IPC-CRASH COURSE
GROUP-I ACCOUNTING
FINANCIAL STATEMENTS OF A COMPANY
PREPARATION OF STATEMENT OF P&L
1. The following items appear in the Trail Balance of BHARAT Ltd. as at 31st March 2012:
Rs.
1. Revenue from Operations
24,00,000
2. Other Income
1,00,000
3. Expenses other than Interest
3,80,000
st
4. General Reserve (as on 1 April 2011)
1,30,000
5. Profit and Loss Account (as on 1.4.2011) RS. 3,28,000. The recommendation of
the company’s Board of Directors include equity dividend of 15% (Including
Interim Dividend of Rs. 80,000). Transfer Debenture Redemption Reserve @
50% of Debentures. Transfer to general reserve at 15%.
(assume corporate tax 30% & corporate dividend tax at 20%)
6. 12%, 10,000 Debentures of Rs. 100 each fully paid up
7. 14%, 5,000 Preference Shares of Rs. 100 each fully paid up
8. 6,000 Equity Shares of Rs. 100 each
9. 8,000 Equity Shares Rs. 100 each, Rs 25 paid up
Required: Show the above items in Profit and Loss Statement and Balance Sheet
Required: Show the above items in Profit and Loss Statement and Balance Sheet
2. Provisional balance sheet of P Ltd as at 31st March 2014 was as under:
Liabilities
Rs.
Share Capital
Assets
Rs.
Fixed assets (at 7,00,000
cost
less
depreciation)
50,000
shares
of
each,
Rs.7
equity 3,50,000
Cash
and
Rs.10
balances
bank 2,00,000
per
share called up
Less:
Calls
in (20,000)
Other
arrear on 10,000
current 6,00,000
assets
shares at Rs.2 per
share
3,30,000
Add:Calls
in 1,20,000
4,50,000
advance on 40,000
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IPC-CRASH COURSE
GROUP-I ACCOUNTING
shares at Rs.3 per
share
20,000,
10%
2,00,000
redeemable
preference
shares
of Rs.10 each, fully
paid
Reserves
and
Surplus
General Reserve
3,00,000
Profit
2,70,000
and
Loss
account
Trade payables
2,80,000
15,00,000
15,00,000
Calls in arrear are outstanding for 6 months. Calls in advance were also received 6 months back.
Interest at 10% p.a on calls in advance and 12% p.a on calls in arrears are allowed/charged.
The Board Of Directors have recommended that:
i.
Dividend for the year 2013-2014 be allowed at 20% on equity shares.
ii.
Money on calls in advance be refunded. Calls in arrears with interest received.
iii.
The preference shares which are redeemable at a premium of 10% any time after 31st
March, 2014 may be redeemed by issue of 10% debentures of Rs.100 in cash.
Show Journal entries to give effect to the above proposals including payment and receipt of cash
and redraft the statement of Profit and Loss and Balance Sheet of P Ltd.
3. On 31st March, 2015 Bose and Sen Ltd provides to you the following ledger balances after
preparing its Profit and Loss account for the year ended 31-03-2015
Credit balances
Particulars
Equity share capital, fully paid shares of Rs.10
each
General Reserve
Loan from State Finance Corporation
(Secured by hypothecation of Plant and
Machinery repayable within one year
Rs.2,00,000)
Loans Unsecured (Long term)
Sundry creditors for goods and expenses
(Payable within 6 months)
Profit and Loss account
Provision for tax
Proposed dividend
Provision for dividend distribution tax
Rs
70,00,000
15,49,100
10,50,000
8,47,000
14,00,000
7,00,000
3,25,500
4,20,000
71400
133,63,000
Debit balances
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IPC-CRASH COURSE
GROUP-I ACCOUNTING
Calls in arrear
Land
Buildings
Plant and Machinery
Furniture and Fixture
Inventories:Finished goods
Raw material
Trade receivables
Advances:Short term
Cash in hand
Balances with bank
Preliminary expenses
Patents and trademarks
7000
14,00,000
20,50,000
36,75,000
3,50,000
14,00,000
3,50,000
14,00,000
2,98,900
2,10,000
17,29,000
93,100
4,00,000
133,63,000
The following additional information is also provided in respect of the above transactions:
i.
ii.
iii.
4,20,000 fully paid up equity shares were allotted as consideration for land and building
Cost of building –Rs.28,00,000
Cost of Plant and Machinery-Rs.49,00,000
Cost of Furniture and Fixtures-Rs.4,37,500
iv.
v.
Trade receivables for Rs.3,80,000 are due for more than 6 months
The amount of balances with bank includes Rs.18,000 with a bank which is not a scheduled
bank and the deposits of Rs.5,00,000 are for a period of 9 months
Unsecured loan includes Rs.2,00,000 from a bank and Rs.1,00,000 from related parties
vi.
You are required to give previous year figures and prepare the Balance Sheet as per Schedule III.
4.
Sumedha Ltd took a loan from bank for Rs.10,00,000 to be settled within 5 years in 10 half yearly
instalments with interest.First instalment is due on 30.09.2013 of Rs.1,00,000.Determine how the loan
will be classified in the preparation of Financial Statements of Sumedha Ltd. for the year ended 31 st
March 2013 according to Schedule III of the Companies Act, 2013.
BONUS ISSUE
1.
Following is the balance sheet of Happy Ltd as on Mar 31,2011
Balance sheet as on 31-3-2011
Liabilities
Rs
Authorised Share Capital:
2,00,000 Equity shares of Rs 10 20,00,000
each
Issued and subscribed share
14,00,000
capital
2,00,000 Equity shares of Rs 10
each, Rs 7 paid up
Reserves and Surplus:
Capital reserve (profit on sale of
1,30,000
Assets)
Securities Premium
90,000
(includes Rs 20000 received
otherwise than in cash)
General reserve
2,40,000
P/L A/c
5,20,000
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Assets
Fixed Assets
Investments
Current Assets
Rs
20,00,000
4,40,000
5,60,000
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IPC-CRASH COURSE
GROUP-I ACCOUNTING
Secured Loans:
12% Fully convertible debentures
@ Rs 100 each
Current liabilities
4,00,000
2,20,000
30,00,000
30,00,000
On Apr 01,2011 company has made final call @Rs 3 on 2,00,000 equity shares and received
complete call money by Apr 30,2011.The company wants to issue bonus shares to its shareholders @
1 share for every 4 shares held.
12 percent debentures are convertible in to equity shares of Rs 10 each fully paid on June 01,2011
.Necessary resolutions were passed and requisite legal requirements were complied with. For issue of
bonus shares it was decided that reserves and surplus, other than P&L a/c should be first capitalised.
Required: Prepare Balance Sheet as on May 15,2011 , date on which all the formalities related to the
issue of bonus shares completed. For the purpose of preparation of Balance Sheet assume that,
Balance Sheet items as on Mar 31,2011 which are not affected by issue of bonus shares as above,
remains unchanged as on May 15,2011. Also pass necessary journal entries in the books of the
company related issue of bonus shares, for the period from Apr 01,2011 to May 15,2011.
2. The paid up capital of Sunshine Ltd. is Rs. 10,00,000 consisting of 60,000 equity shares of
Rs.10 each fully paid up and 50,000 equity shares of Rs.10 each , Rs. 8 paid up .
It has Rs.40,000 in Securities Premium account ,Rs. 2,00,000 in Profit and Loss account (Cr.)
Rs. 3,00,000 in General Reserve and Rs. 60,000 in Capital Redemption Reserve account.
By way of bonus dividend the partly paid shares are converted into fully paid up shares and
the holders of fully paid shares are also allotted fully paid –up bonus shares in the same ratio.
Pass journal entries showing separately the two types of bonus issues stated above. It is
desired that there would be minimum reduction in free reserves.
DIVIDEND
1. Due to inadequacy of profits during the year ended 31st March,2015, XYZ Limited proposes
to declare 10% dividend out of general reserves. From the following particulars, ascertain the
amount that can be utilized from general reserves, according to the Companies(Declaration of
dividend out of Reserves) Rules, 2014:
Particulars
Rs.
17,500 9% Preference shares of Rs.100
17,50,000
each, fully paid
8,00,000 equity shares of Rs.10 each, fully
80,00,000
paid
General Reserves as on 1.4.2014
25,00,000
Capital Reserves as on 1.04.2014
3,00,000
Revaluation Reserves as on 1.04.2014
3,50,000
Net profit for the year ended 31st March
3,00,000
2015
Average rate of dividend during last 3 years has been 12%
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IPC-CRASH COURSE
GROUP-I ACCOUNTING
MANAGERIAL REMUNERATION
1. The following extract of Balance Sheet of X Ltd was obtained:
Balance Sheet (Extract) as on 31st March, 2015
Liabilities
Authorised Capital:
20,000, 14% preference shares of Rs.100
2,00,000 equity shares of Rs.100 each
Issued and Subscribed Capital:
15,000, 14% preference shares of Rs.100
each fully paid
1,20,000 equity shares of Rs.100 each,
Rs.80 paid up
Share Suspense a/c
Reserves and Surplus
Capital Reserves (Rs.1,50,000 is
revaluation reserve)
Securities Premium
Secured Loans
15% Debentures
Unsecured Loans:
Public Deposits
Cash credit loan from SBI (Short term)
Current Liabilities
Trade Payables
Assets:
Investment in shares, debentures etc.
Profit and Loss account
Rs.
20,00,000
200,00,000
2,20,00,000
15,00,000
96,00,000
20,00,000
1,95,000
50,000
65,00,000
3,70,000
4,65,000
3,45,000
75,00,000
15,25,000
Share suspense account represents application money received on shares, the allotment of
which is not yet made.
You are required to compute effective capital as per provisions of Schedule V. Would
your answer differ if X Ltd is an investment company?
2. The following is the Profit and Loss a/c of Mudra Ltd:
Particulars
Rs.
To Salaries and wages 1,92,000
To Bonus for 20135000
2014
To interest on
debentures
To interest on
unsecured loan
To repairs to
-Movable property
-immovable property
12,000
6000
1000
2000
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Particulars
By Gross profit
By premium on issue
of shares and
debentures
By profit on sale of
forfeited shares
By Profit on sale of
building (Cost-Rs.2
lakhs, W.D.V Rs.1.3
lakhs)
By bounties and
subsidies received
from Govt.
