Cma Inter - Corporate Accounts Marathon Notes

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Accounting for Share Capital
Issue of Shares
For
For Cash Consideration
other than Cash
Issued to
Purchase of
At Par At Premium promoters for
Asset
their service
Issue at par & Goodwill A/c Dr.

Lump Sum
premium To Share Capital
Installments
Pro Rata Forfeiture of Reissue of

Allotment shares shares
FOR LIVE ENQUIRIES-
Buy Back of Shares
Nominal value of
shares (Fave Value)
Proceeds of fresh
Out of Free reseserves issue means issue of
means creation of CRR Prefernce Share &
Debenture
Security Premium A/c Dr.

General Reserve A/c Dr.
Profit & Loss A/c Dr. Bank A/c Dr.
Free reserve A/c Dr. To Share Application
To Capital Redemption Share Application A/c Dr.
Reserve To Share Capital
The premium, if any, on buy back will be set off against Security Premium Account, General Reserve, Free Reserve & Profit & loss
A/c.
FOR LIVE ENQUIRIES-
Illustration 1
B Ltd purchase the assets of ₹ 10,80,000 from C Ltd. The consideration was payable in fully paid equity shares of ₹ 100 each.
Required: Show the necessary journal entries in books of B Ltd. assuming that —
a. Such shares are issued at par
b. Such shares are issued at premium of 20%
FOR LIVE ENQUIRIES-
Illustration 2
ICC Ltd. forfeited 500 equity shares of ₹10 each fully called up which were issued at a premium 20%. Amount
payable on shares were: on application ₹2; on allotment ₹5; on first and final call ₹5. Only application money
was paid by the shareholders in respect of these shares. 300 shares out of the above were reissued at ₹9 per
share fully paid. Pass journal entries for the forfeiture and re-issue.
FOR LIVE ENQUIRIES-
Illustration 3
Give journal entries for the following:
(1) PK Ltd. forfeited 10,000 equity shares of ₹10 each for non-payment of first call of ₹2 and final call of ₹3 per
share. These shares were reissued at a discount of ₹3.50 per share.
(2) KP Ltd. forfeited 20,000 equity shares of ₹15 each (including ₹5 per share as premium), for non-payment of
final call of ₹3 per share. Out of these 10,000 shares were reissued at a discount of ₹4 per share.
(3) KP Ltd. forfeited 15,000 equity shares of ₹15 each (including ₹5 per share as premium), for non-payment of
allotment money ₹8 (including premium money) and first & final call of ₹5 per share. Out of these 10,000
shares were reissued at ₹14 per share.
FOR LIVE ENQUIRIES-
Illustration 4
SOS Limited issued a prospectus inviting applications for 6,000 shares of ₹10 each at a premium of ₹2 per
share, payable as follows;
On application ₹2 per share; On allotment ₹5 per share (including premium): On 1st call ₹3 per share; On
Second and Final Call ₹2 per share.,
Applications were receive for 9,000 shares and allotment was made prorate to the applicants of 7,500 shares,
the remaining applicants were refused allotment. Money overpaid on applications were applied towards sums
due on allotment.
D to whom 100 shares were allotted, failed to pay the allotment money and on his subsequent failure to pay the
first call, his shares were forfeited. Z, the holder of 200 shares, failed to pay both the calls, and his shares were
forfeited after the second and final call.
Of the shares forfeited 200 shares were sold to C credited as fully paid up for ₹8.50 per share, the whole of D’s
shares being included.
Particular Category 1 Category 2

Shares applied
Shares allotted
Application money
received
Application money due
Excess
Allotment money due

Allotment received
1st call due

1st call received
2nd call due

2nd call received
FOR LIVE ENQUIRIES-
Illustration 5
A Company is planning to raise funds by making rights issue of equity shares to finance its expansion. The
existing equity share capital of the company is ₹50,00,000. The market value of its share is ₹42. The company
offers to its shareholders the right to buy 2 shares at ₹11 each for every 5 shares held. You are required to
calculate:
(i) Theoretical market price after rights issue;
(ii) The value of rights; and
(iii) Percentage increase in share capital.
FOR LIVE ENQUIRIES-
Illustration 6
K Ltd. granted option for 16,000 equity shares on 01.10.18 at ₹80 when the market price was ₹170. the vesting
period is 4 ½ years. 8,000 unvested options lapsed on 01.01.2021. 6,000 options are exercised on 30.09.23 and
2,000 vested options lapsed at the end of the exercise period. Pass journal entries to record the above transactions.
Particular 31-03-2019 31-03-2020 31-03-2021 31-03-2022 31-03-2023

