125ki Final Accounts

11-Final Accounts

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Final Accounts

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11-Final Accounts


Final Accounts

Frequently Asked PointsFrequently Asked PointsFrequently Asked PointsFrequently Asked Points � Final accounts of a company consist of balance sheet as at the end of the accounting period and profit and

loss account for that period.

� Section 211 of the Companies Act, 1956 prescribes the form and contents of balance sheet and profit and loss account of a company.

� Balance sheet of a company shall be prepared in the form set out in Part I and profit and loss account of a company shall comply with the requirements of Part II of Schedule VI of the Companies Act, 1956.

� Profit and Loss Appropriation Account shows the disposal of the net profit as disclosed by the Profit and Loss Account proper.

� The term 'Provision' means any amount written off or retained by way of providing for depreciation, renewals or diminution in value of assets or retained by way of providing for any known liability of which the amount cannot be determined with substantial accuracy.

� Reserves refer to amounts set aside out of profits or surplus of the company which are neither meant to meet any loss in respect of depreciation, renewals or diminution in the value of assets nor meant to meet any known liability.

� The term managerial remuneration includes remuneration payable to managing director, whole-time directors, part-time directors and manager.

� The total managerial remuneration payable by a public company or a private company which is a subsidiary of a public company to its directors including any managing or whole-time director or manager is limited to 11 % of the net profits.

� Sections 349 and 350 of the Companies Act contain the provisions relating to the manner of determination of net profits for the purpose of calculating the managerial remuneration.

� Dividend refers to that part of the profits of a company which is distributed by the company among its shareholders by way of return on investments made by the shareholders in the shares, of the company.

� Companies declaring distributing or paying dividends are liable to pay tax on the same at prescribed rate which is known tax on distributed profit.

� Interim dividend means a dividend paid to the shareholders of a company in anticipation of profits of a period before the accounts of the company for that period have been prepared.

� When a company accumulates huge reserves out of its profits which is much in excess of the needs of the company, the excess amount can be distributed among the existing shareholders of the company by way of bonus shares.

Questions from Past CA,CS,CMA ExaminationsQuestions from Past CA,CS,CMA ExaminationsQuestions from Past CA,CS,CMA ExaminationsQuestions from Past CA,CS,CMA Examinations

11-Final Accounts


Theory Questions

CA, CMA

SN 1: Write short notes on the following:

Taxation on distributed profits.

Or

[2011, June Exec

Write short notes on the following:

Tax on distributed profit.

Answer: Taxation on Distributed Profits

The Finance; Act, 1997 introduced, an additional income tax, known as tax on distributed profits, on joint stock companies. This taxis designated as tax on distributed profit or dividend distribution tax or corporate dividend tax. Section 1150(1) of the Income-tax Act lays down that any amount declared, distributed or paid by a domestic company by way of dividend, whether interim or otherwise shall be charged tax on distributed profits at specified rates. It is paid in addition to the income tax chargeable on total income. The dividend chargeable to tax on distributed profit may be out of current profits or accumulated profits. The tax on dividend shall be payable even if the company has to pay no tax on profits. Further, it is specified that the tax has to be paid within 14 days from the date of: (a) declaration of dividend, (b) distribution of dividend, or (c) payment of dividend, whichever is earliest. Like rates of income tax, the rate of tax on distributed tax may vary from one financial year to other year.

As tax on distributed profit is levied on the profits distributed, it should be shown below the line i.e. in profit and loss appropriation account. In case of interim dividend, the tax will normally be paid in the same accounting year in which the dividend is declared and paid. In case of proposed dividend, a provision for tax on distributed profit on the amount proposed to be distributed should be made and shown along with the proposed dividend in the profit and loss appropriation account. Thus, tax on distributed profit liability should be disclosed in the profit and loss appropriation account in Notes to Accounts for RESERVES.

In the balance sheet, tax on distributed profit should be shown separately under the head "Provisions'.

CMA,CS-2010, June Exec Prog - 3m

SN 2: Write short notes on the following:

Capitalisation of profits and reserves

Answer: Capitalisation of profits and reserves

When a company accumulates huge reserves out of its profits which is much in excess of the needs of the company, the excess amount can be distributed by way of bonus shares among the existing shareholders of the company. Thus, the accumulated profits and reserves of the company are converted into its share capital which is permanently used in the business. This process is also known as "capitalisation of profits and reserves". Capitalisation of accumulated profits and reserves of a company is possible only if the Articles of the company contain such provision. The basic characteristics of bonus shares are the following:

(1) Bonus shares are issued to the existing shareholders.

(2) Bonus shares are always fully paid up.

(3) Right to renunciation is not available in respect of bonus shares.

Bonus shares can be issued out of the following:

11-Final Accounts


(i) Balance in the Profit and Loss Account;

(ii) General Reserves or other Reserves created out of the profits;

(iii) Realised capital profits and reserves;

(iv) Securities Premium Account;

(v) Capital Redemption Reserve Account.

CA-Inter, CMA, CS

DB 1: Differentiate between 'provision' and 'reserve'. Give any four examples of provisions.

Answer: Provision is any amount written off or retained by way of providing for depreciation, renewals or diminution in the value of assets or retained by way of providing for any known liability amount of which cannot be determined with substantial accuracy. Reserve has been negatively defined in Companies Act and does not include any amount covered under the definition of provision. Thus, reserves by implication represent undistributed profits.

The significant points of distinction between provision and reserve are as follows:

Provision Reserve

1. It is created for a specific purpose. It is created for probable losses.

2. It is a charge against revenue It is an appropriation of profit.

3. It cannot be distributed as dividend. It can be distributed as dividend.

4. Provision is an accounting necessity. It is a matter of financial prudence.

5. Some provisions like provision for taxation are shown on the liabilities side of the balance sheet while some other provisions like provision for depreciation and provision for bad and doubtful debts are shown by way of deductions from the relevant amounts on the assets side of the balance sheet.

All reserves are shown on the liabilities side of the balance sheet,

Examples of Provision:

1. Provision for depreciation

2. Provision for repairs and renewals

3. Provision for bad and doubtful debts

4. Provision for taxation.

CA PII, 2011, Jun Exec

DB 2: Distinguish between the following:

'Interim dividend' and 'final dividend'.

Answer: Dividend: The term “Dividend” refers to that part of the profits of a company which is distributed by the company among its shareholders by way of return on investments made by the shareholders in the shares, of the company. In other words, dividend is nothing but the distribution of divisible or distributable profits of a company among the holders of its shares. Dividend is paid by a company to its shareholders on the basis of number of shares held by them and the rights attaching to the various classes of shares.

Interim Dividend: Interim dividend means a dividend paid to the shareholders of a company in anticipation of profits of a period before the accounts of the company for that period have been prepared. In other words, an interim dividend is a dividend declared at any time between the two annual general meeting where the final dividend is declared. It can

11-Final Accounts


be paid if authorised by the Articles. Clause 86 of Table A empowers the Board of directors to pay interim dividend from time to time as it appears to be justified by the profits of the company.

CMA-2003, CS Inter

DQ1: What is proper books of account for a company?

Answer: Section 209 of the Companies Act requires every company to keep at its registered office or at such other place in India as the board of directors may decide, proper books of account with respect to-

(a) all sums of money received and expended by it and the matter in respect of which the receipt and expenditure takes place;

(b) all sales and purchases of goods by the company;

(c) the assets and liabilities of the company; and .

(d) such particulars relating to utilization of material or labour or to other items of cost as may be prescribed by the Central Government in the case of a company pertaining to any class of companies engaged in production, processing, manufacturing or mining activities.

Section 209(3) requires that the books of account should, be maintained on accrual basis and according to the double entry system of accounting to ensure that these represent true and fair view of the affairs cf the company or branch office and all transactions are fully explained.

CA, CMA

DQ 2: Explain the circumstances under which dividend can be paid out of capital profits of a company.

Answer: Payment of Dividends out of Capital Profit

A company, subject to the fulfillment of certain conditions, can pay dividend out of capital profits. These conditions, as per various judicial decisions are:

(i) the Articles of the company does not forbid such distribution

(ii) such profits were actually realised in cash

(iii) surplus did remain after a fair evaluation of all the assets of the company.

Capital profits available for dividends should not be included in Capital Reserve since by definition this means a reserve which cannot be used for paying a dividend. The following items of capital profits are not available for dividend :

(i) profit on reissue of forfeited shares

(ii) securities premium account

(iii) capital redemption reserve account

(iv) profit on sale of fixed assets (to the extent to the sale proceeds exceed the original cost of the fixed assets sold)

(v) profits prior to incorporation

(vi) profits on redemption of debentures etc.

CA-Inter, CA-2004

DQ 3: What are the statutory books prescribed under the Companies Act, 1956?

Or

11-Final Accounts


CA,CMA, CS- Exec 2011

Distinguish between the following:

'Statutory books' and 'statistical books'.

Answer: The following statutory books have been prescribed under various provisions of the Companies Act, 1956 :

(i) Books of accounts as detailed in Section 209

(ii) Register of investments not held in company's name

(iii) Register of fixed deposits

(iv) Register of charges

(v) Register of members

(vi) Index of members where the number is more than 50.

(vii) Register of debentureholders

(viii) Index of debentuseholders where the number is more than 50

(ix) Foreign register (and a duplicate) of members, debentureholders, if any

(x) Minutes book of proceedings of General Meeting

(xi) Minutes book of proceedings of Board Meetings

(xii) Register of contracts with firms and companies in which directors are interested

(xiii) Register of directors, managing director, manager and secretary

(xiv) Register of directors’ shareholdings

(xv) Register of loans made, guarantees given or securities provided to companies under same management

(xvi) Register of investment in shares, debentures of other companies.

(xvii) Register of renewed/duplicate certificates.

CMA, CS Inter

DQ 4: Can a company pay dividend out of current profits without making good past losses?

Answer : Yes. A company can pay dividend out of current profits without making good past losses. However, the loss sustained by the company in the past financial years falling after 28th December 1960 as is attributable to the amount of provision made for depreciation has to be setoff against the current profit of the company before dividend is declared. The arrears of depreciation in respect of previous years ending 28th December 1960 need not be taken into account. But as a sound commercial policy, it is desirable to apply current profit in making good lost capital.

CA, CS-2004

DQ 5: Attempt the following:

Enumerate the provisions of the Companies Act, 1956 with regard to providing depreciation on the assets of a company.

Answer: Part II of Schedule VI of the Companies Act, 1956 requires that the profit and loss account must disclose the amount provided for depreciation, renewals or diminution in value of fixed assets. If such provision is not made by means of a depreciation charge, the method adopted for making such provision should be stated. But where no provision is made for depreciation, the fact thereof must be stated and the quantum of arrears of depreciation computed in accordance with Section 205(2) of the Act is also to be stated by way of a note.