Rs.
10,15,200
50,000
5000
90,000
60,000
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IPC-CRASH COURSE
GROUP-I ACCOUNTING
To contributions
To Depreciation
To Compensation for
breach of contract
To insurance
premium against the
risk or meeting
liability on a/c of
compensation for
breach of contract
To loss on sale of
investments
To loss on sale of
machinery (Cost
Rs.2,00,000 Sale
proceeds Rs.1,10,000
W.D.V Rs.1,30,000)
To Expenditure on
Scientific Research
To Provision for
income tax
To Provision for
doubtful debt
To Directors’ fees
To Ex-gratia
payments to
employees
To Balance c/d
To proposed dividend
To Corporate
dividend tax
To bal c/d
25000
82,000
1000
5000
5000
20,000
20,000
1,60,000
7,500
5000
2,200
6,69,500
12,20,200
1,60,000
By profit for the year
2014-2015
12,20,200
6,69,500
16,000
4,93,500
Estimated liability on account of bonus in respect of 2014-2015 in accordance with the
payment of Bonus Act is Rs.10,000
Depreciation on fixed assets as per Schedule II of the Companies Act, 2013 was 67,000.You
are required to calculate the maximum limits of the managerial remuneration as per
Companies Act, 2013.
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IPC-CRASH COURSE
GROUP-I ACCOUNTING
CASH FLOW STATEMENTS
1. The Balance Sheets of Z Ltd. as on 31st March, 2012 and 2013 are given below:
Liabilities
31.03.2012
Rs.
Share Capital
3,00,000
Capital Reserve
__
General Reserve
1,70,000
Profit and Loss A/c
60,000
10% Debentures
2,00,000
Current Liabilities
1,20,000
31.03.2013 Assets
31.03.2013
Rs.
Rs.
8,00,000
9,50,000
(2,30,000)
(2,90,000)
1,00,000
80,000
80,000
30,000
2,00,000
3,00,000
20,000
10,000
9,70,000
10,80,000
Rs.
4,00,000 Fixed Assets:
10,000 Less:
Depreciation
2,00,000
Trade Investment
75,000
(in shares)
1,40,000
Cash & Bank
1,30,000 Bal.
Provision for
Income Tax
90,000
85,000
Proposed Dividend
30,000
36,000 Preliminary Exp.
Unpaid Dividend
31.03.2012
__
4,000
9,70,000
10,80,000
Other Current
Assets
During the year 2012 – 2013, the Company
(i)
Sold one machine for Rs.25,000 the cost of which was Rs.50,000 and the depreciation
provided on it was Rs.21,000.
(ii)
Provided Rs.95,000 as depreciation.
(iii)
Redeemed 30% of the Debentures at Rs 103 as at 31.3.2013.
(iv)
Sold some Trade Investments at a profit which was credited to Capital Reserve.
(v)
Decided to value stock at cost where as previously the practice was to value stock at cost
less 10%. The stock according to books on 31.3.2012 was Rs.54,000. The stock on
31.3.2013 was correctly valued at Cost Rs.75,000.
(vi)
Decided to write off Fixed Assets costing Rs. 14,000 (depreciated).
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IPC-CRASH COURSE
GROUP-I ACCOUNTING
2. From the following balance sheet and information, prepare Cash Flow Statement of Ryan Ltd.
for the year ended 31st March,2013
Balance Sheets
Liabilities
Equity Share
Capital
10%
Redeemable
Preference
31.03.2013
6,00,000
31.03.2012
5,00,000
Assets
Land and
building
Plant and
machinery
31.03.2013
1,50,000
31.03.2012
2,00,000
-
2,00,000
7,65,000
5,00,000
Capital
Redemption
Reserve
Capital
Reserve
General
Reserve
Profit and loss
a/c
9%
Debentures
Sundry
creditors
Bills payable
1,00,000
-
Investments
50,000
80,000
1,00,000
-
Inventory
95,000
90,000
1,00,000
2,50,000
65,000
70,000
70,000
50,000
1,75,000
1,30,000
2,00,000
----
Bills
receivable
Sundry
debtors
Cash and bank
65,000
90,000
95,000
80,000
10,000
25,000
20,000
30,000
Preliminary
expenses
Voluntary
separation
payments
1,25,000
65,000
Liabilities for
expenses
Provision for
taxation
Proposed
dividend
30,000
20,000
95,000
60,000
90,000
60,000
15,00,000
12,50,000
15,00,000
12,50,000
a. A piece of land has been sold out for Rs.1,50,000 (Cost :Rs.1,20,000) and the balance land
was revalued. Capital Reserve consisted of profit on sale and profit on revaluation
b. On 1st April 2012 a plant was sold for Rs.90,000 (Original Cost Rs.70,000 and W.D.V
Rs.50,000) and debentures worth Rs.1,00,000 was issued at par as part consideration for plant
of Rs. 4.5 lakhs acquired.
c. Part of the investments (Cost Rs.50,000) was sold for Rs.70,000
d. Pre-acquisition dividend received Rs.5000 was adjusted against cost of investment.
e. Directors have proposed 15% dividend for the current year
f.
Voluntary separation cost of Rs.50,000 was adjusted against general reserve.
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IPC-CRASH COURSE
GROUP-I ACCOUNTING
g. Income tax liability for the current year was estimated at Rs.1,35,000
h. Depreciation at 15% has been written off from Plant account but no depreciation has been
charged on Land and Building a/c
3. Given below is the Statement of Profit and Loss of ABC Ltd. and the relevant Balance Sheet
information:
Statement Of Profit and Loss of ABC Ltd for the year ended 31st December, 2013
Particulars
Revenue
Sales
Interest and dividend
Stock adjustment
Total (A)
Expenditure:
Purchases
Wages and salaries
Other expenses
Interest
Depreciation
Total (B)
Profit before tax(A-B)
Tax Provision
Profit after tax
Balance of Profit and Loss account brought
forward
Profit available for distribution
Appropriations:
Transfer to general reserve
Proposed dividend
Dividend Distribution Tax
Total
Balance
Relevant Balance Sheet Information:
Rs.in lakhs
4150
100
20
4270
2400
800
200
60
100
3560
710
200
510
50
560
200
300
30
530
30
Particulars
31.12.2013
31.12.2012
Trade receivables
400
250
Inventories
200
180
Trade payables
250
230
Outstanding Wages
50
40
Outstanding expenses
20
10
Advance Tax
195
180
Tax Provision-Assessed tax
200
180
liability
Compute cash flow from operating activities using direct method and indirect method
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IPC-CRASH COURSE
GROUP-I ACCOUNTING
4. The Summarised Balance Sheets of XYZ Ltd. As at 31.3.2010 and 31.3.2011 are given below
Liabilities
31.03.2010
31.03.2011 Assets
31.03.2010
31.03.2011
Rs.
Rs.
7,00,000
8,20,000
3,20,000
4,00,000
-
30,000
9,10,000
11,41,000
1,00,000 Short term
investments
1,20,000
( less than 2
months)
1,75,000
50,000
84,000
9,00,000 Cash at bank
1,00,000
80,000
40,000
20,000
21,20,000
23,75,000
Rs
Preference share
capital
Equity Share
Capital
Securities
Premium
Capital
Redemption
Reserve
4,00,000
2,00,000 Plant and
machinery
4,00,000
6,60,000
Long term
investment
Goodwill
40,000
NIL
General Reserve
2,00,000
P&L account
1,30,000
Current
Liabilities
Rs.
6,40,000
30,000 Current
Assets
Preliminary
expenses
Proposed
dividend
1,60,000
2,10,000
Provision for tax
1,50,000
1,80,000
21,20,000
23,75,000
Additional information:
During the year 2011 the company:
i.
Preference share capital was redeemed at a premium of 10% partly out of proceeds issue of
10,000 equity shares of Rs.10, each issued at 10% premium and partly out of profits
otherwise available for dividends.
ii.
The company purchased plant and machinery for Rs. 95,000.It also acquired another company
stock Rs. 25,000 and plant and machinery Rs. 1,05,000 and paid Rs. 1,60,000 in equity share
capital for the acquisition.
iii.
Foreign exchange loss of Rs. 1600 represents loss in value of short term investment.
iv.
The company paid tax of Rs.1,40,000
Prepare Cash flow statement.
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IPC-CRASH COURSE
GROUP-I ACCOUNTING
AMALGAMATION OF COMPANIES
1. Let us consider the draft balance sheet of X Ltd as on 31st March,2011
Liabilities
Share Capital
Equity shares of Rs.10
each
14% Preference shares
of Rs.100 each
General reserve
12% Debentures
Trade payables and
other current liabilities
Rs(‘000)
Assets
Rs(‘000)
7500
Land and Buildings
5000
2500
Plant and machinery
4500
1250
4000
2000
Furniture
Investments
Inventory
1050
500
2300
Trade receivables
Cash and bank
balance
2400
1500
17,250
17,250
Other information:
i.
Y Ltd takes over X Ltd on 10th April, 2011
ii.
Debentureholders of X Ltd are discharged by Y Ltd at 10% premium by issuing 15%
own debentures of Y Ltd.
iii.
14% Preference shareholders of X Ltd are discharged at a premium of 20% by issuing
necessary number of 15% preference shares of Y Ltd.(Face value Rs. 100 each)
iv.
Intrinsic Value per share of X Ltd is Rs.20 and that of Y Ltd Rs.30.Y Ltd will issue
equity shares to satisfy the equity shareholders of X Ltd. on the basis of intrinsic
value.
Compute the purchase consideration
2. P Ltd. acquires the business of V Ltd. whose Balance Sheet as at 31st March 2012 was as
under:
Liabilities
6% Preference Share Capital (Rs
100)
Equity Share Capital (Rs 100)
Statutory Reserves
Profit & Loss A/c
6% Debentures
Interest outstanding on above
Workmen’s compensation Reserve
(Expected liability Rs 5,000)
Trade Creditors
Bills Payable
Rs Assets
4,00,000 Goodwill
8,00,000 Tangible Fixed Assets
78,400 Stock
71,600 Book Debts
2,00,000 Bills Receivable
12,000 Cash at Bank
Underwriting Commission
Rs
2,00,000
10,50,000
1,50,000
1,55,000
25,000
70,000
40,000
8,000
1,00,000
20,000
16,90,000
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16,90,000
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IPC-CRASH COURSE
GROUP-I ACCOUNTING
Prior to acquisition, V Ltd decided to declare and pay an equity dividend of 4% and preferences
dividend.