No of options
Total Compensation
expense
Expense to be booked
upto date
Expense booked till
date
Expense for the year
FOR LIVE ENQUIRIES-
Illustration 7
XYZ Ltd. has the following capital structure on of 31st March 2021.
Particulars ₹ in Crores
a. Equity Share capital (Shares of ₹ 10 each) 300
b. Reserves :
General reserve 270
Security Premium 100
Profit and Loss A/c 50
Export Reserve (Statutory reserve) 80
c. Loan Funds 800
The shareholders have on recommendation of Board of Directors approved vide special resolution at their
meeting on 10th April 2021 a proposal to buy back maximum permissible equity shares considering the huge
cash surplus following A/c of one of its divisions.
The market price was hovering in the range of ₹25 and in order to induce existing shareholders to offer their
shares for buy back, it was decided to offer a price of 20% above market.
Advice the company on maximum number of shares that can be bought back and record journal entries for the
same assuming the buy back has been completed in full within the next 3 months.
If borrowed funds were ₹1200 crores, and 1500 crores respectively would your answer change?
FOR LIVE ENQUIRIES-
Illustration 8 (Full Underwriting, Multiple underwriters, Firm underwriting with Alternative Treatment,
Adjustment of Surplus)
The following underwriting took place for P Ltd. which invited applications for 10,000 shares of ₹ 10 each:
X: 6,000 shares Y: 2,500 shares Z: 1,500 shares
In addition, there were firm underwriting as follows:
X: 800 shares Y: 300 shares Z: 1,000 shares
Total subscription including firm underwriting was 7,100 shares, and the forms included the following marked
forms:
X: 1,000 shares Y: 2,000 shares Z: 500 shares
Show the allocation of liability of the underwriters, if –
(i) Firm underwriting is treated as unmarked applications.
(ii) Firm underwriting is treated as marked applications
FOR LIVE ENQUIRIES-
Illustration 9 (Accounting in the books of the company)

M Ltd., incorporated on April 1, 2021, issued a prospectus inviting applications for 2,50,000 equity shares of
₹10 each. The issue was fully underwritten by A, B, C and D as follows:
A - 1,00,000; B - 75,000; C - 50,000; and D - 25,000.
The applications were received for 2,25,000 shares of which marked applications were as follows:
A – 1,10,000; B- 45,000; C - 55,000; and D - 5,000.:
Unmarked applications are apportioned in the ratio of “Gross Liability”.
Underwriters’ commission: 4% of the issue price.
Required:
(a) Determine the underwriters’ liability in shares;
(b) Determine the underwriters’ liability in amount;
(c) Pass journal entries in the books of M Ltd. to record the above transactions.
FOR LIVE ENQUIRIES-
Redemption of Preference
Shares
Section 55 of The Companies Act
 Shares can be redeemed Out of proceeds of fresh issue of shares made for the purpose of redemption or
 Out of divisible profits (creation of CRR)
 Only fully paid preference shares can be redeemed
 Premium Payable on redemption shall be provided for out of the profits of the company or out of the company’s securities premium
account
o Exception: Company whose financial statement comply with the accounting standards prescribed, Premium payable on
redemption shall be provided for only out of the profits of the company and not Securities Premium account.
 Shares issued before the commencement of this Act are exempted from this exception
 CRR can be used only for issue of bonus shares
Nominal value of
shares (Fave Value)
Out of Free Proceeds of fresh

reseserves means issue means issue
Creation of CRR of Prefernce Share
& Equity Shares
General Reserve A/c Dr.

Profit & Loss A/c Dr. Bank A/c Dr.
Free reserve A/c Dr. To Share Application
To Capital Redemption Share Application A/c
Reserve Dr. To Share Capital
FOR LIVE ENQUIRIES-
Journal entries for Redemption of Preference Shares is as follows: -

a. Preference Share Capital A/c………Dr
Premium on Redemption of Preference Shares A/c………Dr
To Preference Shareholders A/c
(Being Preference Share Capital due for redemption)
b. Preference Shareholders A/c……..Dr

To Bank A/c
(Being Amount paid)
c. Profit & loss A/c………………Dr.

Free Reserves A/c…………….Dr.
To Premium on Redemption of Preference Shares A/c
(Being premium adjusted against reserves)
FOR LIVE ENQUIRIES-
Question 1
C Ltd. had 10,000, 10% Redeemable Preference Shares of ₹ 100 each, fully paid up. The company decided to redeem these preference
shares at par, by issue of sufficient number of equity shares of ₹ 10 each at a premium of ₹ 2 per share as fully paid up. You are required
to pass necessary Journal Entries including cash transactions in the books of the company.
Preference Share Capital =
CRR Fresh Issue
1) Bank A/c Dr.

