11-Final Accounts
Video Classes by CA M K Jain ph.9990112455 http://www.micecareer.com Page 11. 1
Final Accounts
ByByByBy
CA M K JainCA M K JainCA M K JainCA M K Jain
Features of Video Classes 1. No internet Connection required when watching video. So there is no hanging of video.
2. e-book with Theory, Questions and Answers in included with each chapter.
3. Can view every video up to 30 times.
4. Can Back or forward the video hear again any point not cleared.
5. You can evaluate your performance by pausing the video and doing the problem on your own.
6. Can ask doubt through sms or phone.
7. We also take test and evaluate them on examination pattern.
11-Final Accounts
Video Classes by CA M K Jain ph.9990112455 http://www.micecareer.com Page 11. 2
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
Video Classes by CA M K Jain ph.9990112455 http://www.micecareer.com Page 11. 3
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
Video Classes by CA M K Jain ph.9990112455 http://www.micecareer.com Page 11. 4
(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
Video Classes by CA M K Jain ph.9990112455 http://www.micecareer.com Page 11. 5
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
Video Classes by CA M K Jain ph.9990112455 http://www.micecareer.com Page 11. 6
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
Video Classes by CA M K Jain ph.9990112455 http://www.micecareer.com Page 11. 7
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
Video Classes by CA M K Jain ph.9990112455 http://www.micecareer.com Page 11. 8
(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
Video Classes by CA M K Jain ph.9990112455 http://www.micecareer.com Page 11. 9
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
Video Classes by CA M K Jain ph.9990112455 http://www.micecareer.com Page 11. 10
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
Video Classes by CA M K Jain ph.9990112455 http://www.micecareer.com Page 11. 11
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
Video Classes by CA M K Jain ph.9990112455 http://www.micecareer.com Page 11. 12
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
Video Classes by CA M K Jain ph.9990112455 http://www.micecareer.com Page 11. 13
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
Video Classes by CA M K Jain ph.9990112455 http://www.micecareer.com Page 11. 14
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
Video Classes by CA M K Jain ph.9990112455 http://www.micecareer.com Page 11. 15
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
Video Classes by CA M K Jain ph.9990112455 http://www.micecareer.com Page 11. 16
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
Video Classes by CA M K Jain ph.9990112455 http://www.micecareer.com Page 11. 17
(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
Video Classes by CA M K Jain ph.9990112455 http://www.micecareer.com Page 11. 18
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
Video Classes by CA M K Jain ph.9990112455 http://www.micecareer.com Page 11. 19
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
Video Classes by CA M K Jain ph.9990112455 http://www.micecareer.com Page 11. 20
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
Video Classes by CA M K Jain ph.9990112455 http://www.micecareer.com Page 11. 21
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
Video Classes by CA M K Jain ph.9990112455 http://www.micecareer.com Page 11. 22
(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
Video Classes by CA M K Jain ph.9990112455 http://www.micecareer.com Page 11. 23
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
Video Classes by CA M K Jain ph.9990112455 http://www.micecareer.com Page 11. 24
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
Profit (Loss) for the period (XI + XIV)
Earnings per equity share:
(1) Basic
Profit before tax (VII- VIII)
Tax expense:
(1) Current tax
(2) Deferred tax
Other expenses
Total expenses
Profit before exceptional and extraordinary
items and tax (III-IV)
Exceptional items
Profit before extraordinary items and tax (V - VI)
Extraordinary Items
Cost of materials consumed
Purchases of Stock-in-Trade
Changes in inventories of finished goods work-
in-progress and Stock-in-Trade
Employee benefits expense
Finance costs
Depreciation and amortization expense
Revenue from operations
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
Video Classes by CA M K Jain ph.9990112455 http://www.micecareer.com Page 11. 25
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
(-) Proposed Dividend
(-) 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
Video Classes by CA M K Jain ph.9990112455 http://www.micecareer.com Page 11. 26
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
Other Current Assets
Interest Accrued on Investment
Advance Payment of Taxes
Contingent Liabilites and Commitements
Workemn Compensation Claim
11-Final Accounts
Video Classes by CA M K Jain ph.9990112455 http://www.micecareer.com Page 11. 27
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
Video Classes by CA M K Jain ph.9990112455 http://www.micecareer.com Page 11. 28
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
Video Classes by CA M K Jain ph.9990112455 http://www.micecareer.com Page 11. 29
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
Video Classes by CA M K Jain ph.9990112455 http://www.micecareer.com Page 11. 30
in Rs.
