xii accountancy(1)

8/9/2019 Xii Accountancy(1)

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KENDRIYA VIDYALAYA SANGATHAN

GURGAON REGION

STUDY MATERIAL ACCOUNTANCY

FOR

CLASS XII

(2014-15)

PATRON

MR. C. MANI

DEPUTY COMMISSIONER KVS RO GURGAON

ADVISOR

MR. !.L. MORODIA (GR)

MR. C. S. A"AD (GR)

M#. A.K. S$%#&% (GR)

COORDINATOR

MR. RA'ENDRA SINGH

PRINCIPAL KV SEC-5

DARKA NE DELHI

R*+,# P#*+*/

1. MS. SHO!HA PGT COMM. K.V NO1 AIRORCE STATION SEC 14

GURGAON2. MR. RAKESH PGT COMM. K.V. SEC 5 DARKA

. MR. ANGRE' SINGH PGT COOM. K.V. SEC 5 DARKA

4. MRS. NAVNEET KAUR PGT COMM. KV !S CAMP CHHALA

1


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PREACE

Dear Students,

Unprecedented popularity of study material of Accountancy has proved its utility. Clear and

easily understandable handy presentation of concepts and content and content has been found

immensely useful and teachers all like for preparation of CBSE Eamination. !"S

authorities and all the persons associated #ith it deserve $reat appreciation.

%o#, this year #e have kept the nature of this material intact. &t has been revised further for

its refinement and update.

Students #ill definitely find it $reatly useful for their eamination due to its uni'ue features

like()

Simple and understandable #ay of presentation of terms and concepts.

Simplified illustration and dia$rams to create picture)impact in the mind of learners.

Addition of more useful 'uestions.

Sufficient practice material in a readymade style for all topics.

*hanks to all teachers for their invaluable efforts.

Dear students #e believe that the study material #ill be hi$hly beneficial and fruitful to

enrich you. And it #ill be a $reat help to score hi$her and better in the eamination.

Best of Luck

S.NO PARTICULARS PAGE NO.

1 ACCOUNTING OR PARTNERSHIP IRM - -15

+

I3


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2

4

5

6

7

1

2

4

5

UNDAMENTALS

GOODILL/ NATURE 8 VALUATION

CHANGE IN PROIT SHARING RATIO ( AMONG THEEXISTING PARTNER )

ADMISSION O PARTNER

RETIREMENT AND DEATH O A PARTNER

DISSOLUTION O PARTNERSHIP IRM

SHARE CAPITAL ACCOUNTING OR SHARE CAPITAL

COMPANY ACCOUNTS/-(ISSUE O DE!ENTURES)

COMPANY ACCOUNTS-REDEMPTION O

DE!ENTURES

PART II

INANCIAL STATEMENTS O A COMPANY

INANCIAL STATEMENT ANALYSIS

TOOLS O INANCIAL STATEMENT ANALYSIS -

COMPARATIVE STATEMENT AND COMMON SI"E

STATEMENT

RATIO ANALYSIS

CASH LO STATEMENT

1-16

17-21

22-0

1-

40-46

47-0

1-

6-64

65-72

7-74

75-7

76-

6-102

A--+,.9%.-:(C+3 N+.055)


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C;%***XII

(2014-15)

O P%9* P#>+3* M%#=*

P%#9 A Accountin$ for -artnership irms and Companies

Unit1. Accountin$ for -artnership irms /0

Unit+. Accountin$ for Companies 20 +

10 20

P%#9 ! inancial Statement Analysis

Unit. Analysis of inancial Statements 0 1+

Unit3. Cash lo# Statement +0 4

0 +0

P%#9 C -ro5ect 6ork 30 +0

-ro5ect #ork #ill include(

-ro5ect ile( 37arks

6ritten *est( 1+ 7arks89ne :our;

"iva"oce(3 7arks

9s fluctuatin$ capital accounts. -reparation of -rofit ? @oss Appropriation account

division of profit amon$ partners, $uaranteed of profits.

-ast ad5ustments 8relatin$ to interest on capital, interest on dra#in$, salary and profit sharin$

ratio;.

3


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Accountin$ treatment of forfeiture and re)issue of shares.

Disclosure of share capital in companys Balance Sheet.

Accountin$ for Debentures

Debentures( &ssue of debentures at par, at a premium and at a discount. &ssue of

debentures for consideration other than cashF &ssue of debentures #ith terms of redemptionF

debentures as collateral security)concept, interest on debentures.


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7eanin$, ob5ectives and preparation 8as per AS 8

Su$$ested Guestion -aper Desi$n Accountancy

8Code%o.0; Class I&&8+013)1;

7arch +01 Eamination

9ne -aper *heory( 407arks

Duration(hrs.

J


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S.%o.

*ypolo$y of Guestions "eryShortAns#er7CG

17ark

Sh

ort

Ans#

er&

7arks

Short

Ans&&

37arks

@on

$Ans#er&

27ar

ks

@on$Ans#er&&

4

7arks K

1. R&&?#>@ (K+;3@ ?%*3

Simple recall Guestions to kno#

specific facts, terms concepts,

principles, or theories, identify, define,

or recite information

, 1 + 1 ) +0 +

+. U3#*9%3>@ (C+&+ ) to

be familiar #ith meanin$ and to

understand conceptually interpret,

compare, contrast, eplain, paraphaseinformation;

+ ) 1 1 1 +0 +

,. A+8Use abstract information

in concrete situation, to apply

!no#led$e to ne# situation, Use $iven

content to interpret a situation. -rovide

an eample, or solve a problem;

) + 1 1 ) 12 +0

3. H>@$ +#3# T$>=>@ S=>;;* (A%;:*>*

8 S:9$*>*- Classify, compare,

contrast, or differiante bet#een

different piece of informationF or$ani=eand >or inte$rate uni'ue pieces of

information from a variety of sources;

+ ) 1 1 1 12 +0

. EB%;,%9>+ %3 M,;9>-D>*>%#: -

8Appraise, Hud$e, and >or ustify the

value or #orth of a decision or

outcome, or to predict outcomes based

on values;

1 1 1 ) ) 04 10

*9*A@ 41L4 3L1+

3L+0 32L+3

+4L12

408+,

; 100

CHAPTER 1

ACCOUNTING OR PARTNERSHIP IRM - UNDAMENTALS

4


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LEARNING O!'ECTIVES

7eanin$ of -artnership

Essential features or characteristics of -artnership

@ + P%#9#*$>%; %9,#* + P%#9#*$>%9>+ + T+ +# M+# P#*+*/ -artnership is an association of t#o or

more persons #ho have a$reed to do business and share profits or losses.

2 A@#&9/-artnership comes into eistence by an a$reement, either #ritten

or oral, and not by the status or process of la#. *he #ritten a$reement amon$

the partners is kno#n as P%#9#*$>< D3.

!,*>**/ *he firm must be en$a$ed in a la#ful business. Business includes

trade, vocation and profession.

4 P#+>9-*$%#>@/ *he a$reement bet#een>amon$ the partners must be to share

profits or losses. &t is not essential that all the partners must share losses also.

5 !,*>** % ? %##>3 + ?: A;; +# A: + 9$ P%#9#* A9>@ +# A;;/

Business of the partnership can be carried on by all the partners or by any of

them actin$ for all the partners. &n other #ords, partners are a$ents as #ell as

the principals.

R>@$9* + P%#9#*/

1 Every partner has the ri$ht to participate in the mana$ement of the

business.

/


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+ Every partner has the ri$ht to be consulted about the affairs of the

business.

Every partner has the ri$ht to inspect the books of accounts and have a

copy of it.

3 Every partner has the ri$ht to share profits or losses #ith others in the

a$reed ratio. A partner has the ri$ht not to allo# the admission of a ne# partner.

P%#9#*$>< D3/

-artnership Deed is a #ritten document #hich contains the terms and conditions of

partnership a$reed upon by all the partners.

I&< D3/

i. &t is important to have -artnership Deed in #ritin$ to settle any possible

dispute #ith re$ard to the terms of partnership.

ii. &t serves as an evidence in the Courts of @a#.

P#+B>*>+ %9>@ A+,9>@ T#%9&9 > 9$ A?* + P%#9#*$>< D3/

>. S%;%#:C+&&>**>+ 9+ % >. S$%#>@ + P#+>9* 8 L+***/ -rofits ? @osses are to be shared e'ually.

>>>. I9#*9 + C%9%;/%o interest is to be allo#ed on capital. &f the a$reementprovides for interest on capital, such interest is payable only out of available profits.

>B. I9#*9 + A3B%*L+% ?: % @oans. Such interest is payable even if there are losses.

B. I9#*9 + D#%>@*/%o interest is to be char$ed on Dra#in$s.

D>*9#>?,9>+ + P#+>9* %&+@ P%#9#*/ P#+>9 %3 L+** A@/ - ? @ Appropriation Account sho#s the distribution of %et -rofits as per - ? @

A>c amon$ the partners by #ay of &nterest on Capital, Salary, Commission to partners,

*ransfer to


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ORMAT O PROIT AND LOSS APPROPRIATION ACCOUNT

-. P%#9#* %9%; A+,9* ,3# >3 %3 ;,9,%9>@ M9$+3* /

%. ;,9,%9>@ C%9%; M9$+3(

a.1; Under luctuatin$ Capital method, only one account 8vi=. CapitalAccount; for each partner is maintained.

a.+; All the transactions relatin$ to a partner are recorded in his

Capital Account.

?. >3 C%9%; M9$+3/

b.1; Under ied Capital method, t#o accounts 8vi=. Capital Account

and Current Account; for each partner are maintained.

b.+; *he transactions relatin$ to introduction or #ithdra#al of Capital

are recorded in Capital account.

b.; 9ther transactions like interest on Capital, Dra#in$s, Salary,

Commission, Share of -rofit>@oss are recorded in Current Account.

>>. I9#*9 + P%#9#* D#%>@*

%. M%>@ + D#%>@*

Dra#in$s mean the amount #ithdra#n in cash or in kind for personal

purposes. Dra#in$s may be a$ainst profits or a$ainst capital.

?. A+,9>@ T#%9&9 + I9#*9 + D#%>@*.