To Equity Share Capital A/c
To Securities Premium A/c
2) 10% Redeemable Preference Share Capital A/c Dr.

To Preference Shareholders A/c
3) Preference Shareholders A/c Dr.

To Bank A/c
FOR LIVE ENQUIRIES-
Logic behind CRR & Fresh Issue

In case of redemption, Preference shares are paid before the creditors and debentures of the company. Thus to protect the interest of
outsiders Companies Act mandates the creation of CRR or Fresh issue.
How interest of outsiders is protected in case of Fresh issue?

As Shares are required to be issued of the same amount of redemption, bank balance remains the same.
How interest of outsiders is protected in case of CRR?

As distributable profits are transferred to CRR and the only use of CRR is to issue bonus shares, Bank balance is saved by reducing the
distributable profits and thus by avoiding payment of dividend
Note 1. Solve all the questions assuming company is complying with accounting standards i.e. Security premium is not used, unless
otherwise specified in question
Note 2. If Question provides partly paid Preference shares & requires redemption, then
 make final call
 make Preference shares fully paid
 Do redemption
Note 3. The following principles should be followed while fresh issue of shares:
i) When fresh issue of shares is made at par: In such a case, there should not be any confusion. The nominal value of the shares issued will
constitute the proceeds and the same should be considered for determining the amount to be credited to Capital Redemption Reserve Account.
ii) When fresh issue of shares is made at a premium: In such a case, the confusion may arise as to whether the nominal value of the
shares issued should constitute the “proceeds” or both the nominal value of the shares issued and the premium money received on those
shares should constitute the “proceeds”.
The premium received on issue of shares should be disregarded and only the nominal value of the shares issued should be considered for
determining the amount to be credited to Capital Redemption Reserve Account.
FOR LIVE ENQUIRIES-
Note 4. Sometimes, question specify to:

*Minimise Fresh Issue- then create CRR to the maximum extent possible.
-Balance will be Fresh Issue.
*Maximum Fresh Issue- then issue Fresh shares in such way that amount needed to redeem Preference Shares is fully financed.
-Balance will be CRR.
FOR LIVE ENQUIRIES-
Question 2
The Board of Directors of a Company decided to issue minimum number of equity shares of ₹ 9 to redeem ₹ 5,00,000 preference
shares. The maximum amount of divisible profits available for redemption is ₹ 3,00,000. Calculate the number of shares to be issued by the
company to ensure that the provisions of Section 55 are not violated.
CRR Fresh Issue

FOR LIVE ENQUIRIES-
Question 3
X Ltd. gives you the following information as at 31st March, 2013:
Particulars ₹
EQUITY AND LIABILITIES
1. Shareholders’ F unds
a Share Capital 2,90,000
b Reserves and Surplus 48,000
2. Current liabilities
Trade Payables 56,500
ASSETS
1. Property, Plant and Equipment 3,45,000
2. Non-Current Investments 18,500
3. Current Assets
Cash and cash equivalents (bank) 31,000
The share capital of the company consists of ₹ 50 each equity shares of ₹ 2,25,000 and ₹ 100 each Preference shares of
₹65,000(issued on 1.4.2011). Reserves and Surplus comprises Profit and Loss Account only.
In order to facilitate the redemption of preference shares at a premium of 10%, the Company decided:
(a) to sell all the investments for ₹ 15,000.
(b) to finance part of redemption from company funds, subject to, leaving a bank balance of ₹ 12,000.
(c) to issue minimum equity share of ₹ 50 each share to raise the balance of funds required.
You are required to pass necessary Journal Entries to record the above transactions.
CRR Fresh Issue

FOR LIVE ENQUIRIES-
Question 4
The capital structure of a company consists of 20,000 Equity Shares of ₹ 10 each fully paid up and 1,000 8% Redeemable Preference
Shares of ₹ 100 each fully paid up (issued on 1.4.2011).
Undistributed reserve and surplus stood as: General Reserve ₹ 80,000; Profit and Loss Account ₹ 20,000; Investment Allowance
Reserve ( out of which ₹ 5,000, not free for distribution as dividend) ₹ 10,000; Securities Premium ₹ 2,000, Cash at bank amounted to ₹
98,000. Preference shares are to be redeemed at a Premium of 10% and for the purpose of redemption, the directors are empowered to
make fresh issue of Equity Shares at par after utilising the undistributed reserve and surplus, subject to the conditions that a sum of ₹
20,000 shall be retained in general reserve and which should not be utilised. Pass Journal Entries to give effect to the above arrangements.
CRR Fresh Issue