Refer
Note No.
I.
II.
III.
IV.
V.
Total Revenue (I + II)
Expenses:
Cost of materials consumed
Purchases of Stock-in-Trade
Changes in inventories of finished goods work-
in-progress and Stock-in-Trade
Employee benefits expense
Finance costs
Depreciation and amortization expense
Other expenses
Total expenses
Profit before exceptional and extraordinary
items and tax (III-IV)
Particulars
Revenue from operations
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
Profit before tax (VII- VIII)
Tax expense:
(1) Current tax
(2) Deferred tax
Profit (Loss) for the period (XI + XIV)
Earnings per equity share:
Exceptional items
Profit before extraordinary items and tax (V - VI)
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
2000 6% PSC of Rs 100 each
20,000 ESC of Rs. 10 each
Subscribed and Paid Up
2000 6% PSC of Rs 100 each
20,000 ESC of Rs. 10 each
Subscribed but not fully paid up
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
Video Classes by CA M K Jain ph.9990112455 http://www.micecareer.com Page 11. 31
(-) Transfer to Reserves
Closing Balance 28,708
28,708
Previous Year Current Year
28,500
7,050
-6,000
-842
Reserves
Profit & Loss A/c
Opening balance
(+) Net Profit/Loss for the Current Year
(-) Proposed Dividend
(-) CDT on Proposed Dividend
(-) Interim Dividend on PSC
(-) CDT on Interim Dividend
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
Other Current Liabilities
o/s Interest
o/s Expenses
O/s MD Remuneration (2695-1800)
Short Term Provisions
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
Video Classes by CA M K Jain ph.9990112455 http://www.micecareer.com Page 11. 32
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
Non-Current Investments
Investments
Shares
Less: Provision for doubtful advances
For Period Less than Six Months
Secured, considered good
Unsecured, considered good
Doubtful
Less: Provision for doubtful advances
Current Year
84,850
-
84,850
6,000
-
6,000
90,850
Previous Year
Secured, considered good
Unsecured, considered good
Doubtful
Trade Receivable
For Period Less than Six Months
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
Other Current Assets
Advance Payment of Taxes
11-Final Accounts
Video Classes by CA M K Jain ph.9990112455 http://www.micecareer.com Page 11. 33
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
Opening Stock (-) closing Stock
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
Video Classes by CA M K Jain ph.9990112455 http://www.micecareer.com Page 11. 34
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
Video Classes by CA M K Jain ph.9990112455 http://www.micecareer.com Page 11. 35
(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
Current Year Previous Year
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
Video Classes by CA M K Jain ph.9990112455 http://www.micecareer.com Page 11. 36
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
Depreciation and amortization expense
Other expenses
Profit before exceptional and extraordinary
items and tax (III-IV)
Revenue from operations
Expenses:
Employee benefits expense
Total Revenue (I + II)
Cost of materials consumed
Purchases of Stock-in-Trade
Changes in inventories of finished goods work-
in-progress and Stock-in-Trade
90,000
1,300
91,300
Current Year Previous Year
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
Profit (Loss) for the period (XI + XIV)
Earnings per equity share:
(1) Basic
11-Final Accounts
Video Classes by CA M K Jain ph.9990112455 http://www.micecareer.com Page 11. 37
1,50,000
Current Year Previous Year
1,50,000
1,50,000
1,50,000
Issued
15,00,000 ES of Rs 100 each
Subscribed and Paid Up
15,00,000 ES of Rs 100 each
Subscribed but not fully paid up
Share Capital
Authorised
15,00,000 ES of Rs 100 each
Notes to Accounts
Closing Balance
Closing Balance
Profit & Loss A/c
Opening balance
(+) Net Profit/Loss for the Current Year
(-) Tax Demand for the year ended 31-9-08
(-) Proposed Dividend
(-) CDT on Proposed Dividend
(-) Interim Dividend
(-) CDT on Interim Dividend
(-) Transfer to Reserves
Security Premium
Opening balance
(+) Current Year Transfer
(-) Transfer to CRR
Closing Balance
General Reserves
Opening balance
(+) Current Year Transfer
(-) Transfer to CRR
Reserves
Capital Redemption Reserve
Opening balance
(+) Current Year Transfer
