Financial Accounting And Reporting – 1

Ahmed Raza Mir

IAS 1 ; Statement Of Changes In Equity

Question 1;
Journalize the following transactions entered into by ABC Ltd. in year 2020

 Issued
o 5000 shares at par
o 3000 shares at a premium of Rs.4
o 1000 Shares at a discount of Rs.2
 Earned a profit of Rs.340,000
 Declared a dividend of Rs.3/share
 Declared a bonus of Rs.1/share

Question 2;
Following are the opening balances of A2Z Ltd;

 Share Capital Rs.450,000

 Share Premium Rs.30,000
 Retained Earnings Rs.215,000
 General Reserves Rs.14,000

Following transactions occurred during the year

1. Issued 7500 shares on par and 1500 shares at a premium of Rs.6

2. Profit earned during the year is Rs.523,000
3. Suffered other operating losses of Rs.13,000 (not included in profit inadvertently)
4. Declared a cash dividend of Rs.5/share

Required;

1. Journalize the transactions

2. Prepare a summarized statement of changes in equity for the current year

Question 3;
Following are the extracts of balance sheet of Nazar Limited on 1 Jan 2020

Share Capital Rs.580,000

Share Premium Rs.24,000
Retained Earnings Rs.1,020,000
Capital Reserves Rs.700,000
General Reserves Rs.55,000
Other information available is;

 Issued 14,000 shares on 30 Nov 2020 at 14 premium

 Declared for 2020
o Final dividend of Rs.8/share
o Interim dividend of Rs.3/share
 The company sales were valued at Rs.3.2 million, cost of sales were Rs.1.3 million

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 Financial Accounting And Reporting – 1
Ahmed Raza Mir
IAS 1 ; Statement Of Changes In Equity

 Capital reserve was created 2 years ago for a skyscraper the entity plans to purchase in the near
future. Each year 12% of profit is dedicated for the reserve
 Company has the policy to transfer 8% of profit in general reserves.
 Apart from the operating expenses (Rs.700,000), the company sold an old machine for Rs.40,000
which had a carrying value of Rs.90,000
 Dividends were paid in the year they were declared

Required;

1. Journal entries for equity transaction

2. Summarized statement of changes in equity

Question 4;
Chal Ltd. has extracted the following balances for you for year ended 31 Dec 2020:

Assets Equities And Liabilities

Non-Current Assets Equity
Property Plant & Equipment 985,000 Share Capital 668,000
Investments 240,000 Share Premium 179,000
Furniture 175,000 Retained Earnings 1,432,000
1,400,000 General Reserves 96,000
Current Assets Revaluation Surplus (1 Jan 2020) 45,000
Inventory 458,000 2,420,000
Receivables 278,000 Current Liabilities
Interest Receivable 12,000 Trade Payables 341,000
Cash & Bank 662,000 Bills Payable 49,000
1,410,000 390,000
2,810,000 2,810,000
Following information is relevant;

 Issued shares as follows

o On 14 Mar 2020, 2800 shares at a premium of 8
o On 21 Sep 2020, 1200 shares at Rs.13/share
 PPE includes plant purchased at 1 Jan 2016 for Rs.500,000 depreciated at a rate of 10%. The
company revalues its plant every three year and discloses the asset at revalued amount.
Assessment suggests following

Year Ended Fair Value

31 Dec 2017 470,000
31 Dec 2018 455,000
31 Dec 2019 428,000
31 Dec 2020 380,000
 Final dividend of 2019 was paid on 30 Mar 2020 @ 6% whil interim dividend of 2020 was declared
and paid on 22 Oct 2020 @ 2.5%
 Company has the policy to transfer 5% of profit in general reserves.
 Profit for the years is Rs.890,000 excluding the effect of information discussed above

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 Financial Accounting And Reporting – 1
Ahmed Raza Mir
IAS 1 ; Statement Of Changes In Equity

Required;

Prepare a statement of changes in equity for Chal Ltd for the year ended 31 Dec 2020

Question 5
The following details pertains to Wednesday Limited (WL) for the year ended 30 June 2019;