P Ltd. was to take over all assets (except cash) and liabilities (except for interest due on debentures)
and to pay the following amounts.
(i)
Rs 2,00,000 7% Debentures (Rs 100 each) in P Ltd. for the existing debentures in V Ltd.;
for the purpose, each debenture of P Ltd. is to be treated as worth Rs 105.
(ii)
For each preference share in V Ltd. Rs 10 in cash and one 9% preference share of Rs 100
each in P Ltd.
(iii)
For Each equity share in V Ltd. Rs 20 in cash and one equity share in P Ltd. of Rs 100 each
at Rs 140.
(iv)
Expenses of liquidation of V Ltd. are to be reimbursed by P Ltd. to the extent of Rs 10,000.
Actual expenses amounted to Rs 12,500.
P Ltd. valued Tangible Fixed Assets at Rs 12,20,000.
V Ltd. owed P Ltd. Rs 60,000 for the purchases of stock from P Ltd. which made a profit of 20% on
cost. Four fifth of such stock were sold till 31.3.2011. All Bills Receivables of V Ltd. were drawn
upon P Ltd. the bills amounting to Rs 10,000 have already been discounted with the Bank.
Required: Prepare Journal of V Ltd. and P Ltd. Also show Realization Account, Cash at Bank
Account and Equity shareholders’ Account (Assume Corporate Dividend Tax @ 10%)
3. Consider the following summarized balance sheets of X Ltd and Y Ltd.
Balance sheet as on 31st March, 2012
Liabilities
Equity share
capital (Rs.10
each)
14%
Preference
share
capital(Rs.100
each)
General
Reserve
Export profit
reserve
Investment
allowance
reserve
Profit and
Loss
13%
Debentures(Rs
.100 each)
Trade
creditors
Other current
liabilities
(Rs. In 000’s)
Y Ltd
1550
X Ltd
5000
Y Ltd
3000
Assets
Land and
building
X Ltd
2500
2200
1700
Plant and
Machinery
3250
1700
500
250
575
350
300
200
Furniture and
Fittings
Investments
700
500
100
Inventory
1250
950
750
500
900
1030
500
350
Trade
receivables
Cash and
bank
725
520
450
350
200
150
9900
6600
9900
6600
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IPC-CRASH COURSE
GROUP-I ACCOUNTING
X Ltd takes over Y Ltd. on 1st April 2012.X Ltd discharges the purchase consideration as
below:
i.
Issued 3,50,000 equity shares of Rs.10 each at par to the equity shareholders of Y
Ltd.
ii.
Issued 15% preference shares of Rs.100 each to discharge the preference shareholders
of Y Ltd at 10% premium
The debentures of Y Ltd will be converted into equivalent number of debentures of X Ltd.
The statutory reserves are required to be maintained for 2 more years.
Show the balance sheet of X Ltd after amalgamation on the assumption that:
a. The amalgamation is in the nature of purchase
b. The amalgamation is in the nature of merger.
4. The following is the summarised Balance Sheets of A Ltd and B Ltd as on 31.3.2012
(Rs. In thousands)
Particulars
A Ltd
B Ltd
Liabilities
Share Capital
Equity shares of Rs.100 each
2000
1000
fully paid
Reserves
800
---10% Debentures
500
---Loan from banks
250
450
Bank Overdraft
---50
Trade payables
300
300
Proposed dividend
200
---Total
4050
1800
Assets
Tangible assets/fixed assets
2700
850
Investments
700
---Trade receivables
400
150
Cash at bank
250
--Accumulated losses
--800
Total
4050
1800
B Ltd has acquired the business of A Ltd.The following scheme of merger was approved.
1. Banks agreed to waive off the loan of Rs.60,000 of B Ltd.
2. B Ltd will reduce its shares to Rs.10 per share and then consolidate 10 such shares into
one share of Rs.100 each(new share)
3. Shareholders of A Ltd .will be given one share (new) of B Ltd.in exchange of every share
in A Ltd.
4. Proposed dividend of A Ltd will be paid after merger to shareholders of A Ltd.
5. Trade payables of B Ltd includes Rs.100 thousands payable to A Ltd.
Pass necessary entries in the books of B Ltd. and prepare balance sheet after merger.
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GROUP-I ACCOUNTING
5. The following is the summarised Balance Sheet of A Ltd as at 31st March 2012:
Liabilities
8000 equity shares of
Rs.100 each
10% debentures
Loan from A Ltd
Trade payables
General Reserve
Rs.
8,00,000
Assets
Building
Rs.
3,40,000
4,00,000
1,60,000
3,20,000
80,000
Machinery
Inventory
Trade receivables
Bank
Goodwill
Share issue expenses
6,40,000
2,20,000
2,60,000
1,36,000
1,30,000
34,000
17,60,000
17,60,000
B Ltd agreed to absorb A Ltd on the following terms and conditions:
a. B Ltd would take over all assets, except bank balance at their book values less 10%.
Goodwill is to be valued at 4 year’s purchase of super profits, assuming that the
normal rate of return be 8% on combined amount of share capital and general reserve.
b. B Ltd is to take over trade payables at book value.
c. The purchase consideration is to be paid in cash to the extent of Rs.6,00,000 and the
balance in fully paid equity shares of Rs.100 each at Rs.125 per share.
The average profits is Rs.124,400.The liquidation expenses amounted to Rs.16,000.B
Ltd sold prior to 31st March, 2012 goods costing Rs.1,20,000 to A Ltd for
Rs.1,60,000.Rs.1,00,000 worth of goods are still in inventory of A Ltd on 31st March
2012.Trade payables of A Ltd include Rs.40,000 still due to B Ltd.
Show the necessary ledger accounts to close the books of A Ltd. and prepare the
balance sheet of B Ltd as at 1st April 2012 after the takeover.
6. Given below is the balance sheet of X ltd. as at 31st March 2012 at which date the Company
was taken over by T Ltd.
Liabilities
Rs
Assets
Rs
12% Pref. Shares of Rs 100 each
1,00,000
Land & Building
2,00,000
Equity SHARES OF Rs 10 each
2,00,000
Plant & Machinery
1,00,000
Stock
2,00,000
Reserves & Surplus
50,000
12% Debentures
1,00,000
Debtors
50,000
Current Liabilities
1,50,000
Cash & Bank Balance
43,600
Preliminary Expenses
6,400
6,00,000
6,00,000
Terms of Absorption:
a) X Ltd. is to declare and pay dividend @ 12% on shares prior to absorption.
b) The value of Land & Building to be increase by Rs 50,000, Stock to be increased to Rs
2,20,000 and Debtors at their book value subject to an allowance of 5% to cover doubtful
debts, Goodwill to be valued at Rs 7,500.
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c) Expenses of liquidation of X Ltd. are to be reimbursed by T Ltd. to the extent of Rs 4,000.
The actual expenses amounted to Rs 5,000.
d) Tulsian Ltd. is to issue such an amount of fully paid 15% Debentures at 96 per cent as is
sufficient discharge 12% debentures in X Ltd. at a premium of 8%.
e) 12% Preference Shareholders of X Ltd. to be discharged at 10% premium by issuing 15%
preference shares (Rs 100 each) of the transferee company at 12% discount to be extent of
80% and balance in cash.
[Assume Corporate Dividend Tax @ 10%]
Required: Calculate the Purchase consideration if:
Equity Shareholders to be allotted 4 Equity Shares of Rs 10 each., Rs 8 paid up at a premium of Rs 3
per share for every 5 shares held in X Ltd. In addition necessary cash to be paid to be Equity
Shareholders as is required to adjust the rights of equity shareholders of X Ltd. in accordance with the
intrinsic value of the shares of X Ltd.
INTERNAL RECONSTRUCTION
1. The Shareholders of Sunrise Ltd decided on a corporate restricting exercise necessitated
due to economic recession and a slump in business. From the audited prepare:
(i) Balance Sheet after the completion of the restricting exercise.
(ii) The Capital Reduction Amount,
(iii) The Cash Account of the entity.
Balance Sheet of Sunrise Ltd as on 31-03-2010
Liabilities
Rs
Share Capital
Assets
Fixed Assets
30,000 Equity Shares (Rs 10
each)
3,00,000 Trade Marks and Patents
40,000 8% Cumulative
Preference Shares (Rs 10
each)
4,00,000
Goodwill at cost
Reserves and Surplus
Securities Premium Account
Profit & Loss Account
10,000
(1,38,400)
Freehold Premises
2,44,000
Plant and Equipment
3,20,000
Investment (Market to Market)
Raw materials and packing
Creditors
Deferred Vat Payable
Temporary Bank Overdraft
Materials
60,000
Finish goods
16,000
1,20,000
64,000
Current Assets
9% Debentures (Rs 100)
1,20,000
Current Liabilities
36,100
1,20,000
Inventories:
1,25,400
1,10,000
Freehold Land
Secured Borrowings:
Accrued Interest
5,400
Rs
Trade receivable
76,000
1,20,000
50,000
2,23,100
10,90,100
10,90,100
Note: Preference Dividends are in arrears for 4 years.
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IPC-CRASH COURSE
GROUP-I ACCOUNTING
The scheme of reconstruction that received the permission of the Court was on the following lines:
(1) The Authorized capital of the Company to be re-fixed at Rs 10 Lakhs (preference Capital Rs 3
Lakhs and Equity Capital Rs 7 Lakhs both Rs 10/- per share each).
(2) The Preference shares are to be reduced to Rs 5 each and equity share reduced by Rs 3 per
share. Post reduction, both classes of shares to be consolidated into Rs 10 shares.
(3) Trade Investments are to be liquidated in the open market
(4) One fresh equity share of Rs 10 to be issued for every Rs 40 of preference dividends in arrears
(ignore taxation).
(5) The Securities premium is to be fully utilized to meet the reconstruction programme.
(6) The debenture holder took over freehold land at Rs 2,10,000 and settled the balance after
adjusting their dues.
(7) Unprovided contingent Liabilities were settled at Rs 54,000 and a pending insurance claim
receivable settled at Rs 12,500 on conditions that claim will be immediately settled.
(8) The Intangible assets were all the written off along with Rs 10,000 worth obsolete packing
material and 10% of the Receivables.
