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Accountancy, 2019 20
Accountancy, 2019 20
{2019–20}
CHARAK RAY
libra.charak@gmail.com
Paper Design
Academic Session 2019 - 20
Marks Allocation,
Suggested Question and
Syllabus.
Allocation of Marks by CBSE
CHANGES
• Statement made should be brief but for the sake of brevity main contents of
the statement should not be sacrificed.
Example: AS 26, Intangible Assets prescribes that Self – generated
Goodwill is not to be accounted in the books of account.
True / False or Yes / No Type Questions
• Given Options (Responses) should be similar but only one of the options
(Response) should be correct.
Do you think, it would not be appropriate to debit Profit and Loss Account for
(a) remuneration paid to the partners;
(b) Stationery Expense;
(c) Goods Donated;
(d) salary to staff.
OBJECTIVE TYPE QUESTIONS /
MULTIPLE CHOICE QUESTIONS (MCQs)
TRUE / FALSE QUESTIONS
(a) A and B
(b) C
(c) Both A and B and also C
(d) Neither A and B nor C
(b) C is correct.
Partnership – Change in Profit Sharing Ratio
(c) A, B and C will bear Rs. 1,25,000, Rs. 1,50,000 and Rs. 1,75,000
respectively.
Share Capital
• Accounting Standards are not complied unless they are applied fully.
Accounting
Indian Accounting
Accounting Standards notified
Standards(IND-AS)
Standards Issued by under the
notified under
ICAI Companies Act,
Companies Act, 2013
2013
Applicable on
Applicable on companies other Applicable on
non-companies than on which specified companies
IND-AS is applicable
Ind-AS are applicable on the following companies:
3. Consistency Concept.
Differences between Accounting Standards (AS) and Indian Accounting
Standards (IND – AS)
Discount or Loss on Issue of Debentures may be written off in the year when
Debentures are allotted from
Securities Premium Reserve, or
Statement of Profit and Loss.
Hero Business Ltd. issued 10,000, 9% Debentures of Rs. 100 each on 1st April,
2018 at a discount of Rs. 10 redeemable at a premium of 10%.
Pass the Journal Entries for Issue of Debentures and Writing off Loss on Issue
of Debenture.
Question
What will be the effect of writing off Loss on Issue of Debentures of Rs.
2,00,000 (in the previous question) on
(a)Cash Flow from Operating Activities, and
(b)Cash Flow from Financing Activity.
Answer
What will be the effect of Writing off Loss on Issue of Debentures (in the
previous question) of Rs. 4,00,000 on
(a)Cash Flow from Operating Activities, and
(b)Cash Flow from Financing Activity.
Answer
(a) Effect on Cash Flow from Operating Activities -
Add: Rs. 2,50,000 to Net Profit before Tax Extraordinary Item as it is
debited as expense i.e., has gone into profit determination.
No adjustment will be made of Rs. 1,50,000, it being written off from
Securities Premium Reserve, which has not gone into profit determination.
No further adjustment needs to be made because it is premium payable at
the time of redemption.
(b) Effect on Cash Flow from Financing Activity:
Proceeds (Inflow) from Issue of Debentures
Rs. 20,00,000
(20,000 X Rs. 100)
Premium on Redemption of Debentures NIL
Illustration
What is the effect of Writing off Loss on Issue of Debentures (in the
previous question) of Rs. 4,00,000 on
(a)Cash Flow from Operating Activities, and
(b)Cash Flow from Financing Activity.
Answer
Citizen Ltd. issued 10,000, 9% Debentures of Rs. 100 each on 1 st April, 2018 at
a discount of Rs. 10 redeemable at a premium of 10%. On 1st January, 2019, it
issued 1,00,000 Equity Shares of Rs. 10 each at a premium of Re. 1 per share.
2. Starting point is net profit for the year determined either as difference
between Closing and Opening Balance in Surplus i.e., Balance in
Statement of Profit and Loss or taking net profit from the Statement of
Profit and Loss.
Financing Activities are the activities that result in change in the size
and composition of the owners’ capital (including Preference Share
Capital in case of companies) and borrowings of the enterprise.
Treatment of Dividends
under
AS 3, Cash Flow Statement
Interim Dividend
Interim Dividend is declared by the Board of Directors of the Company. It
does not require approval (declaration) by the shareholders.
AGM is held after the end of the financial year i.e., in the next financial year.
In the AGM held in next year, Proposed Dividend of this year will be
declared. For example, in the AGM held in financial year 2019 – 20,
Proposed Dividend of financial year 2018 – 19 will be declared.