$ 9+ $%#@/&nterest on Dra#in$s is to be char$ed for partners

only #hen partnership a$reement provides for the same.

H+ 9+ %;,;%9 >9#*9 + 3#%>@*/

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S$+#9 C,9 M9$+3/ 6hen a fied amounts is #ithdra#n at

fied dates, the interest on dra#in$s may be calculated #ith

the help of short cut formula as follo#s(

I >3 A&+,9 >* >9$3#%F I9#*9 + D#%>@*

&n the be$innin$ of each month *otal Dra#in$s 8+; R

100 1+

At the end of each month *otal Dra#in$s 8+; RR

100 1+

Durin$ the middle of each month *otal Dra#in$s 8


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II -- C+&&>**>+ %* + N9 P#+>9 %9# $%#@>@ *,$

+&&>**>+

L %et -rofit before Commission 8 100

M B. P%*9 A3,*9&9*

M%>@ / -ast Ad5ustments refer to those ad5ustments #hich

affect the distribution of past profits like omission or commission

in respect of interest on Capital>Dra#in$s of a -artner,

Salary>Commission to a partner, Sharin$ of -rofits.

H+ 9+ C%##: O,9/ -ast Ad5ustments should be carried out

directly throu$h the Capital Accounts of the concerned -artners.

H+ 9+ P%** S>@; A3,*9>@ '+,#%; E9#: / *he passin$ of

the necessary Ad5ustin$ Hournal Entry involves the follo#in$

steps(

1. Calculate the amount already recorded by #ay of share of-rofit, &nterest on Capital, Salary, Commission etc.

B. I9#*9 + P%#9#* C%9%;*

Calculation of &nterest

-articulars 1+

Add( &nterest on Additional Capital Additional Capital 100

-eriod from the date of introduction to the end of accountin$ period>1+T

@ess( &nterest on Capital #ithdra#n L Capital 6ithdra#n 100

-eriod from the date of #ithdra#l to the end of accountin$ period>1+T

*otal interest on Capital A M B CT

8;

B>. I9#*9 + P%#9#* L+% 9+ 9$ >#&

R%9 +

>9#9

T+ ?

%;;+3

C%* R%9 + I9#*9

>. I 9$# >* % %@#&9 %* 9+ 9$ #%9 +

I9#*9 + L+%.

-artner is entitled to an

interest on loan at an a$reed

>. I 9$# >* + %@#&9 %* 9+ #%9 +

I9#*9 + L+%

-artner is entitled to &nterest

on @oan O 2K p.a.

B>>. G,%#%9 + P#+>9

M%>@ / &t means assurance to $ive a minimum amount of -rofit to apartner.

1


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&f in any year, the actual Share of -rofit of a uaranteed -artner is less

than the uaranteed Amount, then the deficiency 8i.e, ecess of

uaranteed Amount over actual share of -rofit; is borne by the

uaranteein$ -artners in their a$reed ratio.

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1 MARK J,*9>+*

1 Define -artnership2 6hat do you understand by -artner, firm and firms nameV

A*.*he persons #ho have entered into a -artnership #ith one another are

individually called -artners and collectively a firm and the name under #hich the

business carried is called the firms name.

6rite any four main features of partnership.

4 6hat is the minimum and maimum number of partners in all partnershipV

5 6hat is the status of partnership from an accountin$ vie#pointV

A*.rom an accountin$ vie#point, partnership is a separate business entity. rom

the le$al vie#point, ho#ever, a -artnership , is not separate from the o#ners.

6hat is meant by partnership deedV

6 &n the absence of -artnership deed , ho# are mutual relations of partners $overnedVA*.*hrou$h -artnership Act, 1/+.

7 ive t#o circumstances in #hich the fied capital of partners may chan$e.

A*. 8i; 6hen additional capital is introduced by the partners.

8ii; 6hen a part of the capital is permanently #ithdra#n by the -artners.

@ist the items that may appear on the debit side and credit side of a -artners

luctuatin$ capital account.

Ans. 9n debit side( Dra#in$, interest on dra#in$, share of loss, closin$ credit balance

of capital.

9n credit side( 9penin$ credit balance of capital, additional capital introduced,

share of profit, interest on capital, salary to a -artner, commission to a -artner.

10 &f the partners capital accounts are fied, #here #ill you record the follo#in$ items(

i Salary to partners

ii Dra#in$ by a partners

iii &nterest on capital and

iv Share of profit earned by a partnerV

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JUESTIONS/ 4 8 M%#=*

1 A and B are partners sharin$ profits in the ratio of (+ #ith capitals of


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I and Q are -artners sharin$ -rofit and @oss in the ratio of +( #ith a capital of


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Is Capital 1+0

Qs Capital 140 00

+,100 +,100

4 I and Q are partners in a firm. I is to $et a commission of 10K of net profit beforechar$in$ any commission. Q is to $et a commission of 10K on net profit after

char$in$ all commission. %et profit for the year ended 1st7arch +013 before

char$in$ any commission #as c

or the year ended 1st7arch +013

Dr. Cr.

-articulars Amount

8100;

*o Qs Commission

81,10,000 11,000; I10>110

*o %et -rofit tr. *o Capital

A>c

I 3,000

Q 3,000

11,000

/,000

/0,000

1,10,000

By -rofit before any

commission

1,10,000

1,10,000

5 A, B and C are -artners in a firm sharin$ -rofit and @osses in the ratio +((. *heir

fied capitals #ere ,00,000F 2,00,000F and 1,+0,000 respectively for the year +013

interest on capital #as credited to them O 1+K instead of 10K. -ass the necessary

ad5ustment entry.

S+;,9>+/

T%?; *$+>@ A3,*9&9

P%#9>,;%#* A ! C T+9%;

&nterest that should have been credited

O 10K&nterest already credited O 1+K

0,000

2,000

20,000

J+,000

1+,000

13,300

1,0+,000

1,++,300

(000) (12000) (2400) (20400)

By recoverin$ the etra amount paid

the share #ill increase and it #ill be

credited in the ratio of +(( (4070) (120) (10200)

N9 9 (120) (5770) 6700

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A* C,##9 A D#. 120

!* C,##9 A D#. 5770

T+ C* C,##9 A 6700

I, Q and W #ere partners in a firm sharin$ profit and losses in the ratio of +(1(+.

*heir capitals #ere fied at


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10 (HOTS) *he -artners of a firm distributed the profits for the year ended 1 st7arch

+013. A and C #ere entitled to a salary of > B #as entitled to a commission of >> B and C had $uaranteed a minimum profit of B -rofit #ere to be shared in the ratio of ((+.

-ass necessary 5ournal entry for the above ad5ustments in the books of the

firm.

8:&%*( Dr. As capital


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>> &nterest on dra#in$s O /K. Each partner #ithdre# >>


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CHAPTER 2

GOODILL/ NATURE 8 VALUATION

L%#>@ O?9>B*

7eanin$

Characteristics of ood#ill

%ature of ood#ill %eed for valuin$ ood#ill

actors affectin$ the "alue of ood#ill

Classification of ood#ill

7ethods of "aluation of ood#ill

M%>@/-

ood#ill is the value of benefit or advanta$e that a business has because of the

factors that help in increasin$ its profits say because of its location, favourable

contracts, access to supplies and customer loyalty etc.

C$%#%9#>*9>* + G++3>;;/

1 &t is an intan$ible asset and not a fictitious asset.

+ &t cant have an eistence separate from that of an enterprise.

N%9,# + G++3>;;/

ood#ill is an intan$ible asset. &ntan$ible asset mean an asset not havin$ physical

eistence. But, it is not a fictitious asset. &t can be sold, thou$h a sale #ill be possible

only alon$ #ith the sale of the business itself. Sometimes, $ood#ill has more value

than the tan$ible assets.

J,.6hat is the nature of ood#illV

N3 +# B%;,>@ G++3>;;/

*he need for valuation of $ood#ill arises in the follo#in$ circumstances(

i. 6hen there is a chan$e in the profit)sharin$ ratio.

ii. 6hen a ne# partner is admitted.

iii. 6hen a person retires or dies,

iv. 6hen partnership firm is sold as a $oin$ concern.

%9+#* %9>@ 9$ V%;, + G++3>;;>. Efficient 7ana$ement

>>. @ocation

>>>. avorable Contracts

>B. Guality

B. 7arket Situation

++


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C;%**>>%9>+ + G++3>;;

>. P,#$%*3 G++3>;;/ &t is the ood#ill that is ac'uired by makin$ payment.

or eample, #hen a business is purchased, the ecess of purchase consideration

of its net assets 8i.e., assets ) liabilities; is the -urchased ood#ill.>>. S;-@#%93 G++3>;; / &t is an internally $enerated $ood#ill #hich arises

from a number of factors that a runnin$ business possesses due to #hich it is able

to earn hi$her profit.

M9$+3* + V%;,%9>+ + G++3>;;

S>&9 M9$+3 ) &t is calculated by takin$ the avera$e profit for

a specified number of years and multiplyin$ it #ith the years of purchase.

G++3>;; AB#%@ P#+>9 X N+. + Y%#* P,#$%*

>@$93 AB#%@ P#+>9 M9$+3 &t is calculated by multiplyin$ the profit for each

year #ith the #ei$ht assi$ned to it. *he amounts so arrived at are totaled and divided

by the total of #ei$hts. *he #ei$hted avera$e profit is multiplied by the years of

purchase.

G++3>;; >@$93 AB#%@ P#+>9 X N+. + Y%#* P,#$%*

S,9 M9$+3 Super -rofit is the profit earned by the business that is in

ecess of the normal profit. ood#ill is determined by multiplyin$ the super profit

by the number of years purchase.

G++3>;; S,9 X NO. + Y%#* P,#$%*

C%9%;>*%9>+ M9$+3

Under Capitalisation 7ethod, capitali=ed value of the business is determined by

capitali=in$ the avera$e profit by the normal rate return. 9ut of the value so determined,

value of net assets is deducted, the balance amount is the value of $ood#ill.

G++3>;; C%9%;>*3 V%;, N9 A**9*

C%9%;>*%9>+ + S,9 Under this method, super profit is capitali=ed at the

normal rate of return.

