UNIT 9 ACCOUNTS OF HOLDING COMPANIES – I

Structure

9.0 Objectives
9.1 Introduction
9.2 Concept
9.2.1 Holding Company
9.2.2 Subsidiary Company
9.3 Objectives of Holding Company
9.4 Types of Holding Company
9.5 Advantages of Holding Company
9.6 Limitations of Holding Company
9.7 Preparation of Final Account of Holding Company without Adjustment
9.7.1 Components/Format of Consolidated Financial Statement
9.7.2 Preparation of Consolidated Balance Sheet in case of Wholly Owned
Subsidiary
9.7.3 Preparation of Consolidated Balance Sheet in case of Partly Owned Subsidiary
9.8 Let Us Sum Up
9.9 Key Words
9.10 Answers to Check Your Progress
9.11 Terminal Questions/Exercises

9.0 OBJECTIVES

After studying this unit, you should be able to:

 Understand the meaning of Holding Company;

 State the objectives of Holding Company;
 Distinguish between Holding Company and Subsidiary Company;
 Explain the different types of holding companies;
 Describe the advantages and limitations of holding companies; and
 Explain the procedure of determining the amount of Goodwill/ Capital Reserve and
Minority Interest

9.1 INTRODUCTION

When the company acquires the majority of shares in the ownership capital or is in a position
to influence or control the management of the other company, the company is called the
holding company and the other company is called subsidiary company. The subsidiary
companies have their independent existence and managed by separate governing boards.
As per section 4 of the Companies Act, 2013- A company shall be deemed to be the
subsidiary company of the other if:
i) The holding company controls the composition of the Board of Directors of the
subsidiary company;
ii) The holding company controls more than half of the total voting power of such
company; and

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 iii) The holding company hold more than half of nominal value of its equity share
capital
This unit will enable you to know basic concept of Holding Company and Subsidiary
Company, objectives of holding company, various types of Holding Company as well as the
advantages and its limitation of Holding Company. This unit will also enable the learners in
terms of preparation of final accounts of Holding Companies without adjustments covering
the determination of amount of Goodwill/Capital Reserve and determination of amount of
minority interest as well.

9.2 CONCEPT

The term holding company refers to that concept where it owns outstanding stock of other
companies (Subsidiary Company). The parent company (Holding Company) does not
produce any kind of goods or services or conduct any other business operation. Rather,
Holding company holds the controlling stock in other company. The prime objective of
holding company is to own shares of other companies in order to influence the control the
management of the other company.

9.2.1 Holding Company

As per 2(46) of the Companies Act, 2013 defines holding company as:
A company which has one or more subsidiary company having full control over them. It is
formed for the purpose of purchases and owning share in other company. Holding company
offers several benefits such as gaining more control, retaining the management of the
subsidiary firm and incurring lower tax liabilities.

9.2.2 Subsidiary Company

Section 2(87) of the Companies act, 2013 defines “Subsidiary Company” as an enterprise that
is controlled by another enterprise (known as holding company). Subsidiary companies are of
two types:
i) Wholly owned: This is the company in which 100% of the shares and the voting
rights are owned by holding company
ii) Partly owned: This is the company in which more than 50 % but less than 100%
shares and voting rights are owned by holding company. In this type of subsidiary,
some of the shareholders of the subsidiary do not sell their shares to the holding
company and these shareholders are known as minority shareholders. The interest
of the monitory shareholders in the assets of the subsidiary is called the minority
interest.

9.3 OBJECTIVESS OF HOLDING COMPANIES

There are many objectives of holding companies. Let us discuss some of them which are as
follow:
1. To eliminate of competition
2. To enjoy the economies of large scale of production
3. To achieve an assured market for the product of the company
4. To ensure a smooth supply of raw materials

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Check Your Progress A

Fill in the blanks:

1 Holding company is defined U/s ______of Companies Act, 2013

2 Subsidiary company is defined U/s ______of Companies Act, 2013
3 Holding Company is also known as ___________________
4 Shareholders of the subsidiary who do not sell their shares to the holding company are
known as____
5 When a company does not manufacture goods or sell any product/services is
called……….company.

