Discussion On Syllabus 2016 and New Topics

Discussion
On
Accountancy
For 2016 Examination
CA. (Dr.) G.S. Grewal 1

Syllabus
for
Examination, 2016

Deleted
1. Multiple Choice Questions (MCQs)

2. Multi-Disciplinary Questions
(Only Evaluation Questions to come)
3. Issue of Shares at Discount

Class XI - Included in Syllabus
1. Under the Heading ‘Origin of Transactions’
(a) Supporting Vouchers;
(b) Debit Note; and (c) Credit Note.
2. Any appropriate Software may be used.
Scope of Syllabus
In Chapter on Not – For – Profit Organisations
1. Adjustment is a question should not exceed 3 or 4 in
number and is restricted to subscriptions, consumption of
consumables and sale of assets / old material.
2. Entrance / admission fees and general donations are to
be treated as revenue receipts.
3. Trading Account of incidental activities is not to be
prepared.
Class XII
1. Accounting of Private Placement of Shares
2. Accounting of ESOP
3. Provisions for Debenture Redemption Reserve
(DRR) have changed.
4. Definitions of terms used in Chapters on Company
Accounts either Introduced or Changed

Clarifications in Syllabus for Class XI
and Class XII
1. 1 Mark Questions will have Very Short Answer Questions
2. All 8 Marks Questions will have internal choice
3. Evaluation Skills Questions Only.
4. Learning Outcomes have been added which are
indicators only and do not restrict the scope of
questions to be asked.
5. Question Paper to be strictly based on Question Paper
Design.

Important Clarifications in Syllabus
Partnership Accounts
1. Interest on Partner’s loan is a charge against
profits.
2. Preparation of Retiring Partner’s Loan Account is
in Syllabus.
3. Preparation of Deceased Partner’s Capital
Account and Executor’s Account is in Syllabus.
4. Dissolution does not include Piecemeal
Distribution, Sale to a Company and Insolvency.

Important Issues in Syllabus
Partnership Accounts
5. The realised value of each asset must be given at
the time of dissolution.
6. In case Realisation Expenses are borne by a

partner, payment thereof should be clearly stated.

Company Accounts
1. Provisions of the Companies Act, 2013 will apply.
2. Provisions relating to DRR given in the
Companies Act, 2013 changed and therefore,
journal entries change.
3. In Debentures, Ex – Interest and Cum – Interest
not in Syllabus.
4. In Statement of Profit and Loss, Exceptional items
and Extraordinary items and Discontinued
Operations not in Syllabus.
5. Schedule VI of the Companies Act, 1956 is
renumbered as Schedule III in the Companies
Act, 2013.

Important Issues in Syllabus
Accounting Ratios
Unless specified, Investments are to be taken as
Trade Investments.
Cash Flow Statement
1. Only Indirect Method in Syllabus.
2. Bank Overdraft and Cash Credit are to be treated
as Short term Borrowings.
3. Unless specified, Current Investments are to be
taken as Marketable Securities.

Project Work
Guidelines for Project Work issued:
• A student shall complete 3 projects.
• One project shall be comprehensive and two projects
shall be specific.
• Tools that to be used shall be:
1. Comparative Statements
2. Common – size Statements
3. Ratios, and
4. Cash Flow Statement
• Viva Voce questions shall be from the project itself
• Examiners should ask 2 – 3 questions out of the
project to check authenticity of the project.

Circular No. Acad. 43/2013

Circular No. Acad. 43/ 2013
Items that will not to be Evaluated
Attention is drawn to the following important note in
the Circular:
“As you proceed reading further, you may find
that there are certain items against which in
bracket the clause ‘Not to be Evaluated’ is
written.
It means that for these items, accounting
treatment will not be asked in the Board
Examination. But students must know their place
in the Financial Statements as per Schedule-VI,
(Read Schedule III) as line items.”