+


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G++3>;; S,9 X 100 N+#&%; #%9 + #9,#

.

1 MARK JUESTIONS

1 Define ood#ill.

2 State any four factors #hich influence the valuation of $ood#ill of a partnership firm.

6hy is ood#ill considered as an &ntan$ible Assets but not a fictitious AssetsV

Ans. &t is not a fictitious Assets because it has a reali=able value. &t is an intan$ible

assets because it cannot be seen and touched.

4 Apart from location and profitability, list any t#o other factors affectin$ ood#ill ofa firm.

5 State any four reasons for valuation of ood#ill in relation to a partnership firm.

( MARKS JUESTIONS)

A business has earned avera$e profit of


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Qears ended 1..+011 +,00,000 8loss;

Qears ended 1..+010 2,0,000

H>9/8ood#ill L 1,,00,000;

+


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Accountin$ treatment of accumulated profit and reserves.

A9 9$ 9>& + $%@ > 9$ 9 *$%#>@ #%9>+ > %: #*#B* +#

%,&,;%93 9;+** >*9>@ > 9$ ?++=* + 9$ >#& 9$: %#

9#%*##3 9+ 9$># +;3 9

*$%#>@ #%9>+.

;%?; +# 9$ 9$ ?++=* + %+,9*

An account titled revaluation account or the profit and the loss ad5ustment account

is opened for this purpose

+ $ 9$ B%;,* %# +9 9+ ? #+#33 > 9$ ?++=* + %+,9

8Ad5ustment of profits>loss on revaluation of asset and reassessment of liabilities

throu$h the capital account only.;

&f the partner decides to record the net effect of revaluation of asset and liabilities

#ithout affectin$ the old amount of asset and liabilities, a sin$le ad5ustin$ entry

involvin$ the capital accounts of $ainin$ partner and sacrificin$ partner is passed.

In this regard, we take the following steps

Step 1. Calculating of the net effect of revaluation

&ncrease in the values of asset P

8M;Decrease in the amount of asset. P

8);Decrease in values of asset. 8P;8);&ncrease in amount of liabilities 8P;

%et effect of revaluation P

Step . !o find share of gain"sacrifice #$ the partner

*heir ne# share P

*heir old share P

Difference P

Step %. Calculation of proportional a&ount of net effect of revaluation.+J


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or $ainin$ partner

-roportion amount of the net effect of revaluation L shared $ained net effect of

revaluation for sacrificin$ partner

-roportion amount of net effect of revaluation L shared sacrificed net effect of

revaluation

Step '. (ass the following )ournal entries

+# 9 + #B%;,%9>+

ainin$ partner8s; capital A>c Dr

*o sacrificin$ partner8s; capital A>c

+# 9 ;+** + #B%;,%9>+

Sacrificin$ partner8s; capital A>c Dr

*o $ainin$ partner8s; capital A>c

J,*9>+*/ 1 &%#=

J1.)6hat is meant by chan$e in profit sharin$ ratioV 81;

J2.) 6hy are reserved and surplus distributed at the time of reconstitution of the firmV

81;

P#%9>%; P#+?;&*/ ( &%#=*)

J1.) Anita, Asha, Amrit are partners sharin$ profit in the ratio of (+(1 respectively. orm

1 Hanuary, +013, they decide to share profit in the ratio 1(1(1. *he partnership deed

provided that in the event of any chan$e in profit sharin$ ratio, the $ood#ill should be

valued at three years purchase of the avera$e of five years, profits. *he profit and losses

of the precedin$ five years are

P#+>9

+00/


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CHAPTER-4

ADMISSION O PARTNER

L%#>@ O?9>B*

Admission of -artner Effects of Admission of -artner

+ + P%#9#/

*he effect of admission of a ne# partner on the firm is that there is a chan$e in the

relations of the partners and reconstitution of the partnership firm.

R>@$9* + % P%#9#/

8i; + + % P%#9#/

Under Section 1 of &ndian -artnership Act, position of a ne# partner #ill be as under( 8i;

:e is not liable to pay any debts of the firm incurred before the admission, 8ii; :e cannot

be held responsible for the acts of the old partners.

M%>@ %3 C%;,;%9>+ + N P#+>9 S$%#>@ R%9>+%e# -rofit)Sharin$ ratio is the ratio in #hich all partners, includin$ ne# or incomin$

partner, share future profits and losses of the firm.

%e# or &ncomin$ partner may ac'uire his share from old partners in any of the follo#in$

alternatives(

i. &n their old profit)sharin$ ratio.

ii. &n a particular ratio or surrendered ratio

iii. &n a particular fraction from some of the partners.

0


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M%>@ %3 C%;,;%9>+ + S%#>>>@ R%9>+/

Sacrificin$ ratio is the ratio in #hich the old partners a$ree to sacrifice their shares of

profit in favor of the ne# partner.

S%#>>>@ R%9>+ O;3 R%9>+ N R%9>+

A+,9>@ T#%9&9 + G++3>;; %* @ S9%3%#3 2/

ood#ill should be recorded in the books only #hen consideration in money or moneys

#orth has been paid for it, i.e. $ood#ill is purchased.. ood#ill, should not be raised in

the books of the firm. &f any partner brin$s any premium over and above his capital

contribution at the time of his admission, such premium should be distributed amon$ the

eistin$ partners in their sacrificin$ ratios.

C%;,;%9>+ + H>33 G++3>;;/

6hen the value of the $ood#ill of the firm is not specifically $iven, the value of $ood#illhas to be inferred on the basis of the %et 6orth of the firm as follo#s(

P%#9>,;%#* R*.

%et 6orth 8includin$ $ood#ill; on the basis of capital brou$ht in by &ncomin$

-artner 8&ncomin$ -artners Capital


32/214

. 6hy are assets revalued at the time of admission of a partnerV

PRACTICAL PRO!LEMS( ( MARKS)

6. A, B and C #ere partners in a firm sharin$ profits in (+(1. *hey admitted D for 10K

profits. Calculate the ne# profit sharin$ ratio. 8 Ans( /(2((+;.7. I and Q are partners sharin$ profits in ( ratio admitted W for 1>10thshare #hich he

ac'uired e'ually for I and Q. Calculate ne# profit sharin$ ratio.8Ans. +(1(3;.

.


33/214

share of $ood#ill in cash and proportionate capital. At the time of leenas admission

the balance sheet of karan and Hitender #as as under(

@iabilities Amount 8


34/214

-repare


35/214

*hey a$reed to admit 7ishra for 1>3thshare from 1.3.+013 sub5ect to the follo#in$

terms(

8a; - to brin$ in capital e'ual to 1>3thof the total capital of - and G after all

ad5ustments includin$ premium for $ood#ill.

8b; Buildin$s to be appreciated by c

By

c

By


36/214

As on April1, +013

Dr. Cr.

L>%?>;>9>* R*. P%#9>,;%#* R*.

Bills -ayables

Creditors

-rovision for @e$alEpenses

Bank 9verdraft

Capital Accounts

- 44,00

G J+,+00

< 30,1+

,000

+0,000

1,400

1J,000

+,00,2+

+3+,3+

Cash in :and

Debtors +0,00

@ess(-rovforDoubtfuldebts 1,000

Stock

7otor "ehicles

-lant

Buildin$s

23,/+

1/,00

13,000

+0,000

30,000

43,000

+3+,3+

6orkin$ %otes(

8i; Calculation of 7ishras Capital(

Sum of capitals of Hain and upta


37/214

-repare c, -artners Capital A>c and the Balance Sheet of the

ne# firm.

Solution(

cDr. Cr.

-articulars Amount -articulars Amount

*o prov. or Bad

debts A>c

*o Stock A>c

200

10,000

By -lant and

7achinery A>c

BQ Capitals A>c

6 20

< +30

10,000

200

10,200 10,200

-artners Capital A>c

Dr. Cr.

-articula

rs

6 < B -articulars 6 < B

*o c

*o Bal.

c>d

20

110430

+30

402

0

20000

By Balance

b>dBQ Cash

A>c

By -?@ A>c

By -rem for

>#

40000

14000

1+00

20000

1+000

4400

20000

111+00 4040

0

20000 111+00 40400 20000

*o Cash

*o Bal.c>d

11430

//000

132

02200

0

20000

By Balance

b>d

110430 4020 20000

110430 402

0

20000 110430 4020 20000

Balance Sheet

J


38/214

As on 1st7arch +013

L>%?>;>9>* A&+,9 A**9* A&+,9

Creditors

Capitals6 //,000

< 22,000

B 20,000

30,000

+,+,000

Cash

SundryDebtors30,000@ess( -rov. +,000

Stock

-lant and 7achinery

-atents

2,200

4,000

30,000

40,000

31,300

+,2,000 +,2,000

6orkin$ %otes(

8i; @et total profit L 1Bs share L 3>1

1 L 11>1

6s share L 11>1I> L >J

1I+> L ++>J

Bs share L 3>1L+0>J

%e# profit sharin$ ratio of 6, < and B

L >J( ++>J(+0>J

L (++(+0

8ii; Qear -rofit

+011 30,000

+01+ +4,000

+01 3,000

+013 0,000

YYYYYYY

*otal 1,+,000

YYYYYYY

Avera$e -rofit L 1,+,000>3L ,000

ood#ill L Avera$e -rofit I %umber of Qears -urchase

L ,000 I >+

L 4+,00

8iii; Bs capital for 3>1thshare L 3 L +,+,000

+,+,000)20,000 L 1,2,000

6s capital L 1,2,000 I > L //,000

L ,000

4


39/214

9rdshare in the profits. W #as to contribute


40/214


41/214

Continuin$ -artners Capital Current A>c P. Dr. &n $ainin$

ratioT

*o 9ut$oin$ -artners Capital>Current A>c

RB%;,%9>+ + A**9* %3 L>%?>;>9>*/

death of a partner,there may be some assets #hich may not have been sho#n at their current values.

A3,*9&9 + A,&,;%93 P#+>9* %3 L+***

*he reserves 8Accumulated profits; or losses belon$ to all the partners and should be

transferred to capital account of all partners on retirement.