9.4 TYPES OF HOLDING COMPANY

1 Pure: This refers to those companies which do not participate in another business other
than controlling one or more firms. It is formed for the purpose of owning stocks in
other companies.
2 Mixed Holding Companies: Refers to those companies which do not only control
other companies but also engages in its own operations.
3 Immediate: refers to that company which retains voting power or control of another
company, inspite of the fact that the company itself is already controlled by another
entity. It is a company that is already a subsidiary of another.
4. Intermediate: It is a firm that is both a holding company of another entity and a
subsidiary of a large corporation. This type of firm might be exempted from publishing
financial records as a holding company of the smaller group.

9.5 ADVANTAGES OF HOLDING COMPANIES

Holding company offers several advantages. Let us discuss those advantages in
detail.
(1) Better quality Decisions: The holding companies allow the better quality
decisions at all levels of the company. The holding company concentrates on the
corporate policies and strategies and the operating levels in the implementation.
(2) Better Utilization of Resources: Holding companies facilitate the better
utilization of the financial and the other resources of the companies. The holding
company pools the resources of group of enterprises.
(3) Easy method of Acquiring Control: Through this method organizations have to
spend less in acquiring the control of the other company.
(4) Reduces Competition: Competition among the two companies is totally
eliminated as both of the companies are managed by the same group.
(5) Easy Rid from Subsidiary: If the company wants to get rid of the subsidiary; it
can easily do so by selling the shares of the subsidiary in the open market.
(6) Income tax benefits: Separate identities are maintained by both the companies so
that they can avail the tax benefits by carrying forward their losses of the previous
years.

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 (7) Efficient Management: It becomes easier to manage both the companies as both
the companies maintain their separate identities. This increases the efficiency of
the management.
(8) Enhances Corporate Planning: The holding company is able to concentrate to
corporate planning, acquisition, and update technology and building of corporate
culture on sound business principles.
(9) Managerial and Commercial Culture: The management of the holding
company promotes the commercial and managerial culture instead of bureaucratic
culture.

9.6 LIMITATIONS OF HOLDING COMPANY

Holding company suffers from several disadvantages. Let us discuss those

disadvantages in detail.

(1) Secret Reserves: To the detriment of the minority interest, the unscrupulous
directors can easily create secret reserves.
(2) Difficulty in Ascertaining Financial Position: The creditors in the subsidiary
company and the shareholders in the holding company may not be aware of the
true financial position of the company.
(3) Mismanagement: When in the holding company number of constituents is more
and there is not equivalent management efficiency, it results in the
mismanagement of the operations of the company.
(4) Fraud in Inter-Company Transactions: There are more chances of fraud due to
the inter-company transactions. This is due to the reason that inter-company
transactions are settled at very high or very low price according to the requirement
of the holding company.
(5) Forced Appointment of the Directors: The subsidiary company is sometimes
forced by the holding company to appoint some directors or the officers in the
company.
(6) Difficulty in Valuation of Stock: It becomes difficult to value the stock as the
stock of the company consists of huge quantity of inter-company goods.
(7) Oppression of Minority Shareholders: There is always the fear of oppression of
minority shareholders as the financial and other resources are totally managed in a
way that suits the interest of the holding company.

Check Your Progress B

1 What do you mean by Holding Company?

…………………………………………………………………………………………..
......………………………………………………………………………………………
…......................................................................................................................................

2 What do you mean by Subsidiary Company?

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 …………………………………………………………………………………………..
......………………………………………………………………………………………
…..............………………………………………………………………………………

3 Differentiate between Holding Company and Subsidiary Company.

…………………………………………………………………………………………..
......………………………………………………………………………………………
…..............………………………………………………………………………………

4. State whether the following statement are True or False.

(i) Minority shareholders do not play vital role in case of acquisition.
(ii) In case of Ownership, where shares are purchased less than 51% controlling
power is also shifted.
(iii) If subsidiary company faces loss, this loss can be set off with the profit of
other subsidiaries.
(iv) Intermediate holding company stands as a holding company for one business
entity, and act as a subsidiary for a more substantial business firm.
(v) Immediate holding company is already a controlled company by other
business entity.