1. Money Received against Share Warrants;
2. Reserves and Surplus: (Revaluation
Reserve, Share Options Outstanding and
Other Reserves are not to be evaluated.
However, General Reserve can be
evaluated);
3. Share Application Money Pending
Allotment;
4. Deferred Tax Liabilities (Net);
5. Other Long-term Liabilities;

6. Intangible Assets:
(Masthead and Publishing Titles, Copyrights,
Patents and Other Intellectual Property
Rights, Services and Operating Rights and
Licenses and Franchises;
7. Capital Work-in-Progress;
8. Intangible Assets Under Development;
9. Deferred Tax Assets (Net);

10. Other Non-current Assets.
11. Cash and Cash Equivalents: (Earmarked
Balance with Banks, Balances with Banks held
as Margin Money or Security against
borrowings, guarantees, other commitments
and Bank Deposits with more than 12 months
maturity are not to be evaluated); and
12. Treatment of Unamortised Expenses.
Also note: Accounting Treatment of Other
Current Assets is restricted to Prepaid Expenses,
Accrued Incomes and Advance Tax only.

Difference Between Companies Act, 2013
and the Companies Act, 1956
The Companies Act, 2013 The Companies Act, 1956
Financial Year Companies to have their Companies could have their

financial year ending on 31st financial year as decided by
March every year. them.
Format of It is prescribed in Schedule It was prescribed in Schedule

Financial III of the Companies Act, VI of the Companies Act,
Statements 2013. 1956.
Definitions of Many terms in the Act have Many terms in the Act were
Various Terms been defined. not defined.
in the
Companies Act,
2013

Maximum Partners Section 464 Section 11
in a firm The section empowers the Maximum number of
Government to prescribe partners of a firm could be
maximum number of partners 10 in banking business
that a firm can has. But, the and 20 in any other
number of partners that can business.
be prescribed cannot exceed
100.
The Government has made
Rule 10 of Companies
(Miscellaneous) Rules, 2014
and prescribed maximum
number of partners of a firm to
be 50.
Thus, a firm with more than 50
partners, is not legal.
Maximum Number Section 2(68) Section3(1)(ii)
of shareholders in Maximum number of Maximum number of
Private Company shareholders in a private shareholders in a private
company can be 200, company was 50,
excluding its past and present excluding its past and
employees. present employees.
Shares held in joint names to
be considered as one
shareholder.
One Person Section 2(62)
Company One Person Company is a One Person Company did
company which has only one not exist under the
member. Companies Act, 1956.

Difference Between Companies Act, 2013 and the
Companies Act, 1956
Issue of Shares Section 53 of the Act Section 79 of the
at Discount prohibits issue of shares Companies Act, 1956
at a discount. permitted issue of
However, Section 54 of shares at a discount.
the Companies Act, 2013
is an exception. It permits
issue of shares at a
discount to employees as
ESOPs.
Receipt of Amount can be received Could be received in
Money Against by a company by way of cash also.
Securities cheque or other
instrument.
Articles of Table F applies where Table A applied where
Association Companies Limited by Companies did not adopt
shares does not adopt their their own Articles of
own Articles of Association. Association.
Interest on In the absence of a clause In the absence of a clause
Calls – in – otherwise, interest on otherwise, interest on
arrears Calls – in – arrears is 10% Calls – in – arrears was
p.a. 5% p.a.
Interest on In the absence of a clause In the absence of a clause
Calls – in – otherwise, interest on otherwise, interest
advance Calls – in – advance is 12% payable on Calls – in –
p.a. advance was 6% p.a.

Minimum Section 39: Section 69:
Subscription
A company shall not allot Requirement of minimum
securities (shares, debentures subscription was with respect
or any securities by whatever to shares only and that too in
name called) unless the respect of initial issue.
amount stated in the
prospectus as minimum
subscription has been
subscribed and the sum
payable on application have
been paid or received by the
company by cheque or other
instrument.

Recent Amendment in the Companies
Act, 2013
Companies not required to have minimum paid-up
capital.
“Private company” means a company which by its
articles,—
(i) restricts the right to transfer its shares.
(ii) limits the number of its members to two hundred
excluding its present or past employee members to
200. Where two or more persons hold one or more
shares in a company jointly, they shall be treated as a
single member.
(iii) prohibits any invitation to the public to subscribe for
any securities of the company.
The name of a private company ends with the words, ‘Private
Limited’.