1. Shareholder’s equity as at July 2018

Rs. In million
Share Capital (Rs.100 each) 200
Share Premium 85
Retained Earnings 124
Revaluation Surplus 65

2. On 30 Nov 2018, WL issued 30% right shares at a premium of Rs.120/share

3. Cash dividend and bonus shares for the last two years
Final Dividend Interim Dividend
For The Year Ended
Cash Bonus Cash Bonus
30 June 3018 18% - 20% -
30 June 2019 - 25% - 10%

4. Profit for the year amounted to RS.95 million

5. Revaluation surplus arising during the year amounted to Rs.35 million whereas transfer of
incremental depreciation for the year was Rs.9 million

Required;

Prepare WL’s statement of changes in equity for the year ended 30 June 2019

Question 6
Following are the balances at 1 Jan 2020 extracted from the books of Delta Ltd. (DL) for the purpose of
statement of changes in equity;

Authorized Share Capital Rs.10,000,000

Share Capital(Rs.10/Share) Rs.2,450,000
Share Premium Rs.1,340,000
General Reserves Rs.245,000
Revaluation Reserves Rs.368,000
Retained Earnings Rs.3,870,000
Following information is available;

 On 28 Feb 2020 an asset showed indications of impairment. After careful assessment following
information was obtained
Carrying amount Rs.680,000
Fair value Rs.650,000
Value in use Rs.630,000

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 Financial Accounting And Reporting – 1
Ahmed Raza Mir
IAS 1 ; Statement Of Changes In Equity

Cost to sell the asset Rs.30,000

The asset is valued using cost model and the depreciation was correctly accounted for
 A summary of dividends declared are as follows
Final Dividend Interim Dividend
For The Year Ended
Cash Bonus Cash Bonus
31 Dec 2019 11% 8% 20% 14%
31 Dec 2020 15% 18% 12% 10%
Interim dividends were declared with semi-annual accounts while final dividends were paid in
March
 On 25 Jan 2020, a right issue of 35% was made at a premium of Rs.14/share. market price of the
shares was Rs.48/share during the year 2020
 On 31 May 2020, DL issued 120,000 ordinary shares to purchase a machinery
 Revaluation reserves against at 31 Dec 2020 stood at Rs.345,000
 DL’s profit for the year is Rs.1,564,000 (excluding the effects of information given above)
 DL transfers its 12% after tax profit to general reserves each year but this year they decided to
transfer 3% more than their usual practice

Required;

Prepare a statement of changes in equity for the year ended 31 Dec 2020

Question 7
Following are the balances extracted from the record of Kate and company at Jan 1 2010;

Amount In Rs.000
Share Capital 15,000
Share Premium 30,000
Translation Reserves 4,000
General Reserves 6,000
Retained earnings 47,000
Revaluation Reserve 3400
1. Total income earned during the year;
Particulars 2011 2010 2009
Amount In Rs.000
Profit After Tax 7,600 5,300 4,100
Other Comprehensive Incomes
Exchange Gains 650 800 600
Hedging Gains 950 660 800
2. Right shares issued in March;

Years Rights Price

2010 25% Rs.40/Share
2011 1 for 5 shares held Rs.52/share
3. Cash dividends(final announced in the first week of Feb in the next year while the interim is
announced in Sept)
Years Final Price
2009 10% 25%

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 Financial Accounting And Reporting – 1
Ahmed Raza Mir
IAS 1 ; Statement Of Changes In Equity

2010 25% 25%

2011 40% 20%
4. Scrip Dividends(final announced in the first week of Feb in the next year while the interim is
announced in Sept)
Years Final Price
2009 25% 20%
2010 35% 15%
2011 20% 30%
5. Amount equal to 10% of profit after tax is transferred every year from retained earnings to
general reserves
6. Incremental depreciation for 2011 was Rs.2,800 (2010 Rs.2,400)
Required;
Prepare a statement of changes in equity for the year ended 31 Dec 2011.

