tulsian’s accountancy
TRANSCRIPT
Tulsian’s
ACCOUNTANCYfor
CA-IPC (Group-II)
S. CHAND & COMPANY PVT. LTD.(AN ISO 9001 : 2008 COMPANY)
RAM NAGAR, NEW DELHI - 110 055
CA (Dr) P C TULSIAN M.Com., PhD, FCA, PGDFM
Additional Director (Former)Board of Studies
The Institute of Chartered Accountants of India, New DelhiHead
Department of CommerceRamjas College
University of DelhiDELHI
Recipient of an Award for Exemplary Services Contributed to the Cause of Profession by The Institute of Chartered Accountants of India, New Delhi
CA BHARAT TULSIAN Chartered Accountant
Manager, KPMGAlumnus of Sri Ram College of Commerce (SRCC)
University of DelhiDELHI
Recipient of an Award for the Best Article on Foreign Exchange at the all-India level by The Institute of Chartered Accountants of India, New Delhi
With Quick Revision
Book
S. CHAND & COMPANY PVT. LTD.(An ISO 9001 : 2008 Company)Head Office: 7361, RAM NAGAR, NEW DELHI - 110 055Phone: 23672080-81-82, 9899107446, 9911310888 Fax: 91-11-23677446www.schandpublishing.com; e-mail: [email protected]
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© 2009, P C Tulsian and Bharat Tulsian
All Rights Reserved. No part of this publication may be reproduced or copied in any material form (including photocopying or storing it in any medium in the form of graphics, electronic or mechanical means and whether or not transient or incidental to some other use of this publication) without written permission of the publisher. Any breach of this will entail legal action and prosecution without further notice.Jurisdiction : All disputes with respect to this publication shall be subject to the jurisdiction of the Courts, Tribunals and Forums of New Delhi, India only.
First Edition 2009; Subsequent Editions and Reprints 2010, 2011 (Twice), 2012, 2013 (Twice), 2014, 2015Tenth Revised Edition 2016
ISBN : 978-93-525-3147-9 Code : 1007J 477
This book is for sale in India & other SAARC countries only.
PRINTED IN INDIA
By Nirja Publishers & Printers Pvt. Ltd., 54/3/2, Jindal Paddy Compound, Kashipur Road, Rudrapur-263153, Uttarakhand and published by S. Chand & Company Pvt. Ltd., 7361, Ram Nagar, New Delhi -110 055.
PREFACE TO THE TENTH EDITION
We are thankful to the readers and teachers for their response and encouragement given to the Ninth Edition. This edition is thoroughly revised and substantially expanded; all chapters have been updated and expanded.
Salient FeaturesThe book adopts a fresh and novel approach to the study of Accountancy for the students of CA Integrated Professional Competence Course (IPC) Group-II. It has been written in a teach yourself style strictly following a student-friendly approach, and is essentially meant to serve as a tutor at home.
PEDAGOGICAL FEATURES
Simple Language The text is presented in the simplest language “meant to serve beginners"
Heading for each Paragraph Each paragraph has been arranged under a suitable heading for easy retention of concepts
Tabular form Wherever possible, the text matter relating to a particular topic/sub-topic has been presented in a tabular form
Eye-catching Screens All important equations, formulae, figures and practical steps have been presented in screen format to catch the eye
Uniform Format of Chapter Each chapter has been uniformly organised under suitable headings, viz., text supported by suitable illustrations, solved problems
DISTINCTIVE FEATURES
Exhibits Over 120 exhibits to acquaint students with various accounting treatment and formats
Illustrations Over 600 illustrations have been provided for a better understanding of the text
Solved Problems Over 250 solved problems along with necessary working notes and alternative solution have been provided throughout the text
Tulsian’s Quick Revision for Accountancy for CA-IPC (Group-II)
Section 1 Fully Solved Scanner Chapterwise (C.A. Professional Examination Problems with Authentic Solutions)
Section 2 Revision One Day Before ExaminationSection 3 Tulsian’s Model Test PapersSection 4 IPC Examination Papers
CA (Dr) P C Tulsian [email protected]
CA Bharat Tulsian [email protected]
ACKNOWLEDGEMENTS