Recent Amendment in the
Companies Act, 2013
Section 2(71) of the Companies Act, 2013 which defines
public company is amended to mean as follows:
“Public company” means a company which—
(i) is not a private company;
(ii) is a private company being a subsidiary of a
company, which is not being a private company.
The name of a public company ends with the words,

‘Limited’.

Debentures

Definition of Debentures
Section 2 (12) of the Companies Act, 1956
“Debenture” includes debenture stock, bonds or
any other instrument of a company, whether
constituting a charge on assets of the company or
not.
Section 2(30) of the Companies Act, 2013
“Debenture” includes debenture stock, bonds or
any other instrument of a company evidencing a
debt, whether constituting a charge on assets of
the company or not.

Debenture Redemption Reserve (DRR)
Section 71 of the Companies Act, 2013 together with
Rule 18(7) of the Companies (Share Capital and
Debentures) Rules, 2014 deals with Debenture
Redemption Reserve.
DRR is required to be created only for non – convertible
part of the Debentures.

Requirements of DRR
• Section 71 of the Companies Act, 2013 prescribes
companies to transfer amount at least equal to 25%
of the nominal value of total redeemable debentures.
• Rule 18(7) of the Companies (Share Capital and
Debentures) Rules, 2014 requires companies to
invest amount at least equal to15% of the value of
debentures to be redeemed by 31st March of the next
year in specified securities.
• Investment in specified securities to be made by 30th
April of the year.
• Investment can be utilised only for redemption of
debentures.

Companies not required to create DRR
1. All India Financial Institutions (AIFIs) regulated by
Reserve Bank of India.
2. Banking Companies.
3. Other Financial Institutions (LIC, IDFCI etc.)

Journal Entries for DRR
1. On Transfer of Amount to DRR
Surplus i.e., Balance in Statement At least 25%
of Profit and Loss A/c Dr. of the total
To Debenture Redemption Reserve A/c amount of
(Being the amount transferred to DRR) Redeemable
Debentures
2. On Investment Made in terms of Rule 18(7)
Debenture Redemption Investment A/c Dr. Amount at
To Bank A/c least equal to
(Being the amount invested in Specified Securities) 15% of the
Debentures
Note: This amount must be invested by 30th to be
April of the current year for the redeemed by
Debentures to be redeemed by 31st 31st March of
March of next year. next year.
Journal Entries for DRR
3. When Debentures are redeemed
Bank A/c Dr. (Amt. Received)
To Debenture Redemption Investment A/c (Amount of Inv.)
(Being the investment realised at the time of
redemption of debentures)
4. If Investment earns Income and Tax is Deducted at Source (TDS)
Bank A/c Dr. (Amt. Received)
TDS Collected (Receivable) A/c Dr. (Amount of TDS)
To Debenture Redemption Investment A/c (Amount of Inv.)
To Interest Earned A/c (Interest Earned)
(Being the investment realised)
5. When all the Debentures have been redeemed

Debenture Redemption Reserve A/c Dr.
To General Reserve A/c
(Being the balance in DRR transferred to General Reserve on
redemption of all debentures)
Question on DRR
Appollo Ltd. issued 21,000, 8% Debentures of Rs. 100
each on 31st March, 2008 redeemable at a premium of
8% on 30th June, 2015. The company transferred the
required amount to Debenture Redemption Reserve in
three equal instalments staring 31st March, 2013.The
required investment was made in specified securities on
30th April, 2015.
Pass the necessary journal entries regarding transfer of
amounts to Debenture Redemption Reserve, investment
made and redemption of debentures.

Solution
Date Particulars Debit Credit
(Rs.) (Rs.)
2013
Mar. 31 Surplus i.e., Balance in Statement
of Profit and Loss A/c Dr. 1,75,000
To DRR A/c 1,75,000
(Being the one – third of 25% of total
redeemable debentures transferred to
DRR)
2014
To DRR A/c 1,75,000
DRR)

Solution
(Rs.) (Rs.)
2015
To DRR A/c 1,75,000
DRR)
2015
Apr. 30 Deb. Redemption Investment A/c Dr. 3,15,000
To Bank A/c 3,15,000
(Being the amount equal to 15% of the
redeemable debentures invested in
Government Securities)