11-Final Accounts


Section 205(2) of the Companies Act, 1956 states that depreciation should be provided either:

(a) to the extent specified in Section 350;

(b) in respect of such item of depreciable asset for such an amount as is arrived at by dividing 95% of the original cost to the company by the specified period in respect of such assets; or

(c) any other basis approved by the Central Government which has the effect of writing off by way of depreciation 95% of the original cost to the company of each such depreciable asset on the expiry of the specified period; or

(d) as regards any other depreciable asset in which no rate of depreciation has been laid down by this Act or any rules made thereunder, on such basis as may be approved by the Central Government. In any general order published in the Official Gazette or any special order in any particular case.

Provided that if any of the aforesaid assets sold, discarded, demolished or destroyed, the excess (if any) of the written down value of such asset over its sale proceeds, or, as the case may be, its scrap value, must be written off in the financial year in which the asset is sold, discarded, demolished or destroyed. Depreciation may be provided either on the written down value basis at the rates specified in Schedule XIV of the Act or on the straight-line basis. In straight line basis, depreciation may be calculated by dividing 95% of the original cost of that asset will have been provided by way of depreciation if depreciation were to be calculated in accordance with the provisions of Section 350.

CA-2005, June, CS Inter

DQ 6: What are the sources from which bonus shares can be issued?

Answer : When a company accumulates huge reserves out of its profits, which is much in excess of; the needs of the company, the excess amount can be distributed by way of bonus shares among the existing shareholders of the company. The effect of an issue of bonus shares are - (i) a reduction in the amount of accumulated profits and reserves, and (ii) a corresponding increase in the paid-up share capital of the company.

Bonus shares can be issued from the following :

(i) Balance in the Profit and Loss Account

(ii) General Reserve or other reserves created out of the profits

(iii) Realised capital profits and reserves

(iv) Securities premium* account

(v) Capital Redemption Reserve Account (created out of profits on the redemption of shares).

While preparing the balance sheet of the company after the issue of bonus shares, the number of shares issued as bonus shares and the source of the issue must be disclosed in the balance sheet.

CMA-CS-2008

DQ 7: Comment on the following statements:

As a matter of sound commercial policy, current profits are to be applied while 'paying dividend out of current profits without making good past losses.'

Answer: A company is under no legal obligation to make good a debit balance in its Profit and Loss Account resulting from past losses before distributing current profits. But so much of the loss sustained by a company in the past financial year and years falling after 28th December, 1960 as is attributable to the amount of provision made for depreciation, must be set off against the current profits of the company before a dividend is declared. The position in respect of set off of past losses for determining divisible profits may be summarized as under:

(1) In respect of previous years ending before 28th December, 1960, arrears of depreciation need not be taken into account.

(2) In respect of previous years, ending after 28th December, 1960:

11-Final Accounts


(a) All arrears of depreciation not provided for must be set off against the profits of the current year;

(b) The losses of such years must be set off to the extent to which the> consist of depreciation provided in the books.

But from the view point of sound commercial policy, however, it is desirable to apply current profits in making good lost capital,

2010, June Exec

DQ 8: State, with reasons in brief, whether the following statements are corrector incorrect:

(i) In the absence of declaration of dividend, there is no need to provide for depreciation in the accounts of companies.

(ii) While preparing the consolidated balance sheet, a contingent liability in respect of a transaction between the holding and the subsidiary companies is disappeared from the footnote.

Answer:

(i) Incorrect: Depreciation represents wear and tear of assets due to constant use. Unless depreciation is provided for, the accounts will not reflect a “true and fair” view of the state of affairs of the company. Further, capital will not be kept intact, unless the depreciation is charged. Hence, even if no dividend is declared, depreciation is to be provided for in the accounts of companies.

(ii) Correct: If the contingent liabilities relate to outsiders, it must be shown by way a foot note in the consolidated balance sheet. But a contingent liability in respect of a transaction between holding and subsidiary companies (internal contingent liability) will disappear from the foot note as they appear as actual liability in the consolidated balance sheet]

11-Final Accounts


Practical Question

Provision for TaxProvision for TaxProvision for TaxProvision for Tax

Question 1

2006, December, CS Inter, 5 Marks

The trial balance of a company as at 31st March, 2005 shows the following items:

Dr. (Rs.) Cr. (Rs.)

Provision for income-tax account - 70,000

Advance payment of income-tax account 1,55,000 -

You are also given the following information:

1. Advance payment of income tax account includes Rs. 65,000 for the financial year 2004-05.

2. Actual tax liability for the financial year 2004-05 amounts to Rs. 68,000 and no effect for the same has been given so far in the accounts.

3. Provision for income-tax to be made for the financial year 2005-06 is Rs. 80,000.

Prepare provision for income-tax account and advance payment of income-tax account, and also show how relevant items will appear in the balance sheet of the company.

Answer:

Provision for Income Tax Account

Dr. Date Particulars Rs. Date Particulars Cr. Rs.

31/03/05 To Advance Payment 01/04/05 By Balance b/d 70,000

of Income Tax A/c 65,000 31/03/06 By Profit & Loss A/c 80,000

To Liability for Taxation. A/c

3,000

To Profit & Loss A/c 2,000

To Balance A/c 80,000

1,50,000 1,50,000

Advance Payment of Income Tax Account

Dr. Date Particulars Rs. Date Particulars Cr. Rs.

01/04/05 To Balance bid 1,55,000 31/03/06 By Provision for

Income Tax A/c 65,000

By Balance c/d 90,000

1,55,000 1,55,000

11-Final Accounts


Balance Sheet as at 31st March, 2006

Liabilities Rs. Assets Rs.

A Current Liabilities: Loans & Advances :

Liability for Taxation (2004-05) 3,000 Advance Payment of

B. Provisions: Income Tax (2005-06)

Provision for Income-tax (2005-06) 80,000 90,000

Question No. 2

Balances as on 1-4-01

Provision for Tax 2,50,000

Advance Tax 2,00,000

Assessment of 1999-2000 was completed and the tax was finalised at Rs. 60,000. While the provision in respect of this was maintained at Rs. 50,000 and advance -tax paid was Rs. 45,000. Provision for tax for the current year Rs. 70,000 and advance-tax paid during the year was Rs. 47,000. Show relevant p/l and balance-sheet

Question No. 3

Balances as on 1-4-01 Provision for Tax 1999-00 1,00,000 2000-01 1,50,000 2,50,000 Advance Tax 1999-00 1,10,000 2000-01 90,000 2,00,000 Assessment of 1999-2000 was completed and the tax was finalised at Rs. 90,000. Provision for tax for the current year Rs. 1,70,000 and advance-tax paid during the year was Rs.1,40,000 Show relevant p/l and balance-sheet

Provision for Bad DebtsProvision for Bad DebtsProvision for Bad DebtsProvision for Bad Debts

Question No. 4

Balances as on 31-3-01 Provision for Bad debts 2,50,000 Bad debts 20,000 Debtors 5,00,000 Additional bad debts to be provided Rs. 15,000. Provision for bad debts to be maintained at 10%

Show relevant p/l and balance-sheet

Question No. 5

Balances as on 31-3-01 Provision for Bad debts 50,000 Bad debts 20,000 Debtors 8,00,000 Additional bad debts to be provided Rs. 15,000. Provision for bad debts to be maintained at 10%. Show relevant p/l and balance-sheet

11-Final Accounts


DividendDividendDividendDividend

Transfer to General Reserve:-

In regard to declaring dividend it is necessary on the part of company to transfer a portion of profit to General Reserve depending on the % of dividend declared. This has been listed below:- 1) If dividend declared doesnot exceed 10% than nothing is transferred to G.R. 2) If dividend declared exceeds 10% but not 12.5% of paid up capital then 2.5% of current profit is

transferred to G.R. 3) If dividend declared exceeds 12.5% but not 15% of paid up capital then 5% of current profit is

transferred to G.R. 4) If dividend declared exceeds 15% but not 20% of paid up capital then 7.5% of current profit is

transferred to G.R. 5) If dividend declared exceeds 20% & above then 10% of current profit is transferred to G.R.

Question No. 6

On 1-6-99 the directors proposed a dividend on Share capital of Rs. 20,00,000 at the rate of 10%. This was declared on 1-9-99 and paid on 1-10-99.

Question No. 7

CA, CWA

Following is the trial blance of XYZ Ltd as on 31-3-2001 Particulars Dr Cr

Purchase & Sales 4,00,000 14,00,000

Debtors & Creditors 5,05,000 2,00,000

Wages 2,00,000

Salaries 3,00,000

Opening Stock 1,00,000

B.Debts 15,000

Provision for Bad Debts 35,000

Rent Received 70,000 Interest received 20,000 Building 4,00,000 Plant & Machinery 8,00,000 Furniture & fixtures 2,00,000 Depreciation on F&F 10,000 Provision for Depreciation on P& M 2,00,000 Outstanding wages 10,000 Share Capital 4,00,000 10% Debentures (Since 1995) 3,00,000 General Reserves 1,45,000 Profit & Loss 1,50,000 --------------- ------------ 29,30,000 29,30,000 ========= ======== Adjustments

1) Prepaid Salary Rs. 5,000. 2) Closing Stock Rs. 2,00,000. 3) Additional bad debts Rs. 5,000.

11-Final Accounts


4) Provision for Bad Debts to be maintained at 5% on debtors. 5) Proposed Dividend 30% 6) Rent received is in respect of part of building let out at Rs.5,000 per month. 7) Provide Tax @ 30% 8) Manager's remuneration is 5% of profits after charging remuneration 9) Provide depreciation on building 10% and P& M @ 20% on WDV. 5% on furniture and fixtures. 10) A machinery purchased in the beginning of the year for Rs. 20,000 was wrongly charged to

Purchases. Name of the Company…………………….

Balance Sheet as at ………………………

Note

No.

Current Year Previous Year

2 3 4

I. EQUITY AND LIABILITIES

1 Shareholders’ funds

(a) Share capital 4,00,000

(b) Reserves and surplus 5,02,666

(c) Money received against share warrants

2 Share application money pending allotment

3 Non-current liabilities

(a) Long-term borrowings 3,00,000

(b) Deferred tax liabilities (Net)

(c) Other Long term liabilities

(d) Long-term provisions

4 Current liabilities

(a) Short-term borrowings

(b) Trade payables 2,00,000

(c) Other current l iabilities 72,905

(d) Short-term provisions 2,60,429

TOTAL 17,36,000

( ` in…………)

Particulars

1

11-Final Accounts


II. ASSETS

Non-current assets

1 (a) Fixed assets

(i) Tangible assets 4 10,56,000

(ii) Intangible assets

(iii) Capital work-in-progress

(iv) Intangible assets under development

(b) Non-current investments

(c) Deferred tax assets (net)

(d) Long-term loans and advances

(e) Other non-current assets

2 Current assets

(a) Current investments

(b) Inventories 2,00,000

(c) Trade receivables 4,75,000

(d) Cash and cash equivalents

(e) Short-term loans and advances 5,000

(f) Other current assets

TOTAL 17,36,000

Refer

Note

No.