Question 8
Clay Pakistan Limited (CPL) is in the process of finalizing its account for the year ended 30 June 2011.
The following information is available;

1. The profit after tax and other comprehensive income for the year ended 30 June 2010 and 2011
(based on draft financial statements) are as follows;

2011 2010
Rs. in Million
Profit after tax 5,240 4,120
Other Comprehensive income
Exchange Difference on translation of foreign operations 155 120
Total comprehensive income 5,395 4,240
2. Incremental depreciation for the year ended 30 June 2010 and 2011 amounting to Rs.1,769 million
and Rs.1,483 million respectively was directly transferred from revaluation surplus account to
retained earnings.
3. Cash dividends and bonuses declared/paid during the three years are as follows;
Cash Dividend Bonus
For The Year Ended
Interim Final Interim Final
30 June 2010 - 20% 10% 10%
30 June 2011 20% 30% 15%- -
*Interim dividends were paid in November
*Final dividends were paid in August
4. CPL follows a policy of transferring 30% of its profit to general reserves
5. Share Capital and reserves as at 30 June 2010 were as follows;
30 June 2010
Rs. In Million
Share Capital 10,340
Share Premium 1,340
Capital Reserves 3,210
Translation Reserves 870
General Reserves 10,141

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 Financial Accounting And Reporting – 1
Ahmed Raza Mir
IAS 1 ; Statement Of Changes In Equity

Revaluation Surplus 2,242

Un-appropriated profit . 6,242
6. CPL issued 18% right shares on 23 Sept 2010 at Rs.16/share 30% right shares on 2 Jan 2011 at
Rs.26/share

Required;

1. Pass Journal entries for the year ended 30 June 2011

2. Prepare a statement of changes in equity for the year ended 30 June 2011 as per IFRS

Question 9
MK Corporation Limited, an entity listed in Pakistan Stock Exchange is in the business of manufacturing
and sale of yarn products. Company year-end is December. Below is the relevant information given:
Opening balances as at January 01, 2018
Description Rs.
Opening Share Capital (at par value of Rs. 10 per share) 25,000,000
Share Premium 7,500,000
Opening General Reserves 750,000
Opening RE 18,250,000
Revaluation Surplus 1,500,000
Following events have taken place in year 2018 and 2019:
1. On March 31, 2018, Company issued Right shares for Rs. 20 per share. Right shares were issued in
the proportion of 1 right share against 5 ordinary shares held.
2. Board of Directors of the Company approved Interim dividend of Rs. 2.25 per share for the half
year ended June 30, 2018.
3. Annual profit for the year ended December 31, 2018 is Rs. 10,250,000.
4. The Board of Directors of the Company recommended annual dividend of Rs. 4.25 per share on
February 15, 2019, which was duly approved by the Shareholders on March 21, 2019.
5. The Board of Directors approved Bonus Shares of 20% of the outstanding shares on June 30,
2019 which were duly credited in Shareholders account on August 31, 2019.
6. Board of Directors of the Company approved Interim dividend of Rs. 1.25 per share for the third
quarter ended September 30, 2019.
7. Annual profit for the year ended December 31, 2019 is Rs. 12,500,000.
8. The Board of Directors of the Company recommended annual dividend of Rs. 5 per share on
February 15, 2020, which was duly approved by the Shareholders on March 21, 2020.
9. The Company has a policy to transfer 5% of the Annual Profit to General Reserves.
10. Company revalued fixed assets on December 31, 2017 resulting in Revaluation Surplus of
Rs.1,000,000. Remaining useful life of the Asset is 10 years and Company has a straight line
method for depreciation.
Required
Make Statement of Changes in Equity for the year ended December 31, 2018 and 2019. Ignore
taxation impact if any.
Question 10
HMK Corporation Limited, an entity listed in Pakistan Stock Exchange is in the business of

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 Financial Accounting And Reporting – 1
Ahmed Raza Mir
IAS 1 ; Statement Of Changes In Equity

manufacturing and sale of Cars. Company year-end is December. Below is the relevant information
given:
Opening balances as at January 01, 2018