C+&+ + %&+,9 3, 9+ #9>#>@ >@ N P#+>9-*$%#>@

#%9>+

D%9$ + death of a partner, the remainin$ partner may decide to keep

their capital contributions in their profit sharin$ ratio.

P#+ + D%*3 P%#9#* C%9%; A+,9 %3 E,9+#* A+,9

JUESTIONS/ (1 MARK)

1. 6hat is meant by retirement of a partnerV

2. Define $ainin$ ratio.

. :o# is $ainin$ ratio calculatedV

4. 6hen is -artners Eecutors Account preparedV

5. 6hy is $ainin$ ratio calculatedV

. A, B and C are partners sharin$ profits in the ratio of (+(1. B retires and the ne#

profit sharin$ ratio bet#een A and C is (1. State the $ainin$ ratio.6. State the need for treatment of ood#ill on retirement of a partner.

7. -, G and < #ere partners in a firm sharin$ profits in the ratio of (3(. *heir capitals

#ere


42/214

11. 6hat are the different #ays in #hich a partner can retire from the firmV

12. Distin$uish bet#een Sacrificin$


43/214


44/214

8i; -remises have appreciated by +0K ,Stock depreciated by 10K and provision for

doubtful debts #as to be made K on debtors. urther, provision for le$al

dama$es is to be made for


45/214

2/,000 2/,000

-ramod retires on the date of Balance Sheet and the follo#in$ ad5ustments #ere

made(

8a; Stock #as valued at 10K less than the book value.

8b; actory buildin$s #ere appreciated by 1+K.8c;


46/214

&nt. on capital upto date of his death, if allo#ed by the partnership deed.

ollo# amounts are debited to his account

:is share of loss on revaluation of the assets and reassessment of liabilities , if any

:is share of accumulated losses

:is dra#in$s.

&nt. on dra#in$s.

&nt. on dra#in$s and his share of loss if any

Calculation of deceased partners share profit

Accordin$ to profit basis Accordin$ to sales basis

1. A,B and C #ere partners in a firm. C died on +4th

eb +013. :is share of profitfrom the closure of the last accountin$ year till the date of death #as to be

calculated on the basis of the avera$e profit of three complete years before death,

profit for +011 +01+ and +01 #ere


47/214

1 mark 'uestion

. A B and C are partners sharin$ profit and losses in the ratio +(+(1 . C died on 1st

7arch +013 profit and sales for the calendar year +01 #ere ;; >*

9+ ? B%;,3 %91

3 8one third; of the net profit credit to the account durin$ the

last four completed years. < died on 1stHan +013.*he firm profit for the four years

#ere as()

+010


48/214

8b; *he deceased partners share in the $ood#ill of the firm #ill be calculated as

the basis of + years purchases of the avera$e profit of last three years. *he

profit of the firm for the last three years #ere


49/214

CHAPTER-

DISSOLUTION O PARTNERSHIP IRM

L%#>@ O?9>B*

7eanin$ of dissolution

Dissolution of -artnership Dissolution of irm

7ode of dissolution of a firm.

Settlement of Accounts in case of Dissolution of irm

*reatment of irms Debts and -rivate Debts

Accountin$ treatment on Dissolution

M%>@ + 3>**+;,9>+/

*he term Dissolution stands for discontinuation. Under *he &ndian -artnerShip Act. 1/+,

the dissolution may be either of partnership or of a firm.

D>**+;,9>+ + P%#9#*$>**+;,9>+ + >#&/

Dissolution of -artnership firm means that the firm close do#n its business activities assets

are sold out, liabilities are paid off, balance if any distributed amon$ partners as cap.

M+3 + 3>**+;,9>+ + % >#&.8i; "oluntary dissolution

8ii; Compulsory dissolution

8iii; Dissolution by court

8iv; Dissolution by notice.

S99;&9 + A+,9* > %* + D>**+;,9>+ + >#&/

(>) R%;>*%9>+ A+,9/ *he ob5ect of reali=ation account is to close the books of

account of a dissolved firm and to compute the net effect of reali=ation of various

assets and payments of various liabilities.

9c 8 ecludin$ cash,

bank, fictitious assets, accumulated

losses, debit balance of -artners

capital>current a>c, loans to partners;

*o -rovision on Any @iability A>c

*o Bank>Cash A>c8amount paid for

dischar$in$ liabilities;

*o Bank>Cash A>c 8epenses on

reali=ation;

Y

Y

Y

Y

By Sundry liabilities A>c 8ecludin$

partners capital, loan from partners

reserve, accumulated profit etc.;

By -rovision on Any Assets A>c

By Bank>Cash A>c 8amount

received on reali=ation of assets;

By Bank>Cash A>c 8amount

received from unrecorded assets;

BQ -artners Capital A>c8assets

Y

Y

Y

Y

Y

3/


50/214

*o -artners Capital>Current

A>c8liability taken over by a partner or

remuneration>commission paid to him

or any epenses beared by him;

*o -artners Capital>Current A>c 8profit

on reali=ation;

Y

Y

taken over by a partner recorded or

unrecorded;

By partners capital>Current A>c

8loss on reali=ation;

Y

*c 8Actual amount;

8c; 6hen epenses are paid by firm and borne by partner

-artners Capital A>c Dr.

*o Cash>Bank A>c 8Actual amount;

8d; 6hen a partner is paid a fied amount for the purpose of bearin$ reali=ation epenses

and actual epenses are borne by partner

c Dr.

*o -artners Capital A>c 8amount fied by firm;

(>>) P%#9# L+% A+,9/

*he loan advanced by a partner to the firm shall be paid off after all the outsideliabilities are paid in full.

Hournal Entry

-artners @oan A>c Dr.

*o Bank A>c

(>>>) P%#9#* C%9%; A+,9*/

Balances of partners capital account and current account are recorded in this

account.

Any asset of firm, taken over by the partner is recorded on the debit side of their

capital account and any liability taken over is recorded on the credit side of their

capital account.

(>B) CALCULATION O MISSING IGURES !Y PREPARATION O

MEMORANDUM !ALANCE SHEET/

6hen Balance sheet is not $iven but some items of Balance sheet are $iven then students

should prepare Balance sheet #ith the help of $iven items and find out the missin$ fi$ures as

Balancin$ amount.

or e$. &f liabilities and Capital A>C s are $iven then the value of assets could be found out as

balancin$ fi$ure.

*


51/214

Deferred -?@ A>c loss>Advertisement

Ependiture transferred to the Dr. side of -artners capital a>c in

profit sharin$ ratio.

-artners current a>c *ransferred to Dr. side of Capital A>c if $iven in

the assets side. *ransferred to Cr. Side of capital A>c if $iven in the

liabilities side.

-?@ A>c 8profit;, eneral c in profit sharin$ ratio.

Hoint -olicy c, &nvestment luctuation und, -lant and

7achinery replacement reserve, s then these items #ill be transferred to c other#ise

these items #ill be transferred to Cr. Side of capital A>cs in profit

sharin$ ratio.

-rovident fund &t is a liability to#ards the #orkers, so it #ill betransferred to the #&* D?9* %3 P#>B%9 D?9*/

A+ + >#&* P#+


52/214

. A and B are partners in a firm sharin$ profit in the ratio (+. 7rs A has $iven a loan of

c creditedV

A*. Because the claim of the partner a$ainst the firm is increased by the amount of

liability assumed.

( MARKS)

11. 8OR !RIGHT STUDENTS) *he firm of


53/214

Ws Capital A>c Dr. +,200

*o c +,200;

14.


54/214

8b; Ashok an old customer #hose account for


55/214

Creditors

Bills -ayable

&nvestment luctuation und

Capitals(

- J,000

G 0,000

+0,000

J,300

/,000

1,0,000

-lant and 7achinery

Stock

&nvestments

Accounts


56/214

Solution(

Dr. c

14,000

1,+0,000

,00,000

/0,000

,10,000 ,10,000

Dr. -A


57/214

,34,000 ,34,000

ORKING NOTE/

Dr. 7E79cs


58/214

CHAPTER - 6

SHARE CAPITAL

ACCOUNTING OR SHARE CAPITAL

LEARNING O!'ECTIVES

7eanin$ of a company 7eanin$ of Share capital

Classification of share capital

*ypes of shares

&ssue of shares

-rivate placement of shares.

Understand the meanin$ of forfeiture of shares.

forfeiture and reissue of shares.

Differentiate bet#een capital reserve and reserve capital

Understand the disclosure of the share capital in the balance sheet.

M%>@ + % +&@ + S$%# %9%;/

Share Capitalis the amount invested by o#ners8share holders; of the company in

small units.

C;%**>>%9>+ + *$%# %9%;/

i. Authorised Share capital maimum capital that a company can raise.

>>. &ssued share capital issued by company for subscription.

>>>. Subscribed share capital part of issued share capital that is subscribed by public.

>B. Called up amount amount of nominal value called up for payment.

B. -aid up amount amount received by company.

T:


59/214


60/214

6hen shares #ere ori$inally issued at par or premium the amount credited to forfeited

shares account.

6hen shares #ere ori$inally issued at a discount the amount credited to orfeited account M

amount of ori$inal discount.

P#>B%9 #9>%9 ?9 %9%; #*#B %3 #*#B %9%; - 9$ ?%;% *$9.

1. !anha @td. 6as re$istered #ith an authori=ed capital of


61/214


62/214

-repare an etract of Balance Sheet of "andan @td. As per revised Schedule

"&, -art & of the Companies Act 1/2 disclosin$ the above information.

Also prepare [%otes to Accounts\ for the same.

M%#=*

1/. Suri @td. 6as re$istered #ith an authori=ed capital of

and 8iii; at premium of +0K.

+1. W ltd. -urchased furniture costin$


63/214

+2. *he Directors of a company forfeited 00 shares of


64/214

Bank A>c Dr.

*o Share capital A>c800I100;

*o Securities -remium A>c8B.f.;

8Bein$ reissue of 00 shares at c Dr.

*o Capital c

8Bein$ balance of forfeited share account

transferred to capital reserve;

0,000

0,000

+4. -oonam @td. orfeited +00, 4K preference shares of c

*o 4K -reference Share Capital

A>c

*o Securities -remium A>c

8Bein$ reissue of +00 4K preference

shares at c Dr.