(9) Remaining cash available as a result of the above transactions is to be utilized to pay off the
bank overdraft to that extent.
(10) The equity shareholder agree that they who bring in cash to liquidate the balance outstanding
on the overdraft account and also agree the sufficient funds will be brought in to bring up the
net working capital, after completing the re-structuring exercise, to Rs 2 lakhs. The Equity
Shares will be issued at par for this purpose.
2. Green Limited had decided to reconstruct the Balance Sheet since it has accumulated huge
losses. The following is the Balance Sheet of the Company on 31.3.2012 before
reconstruction:
Balance Sheet of Green Limited as at 31.3.2012
Liabilities
Rs
Goodwill
20,00,000
75,00,000 Building
10,00,000
Plant
Subscribed 50,000 Equity Shares
of Rs. 50 each
25,00,000 Computers
1,00,000 Equity Shares of Rs. 50
each, Rs. 40 per share paid up
Investments
40,00,000 Current Assets
Secured Loans:
12% First Debentures
12% Second Debentures
Current Liabilities:
Sundry Creditors
Rs
Fixed Assets:
Share Capital:
Authorized:
1,50,000 Equity Shares of Rs. 50
each
Assets
5,00,000
Profit and Loss A/c (Loss)
10,00,000
25,00,000
Nil
Nil
20,00,000
10,00,000
5,00,000
85,00,000
WINNERS NEVER QUIT AND QUITTERS NEVER WIN
85,00,000
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GROUP-I ACCOUNTING
The Following is the interest of Mr. X and Mr. Y in Green Limited:
Mr. X
Rs
Mr. Y
Rs
12% First Debentures
3,00,000
2,00,000
12% Second Debentures
7,00,000
3,00,000
Sundry Creditors
2,00,000
1,00,000
12,00,000
6,00,000
Fully paid up Rs. 50 shares
3,00,000
2,00,000
Parly paid shares (Rs. 40 paid up)
5,00,000
5,00,000
The following Scheme of Reconstruction is approved by all parties interested and also by the Court:
(a) Uncalled capital is to be called up in full and such shares and the other fully paid up shares be
converted into equity shares of Rs. 20 each.
(b) Mr. X is to cancel Rs. 7,00,000 of his total debt (other than share amount) and to pay Rs. 2
lakhs to the company and to receive new 14% First Debentures for the balance amount.
(c) Mr. Y is to cancel Rs. 3,00,000 of his total debt (other than equity shares) and to accept new
14% First Debentures for the balance.
(d) The amount thus rendered available by the scheme shall be utilized in writing off of
Goodwill, Profit and Loss A/c Loss and the balance to write off the value of computers.
Required: Pass the Journal Entries and prepare the Balance Sheet of the reconstructed company.
3. The following is the balance sheet of CSJHB Ltd. as at 31st March, 2012:
Liabilities
Rs
Assets
Share Capital:
Fixed Assets:
Authorized:
Pune Property
30,000 Equity Shares of Rs 10
each
3,00,000 Bombay Property
30,000 13% Pref. Shares of Rs 10
each
3,00,000
Plant and Machinery
Rs
1,60,000
1,20,000
1,50,000
Investments:
6,00,000 10% Government loan earmarked
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GROUP-I ACCOUNTING
against Workmen’s
compensation Fund
Subscribed, Issued and Paid-up:
20,000 Equity Shares of Rs 10
each fully paid
18,000 13% Pref. Shares of Rs 10
fully paid
30,000
2,00,000 Miscellaneous expenditure and
losses:
1,80,000 Profit and Loss Account
40,000
Reserves & Surplus:
Workmen’s compensation fund:
Pune
20,000
Bombay
10,000
30,000
Secured loans:
12% ‘A’ Debentures secured
On Pune Property
30,000
12% ‘B’ Debentures secured
on Bombay Property
35,000
65,000
Current Liabilities &
Provisions:
(A)
Current Liabilities:
Sundry Creditors
(B)
Provisions:
25,000
5,00,000
5,00,000
The following scheme of reconstruction was duly approved:
(a) Equity shares were to be reduced to Re. 1 each.
(b) Preference shares were to be reduced by Rs 2 per share.
(c) Debenture holders were to forgo their unpaid interest Rs 5,200 which is included in sundry
creditors.
(d) ‘B’ Debenture holders agreed to take over the Bombay property at Rs 50,000 and paid the
balance amount due from them in cash.
(e) Workmen’s compensation fund (Bombay) disclosed the fact that actually there was a liability
of Rs 2,000 only. As a result the relevant fund amount balance was to be brought down to the
required amount. Investments were realized at 10% above the book value.
(f) The Plant and Machinery were to be written down by Rs 90,000.
(g) Any balance remaining was to be applied as to 75% in writing down Pune property and 25%
transferred to capital reserve.
Required: Pass the necessary journal entries and prepare the Balance Sheet after reconstruction.
WINNERS NEVER QUIT AND QUITTERS NEVER WIN
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IPC-CRASH COURSE
GROUP-I ACCOUNTING
NOT FOR PROFIT ORGANISATION
1. Following is the Receipts and Payments accounts for the year ended 31st March 2011
Receipts
To Balance as per pass
book
To Cash overspent
Rs
8230
Payments
Rs
By honorarium of
4800
secretary
20
By printing and
470
stationery
By balance as per pass
3480
book
Unpresentedcheques being payment on printing on 01.04.2010 Rs. 90 and on 31.03.2011 Rs.30
Cash overspent represents amount of honorarium to the treasurer not drawn due to shortage of fund.
But the total salary payable to him for the year was already included in Rs.4800.
Required:
How will you show the above items in final accounts of a club for the year ended 31st March,2011
2. How will you deal with the following items in the final accounts of a club for the year ended
31st March 2011
a) Entrance donation received during 2010-2011 Rs.1,00,000
b) Entrance donation received pending membership Rs.1,00,000 as on 1.04.2010
c) A sum of Rs.20,000 received in October 2010 as entrance donation from an applicant was to be
refunded as he had not fulfilled the requisite membership qualifications.The refund was made on
03.06.2011
d) 50% of entrance donation was to be capitalized.There was no pending membership as on
31.03.2011
3. Prizes awarded Rs.2,00,000.Prize fund as at 31.03.2010 Rs.12,00,000.Donations for prizes
received during the year 2010-2011 Rs.2,80,000, 10% Prize fund investments as at
31.03.2010 Rs. 12,00,000.Interest received on prize fund investments Rs.60,000.Capital fund
as at 31.03.2010 Rs.90,00,000.How will you disclose these items in balance sheet as at
31.03.2011
4.
Expenditure on building Rs.2,00,000, building fund as at 31.03.2010 Rs.12,00,000.Donations
for building received during the year 2010-2011 Rs.2,80,000, 10% building fund investments
as at 31.03.2010 Rs.12,00,000.Interest received on building fund investments
Rs.60,000.Capital fund as at 31.03.2010 Rs.90,00,000.How will you disclose these items in
the balance sheet as at 31.03.2011.
5. How will you deal with the following items while preparing the Income and Expenditure a/c
for the year ending on 31st March, 2011 and balance sheet as on that date
Particulars
As at 1.04.2010
As at 31.03.2011
Amount due to Suppliers of
15000
9750
Sports material
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IPC-CRASH COURSE
GROUP-I ACCOUNTING
Advances to suppliers of
sports material
Stock of sports material
5000
3750
15,000
2000
During 2010-2011 the payment made to suppliers of sports materials was Rs.44,000.Cash
purchases amounted to 20% of total purchases.
6. How will you treat the following items in the final accounts of a club?
a.
b.
c.
d.
Payment for new car(less sale proceeds of old car Rs.6000 as on 1.4.2010) Rs.25,200
Car (as on 1.4.2010) Rs.24,380
Depreciation on car(as on 1.04.2010) Rs.20,580
Rate of depreciation on car at 15% p.a for whole year
7. The following particulars relate to Hanuman Sports Club:
Income & Expenditure Account for the year ending on 31st Dec., 20X2
Expenditure
Rs Income
Rs
To Secretary’s Salary
1,500 By Entrance Fees
10,500
To Printing & Stationery
2,200 By Subscriptions
15,600
To Advertising
1,600 By rent
To Audit Fees
To Fire Insurance
500 By Interest on Investments
2,800
1,200
1,000
To Depreciation:
-Sports Equipments
9,000
-Furniture
500
To Surplus
13,800
30,100
30,100
Receipts & Payments Account
Dr.
Receipts
for the year ending on 31st Dec., 20X2
Rs Payments
Rs
To Balance b/d
4,200 By Secretary’s Salary
1,000
To Entrance Fee 20X1
1,000 By Printing & Stationery
2,600
To Entrance Fee 20X2
10,000 By Advertising
To subscriptions 20X1
600 By Fire Insurance
To Subscription 20X2
15,000 By 12% Investments
To Subscription 20X3
To Rent received
400
(purchased on 1.7.20X2)
2,400 By Furniture
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1,600
1,200
20,000
2,000
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IPC-CRASH COURSE
GROUP-I ACCOUNTING
To Interest received
600 By Balance c/d
34,200
5,800
34,200
The assets on 1 January, 20X2 included Club Grounds & Pavilion Rs 44,000, Sports Equipments Rs
25,000 and Furniture and Fixtures Rs 4,000. Subscriptions in arrear on that date were Rs 800.
Subscriptions received in advance on that date were Rs 200. Creditors for Printing & Stationery on
that date were Rs 500.
Requirements: Prepare the Balance sheet as at 1.1.20X2 and 31.12.20X2.
8.
The Lok Kalyan Dispensary had the following:
Income and Expenditure Account
for the year ending on 31st March, 20X2
Expenditure
Salaries
Surgery & Dispensary
Rs Income
23,500 Subscriptions
3,000 Interest
Rent and Taxes
500 Donations
Insurance
200 Miscellaneous Receipts
Office expenses
800
Rs
25,000
9,000
4,000
300
Depreciation:
Building -3750
Furniture -120
Instruments-100
3,970
Surplus
6,330
38,300
WINNERS NEVER QUIT AND QUITTERS NEVER WIN
38,300
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IPC-CRASH COURSE
GROUP-I ACCOUNTING
Information:
31.3.20X1
31.3.20X2
Rs
Rs
?