Figures for the

current

reporting period

Figures for the

previous

reporting period

I. 14,00,000

II. 80,000

III. 14,80,000

Particulars

Name of the Company…………………….

Profit and loss statement for the year ended ………………………

( ` in…………)

Revenue from operations

Other income

Total Revenue (I + II) IV.

2,80,000

4,95,000

30,000

4 1,74,000

10 32,905

10,11,905

V. 4,68,095

Depreciation and amortization expense

Other expenses

Total expenses

Expenses:

Cost of materials consumed

Purchases of Stock-in-Trade

Changes in inventories of finished goods work-

in-progress and Stock-in-Trade

Profit before exceptional and extraordinary

items and tax (III-IV)

Employee benefits expense

Finance costs

11-Final Accounts


VI. -

VII. 4,68,095

VIII.

IX. 4,68,095

X

(1,40,429)

XI 3,27,666

Tax expense:

(1) Current tax

(2) Deferred tax

Profit (Loss) for the period from continuing

operations (IX-X)

Exceptional items

Profit before extraordinary items and tax (V - VI)

Extraordinary Items

Profit before tax (VII- VIII)

XII

XIII

XIV

XV 3,27,666

XVI

8.19

(2) Diluted

Tax expense of discontinuing operations

Profit/(loss) from Discontinuing operations

(after tax) (XII-XIII)

Profit (Loss) for the period (XI + XIV)

Earnings per equity share:

(1) Basic

Profit/(loss) from discontinuing operations

No. Current Yr Previous Yr

1

1,45,000

32,767

1,77,767

1,50,000

3,27,666

(32,767)

(1,20,000)

3,24,899

5,02,666

NP

Notes to Accounts

From PL

PL

Opening balance

(-) trnasfer to GR 10% of NP

(-) Proposed Dividend

Details

Reserves

General Reserves

Opening balance

2

30,000

10,000

22,905

10,000

72,905

3

1,20,000

1,40,429

2,60,429

Rent Received in advance

o/s Managerial Remuneration

o/s Wages

Short term Provisions

Proposed Dividend

Provision for Tax

Other Current Liabilites

O/s Interest

11-Final Accounts


4 WDV

10,56,000

5

5,00,000

(25,000)

4,75,000

Debtors

(-) Provision fro bad debts

Tangible Assets

Building

PM

Furniture & Fixtures

Trade Receivable

6

5,000

7

60,000

20,000

80,000

Other Incomes

Rent (70,000-10,000)

Interest Received

Prepaid Salary

Other Current Assets

8

1,00,000

3,80,000

(2,00,000)

2,80,000

9

2,95,000

2,00,000

4,95,000

Employee Benefits

Salary (3,00,000- 5,000)

Wages

Raw Material Consumed

Opening Stock

Purchases (400,000 - 20,000)

(-) Closing Stock

10

10,000

22,905

32,905

Other Expenses

Provision for Bad debts

(25000 + 5,000 +15,000 - 35,000)

Managerial Remuneration

14,00,000

80,000

14,80,000

2,80,000

4,95,000

1,74,000

30,000

20,000

9,99,000

4,81,000

22,905 MR = 481,000 x 5/105

Calculation of Managerial Remuneration

Other Incomes

(-) expenses

RMC

Employee Cost

Depreciation

Interest

Actual BD

Profit for MR

Sales

Illustration 8

11-Final Accounts


CA Modified

From the balances and other information given below, prepare Profit and Loss Account for the year ended on 30 June, 1987 and also the Balance Sheet as on that date as per directions given by the Companies Act, 1956: Rs. Rs. Purchase 4,36,000 Paid-up share capital;

Salaries & wages 1,24,000 (60,000 ordinary shares of

Director’s fees 10,000 Rs. 8 per share called and

Furniture 7,000 paid-up) 4,80,000

Sundry debtors 2,50,000 Profit & Loss account 50,000

Insurance premium 6,400 Provision for taxation 16,000

Opening stock 1,64,000 General reserve 80,000

Prepaid expenses 24,000 Bills payable 32,000

Rent 5,000 Bank loan 1,00,000

Land & Buildings 2,20,000 Sundry Creditors:

Plant & Machinery 1,50,000 - for goods 54,000

Audit fees, etc. 10,000 - for expenses 64,000

Repairs 6,400 Provision for bad debts 4,000

Printing & Stationery 2,200 Unclaimed dividends 4,000

Cash in hand 12,400 Sales 6,56,000

Bills receivable 15,000 Interest on investment 2,000

Investment in 10% bond 24,000

Preliminary expenses 12,000

Cash at bank 63,600

-------------- ----------------

15,42,000 15,42,000

======== =========

Other information: a) The authorised share capital of the company is 1,00,000 ordinary share of Rs. 10 each. b) The paid-up capital consists of 60,000 ordinary shares of Rs, 10 each, Rs. 8 per share called and

paid-up. c) During the year 1986-87, the Board of directors decided to make the final call of Rs. 2 per share and

the call money were duly received except from two shareholders holding 5,000 shares each. No effect of his final call whose amount are lying in a separate bank account, has been given in the above trial balance.

d) The total preliminary expenses amounting to Rs. 20,000 are to be written off in 5 years. e) The value of closing stock is Rs. 3,80,000. f) Provide Rs. 10,000 for taxation and Rs. 4,000 for salary outstanding. g) A sum of Rs. 30,000 is to be transferred to general reserve. h) The directors have proposed Rs. 3 per share as dividend. i) Audit fee includes Rs. 4,000 for taxation work. j) Sundry debtors for Rs. 20,000 are due for more than 6 months, of which Rs. 4,000 are bad and Rs. 6,000 are doubtful and to be provided for k) The details of fixed assets are given below: OriginalTotal dep.Rate of dep. costupto 30.6,86 Land & Building 3,80,000 1,60,000 10% Plant & Machinery 2,00,000 50,000 10% Furniture 24,000 17,000 20%

11-Final Accounts


(1) Claim for compensation by workers disputed in the labour court Rs. 30,000.

Question 9

CS Modified

Given below is the Trial Balance and additional information relating Bharat Implement Limited as at the end of their financial year 1988-89. Prepare final accounts in proper form:

Trial Balance As On 31 March 1989 Stock(1-4-1988): Raw materials and stores 1,00,040 work in Process 40,160 Finished Goods 1,99,800 Purchase 8,96,800 Sales 13,39,400 Salaries and wages 59,420 Other expenses 2,35,280 Other income 5,760 Depreciation 7,100 Investments 380 Fixed assets at cost 1,27,740 Interest accrued 50 Sundry debtors 1,18,070 B.debts 10 Cash at bank 640 Loans and advances 1,160 Shares capital 40,000 Development rebate reserve 4,680 Investment allowance reserve 8,500 General reserve 51,600 Secured loans 26,960 Fix deposits 32,000 Depreciation reserve 56,000 Provision for doubtful debts 200 Sundry creditors 2,21,550

Additional information a) Stocks at the end of 31-3-1989: Raw materials and stores 60,020 Work-in-process 50,080 Finished goods 1.51,900 b) Deprecation allowable under Schedule XIV of the Companies Act. 8,500 c) Market value of investments. 300 d) Sundry debtors include Rs. 242 due for more than six months out of which provision to be made for

doubtful debts is at Rs. 90 during the year. Further bad debts to provided for Rs. 70 e) Include in other expenses are: (i) Fees to auditors Rs. 130 , out of which Rs. 30 are in other capacities; and (ii ) Interest on fixed loans Rs. 1,240 and other interest Rs. 2,000. f) Rs. 680 are to be re-transferred from development rebate reserve account. g) Provision is to be made for managing director’s remuneration of 240 per annum. h) Balance of profit is to be transferred to general reserve after providing for dividend at 25% on capital. i) The authorised capital of the company is in 4,000 equity shares of Rs. 10 each.

11-Final Accounts


Question No. 10

CS

Balance-sheet of P ltd. as on 31-3-01 (Rs. in Lakhs) (Rs. in Lakhs)

20 lakhs Equity Shares of Rs. 10 each 200 Freehold property 200

Profit & Loss A/c 180 Stock 120

12% Debentures 120 Debtors 100

Creditors 100 Cash & Bank 180

--------- --------

600 600

===== ===== It was resolved in AGM of the company a) to pay a dividend of 10% and corporate dividend tax of 10% b) to issue one bonus share for every four shares held. c) to give existing shareholders the option to buy one Rs. 10 share @ Rs. 14 for every four shares held

prior to the bonus distribution. d) to repay debentures at a premium of 4%. All shareholders took the option in point c above. Pass journal entries and draw up the balance-sheet.

Answer:- Balance-sheet 523.2 lakhs

Hints:- 1) Dividend paid Rs. 22 lakhs 2) Debentures redeemed a premium of 4.8 lakhs which should be written off from Security premium

a/c. 3) 5 lakhs new shares of Rs. 10 each were issued at a premium of Rs. 4 per share. 4) 5 lakhs Bonus shares ofm Rs. 10 each are are issued.

Question No. 11

B.Com XYZ Ltd. has Capital of 50,000 Equity shares of Rs. 10 each and 4,000 10% Preference Shares of Rs. 100 each. The Profit for the year 2002 amounted to Rs. 2,00,000. The balance of Profits brought from the previous year amounted to 40,000. It is resolved in the AGM to pay 20% dividend on equity shares. Do needful to give effect of the above and Prepare P/l Appropriation A/c

Answer:- Closing Balance of Profit & Loss Appropriation A/c after above adjustments Rs. 80,000 1) Transfer 10% of 2,00,000 to General Reserve 2) Give Preference dividend

Question No. 12

B.Com, CA Balances as on 1-4-00 Provision for Tax (1999-00) 20,000 Advance Tax Paid (1999-00) 18,000 Other Details

11-Final Accounts


Advance Tax Paid (2000-01) 10,000 Tax deducted at Source (00-01) 1,000 Profit & Loss Balance (1999-00) 20,000 Assessment of 1999-2000 was finalised during the year 00-01. The total tax liability for that year was fixed at 22,000. The net Profit earned by the company during 00-01 before tax amounts to Rs. 40,000. The tax rate is 35%.. Pass Journal Entries.

Answer:- 1) Provision for Tax Dr. 20,000 P/L a/c (Prior Period Item) Dr. 2,000 To Income-Tax Payable A/c 22,000 2) Income Tax Payable A/c Dr. 18,000 To Advance Tax 18,000 3) P/L Dr. 14,000 To Provision For Tax (00-01) 14,000

Question No. 13

CA,CS A Limited Company has paid up Equity capital of Rs. 15,00,000 divided into 1,50,000 shares of Rs. 10 each and 11% preference share Capital of Rs. 5,00,000 divided into 5,000 shares of Rs. 100 each. The balance of Profit & Loss brought forward from Balance-sheet was Rs. 38,000 The Profit for the year ended 31-3-98 amounted to Rs. 5,80,000 after Tax. The directors proposed a dividend of 24% on equity shares after making the following provisions:- 1) Statutory transfer to General Reserve. 2) Provision for Corporate dividend Tax @ 20% Pass entries and prepare Profit & loss Appropriation A/c

Answer:- Balance of P/L appropriation A/c 62,000

Hints:- 1) Transfer 10% of current year profit i.e. Rs. 58,000 to General Reserve. 2) CDT will be 83,000.

