You are on page 1of 84

ACCOUNTING FOR BUSINESS

AFTERSCHO☺OL
– DEVELOPING CHANGE MAKERS CENTRE FOR SOCIAL ENTREPRENEURSHIP PGPSE PROGRAMME – World’ Most Comprehensive programme in social entrepreneurship & spiritual entrepreneurship OPEN FOR ALL FREE FOR ALL

www.afterschoool.tk 04/30/09 www.afterschoool.tk

AFTERSCHO☺OL's MATERIAL AFTERSCHO☺OL's MATERIAL FOR PGPSE PARTICIPANTS

1

ACCOUNTING FOR BUSINESS
Dr. T.K. Jain.

AFTERSCHO☺OL
Centre for social entrepreneurship Bikaner M: 9414430763 tkjainbkn@yahoo.co.in www.afterschool.tk, www.afterschoool.tk
www.afterschoool.tk 04/30/09 www.afterschoool.tk AFTERSCHO☺OL's MATERIAL AFTERSCHO☺OL's MATERIAL FOR PGPSE PARTICIPANTS 2

Prepare trading and P & L a/c
• The following are the details relating to transactions during the year ended 31M March 2007 extracted from the books of Goti who does not maintain proper books of account: • Cash and discount credited to debtors 6, 40,000 • Sales return• 14,500 • Bad debts 4,200 • Sales (cash and credit) 7,18,100 • Discount allowed by trade creditors 7,000 • Purchases returns 4,000
04/30/09 www.afterschoool.tk AFTERSCHO☺OL's MATERIAL FOR PGPSE PARTICIPANTS 3

Continued…
• • • • • • • • • • Additional capital-paid into bank 85.000 Realisations from debtors-paid into bank 6, 25,000 Cash purchases 10,300 Cash expenses 95,700 Paid by cheque for furniture purchased 4,300 Household expenses drawn from bank 31,800 Cash paid into bank 50,000 Cash drawn from bank 92,400 Cheques issued to trade creditors 6, 02,700 marks)
AFTERSCHO☺OL's MATERIAL FOR PGPSE PARTICIPANTS 4

04/30/09 www.afterschoool.tk

Continued…
• The following additional information are also available:
Ist April • 2006 31 March 2007

• Creditors 1, 57,700 1, 24,000 • Sundry expenses outstanding 6,000 3,300 • Sundryassets 1,16,100 1,20,400 • Stock-in-trade 80,400 1, 11,200 • Cash in hand and at bank 69,600 80,800 • Trade debtors ? 1,78,700 • You are required to prepare the Trading and Profit and• Loss Account for the year ended 31st March, 2007 and a balance sheet as on that date
04/30/09 www.afterschoool.tk AFTERSCHO☺OL's MATERIAL FOR PGPSE PARTICIPANTS 5

Debtors A/c
• To opening stock 337400 • To Sales 500000 • (837400) • • • • • By sales return 14500 By discount 15000 By bank 625000 By Bad debt 4200 By balance 178700

04/30/09 www.afterschoool.tk

AFTERSCHO☺OL's MATERIAL FOR PGPSE PARTICIPANTS

6

Trading ac
• Opening stock 80400 • To purchase 580000 • Cash purchase 10300 • To gross profit 148100 • Total 818100 • B sales 718100 • Less : sales (cash) 14500 • By purchase return 4000

• Closing stock 111200 • Total : 818100
04/30/09 www.afterschoool.tk AFTERSCHO☺OL's MATERIAL FOR PGPSE PARTICIPANTS 7

Creditors a/c
• To bank 602700 • To purchase return 4000 To discount 7000 To balance 124000 • By purchase =580000 • By balance b.d. = 157700

04/30/09 www.afterschoool.tk

AFTERSCHO☺OL's MATERIAL FOR PGPSE PARTICIPANTS

8

P & L ac/
• To exp. 95700 • To bad debt 4200 • Discount allowed 15000 • To N.P. 40200 • By G P 148100 • By discount 7000

04/30/09 www.afterschoool.tk

AFTERSCHO☺OL's MATERIAL FOR PGPSE PARTICIPANTS

9

Balance sheet
• Net profit : 40200 • Creditors 124000 • Outstanding exp. 3300 • Additional capital 85000 • Capital : 243200 • Total 495700
04/30/09 www.afterschoool.tk