18,700
1,80,000
1,80,000
7,000
10,000
200
600
Salaries unpaid
1,000
1,500
Furniture
2,000
1,980
1,00,000
96,250
3,500
3,900
Creditors for medicines
200
300
Stock of medicines
300
100
Cash in hand and at bank
4.5% Tax free Government securities (Face value Rs 2,00,000)
Subscription outstanding
Subscription received in advance
Land & Buildings
Instruments
Prepare Receipts and Payments Account for 20X1-20X2 and also the Balance Sheet.
9. Prepare Income and Expenditure Account and Balance Sheet of Tulsian Sports Club, Delhi
from the following Information:
Receipts and Payments Account of Tulsian Sports Club, Delhi
for the year ending on 31st March, 2012
Receipts
To Balance b/d:
Cash
To Subscriptions
To Entrance Fees
To Life Membership Subscription
To General Donations
To Cricket Fees
To Refreshment Room Receipts
To Sale of Old periodicals
Rs ‘000 Payments
Rs ‘000
By Balance b/d (Bank
200 Overdraft)
7,000 By Insurance (paid up to
30.6.2012)
200
By Miscellaneous Expenses
500
By Postage Expenses
2,000
By Refreshment Room
250
Expenditure
3,100 By Furniture (Purchased on
72, 1.10.2011)
3,000
300
3,875
200
2,100
600
600
To Interest on Govt. Securities
(T.D.S. @ 20%)
144 By Honorarium to Cricket
coach
To Donation for Club Pavilion
(on 1.1.2012)
By Sports Equipments (on
1.10.2011)
10,000
By 10% RBI Tax Free Bonds
(on 1.1.2012) (Pavilion)
2,200
10,000
By Balance c/d:
23,466
WINNERS NEVER QUIT AND QUITTERS NEVER WIN
Cash in hand
52
Cash at bank
539
591
23,466
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IPC-CRASH COURSE
GROUP-I ACCOUNTING
Information:
Particulars
1.4.2011 31.3.2012
Rs ‘000 Rs ‘000
Club Pavilion Fund
5,000 ?
Sports Equipments
4,500 ?
Furniture
3,200 ?
Stock of Foodstuff
6% Government Securities (Face Value Rs 30,00,000)
Subscription Outstanding
120 80
2,580 ?
600 250
Subscription in Advance
Outstanding Miscellaneous Expenses
- 300
200 250
Accounting policies followed by Tulsian Sports Club, Delhi are, provide as under:
(a) The sports equipments and furniture are to be depreciated @ 25% and 19% p.a. respectively.
(b) One half of the entrance fees and life membership fee are to be treated as income.
SINGLE ENTRY
1. Opening Bills receivable –nil, Closing Bills receivable-Rs.5000
During the year, of the bills drawn(Rs.1,00,000)
a. Some bills were endorsed in favour of creditors .Out of these endorsed bills, bills for Rs.25,000
were dishonoured.
b. Bills amounting to Rs.25,000 were discounted at a discount of 2% of which a bill for Rs. 12,500
was dishonoured
c. Out of these dishonoured bills, drawees of bills of Rs.18750 became insolvent and paid 50% only
by means of a bank draft.
d. Bills amounting to Rs.10,000 were discharged by drawees before maturity at a rebate of 2% by
means of bank draft
e. Bills amounting to Rs.10,000 were collected at maturity by means of bank draft.
Prepare bills receivable account
2. Calculate cash sales, gross credit sales, cash purchases and gross credit purchases from the
following information:
Stock as on 1st April 2006 was Rs.20,000
Rate of GP-No change
Terms of credit:Debtors-2 months, Creditors-1 month
Cash sales 331/3 % of Net Credit Sales, Sales Returns -1/7th of Gross credit sales
Cash purchases-20% of net credit purchases,Purchases returns 1/7th of gross credit purchases
The sales for the year ended 31st March,2008 were 20% higher than the previous year’s
On 1st April, 2007 the stock level was raised by Rs.48,000 and stock was maintained at his new level
throughout the year.
Trade debtors as on 31.03.2007: Rs.50,000
Trade creditors as on 31.03.2007: Rs.25,000
Stock as at 31.03.2007:Rs. 60,000
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GROUP-I ACCOUNTING
3. From the following information in respect of BHARAT a trader, prepare a Trading, Profit and
Loss Account for the year ended 31st March, 2012 and a Balance Sheet as on that date.
(a)
Liabilities and Assets:
Particulars
31.3.2011
Rs
Stock-in-trade
31.3.2012
Rs
80,000
70,000
1,60,000
1,49,500
-
17,500
1,10,000
1,50,000
Fixed Assets (at written down value)
60,000
63,500
Expenses outstanding
20,000
18,000
Prepaid expenses
6,000
7,000
Cash in hand
2,000
1,500
Bank balance
10,000
4,750
Debtors for Sales
Bills Receivable
Creditors for purchases
b. Receipts and Payments during the year
Rs
Collections from Debtors (after allowing 2.5% discount)
Payments to Creditors (after receiving 2% discount)
?
3,92,000
Proceeds of Bills Receivable, discounted at 2%
61,250
Proprietor’s drawings
70,000
Purchases of Fixed Assets midway through the year
10,000
4% Government Securities purchased (at 96% on 1.10.20X1)
96,000
Expenses
Miscellaneous income
1,75,000
5000
(c) Sales are affected so as to realize a gross profit of 33-1/3% on the sale proceeds.
(d) Goods costing Rs 9,000, were issued as advertisement articles.
(e) During the year, Bills Receivable were drawn on debtors. Of these, Bills amounting to Rs 20,000
were endorsed in favour of creditors. Of this later amount, a bill for Rs 4,000 was dishonored by
the debtor.
(f) Capital introduced during the year by the proprietor by cheques was omitted to be recorded in Cash
Book, though the Bank balance of Rs 4,750 on 31st March, 2012 (as shown above), takes the same
into account.
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4. Indian Travel Agency sells tickets for Inland Transport ltd. Bharat Air Lines and
GOVERNMENT Railways. The rate of commission due to the agency on account of sales of
tickets are 10 per cent, 7.5 per cent, and 5 per cent respectively on the sale price of tickets.
The firm closes its books on 31st December every year. The balances as on 31st Dec., 20X1
were as follows:
Particulars
Dr. (Rs)
Cr. (Rs)
Capital
50,000
Deposits from customers of Inland Transport Ltd.
10,000
Deposits from general public
10,000
Interest due for half year on above
500
Auditors
1,500
Advertising
1,000
Rates and taxes
500
Fixtures and fittings
20,000
Motor car
18,000
Debtors for Rail Tickets
5,000
Debtors for Air Tickets
2,000
Rent paid in Advance
1,250
Bank Balance
27,250
73,500
73,500
Other available particulars are:
(a) From the Bank statements, returned cheques and the paying- in slips for the year ended 31st
Dec., 2012
Particulars
Rs
Particulars
Rs
Payment for tickets –
Electricity
5,000
3,000
Inland Transport ltd.
6,20,000
Rates and Taxes
Bharat Air Lines
1,69,000
Interest paid to public on their
Government Railways
84,000
Rent paid for 4 quarters
5,000
deposits
1,000
Amount paid to Auditors
1,500
Advertising
6,250
Bank Balance as on 31.12.2012
55,500
(b) Weekly expenditure defrayed from cash receipts before banking: Staff Wages Rs 1,100, Petty
Expenses Rs 50
In addition to the above, the owner has drawn Rs 650 per month to meet personal expenses
and spent Rs 350 per month for maintenance of a car in the interest of the agency, out of the
cash receipts before banking:
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IPC-CRASH COURSE
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(c) Liabilities of the firm as on 31st Dec., 2012 include:
Auditors’ Fee
1,500
Inland Transport Ltd.
5,500
Advertising charges
1,250
Bharat Air lines
16,000
Rates and taxes
1,000
Governments Railways
11,000
(d) Customers deposits on 31st Dec., 2012 were for Inland Transport Ltd. Rs 8,000
(e) Debtors for air and rail tickets on 31st Dec., 2012 were Rs 2,500 and 800 respectively.
(f) Depreciation on car and fixtures is allowed at the rate of 20% and 10% of the last year’s
balance respectively.
(g) Owner agrees to treat the cash differences, if any as his drawings.
Required: Draw a Profit and Loss Account showing commission earned for each class of tickets sold
for the year ending 31st Dec., 2012 and a Balance Sheet as at the date.
5. The following is the Balance Sheet of Sri CAMHG as on 31st March, 2011:
Liabilities
Rs
Assets
Rs
Capital Account
96,000 Building
65,000
Loan
30,000 Furniture
10,000
Creditors
62,000 Motor Car
18,000
Stock
40,000
Debtors
34,000
Cash in hand
4,000
Cash at bank
17,000
1,88,000
1,88,000
A riot occurred on the night of 31st March, 2012 in which all books and records were lost. The cashier
had absconded with the available cash. He gives you the following information.
(a) His sales for the year ended 31st March, 2012 were 20% higher than the previous year’s. He
always sells his goods at cost plus 25%; 20% of the total sales for the year ended 31st March,
2012 were for cash. There were no cash purchases.
(b) On 1st April, 2011, the stock level was raised to Rs 60,000 and stock was maintained at this
new level all throughout the year.
(c) Collection from debtors amounted to Rs 2,80,000 of which Rs 70,000 was received in cash.
Business expenses amounted to Rs 40,000 of which Rs 10,000 was outstanding on 31st
March, 2012 and Rs 12,000 was paid by cheques.
(d) Analysis of the Pass Book revealed the Payment to Creditors Rs 2,75,000, Personal Drawings
Rs 15,000, Cash deposited in Bank Rs 1,43,000, Cash withdrawn from Bank Rs 24,000.
(e) Gross profit as per last year’s audited accounts was Rs 60,000.
(f) Provide depreciation on Building and Furniture at 5% and Motor Car at 20%.
(g) The amount defalcated by the cashier may be treated as recoverable from him.
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Required: Prepare the Trading and Profit and Loss Account for the year ended 31st March, 2012 and
the Balance Sheet as on that date.