Question No. 14

CMA,CA Following is the trial balance of Fine Print Limited, whose authorised Share capital is Rs. 5,00,000 divided into shares of 100 each.

Building 2,90,000 Sales 5,20,000

Machinery 1,00,000 Outstanding Salaries 2,000

Closing Stock 90,000 Provision for Bad Debt 3,000

Purchases (adjusted) 2,10,000 Share Capital 2,00,000

Salaries 60,000 General Reserve 40,000

Directors Fee 10,000 Profit & Loss 25,000

Rent 26,000 Creditors 92,000

Depreciation 20,000 Provision For Dep

Bad Debts 6,000 on Building 50,000

Accrued Interest on Inv 2,000 on Machinery 55,000 1,05,000

11-Final Accounts


Investment in 12,000 shares 14% Debentures 2,00,000

of A ltd. of Rs. 10, Rs. 8 Paid 1,20,000 Interest on Debentures

Debenture Interest 28,000 accrued but not due 14,000

Loose Tools 23,000 Interest on Investment 12,000

Advance Tax 60,000 Unclaimed dividend 5,000

Sundry Expenses 18,000

Debtors 1,25,000

Bank 30,000

--------------- --------------

12,18,000 12,18.000

========= ======== You are required to Prepare Trading, Profit & Loss A/c for the year ending on 31-3-1997 and Balance-sheet as on 31-3-1997. a) Closing Stock is more than opening stock by Rs. 30,000 b) Provide Provision for Bad and Doubtful debts @ 4% on Debtors c) Make Provision for Income Tax @ 50% d) Depreciation expense include depreciation of Rs. 8,000 in building and that of Rs. 12,000 on

Machinery e) Directors Proposed Dividend of 25%. CDT 10%.

Answer:- B/S 7,30,000 GP 3,10,000. NP ( bef Tax) 1,52,000

Prov For Tax 76,000 NP (after Tax) 76,000 P/L App Closing balance 38,400.

Hints:- 1) Since closing stock is given in the Trial balance therefore Purchases represent raw material

consumed i.e. Raw material consumed = Op Stock + Purchases - closing Stock = 2,10,000 = (90,000-30,000) + Purchases - 90,000 = 2,10,000 Purchases = 2,40,000 Opening Stock = 60,000 Closing Stock = 90,000

Question No. 15

1996 The following items, among others, appeared in the balance sheet x ltd. as on 1st January, 1995 : 13½ %, preference share capital 4,00,000 fully paid equity share capital 5,00,000 partly paid –60%- equity share capital 3,00,000 securities premium account 7,00,000 15% debentures 10,00,000 profit before interest on debentures and before payment of tax @ 60%, is Rs. 12,50,000 for the year ended 31st dec 1995. The board of directors of the company proposed a dividend of 15 percent on equity capital and capitalization of profits for making partly paid-up shares into fully paid up. Assume CDT to 10% Pass the necessary journal entries to incorporate the board’s recommendations and show how the items concerned would be shown on the liabilities side of the balance sheet (necessarily memorandum) of x limited as on 31st December ,1995

11-Final Accounts


Answer:- Tax 6,60,000. Proposed Dividend on Pref Shares 54,000 Equity shares 1,20,000. CDT 17,400. Transfer to GR (5% of profits) Rs. 22,000. Bonus Rs. 2,00,000

Hints:-

Question No. 16

The following balances appeared in the books of the Moon-Light Co. Ltd. as on 31st March, 2008:

(Rs. in 000’s)

Dr. Cr.

Rs. Rs.

Issued, Subscribed and paid-up Capital:

60,00,000 Equity Shares of Rs. 100 each 6,00,000

General Reserve 2,50,000

Unclaimed Dividend 6,526

Trade Creditors 36,858

Buildings at cost 1,50,000

Purchases 5,00,903

Sales 10,83,947

Manufacturing Expenses 3,59,000

Establishment Charges 26,814

General Charges 31,078

Machinery at Cost 2,00,000

Motor Vehicle at Cost 30,000

Furniture at Cost 5,000

Opening Stock 1,72,058

Book Debts 2,23,380

Investments 2,88,950

Depreciation Reserve 71,000

Advance Payment of Income-tax 50,000

Cash Balance 72,240

Directors’ Fees 1,800

Interest on Investment 8,544

Profit and Loss Account

1st April, 2007 16,848

Staff Provident Fund ________ 37,500

21,11,223 21,11,223

From these balances and the following information, prepare the Company’s Balance Sheet as on 31st March, 2008 and its Profit and Loss Account for the year ended on that date:

(a) The stocks on 31st March, 2008 were valued at Rs. 1,48,680 thousand.

11-Final Accounts


(b) Provided Rs. 10,000 thousand for depreciation on fixed assets, Rs. 1,800 thousand for Managing Director’s remuneration and Rs. 6,200 thousand for the company’s contribution to the Staff Provident Fund.

(c) Interest accrued on investment amounted to Rs. 2,750 thousand.

(d) A provision of Rs. 50,000 thousand for taxes in respect of the profit for 2007-08 considered necessary.

(e) The directors propose a final dividend @ 8% after transfer to General Reserve Rs. 30,000 thousand.

(f) A claim of Rs. 2,500 thousand for workmen’s compensation is being disputed by the company.

(g) The market value of investments as on 31.3.2008 amounts to Rs. 3,02,500 thousand.

Answer

Moon Light Co. Ltd

Balance Sheet as at 31-3-2008

Note

No.

Figures as at

the end of

current

reporting period

Figures as at the

end of previous

reporting period

2 3 4

I. EQUITY AND LIABILITIES

1 Shareholders’ funds

(a) Share capital 6,00,000

(b) Reserves and surplus 2,95,916

2 Share application money pending allotment

3 Non-current liabilities

(a) Long-term borrowings

(d) Long-term provisions 43,700

4 Current liabilities

(a) Short-term borrowings

(b) Trade payables 36,858

(c) Other current liabilities 8,326

(d) Short-term provisions 1,05,200

TOTAL 10,90,000

( ` in…………)

Particulars

1

11-Final Accounts


II. ASSETS

Non-current assets

1 (a) Fixed assets 3,04,000

(i) Tangible assets -

(ii) Intangible assets

(b) Non-current investments 2,88,950

2 Current assets

(a) Current investments

(b) Inventories 1,48,680

(c) Trade receivables 2,23,380

(d) Cash and cash equivalents 72,240

(e) Short-term loans and advances

(f) Other current assets 52,750

TOTAL 10,90,000

11-Final Accounts


Refer

Note

No.

Figures for the

current

reporting period

Figures for the

previous

reporting period

I. 10,83,947

II. 11,294

III. 10,95,241

IV.

5,00,903

23,378

8,000

10,000

4,18,692

9,60,973

V. 1,34,268

VI.

VII.

VIII.

IX. 1,34,268

X

50,000

XV 84,268

XVI

14

Particulars



(1) Basic


Tax expense:

(1) Current tax

(2) Deferred tax

Other expenses

Total expenses



Exceptional items


Extraordinary Items






Finance costs



Other income

Total Revenue (I + II)

Expenses:

( ` in…………)

Moon Light Co Ltd.

Profit and loss statement for the year ended 31-3-2008

Notes to Accounts

11-Final Accounts


Figures for the

current

reporting period

Figures for the

previous

reporting period

Authorised

6,00,000

Issued

6,00,000

6,00,000

6,00,000

60,00,000 ES of Rs 100 each

Share Capital

Subscribed and Paid Up

60,00,000 ES of Rs 100 each

Subscribed but not fully paid up

60,00,000 ES of Rs 100 each

Reserves

2,50,000

30,000

2,80,000

16,848

84,268

-48,000

-7,200

-30,000

15,916

2,95,916

(-) Written Back in Current Year

Closing Balance

General Reserves

Opening balance

(+) Current Year Transfer

Closing Balance

(-) Interim Dividend

(-) CDT on Interim Dividend

(-) Transfer to Reserves

(+) Transfer from Reserves


(-) CDT on Proposed Dividend

Profit & Loss A/c

Opening balance

(+) Net Profit/Loss for the Current Year

43,700

43,700

Long Term Provisions

Provisions for Employee Benefits

Staff Provident Fund

43,700

43,700

Creditors 36,858

36,858

6,526

1,800

8,326

50,000

48,000

7,200

1,05,200

Long Term Provisions

CDT on Proposed Dividend

Short Term Provisions

Provision For Tax

Proposed Dividend

O/s MD Remuneration

Other Current Liabilities

Unclaimed dividend

Trade Payables

Provisions for Employee Benefits

Staff Provident Fund

11-Final Accounts


10 Fixed Assets

Opening

balance

Additio

ns/

(Dispos

als)

Closing

balance

Opening

balance

Depreci

ation

charge

for the

year

Closing

balance

Opening

balance

Closing

balance

a Tangible Assets

Building 1,50,000

Machinery 2,00,000

Motor Vehicles 30,000

Furniture 5,000

Total - - 3,85,000 71,000 10,000 81,000 3,04,000 -

Fixed Assets Accumulated Depreciation Net BlockGross Block

Figures for the

current

reporting period

Figures for the

previous

reporting period

2,88,950

Rs.3,02,500

2,88,950

Inventories

Stock 1,48,680

1,48,680

2,23,380

-

2,23,380

Non-Current Investments

Investments

Aggregate Amount of Quoted Investment (MV being)

Trade Receivable

For Period Less than Six Months

Secured, considered good

Unsecured, considered good

Doubtful

Less: Provision for doubtful advances

72,240

72,240

2,750

50,000

52,750

2,500

2,500

Cash And Equivalent

Cash in hand


Interest Accrued on Investment

Advance Payment of Taxes

Contingent Liabilites and Commitements

Workemn Compensation Claim

11-Final Accounts


10,83,947

10,83,947

11,294

11,294

1,72,058-1,48,68023,378

Less: Excise duty

Total

Other Income Interest on Investment

Total

Change in Inventory

Income from Revenue Sale of products Sale of services

Opening Stock (-) closing Stock

Total

1,8006,200

8,000

3,59,00026,81431,0781,800

4,18,692

Establishement Charges General Charges Directors Fees

Total

Employee Benefit Expenses MD Remuneration Contribution to Staff PF

Total

Other Expenses Manufacturing Expenses

Question 17

2010, CS Dec Exec Prog- 15m

PQ 8: The authorised capital of Moon Ltd is Rs.5,00,000 consisting of 2,000,6% preference shares of Rs. 100 each and 30,060 equity shares of Rs, 10 each. The following was the trial balance of Moon Ltd. as on 31st March, 2010:

Debit Balances Rs.