9.7 PREPARTION OF FINAL ACCOUNTS OF HOLDING COMPANY

WITHOUT ADJUSTMENTS

The main purpose of Final Account preparation is intended to present financial information
about a parent and its subsidiary (ies) into a single economic entity to show the economic
affairs controlled by the group.

9.7.1 Components/Format of Consolidated Financial Statement

It is not a legal requirement to prepare the consolidated balance sheet under the
Companies Act, 2013 and there is no prescribed format for that. It should be however
prepare according to the schedule (iii) of the Companies Act, 2013
Consolidated Balance Sheet of Holding Co. and the Subsidiary Company
Liabilities Amount Assets Amount
(Rs.) (Rs.)
Share Capital (of Holding ……… Fixed Assets:
Company) ………. Cost of Control (Goodwill)
Minority Interest Less: Capital Reserve ……..
Reserve and Surplus: Other Fixed Assets
Capital Reserve Investments:
Add Capital Reserve from Investments of all Companies …........
acquisition Current Assets, Loans and
Less: Goodwill (if any) ………. Advances of All Companies
Revenue Reserve base: (of Less: Mutual Owings ……….
holding Company) Less: Unrealised Profits ……….
Profit of holding Company: Miscellaneous Expenditure
Add: Share in Post profits (Profit and Loss Account Dr.
Less: Unrealized Profits Balance)
Secured Loans: (of all ……….
companies) ……….

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 Unsecured Loans: (of all
companies) ……….
Current Liabilities: (of all
companies) ………
Less: Mutual Owings

………. ………..

9.7.2 Preparation of Consolidated Balance Sheet in case of Wholly Owned Subsidiary

In section 9.7.1, you have understood the format of preparation of a Consolidated Balance
Sheet of Holding company and Subsidiary company. Now let us understand how
Consolidated Balance Sheet is prepared with the help of illustrations in case of wholly owned
Subsidiary company.
Illustration 9.1
The following is the Balance Sheet of H Ltd. and S Ltd. as on 31 st March 2021.
Liabilities H Ltd. S Ltd. Assets H Ltd. S Ltd.
(Rs.) (Rs.) (Rs.) (Rs.)
Share Capital Sundry Assets 4,00,000 4,00,000
(Shares of Rs. 10 each) 4,00,000 3,00,000 Investments
Reserves 1,00,000 - (In 100% shares of S 3,00,000
Creditors 2,00,000 1,00,000 Ltd.)
7,00,000 4,00,000 7,00,000 4,00,000
st
Prepare a Consolidated Balance Sheet as on 31 March, 2021.
Solution
Amount Paid = Rs. 3, 00,000
Less: Amount due = Rs. 3, 00,000
Balance = Nil

Consolidated Balance Sheet as on 31.03.2021

Liabilities Amount Assets Amount
(Rs.) (Rs.)
Share Capital of Rs. 10 each 4,00,000 Sundry Assets
Reserves 1,00,000 H Ltd 4,00,000
Creditors S Ltd 4,00,000 8,00,000
H 2,00,000
S 1,00,000 3,00,000
8,00,000 8,00,000

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 Calculation of Goodwill/Capital Reserve
Goodwill/Capital Reserve is the difference between amount paid i.e. investment and the
amount due, i.e. the sum total of Equity share capital, Reserves, Profit and Loss A/c. It is
calculated as follows:
Amount Paid i.e., Investment in subsidiary by Holding Co.
Less: Amount due (Equity Share Capital of Subsidiary Co. + Reserves of subsidiary
Co. + Profit and Loss A/c – Preliminary expenses of subsidiary Co.)
= Goodwill (Excess of Amount Paid over amount due)/Capital Reserve (Excess of
Amount due over amount paid)
(i) If amount paid is more than the amount due, then the difference is Goodwill
(ii) If amount due is more than the amount paid, then the difference is Capital
Reserve.

