Professional Documents
Culture Documents
– V)
3 COMPANY FINAL
ACCOUNTS
LEARNING OBJECTIVES
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SYNOPSIS
1. Company Final Accounts
2. Corporate Final Accounts
3. Theory Questions
4. Exercise Sums
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Financial Reporting of Insurance Companies 73
4. Current liabilities
a) Short term borrowings
b) Trade payables
c) Other current liabilities
d) Short term provisions
Total
II. ASSETS
1. Non-Current Assets
a) Fixed assets
i) Tangible Assets
ii) Intangible Assets
iii) Capital work in progress
iv) Intangible assets under development
b) Non-current investments
c) Deferred tax assets (net)
d) Long term loans and advances
e) Other non-current assets
2. Current Assets
a) Current investments
b) Inventories
c) Trade receivables
d) Cash and cash equivalents
e) Short term loans and advances
f) Other current assets
Total
10 : Intangible Assets
Assets Original Additions Disposal Original Total Depreci- Depreci- Total Net
cost at during during cost at depreci- ation ation on Depreci- at
the the the the end ation for Assets ation at the
begin- year year at the the disposed the end
ing beginning year off end
1 2 3 4 5 6 7 8 9 10
Good-will
Brands
Trade
marks
Com.
software
Mast
theads&
publishing
titles
Mining
rights
Copy rights
& patents
Model
designs
proto-
types
Receipts
formable
Licenses
Franctise
Particulars Amt.
11. Non – Current Investment
Trade Investment xx
Investment in property xx
Investment in Equity Shares xx
Investment in Preference Shares xx
Investment in Government Securities xx
Investment in Trust Securities xx
Investment in Debentures / Bonds xx
Investment in Mutual Fund xx
Investment in Partnership Firms xx
Other Non-Current Investment xx
xx
12. Long Term Loans and Advances
Capital Advances xx
Security Deposits xx
Loans and Advances to related parties xx
Other loans and advances xx
Advance Tax xx
GENVAT Credit Receivables xx
VAT credit Receivables xx
Service Tax xx
Credit Receivables xx
13. Other Non-Current Assets
Long Term Trade Receivables xx
Others xx
Discount on issue of Debentures xx
Amalgamation Adjustment Account xx
14. Current Investments
Investment in :
Equity Shares xx
Preference shares xx
Government Securities xx
Trust Securities xx
Debentures xx
Bonds xx
Mutual Funds xx
Partnership Firms xx
Other Investments xx
Financial Reporting of Insurance Companies 77
15. Inventories
Raw Materials xx
W.I.P. xx
Finished Goods xx
Stores & Spares xx
Loose Tools xx
Others xx
xx
16. Trade Receivables
Sundry Debtors xx
Less : Provision for doubtful debts xx
Bills Receivables xx
xx
17. Cash & Cash Equivalent
Cash & Cash Equivalent xx
Bank balance xx
Cheques / Drafts on hand xx
Cash Balance xx
Other Bank Balances xx
Margin money deposits xx
Security against borrowings xx
Guarantees and other Commitments. xx
xx
18. Short Term Loans / Advances
Loans & advances to related parties xx
Prepaid expenses xx
Tax refund receivable xx
19. Other Current Assets
Non –trade Receivables xx
Unamortized Expenditure xx
Unbilled Revenue xx
I. Items appearing under the head EQUITY AND LIABILITIES
1. Shareholders’ Funds
a) Share Capital : Under the head “Share Capital”, some of important items to be
shown are as under :
i) Number and amount of shares authorized.
ii) Number of shares issued, subscribed and fully paid up and subscribed but not
fully paid up.
iii) Par value per share.
iv) A reconciliation of the number of shares outstanding at the beginning and at the
end of reporting period.
v) Shares in the company held by each share holder holdings more than 5% shares
specifying the number of shares held.
vi) Aggregate number and class of shares allotted as fully paid up for consideration
other than cash.
vii) Aggregate number and class of shares allotted as fully paid up by way of bonus
shares.
viii) Calls unpaid showing aggregate value of calls unpaid by directors and officers.
ix) Share forfeited amount.
b) Reserve and Surplus : Under this head the following items are shown;
i) Capital Reserve
ii) Securities Premium (Reserve)
iii) Capital Redemption Reserve
iv) Debenture Redemption Reserve
v) Revaluation Reserve
vi) Share options outstanding Account
78 Financial Reporting of Analysis – (T.Y.B.B.I. – Sem. – V)
Changes in Investments
Inventory at the end of the year xx
Inventory at the beginning of the year xx
Employee Benefit Expenses xx
Salaries & Wages xx
Contribution to P.F. xx
Contribution to others Funds xx
Expenses on ESOP xx
Expenses on ESPP xx
Employee welfare expenses xx
Finance Cost
Interest on Borrowings from Banks xx
Interest on Borrowings from others xx
Interest on Debentures xx
Finance charge on lease Financing xx
Interest levied by Tax department xx
Commitment charges xx
Dis./Issue expenses on Debentures xx
Written off xx
Processing /charges xx
Net Gain/loss on foreign xx
Currency transactions xx
Dep. and amortization Expenses
Buildings xx
Plant & Machinery xx
Vehicles xx
Equipments xx
Furnitures xx
Brands xx
Computer software xx
Other Expenses
Stores & Spares xx
Power xx
Fuel and Oil xx
Rent xx
Insurance xx
Repairs & Maintenance xx
Building xx
Machinery xx
Furniture xx
Vehicles xx
Equipments xx xx
Rates & Taxes xx
Miscellaneous Expenses xx
Provision for Doubtful Debts xx
Payment to Auditors for :
Audit work xx
Taxation work xx
Company law matter xx
Management Services xx
Other Services xx xx
Distribution Expenses xx
Sales Commission xx
Advertising xx
Showroom Expenses xx
Discount Allowed xx
Loss on Foreign Currency Transactions xx
Exceptional Items :
Restructuring Cost xx
Disposal of Investment xx
Disposal of fixed assets xx
Litigation settlement xx
Reversal of Provision xx
Written down of stock xx xx
82 Financial Reporting of Analysis – (T.Y.B.B.I. – Sem. – V)
Adjustments :
1.