• Cash & bank 80800 Debtors 178700 • Assets 120700 • Furniture 4300 • Closing stock 111200 • Total 495700

AFTERSCHO☺OL's MATERIAL FOR PGPSE PARTICIPANTS

10

Cash received from X and discount allowed to him.
• Cash A/c Dr. • Discount Dr. • To X a/c Credit

04/30/09 www.afterschoool.tk

AFTERSCHO☺OL's MATERIAL FOR PGPSE PARTICIPANTS

11

Cash account
• To balance 69600 • By Cash sales 220800 • • • • • • • • • by outstanding exp. 2700 By bank 85000 By bank 625000 By purchase 10300 By expsnes 95700 By furniture 4300 By household exp. 31800 By bank 50000 By closing blance 80800

• To credors 602700 • To bank 92500

• Total : 985600 • Total :
04/30/09 www.afterschoool.tk AFTERSCHO☺OL's MATERIAL FOR PGPSE PARTICIPANTS 12

Cash paid to V and discount received from him.
• V a/c Dr. • To Discount Ac. • To Cash Ac

04/30/09 www.afterschoool.tk

AFTERSCHO☺OL's MATERIAL FOR PGPSE PARTICIPANTS

13

Credit Sales to Z.
• Z a/c dr. • To sales a/c

04/30/09 www.afterschoool.tk

AFTERSCHO☺OL's MATERIAL FOR PGPSE PARTICIPANTS

14

Cash Sales to A.
• Cash Ac. • To Sales Ac

04/30/09 www.afterschoool.tk

AFTERSCHO☺OL's MATERIAL FOR PGPSE PARTICIPANTS

15

Purchases from B on credit.
• Purchase Ac dr. • To B account

04/30/09 www.afterschoool.tk

AFTERSCHO☺OL's MATERIAL FOR PGPSE PARTICIPANTS

16

Salary.paid to clerk by means of cheque.
• Salary a.c. dr. • To bank ac.

04/30/09 www.afterschoool.tk

AFTERSCHO☺OL's MATERIAL FOR PGPSE PARTICIPANTS

17

Payment of cash to Landlord for rent.
• Rent A.c dr. • To cash a.c

04/30/09 www.afterschoool.tk

AFTERSCHO☺OL's MATERIAL FOR PGPSE PARTICIPANTS

18

Depreciation on furniture.
• Depreciation a/c. dr • To furniture a/c

04/30/09 www.afterschoool.tk

AFTERSCHO☺OL's MATERIAL FOR PGPSE PARTICIPANTS

19

Interest on debenture due but not yet paid.
• Interest Ac/ dr. • To outstanding interest a/c • Outstanding interest ac/ dr. • To the debenture holders a/c • P & L a/c dr. • To Outstanding interest Ac.
04/30/09 www.afterschoool.tk AFTERSCHO☺OL's MATERIAL FOR PGPSE PARTICIPANTS 20

Interest provided on capital.
• Interest .a/c dr. • To Capital Ac/

04/30/09 www.afterschoool.tk

AFTERSCHO☺OL's MATERIAL FOR PGPSE PARTICIPANTS

21

04/30/09 www.afterschoool.tk

AFTERSCHO☺OL's MATERIAL FOR PGPSE PARTICIPANTS

22

A firm purchases a lease of 3 years for Rs. 60,000 on 1.4.2004. it decides to provide for its replacement by means of an insurance policy for Rs. 60,000. The annual premium is Rs. 19,000. On 1.4.2006, the lease is renewed for a further period of 3 years for Rs. 60,000. You are required to show necessary ledger accounts.