Illustration 9.2
The following is the Balance Sheet of H Ltd. and S Ltd. as on 31 st march 2021.

Liabilities H Ltd. S Ltd. Assets H Ltd. S Ltd.

(Rs.) (Rs.) (Rs.) (Rs.)
Share Capital Sundry Assets 3,80,000 4,00,000
(Shares of Rs. 10 each) 4,00,000 3,00,000 Investments 3,20,000 -
(In 100% shares of S
Ltd.)
Reserves 1,00,000 -
Creditors 2,00,000 1,00,000
7,00,000 4,00,000 7,00,000 4,00,000
Prepare a Consolidated Balance Sheet as on 31st March, 2021.
Solution
Amount Paid = Rs. 3, 20,000
Less: Amount due = Rs. 3, 00,000
Goodwill = Rs. 20,000

Consolidated Balance Sheet as on 31.03.2021

Liabilities Amount Assets Amount
(Rs.) (Rs.)
Share Capital of Rs. 10 each 4,00,000 Goodwill 20,000
Reserves 1,00,000 Sundry Assets
Creditors H Ltd 3,80,000
H 2,00,000 S Ltd 4,00,000 7,80,000
S 1,00,000 3,00,000
8,00,000 8,00,000

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Illustration 9.3
The following is the Balance Sheet of H Ltd. and S Ltd. as on 31 st March 2021.

Liabilities H Ltd. S Ltd. Assets H Ltd. S Ltd.

(Rs.) (Rs.) (Rs.) (Rs.)
Share Capital Sundry Assets 4,20,000 4,00,000
(Shares of Rs. 10 4,00,000 3,00,000 Investments 2,80,000 -
each) (In 100% shares of S
Ltd.)
Reserves 1,00,000 -
Creditors 2,00,000 1,00,000
7,00,000 4,00,000 7,00,000 4,00,000
Prepare a Consolidated Balance Sheet as on 31st March, 2021.
Solution
Amount Paid = Rs. 2, 80,000
Less: Amount due = Rs. 3, 00,000
Capital Reserve = Rs. 20,000

Consolidated Balance Sheet as on 31.03.2021

Liabilities Amount Assets Amount
(Rs.) (Rs.)
Share Capital of Rs. 10 each 4,00,000 Sundry Assets
Reserves 1,00,000 H Ltd 4,20,000
Capital Reserve 20,000 S Ltd 4,00,000 8,20,000
Creditors
H 2,00,000
S 1,00,000 3,00,000
8,20,000 8,20,000

9.7.3 Preparation of Consolidated Balance Sheet in case of Partly Owned Subsidiary

In section 9.7.2, you have understood the procedure of preparation of a consolidated

Balance Sheet of wholly owned subsidiary company. Now let us understand how
consolidated Balance Sheet is prepared with the help of illustrations in case of partly
owned subsidiary company.
Minority Interest
When the holding company does not own 100% shares of the subsidiary company, then
the subsidiary is known as partly owned subsidiary. For example, H Ltd. owns, only 60%
of the shares of S Ltd., the remaining 25% shares will be owned by the outsiders or other
people. The interest of the outsiders or the other persons is called the minority Interest.
The amount of this minority interest is shown on the liabilities side of Balance Sheet
between the Share Capital and Reserves and Surplus.
Calculation of Minority Interest
Minority Interest = (Equity Share Capital of Subsidiaries Co. + Reserves of Subsidiaries
Co. + P&L A/c (Cr.) of Subsidiaries Co. – Fictitious Asset of Subsidiaries Co.) ×
Remaining Percentage.