Proposed Dividend (Declared on paid up valued)
2.
Transfer to Reserve
6.
Accrued interest on investment
(if interest rate is known than this adjustment has to be done)
Balance Sheet
Current Assets
Receivable
Due for more/less than 6 month xx
other xx
ii) Receivable considered good
(Only information to be disclosed).
Balance Sheet
Current Assets
Receivable xx
(Only of which ` _____ is considered goods)
84 Financial Reporting of Analysis – (T.Y.B.B.I. – Sem. – V)
iii)
Bad debts & RDD, given in Adjustment
4,000 800
Share Capital Premium @ 20%
2. Preference share will not be recorded since i) is recorded.
3. Create CRR from General Reserve(Amt. is equal to Pref. Share Capital A/c)
Balance Sheet
Reserve & Surplus
Security Premium 2500
(–) Premium or redemption 800 1,700
Solution
Note on Share Capital
Dr. Cr.
` `
Share Capital Authorised :
5,000 8% Preference shares of ` 100 each … …. …. 5,00,000
5,000 Equity shares of ` 10 each … …. …. 5,00,000 10,00,000
Issued, Subscribed, Called –up & paid-up :
2,500 8% Preferences shares of ` 100 each … …. …. 2,50,000
Less : Calls in arrears [100 × 20] … …. …. 2,000 2,48,000
25,000 Equity shares of ` 10each … …. …. 2,50,000
Less : Calls in arrears [2,000 × 2] … …. …. 4,000 2,46,000
4,94,000
Illustration 2 :
Prepare fixed Assets Schedule from the following extracts :
Schedule of Fixed Assets as on 31stMarch, 2012
Assets Gross Block Provision for Depreciation Net Block
As on Addition Deduction As on As on Addition Deduc- As on As on As on
1.4.11 31.3.12 1.4.11 tion 31.3.12 1.4.11 31.3.12
Land 3,50,000 ? – – – – – – ? 8.100
Building 7,50,000 2,50,000 – 10,00,000 37,500 25,000 – 62,500 7,12,500 ?
Plant ? – – 7,25,000 ? 72,500 – 2,90,000 5,07,500 4,35,000
Vehicles ? ? 2,00,000 14,00,000 1,53,000 1,60,000 ? 2,73,000 ? 11,27,000
Total 25,90,000 11,35,000 2,00,000 35,25,500 4,08,000 2,57,000 ? 6,25,500 ? 29,00,000
Solution
Fixed Assets (Tangible Assets)
Assets Gross Block Provision for Depreciation Net Block
Opening Addition Deduction Closing Opening During Dedu- Closing Opening Closing
Year ction
Land 3,50,000 50,500 – 4,00,500 – – – – 3,50,000 4,00,500
Building 7,50,000 2,50,000 – 10,00,000 37,500 25,000 – 62,500 7,12,500 9,37,500
Machinery 7,25,000 – – 7,25,000 2,17,500 72,500 – 2,90,000 5,07,500 4,35,000
Vehicles 7,65,000 8,35,000 2,00,000 14,00,000 1,53,000 1,60,000 40,000 2,73,000 6,12,000 11,27,000
Total 25,90,000 11,35,000 2,00,000 35,25,500 4,08,000 2,57,000 40,000 6,25,500 21,82,000 29,00,000
Illustration 3 :
From the below given information prepare the schedule of fixed assets:
The following balances are extracted from its ledger as on 31-3-2012
Particulars `
Land 3,00,000
Building (Cost ` 15,00,000) 10,00,000
Machinery (Cost ` 20,00,000) 14,60,000
Furniture (Cost ` 1,75,000) 1,30,000
Solution
Fixed Assets
Particulars Gross Depre- Net
Block citation Block
Tangible Assets
Land … …. …. 3,00,000 3,00,000
Building … …. …. 15,00,000 5,00,000 10,00,000
Machinery … …. …. 20,00,00 5,40,000 14,60,000
Furniture … …. …. 1,75,000 45,000 1,30,000
Total … …. …. 39,75,000 10,85,000 28,90,000
Financial Reporting of Insurance Companies 87
Illustration 4 :
From the below Schedule of fixed asset find out the missing figures :
Schedule of Fixed Assets as on 31stMarch, 2012
Assets Gross Block Provision for Depreciation Net Block
Opening Addition Deduction Closing Opening Addition Deduc- Closing Opening Closing
1.4.11 31.3.12 1.4.11 tion 31.3.12 1.4.11 31.3.12
Land ? – – ? – – – – ? 50,000
Building 1,50,000 – ? ? 18,750 2,500 6,250 15,000 ? 85,000
Plant&
Machinery 7,00,000 – – ? 2,80,000 70,000 – ? ? ?
Total 9,00,000 – 50,000 8,50,000 2,98,750 72,500 6,250 3,65,000 ? ?
Solution
Fixed Assets (Tangible Assets)
Gross Block Net Block
Assets Opening Dedu- Closing Opening Addition Deduc- Closing Opening Closing
ction tion
Land 50,000 – 50,000 – – – – 50,000 50,000
Building 1,50,000 50,000 1,00,000 18,750 2,500 6,250 15,000 1,31,250 85,000
Plant &
Machinery 7,00,000 – 7,00,000 2,80,000 70,000 – 3,50,000 4,20,000 3,50,000
Total 9,00,000 50,000 8,50,000 2,98,750 72,500 6,250 3,65,000 6,01,250 4,85,000
Illustration 5 :
The Trial Balance of Zidane Limited having an authorized capital of ` 10,00,000 as at 31st March.