04/30/09 www.afterschoool.tk

AFTERSCHO☺OL's MATERIAL FOR PGPSE PARTICIPANTS

23

Solution… Ist year..
• • • • • • • • Lease A/c Dr. 60000 To Bank Account 60000 -------Insurance policy a/c dr. 19000 To bank a/c 19000 ---P & L a/c dr. 19000 To depreciation 19000
AFTERSCHO☺OL's MATERIAL FOR PGPSE PARTICIPANTS 24

04/30/09 www.afterschoool.tk

IInd year …
• • • • • • • Insurance policy a/c dr. 19000 To bank 19000 (closing balance becomes 38000) -----P & L a/c dr. 19000 To depreciation 19000 (closing balance beomes 38000)
AFTERSCHO☺OL's MATERIAL FOR PGPSE PARTICIPANTS 25

04/30/09 www.afterschoool.tk

IIIrd year …
• • • • • • • • • • • • Insurance policy dr. 19000 To bank ac/ 19000 ---P & L a/c dr. 19000 To depreciation 19000 --Bank a/c dr. 60000 To insurance policy : 60000 --Insurance policy a/c dr. 3000 To depreciation a/c (reserve) 3000 (profit received on insurance policy transferred to dep ac
AFTERSCHO☺OL's MATERIAL FOR PGPSE PARTICIPANTS 26

04/30/09 www.afterschoool.tk

IIIrd year continued…
• Depreciation a/c dr. 60000 • To Lease a/c 60000

04/30/09 www.afterschoool.tk

AFTERSCHO☺OL's MATERIAL FOR PGPSE PARTICIPANTS

27

Which of these is not a preliminary expenditure ?
1. 2. 3. 4. Cost of project report Stamp duty on authorised capital Cost of acquisition of a running business Cost of vetting of MOA and AOA and Prospectus • Answer : No. 1. and 3.
04/30/09 www.afterschoool.tk AFTERSCHO☺OL's MATERIAL FOR PGPSE PARTICIPANTS 28

Which of these is a preliminary expenditure ?
1. Consultancy fees of Goti, who is a business consultant 2. Charges paid to Jitu for conducting market survey of the product before its start. 3. Printing charges of letters of allotment. 4. Payment paid to Sudha, who is approved valuer and has prepared valuation report and accounts along with drafting necessary documents required at start up. Answer : 3rd and 4th
04/30/09 www.afterschoool.tk AFTERSCHO☺OL's MATERIAL FOR PGPSE PARTICIPANTS 29

Difference between financial accounting & management accounting ..
• Financial accounting records day to day decisions and prepares annual accounts as per the prescribed formats for external reporting. • Management accounting is presentation of accounting information so that management may take appropriate decisions and policies.
04/30/09 www.afterschoool.tk AFTERSCHO☺OL's MATERIAL FOR PGPSE PARTICIPANTS 30

ACCOMMODATION BILL
• When one party tries to help others, they use accommodation bill to help each other. Suppose Kapsa needs Rs. 1 billion, he approaches Jitu for help, Jitu accepts a bill of Rs. 1 billion thus Kapsa can get this amount by bill discounting from bank. On due date Kapsa will give the money back to Jitu so that that Jitu may make the payment to Bank.
04/30/09 www.afterschoool.tk AFTERSCHO☺OL's MATERIAL FOR PGPSE PARTICIPANTS 31

Holder in due course
• A person who gets a bill in due course is called holder in due course. He gets all the authority on bill. Even if the holder get the bill from someone who has defective title, the holder in due course will get full authority.

04/30/09 www.afterschoool.tk

AFTERSCHO☺OL's MATERIAL FOR PGPSE PARTICIPANTS

32

QUORUM
• For any meeting, we need a quorum. It is the minimum number of members, who must be present for the meeting to start. For example : if quorum is 1/10, and there are 100 members, then the meeting can start only if at least 10 members are present.

04/30/09 www.afterschoool.tk

AFTERSCHO☺OL's MATERIAL FOR PGPSE PARTICIPANTS

33

Goti had entered Rs 75 in petty cash book, but did not post it in repairs account. What should he do now?
• Solution : • Repairs A/c debit Rs. 75 • To suspense a/c credit : 75

04/30/09 www.afterschoool.tk

AFTERSCHO☺OL's MATERIAL FOR PGPSE PARTICIPANTS

34

Define a cheque?
• Sec. 6 : a cheque is a bill of exchange drawn on a specified bankder and not expressed to be pyable otherwise thn on demand and it includes electronic image of a truncated cheque and a cheque in electronic form.

04/30/09 www.afterschoool.tk

AFTERSCHO☺OL's MATERIAL FOR PGPSE PARTICIPANTS

35

Protection of a paying bak
• Suppose a cheque is drawn by A on B and is endorsed by D (by making forged signature of B) to C. The bank makes the payment. The bank is discharged here as the bank does not have signature of every one. However, bank will not be discharged if the signatue of A are forged.