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Calculation of Goodwill/Capital Reserve
Amount paid i.e., Investment in Subsidiary
Less: Amount due
= Goodwill (Excess of Amount Paid over amount due)/Capital Reserve (Excess of
Amount due over Amount paid)
Amount due = (Equity Share Capital + Reserves + Profit & Loss A/c –Preliminary
Expenses) × Acquisition percentage
(i) If amount paid is more than the amount due then the difference is Goodwill.
(ii) If amount due is more than the amount paid then the difference is Capital
Reserve.

Illustration 9.4
The following is the Balance Sheet of R Ltd. and M Ltd. as on 31 st March, 2021
Liabilities R Ltd. M Ltd. Assets R Ltd. M Ltd.
(Rs.) (Rs.) (Rs.) (Rs.)
Share Capital Sundry Assets 4,90,000 4,00,000
(Shares of Rs. 10 4,00,000 3,00,000 Investments 2,10,000
each) (In 70% shares of M
Ltd.)
Reserves 1,00,000 -
Creditors 2,00,000 1,00,000
7,00,000 4,00,000 7,00,000 4,00,000
Prepare a Consolidated Balance Sheet as on 31st March, 2021.
Solution
Amount Paid = Rs. 2, 10,000
Less: Amount due 3, 00,000 × 70% = Rs. 2, 10,000
Capital Reserve/Goodwill = Nil
Calculation of Minority Interest
Minority Interest = Equity Share Capital × Remaining %age
= Rs. 3, 00,000 × 30% = Rs. 90,000

Consolidated Balance Sheet as on 31.03.2021

Liabilities Amount Assets Amount
(Rs.) (Rs.)
Share Capital of Rs. 10 each 4,00,000 Sundry Assets
Minority Interest 90,000 R Ltd 4,90,000
Reserves 1,00,000 M Ltd 4,00,000 8,90,000
Creditors
R 2,00,000
M 1,00,000 3,00,000
8,90,000 8,90,000

Illustration 9.5
The following is the Balance Sheet of H Ltd. and S Ltd. as on 31st March 2021
Liabilities R Ltd. M Ltd. Assets R Ltd. M Ltd.
(Rs.) (Rs.) (Rs.) (Rs.)

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Share Capital Sundry Assets 4,70,000 4,00,000
(Shares of Rs. 10 4,00,000 3,00,000 Investments 2,30,000
each) (In 70% shares of M
Ltd.)
Reserves 1,00,000 -
Creditors 2,00,000 1,00,000
7,00,000 4,00,000 7,00,000 4,00,000
st
Prepare a Consolidated Balance Sheet as on 31 March, 2021.
Solution
Amount Paid = Rs. 2, 30,000
Less: Amount due 3, 00,000 × 70% = Rs. 2, 10,000
Goodwill = Rs. 20,000
Calculation of Minority Interest
Minority Interest = Equity Share Capital × Remaining %age
= Rs. 3, 00,000 × 30% = Rs. 90,000
Consolidated Balance Sheet as on 31.03.2021
Liabilities Amount Assets Amount
(Rs.) (Rs.)
Share Capital of Rs. 10 each 4,00,000 Sundry Assets
Minority Interest 90,000 R Ltd 4,70,000
Reserves 1,00,000 M Ltd 4,00,000 8,70,000
Creditors Goodwill 20,000
R 2,00,000
M 1,00,000 3,00,000
8,90,000 8,90,000
Illustration 9.6
The following is the Balance Sheet of R Ltd. and M Ltd. as on 31 st March 2021
Liabilities R Ltd. M Ltd. Assets R Ltd. M Ltd.
(Rs.) (Rs.) (Rs.) (Rs.)
Share Capital Sundry Assets 5,10,000 4,00,000
(Shares of Rs. 10 4,00,000 3,00,000 Investments 1,90,000
each) (In 70% shares of M
Ltd.)
Reserves 1,00,000 -
Creditors 2,00,000 1,00,000
7,00,000 4,00,000 7,00,000 4,00,000
Prepare a Consolidated Balance Sheet as on 31st March, 2021.
Solution:
Amount Paid = Rs. 1, 90,000
Less: Amount due 3, 00,000 × 70% = Rs. 2, 10,000
Capital Reserve = Rs. 20,000
Calculation of Minority Interest:
Minority Interest = Equity Share Capital × Remaining %age
= Rs. 3, 00,000 × 30% = Rs. 90,000