Particulars Dr. Cr.
` `
Share Capital (Share of ` 10/- each fully paid) … …. …. – 5,00,000
Securities Premium … …. …. – 50,000
Building (Cost ` 3,00,000) … …. …. 2,50,000 –
Plant & Machinery (Cost ` 4,00,000) … …. …. 3,00,000 –
Land … …. …. 20,000 –
Operating Income earned during the year … …. …. – 1,80,000
General Reserve … …. …. – 1,80,000
6 % Debentures (secured by mortgage on land) … …. …. – 1,00,000
Sundry Debtors &Creditors … …. …. 60,000 20,000
Stock as at 31-3-2011 (At cost or market value whichever is lower) …. …. 50,000 –
Salaries … …. …. 20,000 –
Directors Fees … …. …. 9,000 –
General Expenses … …. …. 15,000 –
Cash at Bank … …. …. 30,000 –
Cash in Hand … …. …. 32,000 –
Fixed Deposits with Banks … …. …. 4,000 –
Profit & Loss b/f … …. …. – 10,000
Investment (4% Government Securities, face value of `1,00,000
purchased on 1–4–2011) … …. …. 95,000 –
Investments in Equity Shares (10,000) shares of `25/- each
`20/- paid up) … …. …. 1,50,000 –
Advance Income Tax … …. …. 5,000 –
10,40,000 10,40,000
Further Information :
a) Of the shares allotted 20,000 shares worth ` 2,00,000 were allotted as fully paid to vendor from
whom a running business was acquired.
b) Of the debtors ` 20,000 were outstanding for more than six months are considered good except
doubtful debt of ` 5,000.
c) A provision is to be made for Income Tax for ` 10,000.
d) The Market Value of Government Securities on the date of Balance Sheet was ` 1,10,000 and that
of equity shares was ` 1,70,000.
e) Rates and cess estimated at ` 5,000 have accrued but the bill is not yet received.
88 Financial Reporting of Analysis – (T.Y.B.B.I. – Sem. – V)
f) Included in General Expenses is insurance ` 2,000 paid for the year ending on 30thSeptember,
2012.
g) Interest on debentures issued and on investment in government Securities should be taken into
account.
h) Depreciation is to be provided for 5% on the original cost of Machinery and 3% on the original cost
of land and building.
I) Provide for dividend of 8% on shares. Ignore Divided Tax and Transfer to Statutory Reserve.
j) Fixed Deposits with banks will mature after 3 years and kept with Excise Department as bond.
Prepare: Profit and Loss Statement for the year ended 31-3-2012 and the Balance Sheet of Zidane
Limited as on that date as per the provision of the Companies Act taking into consideration the above
mentioned adjustments. Ignore previous year’s figures.
Solution
Zidane Limited
Balance sheet as at 31st March 2012
Particulars Note `
I. Equity and Liabilities
1. Shareholder’s Funds
a) Share Capital … …. …. 1 5,00,000
b) Reserve and Surplus … …. …. 2 2,86,000
2. Non-Current Liabilities
Long-term borrowings … …. …. 3 1,00,000
3. Current Liabilities
a) Trade Payables (Goods) … …. …. 20,000
b) Other Current Liabilities … …. …. 4 11,000
c) Short-term provisions … …. …. 5 45,000
Total … …. …. 9,62,000
II. ASSETS
1. Non-current Assets
a) Fixed Assets – Tangible Assets … …. …. 6 5,41,000
b) Non-current Investments … …. …. 7 2,45,000
c) Other non-current Assets … …. …. 8 4,000
2. Current Assets
a) Inventories … …. …. 9 50,000
b) Trade Receivables … …. …. 10 55,000
c) Cash and Cash Equivalents … …. …. 11 62,000
d) Short-term Loans and Advances … …. …. 12 1,000
e) Other Current Assets … …. …. 13 4,000
9,62,000
Profit and Loss Statement for the Year Ended 31stMarch, 2012
Particulars Note ` `
1. Revenue from Operations … …. …. 1,80,000
2. Other Income (Interest) … …. …. 4,000
I. Total Revenue … …. …. 1,84,000
Expenses :
1. Employee Benefits Expenses … …. …. 14 20,000
2. Finance Costs … …. …. 15 6,000
3. Depreciation and Amortization Expense … …. …. 29,000
4. Other Expenses … …. …. 16 33,000
II. Total Expenses … …. …. 88,000
III. Profit Before Tax … …. …. 96,000
Provision for tax for Current Year … …. …. (10,000)
IV. Profit/(Loss) for the Period … …. …. 86,000
Notes to Accounts `
1. Share Capital
Equity Share Capital
Authorised shares (Par Value per shares: ` 10) … …. …. 1,00,000 10,00,000
Issued, subscribed & fully paid shares … …. …. 50,000 5,00,000
(20,000) allotted for consideration other than Cash
Financial Reporting of Insurance Companies 89
Illustration 6 :
M/s. Sanjay Co. Ltd. is a registered company with an authorized share capital of ` 70,000 divided into
7,000 Equity Shares of ` 10 each. Company’s Trial Valance as on 31-3-2012 was as under :
Debit Balances ` Credit Balances `
Buildings (Cost ` 50,000) 40,000 Share Capital :
Furniture (Cost ` 5,000) 4,000 5,000 Equity Shares of ` 10 each 50,000
Vehicles (Cost `10,000) 6,500 6% Debentures of ` 100 each 10,000
Equity Shares of Companies Provision for Tax
(Market Value ` 22,000) 20,000 (Accounting year 2010-11) 10,000
500 – 8% Preference shares of ` 10 Sundry Creditors 7,500
each, ` 6 per share paid up 3,000 Bills Payable 4,000
Stock in trade at cost 20,000 General Reserve 10,000
Sundry Debtors 14,000 Profit and Loss Statement (1– 4 –11) 2,000
90 Financial Reporting of Analysis – (T.Y.B.B.I. – Sem. – V)
Adjustments :
1. Provide 10% Depreciation p.a. on cost of fixed assets.
2. The company had given a contract for the construction of a building at ` 1,00,000 which is still
incomplete
3. Provide ` 10,000 in respect of taxation liability for the year 2011 – 12.
4. Write back ` 200 liability included in Sundry Creditors.
5. Due to change in the basis of valuation of stock, its value has come down to ` 18,000. This has not
been considered as yet.