04/30/09 www.afterschoool.tk

AFTERSCHO☺OL's MATERIAL FOR PGPSE PARTICIPANTS

36

04/30/09 www.afterschoool.tk

AFTERSCHO☺OL's MATERIAL FOR PGPSE PARTICIPANTS

37

Goti maintains single entry system of accounting. He had Rs. 3 Lakh on 1 January 2006 following is the details of accounts that he had
1/4/6 Cash in hand Stock Debtors Creditors
04/30/09 www.afterschoool.tk

31/3/7 3000 29000 2000 3000
38

2000 19000 1000 5000
AFTERSCHO☺OL's MATERIAL FOR PGPSE PARTICIPANTS

Other details
• • • • • • On 1/4/6 h began drawing Rs. 700 per month for personal expenses. His bank details are as under : Deposited : Rs. 3 lakh on 1/1/6 Withdrew Rs. 2,23,000 from 1/1/6 to 31/3/6 Deposited Rs. 230000 from 1/4/6 to 31/3/7 Withdrew Rs. 2,70000 from 1/4/6 to 31/3/7 The above withdrawals included payments by cheques of Ps. 2,00,000 and Ps. 60,000 respectively during the period from 1st January, 2006 to 31st March, 2006 and on 1st March, 2007 for the purchase of machinery for the business. The deposits after 1st January, 2007 consisted wholly of sale price received from customers by cheques. Draw up Ramesh’s Statement of Affairs as at 31st March, 2006 and 31st March, 2007 respectively and work out his profit or loss for the year ended 31st March, 2007.
AFTERSCHO☺OL's MATERIAL FOR PGPSE PARTICIPANTS 39

04/30/09 www.afterschoool.tk

Solution…..
• Profit = closing capital – opening capital • Therefore calculate opening and closing capitals. • Prepare a bank statement and ascertain bank balances on 31/3/6 and 31/3/7. • Bank balance on 31/3/6 (3 – 2.23) = 77000 • Bank balance on 31/3/7 = (77-40) = 37000
04/30/09 www.afterschoool.tk AFTERSCHO☺OL's MATERIAL FOR PGPSE PARTICIPANTS 40

Opening capital =
• • • • • • • • • Assets : Bank : 77000 Stock = 19000 Debtors = 1000 Cash = 2000 Machinary = 200000 Total= 299000 Less : creditors : 5000 Capital = 294000 (as on 31 march 2006)
AFTERSCHO☺OL's MATERIAL FOR PGPSE PARTICIPANTS 41

04/30/09 www.afterschoool.tk

Closing capital
• • • • • • • • • Assets : Cash : 3000 Stock : 29000 Debtors : 2000 Machinary : 260000 Bank balance = 37000 Total assets = 331000 Less creditors = 3000 Capital = 328000 (as on 31 march 2007)
AFTERSCHO☺OL's MATERIAL FOR PGPSE PARTICIPANTS 42

04/30/09 www.afterschoool.tk

Profit
• Closing capital = 328000 • Add = drawings ( 700 * 12) 8400 • Less : Opening capital : 294000 • Profit during the year = 42400 answer.

04/30/09 www.afterschoool.tk

AFTERSCHO☺OL's MATERIAL FOR PGPSE PARTICIPANTS

43

Solve it …
• Prabhakar commenced business on 1 April, 2006 with a capital of Rs. 90,000. He immediately purchased furniture of As. 48,000. During the year he received from his uncle a gift of As. 6,000 and he borrowed from his father a sum of Rs. 10,000. He had withdrawn As. 1,200 per month for his household expenses. He had no bank account and all dealings were in cash. He did not maintain any books but following information is given: Sales (including cash sales ot As. 60,000) = 200000 Purchases (including cash purchases of As. 20,000) = 150000 Carriage inwards = 1400 Wages = 600 Discount allowed to debtors= 2400 Salaries = 12400 Bad debts written off : 2200 Trade exp. : 2400; advertisement = 4400
AFTERSCHO☺OL's MATERIAL FOR PGPSE PARTICIPANTS 44