*o Capital c


10,000

10,000

23


65/214


+/. Samta ltd. orfeited 400 e'uity shares of


66/214


67/214

Case 8iii; H9Uc 8+00I0;Dr.

*o Share inal Call A>c

*o Share orfeiture A>c

8Bein$ +00 shares forfeited for the non)payment of

final call;

10,000

+,000

4,000

Bank A>c 8+00I3; Dr.

Share forfeiture a>c 8+00I; *o Share capital A>c 8+00I0;

8Bein$ reissue of 300 shares at c Dr.

*o Capital c



J000

J000

+. %isha ltd issued ,000 e'uity shares of


68/214

All money #as received ecept from I #ho did not pay anythin$ after

application. Hournalise.

Solution( H9Uc Dr.

*o E'uity Share Application A>c

8Bein$ money received on application for +,00

shares at c

*o E'uity Share Allotment A>c

8Bein$ application money ad5usted;

2+,00

20,000

+,00

E'uity Share Allotment A>c Dr. *o E'uity Share capital A>c

8Bein$ allotment money due on +,000 shares at

c 840,000 1+,00 ,000; Dr.

*o E'uity Share Allotment A>c

8Bein$ money received on share allotment ecept

surplus application money and amount not

received by I;

+,00

+,00

E'uity Share irst and inal Call A>c Dr.

*o E'uity Share Capital A>c

8Bein$ amount due on first and final call on +,000

shares at c Dr.

*o E'uity Share irst and inal Call

A>c

8Bein$ money received on first and final call

ecept 1,000 shares of I;

,000

,000

Shares to be issued ) +000 shares


69/214

M+: +9 #>B3 #+& XEcess application money received from I L 81+00 )1000; I + L 000

7oney due on allotment L 1000 I 30 L 30,000

7oney not received L 30,000 ,000 L ,000

3. Alpha ltd. &ssued +,000 shares of


70/214


71/214

Ecess application money 81000 I J0 I ; L J0

Due on Allotment 8J0 I ; L ,J0

@ess ( Ecess L J0

7oney not received 8Call)in)arrear; L ,000

Calls in advance L 300 I 3 L 1,200. 7a @td. &ssued 1,00,000 shares of


72/214

CHAPTER 7

COMPANY ACCOUNTS/-(ISSUE O DE!ENTURES)

L%#>@ O?9>B*

7eanin$ of Debenture and Bonds

&ssue of Debentures for cash

&ssue of debentures at -ar, -remium and at discount

&ssue of debentures for consideration other than cash

&ssue of debentures as collateral security

Accountin$ entries for interest on debentures

M%>@ + D?9,# %3 !+3*

D?9,#is a #ritten instrument ackno#led$in$ a debt under the common seal of thecompany.

Accordin$ to Section +81+; of the Companies Act, 1/2 Debenture includes Debenture Stock,

Bonds and any other securities of a company #hether constitutin$ a char$e on the assets of

the company or not.

*he return on debentures is called interest on Debentures.

*he debentures are $enerally secured and carry a fied or floatin$ char$e over the assets of

the company.

!+3is similar to debentures in terms of contents and teture. *he only difference is #ith

respect of issue condition i.e. bonds can be issued #ithout predetermined rate of interest as in

case of deep discount bonds.

I**, + D?9,#*

*he debentures may be issued for

(>) +# %*$

(>>) C+*>3#%9>+ +9$# 9$% %*$ Debentures can be issued to vendors a$ainst thepurchase of assets or for purchase of business.

J,*9>+/ -ass Hournal entries for the follo#in$ transactions(

Q ltd. -urchased plant and machinery for


73/214

"endors A>c Dr.

*o Cash A>c

*o 2K Debentures A>c

8Bein$ cash paid to vendor and balance issue of debentures

O 9:

Any security in addition to primary security is called collateral security. Debentures are

normally issued as collateral security #hen the borro#er is not able to mort$a$e an asset as

collateral security. *he holder of debenture as a collateral security is not entitled to interest

on debentures. But if the company fails to repay loan, the lender may eercise its ri$hts and

claim the ri$hts of a debentureholder.

J,*9>+/ -ass the necessary Hournal entry #hen ,000 debenture of c ,00,000

8Bein$ issue of ,000 debentures of c.

J


74/214


75/214

Bank A>c Dr.

*o Debenture Application? Allot A>c

4,30,000

4,30,000

Debenture Application ? Allot A>c Dr.

*o /K Debentures a>c *o Security -remium a>c

4,30,000

4,00,00030,000

1+. Qello# ltd. &ssued /0,000 /K Debentures, of c Dr.

*o Debenture Application? Allot A>c

/0,00,000

/0,00,000

Debenture Application a>c Dr.

loss on issue of Allot debentures a>c

*o /K Debentures a>c

*o -remium on c Dr.

*o Debenture Application A>c

/,00,000

/,00,000

Debenture Application ? Allot a>c Dr.

Discount on issue of debentures a>c

@oss on &ssue of Debentures Dr. *o 4K Debentures a>c

*o -remium on redemption of debentures

a>c

/,00,000

1,00,000

1,0,00010,00,000

1,0,000

13. G ltd. &ssued 3,000 /K debentures of c Dr. *o Debenture Application A>c

3,30,0003,30,000

Debenture Application ? Allot a>c Dr.

loss on issue of debenture Dr.

*o /K Debentures a>c

*o securities premium a>c

*o -remium on redemption a>c

3,00,000

40,000

3,00,000

30,000

40,000

1. I ltd. Secured a loan of


76/214

IRST METHOD

-articulars %ote

%o.

%?>;>9>*@on$)term Borro#in$s 1 1,20,000

%ote to Accounts

-articulars


77/214

@on$)term Borro#in$s

@oan from Bank of Baroda

8Secured by issue of +000 debentures of


78/214

8i; A Co. issued 30,000F 1+K debentures of


79/214

CHAPTER-COMPANY ACCOUNTS-

REDEMPTION O DE!ENTURES

LEARNING O!'ECTIVES/

7eanin$ of


80/214

CREATION As per Sec 11J8c; of *he Companies Act, 1/2, a company is re'uired

to transfer ade'uate amounts of its profits every year to D**,3 ?: SE!I #@%#3>@ #%9>+ + DRR %#/

A company is re'uired to debenture redemption reserve of an amount at least e'ual to 0K of

the amount of debentures issued before redemption of debentures commences.

M9$+3* + R3&+ + D?9,#*

8i; R3&+ + D?9,#* > L,&< *,&means all the debentures are

redeemed at the date specified for redemption of debentures.

8ii; R3&+ ?: D#% + L+9*means redemption of debentures 8selected by

lottery; at the specified date.

8iii; R3&+ ?: P,#$%* #+& +


81/214

PRACTICAL PRO!LEMS/ 4 MARKS

G4( Q ltd. &ssued 0,000F 10K Debentures of c

*o Bank A>c

8Bein$ the debenture app. 7oney

ad5usted;

&nt. on debentures A>c

Dr.

*o Deb. :olders A>c

8Bein$ the int. due;

Deb. :olders A>c

Dr. *o Bank A>c

8Bein$ the payment of interest;

&nterest on Debentures A>c

Dr.

*o Deb. :olders A>c

8bein$ the int. due for mths;

10K Debentures A>c

Dr.

*o Deb. :olders A>c

8Bein$ the payment on red. 9f

deb. :olders due to deb holders;Debenture holders A>c

,0,000

,0,000

0,000

0,000

1+,00

,00,000

,1+,00

,0,000

,00,000

0,000

0,000

0,000

1+,00

,00,000

,1+,00

41


82/214

Dr.

*o Bank A>c

8Bein$ the payment due to deb.

:olders disch. &ncl. interest;

%ote( 1. Accordin$ to SEB& uidelines, D


83/214

Dc Dr.

*o Deb. :olders

8 Bein$ the amt. due;

Deb. :olders A>c Dr.

*o Bank A>c8Bein$ the amt. paid;

Dc Dr.

*o en. c

8Bein$ Dc

*o Sec. -rem. c

8Bein$ app money tr. *o /K

deb. And sec. prem. c;

/K Debentures a>c Dr.

*o Debentureholders

8Bein$ the payment due;

Debentureholders a>c Dr.

*o Bank A>c

8Bein$ the payment made;

10+,00,00

0

10+,00,00

0

100,00,00

0

100,00,000

10+,00,00

0

100,00,00

0

+,00,000

100,00,00

0

100,00,00

0

%ote( D


84/214

Hournal

Dt. -articulars l.

f.

Dr. Cr.

Qear 1

Qear

Qear

O >**, + 3?9,#*

Bank A>c Dr.

*o Debenture app.a>c

8Bein$ the amt. rec.;

Deb. App. A>c Dr.

@oss on issue of deb. A>cDr.

*o Deb. A>c

*o -rem. 9n red.of deb.

8Bein$ the allotment done;

O #%9>+ + DRR

-?@ A>c Dr.

*o Dc Dr.

*o Bank A>c

8bein$ the amt paid;Dc Dr.

*o en reserve

8bein$ the tr. *o . res.;

10,00,000

10,00,000

0,000

,00,000

10,00,000

0,000

10,0,000

,00,000

10,00,000

10,00,000

0,000

,00,000

10,0,000

10,0,000

,00,000

G1 I ltd. :as a balance of


85/214

Dr.

-remium on c

Dr.

*o debentureholders A>c

8Bein$ the amtpayableon red.

&ncludin$ prem. 9n redemption;-?@ A>c

Dr.

*o Dc

8Bein$ the app. 9f profits to

redeem the deb. ully out of

profits;

Debentureholders A>c

Dr.

*o Bank A>c

8bein$ the payment made todebentureholders on redemption

#ith interest due;

Dc

Dr.

*o eneral


86/214

&n the books of = ltd.

Hournal

Dt. -articulars l.f. Dr. Cr.

9#n Debentures A>c

Dr.

*o Bank A>c

8Bein$ the purchase of +00 o#n

debentures O c

Dr.

*o o#n Debentures A>c

*o profit on cancellation

of o#n debentures A>c

8Bein$ o#n debentures

purchased from open market andcancelled;

-rofit on Cancellation of 9#n

Debentures A>c

Dr.