6. Dividend is proposed for the year @ 10%.
7. Sundry Debtors include Debts which are due for more than 6 months ` 4,000.
8. Income tax assessment for the accounting year 2010-11 has been completed with a gross demand of
` 11,000.
9. Ignore previous year’s figures an tax on proposed dividend.
Prepare Profit and Loss Statement for the year ended 31-03-2012 and Balance Sheet as on that as per
the provisions of the Schedule VI of the Companies Act, 1956 taking into consideration the above
mentioned adjustments.
Solution
Sanjay Co. Ltd.
Balance Sheet as at 31st March 2012
Particulars Note ` `
I. Equity and Liabilities
1. Shareholder’s Funds
a) Share Capital … …. …. 1 50,000
b) Reserve and Surplus … …. …. 2 32,050 82,050
2. Non-Current Liabilities
Long-term borrowings … …. …. 3 10,000
3. Current Liabilities
a) Trade payables … …. …. 4 11,300
b) Other current Liabilities … …. …. 5 2,100
c) Short-term Provisions … …. …. 6 5,700 19,100
Total … …. …. 1,11,150
II. Assets
1. Non-current Assets
a) Fixed Assets – Tangible Assets … …. …. 7 44,000
b) Non-current Investments … …. …. 8 23,000
c) Long term Loans and Advances … …. …. 9 3,000
d) Other Non-current Assets … …. …. 10 400 70,400
2. Current Assets
a) Inventories … …. …. 11 18,000
b) Trade Receivables … …. …. 12 14,000
c) Cash and Cash Equivalents … …. …. 8,750 40,750
Total … …. …. 1,11,150
Financial Reporting of Insurance Companies 91
Profit and Loss Statements for the year ended 31st March, 2012
Particulars Note ` `
1. Revenue from Operations … …. …. 55,000
2. Other Income (Interest) … …. …. 13 1,200
I. Total Revenue … …. …. 56,200
Expenses :
1. Employee Benefits Expenses … …. …. 14 10,000
2. Finance Costs … …. …. 15 600
3. Depreciation and Amortization Expense … …. …. 6,500
4. Other Expenses … …. …. 16 3,050
II. Total Expenses … …. …. 20,150
III. Profit Before Tax … …. …. 36,050
Provision for tax for Current Year … …. …. 10,000
Short Provision of Tax for last year (11,000 – 10,000) …. …. 1,000 (11,000)
IV. Profit/(Loss) for the Period … …. …. 25,050
Notes to Accounts `
1. Share Capital No.
Equity Share Capital
Authorised shares (Par Value per shares: ` 10) … …. …. 7,000 70,000
Issued, subscribed &fully paid shares … …. …. 5,000 50,000
2. Reserves and Surplus
a) General Reserve 10,000
b) Balance in Statement of Profit & Loss b/d 2,000
Surplus for the year 25,050
Available for Appropriation … …. …. 27,050
Less : Dividend – Equity … …. …. 5,000 22,050
Total … …. …. 32,050
3. Long – term borrowings
6% Debentures of `100 each … …. …. 10,000
4. Trade Payables
a) Sundry Creditors for Goods (7,500 – 200) … …. …. 7,300
b) Bills Payable … …. …. 4,000
Total … …. …. 11,300
5. Other Current Liabilities
a) Interest accrued on Debentures … …. …. 100
b) Income-tax Payable (11,000 – 9,000) … …. …. 2,000
Total … …. …. 2,100
6. Short-term Provisions
a) Provision for Tax … …. …. 10,000
Less : Advance Tax 9,000
TDS – Dividend (1,000 – 700) 300 9,300 700
b) Proposed Dividends … …. …. 5,000
Total … …. …. 5,7000
7. Fixed Assets
Illustration 7 :
The Trial Balance of K. Swapanil Ltd. As on 31st March, 2012 is as below :
Particulars Dr. Cr.
` `
16,000 Equity Share of ` 100/- each fully paid up … …. …. – 16,00,000
Securities Premium … …. …. – 15,000
General Reserve … …. …. – 50,000
Gross Profit … …. …. – 8,00,000
Discount Received … …. …. – 8,700
Creditors … …. …. – 25,800
Profit & Loss A/c … …. …. – 20,000
Provision for Taxation (Accounting Year 2010 – 11) … …. …. – 70,000
Interest Received … …. …. – 10,000
Land (Cost) … …. …. 1,55,000 –
Building … …. …. 3,00,000 –
Plant &Machinery … …. …. 2,50,000 –
Furniture … …. …. 1,00,000 –
Vehicles … …. …. 1,50,000 –
Office Salaries … …. …. 1,55,000 –
Office Rent … …. …. 1,20,000 –
Establishment Expenses … …. …. 58,000 –
Finance Expenses … …. …. 49,000 –
Debtors … …. …. 90,000 –
Interim Dividend … …. …. 80,000 –
Cash on Hand … …. …. 8,500 –
Bank Balance … …. …. 2,00,000 –
Security Deposit … …. …. 7,800 –
Advance Tax (Accounting Year 2011 – 2012) … …. …. 1,00,000 –
Investments (5% Government Securities) … …. …. 2,10,000 –
Stock – Raw Material … …. …. 1,50,000 –
Stock – work-in-progress … …. …. 1,75,000 –
Stock – Finished Goods … …. …. 1,25,000 –
Advance tax (Accounting Year 2010 –11) … …. …. 80,000 –
Selling and Distribution Expenses … …. …. 36,200 –
Total 25,99,500 25,99,500
Financial Reporting of Insurance Companies 93
After taking into account adjustment, prepare Profit & Loss account for the year ended 31st March, 2012
and Balance Sheet as on the same date, as per Schedule VI requirements :
a) Write off depreciation on fixed assets on the original cost of fixed assets as hereunder.