• • • • • • • •

04/30/09 www.afterschoool.tk

Other details …
• He spent Rs. 1000 for his personal expenses, he used goods of Rs. 2600 for personal use • On 31/3/7, his debtors were Rs. 42000, creditors : Rs. 30000, his stocks were Rs. 20000. • Dep. on furniture : 10%. • Prepare trading & p & l account
04/30/09 www.afterschoool.tk AFTERSCHO☺OL's MATERIAL FOR PGPSE PARTICIPANTS 45

Trading account
• • • • Opening stock =nil Purchase 150000 Less drawings : 2600 Net purchase : 147400 • Carriage inward 1400 • Wages 600 • Gross profit : 70600
04/30/09 www.afterschoool.tk

• Sales 200000 • Closing stock 20000

AFTERSCHO☺OL's MATERIAL FOR PGPSE PARTICIPANTS

46

P & L account
• • • • • • • Discount 2400 Bad debts 2200 Salaries : 12400 Trade exp. 2400 Depreciation: 4800 Net profit : 46400 Total : 70600 • Gross profit 70600

04/30/09 www.afterschoool.tk

AFTERSCHO☺OL's MATERIAL FOR PGPSE PARTICIPANTS

47

Promissory note
• It is an unconditional undertaking to make payment of certain amount to the bearer of the instrument / or the person so named in the instrument or to the order of such person after sight.

04/30/09 www.afterschoool.tk

AFTERSCHO☺OL's MATERIAL FOR PGPSE PARTICIPANTS

48

Crossing of cheque..
• When a cheque is crossed at its top left corner, it cannot be paid cash, its payment can only be through bank account. We can also add ‘NOT NEGOTIABLE’ on the crossing – making it a non-negotiable instrument.

04/30/09 www.afterschoool.tk

AFTERSCHO☺OL's MATERIAL FOR PGPSE PARTICIPANTS

49

Accounting numericals
• Goti returned to India from London after retirement and purchased a small retail business. He took over the business on 1st April 2006 acquiring the existing stock at a valuation of Rs. 22,840 and the rest of the purchase consideration was apportioned as to Rs. 30,000 for fixtures and fittings and the balance for goodwill. He used his existing bank account and, other than bank statements and vouchers, the only record available was a bill book recording cash payments from the bill. Surplus cash was banked periodically during the year. Prepare a/c
04/30/09 www.afterschoool.tk AFTERSCHO☺OL's MATERIAL FOR PGPSE PARTICIPANTS 50

BANK ACCOUNT
• Balance 1 April, 2006 72,920 • Pension from employment 19,500 • Bankings from shop 3,28,540 • • • • • • • • • • •
04/30/09 www.afterschoool.tk

Purchases of business 63,840 Rent 15 months to 30th June, 2007 10,000 Rates 9 months to 31st Dec., 2006 1,680 Electricity 1,840 Hire of frozen food cabinet 1,600 Purchases for resale 2,94,000 Private cheques 22,440 Balance 31 March, 2007 25,560 TOTAL = 4,20,960
51

AFTERSCHO☺OL's MATERIAL FOR PGPSE PARTICIPANTS

Continued….
• • • • • Cash purchases for resale 32,120 Staff salaries 14,840 Sundry shop expenses 3,120 Cash drawings 10,400 On 31st March, 2007 stock valued at cost amounted to As. 30,840, amounts duo from customers Rs, 1,480, and cash in hand amounted to Rs. 1,080. Depreciation is to be provided on fixtures and fittings at a rate of 10%. • Accounts outstanding on 31st March, 2007 were: purchases Rs 9,400 For the year ending 31st December, 2007= 2,400.
04/30/09 www.afterschoool.tk AFTERSCHO☺OL's MATERIAL FOR PGPSE PARTICIPANTS 52

Solution – trading a/c
• Opening stock 22840 • Credit Purchase 303400 • Cash purchase 32120 • Gross profit 64060 • Total : 422420 • • • • Credit Sales : 330020 Cash sales 61560 Closing stock 30840 Total : 422420

04/30/09 www.afterschoool.tk

AFTERSCHO☺OL's MATERIAL FOR PGPSE PARTICIPANTS

53

P & L a/c
• • • • • • • • • To salaries 14840 To rates 2280 To rent 8000 To electricity 1840 To hire charges 1600 To sundary exp. 3120 To dep. 3000 To net profit 29380 Total : 64060 • By G.P. 64060