Solution
(Rs.) (Rs.)
2015
June 30 Bank A/c Dr. 3,15,000
To Deb. Redemption Investment A/c 3,15,000
(Being the investment encashed)
2015
June 30 8% Debentures A/c Dr. 21,00,000
Premium on Redemption of 1,68,000
Debentures A/c Dr. 22,68,000
To Debenture Holders A/c
(Being the amount payable on
redemption)

Solution
(Rs.) (Rs.)
2015
June 30 Debenture Holders’ A/c Dr. 22,68,000
To Bank A/c 22,68,000
(Being the amount paid to debenture
holders)
2015
June 30 DRR A/c Dr. 5,25,000
To General Reserve A/c
(Being the amount of DRR 5,25,000
transferred to General Reserve after
redemption of debentures)

Employees Stock Option Plan
(ESOP)

Employees Stock Option Plan (ESOP)
What is Employees Stock Option Plan (ESOP)?
Employees Stock Option Plan is a plan drawn to issue
securities (Shares etc.) to employees (including whole
time directors) at a discount i.e., at a price which is lower
than its market value.
The Companies Act, 2013 (Section 53) prohibits issue of
shares at a discount. But, through Section 54, it permits
issue of ESOPs at a discount.

Important Terms in ESOP
Term Meaning
Grant Date Date on which the Enterprise and Employees agree
to the Plan.
Vesting Period between the grant date and the date on
Period which all the specified conditions of Employees
Stock Option Plan (ESOP) are satisfied.
Vesting Date on which an employee satisfies the specified
Date conditions and thus, becomes entitled to the options.
Exercise It means making an application by an employee for
issue of shares against the options vested in him.
Exercise Period after vesting within which an employee
Period should exercise the right to apply under the Plan.
Exercise Price payable by the employee for exercising the
Price right for option granted.
Employees Stock Option Plan (ESOP)
How is it accounted in the books of accounts?
The difference between Market Value and Issue Price is
the cost to the company i.e., it is an expense for the
company. The entry passed is:
Employees Compensation Expense A/c Dr.
To Shares Options Outstanding A/c
Employees Compensation Expense A/c is shown under

‘Employees Benefit Expenses’ in the Statement of Profit
and Loss.
Shares Options Outstanding Account is shown as
Reserves and Surplus under Shareholders’ Funds.

When the Vesting Period has Elapsed
When all Option is Exercised by the Employees
Bank A/c Dr. (Amount Received)
Shares Options Outstanding A/c Dr. (Amount Credited to
Shares Options
Outstanding A/c)
To Share Capital A/c (Nominal Value Per
Share X No. of Shares)
To Securities Premium Reserve A/c (Amount Received in
Excess of Nominal
Value + Amount
Credited to Shares
Options Outstanding
A/c)
(Being the shares allotted against ESOP)

When all Options are Exercised by the Employees
Alternate Entries
To Share Capital A/c (Nominal Value Per
Share X No. of Shares)
To Securities Premium Reserve A/c (Amount of Securities
Premium Received)
(Difference between
Issue Price and
Nominal (Face Value)
(Being the shares allotted against ESOP)
Shares Options Outstanding A/c Dr. (Amount credited to
To Securities Premium Reserve A/c Shares Options
(Being the amount of Shares Options Outstanding A/c)
Outstanding A/c transferred to Securities
Premium
CA. (Dr.) G.S.Reserve)
Grewal 42
When All Options are not Exercised
Shares Options Outstanding A/c Dr. (Amount Credited to Shares
Options Outstanding A/c)
To Share Capital A/c (Nominal Value Per Share X
No. of Shares)
To Securities Premium Reserve A/c (Amount Credited to Shares
Options Outstanding A/c
relating to Options Exercised +
amount received as premium)
To General Reserve A/c (Amount Credited to Shares
Options Outstanding A/c
relating to Options not
Exercised)
(Being the shares allotted against
ESOP)
Alternate Entries
To Share Capital A/c (Nominal Value Per Share X
No. of Shares)
To Securities Premium Reserve A/c (Amount of premium Received
i.e., difference between Issue
(Being the shares allotted against Price – Nominal Value of
ESOP) shares)