We wish to express our sincere thanks to several individuals who have been a source of inspiration and support, personally and professionally, including Dr. R P Tulsian, Dr. M M Goyal, Dr. S C Garg, Dr. Tanushree Jain, Ms. Madhu Aggarwal, Dr. Rajeev Goyal, Dr. S N Gupta, Dr. S S Lamba, Dr. Sarita Jain, Dr. Usha Jain, Dr. V K Aggarwal, Dr. V P Bansal, Dr. Vibha Jain, Dr. Savita Gopal, Dr. S C Gupta, Dr. S P Gupta, Dr. Naresh Gupta, Dr. Amit Singhal, Dr. J B Gupta, Dr. Madhu Gupta, Dr. Sushma Aggarwal, Dr. Renu Gupta, Dr. Manju Gupta, Dr. C P Gupta Dr. S Z H Zaidi. CA M K Aggarwal, CA S K Aggarwal, CA N D Gupta, CA Naveen Gupta, CA Anil Jindal, CA Madhu Sudan Goyal, CA Vinod Aggarwal, CA Sunil Gupta, CA Arun Jain, CA Virender Aggarwal, CA S K Gupta, CA Ishwar Khemka, CA Prem Bansal, CA Ashish Gupta, CA M K Sharda, CA Rajeev Rastogi. CA Atul Gupta, CA Kuldeep Bhardwaj, CA Neeraj Chabra, CA Kishore Paul, CA Pradeep Narang, CA S K Gupta, CA R Devarajan, CA Tapas Dutta, CA Arnav Chakrabarty, CA Seema Gupta, CA Shilpa Aggarwal, CA Vishal Pandey, Ms. Nidhi Singh, Dr. N N Sen Gupta, Prof. J P Sharma, CA Pallavi, CA Antima Jain, CA Piyush Tulsian, CA Swati Tulsian, CA Piyush and CA Prarthana Mittal.
Special word of thanks is also due to our favourite students Piyush, Pranav, Arushi and Aman Mittal who provided incisive comments and useful feedback.
We must conclude that this book would have never been written without the support, encourage-ment and prodding of our family members. Many thanks to them.
Any criticisms or suggestions for further improvement of the book will be gratefully acknowledged and appreciated.
CA (Dr) P C Tulsian [email protected]
CA Bharat Tulsian [email protected]
Disclaimer : While the authors of this book have made every effort to avoid any mistakes or omissions and have used their skill, expertise and knowledge to the best of their capacity to provide accurate and updated information, the authors and S. Chand do not give any representation or warranty with respect to the accuracy or completeness of the contents of this publication and are selling this publication on the condition and understanding that they shall not be made liable in any manner whatsoever. S.Chand and the authors expressly disclaim all and any liability/responsibility to any person, whether a purchaser or reader of this publication or not, in respect of anything and everything forming part of the contents of this publication. S. Chand shall not be responsible for any errors, omissions or damages arising out of the use of the information contained in this publication.Further, the appearance of the personal name, location, place and incidence, if any; in the illustrations used herein is purely coincidental and work of imagination. Thus, the same should in no manner be termed as defamatory to any individual.
SYLLABUS
INTEGRATED PROFESSIONAL COMPETENCE COURSE (IPC) SYLLABUS Paper 5: Advanced Accounting (Group II)
Time: 3 Hours Marks-100Level of Knowledge: Working KnowledgeObjectives: (a) To have an understanding of the conceptual framework for the preparation and presentation
of financial statements
(b) To gain working knowledge of the professional standards and application of accounting principles to different practical situations
(c) To gain the ability to solve advanced problems in the case of different entities
S.No. Contents Relevant Chapter of the Book
1. Conceptual Framework for Preparation and Presentation of Financial Statements
Sec. B
2. Accounting StandardsWorking knowledge of:AS 4: Contingencies and Events occurring after the Balance Sheet DateAS 5: Net Profit or Loss for the Period, Prior Period Items and Changes in Accounting PoliciesAS 11: The Effects of Changes in Foreign Exchange Rates (Revised 2003)AS 12: Accounting for Government GrantsAS 16: Borrowing CostsAS 19: LeasesAS 20: Earnings Per ShareAS 26: Intangible AssetsAS 29: Provisions, Contingent Liabilities and Contingent Assets.
Sec. B
3. Advanced Issues in Partnership AccountsDissolution of partnership firms including piecemeal distribution of assets; Amalgamation of partnership
1, 2, 2A
4. Company Accounts
(a) Accounting for employee stock option plan, Buy-back of securities, Equity shares with differential rights, Underwriting of shares and debentures, Redemption of debentures
(b) Advanced problems for business acquisition, Amalgamation and reconstruction (excluding problems of amalgamation of inter-company holding)
3, 4, 5, 6
7, 8
(c) Accounting involved in liquidation of companies, Statement of Affairs (including deficiency/surplus accounts) and Iiquidator’s statement of account of the winding up
9
(d) Financial Statements of Banking, Insurance and Electricity Companies
10, 11, 12, 13
5. Accounting for Special TransactionsDepartmental and branch accounts including foreign branches
14, 15, 15A
Note: If either old Accounting Standards (ASs), Announcements and Limited Revisions to ASs are withdrawn or new ASs, Announcements and Limited Revisions to ASs are issued by the Institute of Chartered Accountants of India in place of existing ASs, Announcements and Limited Revisions to ASs, the syllabus will accordingly include/exclude such new developments in place of the existing ones with effect from the date to be notified by the Institute.