04/30/09 www.afterschoool.tk

AFTERSCHO☺OL's MATERIAL FOR PGPSE PARTICIPANTS

54

Balance sheet
• • • • • • • • • LIABILITIES Capital 72920 Less drawings: 32840 Add Net profit : 29380 Pension (outstanding) 19500 Net capital : 88960 Creditors : 9400 Outstanding rates 600 Total : 98960 • • • • • • • • • ASSETS Furniture : 27000 Stock 30840 Debtors 1480 Bank 25560 Cash 1080 Prepaid rent 2000 Goodwill 11000 Total : 98960
55

04/30/09 www.afterschoool.tk

AFTERSCHO☺OL's MATERIAL FOR PGPSE PARTICIPANTS

Debtors a/c
• To sales : 330020 • By bank 328540 • By closing balance 1480

04/30/09 www.afterschoool.tk

AFTERSCHO☺OL's MATERIAL FOR PGPSE PARTICIPANTS

56

Fictitious person
• Articificial persons like company, firm etc. are called fictitious persons. They have legal entity and can contract in their own name.

04/30/09 www.afterschoool.tk

AFTERSCHO☺OL's MATERIAL FOR PGPSE PARTICIPANTS

57

SOLVE IT ….
• A company purchased 3 years lease on 1st April, 2004 for Rs. 50,000. It is decided to provide for the replacement of the lease at the end of 3 years by setting- up a depreciation fund. It is expected that investment will fetch at 12%. Sinking fund Tables shows that Rs. 0.296349 invested each year will produce Re. 1 at the end of 3 years at 12% per annum. The investments are sold for rs. 28,500.
04/30/09 www.afterschoool.tk AFTERSCHO☺OL's MATERIAL FOR PGPSE PARTICIPANTS 58

SOLUTION…lease account
• To bank 50000 • (at the end of thrd year) • Dep fund ac 45645 • P & L ac/ 4355 • Total : 50000

04/30/09 www.afterschoool.tk

AFTERSCHO☺OL's MATERIAL FOR PGPSE PARTICIPANTS

59

Dep. Fund account
• To balance 14817.45 • • • • • • • • • By dep. A/c 14817.45 IInd Year By balance 14817.45 By dep. Ac/ 14817.45 By interest 1778 III rd year By balance : 31412.9 By interest 3769 By dep. Ac. 14817.45
60

To investment 3412 To lease a/c 45645

04/30/09 www.afterschoool.tk

AFTERSCHO☺OL's MATERIAL FOR PGPSE PARTICIPANTS

Investment account
• To bank 14817.45 • • • • • IInd year To balance 14817 To bank 16595 IIIrd year : To balance 31412 • By balance 14817

• By balance 16595 • By bank 28000 • By dep. Fund 3412
61

04/30/09 www.afterschoool.tk

AFTERSCHO☺OL's MATERIAL FOR PGPSE PARTICIPANTS

Declaration of dividend out of reserves…
• The rate of dividend will not exceed 10% or average rate of last 5 years. • First set off any previous loss – before dividend is declared • The balance of reserve after declaration of dividend should be at least 15% of the paid up share capital • The amount drawn from reserves should not be more than 1/10 of the (paid up capital + reserves). • (read section 205A of companies act).
04/30/09 www.afterschoool.tk AFTERSCHO☺OL's MATERIAL FOR PGPSE PARTICIPANTS 62

Due to inadequacy of profit during the year, the company proposes to declare dividend out of the general reserves. From the following particulars, find the amount that can be drawn applying the Companies (Declaration of dividend out of Reserves) Rules, 1975:
• • • • • • • • (a) 17,500 9% preference shares of Rs. 100 each fully paid (b) 7,00,000 equity shares of Rs. 10 each fully paid (c) General reserves 21 lakhs (d) Capital reserves on revaluation of assets 3.5 lakhs (e) Share premium 3.5 lakhs (f) Profit and loss account-credit balance 63000 (g) Net profit for the year 357000 Average rate of dividend during the last five years: 15%.
AFTERSCHO☺OL's MATERIAL FOR PGPSE PARTICIPANTS 63