Alternate Entries
Shares Options Outstanding A/c Dr. (Amount credited to Shares
Options Outstanding Account)
To Securities Premium Reserve A/c (Amount credited to Shares
Options Outstanding Account
and relating to Options
Exercised)
To General Reserve A/c (Amount credited to Shares
Options Outstanding Account
(Being the amount credited to Shares and relating to Options
Options Outstanding Account and Exercised)
relating to Options not exercised
transferred to General Reserve)

Illustration
Bloom Ltd. grants options to subscribe 500 shares of Rs.
10 each at a price of Rs. 30 per share to each of its
employees numbering 100. Vesting period being 3
years. Fair (Market) price of the share as on the grant
date was Rs. 45. Employees numbering 75 exercised
the option by the exercise date.
Pass the necessary journal entries.

Solution
(Rs.) (Rs.)
Year Employees Compensation Exp. A/c Dr. 2,50,000
1 To Shares Options Outstanding A/c 2,50,000
(Being the 1/3rd amount of difference
between Fair (Market) Value and Issue
Price recognised as expense)
Solution
(Rs.) (Rs.)
Year 4 Bank A/c (75 X 500 X Rs. 30) Dr. 11,25,000
Shares Options Outstanding A/c Dr. 7,50,000
To Share Capital A/c 3,75,000
(75 X 500 x Rs. 10)
To Securities Premium Res. A/c 13,12,500
75 x (500 x Rs. 20) + 75 X (500 x Rs. 15)
To General Reserve A/c 1,87,500
(25 x 500 x Rs. 15)
(Being 500 shares each allotted to 75
employees exercising options, related
amount transferred from Shares
Options Outstanding Account to
Securities Premium Account . Balance
amount i.e., amount relating to 25
employees who did not exercise option
transferred
Grewal to General Reserve)
CA. (Dr.) G.S. 48
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Phone: 09811242856
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Discussion

CA. (Dr.) G.S. Grewal 1

CA. (Dr.) G.S. Grewal 2

1. Multiple Choice Questions (MCQs)

CA. (Dr.) G.S. Grewal 3

CA. (Dr.) G.S. Grewal 5

CA. (Dr.) G.S. Grewal 6

CA. (Dr.) G.S. Grewal 7

6. In case Realisation Expenses are borne by a

CA. (Dr.) G.S. Grewal 8

CA. (Dr.) G.S. Grewal 9

CA. (Dr.) G.S. Grewal 10

CA. (Dr.) G.S. Grewal 11

CA. (Dr.) G.S. Grewal 12

CA. (Dr.) G.S. Grewal 13

CA. (Dr.) G.S. Grewal 14

CA. (Dr.) G.S. Grewal 15

CA. (Dr.) G.S. Grewal 16

Financial Year Companies to have their Companies could have their

Format of It is prescribed in Schedule It was prescribed in Schedule

CA. (Dr.) G.S. Grewal 17

CA. (Dr.) G.S. Grewal 19

CA. (Dr.) G.S. Grewal 21

CA. (Dr.) G.S. Grewal 22

CA. (Dr.) G.S. Grewal 23

The name of a public company ends with the words,

CA. (Dr.) G.S. Grewal 24

CA. (Dr.) G.S. Grewal 25

CA. (Dr.) G.S. Grewal 26

CA. (Dr.) G.S. Grewal 27

CA. (Dr.) G.S. Grewal 28

CA. (Dr.) G.S. Grewal 29

5. When all the Debentures have been redeemed

CA. (Dr.) G.S. Grewal 32

CA. (Dr.) G.S. Grewal 33

CA. (Dr.) G.S. Grewal 34

CA. (Dr.) G.S. Grewal 35

CA. (Dr.) G.S. Grewal 36

CA. (Dr.) G.S. Grewal 37

CA. (Dr.) G.S. Grewal 38

Employees Compensation Expense A/c is shown under

CA. (Dr.) G.S. Grewal 40

CA. (Dr.) G.S. Grewal 41

CA. (Dr.) G.S. Grewal 44

CA. (Dr.) G.S. Grewal 45

CA. (Dr.) G.S. Grewal 46

CA. (Dr.) G.S. Grewal 49

Sultan Chand & Sons P Ltd.

T S GREWAL Double Entry Book Keeping

CA. (Dr.) G.S. Grewal 50

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