Description Rs.
Opening Share Capital (at par value of Rs. 10 per share) 100,000,000
Share Premium 50,000,000
Opening General Reserves 5,000,000
Opening RE 55,000,000
Following events have taken place in year 2018 and 2019:
1) On February 28, 2018, the Company issued Initial Public Offering, thereby offering 5
million shares for Rs. 25 each. All shares were subscribed and company received the
subscription money by March 31, 2018.
2) The Board of Directors of the Company recommended annual dividend for the year
ended December 31, 2017 of Rs. 5 per share on February 15, 2018, whereas
Shareholders only approved Rs. 4 per share on March 31, 2018.
3) Board of Directors of the Company approved Interim dividend of Rs. 1 per share for
the third quarter ended September 30, 2018.
3) Annual profit for the year ended December 31, 2018 is Rs. 130,250,000.
4) The Board of Directors of the Company recommended annual dividend of Rs. 4.25 per
share on February 15, 2019, whereas Shareholders approved Rs. 6 per share on March 31,
2019.
5) The Board of Directors approved Bonus Shares of 10% of the outstanding shares on
June 30, 2019 which were duly credited in Shareholders account on August 31, 2019.
6) Board of Directors of the Company approved Interim dividend of Rs. 1.5 per share for
the third quarter ended September 30, 2019.
7) Annual profit for the year ended December 31, 2019 is Rs. 175,000,000.
8) The Board of Directors of the Company recommended annual dividend of Rs. 5.5 per
share on February 15, 2020, which was duly approved by the Shareholders on March 31,
2020.
9) The Company has a policy to transfer 5% of the Annual Profit to General Reserves.
Required:
Make Statement of Changes in Equity for the year ended December 31, 2018 and 2019. Ignore
taxation impact if any.

Question 11
Following is the trial balance of Ustaad and Co. for the year ended 30 Dec 2020
Ustaad And Co.
Trial Balance
For The Year Ended 31 December 2020
Particulars Debit Credit

Sales 1,180,000

Purchases 420,000

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 Financial Accounting And Reporting – 1
Ahmed Raza Mir
IAS 1 ; Statement Of Changes In Equity

Op Stock 100,000

Electricity Expense 60,000

PPE (1st Jan 2020) 1,200,000

Accumulated Depreciation 350,000

Share Capital 650,000

Share Premium 140,000

Retained Earnings 1st Jan 2020 430,000

General Reserve 48,000

Translation Reserve 47,000

Warranty Expense 123,000

Loan Payable 504,000

Transportation in 56,000

Rent Payable 74,000

Accounts Receivable 235,000

Provision for doubtful debts 66,000

Cash & Bank 775,000

Prepaid Rent 1 Jan 2020 125,000

Sales Return 81,000

Trade Payables 93,000

Salary Expense 147,000

Legal Fees 127,000

Gain on Disposal of Vehicle 15,000

3,523,000 3,523,000

Following information is also available

 The inventory at the end of the year was Rs.85000

 Information regarding PPE is as follows;
o Gain on disposal pertains to a vehicle purchased on 1 Oct 2018 at a cost of Rs.65,000 and
disposed off at 30 Apr 2020
o Following Are the Non-current asset of the company
Particulars Cost Accumulated Depreciation Rate
Depreciation Method
Land 150,000 - - -
Building 350,000 84,000 Straight Line 5%
Plant 500,000 186,000 Reducing Balance 10%
Vehicle 200,000 65,000 Reducing Balance 15%
 Rent paid during the year was Rs.255,000.
 Loan has an interest rate of 12%.

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 Financial Accounting And Reporting – 1
Ahmed Raza Mir
IAS 1 ; Statement Of Changes In Equity

 Company had to write off Rs.13,000 as the counter party was declared as bankrupt. Also the
company had to increase the provisions of doubtful debt by Rs.12,000.
 Company issued 12,000 shares at a premium of Rs.4/share in September and announced a right
issue of 20% in July at a price of Rs.13/share.
 The final cash dividend of Rs.3/share and bonus dividend of 18% pertaining to 2019 was paid in
March.
 The company also declared an interim dividend of cash 12%.
 The prices of US$ increased significantly during the year which resulted in an Income Of
Rs.103,000 for the company.
 The company has a policy to transfer 5% of net profit into general reserves.

Required: Prepare A statement of changes in equity for Ustaad Ltd for year ended 2020. Show all
your relevant workings.

From The Desk Of Syed Huzaifa Sami 9