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 Consolidated Balance Sheet as on 31.03.2021
Liabilities Amount Assets Amount
(Rs.) (Rs.)
Share Capital of Rs. 10 each 4,00,000 Sundry Assets
Minority Interest 90,000 R Ltd 5,10,000
Reserves 1,00,000 M Ltd 4,00,000 9,10,000
Capital Reserve 20,000
Creditors
R 2,00,000
M 1,00,000 3,00,000
9,10,000 9,10,000

9.8 LET US SUM UP

When the company acquires the majority of shares in the ownership capital or is in a position
to influence or control the management of the other company, the company is called the
holding company and the other company is called subsidiary company. The subsidiary
companies have their independent existence and managed by separate governing boards.
There are two types of subsidiary company such as Wholly owned: This is the company in
which 100% of the shares and the voting rights are owned by holding company.
Partly owned: This is the company in which more than 50 % but less than 100% shares and
voting rights are owned by holding company. In this type of subsidiary, some of the
shareholders of the subsidiary do not sell their shares to the holding company and these
shareholders are known as minority shareholders. The interest of the monitory shareholders
in the assets of the subsidiary is called the minority interest.
Objectives of holding companies are: 1. To eliminate of competition, 2. To enjoy the
economies of large scale of production, 3. To achieve an assured market for the product of
the company, 4. To ensure a smooth supply of raw materials.
There are four types of holding companies such as 1. Pure, 2. Mixed, 3. Immediate and 4.
Intermediate. There are many advantages of holding company. Some of them are:
Better quality Decisions, Better Utilization of Resources, Easy method of Acquiring
Control, Reduces Competition, Income tax benefits, Efficient Management. Holding
company suffers from limitations too. Some of them are: Secret Reserves, Difficulty in
Ascertaining Financial Position, Mismanagement, Fraud in Inter-Company
Transactions, Difficulty in Valuation of Stock, Oppression of Minority Shareholders

9.9 KEY WORDS

Holding Company: Holding company is one which controls the composition of Board of
Directors of subsidiary companies.

Subsidiary Company: A company which is being controlled by the other company known
(Holding company) is called subsidiary company

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Minority Interest: The shares of subsidiary company not owned by holding company and
are owned by outsiders. The interest of outsiders is called minority interest.

Goodwill: If amt. paid by holding company to the subsidiary company on account of

acquiring the shares of subsidiary company is more than the amt. due, the difference is the
amt. of Goodwill

Capital Reserve: If amt. paid by holding company to the subsidiary company on account of
acquiring the shares of subsidiary company is less than the amt. due, the difference is the amt.
of capital reserve.

9.10 ANSWERS TO CHECK YOUR PROGRESS

A 1 (i) 2(46) (ii) 2 (87) (iii) Parent Company (iv) Minority Shareholders, (v) Holding
B 4 (i) False (ii) True (iii) True (iv) True (v) True

9.11 TERMINAL QUESTIONS/EXERCISES

1. What do you mean by Holding Company? How it is different from Subsidiary

Company?
2. Describe various objective of Holding Company.
3. Write short notes on:
a) Goodwill
b) Capital Reserve
c) Minority Interest
4. Explain the use of Consolidated Balance Sheet with an imaginary figure.
5. Describe the various advantage of Holding Company.
6. What the various limitations of Holding Company. Discuss
7. What are the different types of Holding Company? Explain
8. Write short notes on:
a) Wholly owned subsidiary company
b) Partly owned subsidiary company

Exercises
1 The following is the Balance Sheet of R Ltd. and M Ltd. as on 31 st March, 2021
Liabilities R Ltd. M Ltd. Assets R Ltd. M Ltd.
(Rs.) (Rs.) (Rs.) (Rs.)
Share Capital Sundry Assets 6,00,000 6,00,000
(Shares of Rs. 10 5,00,000 4,00,000 Investments 4,00,000 -
each) (In 100% shares of
S Ltd.)