Name Cost (`) Rate %
Building 4,00,000 2.5%
Plant & Machinery 5,00,000 10%
Furniture 2,00,000 15%
Vehicles 3,00,000 20%
b) Market value of investments is ` 2, 15,000 while value is ` 2, 00,000.
c) Auditor’s Remuneration accrued for the year ` 16,000/-. It includes their fees as auditors ` 10,000,
as consultant on Tax matters ` 4,000 while the remaining amount is as consultant on Company law
matters.
d) Managing director’s remuneration paid ` 5,000 per month is included in office salaries. However,
he is entitled to remuneration of ` 70,000 p.a. as per agreement.
e) Record the following Expenses accrued: Salaries ` 8,000, Rent ` 10,000, Establishment Expenses
`7,000.
f) General Reserve includes profit on re-issue of forfeited shares earned ` 5,000/-.
h) Debtors include debts due for more than 6 months ` 15,000/-. All debts are considered to be good
and unsecured.
i) The Income Tax Assessment for accounting year 2010–11 was completed resulting into gross
demand of ` 78,000/-
j) Ignore previous year’s figures and Corporate Dividend Tax.
Solution
K. Swapnil
Balance Sheet as at 31st March 2012
Particulars Note ` `
I. Equity and Liabilities
1. Shareholder’s Funds
a) Share Capital … …. …. 1 16,00,000
b) Reserve and Surplus … …. …. 2 96,500 16,96,500
2. Current Liabilities
a) Trade payables … …. …. 3 35,800
b) Other current Liabilities … …. …. 4 41,000 76,800
Total … …. …. 17,73,300
II. Assets
1. Non-current Assets
a) Fixed Assets – Tangible Assets … …. …. 5 8,05,000
b) Non-current Investments … …. …. 6 2,10,000
c) Long term Loans and Advances … …. …. 7 7,800 10,22,800
2. Current Assets
a) Inventories … …. …. 8 4,50,000
b) Trade Receivables … …. …. 9 90,000
c) Cash and Cash Equivalents … …. …. 10 2,08,500
d) Other Current Assets (Tax Refund) 2,000 7,50,500
Total … …. …. 17,73,300
Profit and Loss Statement for the year ended 31stMarch, 2012
Particulars Note ` `
1. Revenue from Operations … …. …. 8,00,000
2. Other Income (Interest) … …. …. 11 18,700
I. Total Revenue … …. …. 8,18,700
94 Financial Reporting of Analysis – (T.Y.B.B.I. – Sem. – V)
Expenses :
1. Employee Benefits Expenses … …. …. 12 1,73,000
2. Finance Costs … …. …. 49,000
3. Depreciation and Amortization Expense … …. …. 1,50,000
4. Other Expenses … …. …. 13 2,47,200
II. Total Expenses … …. …. 6,19,200
III. Profit Before Tax … …. …. 1,99,500
Provision for tax for Current Year … …. …. 1,00,000
Short Provision of Tax for last year (11,000 – 10,000) …. …. 8,000 (1,08,000)
IV. Profit/(Loss) for the Period … …. …. 91,500
Notes to Accounts `
1. Share Capital
Issued and paid up : 16,000 Equity Shares of ` 10 each … …. …. 16,00,000
2. Reserves and Surplus
a) Capital Reserves … …. …. 5,000
b) Securities Premium … …. …. 15,000
c) General Reserve
Balance b/d … …. …. 50,000
Less :Transfer. To Capital reserve … …. …. (5,000) 45,000
d) Surplus / (Deficit)
Balance in Statement of Profit & Loss b/d … …. …. 20,000
Surplus for the year … …. …. 91,500
Available for Appropriation … …. …. 1,11,500
Less : Dividend – Interim … …. …. 80,000 31,500
Total … …. …. 96,500
3. Trade Payables
a) Creditors … …. …. 25,800
b) MD’s Remuneration … …. …. 10,000
Total … …. …. 35,800
4. Other Current Liabilities
Accrued Expenses
– Salaries … …. …. 8,000
– Auditor Remuneration … …. …. 16,000
– Rent … …. …. 10,000
– Establishment Expenses … …. …. 7,000
Total … …. …. 41,000
5. Fixed Assets
Gross Block Depreciation Net Block
Particulars Opening Additions Closing Opening During Closing Opening Closing
year
Tangible
Assets
Land 1,55,000 – 1,55,000 – – – 1,55,000 1,55,000
Building 4,00,000 – 4,00,000 1,00,000 10,000 1,10,000 3,00,000 2,90,000
Plant & 5,00,000 – 5,00,000 2,50,000 50,000 3,00,000 2,50,000 2,00,000
Mach.
Furniture 2,00,000 – 2,00,000 1,00,000 30,000 1,30,000 1,00,000 70,000
&Fittings.
Vehicles 3,00,000 – 3,00,000 1,50,000 60,000 2,10,000 1,50,000 90,000
Total 15,55,000 – 15,55,000 6,00,000 1,50,000 7,50,000 9,55,000 8,05,000
6. Non–current Investments
Investments in Government Securities … …. …. 2,10,000
(FV ` 2,00,000; MV ` 2,15,000)
7. Long term Loans and Advances
Security Deposits … …. …. 7,800
8. Inventories
a) Raw Materials … …. …. 1,50,000
b) Work-in-progress … …. …. 1,75,000
c) Finished Goods … …. …. 1,25,000
Total … …. …. 4,50,000
Financial Reporting of Insurance Companies 95
9. Trade Receivables
Unsecured, considered good … …. ….