CONTENTSPAPER 5: ADVANCED ACCOUNTING (GROUP II) (One Paper – Three hours – 100 Marks)
SECTION A – TEXTBOOK
1. Dissolution of a Firm 1.1 – 1.74
2. Partnership — Insolvency, Piecemeal Distribution and Sale 2.1 – 2.74
2A. Partnership — Amalgamation and Conversion 2A.1 – 2A.31
3. Accounting for Employee Stock Option Plan 3.1 – 3.25
4. Accounting for Buy-back of Shares 4.1 – 4.16
5. Underwriting of Shares and Debentures 5.1 – 5.25
6. Redemption of Debentures 6.1 – 6.103
7. Amalgamation of Companies 7.1 – 7.70
8. Internal Reconstruction 8.1 – 8.61
9. Liquidation of Companies 9.1 – 9.63
10. Financial Statements of Banking Companies 10.1 – 10.97
11. Financial Statements of Life Insurance Companies 11.1 – 11.48
12. Financial Statements of General Insurance Companies 12.1 – 12.53
13. Financial Statements of Electricity Companies 13.1 – 13.19
14. Accounting for Departments 14.1 – 14.33
15. Accounting for Branches 15.1 – 15.123
15A. Accounting for Foreign Branches 15A.1 – 15A.16
SECTION B – ACCOUNTING STANDARDS
1. Conceptual Framework for Preparation & Presentation of Financial Statements
1.3 – 1.9
2. Applicability of Accounting Standards 2.1 – 2.3
3. AS 4 – Contingencies and Events Occuring after the Balance Sheet Date
3.1 – 3.12
4. AS 5 – Net Profit or Loss for the Period, Prior Period Items and Changes in Accounting Policies
4.1 – 4.13
5. AS 11 – The Effects of Changes in Foreign Exchange Rates 5.1 – 5.12
Tulsian’s
ACCOUNTANCYfor
CA-IPC (Group-II)
6. AS 12 – Accounting for Government Grants 6.1 – 6.16
7. AS 16 – Borrowing Cost 7.1 – 7.16
8. AS 19 – Leases 8.1 – 8.22
9. AS 20 – Earnings Per Share 9.1 – 9.23
10. AS 26 – Intangible Assets 10.1 – 10.15
11. AS 29 – Provisions, Contingent Liabilities and Contingent Assets 11.1 – 11.12
SECTION C – QUESTIONS BASED ON SCHEDULE III TO THE COMPANIES ACT, 2013
Questions Based on Schedule III to the Companies Act, 2013 3 – 32
SECTION 1
FULLY-SOLVED SCANNER CHAPTERWISE
[CA ProfessionAl exAminAtion Problems with AuthentiC solutions]
SCANNER FOR CA EXAMINATION PROBLEMSSHORT ANSWER CARRYING 4-6 MARKS &LONG ANSWER CARRYING 8-16 MARKS
1. Dissolution of a Firm 1.3–1.6 2. Partnership — Insolvency, Piecemeal Distribution and Sale 2.1–2.31 2A. Partnership — Amalgamation and Conversion 2A.1–2A.31 3. Accounting for Employee Stock Option Plan 3.1–3.5 4. Accounting for Buy-back of Shares 4.1–4.7 5. Underwriting of Shares and Debentures 5.1–5.10 6. Redemption of Debentures 6.1–6.28 7. Amalgamation of Companies 7.1–7.14 8. Internal Reconstruction 8.1–8.42 9. Liquidation of Companies 9.1–9.14 10. Financial Statements of Banking Companies 10.1–10.39 11. Financial Statements of Life Insurance Companies 11.1–11.5 12. Financial Statements of General Insurance Companies 12.1–12.21 13. Financial Statements of Electricity Companies 13.1–13.1 14. Accounting for Departments 14.1–14.10 15. Accounting for Branches 15.1–15.36 15A. Accounting for Foreign Branches 15A.1–15A.9
SCANNER FOR ACCOUNTING STANDARDS CA EXAMINATION PROBLEMS CARRYING 4-6 MARKS
Scanner for Accounting Standards CA Examination Problems AS-1– AS-68
SECTION 2
REVISION ONE DAY BEFORE EXAMINATION
Important Short Answer Theory Questions for Revision Theory 1–Theory 22
SECTION 3
TULSIAN'S MODEL TEST PAPERS WITH ANSWERSTulsian’s Model Test Papers – Advanced Accounting [Group II] MTP1–MTP76
SECTION 4
IPC EXAMINATION PAPERSIPC Examination Papers – Accounting [Group II Nov 2012, 2013, 2014] P1–P99IPC Examination Papers – Accounting [Group II May 2015, Nov 2015] Paper1–Paper26
Supplement to Textbook
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CONTENTS
SECTION A
PAPER 5: ADVANCED ACCOUNTING [GROUP-II]
Textbook
1 DISSOLUTION OF A FIRM
After studying this chapter, you should be able to understand:◊Meaning of Dissolution
◊Meaning of Dissolution of Partner
