: 5.20% Details of allowed Additional Capital, Repayment of loan and Weighted Average Rate of (Amount in Rs) Year WOHRAS | 7013-14] 2018-15 [Additional Capital Expenditure (alowed) 70,000} 20,000} 15,000] Repayment of Loan 0,000] 70,900] — 70,000 Weighted Average Rate of interest on Loan 730%] —7.60%| 7.80% Iferest on Loan are as follows: SOLUTION: ViOYUT ELECTRICITY CO. LTD. ‘A. Computation of DepreciationGEES © Particulars 2012-13] 2013-14[ 2014-15 [Opening Capital Cost 20,00,000| 10, 70,000] 10 90,000] [Additional Capital Cost 70,000| 20,000) 15,000] [Cosing Capital Cost 30,70,000| 10 90,000] 105,000] [Average Capital Cost (AvCV2 20,35,000| 10 80,000] 10,97, 500] le| Weighted average rate of depreciation 5.20%] 5.20%] 5.20%] IF|Annualized depreciation (O)»(E) 53,820] 56,160] 57,070 felaivance against depreciation (ADD) 6,180] 13,840] 12.930 [Total depreciation (including ADD) for tariff (F¥G) | 60,000) 70,000) 70,000 ‘B_Computation of Depreciation, Particulars zorz-13] 20isa4 201815 [a |Repayment of Loan (10% of loan amount) 60,000] 70,000] 70,000) 8 [Depreciation (Excluding AD) 53,820] 56,160] 57,070) (C__ [Difference between A&B (A-B) 6,180] 13,840] 12,930] D__[Cumulative repayment of Loan, 60,000] 3,20,009] 2,00,000] [Cumulative Depreciation (Excluding AAD) at | 53,820] 1,09,980] 1,67,050] the beginning F__ [Difference between D&E (0-F) 6,180] 20,020] 32,350] GS _ [Advance against depreciation (AAD) 6,180) 13,840) 12,930) (Minimum of C&F) Central Electricity 200 23) From the following information calculate return on equity as per Regulation 21 of the atory Commission (Terms and Conditions of Tarif) Regulation (1) Date of commercial operation of COD=01.04.2014 (44) Approved opening capital cst as on 01.04.2014 Details of allowed additional capital expenditure: way 3.30,00,000 Year 1 2 z 4 [Adaitional Capital Expenaiture (Ra 700,000 60,000 | 40,000_| 30,000 eee seesCalculation of Return on Equity Particulars Year Year? | Years | veara [A Opening Equity ‘30000 | 960000] 976000] 990000 (20% of Opening Capital Cost) | 000000"30%) '. Additional Equity 0000} 8000 12000 6000 (30% of Additional Expenditure) [c. Closing Equity (A+B) ‘360000 | “978000 990000996000 . Average Equity ((A*¢)/2] ‘930000 | 965000 | 984000 993000 E. Return of Equity Taoz00 | 135560) 137760] 139020 (1495 of average Equity) i Gane ESA poCHAPTER 6- INSURANCE Ja-1) The Ife insurance fund of Upkar Life insurance Co, Ltd was fs 68,00,000 on 31st, March,2015. its actuarial valuation on 31st March, 2015 disclosed a net liabilty of Rs 57,60,000. aninterim bonus of Rs 80,000 was pad to the palcyholders during the previous two years. Its now proposed to carry forward Rs 2,20,000 and to divide the balance between the policyholders anc the shareholders. show (a) the Valuation Balance Sheet, (b) the net profit for the two-year period, and c) the distribution of the profits ‘the Books of Prakash life Insurance Co. Ltd Valuation Balance sheet as on 31st March, 2013, abilities jount Assets. JAmount (Rs) (Rs) 7.90000 py ifessrance [800,000 nd ho.4,000 500.000 8.00000 [fet profit forthe two-year period ros par Valuation Balance Seat ioa0,000 ner Bonus paid during the previous bo yeas fs000 het Prof 3.20900 Pistribuon ofthe proms fre brone L200 [ese mount proposed tobe cared forward 2.20000 atance. 2,00,000 Fare of poloholers (5% of 300000) 85,000 [es Inter bonus paid 0,000 mount due to potholes 3.75000 hare of Shareholders (5% af Rs 90,000), ‘5,000[a.2) From the following figures of Well Life assurance Co, Lte. prepare = Valuation Balance Sheet and Profit Distribution Statement forthe year ended 315t March 2016, Also pass necessary journal entries to record the above transactions with narrations: Particulars: Ris (in lakhs) leslance of Life Assurance Fund as on 18.2015 34.30 [aterim bonus paid in the valuation period 50.00 folance of Revenue Account for the year }:80.00 nded 31.3.2016 fet Liability as per valueer’s Certificates as on 30.00 b1.3.2016 The company declares a revisionary bonus of Rs185 per Rei,000 and gave the policyholders an option to take bonus in cash RS105 per Rs,000. Total business Jconducted by the company was RS1,200 lakhs. The company isued profit policy only, 3/5 ofthe policyholders in value opted for cash bonus, SOLUTION: Ta the Books of Wal Assurance Co Valuation Balance Sheet As at 315t March 2016 iiailties Penount (fs) | Assets mount) letLabiltes ar per f30.00,000 [fe nsrance 4430,00000 jctuaalValuarion Fund plus rat 8,50,0,000 800,000 130,00, 000 Dinibation Statement of Surpls i arp) Net ro 1,590 000 hc interim Bonus Pai 50,0,000 2,00,0,00 — TPotcrhoiden’ saves @asmafaezo000000 | 1a000900 est Interim Bonus paid 50.00.00 3.40,00,000, Bhareholders’ share @ 5% of Rs2,00,00,000 f:,00,000, Toaral Date Paniculas [F pet frede as__|ae ie esorance Fund Ne oe 7.30001 To, Profit and Loss A/c 1,50,00, Surplus/Net Profi eransered to PRL AJ asPer Valuation Balance sheet) Revisionary Bonus payable transferred to fe assurance Fund) Profitand toss Ne Or. 75,60,00: To, Bonus (in cash) Payable A/c 75,60,004 (Bonus paid in cash) Profit and Loss A/c Or. '88,80,005 To, Life Assurance Fund Afe 88,80, Bonus payable in cash fe Rsi05 per Rs100 In 7,20,00,000{Rs12,00,00,000 « 3/5) | (7,23,00,000 /2000) x 105, 750,000 Revisionary Bonus fe Rsi85 per Rs1,000 Jn 4, 80,00,000 {Rs12,00,00,000 « 2/5) (4, 82,00, 000 /1000) x 185 | R83 80,000 12.3} Prepare the Fire Insurance Revenue Account of JS Fire Insurance Ltd, As perIROA regulations for the year ended 215t March, 2036 from the following details: Particulars mount (Rs) jaime paid 00,000 Se rn 710000 Premiums receved 2.50.00 Resinsurance premium pad 0000 maaan 10.000 Saige oat 0.000 Provsion agaist unexpred riko on FR ApAIZOIS 73.0 aims unpaid ont Agri 2015 S000 fesinsunpsi on 35% March 2006 50,00 Provide for unexpired risk @ 50% less reinsurance