– More than 6 months … …. …. 15,000
– Other … …. …. 75,000
Total … …. …. 90,000
10. Cash and Cash Equivalents
a) Balances with Banks … …. …. 2,00,000
b) Cash on Hand … …. …. 8,500
Total 2,08,500
11. Other Income
a) Discount received … …. …. 8,700
b) Interest on Govt. Securities … …. …. 10,000
Total … …. …. 18,700
12. Employee Benefits Expense
Salaries (1,55,000 + 8,000 + 10,000) … …. …. 1,73,000
13. Other Expenses
a) Rent (1,20,000 + 10,000) … …. …. 1,30,000
b) Establishment Expenses (58,000 + 7,000) … …. …. 65,000
c) Selling Expenses … …. …. 36,200
d) Payment to Auditors
Audit Services … …. …. 10,000
Taxation Matters … …. …. 4,000
Company Law matters … …. …. 2,000
Total … …. …. 2,47,200
Illustration 8 :
Following is the Trial Balance of EKKY Ltd. as on 31st March, 2012:
Debit Balance ` Credit Balance `
Stock (at Cost) 5,00,000 Share Capital :
Fixed Assets (Net block) 12,35,000 (Equity Shares of `100 each) 20, 00,000
Sundry Debtors (unsecured & good) 4,00,000 General Reserve 70,000
Staff Advance 97,400 Loan from State-financial Corp. 3,00,000
Cash in hand 60,000 Provision for Taxation 11,000
Bank balance 4,94,000 Net profit for the year 2,70,000
Share Issue Expenses 26,600 Profit and Loss A/c 1,00,000
Bills Receivable - Trade 58,000 (Opening balance)
Investments (at cost) 75,000 Short Term Loans 50,000
Sundry Creditors 1,40,000
– Unclaimed Dividend 5,000
29,46,000 29,46,000
Additional Information :
1. Transfer to General Reserve ` 50,000.
2. Directors recommended 6% dividend.
3. Out of debtors, debts due the for more than six months were ` 52,000
4. Sundry Creditors included creditors for goods ` 1, 05,000, while the remaining is for expenses.
5. Loan from state financial corporation is secured against stock.
6. Market value of investments is ` 78,000 while its face value is ` 60,000.
7. Ignore previous year’s figures and corporate dividend tax.
Prepare Balance Sheet as on 31stMarch, 2012 as per legal requirements, after considering the above
adjustments.
Solution
EKKY Co. Limited
Balance sheet as at 31st March 2012
Particulars Note `
I. Equity and Liabilities
1. Shareholder’s Funds
a) Share Capital … …. …. 1 20,00,000
b) Reserve and Surplus … …. …. 2 3,20,000
96 Financial Reporting of Analysis – (T.Y.B.B.I. – Sem. – V)
2. Non-Current Liabilities
Long-term borrowings … …. …. 3 3,00,000
3. Current Liabilities
a) Short Term Borrowings … …. …. 50,000
b) Trade Payables … …. …. 4 1,40,000
c) Other Current Liabilities … …. …. 5 5,000
d) Short-term provisions … …. …. 6 3,31,000
Total … …. …. 29,46,000
II. ASSETS
1. Non-current Assets
a) Fixed Assets – Tangible Assets (Net Block) … …. …. 12,35,000
b) Non-current Investments (FV :` 60,000; MV: ` 78,000) … …. …. 75,000
c) Other non-current Assets … …. …. 7 26,000
2. Current Assets
a) Inventories … …. …. 5,00,000
b) Trade Receivables … …. …. 8 4,58,000
c) Cash and Cash Equivalents … …. …. 9 5,54,000
d) Short-term Loans and Advances … …. …. 10 97,400
Total 29,46,000
Notes to Accounts `
1. Share Capital No.
Equity Share Capital
Issued, subscribed & fully paid shares … …. …. 20,000 20,00,000
2. Reserves and Surplus
a) General Reserve 10,000
Balance b/d … …. …. 70,000
Tfd. From P & L A/c … …. …. 50,000 1,20,000
b) Surplus / (Deficit)
Balance in Statement of Profit and Loss b/d … …. …. 1,00,000
Surplus for the Year … …. …. 2,70,000
Available for Appropriation … …. …. 3,70,000
Less : Allocations and Appropriations
Dividend – Equity 1,20,000
Transfers to General Reserve 50,000
Appropriations … …. …. (1,70,000) 2,00,000
Total … …. …. 3,20,000
3. Long – term borrowings
Loan from SFC (Secured against Stock) … …. …. 3,00,000
4. Trade Payables
a) Sundry Creditors for Goods … …. …. 1,05,000
b) Sundry Creditors for Expenses … …. …. 35,000
Total … …. …. 1,40,000
5. Other Current Liabilities
Unclaimed Dividend … …. …. 5,000
6. Short-Term Provisions
a) Provision for Tax … …. …. 11,000
b) Proposed Dividends … …. …. 1,20,000
Total … …. …. 1,31,000
7. Other Non-Current Assets
Shares Issue Expenses (assumed to be amortized after 12 months) 26,600
8. Trade Receivables
(Unsecured, considered good)
a) Sundry Debtors
– More than 6 months … …. …. 52,000
– Other … …. …. 3,48,000 4,00,000
b) Bills Receivable – trade … …. …. 58,000
Total … …. …. 4,58,000
9. Cash and Cash Equivalents
a) Balances with Banks … …. …. 4,94,000
b) Cash on hand … …. …. 60,000
Total 5,54,000
10. Short Term Loans and Advances
Staff Advance … …. …. 97,400
Financial Reporting of Insurance Companies 97