(-) Transfer to CRR
4,000
4,000
Current Year Previous Year
-
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
Video Classes by CA M K Jain ph.9990112455 http://www.micecareer.com Page 11. 38
O/s MD Remuneration (2695-1800)
Short Term Provisions
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
Other Current Liabilities
Unclaimed dividend
o/s Expenses
Current Year
2,560
2,560
Current Year
200
Current Year Previous Year
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
Current Year Previous Year
Investments
Aggregate Amount of Quoted Investment 20,000
Non-Current Investments
Stock 35,300
35,300
(MV being Rs.18,000 )
20,000
Inventories
11-Final Accounts
Video Classes by CA M K Jain ph.9990112455 http://www.micecareer.com Page 11. 39
Trade Receivable Current Year Previous Year
Doubtful
Less: Provision for doubtful advances -
6,660
For Period Less than Six Months
Secured, considered good 6,660
Unsecured, considered good
Doubtful
Less: Provision for doubtful advances -
4,000
For Period Less than Six Months
Secured, considered good 4,000
Unsecured, considered good
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
Video Classes by CA M K Jain ph.9990112455 http://www.micecareer.com Page 11. 40
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
Opening Stock (-) closing Stock
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
Video Classes by CA M K Jain ph.9990112455 http://www.micecareer.com Page 11. 41
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
Video Classes by CA M K Jain ph.9990112455 http://www.micecareer.com Page 11. 42
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
Video Classes by CA M K Jain ph.9990112455 http://www.micecareer.com Page 11. 43
(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
Video Classes by CA M K Jain ph.9990112455 http://www.micecareer.com Page 11. 44
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
Video Classes by CA M K Jain ph.9990112455 http://www.micecareer.com Page 11. 45
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
Video Classes by CA M K Jain ph.9990112455 http://www.micecareer.com Page 11. 46
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
Video Classes by CA M K Jain ph.9990112455 http://www.micecareer.com Page 11. 47
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
Video Classes by CA M K Jain ph.9990112455 http://www.micecareer.com Page 11. 48
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
Video Classes by CA M K Jain ph.9990112455 http://www.micecareer.com Page 11. 49
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
Video Classes by CA M K Jain ph.9990112455 http://www.micecareer.com Page 11. 50
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
Video Classes by CA M K Jain ph.9990112455 http://www.micecareer.com Page 11. 51
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
Video Classes by CA M K Jain ph.9990112455 http://www.micecareer.com Page 11. 52
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
(1) Profit & Loss A/c Dr. 50,00,000
To Bonus Issue 50,00,000
(2) Bonus Issue Dr. 50,00,000
To ESC 50,00,000
Part C
11-Final Accounts
Video Classes by CA M K Jain ph.9990112455 http://www.micecareer.com Page 11. 53
(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
Video Classes by CA M K Jain ph.9990112455 http://www.micecareer.com Page 11. 54
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
(1) Profit & Loss A/c Dr. 5,56,000
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
Video Classes by CA M K Jain ph.9990112455 http://www.micecareer.com Page 11. 55
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
Video Classes by CA M K Jain ph.9990112455 http://www.micecareer.com Page 11. 56
(1) Profit & Loss A/c Dr. 10,23,400
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
(2) Profit & Loss A/c Dr. 2,00,000
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
Video Classes by CA M K Jain ph.9990112455 http://www.micecareer.com Page 11. 57
(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
Video Classes by CA M K Jain ph.9990112455 http://www.micecareer.com Page 11. 58
Development Rebate Reserve 2,30,000 Investment allowance Reserve 2,50,000 Plant Revaluation Reserve 20,000 ------------- ------------ 17,00,000 17,00,000 ======== ========