04/30/09 www.afterschoool.tk

Solution …
• Maximum dividend that can be paid is 10% • Dividend on equity : 7,00,000 • Dividend on prefernece (9%) 157500 • Total : 8,57,500 • Total paid up capital + reserves 10% of • (7000000+2100000+1750000) 1085000 • Total amount available: 420000+ 21 lakhs
04/30/09 www.afterschoool.tk AFTERSCHO☺OL's MATERIAL FOR PGPSE PARTICIPANTS 64

Solution…
• • • • • • • 15% of equity + preference = 1312500 (7000000+ 1750000) Total amount payable : 857500 Less profit 420000 =437500 to be drawn from reserves. (ans.)
AFTERSCHO☺OL's MATERIAL FOR PGPSE PARTICIPANTS 65

04/30/09 www.afterschoool.tk

Goti purchases Ito Ltd. For Rs. 250000 and pays in 20000 shares of Rs. 10 + cash. Show the entries?

04/30/09 www.afterschoool.tk

AFTERSCHO☺OL's MATERIAL FOR PGPSE PARTICIPANTS

66

Solution .. (entries in Goti ltd)
• Business purchase A/c Dr. 250000 • To Ito Ltd. 250000

04/30/09 www.afterschoool.tk

AFTERSCHO☺OL's MATERIAL FOR PGPSE PARTICIPANTS

67

• • • • • • • •

Freehold Premises Dr. 100000 Plant and Machinery Dr. 80000 Stock 20000 Debtors 27500 Cash at Bank 75000 Goodwill A/c dr. 30000 To credtors 50000 To B.P. 30000 To Provision for bad debt : 2500 • To Purchase consideration 250000
04/30/09 www.afterschoool.tk AFTERSCHO☺OL's MATERIAL FOR PGPSE PARTICIPANTS 68

For payment …
• Ito Ltd 250000
• To equity shares 200000 • To cash 50000

• (PAYMENT OF CONSIDERATION).

04/30/09 www.afterschoool.tk

AFTERSCHO☺OL's MATERIAL FOR PGPSE PARTICIPANTS

69

VALUATION OF INTANGIBLES
Intangibles means non-physical benefits from which the organisation can expect to receive profits / benefits in the future. This asset is intangible – therefore it has to be identified - and amortised periodically. Examples inclue softwares, knowledge base, trademark, patents, etc. There are two types : internally generated (for example goodwill) 2: externally generated intangible assets (for example goodwill is generally written only when we purchase it.
04/30/09 www.afterschoool.tk AFTERSCHO☺OL's MATERIAL FOR PGPSE PARTICIPANTS 70

Amortisation …
• Intangible assets include cost of development, training, research and development and other costs. Its useful life is identified and then amortisation is done over that life. • Applying the principles of impairment of assets, impairment is provided on intangible assets.
04/30/09 www.afterschoool.tk AFTERSCHO☺OL's MATERIAL FOR PGPSE PARTICIPANTS 71

A company purchased 3 years lease on ist April, 2004 for Rs. 50,000. it is decided to provide for the replacement of the lease at the end of 3 years by setting- up a depreciation fund. It is expected that investment will fetch at 12%. Sinking fund tables shows that As. 0.296349 invested each year will produce Re. 1 at the end of 3 years at 12% per annum. The investments are sold for Rs. 28,500.

• Taking approx. value…. • 50000*.29 = 14500
04/30/09 www.afterschoool.tk AFTERSCHO☺OL's MATERIAL FOR PGPSE PARTICIPANTS 72

Solution..
• • • • • • • • • • • Lease A/c Dr. 50000 To Bank 50000 ---P & L a/c dr. 14500 To Dep. 14500 ----Dep. A/c dr. 14500 To dep fund investment a/c 14500 -----Dep. Fund Investment a/c dr. 14500 To bank 14500
AFTERSCHO☺OL's MATERIAL FOR PGPSE PARTICIPANTS 73

04/30/09 www.afterschoool.tk

Solution… IInd year
• • • • • • • • • P & L a/c dr. 14500 To Dep. 14500 ----Dep. A/c dr. 14500 Interest on Dep. Fund Investment 1740 To dep fund investment a/c 16240 -----Dep. Fund Investment a/c dr. 16240 To bank 16240
AFTERSCHO☺OL's MATERIAL FOR PGPSE PARTICIPANTS 74