Investment in shares at cost 50,000

Purchases 4,90,500

Selling expenses 79,100

Stock on 1st April, 2009 1,45,000

Salaries and wages 52,000

Cash in hand 12,000

Interim preference dividend for the half year ended

30th September, 2009 6,000

Discount on issue of debentures 2,000

Preliminary expenses 1,000

Bills receivable 41,500

Interest on bank overdraft 7,800

Interest on debentures upto 30th September, 2009 3,750

11-Final Accounts


Sundry debtors 50,000

Freehold property at cost 3,50,000

Furniture at cost less depreciation of Rs. 15,000 35,000

Income-tax paid in advance for 2009-10 10,000

Technical know-how fees at cost, paid during the year 1,50,000

Audit fees 5,000

14,90,950

Credit Balances

Sundry creditors 87,850

6% Preference share capital 2,00,000

Equity share capital fully paid-up 2,00,000

5% Mortgage debentures secured on freehold properties 1,50,000

Dividend 4,250

Profit and loss account (1st April, 2009) 28,500

Sales (Net) 6,70,350

Bank overdraft secured by hypothecation of stock and receivables 1,50,000

14,90,000

You are required to

Prepare profit and loss account for the year ended 31st March, 2010 and the balance sheet as on that date after taking into account the following:

(i) Closing stock was valued at Rs. 1,42,500.

(ii) Purchases include Rs.5,000 worth of goods and articles distributed among valued customers.

(iii) Salaries and wages include Rs.2,000 being wages incurred for installation of electrical fittings which were recorded under furniture.

(iv) Bills receivable include Rs. 1,500 being dishonored bills, 50% of which had been considered irrecoverable.

(v) Bills receivable ofRs.2,000 maturing after 31st March, 2010 were discounted,

(vi) Depreciation on furniture to-be charged @10%on written down value,

(vii) Rs. 1,000 discount on issue of debentures to be written off.

(viii) Interest on debentures for the half year ended on 31st March, 2010 was due on that date.

(ix) Provide provision, for taxation Rs. 4,000,

(x) Technical know-how fees, is to be written off over a period of 10 years,

(xi) Rs. 500 of preliminary expenses are to be written off.

(xii) Salaries and wages include Rs, 10,000 being directors' remuneration.

(xiii) Sundry debtors include Rs. 6,000 debts due for more than 6 months.

(xiv) Rate of corporate dividend tax is 12%% and surcharge of 10% and 2% education cess.

11-Final Accounts


Keeping in mind the requirements of Part-I and Part-II of Schedule VI of the Companies Act, 1956, prepare the profit and loss account for the year ended 31st March, 2010 and balance sheet as on that date of Moon Ltd. as close thereto as possible. Figures for the previous year can be ignored.

in Rs.

Note

No.

2

I.

1

(a)

(b)

2

3

(a)

(d)

4

(a)

(b)

(c)

(d)

EQUITY AND LIABILITIES

Shareholders’ funds

Share application money pending allotment

Non-current liabilities

Share capital

Reserves and surplus

Long-term borrowings

Long-term provisions

Short-term borrowings

Current liabilities

Trade payables

Other current liabilities

Short-term provisions

TOTAL

Current Year

3

4,00,000

28,708

1,50,000

1,50,000

87,850

3,750

4,842

8,25,150

Previous Year

4

Particulars

1

Name

Balance Sheet as at

Moon Limited

31-3-2010

II.

1 (a)

(i)

(ii)

(b)

(c)

2

(a)

(b)

(c)

(d)

(e)

(f)

Current assets

TOTAL

ASSETS

Non-current assets

Non-current investments

Other Non Current Assets

Current investments

Inventories

Trade receivables

Cash and cash equivalents

Short-term loans and advances

Other current assets

Fixed assets

Tangible assets

Intangible assets

50,000

1,500

1,42,500

90,850

8,25,150

3,83,300

1,35,000

12,000

10,000

11-Final Accounts


in Rs.

Refer

Note No.

I.

II.

III.

IV.

V.


Expenses:






Finance costs


Other expenses

Total expenses



Particulars


Other income

Current Year

6,70,350

4,250

6,74,600

4,85,500

2,700

50,000

15,300

3,700

1,06,350

6,63,550

11,050

Previous Year

Name Moon Limited

Profit and Loss for the year ended 31-3-2010

VI.

VII.

VIII.

IX.

X

XV

XVI

Extraordinary Items


Tax expense:

(1) Current tax

(2) Deferred tax



Exceptional items


11,050

-4,000

7,050

Notes to Accounts

Share Capital

Authorised

2000 6% PSC of Rs 100 each

30,000 ESC of Rs. 10 each

Issued







Current Year

2,00,000

3,00,000

5,00,000

2,00,000

2,00,000

4,00,000

2,00,000

2,00,000

4,00,000

4,00,000

Previous Year

11-Final Accounts



Closing Balance 28,708

28,708

Previous Year Current Year

28,500

7,050

-6,000

-842

Reserves

Profit & Loss A/c

Opening balance




(-) Interim Dividend on PSC


Unsecured

Trade Payables

Creditors

1,50,000

Current Year

87,850

87,850

Current Year

1,50,000

1,50,000

Current Year

1,50,000

Long Term Borrowings

Secured

5% Mortgage Debentures

Unsecured

Short Term Borrowings

Secured

Bank Overdraft

Previous Year

Previous Year

Previous Year

Provision For Tax

CDT on Interim Preference Dividend


o/s Interest

o/s Expenses

O/s MD Remuneration (2695-1800)


Current Year

3,750

Previous Year

Previous Year

3,750

Current Year

4,000

842

4,842 Fixed Assets

Opening

balance

Additio

ns/

(Dispos

als)

Closing

balance

Opening

balance

Depreciati

on charge

for the

year

Closing

balance

Opening

balance

Closing

balance

a

3,50,000 3,50,000

52,000 18,700 33,300

- - 4,02,000 18,700 3,83,300

a

1,35,000 1,35,000

- - 1,35,000 - 1,35,000

Accumulated Depreciation Net Block

Tangible Assets

Freehold Property

Furniture

Total

Intangible Assets

Technical Knowhow

Total

Fixed Assets Gross Block

11-Final Accounts


1,42,500

1,42,500

Current Year

50,000

50,000

Current Year

500

1,000

1,500

Previous Year

Previous YearOther Non-Current Assets

Preliminary Expenses

Discount on Issue of Debentures

Inventories

Stock


Investments

Shares





Doubtful


Current Year

84,850

-

84,850

6,000

-

6,000

90,850

Previous Year



Doubtful

Trade Receivable


Cash at bank

Cash And Equivalent

Cash in hand

12,000

Current Year

10,000

10,000

Current Year

12,000

Previous Year

Previous Year


Advance Payment of Taxes

11-Final Accounts


Total

Other Income

Dividend

Total

Half-year Preference Dividend is not provided

Income from Revenue Sales of Goods Sale of services Less: Excise duty

Current Year

Current Year

4,250

4,250

2,000

-

Current Year

6,70,350

6,70,350

Previous Year

Previous Year

Previous Year

Contingent Liabilites and Commitements

Discounted bills

Change in Inventory


Total

Employee Benefit Expenses Salaries & Wages (52000-10000-2000)

Directors Remuneration

Total

Finance Charges Interest of Bank O/D

Interest on Debentures

Total

Current Year

1,45,200-1,42,500

2,700

Current Year

40,00010,000

50,000

Current Year

7,8007,500

15,300

Previous Year

Previous Year

Previous Year

Other Expenses

Selling Expenses Discount on Issue Debentures Audit Fees Technical Know-howWritten off Preliminary Expenses Provision for Bad Debts Advertisements (sample)

15,000500750

5,0001,06,350

Current Year

79,1001,0005,000

Previous Year

Total

Question 18

CA (Modified) CS-2010, June Exec- 15 m PQ 7: The following balances have been extracted from the books of pioneer Traders Ltd. as on 30th September, 2009:

(Rs. '000)

Dr. Cr.

Share capital (Authorised and issued): — 1,50,000

Equity (15.00,000 Shares of Rs. 100 each) — 4,000

8% Redeemable preference (40,000 shares) — 2,500

11-Final Accounts


Securities premium 4,800 —

Preference share redemption 10,000

General reserve —

Land (cost) 30,000 —

Buildings (cost less depreciation) 70,000 —

Furniture (cost less depreciation) 2,000 —

Motor vehicle (costless depreciation) 3,500 —

Trading account - gross profit — 90,000

Establishment charges 25,000

Rate, taxes and insurance 1,200

Commission 600

Discount received — 500

Interest on investments — 800

Depreciation 6,000

Sundry office expenses 6,000

Payment to auditors 400

Sundry debtors and creditors 10,660 2,560

Profit and loss account (as on 30.9.2008) — 1,000

Unpaid dividend — 200

Cash in hand 1,200 —

Cash at bank in current account 19,500 —

Security deposit 1,000 —

Outstanding expenses — 600

Investments in G.P. Notes 20,000 —

Stock in trade (at or below cost) 35,300 —

Provision for taxation (year ended 30.9.2008) — 7,000

Income-tax paid under dispute (year

ended 30.9.2008) 10,000 —

Advance payment of income-tax 22,000 —

2,69,160 2,69,160

The following further details are available:

(i) The preference shares were redeemed on 1st October, 2008 at a premium of 20% but no entries were passed for giving effect thereto, except payment standing to the debit of preference share redemption account, (ii) Depreciation as provided upto 30th September, 2009 is as follows:

(a) Building - Rs. 2,10,00,000.

11-Final Accounts


(b) Furniture - Rs. 20,00,000.

(c) Motor vehicles - Rs. 60,00,000.

(iii) Establishment charges include Rs. 18,00,000 paid to managing director as remuneration in terms of agreement which provides for a remuneration of 5% of annual net profits.

(iv) Payment to auditors includes Rs. 1,00,000 for taxation work in addition to audit fees.

(v) Market value of investments on 30th September, 2009 is Rs. 1,80.00,000.

(vi) Sundry debtors include Rs. 40,00,000 due for a period exceeding six months.

(vii) All receivables and deposits are considered good for realisation.

(viii) Income-tax demand for the year ended 30th September, 2008 Rs. 1,00,00,000 has not been provided for against which appeal is pending.

(ix) Income-tax is to be provided @ 34%. Also provide for tax on divisible profit @ 16%.

(x) Directors recommended payment of dividend on equity shares at the rate of 12%.

(xi) Ignore previous year's figures.

You are required

To prepare the profit and loss account for the year ended 30th September, 2009 and a balance sheet as at that date.