ACCOUNTING FOR INVESTMENTS
1. On 1st May, 2012 Sumedha purchased 5000, 13.5% convertible debentures in X Ltd of face
value of Rs.100 each at 105 ex-interest. Interest on debentures is payable each year on 31st
March and 30th September. The accounting year is the calendar year. The following other
transactions were entered into during 2012:
Date
August 1st
October 1st
Dec.31st
Particulars
Purchased Rs.2,50,000 debentures at Rs.107
cum interest
Sale of Rs.2,00,000 debentures at Rs.103
Receipt of 10,000 equity shares in X Ltd. of
Rs.10 each on conversion of 20% of the
debentures held.Further it also received
interest on debentures converted in cash at the
time of conversion.
The market price of a debenture and an equity share in X Ltd as on 31st Dec, 2012 was Rs.106
and Rs.15.
Sumedha held the debentures as current assets.You are required to prepare debenture
investment account in the books of Sumedha on Average Cost Basis.
2. On 1st Apr 2009 XY Ltd has 15000 equity shares of ABC Ltd at a value of 15 per share(face
value Rs 10 per share) . On 1st June2009, XY ltd acquired 5000 equity shares of ABC Ltd .Rs
1,00,000 on cum right basis. ABC Ltd announced a bonus and right issue.
a) Bonus was declared , at the rate of 1 equity share for every 5 shares held, on 1stjuly 2009
b) Right shares are to be issued to the existing shareholders on 1stsep 2009. The company
will issue one right share for every 6 shares at 20% premium. No dividend was payable
on these shares.
c) Dividend for the year ended 31.3.2009 were declared by ABC LTD @ 20% which was
received by XY LTD on 31.10 2009
XY Ltd
Took up half the right issue
Sold the remaining rights for Rs 8 per share
Sold half of its share holdings on 1st Jan 2010 at rs 16.5 per share .Brokerage being 1%
You are required to prepare investment account of XY ltd. For the year ended 31 st mar
2010 assuming the shares are being valued at average cost .
3. Mr.M purchased on 1st March, 20X1 Rs 24,000 5% Bharat Debenture Stock @ 90 cuminterest, interest being payable on 31st March and 30th September each year. Stamp and
expenses on purchase amounted to Rs 20 and brokerage @ 2% was charged on cost; interest
for the half-year was received on the due date. On 1st September Rs 10,000 of the stock was
sold @ 92 ex-interest less brokerage @ 2%. On 30th September Rs 8,000 stock was
purchased @ 91 ex-interest plus brokerage @ 2% and charges Rs 10. On 1st December, Rs
6,000 stock was sold @ 94 cum interest less brokerage @ 2%. The market price of stock on
31st December was 88.5%. Show the Investment Account for the year ending on 31st
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December, 2011 assuming FIFO Method. Calculation should be made in the multiple of
rupee. Mr.M holds the Bharat Debenture Stock as a current asset.
INSURANCE CLAIMS
1. From the following information, compute the amount of claim under loss of Stock
Policy:
Sum Insured
Rs 6,000
Accounting Year
Calendar Year
Reason for Damage on 30-6-2012
Due to fire accident
Value of Salvaged Stock
G.P. Ratio
Rs 5,000
Uniform from year to year
Stock as on 1.1.2011
Rs 90,000
Sock as on 31.12.2011
Rs 70,000
Purchases during 2011
Rs 4,00,000
Sales during 2011
Rs 6,00,000
Purchases from 1.1.2012 to 30.6.2012
Rs 6,00,000
Sales from on 1.1.2012 to 30.6.2012
Rs 8,80,000
You are informed that in 2012, the cost of purchases and selling prices have increased by 20% and
10% respectively above the levels prevailing in 2011.
2. Calculate the net claim for the increased cost of working from the following information:
Agreed G.P ratio 20%, net profit for the last accounting year Rs.2,40,000, Standing charges (out of
which Rs.80,000 have not been insured) Rs.5,60,000, actual turnover during claim period
Rs.8,00,000.During the claim period, 50% of the total turnover of this period was maintained by
incurring the additional expenses amounting to Rs.1,50,000 and there was a saving in insured standing
charges of 6.25% and in uninsured standing charges of Rs.10,000.Turnover during 12 months
preceding the date of fire Rs.30,00,000.Agreed increase 20%.
3. A fire occurred in the premises of M/s Fireprone Co. on 30th May 2012. From the following
particulars, relating to the period from 1.1.2012, you are required to ascertain the amount of
claim to be filed with the insurance company for the loss of stock.
Particulars
Amount
(Rs.)
The average rate of GP has been 20% in the past. The selling price has been increased by 20% with
effect from 1.1.2012.
For valuing the stocks for the balance sheet as at 31st Dec.2011, Rs.1000 had been written off in
respect to a slow moving item, the cost of which was Rs.5000.A portion of these goods was sold at a
loss of Rs.500 on the original cost of Rs.2500.The reminder of the stock was now estimated to be
worth the original cost.
Subject to the above exceptions, the gross profit had remained at the uniform rate throughout. The
value of goods salvaged was estimated at Rs.25,000.
The concern had taken an insurance policy for Rs.60,000 which was subject to average clause.
4. Sony Ltd’s Trading and profit and loss account for the year ended 31st December 2011 were
as follows:
Trading and Profit and Loss account for the year ended 31.12.2011
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Particulars
To opening stock
To purchases
To manufacturing
expenses
To gross profit
To administrative
expenses
To selling expenses
To finance charges
To NP
Rs
20,000
6,50,000
1,70,000
2,50,000
10,90,000
80,000
Particulars
By sales
By closing stock
Rs.
10,00,000
90,000
By gross profit
10,90,000
2,50,000
20,000
1,00,000
50,000
2,50,000
2,50,000
The company had taken out a fire policy for Rs.3,00,000 and a loss of profit policy for
Rs.1,00,000 having an indemnity period of 6 months.A fire occurred on 1.04.2012 at the
premises and the entire stock was gutted with nil salvage value. The net quarter sales i.e
1.04.2012 to 30.06.2012 was seriously affected. The following are the other information
Sales during the period
Purchases during the period
Manufacturing expenses
Sales during the period
Standing charges insured
Actual expenses incurred
after fire
1.1.2012 to 31.03.2012
1.1.2012 to 31.03.2012
1.1.2012 to 31.03.2012
1.04.2012 to 30.06.2012
2,50,000
3,00,000
70,000
87,500
50,000
60,000
The general trend of the industry shows an increase of sales by 15% and decrease in GP by
5% due to increased cost.
Ascertain the claim for loss of stock and loss of profit
HIRE PURCHASE
5. A Ltd purchases a plant on hire purchase basis for Rs.1,00,000(cash price Rs.86,000) and
makes the payment in the following order:
Down Payment Rs.20,000
1st instalment after one year Rs.40,000
2nd instalment after two years Rs.20,000
Last instalment after 3 years.
You are required to calculate
i.
Total interest and
ii.
Interest included in each instalment
6. On 1.1.2011 Shaan Ltd purchased a machine on hire purchase basis.The terms of agreement
provided for 40% as cash down payment and the balance in three instalments of Rs. 1,63,000
on 31.12.2012, Rs.1,20,000 on 31.12.2013 and Rs.1,10,000 on 31.12.2014.The rate of interest
charged by vendor is 10% p.a compounded annually.
You are required to calculate the cash price and periodic interest charged hire vendor.
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7. On 1.1.2011 Beeta Ltd. purchased a machine from Yama Ltd on hire purchase basis.The
terms of agreement provided for 40% cash down payment and the balance in three instalment
of Rs.1,30,000 on 31.12.2011, Rs.1,42,000 on 31.12.2013, and Rs.1,10,000 on
31.12.2014.The rate of interest charged by the vendor is 10% p.a compounded annually.You
are required to calculate the cash price when 2nd instalment is payable after two years.
8. Shyam purchased from Rang Ltd a colour T.V set on 1st October, 2011 on hire purchase
system.The cash price of the T.V set was Rs.15,000.Term of payment were Rs.1150 down
payment and half yearly instalments of Rs.4000 each, over two years.The first instalment was
to be paid on 31st March, 2012.Rate of interest was 12% p.a.Shyam could not pay the second
instalment due on 30th September, 2012 as a consequence, Rang Ltd repossessed the T.V set
after fulfilling legal formalities. Prepare Shyam‘s a/c. and Goods repossessed a/c in Rang’s
books.Assume that the estimated value of T.V set at the time of repossession was Rs.12,000
and after an expenditure of Rs.850 on repairs and re-packing, the company re-sold it on 6th
December, 2012 for cash to one of its employees at a special discount of 10% of cash price i.e
for Rs.13,500.Rang closes its books of accounts every year on 31st March.
9. Computer point sells computers on HP basis at cost plus 25%.Terms of sales are Rs.10,000
down payment and eight monthly instalments of Rs.5000 for each computer.Two computers
were repossessed for non-payment of instalments and to be valued at 50% of cost price.
Compute the value of repossessed computers.
AVERAGE DUE DATE AND ACCOUNT CURRENT
1. Ketan had accepted a bills payable to Mitesh, falling due on different dates. The details of
bills are as follows:
Date of bill
Amount
Usance of Bill
10th April 2012
Rs. 4000
For 4 months
18th April 2012
Rs.5000
For 3 months
25th May 2012
Rs.3000
For 6 months
th
5 June 2012
Rs.6000
For 3 months
On 1st July, it was agreed that these bills should be withdrawn and that Ketan should accept on that
day two bills, on for Rs.10,000 due in 4 months and the other for the balance with interest, due in 6
months. Calculate the amount of the second bill taking interest at 10% p.a.Take 365 days in the year
2012-2013 for calculation purposes.
2. A had the following bills receivable and bills payable against B. Calculate average due date
when the payment can be made or received without any loss or gain of interest to either party.
BILLS RECEIVABLE
BILLS PAYABLE
Date of bill
Amount
Tenure in months Date of bill
Amount
Tenure in
months
1.06.2013
18,000
3
29.05.2013
12,000
2
5.06.2013
15,000
3
03.06.2013
18,000
3
9.06.2013
20,000
1
10.06.2013
20,000
2
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12.06.2013
16,000
2
13.06.2013
14,000
2
20.06.2013
24,000
3
27.06.2013
22,000
1
Gazetted holiday intervening in the period are 15th August 2013, 16th August 2013, and
6 September 2013.
th
3. The following are the transactions that took place between Geet and Hari during the period
from 1st October 2013 to 31st March 2014:
Date
Oct 1, 2013
Oct 18,2013
Nov 16,2013
Dec 7th 2013
Jan 3, 2014
Feb 4, 2014
March 21, 2014
March 28, 2014
Particulars
Balance due to Geet by Hari
Goods sold by Geet to Hari
Goods sold by Hari to
Geet(due date November 26)
Goods sold by Hari to
Geet(due date December 17th
)
Promissory note given by
Geet to Hari, at 3 months
Cash paid by Geet to Hari
Goods sold by Geet to Hari
Goods sold by Hari to
Geet(due date April 8)
Amount
6000
5000
8000
7000
10,000
2000
8600
5400
Draw up an account current upto 31st March 2014 to be rendered by Geet to Hari charging
interest at 10% per annum.