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 Reserves 2,00,000 -
Creditors 3,00,000 2,00,000
10,00,000 6,00,000 10,00,000 6,00,000
Prepare a Consolidated Balance Sheet as on 31st March, 2021.
Ans: B/S Rs. 12, 00,000, Goodwill/Capital Reserve: Nil
2. The following is the Balance Sheet of R Ltd. and M Ltd. as on 31 st March, 2021:
Liabilities R Ltd. M Ltd. Assets R Ltd. M Ltd.
(Rs.) (Rs.) (Rs.) (Rs.)
Share Capital Sundry Assets 7,00,000 6,00,000
(Shares of Rs. 10 5,00,000 4,00,000 Investments 3,00,000 -
each) (In 100% shares of
M Ltd.)
Reserves 2,00,000 -
Creditors 3,00,000 2,00,000
10,00,000 6,00,000 10,00,000 6,00,000
Prepare a Consolidated Balance Sheet as on 31st March, 2021.
Ans: B/S Rs. 13, 00,000, Goodwill/Capital Reserve: Rs. 1, 00,000

Preparation of Consolidated Balance Sheet in Case of Partly Owned Subsidiary

3. The following is the Balance Sheet of R Ltd. and M Ltd. as on 31 st March, 2021
Liabilities R Ltd. M Ltd. Assets R Ltd. M Ltd.
(Rs.) (Rs.) (Rs.) (Rs.)
Share Capital Sundry Assets 7,60,000 6,00,000
(Shares of Rs. 10 5,00,000 4,00,000 Investments 2,40,000 -
each) (In 60% shares of
M Ltd.)
Reserves 2,00,000 -
Creditors 3,00,000 2,00,000
10,00,000 6,00,000 10,00,000 6,00,000
Prepare a Consolidated Balance Sheet as on 31st March, 2021.
Ans: B/S Rs. 13, 60,000, Goodwill/Capital Reserve: Nil, Minority Interest = Rs. 1, 60,000

4. The following is the Balance Sheet of R Ltd. and M Ltd. as on 31 st March, 20021

Liabilities R Ltd. M Ltd. Assets R Ltd. M Ltd.

(Rs.) (Rs.) (Rs.) (Rs.)
Share Capital Sundry Assets 7,00,000 6,00,000
(Shares of Rs. 10 5,00,000 4,00,000 Investments 3,00,000 -
each) (In 60% shares of
M Ltd.)
Reserves 2,00,000 -
Creditors 3,00,000 2,00,000
10,00,000 6,00,000 10,00,000 6,00,000
Prepare a Consolidated Balance Sheet as on 31st March, 2021.

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 Ans: B/S Rs. 13, 60,000, Goodwill/Capital Reserve: Rs. 60,000, Minority Interest =
Rs. 1, 60,000

5. The following is the Balance Sheet of H Ltd. and S Ltd. as on 31 st March, 2021
Liabilities R Ltd. M Ltd. Assets R Ltd. M Ltd.
(Rs.) (Rs.) (Rs.) (Rs.)
Share Capital Sundry Assets 8,00,000 6,00,000
(Shares of Rs. 10 5,00,000 4,00,000 Investments 2,00,000 -
each) (In 60% shares of
M Ltd.)
Reserves 2,00,000 -
Creditors 3,00,000 2,00,000
10,00,000 6,00,000 10,00,000 6,00,000
Prepare a Consolidated Balance Sheet as on 31st March, 2021.
Ans: B/S Rs. 14, 00,000, Goodwill/Capital Reserve: Rs. 40,000, Minority Interest
Rs. 1, 60,000

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