Answer:

( Rs in 000) Note

No.

2

I.

1

(a)

(b)

2

3

(a)

(d)

4

(a)

(b)

(c)

(d) Short-term provisions

TOTAL

Long-term borrowings

Balance Sheet as at 30-09-2009

1,50,000

Reserves and surplus 22,615

Non-current liabilities

Share application money pending allotment

Share capital


3 4

Shareholders’ funds

EQUITY AND LIABILITIES

Particulars

1

48,290

2,25,160

Short-term borrowings

2,560

1,695

Trade payables

Other current liabilities

Long-term provisions

Current liabilities

Question 18

Name Pioneer Traders Limited

11-Final Accounts


II.

1 (a)

(i)

(ii)

(b)

2

(a)

(b)

(c)

(d)

(e)

(f)

Inventories

Non-current investments

ASSETS

Non-current assets

Fixed assets

Tangible assets

Intangible assets

Current investments

33,000

2,25,160

35,300

10,660

20,700

20,000

1,05,500

-

Trade receivables

Cash and cash equivalents

Short-term loans and advances

Other current assets

Current assets

TOTAL

I.

II.

III.

IV.

V.

Total expenses

Finance costs


Other expenses




Expenses:







90,000

1,300

91,300


40,095

51,205

2,695

6,000

31,400

Particulars

Other income

Pioneer Traders Limited

Profit and loss statement for the year ended 30-9-

VI.

VII.

VIII.

IX.

X

XV

XVI

Tax expense:

(1) Current tax

Exceptional items

Profit before extraordinary items and tax

Extraordinary Items

Profit before tax (VII- VIII) 51,205

-17,410

33,795

(2) Deferred tax



(1) Basic

11-Final Accounts


1,50,000


1,50,000

1,50,000

1,50,000

Issued

15,00,000 ES of Rs 100 each


15,00,000 ES of Rs 100 each


Share Capital

Authorised

15,00,000 ES of Rs 100 each

Notes to Accounts

Closing Balance

Closing Balance

Profit & Loss A/c

Opening balance


(-) Tax Demand for the year ended 31-9-08



(-) Interim Dividend



Security Premium

Opening balance


(-) Transfer to CRR

Closing Balance

General Reserves

Opening balance


(-) Transfer to CRR

Reserves

Capital Redemption Reserve

Opening balance


(-) Transfer to CRR

4,000

4,000


-

845

-4,000

6,845

1,700

10,000

1,700

-

-845

-18,000

-2,880

1,000

33,795

-3,000

10,070

22,615

Closing Balance

11-Final Accounts


O/s MD Remuneration (2695-1800)


2,880

48,290

600

895

1,695

Previous Year

Previous Year

Provision For Tax for year 2008-09

Provision For Tax for year 2007-08

Proposed Dividend

CDT on Proposed Dividend

Trade Payables

Creditors


Unclaimed dividend

o/s Expenses

Current Year

2,560

2,560

Current Year

200


17,410

10,000

18,000

Opening

balance

Additi

ons/

(Dispo

sals)

Closing

balance

Opening

balance

Depreciat

ion

charge

for the

year

Closing

balance

Opening

balance

Closing

balance

a

30,000 30,000

91,000 21,000 70,000

4,000 2,000 2,000

9,500 6,000 3,500

- - 1,34,500 71,000 6,000 29,000 1,05,500

Motor Vehicles

Total

Tangible Assets

Land

Building

Furniture

Fixed Assets Gross Block Accumulated Depreciation Net Block

Fixed Assets


Investments

Aggregate Amount of Quoted Investment 20,000


Stock 35,300

35,300

(MV being Rs.18,000 )

20,000

Inventories

11-Final Accounts


Trade Receivable Current Year Previous Year

Doubtful

Less: Provision for doubtful advances -

6,660


Secured, considered good 6,660


Doubtful

Less: Provision for doubtful advances -

4,000


Secured, considered good 4,000


10,660

Cash at bank 19,500

20,700

Other Current Assets Current Year Previous Year

Cash And Equivalent Current Year Previous Year

Cash in hand 1,200

33,000

Security Deposit 1,000

Tax paid under dispute 10,000

Advance Payment of Taxes 22,000

Contingent Liabilites and Commitements Current Year Previous Year

Income from Revenue Current Year Previous Year

Gross Profit 90,000 Sale of services

-

Other Income Current Year Previous Year

Interest on Investment 800

Discount received 500

Less: Excise duty

Total 90,000

Total 1,300

11-Final Accounts


Change in Inventory Current Year Previous Year

Total 2,695

Other Expenses Current Year Previous Year

Employee Benefit Expenses Current Year Previous Year

MD Remuneration 2,695


Total -

1,20023,200

6006,000

300100

31,400

Rates Taxes insurance Establishement Charges Commission Sundry Office expenses Auditor for Audit Fees For Taxation

Total

Question 19

CA-2005, CS-2003

From the following particulars of a Limited Company, calculate the maximum remuneration payable to managing director and other part-time directors of the company:

Rs.

1. Net profit before provision for income-tax and managerial remuneration, but after depreciation and provision for repairs 86,84,100

2. Depreciation provided in the books 32,00,000

3. Repairs of machinery provided for during the year 2,50,000

4. Actual expenditure incurred on repairs during the year 1,50,000

Answer: Calculation of maximum remuneration payable to managing director and other part- time directors :

Rs.

Net profit before provision for income-tax and managerial remuneration 86,84,100

Excess provision made for repairs of machinery (Provision-Actuals

= Rs. 2,50,000-Rs. 1,50,000) 1,00,000

Net profit for the purpose of calculating Managerial remuneration 87,84,100

Remuneration Managing Director® 5% on Rs.87,84,100 4,39,205

Part-time Directors @ 1 % on Rs.87,84,100 87,841

Total Managerial Remuneration 5,27,046

Question 20

CMA-2003, CS-2005

11-Final Accounts


Yash Ltd. has only one type of capital, viz., 40,000 equity shares of Rs. 100 each. It also has got reserves totalling Rs. 20,00,000. The company closes its books on 31st March each year. It has paid dividends @ 12% upto 2001 -02 and 15% thereafter. In 2004-05, the company suffered a loss of Rs.2,50,000; therefore, it wishes to draw required amount out of the reserves to pay dividend at 12%. Advise the company.

Answer:

Question 21

CA-May 1997 Q2

The following is the Trial Balance of Subash Limited as on 31.3.97: Debit Rs. Credit Rs. Land at cost 110 Equity Capital (Shares of Rs. 10 each) 150 Plant & Machinery at Cost 385 10% Debentures 100 Debtors 48 General Reserve 15 Stock (31.3.97) 43 Profit & Loss A/c 86 Bank 10 Share Premium 20 Adjusted Purchases 160 Sales 350 Factory Expenses 30 Creditors 26 Administration Expenses 15 Provision for Depreciation 86 Selling Expenses 15 Suspense Account 2 Debenture Interest 10 Interim Dividend paid 9 ----- ----- 835 835 ===== ===== Additional Information: (a) On 31.3.97 the company issued bonus shares to the shareholders on 1:3 basis. No relating to this has

yet been made. (b) The authorised share capital of the company is 25,000 share of Rs. 10 each. (c) The company on the advice of independent valuer wish to revalue the land at Rs. 1,80,000. (d) Proposed final dividend 10%. (e) Suspense account of Rs. 2,000 represents cash received for the sale of some of the machinery on

1.4.96. The cost of the machinery was Rs. 5,000 and the accumulated depreciation theron being Rs. 4,000.

(f) Depreciation is to be provided on plant and machinery at 10% on original cost. You are required to prepare Subash Limited's profit & Loss account for the year ended 31.3.97 and a balance sheet on that date in vertical form as per the provisions of schedule VI of the Companies Act, 1956. Your answer to include detailed Schedules only for the following: (1) Share Capital (2) Reserves and Surplus (3) Fixed Assets Ignore previous Year's figures & taxation.

Question 22

CA-Nov 1995 Q.1

The balance sheet of A Ltd. as at 31.3.1995 is as follows:

Balance sheet as at 31.3.1995 Liabilities Rs. Assets Rs. Authorised Share Capital 1,50,000 Equity shares of Rs. 10 each 15,00,000 Sundry Assets 17,00,000

11-Final Accounts


Issued, Subscribed and paid-up 80,000 Equity shares of Rs. 7.50 each called-up and paid-up 6,00,000 Reserves Capital Redemption Reserve 1,50,000 Plant Revaluation Reserve 20,000 Share Premium Account 1,50,000 Development Rebate Reserve 2,30,000 Investment Allowance Reserve 2,50,000 General Reserve 3,00,000 ------------ -------------- Total 17,00,000 17,00,000 ======== ========= The company wanted to issue bonus shares to its share holders at the rate of one share for every two shares held. Necessary resolutions were passed; requisite legal requirements were complied with: (a) You are required to give effect to the proposal by passing journal entries in the books of A Ltd. (b) Show the amended Balance sheet.

Question 23

2009, December Executive Programme - 6 marks

Anuj Ltd. had an accumulated amount of general reserve of Rs.5,00,000. The directors of Anuj Ltd. decided to declare bonus shares out of the general reserve and to utilise the dividend in the following manner.

i. To make 10,000 partly paid shares of Rs. 10 each paid-up at fully paid-up. –

ii. To distribute 4 fully paid bonus shares of Rs. 10 each at Rs. fully paid existing 20,000 shares of Rs. 10 each.

Show journal entries in the books of Anuj Ltd. to. give effect to adjustments.

Answer:

In the Books of Anuj Ltd. Journal entries

Particulars Dr.(Rs). Cr.(Rs).

Equity Share Final Call A/c Dr. 40,000

To Equity Share Capital A/c 40,000

(Being final call money due on 10,000 shares @Rs.4/- each as per Board's Resolution datedKKK)

General Reserve A/c Dr. 40,000

To Bonus to Shareholders A/c 40,000

(Being bonus payable on 10,000 shares @ Rs.4 each as per shareholders' resolution dated)

Bonus to Shareholders A/c Dr. 40,000

To Equity Share Final Call A/c 40,000

(Being utilization of. bonus towards final call)

General Reserve A/c Dr. 1,92,000

To Bonus to Shareholder A/c 1,92,000

11-Final Accounts


(Being bonus shares payable in the ratio 5:4 of Rs.10/- each at Rs. 12 as per shareholders' resolution dated)

Bonus to shareholders A/c. Dr. 1,92,000

To Equity Share Capital A/c 1,60,000

To Security Premium A/c . 32,000

(Being issue of 16,000 bonus shares of Rs.10Aeach at Rs.12 per shareholders' resolution dated...)

Question 24

2007, December, CS Inter, 5 Marks

Following particulars are available from the books of Rajat Ltd.:

Rs.

