Group-I Accounting

IPC-CRASH COURSE

GROUP-I ACCOUNTING

FINANCIAL STATEMENTS OF A COMPANY

PREPARATION OF STATEMENT OF P&L

1.  The following items appear in the Trail Balance of BHARAT Ltd. as at 31st March 2012:
Rs.
1. Revenue from Operations / 24,00,000
2. Other Income / 1,00,000
3. Expenses other than Interest / 3,80,000
4. General Reserve (as on 1st April 2011) / 1,30,000
5. Profit and Loss Account (as on 1.4.2011) RS. 3,28,000. The recommendation of the company’s Board of Directors include equity dividend of 15% (Including Interim Dividend of Rs. 80,000). Transfer Debenture Redemption Reserve @ 50% of Debentures. Transfer to general reserve at 15%.
(assume corporate tax 30% & corporate dividend tax at 20%)
6. 12%, 10,000 Debentures of Rs. 100 each fully paid up
7. 14%, 5,000 Preference Shares of Rs. 100 each fully paid up
8. 6,000 Equity Shares of Rs. 100 each
9. 8,000 Equity Shares Rs. 100 each, Rs 25 paid up
Required: Show the above items in Profit and Loss Statement and Balance Sheet
Required: Show the above items in Profit and Loss Statement and Balance Sheet
2.  Provisional balance sheet of P Ltd as at 31st March 2014 was as under:
Liabilities / Rs. / Assets / Rs.
Share Capital / Fixed assets (at cost less depreciation) / 7,00,000
50,000 equity shares of Rs.10 each, Rs.7 per share called up / 3,50,000 / Cash and bank balances / 2,00,000
Less: Calls in arrear on 10,000 shares at Rs.2 per share / (20,000) / Other current assets / 6,00,000
3,30,000
Add:Calls in advance on 40,000 shares at Rs.3 per share / 1,20,000 / 4,50,000
20,000, 10% redeemable preference shares of Rs.10 each, fully paid / 2,00,000
Reserves and Surplus
General Reserve / 3,00,000
Profit and Loss account / 2,70,000
Trade payables / 2,80,000
15,00,000 / 15,00,000
Calls in arrear are outstanding for 6 months. Calls in advance were also received 6 months back. Interest at 10% p.a on calls in advance and 12% p.a on calls in arrears are allowed/charged.
The Board Of Directors have recommended that:
i.  Dividend for the year 2013-2014 be allowed at 20% on equity shares.
ii.  Money on calls in advance be refunded. Calls in arrears with interest received.
iii.  The preference shares which are redeemable at a premium of 10% any time after 31st March, 2014 may be redeemed by issue of 10% debentures of Rs.100 in cash.
Show Journal entries to give effect to the above proposals including payment and receipt of cash and redraft the statement of Profit and Loss and Balance Sheet of P Ltd.
3.  On 31st March, 2015 Bose and Sen Ltd provides to you the following ledger balances after preparing its Profit and Loss account for the year ended 31-03-2015
Credit balances
Particulars / Rs
Equity share capital, fully paid shares of Rs.10 each / 70,00,000
General Reserve / 15,49,100
Loan from State Finance Corporation / 10,50,000
(Secured by hypothecation of Plant and Machinery repayable within one year Rs.2,00,000)
Loans Unsecured (Long term) / 8,47,000
Sundry creditors for goods and expenses
(Payable within 6 months) / 14,00,000
Profit and Loss account / 7,00,000
Provision for tax / 3,25,500
Proposed dividend / 4,20,000
Provision for dividend distribution tax / 71400
133,63,000
Debit balances
Calls in arrear / 7000
Land / 14,00,000
Buildings / 20,50,000
Plant and Machinery / 36,75,000
Furniture and Fixture / 3,50,000
Inventories:Finished goods / 14,00,000
Raw material / 3,50,000
Trade receivables / 14,00,000
Advances:Short term / 2,98,900
Cash in hand / 2,10,000
Balances with bank / 17,29,000
Preliminary expenses / 93,100
Patents and trademarks / 4,00,000
133,63,000
The following additional information is also provided in respect of the above transactions:
i.  4,20,000 fully paid up equity shares were allotted as consideration for land and building
ii.  Cost of building –Rs.28,00,000
iii.  Cost of Plant and Machinery-Rs.49,00,000
Cost of Furniture and Fixtures-Rs.4,37,500
iv.  Trade receivables for Rs.3,80,000 are due for more than 6 months
v.  The amount of balances with bank includes Rs.18,000 with a bank which is not a scheduled bank and the deposits of Rs.5,00,000 are for a period of 9 months
vi.  Unsecured loan includes Rs.2,00,000 from a bank and Rs.1,00,000 from related parties
You are required to give previous year figures and prepare the Balance Sheet as per Schedule III.