It is added to Net Profit before Tax and Extraordinary Items under Cash Flow from
Operating Activities being an payment to be shown in Financing Activities.
Assets
1. Non – current Assets
Fixed Assets
Tangible (Machinery) 30,00,000 20,00,000
Intangible (Goodwill) 3,00,000 3,40,000
2. Non–Current Investments 7,00,000 1,50,000
3. Current Assets
Inventories 14,00,000 6,00,000
Trade Receivables 12,00,000 9,00,000
Cash and Cash Equivalents 4,50,000 1,80,000
Total 70,50,000 41,70,000
Notes to Accounts
Note Particulars 31st March, 31st March,
No. 2019 (Rs.) 2018 (Rs.)
17,90,000
Less: Gain on Sale of Machinery 60,000
Operating Profit before Working Cap. 17,30,000
Changes
Add: Increase in C L
Trade Payables 8,50,000
25,80,000
Less: Decrease in C L/Increase in CA
Other Current Liabilities 30,000
Inventories 8,00,000
Trade Receivables 3,00,000 11,30,000
99
Some Issues in Cash Flow Statement
3. Preference Shares were redeemed at a premium and
premium was written off from Securities Premium Reserve.
What will be the treatment in Cash Flow Statement?
And
or
2. Banking Companies.
Debenture Redemption Reserve (DRR)
• the amount credited to DRR will not be used for purposes other than
redemption of debentures.
•CBSE requires that where the redemption is out of profit, DRR should be equal to
100% of the nominal (face) value of Outstanding Debentures.
Question
Rain Forest Resorts Ltd. can transfer Rs. 5,00,000 because Dividend Equalisation
Reserve, General Reserve and Surplus i.e., Balance in Statement of Profit and Loss
can be used for payment of Dividend.
Securities Premium Reserve can be utilised for the purposes prescribed in section
52(2) of the Companies Act, 2013, which does not include utilisation towards
payment of dividend.
Question
Star Ltd. has credit balances under Reserves and Surplus as follows:
Rule 18(7)(c) of the Companies (Share Capital and Debentures) Rules, 2014
prescribes:
•that a company shall invest an amount
•not less than15% of the nominal (face) value of the debentures to be redeemed
(maturing) during the year ending 31st March of the next
year
•in specified securities
•on or before 30th April of the current year.
Specified Securities
•In unencumbered securities mentioned in sub-clauses (a) to (d) and (e) of section
20 of the Indian Trust Act, 1882;
•In unencumbered bonds issued by a company which is notified under section
20(f) of the Indian Trust Act, 1882.
Some Issues on Debentures
• It is that part of Uncalled Capital which a company decides to call at the time of
winding up;
• Shares in such cases is shown as Subscribed but Not Fully Paid up.
5. Entries for Allotment Money and Call Money due is passed for the number of
shares subscribed.
Some Important Points Related to Accounting for Share Capital
6. If the shares are oversubscribed, shares may be allotted to:
(i) all the applicants on pro rata basis, or
(ii) full allotment to some applicants and on pro rata basis to some applicants
and reject the remaining applicants, or
(iii) full allotment to some applicants and no allotment to remaining applicants.
Forfeiture of Shares
11. Discount on reissue of forfeited shares cannot be more than the amount
forfeited on reissued shares.
Excess Application
Shares Allotted 40 Securities Premium
Money Rs. 48
Share Capital Rs. Rs. 40
(Rs. 288 – Rs. 200 –
200 (40 x Rs.5) (40 x Rs.1)
Rs. 40)
Securities Premium
Share Capital
Amount Due Rs.
Amount Due Rs. 40
40
Excess Application
Excess Application
Money Adjusted Rs. 40
Money Adjusted Rs. 8
Balance Due NIL
Amount not Recd. Rs. 32
Excess Application
Shares Allotted 60 Securities Premium
Money Rs. 72
Share Capital Rs. Rs. 60
(Rs. 432 – Rs. 300 –
300 (60 x Rs.5) (60 x Rs.1)
Rs. 60)
31,688 31,688
Dt Particulars LF Dr. (Rs.) Cr. (Rs.)