Net profit before provision for income-tax and managerial

remuneration; but after depreciation and provision

for repairs

98,04,100

Depreciation provided in the books 35,00,000

Provision for repairs of machinery during the year 2,50,000

Depreciation allowable under Schedule XIV of the

Companies Act, 1956

28,00,000

Actual expenditure incurred on repairs during the year 1,50,000.

You are required to calculate the managerial remuneration In the following cases:

(i) If there is one whole-time director; and

(ii) If there are two whole-time directors, a part-time director and a manager

Answer: Sections 198 and 309 of the Companies Act, 1956 prescribe the maximum percentage of profit that can be paid as managerial remuneration. For this purpose, profit is to be calculated in the manner as prescribed in Section 349 of the Companies Act.

Calculation of net profit u/s 349 of the Companies Act, 1956

Rs. Rs

Net profit before provision for income-tax

and managerial remuneration, but after

depreciation and provision for repairs 98,04,100

Add: Depreciation provided in the books 35,00,000

Provision for repairs of machinery 2,50,000 37,50,000

1,35,54,100

Less: Depreciation allowable under Schedule XIV 28,00,000

11-Final Accounts


Actual expenditure incurred on repairs 1,50,000 29,50,000

1,06,04,100

Calculation of managerial remuneration

(i) If there is only one whole-time director:

Managerial remuneration = 5% of net profit = 5%of Rs.1,06,04,100

= Rs.5,30,205

(ii) If there are two whole-time directors, apart time director and a manager-Managerial remuneration = 11% of net profit = 11%of Rs.1,06, 04,100 = Rs.11,66,451

Question 25

2009, June, CS Inter, 6 Marks

Following is the profit and loss account of Azad Ltd. for the year ended 31st March, 2009:

Rs.

To Office and administrative expenses 3,10,000

To Selling and distribution expenses 1,92,000

To Directors' fees 39,500

To Managerial remuneration 1,70,000

To Interest on debentures 18,500

To Donation to charitable trust 15,000

To Compensation for breach of contract 27,000

To Depreciation on fixed assets 3,12,000

To Investment revaluation reserve 12,-500

To Provision for taxation 7,40,000

To General reserve 2,50,000

To Balance c/d 8,46,500

29,33.000

By Balance b/d 3,43,200

By Gross profit b/d 24,15,000

By Subsidies 1,39,300

By Interest on investment 9,500

By Transfer fees 1,000

By Profit on sale of machinery (W.D. V. Rs. 30,000) 25,000

29,33,000

Additional information:

(1) Original cost of the machinery sold was Rs. 40,000.

(2) Depreciation on fixed assets as per Schedule XIV of the Companies Act, 1956 was Rs.3,42,000.

11-Final Accounts


You are required to calculate managerial remuneration in the following situations:

(i) When there is only whole-time director;

(ii) When there are two whole-time directors; and

(iii) When there are two whole-time directors, a managing director and a part-time director.

Answer:

Rs. Rs.

Gross profit as per Profit & Loss Account 24,15,000

Add: Subsidies 1,39,300

Interest on investments 9,500 “

Transfer fees 1,000

Profit on sale of machinery (Cost - W.D.V.)

(40,000-30,000) 10,000 1,59,800

25,74,800

Less Office and administrative expenses 3,10,000

Director's fees 39,500

' Selling and distribution expenses 1,92,000 t

Interest on debentures 18,500

Compensation for breach of contract 27,000

Depreciation as per Schedule XIV 3,42,000 9,29,000

16,45,800

Computation of managerial remuneration:

(i) When there is only one whole-time director:

5% of Rs. 16,45,800

Rs. 82.290

(ii) When there are two whole-time directors:

10%ofRs.16,45,800

Rs. 1.64.580

(iii) When there are two whole-time directors, a

managing director and a part-time director:

11% of Rs. 16,45,800

Rs. 1.81.038

Question-26

11-Final Accounts


2011, June Executive Programme - 3 marks

A limited company has a paid-up equity share capital of `15,00,000 divided into 1,50,000 shares of ?10 each and 11%

preference share capital of ` 5,00,000 divided into 5,000 shares of `100 each. The balance of profit brought forward

from the previous balance sheet was `38,000.

The profit for the year ended 31st March, 2010 amounted to ̀5,80,000 after tax. The directors proposed a dividend of 24% on equity share capital after providing for — (i) statutory minimum transfer to general reserve; and (ii) dividend on preference shares. Ignore tax on distributed profit. Prepare profit and loss appropriation account.

11-Final Accounts


Detailed Answers

Answer.2

Provision for tax A/c To Tax Payable/Refundable A/c 50,000 By Balance b/d 2,50,000 To Balance c/d 2,70,000 By Profit & Loss A/c 70,000 --------------- -------------- 3,20,000 3,20,000 ========= ========

Advance Tax A/c To Balance b/d 2,00,000 By Tax Payable/Refundable A/c 45,000 To Bank 47,000 By Balance c/d 2,02,000 --------------- -------------- 2,47,000 2,47,000 ========= ========

Tax Payable / Refundable A/c To Advance Tax A/c 45,000 By Provision for Tax A/c 50,000 To Bank 15,000 By Profit & Loss A/c 10,000 -------------- ------------ 60,000 60,000 ======== =======

Relevant Profit & Loss A/c and Balance Sheet

Profit & Loss A/c To Provision for Tax 70,000 To Tax P/R A/c 10,000

Balance Sheet Provision for Tax 2,70,000 Advance Tax 2,02,000

Answer.3

Profit & Loss A/c To Provision for tax 1,70,000 By Tax P/R A/c 10,000

Balance Sheet Provision for tax 3,20,000 Advance tax 2,30,000

Answer.4

Provision for Bad Debts A/c

11-Final Accounts


To Bad debts 20,000 By Balance b/d 2,50,000 To Bad debts 15,000 To P/L A/c (B.F.) 1,66,500 To Balance c/d 48,500 --------------- -------------- 2,50,000 2,50,000 ========= ========

Profit & Loss A/c By Provision for Bad debts 1,66,500

Balance Sheet Debtors 5,00,000 Bad Debts (15,000) provision for bad debts (48,500) 4,36,500

Answer.5

Provision for Bad Debts A/c To Bad Debts 20,000 By Balance b/d 50,000 To Bad Debts 15,000 By Profit & Loss A/c (B.F.) 63,500 To Balance c/d 78,500 --------------- -------------- 1,13,500 1,13,500 ========= ========

Relevant Profit & Loss A/c To Provision for bad debts 63,500

Relevant Balance Sheet Debtors 8,00,000 Bad debts (15,000) -------------- 7,85,000 Provision for bad debts (78,500) 7,06,500

Answer.6

Journal Entries

1-6-99 Profit & Loss A/c Dr. 2,40,000

To Proposed dividend 2,00,000

To CDT payable 40,000

1-9-99 Proposed dividend Dr. 2,00,000

CDT on P.D. Dr. 40,000

To Dividend payable 2,00,000

To CDT Payable 40,000

11-Final Accounts


1-10-99 Dividend payable Dr. 2,00,000

CDT Payable Dr. 40,000

To Bank 2,40,000

Solution 8

Profit and Loss Account for the Year Ended 30 June, 1987

TO Opening Stock 1,64,000 By Sales 6,56,000

To Purchases 4,36,000 By Closing Stock 3,80,000

To Salary & Wages 1,28,000 By Interest on Investment 2,400

( including outstanding) (2,000 + 400)

To Directors’ Fees 10,000

To insurance Premium 6,400

To Rent 5,000

To Payment to Auditor:

Audit Fees 6,000

Taxation Work 4,000 10,000

To Repairs 6,400

To Printing & Stationery 2,200

To Provision for Taxation 10,000

To Depreciation 38,400

( 15,000 + 22,000 + 1,400)

To Provision for Bad Debts 6,000

To Preliminary Expenses 4,000

TO Net Profit 2,12,000

--------------- -------------

10,38,400 10,38,400

========= ========

Profit and Loss Appropriation A/C To General Reserve 30,000 By balance 50,000 To Proposed Dividend 1,80,000 Net Profit b/d 2,12,000

To Balance c/d 52,000

———— ————---

2,62,000 2.62,000

======= =========

Balance Sheet As On 30 June 1987 Liabilities Rs. Assets Rs. Share Capital Fixed Assets Authorised Capital: Land & Building 3,80,000 1,00,000 ordinary Shares of Less: Dep. upto date 1,82,000 1,98,000 Rs. 10 each 10,00,000 Issued & Paid up Plant & Machinery 2,00,000 60,000 Ordinary Less: Dep. upto date 65,000 1,35,000 Shares of Rs. 10 each fully paid 6,00,000 Furniture 24,000 Less: Calls unpaid 20,000 5,80,000 Less: Dep. upto date 18,400 5,600 Reserves & Surplus General Reserve 1,10,000 Investment 24,000 Profit & Loss A/C 52,000 A. Current Assets

11-Final Accounts


Secured Loans Closing Stock 3,80,000 Bank Loan 1,00,000 Sundry Debtors due for Unsecured Loans NIL more than 6 months 20,000 Current Liability & Provisions Less: Bad Debts 4,000 A. Current Liabilities ------------ Bills payable 32,000 16,000 Sundry Creditors for Other Debt 2,30,000 goods 54,000 Less: Provision for For Expenses (64000+4000) 68,000 1,22,000 Bad Debt 6,000 2,40,000 Unclaimed Dividend 4,000 Cash at Bank 1,63,600 B. Provision Cash in hand 12,400 For Taxation 16,000 B. Loan & Advances Addition 10,000 26,000 Prepaid Expenses 24,000 Proposed Dividend 1,80,000 Bills Receivable 15,000 Accrued Int. on Investment 400 Miscellaneous Expenditures Preliminary Expenses 20,000 Less: Written off 12,000 8,000 ------------ ----------- 12,06,000 12,06,000 ======== ========

Contingent Liabilities

Claims for compensation not acknowledged as debt 30,000 Note: Figures for previous year are not available and hence not given.