*o Capital c

8Bein$ the transfer of profit on

redemption of debentures to

capital reserve;

2,400

30,000

,+00

2,400

2,400

,+00

,+00

G1J 9n 1stApril, +01, a company issued +,000, /K Debentures of


87/214

PART II

CHAPTER 1

>%>%; S9%9&9* + % C+&@ O?9>B*

T$ *9,3: + 9$>* $%%; C+*,&3 &t is the a$$re$ate of cost of ra# materials and other

materials used

in manufacture of $oods.

P,#$%* + S9+=- I T#%3 &t means purchases of $oods for resale.

C$%@ > IB9+#>* + &t is the difference bet#een the openin$ inventories and

of inished

>>*$3 G++3* IP %3 oods, 6&- and Stock in)*rade .&t is sho#n

separately in the %ote to S9+= >-T#%3 Accounts and one sin$le amount on the face of the

Statement of -rofit

and @oss

E&9 E%>%; C+*9* *hey are the epenses of the company incurred on the

borro#in$,

i.e loans taken by it.

4J


88/214

D%9>+ %3 A&+#9>*%9>+ &t is the fall in the value of fied assets due to its or

afflu of time or

obsolescence .Amortisation is #ritin$ off of

intan$ible assets.

O9$# E%?>;>9>*%on)current @iabilities are defined in Schedule "& as those

liabilities

#hich are not current liabilities.

L+@ 9#& !+##+>@* @on$ *erm borro#in$s #hich are repayable

after more than 1+

months.

D##3 T% L>%?>;>9>* &t is the amount of ta on the temporary

differences bet#een the

accountin$ income and taable income. &t isonly a book entry and

44


89/214

not an actual liability. &t arises #hen accountin$ income is more than

taable income.

O9$# L+@-9#& L>%?>;>9>* *hey are the @iabilities other than @on$)term

Borro#in$s of the

company.

L+@-9#& P#+B>*>+* *hey are the provision for liabililities that #ill

be payable after 1+

months from the date of Balance Sheet or after

the period of

9peratin$ Cycle.

C,##9L>%?>;>9>*Current @iabilities are those liabilities #hich are (

epected to be settled in companys

normal 9peratin$ Cycle( or

due to be settled #ithin 1+ months

after reportin$ date.

O@ C:;&t is the time bet#een the ac'uisition of assets for processin$ and

their reali=ation into cash and cash

e'uivalents. 6here the

9peratin$ Cycle cannot be identified, &t is assumed to be of 1+

months.

HINT

C,##9 L>%?>;;>9>*are classified into Short term Borro#in$sF *rade -ayables( 9ther

Current @iabilities F and Short)term -rovisions.

ASSETS

N+-,##9 A**9* %on)current assets are those assets #hich are not current

assets.*hese are sub)classified into(ied Assets F%on)current

&nvestments FDeferred *a Assets 8%et;F@on$term@oans

and Advances( and 9ther %on)current Assets.

C,##9A**9* Current assets are those assets #hich are(

epected to be reali=ed in or intended

for sale or consumption in normal9peratin$ Cycle of the companyFor

held primarily for the purposes of

tradin$ F or

epected to be realised #ithin 1+

months from the reportin$ data or

closin$ date.

Cash and cash e'uivalent unless it is

restricted from bein$ echan$ed or

used to settle a liability for at least 1+

months after the reportin$ date.

4/


90/214

HINT

C,##9 A**9*are classified into ( Current &nvestmentsF &nventoriesF *rade


91/214

+#& + 9$ !%;% S$9

*he form of Balance Sheet as prescribed in -art & of Schedule "& of the Companies Act,

1/2, is as follo#s(

N%& + 9$ C+&%?>;>9>*

i; @on$)*erm Borro#in$

ii; Deferred *a @iabilities 8%et;

iii; 9ther @on$)*erm @iabilities

iv; @on$ *erm -rovisions

3) C,##9 L>%?>;>9>*

i; Short) term Borro#in$s

ii; *rade -ayables

iii; 9ther Current @iabilities

iv; Short)term -rovisions

T+9%;

/1


92/214

2) ASSETS

%) N+-C,##9 A**9*

i; ied Assets

*an$ible Assets

&ntan$ible Assets

Capital 6ork)in)pro$ress

&ntan$ible Assets under Development

ii; %on)Current &nvestments

iii; Deferred *a Assets8%et;

iv; @on$ *erm @oans and Advances

v; 9ther %on)current Assets

?) C,##9 A**9*

i; Current &nvestments

ii; &nventories

iii; *rade


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8iv;&nterest Accrued but not due on debentures

8v; Arrears of fied cumulative preference dividends

8vi;Sundry creditors

8; Under #hich head follo#in$ revenue items of a non)financial companies #ill

be sho#n(

8i; &nterest Earned8ii; Dividend

8iii; -rofit on sale of Asset

8iv;


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8ii; @on$)term investments

8iii; -re)paid insurance

8iv;Buildin$s

8v; Sundry debtors

8vi;Share of reliance ltd. Deposit #ith custom authorities.

84; Under #hich main heads and sub)heads of balance sheet of a company.&. Calls in Arrears

&&. Debentures

&&&. Commission receive in advance

&". Stores and spare parts

". @and and Buildin$

"&. orfeited Share account

CHAPTER-2

INANCIAL STATEMENT ANALYSIS

L%#>@ +?9>B

7eanin$ of financial statement analysis

*ools of inancial statement analysis

*ypes of financial statement analysis

-urpose>ob5ectives of financial statement analysis

Uses of financial Analysis

-arties &nterested of financial analysis

@imitation of financial analysis

M%>@ + >%>%; *9%9&9 %%;:*>*

inancial statement Analysis is lar$ely a study of relationship amon$ the various

financial factor in a business, as disclosed by the various financial of statements and a

study of trends of these factors as sho#n in a series of statement.

inancial statement Analysis is an important part of the overall financial analysis. &t is

based on the financial statement i.e Balance sheet and statement of-? @ #hich are the

end products of accountin$ process.

T++;* + >%>%; *9%9&9 %%;:*>*

8i; Comparative statement

8ii; Common si=e statement

8iii; %; *9%9&9 A%;:*>*

8i; Eternal

8ii; &nternal

8iii; "ertical

8iv; :ori=ontal

/3


95/214

U** + >%>%; A%;:*>*

8i; Security Analysis

8ii; Credit Analysis

8iii; Debit Analysis8iv; Dividend Decision

P,#B + >%>%; A%;:*>*

8i; Assessin$ the earnin$ Capacity

8ii; 7ana$erial Efficiency

8iii; Short term and lon$ term Solvency of the enterprise

L>&>9%9>+* + >%>%; %%;:*>*

8i; &$nores -rice level Chan$es

8ii; Gualitative Aspect &$nored

8iii;:istorical analysis

P%#9>* I9#*93 + >%>%; %%;:*>*

8i;7ana$ement

8ii;Employees

8iii;Shareholder

8iv;Suppliers

8v;Bankers

8vi; @ O?9>B*

7eanin$ of Comparative inancial Statement.

9b5ectives of preparin$ comparative financial statements.

-reparation of comparative Balance Sheet.

/


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-reparation of comparative &ncome Statement.

7eanin$ of Common si=e inancial statement

9b5ectives of preparin$ common si=e financial statement.

-reparation of common)si=e Balance Sheet.

-reparation of Common)si=e &ncome Statement.

M%>@ + C+&B S9%9&9

Comparative statement is the statement prepared to compare individual components

of the financial statement of t#o or more years of a company.

O?9>B* + %>%; *9%9&9*/

1. Data presentation becomes simple and comparable.

+. ives information about the chan$es affectin$ financial position

and performance of an enterprise.. Comparision of performance #ith other firms becomes easy.

PREPARTION O COMPARATIVE INANCIAL STATEMENTS

9;>9>*

i. @on$)*erm Borro#in$

ii. @on$ *erm -rovisions

. C,##9 L>%?>;>9>*

i. Short) term Borro#in$s

ii. *rade -ayables

iii. 9ther Current @iabilitiesiv. Short)term -rovisions

T+9%;

II. ASSETS

2. N+-C,##9 A**9*

/2


97/214

8a; ied Assets

8i;*an$ible Assets

8ii;&ntan$ible Assets

8b; %on)Current &nvestments

8c; @on$ *erm @oans and Advances

. C,##9 A**9*i. Current &nvestments

ii. &nventories

iii. *rade


98/214

,00,000

1,00,000

+,0,000

0,000

1,00,000 10,0,000

S9@U*&9%(

E ;93.

C97-A


99/214

8b; -urchase of Stock)in)trade

8c; Chan$e in inventories of finished

$oods, #ork)in)pro$ress and stock)

in)trade

8d; Employees benefit epenses

8e; inance costs8f; Depreciation and amorti=ation

epenses

8$; 9ther epenses

V. P#+>9 ?+# T% (III-IV)

@ess( income *a

VI. -rofit after ta

J,*9>+( -repare Comparative Statement of -rofit and loss from the follo#in$(-articulars 1st7arch +01+ 1st7arch +011


100/214

1 *o analyse chan$e in individual items of &ncome statement and

Balance sheet.

+ *o study the trend in different items of &ncomes and Epenses >

@iabilities and Assets.

*o assess the efficiency and financial soundness.

PREPARATION O COMMON SI"E STATEMENTS

ORMAT O COMMON SI"E INCOME STATEMENTS

C9779%)S&WE S*A*E7E%* 9 -


101/214

Solution(

-articulars %ote

%o.

1st7arch

+01

1st7arch

+013

+01K

&.


102/214

8b; *rade payables

8c; 9ther current liabilities

8d; short term provisions

*otal 100 10

&& ASSE*S

1. %on)Current Assets

8a; ied Assets

8i; *an$ible Assets

8ii; &ntan$ible Assets

8b; %on)current &nvestments

8c; @on$)term @oans and Advances

+. Current Assets

8a; Current &nvestments

8b; &nventories_ *rade


103/214

8a; *rade payables +,00,000 1,00,000

*otal 1+,00,000 J,0,000

&& ASSE*S

1. %on)Current Assets

8a; ied Assets

8i; *an$ible Assets

+. Current Assets

8a; Cash and Cash E'uivalents

J,0,000

3,0,000

,00,000

+,0,000

*otal 1+,00,000 J,0,000

-articulars %ote

%o.