SELF BALANCING AND SECTIONAL BALANCING
1. From the following information available from the books of a trader from 1-1-2011 to
31-03-2011, you are required to draw up the debtors ledger adjustment account in the
general ledger.
a. Total sales amounted to Rs.1,80,000 including the sale of old Xerox Machine for
Rs.4,800(Book value Rs.8000).The total cash sales were 80% less than the total credit
sales.
b. Collections from debtors amounted to 70% of the aggregate of the opening debtors
and credit sales for the period. Debtors were allowed a cash discount of Rs.20,000
c. Bills receivable drawn during the three months totalled Rs.30, 000 of which bills
amounting to Rs.10,000 were endorsed in favour of suppliers. Out of the endorsed
bills, one bill for Rs.6000 was dishonoured for non-payment as the party became
insolvent, his estate realized nothing.
d. Cheques received from customers Rs.8000 were dishonoured, a sum of Rs.2000 was
irrecoverable, bad debt written off in the earlier years realised Rs.11,000
e. Sundry debtors as on 1.1.2011 stood at Rs.50,000
2. Prepare the General Ledger Adjustment accounts as will appear in the debtor’s and
creditor’s ledger, from the information given below:
Balance as on 1.04.2011
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Particulars
Dr.
Debtor’s Ledger
47,200
Creditor’s Ledger
280
Transactions for the year ended 31.03.2012
Particulars
Rs.
Total Sales
1,20,100
Cash Sales
8,100
Total Purchases
89,500
Credit purchases
67,000
Creditors paid off(in
full settlement of
Rs.40,000)
Received from
debtors (in full
settlement of
Rs.59,000)
Return from debtors
39,500
Return to creditors
1800
Bills accepted for
creditors
5500
Bills payable
matured
8000
58,200
2600
Balance on 31.03.2012
Debtor’s Ledger (Cr.)
Creditor’s Ledger (Dr.)
Cr.
240
26,300
Particulars
Bills accepted by
customers
Bills receivable
dishonoured
Bills receivable
discounted
Bills receivable
endorsed to creditors
Endorsed bills
dishonoured
Rs.
20,100
Bad-debts written
off(after deducting
bad debts recovered
Rs.300)
Provision for
doubtful debts
Transfer from
debtor’s ledger to
creditor’s ledger
Transfer from
creditor’s ledger to
debtor’s ledger
2,200
1,500
5000
4000
1000
550
1100
1900
Rs.380
Rs.420
3. Pass journal entries in the books of Exe Ltd both under self balancing and sectional
balancing system:
a) The sales book was found undercast by Rs.1000
b) Discount allowed to Rao Rs.50 correctly entered in the cash book but not posted to
his account.
c) Credit balance of Rs.310 in Murthy’s account in the Purchase Ledger was transferred
to his account in the Sales Ledger.
4. M/s Big Systematic Limited maintains self-balancing ledgers preparing control accounts
at the of each month.
On 3rd January 2013 the accountant of the company located the following errors in the
books of account:
i.
An amount of Rs.8700 received from customer Mehra was credited to customer
Mehta another customer.
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ii.
Goods invoiced at Rs.15,600 were returned to supplier M/s Mega Ltd. but no
entry was made in the books for his return made on 28th December, 2012
Pass the necessary journal entries to rectify this error.
PARTNERSHIP ACCOUNTS
1. i) Anil and Mukeshan partners sharing profit and losses in the ratio of 3:2 .Govind is admitted
for 1/4th share of firm. Thereafter Madan enters for 20 paise in a rupee. Compute new profit
sharing ratios under both admission of partners
ii) The following goodwill a/c was opened by the partners R &S , on the admission of H as a
new partner into firm Om and sons .Calculate the share of profit agreed to be given to “H”
Goodwill A/c
Dr
1-4-10 to R’s Capital
1-4-10 to S’s Capital
Cr
1-4-10 by R’s Capital 12,400
1-4-10 by S’s Capital 12,400
1-4-10 to H’s Capital 18,600
43,400
43,400
2. P , Q, and R share profit & losses in the ratio of 4:3:2 respectively .Q retires and P and R
decide to share future profits and losses in the ratio of 5:3 .Then immediately H is admitted
for 3/10 share of profits half of which was gifted by p and the remaining was taken by H
equally from P and R. Calculate the new profit sharing ratio after H’s admission and gaining
ratio of P & R after Q’s retirement.
24,800
18,600
3. A & B are in partnership sharing profit and losses in the ratio of 3;2 .The capitals of A & B
are Rs 80000 and Rs 60000 respectively. They admit C as a partner who contributes Rs 35000
as capital for 1/5th share of profits to be acquired equally from both A &B.The capital
accounts of old partners are to be adjusted on the basis of the proportion of C’s capital to his
share in the business. Calculate the amount of actual cash to be paid off or brought in by the
old partners for the purpose and pass the necessary Journals.
4. X, Y & Z are partners sharing profits and losses in the ratio of 4:3:2 respectively. On Mar
2011 Y retires and X & Z decide to share profits and losses in the ratio of 5:3 .Then
immediately , W is admitted for 3/10th in profits , 2/3rd of which was given by X and rest was
taken by W from Z . Goodwill of the firm is valued at Rs 216000 W brings required amount
of goodwill.
Give necessary Journal entries to adjust goodwill on retirement of Y and admission of W if
they do not want to raise goodwill in the books of accounts.
5. X, Y and Z are in partnership with capital of Rs 1,20,000 (credit), Rs 1,00,000 (credit)
and Rs 8,000 (debit) respectively on 1st April, 2011. Their partnership deed provided for
the following:
(a) 7.5% of profit to be transferred to General Reserves
(b) Partners are to be only allowed interest on capital @ 5% p.a. and are to be charged interest on
drawings @ 6% p.a.
(c) Z is entitled to a salary of Rs 7,000
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(d) X is entitled to a remuneration of 10% of the net profit before making any appropriation
(e) Y is also entitled to a commission of 8% of the net profit after making all appropriations
During the year, X withdrew Rs 1,000 at the beginning of every month, Y Rs 1,000 during the month
and Z Rs 1,000 at the end of every month. On 1st Oct. 2011, Z granted a loan of Rs 6,00,000.
The manager is entitled to a salary of Rs 1,000 p.m. and a commission of 10% of net profits after
charging his salary & commission.
The net profit of the firm for the year ended on 31st March, 2012 before providing for any of the
above adjustments was Rs 1,62,000.
Required: Prepare profit and Loss Appropriation Account for the year ended on 31st March, 2012.
6. X, Y and Z were in partnership sharing profits and losses as one-half, one fourth and onefourth respectively. It was agreed that interest should be allowed at the rate of 10% per
annum on partners’ capital accounts and charged at the rate of 8 per cent annum on their
drawings. No interest was to allowed or charged on current accounts.
The following are the particulars of their capital accounts, current accounts and drawings (as shown
by the draft accounts):
Capital Account
Balance on
1.1.20X1
Current Account
Balance on
1.1.20X1
Drawings for the
Year Ending 31st
Dec 20X1
Interest on
Drawings
Rs (Cr.)
Rs (Cr.)
Rs
Rs
X
1,50,000
20,000
30,000
2,000
Y
80,000
10,000
20,000
760
Z
60,000
10,000
20,000
1,400
st
The draft accounts for the year up to 31 December, 20X1 showed a net profit of Rs 1,20,000 before
taking into account interest on partners’ capital account balances and drawings. The audit of the draft
accounts revealed the following errors:
(a) The rent of X’s private house, amounting to Rs 1,500 and paid on 31st Dec 20X1 had been
included in rents charged in profit and loss Account.
(b) Repairs amounting to Rs 20,000 had been treated as addition to machinery, depreciation on
which had been charged at the rate of 20 per cent.
(c) The premium, amounting to Rs 6,000, on Y’s Life Insurance Policy, and paid on 30th June
20X1 had been included as insurance charges in the Profit and Loss Account.
Z retired from the partnership on 31st December 20X1 and agreed to leave the amount due to him
from the firm as a loan repayable by agreed installments. X and Y agreed to continue in partnership,
sharing profits and losses as two-third and one-third. In ascertaining the amount due to Z from the
firm and for the purposes of the new partnership, it was agreed to make the following adjustments:
(1) Goodwill to be valued at Rs 1,44,000, but no account for goodwill to be raised n the books.
(2) The value of freehold premises to be increased by Rs 40,000.
(3) The provision for doubtful debts to be increased by Rs 12,000
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You are required to prepare (a). The Profit and Loss Appropriation account for the year ended 31st
December 20X1, making all the necessary adjustments for the errors revealed, and (b) Partners’
Capital and Current Accounts (in columnar form) for the year ended 31st December, 20X1
incorporating the adjustment on Z’s retirement;
7. Jeet, Meet, and Reet were partners sharing profits and losses in the ratio of 2/5, 2/5 and 1/5.
On 1st Jan. 20X1 their Balance Sheet stood as follows:
Liabilities
Rs
Assets
Creditors
40,000 Fixed Assets
Reserve
10,000 Stock
Capital Accounts:
Rs
1,00,000
25,000
Debtors
Jeet
50,000 Cash
Meet
40,000
Reet
30,000
35,000
10,000
1,70,000
1,70,000
The firm had taken out a Joint Life Policy for Rs 1,00,000 the premiums on which were charged to the
Profit and Loss Accounts. On 1st July, 20X2 Reet died. His representatives agree that:
(a) Goodwill of the firm be valued at Rs 50,000; (b) Fixed assets be written down by Rs 10,000;
and (c) In lieu of profits, upto his death, Reet should be paid interest at the rate of 25% p.a. on
his capital as on 1st Jan. 20X1
The Policy money was received on December 31, 20X1 and Reet’s heirs were paid the total amount
due to them. The accounts reveal that the firm had made a profit of Rs 40,500 during the year after
writing off Rs 9,500 as depreciation on fixed assets (of which Rs 5,000 was up to 1st July. 20X1). At
the end of the year. The creditors had been reduced by Rs 5,000 and debtors by Rs 6,000 and stock
had increased by Rs 8,000 (as compared to the figures on 1st Jan, 20X1. The drawings of the partners
were;
Up to 1st July 20X1
After 1st July 20X1
Rs
Rs
Jeet
4,125
5,000
Meet
4,125
5,000
Reet
1,750
-
Required: Prepare the Balance Sheet of the firm as on 31st Dec, 20X1 assuming that remaining
partners did not retain goodwill in their books.