4.  Sumedha Ltd took a loan from bank for Rs.10,00,000 to be settled within 5 years in 10 half yearly instalments with interest.First instalment is due on 30.09.2013 of Rs.1,00,000.Determine how the loan will be classified in the preparation of Financial Statements of Sumedha Ltd. for the year ended 31st March 2013 according to Schedule III of the Companies Act, 2013.

BONUS ISSUE

1.  Following is the balance sheet of Happy Ltd as on Mar 31,2011

Balance sheet as on 31-3-2011

Liabilities / Rs / Assets / Rs
Authorised Share Capital:
2,00,000 Equity shares of Rs 10 each
Issued and subscribed share capital
2,00,000 Equity shares of Rs 10 each, Rs 7 paid up
Reserves and Surplus:
Capital reserve (profit on sale of Assets)
Securities Premium
(includes Rs 20000 received otherwise than in cash)
General reserve
P/L A/c
Secured Loans:
12% Fully convertible debentures @ Rs 100 each
Current liabilities / 20,00,000
14,00,000
1,30,000
90,000
2,40,000
5,20,000
4,00,000
2,20,000
30,00,000 / Fixed Assets
Investments
Current Assets / 20,00,000
4,40,000
5,60,000
30,00,000

On Apr 01,2011 company has made final call @Rs 3 on 2,00,000 equity shares and received complete call money by Apr 30,2011.The company wants to issue bonus shares to its shareholders @ 1 share for every 4 shares held.

12 percent debentures are convertible in to equity shares of Rs 10 each fully paid on June 01,2011 .Necessary resolutions were passed and requisite legal requirements were complied with. For issue of bonus shares it was decided that reserves and surplus, other than P&L a/c should be first capitalised.

Required: Prepare Balance Sheet as on May 15,2011 , date on which all the formalities related to the issue of bonus shares completed. For the purpose of preparation of Balance Sheet assume that, Balance Sheet items as on Mar 31,2011 which are not affected by issue of bonus shares as above, remains unchanged as on May 15,2011. Also pass necessary journal entries in the books of the company related issue of bonus shares, for the period from Apr 01,2011 to May 15,2011.

2.  The paid up capital of Sunshine Ltd. is Rs. 10,00,000 consisting of 60,000 equity shares of Rs.10 each fully paid up and 50,000 equity shares of Rs.10 each , Rs. 8 paid up .

It has Rs.40,000 in Securities Premium account ,Rs. 2,00,000 in Profit and Loss account (Cr.) Rs. 3,00,000 in General Reserve and Rs. 60,000 in Capital Redemption Reserve account.

By way of bonus dividend the partly paid shares are converted into fully paid up shares and the holders of fully paid shares are also allotted fully paid –up bonus shares in the same ratio.

Pass journal entries showing separately the two types of bonus issues stated above. It is desired that there would be minimum reduction in free reserves.