FOR LIVE ENQUIRIES-
Question 5
The Balance Sheet of XYZ Ltd. as at 31st December, 2011 inter alia includes the following information:
₹
50,000, 8% Preference Shares of ₹100 each, ₹70 paid up 35,00,000
1,00,000 Equity Shares of ₹100 each fully paid up 1,00,00,000
Securities Premium 5,00,000
Capital Redemption Reserve 20,00,000
General Reserve 50,00,000
Bank 15,00,000
Under the terms of their issue, the preference shares are redeemable on 31st March, 2012 at 5% premium. In order to finance the
redemption, the company makes a rights issue of 50,000 equity shares of ₹ 100 each at ₹ 110 per share, ₹ 20 being payable on
application, ₹ 35 (including premium) on allotment and the balance on 1st January, 2013. The issue was fully subscribed and
allotment made on 1st March, 2012. The money due on allotment were duly received by 31st March, 2012. The preference shares
were redeemed after fulfilling the necessary conditions of Section 55 of the Companies Act, 2013.
You are asked to pass the necessary Journal Entries.

CRR Fresh Issue

FOR LIVE ENQUIRIES-
Question 6
With the help of the details in p r e v i o u s Illustration above and further assuming that the Preference Shareholders holding 2,000
shares fail to make the payment for the Final Call made under Section 55, you are asked to pass the necessary Journal Entries assuming
that the shares in default are forfeited after giving proper notices.
CRR Fresh Issue

FOR LIVE ENQUIRIES-
Question 7
The books of B Ltd. showed the following balance on 31st December, 2013:
30,000 Equity Shares of ₹10 each fully paid; 18,000 12% Redeemable Preference Shares of ₹10 each fully paid; 4,000 10%
Redeemable Preference Shares of ₹ 10 each, ₹ 8 paid up (all shares issued on 1st April, 2012).
Undistributed Reserve and Surplus stood as: Profit and Loss Account ₹ 80,000; General Reserve ₹ 1,20,000; Securities Premium
Account ₹ 15,000 and Capital Reserve ₹ 21,000.
For redemption, 3,000 equity shares of ₹10 each are issued at 10% premium. At the same time, Preference shares are redeemed on 1st
January, 2014 at a premium of ₹2 per share. The whereabouts of the holders of 100 shares of ₹10 each fully paid are not known.
A bonus issue of equity share was made at par, two shares being issued for every five held on that date out of the Capital Redemption
Reserve Account. However, equity shares, issued for redemption are not eligible for bonus.
Show the necessary Journal Entries to record the transactions.
CRR Fresh Issue

FOR LIVE ENQUIRIES-
Question 8 (RTP Nov 2021)

Neeraj Ltd.’s capital structure consists of 45,000 Equity Shares of Rs. 10 each fully paid up and 3,000 9% Redeemable Preference Shares of
Rs. 100 each fully paid up as on 31.03.2021. The other particulars as at 31.03.2021 are as follows:
Amount (Rs.)
General Reserve 1,80,000
Profit & Loss Account 90,000
Investment Allowance Reserve (not free for distribution as dividend) 22,500
Cash at bank 2,92,500
Preference Shares are to be redeemed at a premium of 10%. For the purpose of redemption, the directors are empowered to make
fresh issue of Equity Shares at par after utilizing the undistributed reserve & surplus, subject to the conditions that a sum of Rs. 60,000 shall
be retained in General Reserve and which should not be utilized. Company also sold investment of 6,750 Equity Shares in Kumar Ltd., costing
Rs.67,500 at Rs. 9 per share.
Pass Journal entries to give effect to the above arrangements.
CRR Fresh Issue

FOR LIVE ENQUIRIES-
Redemption of Debentures
By payment in Lumpsum & Purchase of Own

Conversion into shares
By payment in installment Debenture in Open Market
Creation of DRR & DRR Investment is No DRR
mandatory No DRR
Entries Entries
12% Debenture A/c Dr. Own Debenture A/c Dr. Entries
Premium on Redemption A/c Dr. Interest on Debenture A/c Dr. 12% Debenture A/c Dr.
To Debenture Holder To Bank A/c Premium on Redemption A/c Dr.
Debenture Holder A/c Dr. 12% Debenture A/c Dr. To Debenture Holder
To Bank To Own debenture A/c Debenture Holder A/c Dr.
DRR A/c Dr. To Profit on Cancellation To Share Capital
To General Reserve Profit on Cancellation A/c Dr. To Security Premium
To Capital Reserve
 DRR is required to be created only by unlisted companies.