3. THEORY QUESTIONS
Questions and Answers available Free with scratch card provided in the book. Please follow
instructions provided for downloading
1. Short Notes
a) Fictitious Assets and Intangible Assets (Nov. 06, 07)
b) Contingent liabilities (Nov. 05)
c) Fixed Assets
d) Owner’s funds
2. Explain the provisions of schedule VI of the companies Act. As regard to :
a) Share Capital (Nov.07)
b) Contingent liabilities (April 06, 08)
c) Current Assets
d) Non Current Assets
e) Reserves & Surplus
f) Fixed Assets
g) Intangible Assets
h) Long Term Borrowings
i) Short Term Borrowings
j) Non-Current Investments
3. Describe the various users of financial statements (Nov.06, April 07)
4. EXERCISE SUMS
1. Following Trial Balance is extracted from the books of Vishy Company limited as on 31st March, 2012 :
Debit Balances ` Credit Balances `
Fixed Assets (Net Block) 7,10,000 Paid up Share Capital :
Investments in Shares of Companies 2,30,000 50,000 Equity Shares of `10 each 5,00,000
Stock (at cost) 2,00,000 5% Debentures ( `100 each) 1,00,000
Sundry Debtors 1,00,000 Provision for Tax for
(unsecured and good) – Financial Year 2010–2011 1,05,000
Bills Receivable 70,000 – Financial Year 2011–2012 95,000
Bank Balance 87,500 Bills Payable 45,000
Discount on Issue of Shares 4,000 Sundry Creditors 70,000
Advance Tax paid for General Reserve 1,00,000
– Financial Year 2010-11 95,000 Profit and Loss Account 20,000
– Financial Year 2011 – 12 90,000 (as on 1st April 2011)
Prepaid expenses 10,000 Net Profit for the year 3,46,500
Outstanding Expenses 15,000
– Unsecured Loans (Long term) 2,00,000
15,96,500 15,96,500
Additional Information :
1. Debentures are secured against stock.
2. Transfer to General Reserve ` 15,000.
3. Proposed Dividend @ 10% for the year is recommended.
4. Ignore previous year’s figures and corporate dividend tax.
5. Market value of investments is ` 2,20,000 while face value is ` 2,00,000.
6. Discount on issue of shares will not be amortized in next 12 months.
Prepare Balance Sheet as at 31st March 2012 as per the Companies Act after considering the above
adjustments.
2. Following balances are extracted from the books of Sure Success Co. Ltd. as on 31-3-2012.
Particulars ` Particulars `
Freehold Factory Premises 6,00,000 2,00,000 Equity Shares of ` 10 each 20,00,000
Leasehold Office Premises 5,00,000 5,000 6% Debentures of ` 10 each 5,00,000
Bank Balance 60,500 General Reserves 75,000
Vehicles 3,15,000 Sinking Fund for Leasehold Premises 15,000
98 Financial Reporting of Analysis – (T.Y.B.B.I. – Sem. – V)
4. Prepare a schedule of Fixed Assets from the following details as on 31stMarch, 2000.
Debit Balances ` Credit Balances `
Goodwill 25,000 Provision for depreciation upto
Plant and Machinery (at cost) 12,000 31st March,2000
Additions to Plant 20,000 On Plant and Machinery 55,000
Motor Car (at Cost) 24,800 On Furniture 4,500
Furniture (at Cost) 16,500 On Motor Car 9,800
Depreciation :
On Plant 8,500
On Furniture 1,200
On Motor Car 3,000
5. Following figures are taken from the trial balance of XYZ Ltd. As on 31st March,2004.
Particulars Cost Provision for Depreciation
as on 1.4.2003
Goodwill 2,30,000 –
Land & Building 4,00,000 30,000
Office Equipment’s 30,000 7,000
Motor Cars 70,000 25,200
Plant & Machinery 5,00,000 1,28,000
Provide depreciation on written down value of the asset at the following data :
Land & Building 5%
Plant & Machinery 20%
Motor Cars 20%
Office Equipment 10%
Prepare a schedule of Fixed Asset as on 31stMarch, 2004.
6. How will you treat following adjustments? Give Journal Entry and show where there items will appear
in the Balance Sheet of a Ltd. Company.
A. 1. Sundry debtors includes dues for more than six months ` 60,000. Total debtors amounted to
` 4,60,000.
2. Issued capital ` 10,00,000 includes 10,000 Equity shares of ` 10 each issued to vendors in
pursuance of an agreement entered into with them.
B. Charge depreciation at given rates, on the following assets and prepare a schedule of Fixed Assets:
1. Land and Building – 2% W.D.V. ` 94,000 (Original cost ` 1,00,000).
2. Plant and Machinery – 15% W.D.V. ` 3,50,000 (Original cost ` 5,00,000)
3. Motor Car – 20% WDV ` 1,40,000 (Original cost 2,00,000) Depreciation is to be calculated on
straight line basis.
7. Sampada Limited is a Company registered with an authorized capital of ` 25,00,000 divided into equity
shares of ` 100 each. 50% of the shares are issued on which ` 80 per share is called up.