DIVIDEND

1.  Due to inadequacy of profits during the year ended 31st March,2015, XYZ Limited proposes to declare 10% dividend out of general reserves. From the following particulars, ascertain the amount that can be utilized from general reserves, according to the Companies(Declaration of dividend out of Reserves) Rules, 2014:

Particulars / Rs.
17,500 9% Preference shares of Rs.100 each, fully paid / 17,50,000
8,00,000 equity shares of Rs.10 each, fully paid / 80,00,000
General Reserves as on 1.4.2014 / 25,00,000
Capital Reserves as on 1.04.2014 / 3,00,000
Revaluation Reserves as on 1.04.2014 / 3,50,000
Net profit for the year ended 31st March 2015 / 3,00,000

Average rate of dividend during last 3 years has been 12%

MANAGERIAL REMUNERATION

1.  The following extract of Balance Sheet of X Ltd was obtained:

Balance Sheet (Extract) as on 31st March, 2015

Liabilities / Rs.
Authorised Capital:
20,000, 14% preference shares of Rs.100 / 20,00,000
2,00,000 equity shares of Rs.100 each / 200,00,000
2,20,00,000
Issued and Subscribed Capital:
15,000, 14% preference shares of Rs.100 each fully paid / 15,00,000
1,20,000 equity shares of Rs.100 each, Rs.80 paid up / 96,00,000
Share Suspense a/c / 20,00,000
Reserves and Surplus
Capital Reserves (Rs.1,50,000 is revaluation reserve) / 1,95,000
Securities Premium / 50,000
Secured Loans
15% Debentures / 65,00,000
Unsecured Loans:
Public Deposits / 3,70,000
Cash credit loan from SBI (Short term) / 4,65,000
Current Liabilities
Trade Payables / 3,45,000
Assets:
Investment in shares, debentures etc. / 75,00,000
Profit and Loss account / 15,25,000

Share suspense account represents application money received on shares, the allotment of which is not yet made.

You are required to compute effective capital as per provisions of Schedule V. Would your answer differ if X Ltd is an investment company?

2.  The following is the Profit and Loss a/c of Mudra Ltd:

Particulars / Rs. / Particulars / Rs.
To Salaries and wages / 1,92,000 / By Gross profit / 10,15,200
To Bonus for 2013-2014 / 5000 / By premium on issue of shares and debentures / 50,000
To interest on debentures / 12,000 / By profit on sale of forfeited shares / 5000
To interest on unsecured loan / 6000 / By Profit on sale of building (Cost-Rs.2 lakhs, W.D.V Rs.1.3 lakhs) / 90,000
To repairs to
-Movable property
-immovable property / 1000
2000 / By bounties and subsidies received from Govt. / 60,000
To contributions / 25000
To Depreciation / 82,000
To Compensation for breach of contract / 1000
To insurance premium against the risk or meeting liability on a/c of compensation for breach of contract / 5000
To loss on sale of investments / 5000
To loss on sale of machinery (Cost Rs.2,00,000 Sale proceeds Rs.1,10,000 W.D.V Rs.1,30,000) / 20,000
To Expenditure on Scientific Research / 20,000
To Provision for income tax / 1,60,000
To Provision for doubtful debt / 7,500
To Directors’ fees / 5000
To Ex-gratia payments to employees / 2,200
To Balance c/d / 6,69,500
12,20,200 / 12,20,200
To proposed dividend / 1,60,000 / By profit for the year 2014-2015 / 6,69,500
To Corporate dividend tax / 16,000
To bal c/d / 4,93,500

Estimated liability on account of bonus in respect of 2014-2015 in accordance with the payment of Bonus Act is Rs.10,000

Depreciation on fixed assets as per Schedule II of the Companies Act, 2013 was 67,000.You are required to calculate the maximum limits of the managerial remuneration as per Companies Act, 2013.