Working Notes Provision for B.debts

To B.debts 4,000 By opening balance 4,000

To closing balance 6,000 By P/L 6,000

----------- ----------

10,000 10,000

---------- ---------- Depreciation charge would have to be modified in the light of Schedule XIV of the Companies Act under: Land and building 2,20,000 5% 11,000 Plant and Machinery 1,50,000 15% 22,500 Furniture 7,000 10% 700 ------------- 34,200 ======

Solution 9

Bharat Implements Ltd. Profit & Loss A/C For The Year Ended 31 March 1987

To Stock (1-4-1986: By Sales 13,39,400

To Raw Materials and stores 1,00,040 By Stocks (31-3-1987):

To Work in process 40,160 Raw materials 60,020

To Finished Goods 1,99,800 Work-in-process 50,080

To Purchase-materials 8.96,800 Finished goods 1,51,900

To Salaries and wages 59,420 By Other income 5,760

To Other expenses 2,31,910 By provision for B. debts 30

To Payment to auditors:

11-Final Accounts


To Audit fees 100

Other service 30

To Interest:

Fixed loans 1,240

Other interest 2,000

To Depreciation 7,100

To Managing director's remuneration 240

To Provision for taxation 27,340

To Net profit 41,010

--------------- ----------------

16,07,190 16,07,190 -------------- ----------------

Profit and Loss Appropriation A/C

To Proposed dividend 10,000 By Balance b/d --

To General Reserve 31,690 By Net profit b/d 41,010

By D R R 680

------------ -------------

41,690 41,690

======= =======

Bharat Implements Limited

Balance Sheet as at 31 March 1987 Liabilities Rs. Assets Rs. Share Capita l Fixed Assets Authorised: 4,000 Fixed assets at cost 1,27,740 Equity shares 10 each 40,000 Less: Dep. 56,000 71,740 Issued and Subscribed, Paid up: ======= Investment at Cost 380 4,000 Equity shares of Rs. (Market value 300) 10 each Current Assets, Loans and Advances Reserves and Surplus 40,000 Current Assets: General Reserve 51,600 Raw Materials 60,020 Add: during the year Word-in-Process 50,080 Transfer from Profit Finished goods 1,51,900 & loss 31,690 83,290 Sundry Debtors: Development Rebate Due for more than Reserve 4,680 6 months 242 Less: Transfer to (including doubtful P/L or General Reserve 680 4,000 Rs. 60 thousand) Investment Allowance Reserve 8,500 Others 1,17,758 Secured Loans 26,960 ----------- Unsecured Loan 1,18,000 Fixed Deposits 32,000 Less: Provision for Current Liabilities and Provisions doubtful debts 90 1,17,910 (A) Current Liability: Cash in hand and at Bank 640 Sundry creditors 2,21,550 Interest accrued 50 Remuneration to Managing director240(B) Loan and Advances 1,160 (B) Provisions: Provision for taxation 27,340 Proposed dividend 10,000 ------------- ------------- 4,53,880 4,53,880 ======== ======== Working Notes: 1) Provision For Taxation

11-Final Accounts


Since the question is silent regarding the provision for taxation, it is assumed to be 40% of net profit. 2) Other Expenses 2,35,280 Less: Auditor's fees included 130 ------------ Less: Interest on fixed loans and other interest 3,240 ------------ 2,31,910 =======

Provision for B.debts

To B.debts (adjustment) 70 By opening balance 200

To B.debts (T.B.) 10

To P/l ( balancing figure) 30

To closing balance 90

----------- ----------

200 200

---------- ----------

Answer. 10

Journal Entries

(1) Profit & Loss A/c Dr. 22,00,000

To Proposed dividend 20,00,000

To CDT on P.D. 2,00,000

(2) Proposed dividend Dr. 20,00,000

CDT on P.D. Dr. 2,00,000

To Dividend payable 20,00,000

To CDT Payable 2,00,000

(3) Dividend Payable Dr. 20,00,000

CDT Payable Dr. 2,00,000

To Bank 22,00,000

Part B


To Bonus Issue 50,00,000

(2) Bonus Issue Dr. 50,00,000

To ESC 50,00,000

Part C

11-Final Accounts


(1) Bank Dr. 70,00,000

To Share Application 70,00,000

(2) Share Application Dr. 70,00,000

To ESC 50,00,000

To Security Premium 20,00,000

Part D

(1) 12% Debentures Dr. 1,20,00,000

Premium on redemption Dr. 4,80,000

To Bank 1,24,80,000

(2) Securities Premium Dr. 4,80,000

To Premium on redemption 4,80,000

Answer. 11

Profit & Loss App A/c To General Reserve 20,000 By Balance b/d 40,000 To preference dividend 40,000 By N.P. 2,00,000 To Proposed dividend 1,00,000 To Balance c/d 80,000 --------------- -------------- 2,40,000 2,40,000 ========= ========

Answer.12

Journal Entries (1) Provision for tax Dr. 20,000

Profit & Loss (APP) A/c Dr. 2,000

To Tax P/R A/c 22,000

(2) Tax P/R A/c Dr. 18,000

To Advance tax 18,000

(3) Profit & Loss A/c Dr. 14,000

To Provision for tax 14,000

11-Final Accounts


Answer.13

Profit & Loss APP A/c To General Reserve 58,000 By Balance b/d 38,000 To Proposed Preference dividend 55,000 By N.P. 5,80,000 To CDT on Preference dividend 11,000 To Proposed equity dividend 3,60,000 To CDT on equity dividend 72,000 To Balance c/d 62,000 --------------- -------------- 6,18,000 6,18,000 ========= ========

Journal Entry


To General Reserve 58,000

To Proposed Preference dividend 55,000

To CDT on Preference dividend 11,000

To Proposed equity dividend 3,60,000

To CDT on equity dividend 72,000

(2) Proposed Preference dividend Dr. 55,000

CDT on Preference dividend Dr. 11,000

Proposed equity dividend Dr. 3,60,000

CDT on equity dividend Dr. 72,000

To Preference dividend payable 55,000

To equity dividend payable 3,60,000

To CDT Payable 83,000

(3) Preference dividend payable Dr. 55,000

equity dividend payable Dr. 3,60,000

CDT Payable Dr. 83,000

To Bank 4,98,000

Answer.14

Trading & Profit & Loss A/c of fine print Ltd. for the year ended 31-3-97 Rs. Rs. To Raw Material consumed 2,10,000 By Sales 5,20,000 To G.P. 3,10,000 --------------- -------------- 5,20,000 5,20,000 ========= ======== To Salaries 60,000 By G.P. 3,10,000 To Directors fee 10,000 By Interest on Investment 12,000 To Rent 26,000 To Depreciation 20,000 To Debenture Interest 28,000

11-Final Accounts


To Sundry Expenses 18,000 To Provision for bad debts 8,000 To Provision for tax 76,000 (50/100 x 1,52,000) To N.P. 76,000 -------------- -------------- 3,22,000 3,22,000 ========= ======== To General Reserve 7,600 By Balance b/d 25,000 To Proposed dividend 50,000 By N.P. 76,000 To CDT on P.D. 5,000 To Balance c/d 38,400 --------------- -------------- 1,01,000 1,01,000 ========= ========

Balance Sheet Share Capital Fixed Assets Share Capital 2,00,000 Building 2,90,000 Provision for Depreciation 50,000 2,40,000 Machinery 1,00,000 Reserves and surplus Provision for Depreciation 55,000 45,000 General Reserve 40,000 Transfer 7,600 47,600 Investment Profit & Loss A/c 38,400 Investment in 12,000 shares of A Ltd. of Rx.10 & Rx.8 paid 1,20,000 Loans 14% Debentures 2,00,000 C.A. Loan & Advances Closing Stock 90,000 Current Liabilities & Provisions Loose Tools 23,000 Outstanding salaries 2,000 Advance Tax 60,000 Debtors 1,25,000 Creditors 92,000 Provision for bad debts 5,000 1,20,000 Outstanding Interest on Debenture 14,000 Bank 30,000 Unclaimed dividend 5,000 Accrued Interest on Investment 2,000 Provision for tax 76,000 Proposed dividend 50,000 CDT on Proposed dividend 5,000 -------------- ------------- 7,30,000 7,30,000 ========= ========

WN

Provision for Bad Debts A/c To Bad Debts 6,000 By Balance b/d 3,000 To Balance c/d 5,000 By Profit & Loss A/c 8,000 ------------- ------------ 11,000 11,000 ======== =======

Answer.15

Entries

11-Final Accounts



To Interest on Debentures 1,50,000

To Provision for tax 6,60,000

To Proposed Preference dividend 54,000

To CDT on preference dividend 5,400

To Proposed Equity shares 1,20,000

To CDT on Equity Shares 12,000

To General Reserve (5% of 4,40,000) 22,000


To Bonus Issue 2,00,000

(3) Share final call Dr. 2,00,000

To ESC 2,00,000

(4) Bonus Issue Dr. 2,00,000

To Share final call 2,00,000

(5) Interest on Debenture Dr. 1,50,000

To Bank 1,50,000

Relevant Balance - Sheet of X Ltd. as on 31.12.1995 Share Capital 13½% Preference Shares 4,00,000 Equity Share Capital 10,00,000 Reserve & Surplus Security Premium 7,00,000 General Reserve 22,000 P&L App A/c 26,600 Secured Loan 15% Debentures 10,00,000 Current Liabilities & Provisions Prov. For Income Tax 6,60,000 Prop Pref Divi 54,000 CDT of Pref Div 5,400 59,400 Prop Equity Divi 1,20,000 CDT on equity Divi12,000 132,000

Answer 21

Answer 22

11-Final Accounts


(a) In the books of A Ltd. Journal Entries

Rs. Rs.

(i) Share Final Call A/c Dr. 2,00,000

To Share Capital A/c 2,00,000 (Being the final call of Rs. 2.50 each on 80,000 equity shares to make them fully paid up)

(ii) General Reserve A/c Dr. 2,00,000

To Bonus to shareholders A/c 2,00,000 (Being the transfer of Rs. 2,00,000 from General Reserve to make the partly paid up shares fully paid up)

(iii) Bonus to Shareholders A/c Dr. 2,00,000

To Share Final Call A/c 2,00,000 (Being the amount due on final call adjusted against transfer from General Reserves to Bonus to Shareholders A/c)

(iv) General Reserves Dr. 1,00,000

Share Premium A/c Dr. 1,50,000

Capital Redemption Reserves A/c Dr. 1,50,000

To Bonus to share holders A/c 4,00,000 (Being the appropriation made as above to facilitate issue of fully paid uo bonus shares at the rate of one share for every two shares held)

(v) Bonus to Shareholders A/c Dr. 4,00,000

To Equity Share Capital A/c 4,00,000 (Being the issuance of 40,000 fully paid up shares of Rs. 10 each by way of bonus)

Tutorial Notes: (i) Reserves other than Capital Redemption Reserve, Plant Revaluation Reserve and Share Premium

account can be utilised for making the partly paid up shares fully paid up. (ii) Except Plant Revaluation Reserve, all other Reserves and Share Premium account can be utilised to

make the bonus issue.

(b) Balance Sheet (after bonus issue) Liabilities Assets Authorised Share Capital 1,50,000 equity shares of Rs. 10 each. 15,00,000 Sundry Assets 17,00,000 ======= Issued and Subscribed 1,20,000 equity shares of Rs. 10 each fully paid up 12,00,000 Of the above call on 80,000 shares @ 2.50 each has been adjusted taking transfer from General Reserve without payments being received in cash. Of the above shares of 40,000 equity shares are alloted as fully paid up by way of bonus shares. Reserves and Surplus

11-Final Accounts


Development Rebate Reserve 2,30,000 Investment allowance Reserve 2,50,000 Plant Revaluation Reserve 20,000 ------------- ------------ 17,00,000 17,00,000 ======== ========

Documents

125ki Final Accounts