Journal Entry for Creation Of DRR.*
Profit & Loss A/c Dr.
To DRR.
FOR LIVE ENQUIRIES-
 Debenture Redemption reserve Investment

o (a) All listed NBFCs (b) All listed HFCs (c) All other listed companies (other than AIFIs, Banking Companies and Other FIs); and
(d) All unlisted companies which are not NBFCs and HFCs before 30th April invest at least 15% of debentures maturing on 31st
march next year.
o Amount to be deposited in (a) in deposits with any scheduled bank, free from charge or lien; (b) in unencumbered securities of the
Central Government or of any State Government; (c) in unencumbered securities mentioned in clauses (a) to (d) and (ee) of
Section 20 of the Indian Trusts Act, 1882; (d) in unencumbered bonds issued by any other company which is notified under clause
(f) of Section 20 of the Indian Trusts Act, 1882.
Journal Entry for Investment.*

For investing the amount set aside for redemption
DRR Investment A/c Dr.
To Bank A/c
For receipt of interest on Debenture Redemption Reserve Investments

Bank A/c Dr.
To Interest on DRR Investment A/c
At the time of redemption of debentures

For encashment of Debenture Redemption Reserve Investments
Bank A/c Dr.
To DRR Investment A/c
FOR LIVE ENQUIRIES-
Illustration 1 Redemption by Conversion

A ltd wants to redeem its outstanding 5000 12% Debentures of Rs. 100 each at par by converting them into equity shares of Rs. 10 each. Pass the
entries in following cases.
Case1. Equity shares are issued at par
Case 2. Equity shares are issued at a premium of 25%
Case1
12% Debenture A/c Dr.
To Debenture Holder
Debenture Holder A/c Dr.

To Equity Share capital
Case2
12% Debenture A/c Dr.
To Debenture Holder
Debenture Holder A/c Dr.

To Equity Share capital
To Security Premium
FOR LIVE ENQUIRIES-
Illustration 2 Redemption by Conversion

Zenith Ltd. gave notice of its intention to redeem its outstanding Rs.6,00,000, 9% debentures at 2% premium and offered the holders the
following options to apply for the redemption moneys to subscribe for:
i) 6% Cumulative preference shares of Rs.20 each at par.
ii) Equity Shares of Rs. 10each at a premium of Rs.5.
The holders of Rs.2,40,000 debentures accepted the proposal (i); and’ Rs.3,60,000 debenture holders accepted the proposal (ii)above.
9% Debentures A/c Dr.

Premium on Redemption A/c Dr.
To Debenture Holder A/c
Debenture Holder A/c

To 6% Preference Share Capital
9% Debentures A/c Dr.

Premium on Redemption A/c Dr.
To Debenture Holder A/c
Debenture Holder A/c

To Equity Share Capital
To Security Premium
FOR LIVE ENQUIRIES-
Illustration 3 Redemption out of Open Market

A Ltd has issued 12% Debenture on 01/04/2022 of Rs 100 each. Interest is payable six monthly on 30/09 & 31/03 every year. These debentures
are listed in open market and its value on various dates is given to you as follows.
Date Market price
31/05/2022 101 (Cum Interest)
31/08/2022 98 (Ex Interest)
01/11/2022 99 (Ex Interest)
28/02/2023 103 (Cum Interest)
Solution
Date Market Price Interest Amount Debenture Value Total Amount
FOR LIVE ENQUIRIES-
Illustration 4 Redemption out of Open Market

On January 1, Rama Ltd. (listed company), had 500 Debentures of Rs. 100 each outstanding in its books carrying interest at 6% per annum. In
accordance with the regulatory requirements, the directors of the company acquired debentures from the open market for immediate cancellation
as follows:
March 1 Rs. 5,000 at face value Rs. 98.00 (cum interest)
Aug. 1 Rs. 10,000 at face value Rs. 100.25 (cum interest)
Dec. 15 Rs. 2,500 at face value Rs. 98.50 (ex-interest)
Debenture interest is payable half-yearly, on 30th June and 31st Dec
Solution.
Date Particular Amount Amount
01/03 Own Debentures A/c Dr.
Interest on Debenture A/c Dr.
To Bank
01/03 6% Debenture A/c Dr.
To Own Debenture
To Profit on Cancellation
30/06