◊Meaning of Dissolution of a Firm
◊Modes of Dissolution of a Firm
◊Distinction between Dissolution of Partnership and Dissolution of Firm
◊Settlement of Accounts [Section 48]
◊Treatment of Firm’s Debts and Private Debts [Section 49]
◊Realisation Account
◊Accounting Entries
◊Treatment of Goodwill preparation of Balance Sheet as at Date of Dissolution
◊Calculation of Remuneration Payable to Incharge of Realisation
LEARNING OBJECTIVES
1.0 MEANING OF DISSOLUTION
The term ‘dissolution’ stands for discontinuation. Under the Indian Partnership Act, 1932, the dissolution may be either of partnership or of a firm.
2.0 MEANING OF DISSOLUTION OF PARTNERSHIP
Dissolution of partnership refers to the change in the existing relations of the partners. The firm continues its business. It may take place on admission/retirement/ death/expulsion/insolvency of a partner or on change in the profit sharing ratio.
3.0 MEANING OF DISSOLUTION OF A FIRM
Dissolution of a firm means the dissolution of partnership between all the partners of the firm alongwith the termination of firm’s business.
4.0 MODES OF DISSOLUTION OF A FIRM
It may take place in any of the following ways:
1. By Mutual Agreement When all the partners agree to dissolve the firm
2. Compulsory Dissolution
(i) on the insolvency of all the partners or all except one partner;
(ii) on business becoming unlawful.
1.2 Tulsian’s Accountancy for CA-IPC (Group II)
3. On happening of Certain Contingencies
Dissolution on the happening of certain contingencies. Subject to contract between the partners. A firm is dissolved by —
(i) the expiry of the term for which the firm was formed;
(ii) the completion of the venture(s) for which the firm was formed;
(iii) the death of a partner;
(iv) the adjudication of a partner as insolvent.
4. By Notice When any one of the partners gives a notice in writing to other partners in case of partnership at will
5. Dissolution by Court A court may dissolve a firm on any of the following grounds:
(a) Insanity of a partner,
(b) Permanent incapacity of a partner,
(c) Misconduct of/by a partner,
(d) Persistent breach of agreement by a partner,
(e) Transfer of interest by a partner,
(f) Improbability of carrying on the business except at a loss,
(g) any other ground on which court is satisfied that it would be just and equitable to dissolve the firm.
5.0 DISTINCTION BETWEEN DISSOLUTION OF PARTNERSHIP AND DISSOLUTION OF FIRM
Dissolution of Partnership differ from Dissolution of Firm in the following respects:
Basis of Distinction Dissolution of Partnership Dissolution of Firm
1. Termination of business
The business is not terminated. The business of the firm is closed.
2. Settlement of assets and liabilities
Assets and liabilities are revalued and new balance sheet is drawn.
Assets are realized and liabilities are paid off.
3. Account to determine Profit/Loss
Revaluation Account is prepared to determine the profit/loss on revaluation.
Realisation Account is prepared to determine the profit/loss on realization.
4. Court’s Intervention Court does not intervene because partnership is dissolved by mutual agreement.
A firm can be dissolved by the court's order.
5. Economic Relationship Economic relationship between the partners changes.
Economic relationship between the partners comes to an end forever.
6. Closure of books It does not require closure of books because the business is not terminated
All books of accounts are closed.
6.0 SETTLEMENT OF ACCOUNTS [SECTION 48]
The provisions of Sec 48 relating to settlement of accounts at the time of dissolution of firm are given below:
Tulsian’s Accountancy For CA-IPC(Group-II) with Quick Revision
Publisher : SChand Publications ISBN : 9789352531479Author : CA & Dr. P CTulsian & CA Bharat Tulsian
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