8. E,F and G were partners sharing profits and losses in the ratio of 5:3:2 respectively.On 31st
March , 2009 Balance Sheet of the firm is as follows:
Liabilities
Capital a/cs
E
F
G
Rs.
50,000
40,000
28,000
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Assets
Buildings
Furniture
Stock
Debtors
Rs.
55,000
25,000
42,000
20,000
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Creditors
Outstanding expenses
33,500
1700
1,53,200
Cash at bank
11,200
1,53,200
On 31st March, 2009 E decided to retire and F and G decided to continue as equal partnes.
Other terms of retirement were as follows:
i.
ii.
iii.
iv.
v.
vi.
Building be appreciated by 20%
Furniture be depreciated by 10%
A provision of 5% be created for bad debts on debtors
Goodwill be valued at two year’s purchase of profit for the latest accounting year.The
firm’s profit for the year ended 31st March 2009 was Rs.25,000.No goodwill account
is to be raised,
Fresh capital be introduced by F and G to the extent of Rs.10,000 and Rs.35,000
respectively.
Out of sum payable to retiring partner E, a sum of Rs.45,000 be paid immediately and
the balance be transferred to his loan account bearing interest at 12% p.a.The loan is
to be paid off on 31st March, 2011
One month after E’s retirement , F and G agreed to admit E’s son H as a partner with
¼ th share in profits/losses. E has agreed that the balance in his loan account be
converted into H’s capital. E also agreed to forgo one month’s interest on his loan.
It was agreed that H will bring in, his share of goodwill through book adjustment,
valued at the price on the date of E’s retirement.No goodwill is to be raised.
You are requested to pass necessary journal entries to give effect to the above
transactions and prepare Partner’s capital account.
AS
1. Unsold units with Agent
- 1000
Cost per unit
- Rs 10
Estimated selling price per unit
as at balance sheet date
- Rs 8
Agents commission on sales
- 5%
What should be the value of closing stock?
2. T Ltd which manufactures three products namely “ O”, “N” and “S” using raw materials M1, M2 and
M3 respectively provides you the following information about the Closing stock at 31st ,March 2013
Items
O
N
S
M1
M2
M3
Historical cost (Rs L)
10
20
30
5
6
7
NRV (Rs L)
11
18
27
Replacement value( Rs L)
12
19
28
3
5
8
Calculate the value of closing stock
3. Cost of production of Product A is given below:
Raw material per unit Rs 150
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Wages per unit
Overheads per unit
Rs. 50
Rs50
Rs 250
As on the balance sheet date the replacement cost of raw material is Rs.110 per unit.There are 100
units of raw material on 31.3.2012.
Calculate the value of closing stock of raw materials in the following conditions:
i.
If finished product is sold at Rs.275 per unit what will be the value of closing stock of raw
material
ii.
If finished product is sold at Rs.230 per unit what will be the value of closing stock of raw
material
4.
Particulars
Kg
Rs
Opening Stock
- Finished goods
1000
25,000
1100
11,000
- Raw materials
10,000 100,000
Purchases
76,500
Labour
75,000
Overhead (Fixed)
10,000 280,000
Sales
900
Closing Stock Raw materials
1200
- Finished Goods
The expected production for the year was 15000 kg.of the finished good products. Due to fall in the
market demand the sales price for the finished goods was Rs 20 per Kg and the replacement cost for
the raw material was Rs 9.5 kg on the closing day.
Calculate the value of the closing stock of finished goods.
5. A company had 5000 units of stock “A”, costing at Rs.50 each on 31.03.2014.Out of this
stock, 3000 units are to be supplied under a firm contract at Rs.45 each. Show how the
valuation will be done of such stock when
-The selling price is Rs.49 each
-the selling price is Rs.52 each
AS-6
1. X Ltd set up a factory in the backward area and purchased plant for Rs. 500 lakhs for the purpose.
Purchases were entitled to Cenvat Credit of 2% and along with this Government agreed to extend
30% subsidy for backward area development. Estimated residual value at the end of the useful life
Rs.43 lakhs. Compute depreciable amount of the asset.
2. In the Trial Balance of M/s Sun Ltd .as on 31-3-2010. Balance of machinery appears at Rs. 5,60,000.
The company follows rate of depreciation on machinery @10% p.a. on WDV basis. On scrutiny it
was found that a machine appearing in the books on 1-4-2010 at Rs. 1,60,000 was disposed of on 309-2010 at Rs. 1,35,000 in Part exchange of a new machine costing Rs. 1,50,000.
You are required to calculate:
(1)Total depreciation to be charged in the Profit and Loss Account.
(2)Loss on exchange of machine.
(3) Book value of machinery in the Balance Sheet as on 31-3-2011.
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3. Machinery purchased on 1/4/2011 Rs.1,00,000
Estimated residual value at the end of the 10th year Rs 10,000
Method of providing depreciation in use –SLM
From 5thyear company decided to change the method of depreciation from SLM method to WDV
method at 20%
4. Machinery purchased on 1/4/2011 Rs. 1,00,000
Estimated residual value at the end of the 10th year Rs 10,000
Method of providing depreciation in use SLM
At the end of the 4th year due to change in technology the total useful life of an asset is reduced to 8
years and residual value at the end of 8thyear is Rs.3000
5. A machinery was purchased on 1.04.2011 for Rs 1,50,000 and useful life of the machine is estimated
to be 10 years.The net book value of the machinery on 1/04/2004 was Rs.1,05,000.The liability for
acquiring this machine was increased by Rs.14,000 due to price adjustments on 31/03/2005.What will
be the depreciation for the year 2004-05 onwards.
Assume depreciation has been provided on SLM.
6. Cost of machine Rs.1,30,000
Residual value NIL
Useful life
10 years
Method of depreciation in use SLM
After 8 years the machine was revalued to Rs.80,000
7. Machinery purchased on 1/04/2010 Rs. 1,00,000
Estimated residual value at the end of the 5th year Rs. 5000
Method of depreciation WDV
Rate of depreciation 55%
Addition to machinery on 1/04/2011 Rs. 50,000
Estimated residual value at the end of the 4th year Rs.2000
This addition becomes an integral part of the existing asset.
AS-7
1. Gammon Ltd has undertaken bridge construction contract as per detail given below, bridge will be
constructed in 3 years
a. Initial contract revenue Rs.900 crores
b. Initial contract cost Rs.800 crores
(Rs. In crores)
Particulars
I year
Estimated contract cost
805
Increase in contract revenue
Estimated additional increase
cost
Contract cost incurred upto
161
II year
III year
20
15
584
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At the end of II year cost incurred includes Rs.10 crores, for material stored at the sites to be used in
III year to complete the project.
2. Calculate the contract revenue from the following details
(Rs. In crores)
Particulars
Initial contract revenue
Revenue increase due to escalation in II year
Claim
Incentive payments
Penalties
I
1000
-
II
1000
200
50
III
1000
100
150
-
Calculate contract revenue
3. Induga Ltd undertook construction of subway for Rs100 crores on 1-01-2009.It estimated construction
cost initially at 70 crores. Contract was estimated to be completed in 3 years.However, when starting
the work it was found that there were rocks underground at construction site and cost shall increase by
Rs.36 crores and the contract shall be completed in three years. The company wants to provide for
expected loss of Rs 2 crores per year.
a. Is the treatment correct?
b. If work has not yet started but by technical survey it was known on 25/12/2009 that there
was rock underneath at construction site.Company did not want to provide for any losses
of Rs. 6 crores for the year ended 31-03-2010.Considering that when project work would
start, the losses shall be provided for.
AS -9
1. Y Ltd used certain resources of X Ltd. In return X Ltd receives Rs.10 lakhs and Rs.15 lakhs as
interest and royalties respectively, from Y Ltd. during the year 2007-2008.State on what basis X Ltd.
should recognize their revenue as per AS-9
2. On 25th September 2009, Planet Advertising Limited obtained advertisement rights to World Cup
Hockey Tournament to be held in Nov;/Dec 2009 for Rs 520 lakhs
They furnish the following information:
The company obtained the advertisements for 70% of available time for Rs. 700 lakhs by
30thSeptember , 2009
For the balance time they got bookings in October 2009 for Rs. 240 lakhs
All the advertisers paid the full amount at the time of booking the advertisements.
40% of the advertisements appeared before public in Nov 2009 and balance 60% appeared in Dec
2009.
You are required to calculate the profit/loss to be recognized for the month of Nov 2009 and
December 2009 as per Accounting Standard-9.
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3. M/s SEA Ltd recognized Rs 5 lakhs on accrual basis income from dividend during the year 20102011., on shares of the face value of Rs. 25 lakhs held by it in Rock Ltd as at 31st March 2011.Rock
Ltd proposed dividend at 20%. On 10th April 2011. However dividend was declared on 30th June
2011.Please state with reference to the relevant AS , whether the treatment is in order.
4. Victory Ltd. purchased goods on credit from Lucky Ltd.for Rs.250 Crores for export.The export order
was cancelled.Victory Ltd decided to sell the goods in the local market with a price discount.Lucky
Ltd.was requested to offer a price discount of 15%.The chief accountant of Lucky Ltd wants to adjust
the sales figure to the extent of the discount requested by Victory Ltd.Discuss whether the treatment is
justified.
AS-10
A company is in the process of setting up a production line for manufacturing a new product.Based
on trial runs conducted by the company, it was noticed that the production lines output was not of the
desired quality.However, company has taken a decision to manufacture and sell sub-standard product
over the next one year due to huge investment involved.
In the background of the relevant accounting standard, advise the company on the cut off date for
capitalisation.
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