To Bank
To Own Debenture
FOR LIVE ENQUIRIES-

To Bank
To Own Debenture
31/12
FOR LIVE ENQUIRIES-
Illustration 5 Redemption by payment in lumpsum

A Company issued 2000, 9% Debentures of Rs. 100 each on 01/04/2020. The Debentures are redeemable after 4 years on 31/03/2024 in
Lumpsum. Debenture interest is Payable annually on 31st March every year. The company also decided the following.
 Create DRR of Rs. 20,000 at the Beginning of each year.
 Invest an amount equal to DRR created, in Scheduled Bank @ 8% per annum on the same date.
 Sell all the investment at face value at the time of redemption
 Redeem the debentures on due date.
Pass all necessary journal entries for 4 years.
FOR LIVE ENQUIRIES-
Accounts of Banking Company
FORMAT OF BALANCE SHEET

Balance Sheet of………. as on 31st March ............ (Year)
CAPITAL & LIABILITIES SCHEDULE AS ON 31.3. AS ON 31.3

NO. (Current Yr.) (Prev. Yr.)
Capital 1
Reserve & Surplus 2
Deposits 3
Borrowings 4
Other Liabilities & Prov. 5
TOTAL
ASSETS
Cash & balances with RBI 6
Balances with banks & money at call and short notices 7
Investments 8
Advances 9
Fixed Assets 10
Other Assets 11
TOTAL
Contingent Liabilities 12
Bills for Collection
FORMAT OF PROFIT & LOSS ACCOUNT FOR THE YEAR ENDED 31ST MARCH
SCHEDULE AS ON 31.3. AS ON 31.3
NO. (Current Yr.) (Prev. Yr.)
1. INCOME
Interest earned 13
Other Income 14
TOTAL
II. EXPENDITURE
Interest Expended 15
Operating Expenses 16
Provision & contingencies
TOTAL
FOR LIVE ENQUIRIES-
III. PROFIT/LOSS
Net Profit/Loss(-) for the year
Profit/Loss(-) brought forward
TOTAL
IV. APPROPRIATIONS
Transfer to Statutory Reserve
Transfer to Other Reserve
Transfer to Government/Proposed Dividend
Balance Carried over to Balance Sheet
TOTAL
FOR LIVE ENQUIRIES-
Rates of Provisioning for Non-Performing Assets.
1. Standard assets: 0.25% of the outstanding amount if the loan is given to agricultural sector and SME sector enterprises 0.4% of the outstanding amount if
the loan is given to other sector enterprises.
2. Sub-Standard Advances: 15 per cent of the outstanding amount. The "unsecured exposures" will attract 25 per cent. But if the unsecured exposure is in
infrastructure sector where escrow accounts are available, the provision will be 20%.
3. Doubtful Advances: Doubtful Advances will continue to attract 100% provision to the extent the advance is not covered by the realizable value of the
security.
(i) The secured portion of advances which have remained in "doubtful" category up toone year will attract a provision of 25 per cent;
(ii) The secured portion of advances which have remained in "doubtful' category formore than one year but upto 3 years will attract a provision of 40
per cent; and
(iii) The secured portion of advances which have remained in "doubtful' category formore than 3 years will continue to attract a provision of 100%
4. Loss Assets: 100% of the outstanding amount.

FOR LIVE ENQUIRIES-
Question 1
From the following information of AY Limited, compute the provisions to be made in theProfit and Loss account:
₹ in lakhs
Assets
Standard 20,000
Substandard 16,000
Doubtful
For one year (secured) 6,000
For two years and three years (secured) 4,000
For more than three years (secured by mortgage of plant and 2,000
machinery ₹600 lakhs)
Loss Assets 1,500
FOR LIVE ENQUIRIES-
Question 2
Outstanding Balance ₹4 lakhs
ECGC Cover 50%
Period for which the advance has remaineddoubtful More than 3 years remained doubtful(as on
March 31, 2011)
Value of security held ₹1.50 lakhs

You are required to calculate provisions.
FOR LIVE ENQUIRIES-
Question 3
The following is an extract from Trial Balance of overseas Bank as at 31st March, 2011
₹ ₹
Bills discounted 12,64,000
Rebate on bills discounted not due on March 31st, 2010 22,160
Discount received 1,05,708
An analysis of the bills discounted is as follows:

Amount ₹ Due Date 2011 (%) Rate of Discount
(i) 1,40,000 June 5 14
(ii) 4,36,000 June 12 14
(iii) 2,82,000 June 25 14
(iv) 4,06,000 July 6 16
Calculate Rebate on Bills Discounted as on 31-3-20X1 and show necessary journal entries.
FOR LIVE ENQUIRIES-
Question 4
On 01.04.2011 bills for collection was 7 lacs. During 2011-12 bills received for collection amounted to 64.5 lacs. Bills
collected were 47 lacs. Bills dishonoured was 5.5 lacs. Prepare Bills for collection (Assets) and Bills for Collection
(Liabilities) Accounts.
FOR LIVE ENQUIRIES-
Question 5
From the following details prepare ―Acceptances, Endorsements and other Obligation A/c‖ as would appear in the
General Ledger.
On 1.4.2011 Acceptances not yet satisfied stood at ₹22,30,000. Out of which ₹20 lacs were subsequently paid off by
clients and bank had to honour the rest. A scrutiny of the Acceptance Register (for transactions during the year)
revealed the following:
Client Acceptances/Guarantees Remarks:
₹
A 10,00,000 Bank honoured on 10.6.2011
B 12,00,000 Party paid off on 30.9. 2011
C 5,00,000 Party failed to pay and bank had to honour on 30.11.2011
D 8,00,000 Not satisfied upto 31.3.2012
E 5,00,000 -do-
F 2,70,000 -do-
Total 42,70,000
FOR LIVE ENQUIRIES-
Insurance Companies
Illustration 1
Indian Insurance Co. Ltd. furnishes you with the following information :
(i) On 31.12.2010 it had reserve for unexpired risk to the tune of Rs. 40 crores. It comprised
of Rs. 15 crores in respect of marine insurance business : Rs. 20 crores in respect of fire
insurance business and Rs. 5 crores in respect of miscellaneous insurance business.
(ii) It is the practice of Indian Insurance Co. Ltd. to create reserves at 100% of net
premium income in respect of marine insurance policies and at 50% of net premium
income in respect of fire and miscellaneous income policies.
(iii) During 2011, the following business was conducted :
Marine Fire Miscellaneous
(Rs. in crores)
Premia collected from :
(a) Insureds in respect of
policies issued 18 43 12
(b) Other insurance companies
in respect of risks undertaken 7 5 4
Premia paid/payable to other insurance
companies on business ceded 6.7 4.3 7
Indian Insurance Co. Ltd. asks you to :
(a) Pass journal entries relating to “Unexpired risks reserve”.
(b) Show in columnar form “Unexpired risks reserve” a/c for 2011.
FOR LIVE ENQUIRIES-
Question 2
From the following information as on 31st March, 2011, prepare the Revenue Accounts of
Sagar Bhima Co. Ltd. engaged in Marine Insurance Business:
Particulars Direct Business Re-insurance
I. Premium :
Received 24,00,000 3,60,000
Receivable – 1st April, 2010 1,20,000 21,000
– 31st March, 2011 1,80,000 28,000
Premium paid 2,40,000 –
Payable – 1st April, 2010 – 20,000
– 31st March, 2011 – 42,000
II. Claims :
Paid 16,50,000 1,25,000
Payable – 1st April, 2010 95,000 13,000
– 31st March, 2011 1,75,000 22,000
Received – 1,00,000
Receivable – 1st April, 2010 – 9,000
– 31st March, 2011 – 12,000
III. Commission :
On Insurance accepted 1,50,000 11,000
On Insurance ceded – 14,000
Balance of Fund on 1st April, 2010 was Rs. 26,50,000 including Additional Reserve of
Rs. 3,25,000. Additional Reserve has to be maintained at 5% of the net premium of the year.
FOR LIVE ENQUIRIES-
Cash flow Statement

Classification of cash flow activities
Operating Activity Investing Activity Financing Activity
• principle revenue • acquisition and disposal of • changes in the size and
generating longterm assets and other composition of the owner’s
• sale &Purchase of goods investments capital and borrowings
and other operating Items • Fixed Assets (both tangible • Issue of shares & Other
• Taxes Unless identified by & Intangible securities
investing or financing • Investment in securities • repayment of loans &
acivity • Loans made to other advances
• Purchase and sales of parties
Trading securities • Future & Option Contracts
• Future & Option Contracts when they are not held for
when they are held for trading
trading
• Loans made by Financial
institutions
FOR LIVE ENQUIRIES-
 Cash Includes
o Cash in hand
o Demand deposits with banks
 Cash Equivalent Includes

o Short term highly liquid investments that are readily convertible into cash
o Securities with short maturity period of, say, three months or less
FOR LIVE ENQUIRIES-
Q1. Classify the following cash flows