1stmarch

+01

8A;

1stmarch

+013

8B;

+01K +013K

& EGU&*Q A%D @&AB&@&*&ES1. Shareholders funds

8a; Share Capital(

8b;


104/214

BA@A%CE S:EE*S

As at 1stmarch +013 and +01

4 MARKS JUESTIONS

1. -repare comparative statement of -rofit and @oss from the follo#in$(

-articulars +01 +013


105/214

1. S$%#$+;3#* ,3*

Share Capital

2. N+-,##9 ;>%?>;>9>*

@on$)term borro#in$s

. C,##9 ;>%?>;>9>*

*rade payablesT+9%;

II ASSETS

1. N+-,##9 A**9*

ied Assets8*an$ible;

2. C,##9 A**9*

*rade 9: 8 ;>%?>;>9>*

Share holders fund

a. Share Capital

b. %?>;>9>*

@on$ term borro#in$

. Current liabilities

*rade payable

T+9%;

2. A**9*

%. N+ C,##9 A**9*

ied Assets

i. *an$ible Assets

ii. &ntan$ible Assets

C,##9 A**9*

i. &nventoriesii. Cash and cash e'uivalents

0,00,000

3,00,000

10,00,000

2,00,000

5000000

0,00,000

2,00,000

10,00,00

3,00,000

10


106/214

T+9%;5000000

102


107/214

CHAPTER-4

RATIO ANALYSIS

LEARNING O!'ECTIVES/

7eanin$ of Accountin$ +

Accountin$ ratio means the numerical relationship bet#een t#o fi$ures or t#o $roups of

fi$ures contained in -rofit and @oss A>c and Balance Sheet.

M%>@ + R%9>+ %%;:*>*

9%9>+* + #%9>+ %%;:*>*

1


108/214

P#+>9%?>;>9: R%9>+*

LIJUIDITY RATIOS

M%>@/@i'uidity ratios are the ratios #hich are calculated to assess companys ability to repay

the short)term loans on their due dates.

*#o important li'uidity ratios are(

8a; Current ratio

8b; Guick ratio

CURRENT RATIO

M%>@/

&t establishes a relationship bet#een Current Assets and Current @iabilities.

O?9>B/

*o measure the ability of the firm to meet its short)term obli$ations.

C,##9 A**9*

L Current &nvestments M &nventories M *rade


109/214

S+;,9>+ ( Current liabilities L Current Assets 6orkin$ Capital

L


110/214

Usually the follo#in$ ratios are calculated to 5ud$e lon$)term financial solvency of the

enterprise(

1 D?9-E,>9: #%9>+

2 T+9%; %**9* 9+ D?9 #%9>+

P#+9+#: #%9>+

4 I9#*9 +B#%@ #%9>+

D?9-E,>9: #%9>+ /

M%>@

&t establishes a relationship bet#een Debt and E'uity.

O?9>B/

*o measure the lon$)term financial solvency.

C%;,;%9>+/

Debt L @on$)term Borro#in$s M @on$)term -rovisions

Debt L *otal Debt Current @iabilities

Debt L Capital Employed E'uity

E'uity L 6hich means funds belon$in$ to all the shareholders 8 #hether E'uity or

-reference;.

D?9-E,>9: R%9>+ D?9 E,>9:

J,*9>+/rom the follo#in$ information. Calculate Debt)e'uity


111/214

SOME IMPORTANT RELATIONSHIPS

1. Debt L *otal Debt Current @iabilities

+. Debt L Capital Employed E'uity. Capital Employed L *otal Assets Current liabilities

3. Capital Employed L %on)Current Assets M 6orkin$ Capital

. Capital Employed L E'uity M Debt

2. E'uity L E'uity Share Capital M -reference Share Capital M


112/214

.

P#+9%#: #%9>+ P#+9+#* ,3*T+9%; A**9* X 100

P#+9+#* ,3* means funds belon$in$ to shareholders i.e. Share capital M +/rom the follo#in$ information, calculate -roprietory &*

J,*9>+( - ltd has a lon$ term loan @/

&t measures the effectiveness #ith #hich a firm use its available resources.

O?9>B/

*o measure ho# #ell the resources have been used by the enterprise. A hi$her ratio indicatesbetter use of capital #hich in turn sho#s better profitability of the firm.

11+


113/214

Usually the follo#in$ ratios are calculated(

1. IB9+#: 9,#+B# #%9>+

2. T#%3 #>B%?;*D?9+#* 9,#+B# #%9>+

. T#%3 9+#* 9,#+B# #%9>+4. +#=>@ %9%; 9,#+B# #%9>+

IB9+#: 9,#+B# #%9>+

M%>@/

&t establishes the relationship bet#een Cost of B/

*o determine the efficiency #ith #hich the &nventory of finished $oods is converted into+/

Cost of +/Calculate &nventory turnover ratio(

Cost of $oods sold>+

M%>@/&t sho#s the relations bet#een Credit revenue from operations and avera$e trade receivables.

11

IB9+#: 9,#+B# #%9>+

C+*9 + RB, #+& ++* AB#%@ IB9+#:

FF.9>&*


114/214

O?9>B/

*o determine the efficiency #ith #hich the trade receivables are mana$ed and collected.

C%;,;%9>+/

Avera$e trade receivables L +F..&+9$*

J,*9>+/Calculate *rade receivable or Debtors turnover ratio and Avera$e collection

period.

Credit revenue from operation for the year is *rade receivable ratio

L2>2

L 21 days appro..

T#%3 9+#* 9,#+B# #%9>+

M%>@/

&t sho#s the relation bet#een %et credit purchases and Accounts payable.

O?9>B/

*o determine the efficiency #ith #hich creditors make payment. A hi$her ratio indicates the

shorter payment period.

113

D?9+#* 9,#+B# #%9>+

C#3>9 RB, #+& ++*AB#%@ 9#%3 #>B%?;*

FF. 9>&*


115/214

C%;,;%9>+/

%et Credit -urchases L %et -urchases Cash -urchases

Avera$e *rade -ayables L 9penin$ *rade -ayablesMClosin$ *rade -ayables>+

*rade -ayables L *rade Creditors M Bills -ayables

J,*9>+/ Closin$ *rade -ayables + RB, #+& ++* +#=>@ C%9%;

6orkin$ capital L Current Assets Current @iabilities


116/214

M%>@/

*hese ratios measure mana$ements overall effectiveness as sho#n by the returns $enerated

on B/

*hese ratios help in measurin$ profitability of the firm. :i$her ratios indicate better

performance.

*he various types of profitability ratios are as follo#s(

1 P#+>9%?>;>9: R%9>+ > #;%9>+ 9+ RB, #+& ++*/

(%) G#+** P#+>9 R%9>+

(?) O@ P#+>9 R%9>+

() O@ #%9>+

(3) N9 9 #%9>+

2 P#+>9%?>;>9: R%9>+ > #;%9>+ 9+ IB*9&9/

(%) R9,# + IB*9&9 +# R9,# + C%9%; E&9 R%9>+

M%>@/

&t measure the relation bet#een $ross profit and revenue from operations.

O?9>B/

&t determines the efficiency #ith #hich production and>or purchase operations and sellin$

operations are carried on.

C%;,;%9>+/

G#+** P#+>9 +/ Calculate ross -rofit


117/214

O@ P#+>9 R%9>+

M%>@/

&t measures the relationship bet#een 9peratin$ -rofit and B/

*o determine the operational efficiency of the mana$ement.

C%;,;%9>+/

O@ 9 #%9>+ O@ P#+>9 RB, #+& ++ X 100

J,*9>+/ * 33,93 #+& 100 %+9$# #%9>+ &%: ? +?9%>3.

11J


118/214

J,*9>+/ rom the follo#in$ information calculate operatin$ ratio

Cost of revenue from operation L


119/214

R9,# + IB*9&9 +# R9,# + C%9%; E&@/

&t measures a relationship bet#een %et -rofit before &nterest and *a and Capital Employed.

O?9>B/

*o find out ho# efficiently the lon$)term funds supplied by the creditors and shareholders

have been used.

C%;,;%9>+/

R9,# + >B*9&9 (ROI) %et profit before interest, ta and dividend>capital

employed I 100

C%9%; &+/ rom the follo#in$ information calculate


120/214

L 34K

GUES*&9%S( 3 marks

1. rom the follo#in$ information calculate(8i; ross -rofit


121/214

*otal Assets


122/214


123/214

4K -refence Share Capital


124/214

-reparation of Cash flo# statement

M%>@ + C%*$ ;+ S9%9&9

Cash flo# statement is $overned by Accountin$ Standard 8+* +9 #@%#33 %* C%*$ ;+*

1+3


125/214

E$. Cash deposited>#ithdra#n into Bank, -urchase>Sale of Short)term 7arketable Securities

O@ %9>B>9>* *he principal revenue)producin$ activities of the enterprise and other

activities that are not investin$ or financin$ activities.

IB*9>@ %9>B>9>* *he ac'uisition and disposal of @on$)term Assets and other investment

not included in cash e'uivalents.

>%>@ %9>B>9>* - the activities that result in chan$e in the si=e and composition of the

o#ners capital and borro#in$ of the enterprise.

ORMAT O CASH LO STATEMENT (INDIRECT METHOD)

As per Accountin$ Standard ) 9>*

%et -rofit as per -?@ A>c

M *ransfer to ) Etraordinary items

%et profit before *a and Etraordinary items

Ad5ustments for %on)cash and %on)operatin$ items

M Depreciation

&nterest on Borro#in$s and Debentures

@oss on Sale of ied Assets

) &nterest &ncome

Dividend &ncome

@ %9%; $%@*

M &ncrease in Current Assets and decrease in Current liabilities

) Decrease in Current Assets and &ncrease in Current liabilities

C%*$ @#%93 #+& ++*

) &ncome ta paid

C%*$ ;+ #+& (+# ,*3 >) O@ A9>B>9>* (A)

II C%*$ ;+ #+& IB*9>@ A9>B>9>*

M -roceeds from Sale of *an$ible>&ntan$ible assets

&nterest and Dividend received 8for non)finance companies only;

&ntan$ible assets

M>) Etraordinary items

C%*$ ;+ #+&(+# ,*3 >) IB*9>@ A9>B>9>* (!)