The following balances are extracted from its ledger as on 31st December, 2008:
` `
Land 3,00,000 Shares Capital 10,00,000
Building (Cost ` 15,00,000) 10,00,000 Security Premium 1,25,000
Machinery (Cost ` 20,00,000) 14,60,000 Debenture Redemption Fund 1,00,000
Furniture (Cost ` 1,75,000) 1,30,000 Capital Reserve 3,00,000
Stock 8,30,000 General Reserve 8,50,000
Debtors 10,18,750 Profit & Loss Account :
Cash in hand 2,500 Opening balance 1,93,400
Current Account with Bank 2,25,000 Add : Net profit
Interim Dividend paid 50,000 for the year 5,50,000 7,43,400
Advance Income Tax 1,90,550 12% Secured Debentures 5,00,000
Pre-payments 15,000 Bank Loan (Unsecured) 5,00,000
Sundry Creditors 8,58,400
- Provision for Tax 2,45,000
52,21,800 52,21,800
100 Financial Reporting of Analysis – (T.Y.B.B.I. – Sem. – V)
Additional Information :
1. During the year company decided to:
a) Make the shares fully paid up out of General Reserves.
b) Issue 2500 equity shares of ` 100 each to the public for cash.
c) Issue of bonus shares in the ratio of one fully paid share for five shares for five shares held out of
general reserve.
The accounting entries for the above are yet to be made.
2. As per the instructions given to Bank ` 1,00,000 is to be transferred from Current Account to account of
Sumedha Ltd. As a consideration for 10,000 equity shares of ` 10 each (market value of the investments
is ` 1,05,000).
3. One of the customers directly paid ` 30,000 to one of the suppliers. Since the intimation was not
received intime, effect is yet to be given.
4. The Directors propose to :
a) Transfer ` 1,00,000 to Debenture Redemption Fund.
b) Declare final dividend at 10% on revised share capital (Ignore taxation).
5. One of the employees, who was injured while working in the company has filled a suit for damages of
`3,00,000. The company has not made any provision as it has been advised that suit is likely to be
decided in favour of the company
Prepare Profit & Loss Appropriation Account for the year ended 31stDecember, 2008 and Balance Sheet
as on that date in a vertical form keeping in mind the prescribed formats and applicable accounting
standards. Ignore previous years figures.
8. Following balances are extracted from the books of Sure Success Co. Ltd as on 31stDecember, 2008:
` `
Freehold Factory Premises 6,00,000 2,00,000 Equity Shares of ` 10 each 20,00,000
Leasehold Office Premises 5,00,000 5,000 6% Debentures of ` 100 each 5,00,000
Bank Balance 60,500 General Reserves 75,000
Vehicles 3,15,000 Sinking Fund for
Plant and Machinery 8,30,000 Leasehold Premises 15,000
Sundry Debtors 2,40,000 Profit & Loss A/c
Computer 30,000 Balance b/d 47,450
Goodwill 2,00,000 + Net Profit after tax 2,90,000
Stock 1,30,000 – Debenture Interest 30,000 3,07,450
Cash in hand 1,950 Provision for tax
Advance Income Tax : (Accounting Year 2007) 1,50,000
(Accounting year 2007) 1,45,000 Provision for tax
(Accounting year 2008) 1,75,000 (Accounting Year 2008) 1,80,000
32,27,450 32,27,450
Adjustments :
1. During the current year, Income tax assessment for the accounting year 2007 is completed with a gross
demand of ` 1,35,000 but no effect of the same is given in the accounts of the current year.
2. The Board of Directors decided to provide :
i) 20% bonus on the year’s salary of `1,00,000
ii) 10% sinking fund on leasehold premises
iii) ` 5,000 as Director’s fees.
iv) 5% Dividend for the year to the shareholders.
v) Transfer ` 50,000 to General Reserves
Considering the above Trial Balance and the adjustments and assuming that there will be no change in
the provision for tax of the accounting year 2008 on account of changes if any, prepare Profit & Loss
Account for the year ended 31stDecember, 2008 and Balance Sheet as on that date in a vertical form
keeping in mind the prescribed formats and applicable accounting standards. Ignore previous year’s
figures.
Investments … …. …. 4,80,000
Bank … …. …. 1,00,000
Gross Profit … …. …. 19,00,000
Sundry Expenses … …. …. 1,00,000
Salaries … …. …. 3,50,000
Selling Expenses … …. …. 1,50,000
Debenture Interest … …. …. 1,00,000
Printing and Stationary … …. …. 1,20,000
Preliminary Expenses … …. …. 20,000
Advance Income Tax (for year ending 31st March, 2012) … …. …. 2,00,000
Advance Income Tax (for year ending 31st March, 2011) … …. …. 3,50,000
Equity share Capital (Shares of ` 100 each, fully paid) … …. …. 15,00,000
10% Debentures … …. …. 10,00,000
Capital Redemption Reserve … …. …. 6,70,000
Profit and Loss A/c … …. …. 3,60,000
Securities Premium … …. …. 2,00,000
Creditors … …. …. 2,60,000
Provision for Depreciation on Plant and Machinery … …. …. 8,40,000
Suspense Account … …. …. 20,000
Provision for Tax (for year ending 31st March, 2011) … …. …. - 4,00,000
71,50,000 71,50,000
Additional Information:
1. On 31stMarch, 2011, the company issued bonus shares in the ration of 1 bonus for every 3 Equity Shares
held. No entry has been passed for the same.
2. The Authorised Share Capital is 25,000 Equity Shares of ` 100 each.
3. Suspense Account of ` 20,000 represents cash received for the sale of some part of the machinery on
1stApril, 2011. The cost of the machinery was ` 50,000 and accumulated depreciation there on being
` 40,000.
4. Depreciation is to be provided on Plant and Machinery at 20% p.a. on Reducing Balance Method.
5. It is the Policy of the company to write off 1/5th of Preliminary Expenses every year, upto 31stMarch,
2011, 4/5th of total Preliminary Expenses were written off.
6. Debtors include ` 80,000 due for more than 6 months.
7. Provision for Taxation to be made for ` 1,20,000.
8. Income Tax Assessment for the Accounting year 2010-11 is completed on 27thMarch, 2012 resulting
with a gross demand of ` 3,30,000 but no effect has been given so far.
Prepare :
1. Profit and Loss Account for the year ended 31stMarch, 2012.
2. Balance Sheet as on 31stMarch, 2012 as per the provisions of the Companies Act.