CASH FLOW STATEMENTS

1.  The Balance Sheets of Z Ltd. as on 31st March, 2012 and 2013 are given below:
Liabilities / 31.03.2012
Rs. / 31.03.2013
Rs. / Assets / 31.03.2012
Rs. / 31.03.2013
Rs.
Share Capital
Capital Reserve
General Reserve
Profit and Loss A/c
10% Debentures
Current Liabilities
Provision for Income Tax
Proposed Dividend
Unpaid Dividend / 3,00,000
__
1,70,000
60,000
2,00,000
1,20,000
90,000
30,000
__ / 4,00,000
10,000
2,00,000
75,000
1,40,000
1,30,000
85,000
36,000
4,000 / Fixed Assets:
Less: Depreciation
Trade Investment
(in shares)
Cash & Bank Bal.
Other Current Assets
Preliminary Exp. / 8,00,000
(2,30,000)
1,00,000
80,000
2,00,000
20,000 / 9,50,000
(2,90,000)
80,000
30,000
3,00,000
10,000
9,70,000 / 10,80,000 / 9,70,000 / 10,80,000
During the year 2012 – 2013, the Company
(i)  Sold one machine for Rs.25,000 the cost of which was Rs.50,000 and the depreciation provided on it was Rs.21,000.
(ii)  Provided Rs.95,000 as depreciation.
(iii) Redeemed 30% of the Debentures at Rs 103 as at 31.3.2013.
(iv) Sold some Trade Investments at a profit which was credited to Capital Reserve.
(v)  Decided to value stock at cost where as previously the practice was to value stock at cost less 10%. The stock according to books on 31.3.2012 was Rs.54,000. The stock on 31.3.2013 was correctly valued at Cost Rs.75,000.
(vi) Decided to write off Fixed Assets costing Rs. 14,000 (depreciated).

2.  From the following balance sheet and information, prepare Cash Flow Statement of Ryan Ltd. for the year ended 31st March,2013

Balance Sheets

Liabilities / 31.03.2013 / 31.03.2012 / Assets / 31.03.2013 / 31.03.2012
Equity Share Capital / 6,00,000 / 5,00,000 / Land and building / 1,50,000 / 2,00,000
10% Redeemable Preference / - / 2,00,000 / Plant and machinery / 7,65,000 / 5,00,000
Capital Redemption Reserve / 1,00,000 / - / Investments / 50,000 / 80,000
Capital Reserve / 1,00,000 / - / Inventory / 95,000 / 90,000
General Reserve / 1,00,000 / 2,50,000 / Bills receivable / 65,000 / 70,000
Profit and loss a/c / 70,000 / 50,000 / Sundry debtors / 1,75,000 / 1,30,000
9% Debentures / 2,00,000 / ---- / Cash and bank / 65,000 / 90,000
Sundry creditors / 95,000 / 80,000 / Preliminary expenses / 10,000 / 25,000
Bills payable / 20,000 / 30,000 / Voluntary separation payments / 1,25,000 / 65,000
Liabilities for expenses / 30,000 / 20,000
Provision for taxation / 95,000 / 60,000
Proposed dividend / 90,000 / 60,000
15,00,000 / 12,50,000 / 15,00,000 / 12,50,000

a.  A piece of land has been sold out for Rs.1,50,000 (Cost :Rs.1,20,000) and the balance land was revalued. Capital Reserve consisted of profit on sale and profit on revaluation

b.  On 1st April 2012 a plant was sold for Rs.90,000 (Original Cost Rs.70,000 and W.D.V Rs.50,000) and debentures worth Rs.1,00,000 was issued at par as part consideration for plant of Rs. 4.5 lakhs acquired.

c.  Part of the investments (Cost Rs.50,000) was sold for Rs.70,000

d.  Pre-acquisition dividend received Rs.5000 was adjusted against cost of investment.

e.  Directors have proposed 15% dividend for the current year

f.  Voluntary separation cost of Rs.50,000 was adjusted against general reserve.

g.  Income tax liability for the current year was estimated at Rs.1,35,000

h.  Depreciation at 15% has been written off from Plant account but no depreciation has been charged on Land and Building a/c

3.  Given below is the Statement of Profit and Loss of ABC Ltd. and the relevant Balance Sheet information:

Statement Of Profit and Loss of ABC Ltd for the year ended 31st December, 2013