04/30/09 www.afterschoool.tk

Solution …IIIrd year
• • • • • • • • • • • P & L a/c dr. 14500 To Dep. 14500 ----Dep. A/c dr. 14500 Interest on Dep. Fund Investment 3480 To dep fund investment a/c 17980 -----Bank a/c dr. 28500 To dep. Fund investment 28500 Dep fund ac. Dr. 1740 To dep fund investment ac. 2240
AFTERSCHO☺OL's MATERIAL FOR PGPSE PARTICIPANTS 75

04/30/09 www.afterschoool.tk

Dep. Fund investment a/c
• • • • • • • Ist year 14500 ---IInd year To balance 14500 To bank 16240 -=== Balance 30740 • Balance cd. 14500 -----Balance c .d. 30740 ---III rd year By bank : 28500 DeP. Fund a/c 2240

04/30/09 www.afterschoool.tk

AFTERSCHO☺OL's MATERIAL FOR PGPSE PARTICIPANTS

76

Dep fund a/c
• • • • To balance 14500 ---IInd year To balance 30740 • • • • • • • • • • By dep ac 14500 ----IInd year By balance cd 14500 By interest 1740 By dep. Ac. 14500 -- IIIrd year By balance 30740 By intrst 3480 By dep. 14500
77

• • • • •

---- IIIrd year To dep fund investment 2240 To lease a/c 45980 Total : 48220

04/30/09 www.afterschoool.tk

AFTERSCHO☺OL's MATERIAL FOR PGPSE PARTICIPANTS

Lease ac/
• • • • • • • To bank 50000 --IInd year To balance bd 50000 …. IIIrd year To balance bd 50000 • • • • • • • By balance 50000 --IInd year By balanc ----IIIrd year By dep. 45980 By P & L 4020

04/30/09 www.afterschoool.tk

AFTERSCHO☺OL's MATERIAL FOR PGPSE PARTICIPANTS

78

About AFTERSCHO☺OL
• PGPSE - World’s most comprehensive programme on social entrepreneurship – after class 12th • Flexible – fast changing to meet the requirements • Admission open throughout the year • Complete support from beginning to the end – from idea generation to making the project viable.
04/30/09 www.afterschoool.tk AFTERSCHO☺OL's MATERIAL FOR PGPSE PARTICIPANTS 79

Branches of AFTERSCHO☺OL
• PGPSE programme is open all over the world as free online programme. • Those who complete PSPSE have the freedom to start branches of AFTERSCHO☺OL • A few branches have already started one such branch is at KOTA (Rajasthan).

04/30/09 www.afterschoool.tk

AFTERSCHO☺OL's MATERIAL FOR PGPSE PARTICIPANTS

80

Workshop on social entrepreneurship
• We conduct workshop on social entrepreneurship – all over India and out of India also - in school, college, club, association or any such place - just send us a call and we will come to conduct the workshop on social entrepreeurship. • These workshops are great moments of learning, sharing, and commitments.
04/30/09 www.afterschoool.tk AFTERSCHO☺OL's MATERIAL FOR PGPSE PARTICIPANTS 81

FREE ONLINE PROGRAMME
• AFTERSCHO☺OL is absolutely free programme available online – any person can join it. The programme has four components : • 1. case studies – writing and analysing – using latest tools of management • 2. articles / reports writing & presentation of them in conferences / seminars • 3. Study material / books / ebooks / audio / audio visual material to support the study • 4. business plan preparation and presentations of those plans in conferences / seminars
04/30/09 www.afterschoool.tk AFTERSCHO☺OL's MATERIAL FOR PGPSE PARTICIPANTS 82

100% placement / entrepreneurship
• AFTERSCHO☺OL has the record of 100% placement / entrepreneurship till date • Be assured of a bright career – if you join AFTERSCHO☺OL

04/30/09 www.afterschoool.tk

AFTERSCHO☺OL's MATERIAL FOR PGPSE PARTICIPANTS

83

Pursue professional courses along with PGPSE
• AFTERSCHO☺OL permits you to pursue distance education based professional / vocational courses and gives you support for that also. Many students are doing CA / CS/ ICWA / CMA / FRM / CFP / CFA and other courses along with PGPSE. • Come and join AFTERSCHO☺OL

04/30/09 www.afterschoool.tk

AFTERSCHO☺OL's MATERIAL FOR PGPSE PARTICIPANTS

84