Shares Application A/c (2,400 X Rs. 6) …Dr. 14,400
10,000
To Share Capital (2,000 X Rs. 5) 2,000
To Securities Premium Reserve A/c
(2,000 X Re. 1) 2,400
To Shares Allotment A/c (400 X Rs. 6)
(Being application money adjusted on allotment)
Shares Allotment A/c (2,000 X Rs. 3) …Dr. 4,000
To Share Capital A/c (2,000 X Rs. 2) 2,000
To Securities Premium Reserve 2,000
(2,000 X Re. 1)
(Being allotment money due)
Shares First Call A/c (2,000 X Rs. 3) …Dr. 6,000
To Share Capital A/c (2,000 X Rs. 2) 4,000
To Securities Premium Reserve A/c 2,000
(2,000 X Re. 1)
(Being the First Call due)
Share Capital A/c (40 X Rs. 8) …Dr. 320
Securities Premium Reserve A/c …Dr. 72
(40 X Rs. 2 – Rs. 8)
To Shares Allotment A/c (WN 1,2 and 3) 32
To Shares First Call A/c ( 40 X Rs. 3) 120
To Forfeited Shares A/c (Balance) 240
(Being 40 shares forfeited for non payment of
allotment and first call money)
Pankaj Ltd. Invited applications for 10,000 Equity Shares of 100 each. The
amount was payable as follows:
Applications were received for 22,000 shares. Applications for 2,000 shares
were rejected and their application money was refunded. Shares were allotted
to the remaining applicants as follows:
i. Allotted 50% shares to Ashok who had applied for 4,000 shares.
ii. Allotted in full to Amar who had applied for 2,000 shares.
iii. Allotted balance of the shares on pro rata basis to the other applicants.
Excess application money was applied in payment of allotment and call. All calls
were made and received except the first and final call on 60 shares allotted to on
applicant in Category (iii).
No Entry
Or
No entry.
Illustrations
Rohit, a partner is to carry out dissolution of the firm
and he gets Rs. 50,000 as remuneration. Realisation
Expenses were Rs. 25,000. Pass the journal entry.
No Entry
PARTNERS’ LOAN
LOAN BY PARTNER TO THE FIRM
Action Points
• It is not an external liability. But, is to be paid before
repayment of Capitals to partners.
• It is not transferred to Realisation Account.
• After Outside Liabilities are paid, Partner’s Loan is
repaid.
• If the partner accepts firm’s asset, entry is passed.
• If the partner loan is settled for lesser amount,
difference is transferred to realisation Account, it
being a gain for all the partners.
LOAN BY THE FIRM TO PARTNER
Action Points
• It is an asset for the firm.
• It is not transferred to Realisation Account.
• It is not transferred to his Capital Account because
if it is transferred, it will mean repayment of
partners capitals before payment of outside
liabilities.
• It is realised in cash.
MULTIPLE CHOICE QUESTIONS
1. Nature of realisation Account is:
a)Nominal Account
b)Real Account
c)Personal Account
d)Asset Account
Answer: [a]
2. Partners Loan Account is:
a)Personal Account
b)Real Account
c)Nominal Account
d)Expense Account
Answer: [ a ]
Outside liabilities are shown in the Realisation
Account in the:
a)Debit side of Realisation Account
b)Credit side of Realisation Account
c)Debit side of Partner Capital Account
d)Credit side of Partner Capital Account
Answer: [ b ]
If a partner has taken some of the Sundry Asset at
Rs. 7,200 ( being 10% less than book value ) its
book value is:
a)Rs. 7,920
b)Rs. 8,000
c)Rs. 7,200
d)Rs. 7,000
Answer: [b]
There were investments of Rs. 1,20,000, 75% of
the investments were taken by a Partner at 75% of
their book value. Partner’s Capital Account will be
debited by:
a)Rs. 90,000
b)Rs. 67,500
c)Rs. 80,000
d)Rs. 65,000
Answer: [b]
50% of the Furniture valued at Rs. 20,000, taken
by a Partner for Rs. 18,000, and remaining 50%
were sold at 20% less of the book value, amount
received from sale of furniture will be:
a)Rs. 20,000
b)Rs. 10,000
c)Rs. 16,000
d)Rs. 18,000
Answer: [c]
FILL IN THE GAPS / BLANKS
1.If and asset is taken by the partner at the time of
the firm’s dissolution, ______ Account is credited.
[Realisation]
2. In case of dissolution of the partnership firm,
Provision for Doubtful Debts is transferred to
__________Account.
[Realisation]
3. Dissolution of Partnership may or may not
involve ___________ of the firm.
[Dissolution]
4. Profit on realisation is credited to Partner’s
Capital Account in their ______________.
[Profit-Sharing Ratio]
5. Asset taken by a partner at the time of
dissolution is_______ to partner’s capital Account.
[debited]
[Credited]
7. Firm’s Property is applied first for payment of
_____.
[firm’s debts]
8.In case of dissolution of a firm ______relationship
between/among the partners come to an end.
[Economic]
[T]