III C%*$ ;+ #+& >%>@ %9>B>9>*

M -roceeds from issue of shares, Debentures and other lon$

*erm borro#in$s

1+


126/214

) inal>interim dividend paid

) &nterest on debentures and loans

) ) >%>@ %9>B>9>* (C)

N9 I#%*D#%* > C%*$ %3 C%*$ E,>B%;9* (A!C)

C%*$ %3 C%*$ ,>B%;9* > 9$ ?@>>@ + :%#

Cash in hand

Cash at bank8less bank overdraft;

Short term deposits

7arketable securities

- C%*$ %3 C%*$ E,>B%;9* %9 9$ 3 + 9$ :%#

Cash in hand

Cash at bank8less bank overdraft;

Short term deposits

7arketable securities

"E


127/214


128/214

-articulars 7arch 8+01; 7arch 8+013;

7achinery A>c1J,J4,/4 +2,,30

Accumulated depreciation A>c,30,J/ 3,J,2/0

Additional &nformation(

7achinery costin$ +,2,000 on #hich accumulated depreciation #as


129/214

E'uity shares of


130/214

8i; A piece of 7achinery costin$


131/214

eneral c 1,000

12,000

Additional &nformation( Deprecition char$es 9>* (10K @oan on

7ort$a$e;

8; C,##9 L>%?>;>9>*

*rade -ayables

9ther current liabilities

T+9%;

() ASSETS

() N+-,##9 A**9**an$ible fied Assets

Accumulated Depreciation

%on)current &nvestments 810K

Sinkin$ fund &nvestments;

83; C,##9 A**9*

&nventories

*rade


132/214

E'uity shares of +%; I+#&%9>+/

Dividend amountin$ to


133/214

ive the necessary ad5ustin$ 5ournal entry #ith #orkin$ notes. 8;

G/. -ass necessary 5ournal entries for issue of debentures for the follo#in$()

i. upta ltd issued 1000 1+K Debentures of


134/214

i. Cs share of $ood#ill #as


135/214

b; :is share of profit for the period he #as alive should be based on the fi$ure of

1stmarch +01+

c; ood#ill accordin$ to his share of profit to be calculated by takin$ t#ice the

amount of the avera$e profit of the last years,the profit of the previous years

#ere(

+010(0,000

+011(3,000

+01+(,000

d; Assets #ere to be revalued(

Buildin$(+,30,000

Stock(/0,000

-rov.for bad debts (O10Kp.a

-repare revaluation a>c and As capital a>c 82;

G1J.A ltd invited applications for issuin$ 1,0,000 e'uity shares of rs.10 each at a discount of10K.*he amount #as payable as follo#s(

9n application


136/214

G14.A,B,C are partners in a firm sharin$ profits in the ratio +(1(1.*heir balance sheet as on

1stmarch +01+ #as(

@iabilties Amt Assets Amt

Creditor

B>-

Capital a>csA)40,000

B)40,000

C)20,000

eneral reserve

0,000

2,000

+,+0,000

10,000

+,42,000

ood#ill

@and and Buildin$

-lant and machinery7otor car

Debtors

Cash

-rofit ? @oss A>c

0,000

42,000

2,0003,000

34,000

4,000

3,000

+,42,000

*he firm #as dissolved on the date the assets reali=ed(

ood#ill(+0,000 ,

@and and buildin$(1,0,000,

-lant and machinery(0,000,

7otor car(+,000,

Debtors(0Kof the book value,

*he realisation epenses #ere c partners capital A>C and cash

A>C.

92 th

share in the profit to be contributed e'ually by A and B.9n the date of admission the Balance

sheet of A and B #as as follo#s()

@iabilities Amt. Assets Amt.

Capital (A. ,00,000

B. +,00,000


137/214

P%#9-!

(>%>%; S9%9&9 A%;:*>*)

G1/. State ho# 'ualitative aspect are i$nored in financial statement analysis. 81;

G+0. &nterest received by a finance company is classified under #hich kind of activity #hile

preparin$ a Cash lo# statement. 81;

G+1.State #eather cash deposit in bank #ill result in inflo# , outflo# or not flo# of cash.

81;

G++. ive the ma5or headin$s under #hich the follo#in$ item #ill be Sho#n in a companys

balance sheet as per revised schedule "&,-art & of Company Act 1/2.8i;Sundry Creditors

8ii;-reliminary Epenses

8iii;&nterest accrued on investment

8iv;-rovision for taation

8v;@oose *ools

8vi;ood#ill 8;

G+. -repare a comparative statement of profit and loss #ith help of follo#in$ information.

-articular +011 +01+

9>*

S$%#$+;3#* ,3

E'uity Share Capital +,00,000 +,00,000

%?>;>9>*

2K Debenture 1,+0,000 1,20,000

C,##9 L>%?>;>9>*

Creditor 20,000 J0,000

Bill -ayable 20,000 +0,000

9ther Current @iabilities 40,000 /0,000

1J


138/214


139/214

J.C;%** A;#%3: I**,3/*he shares to be issued at a reduced price must belon$ to a class of

shares that has already been issued.

A9 L%*9 O +#=>@ Y%#/A company can issue shares at discount only if it has been

functionin$ for a minimum period of one year from the date it #as entitled to be$in business

transactions. 81>+M1>+L1;

9r

Any other correct point

-articulars Amt. Amt.

Bs current a>cPP.dr.

C,s current a>c PPdr.

*o As current a>c

+000

4000

10000

8+ marks for entry and 1 mark for full #orkin$ note;

/.


8a;1.Bank a>cP.dr

*o debenture application and allotment a>c

Deb.appli.?allot a>cP..dr

@oss on issue a>cPPdr

*o deb. a>c

100000

100000

10000

100000

1/


140/214

*o premium on redemtion a>c

8b;Bank a>cP.dr

*o deb. Application?allot a>c

deb app ?allotP.dr

@oss on issue a>cP..dr

*o debenture a>c

*o security premium a>c

*o premium on redemption a>c

/20000

/20000

/2000

100000

10000

/20000

400000

120000

/2000

81>+M1M1>+M1L;

10.


Bank a>c dr.

*o deb app?allot a>c

Deb app ?allot a>c..dr

*o 4K deb a>c

+00000

+00000

+00000

+00000

130


141/214

4K deb a>c..dr

*o debenture holder a>c

Debenture holder a>c..dr

*o e'uity cap a>c

*o security premium a>c

20000

20000

20000

30000

+0000

81>+M1>+M1M1L;11.

ollo#in$ are the value #hich motivated mohan and sohan to form the partnership firm(8i;.Studentssensitivity to#ards belon$in$ to lo# income $roup.

8ii;. Supportin$ the implementation of ri$ht to education act +00/

8iii; . -rovidin$ entrepreneurial oppurtunity to people from different areas of the country.

8iv;. any other correct point.

8any +, 1M1L+;

-rofit?loss Appropriation a>c

-articulars Amt. -articulars Amt.

&nterest on capital a>c)

7ohan)+0000

Sohan)10000


142/214

+/0000

300000 300000

1 mark correct interest on capital and 1 mark correct profit.

81 M 1 L +;

1+.

-ariculars Amt. Amt.

c Dr.

*o prov for bad debts

*o sundry creditors

/200

3400

+00

1200

2000

3000

104300

1200

4000

/200

10000

104300

As capital Dr.

Bs capital Dr.

Cs capital Dr.

*o revaluation

As capital dr.

Bs capital dr.

*o Cs capital a>c

Cs capital Dr.

*o C loan a>c

81 mark for each correct entry; 813 L 3;

13+


143/214

1

-ariculars Amt. Amt.

-lant and 7achine Dr.

@and And Buildin$ Account Dr.

Debtors Account Dr.

Stock Account Dr.

Cash Account Dr.

*o Creditor

*o


144/214

-articular %ote %o. Current Qear


145/214

1.

-rofit and loss appropriation account

or the year endin$ 1 march +01+

*o !alus Sal.

*o @aluscomm.

&nt on capital

!. +000

@. 1000

*o profit

!. /4,030

@. 2,20

1,+0,000

1,00,000

30,000

1,2,300

3,+,300

By -rofit

&nterest on Dra#in$

!. +,00

@. /00

3,+0,000

,300

3,+,300

7ark

P%#9#* C%9%; A+,9

-articular ! @ -articular ! @

*o balance c>d ,00,000 ,00,000 By balance b>d ,00,000 ,00,000

17ark

P%#9#* C,##9 A+,9

13


146/214


147/214

*o Share application A>C

Share application account

Dr.

*o Share capital account

*o Bank Account

*o share allotment account

2,00,000

,00,000

1,00,000

+,00,000

Share allotment

Dr.

Discount on issue of share account

Dr.

*o share capital account

,00,000

1,0,000

3,0,000

Bank A>C

Dr.

*o Share allotment account

//,000

//,000

Share first ? inal A>C

Dr.


J,0,000

J,0,000

Bank A>C

Dr.

*o Share irst ? inal Account

J,+,00

J,+,00

Share Capital A>C

Dr.

*o Share orfeited

*o discount A>C



,000

1,000

,00

1000

1J,00

Bank A>CDr.


*o Security -remium

3,000+0,000

13,000

Share forfeited A>C

Dr.

*o Capital C

J,000

J,000

9


148/214

Z

Z

Z

1

Z

Z

1

1

1

Share application account

Dr.


1,/,000

1,/,000

Share allotment

Dr.

*o share capital account*o Security -remium

+,20,000

1,0,000

1,0,000

Bank A>C

Dr.


+,+,000

+,+,000

Share capital account

Dr.

Security -remium

Dr.

*o Share orfeited


10,000

3,000

2,000

4,000

irst ? inal Call account Debit

*o Share Capital account

,1,000

,1,000

Bank A>C

Dr.


,00,000

,00,000

Share Cap

xii accountancy(1)

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