 Loans and Advances given to the following and interest and TDS earned on them:
(1) to suppliers
(2) to employees
(3) to its subsidiaries companies
 Dividend paid for the year
 Dividend received
 TDS on interest income earned on investments made
 Interests earned from customers for late payments
 Investment by financial enterprises
 Investment by Non-financial Enterprises
 Investment in subsidiaries by financial enterprises
FOR LIVE ENQUIRIES-
Q 2. Value of Plant on 31/03/2021 is Rs. 7,15,000/- and on 31/03/2020 is Rs. 5,05,000.

Accumulated Depreciation on the same dates is 1,03,000 and 68,000 respectively.
Sold plant assets that cost Rs.10,000 with accumulated depreciation of Rs. 2,000 for Rs. 5,000
Issued Rs. 1,00,000 of 10% bonds at face value in an exchange for plant assets on 31st March, 2021
FOR LIVE ENQUIRIES-
Q 3. Income Tax payable on 31/03/2018 Rs. 60,000/-. And payable on 31/03/2019 was Rs. 90,000.
Case1) Income tax expense for the year was Rs. 80,000/-
Case2) Income tax expense for the year was Rs. 95,000/-
FOR LIVE ENQUIRIES-
Q 4. Income Tax payable on 31/03/2018 Rs. 60,000/-. And payable on 31/03/2019 was Rs. 90,000.
Advance tax paid on 31/03/2018 Rs. 40,000/-. And on 31/03/2019 was Rs. 75,000/-.
FOR LIVE ENQUIRIES-
Q 5. Dividend payable on 31/03/2018 Rs. 30,000/-. And payable on 31/03/2019 was Rs. 50,000.
FOR LIVE ENQUIRIES-
Q 6. (i) 10% Debentures : As on 01-04-2021 Rs. 1,10,000 As on 31-03-2022 Rs. 77,000

(ii) Debentures were redeemed at 5% premium at the end of the year. Premium was charged to the Profit & Loss Account for the year.
(iii) Unpaid Interest on Debentures: As on 01-04-20X1 Rs. 275 As on 31-03-20X2 Rs. 1,175
FOR LIVE ENQUIRIES-

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FOR LIVE ENQUIRIES-

9830741471 / 03325551197 FOR PD/D2H ENQUIRIES-

Accounting for Share Capital

Issue at par & Goodwill A/c Dr.

Pro Rata Forfeiture of Reissue of

Buy Back of Shares

Security Premium A/c Dr.

Particular Category 1 Category 2

Allotment money due

1st call due

2nd call due

Particular 31-03-2019 31-03-2020 31-03-2021 31-03-2022 31-03-2023

Illustration 9 (Accounting in the books of the company)

Out of Free Proceeds of fresh

General Reserve A/c Dr.

Journal entries for Redemption of Preference Shares is as follows: -

b. Preference Shareholders A/c……..Dr

c. Profit & loss A/c………………Dr.

Preference Share Capital =

CRR Fresh Issue

1) Bank A/c Dr.

2) 10% Redeemable Preference Share Capital A/c Dr.

3) Preference Shareholders A/c Dr.

Logic behind CRR & Fresh Issue

How interest of outsiders is protected in case of Fresh issue?

How interest of outsiders is protected in case of CRR?

Note 4. Sometimes, question specify to:

Preference Share Capital =

CRR Fresh Issue

CRR Fresh Issue

CRR Fresh Issue

You are asked to pass the necessary Journal Entries.

CRR Fresh Issue

CRR Fresh Issue

CRR Fresh Issue

Question 8 (RTP Nov 2021)

Pass Journal entries to give effect to the above arrangements.

Preference Share Capital =

CRR Fresh Issue

By payment in Lumpsum & Purchase of Own

 DRR is required to be created only by unlisted companies.

 Debenture Redemption reserve Investment

Journal Entry for Investment.*

For receipt of interest on Debenture Redemption Reserve Investments

At the time of redemption of debentures

Illustration 1 Redemption by Conversion

Debenture Holder A/c Dr.

Debenture Holder A/c Dr.

Illustration 2 Redemption by Conversion

9% Debentures A/c Dr.

Debenture Holder A/c

9% Debentures A/c Dr.

Debenture Holder A/c

Illustration 3 Redemption out of Open Market

Illustration 4 Redemption out of Open Market

01/08 Own Debentures A/c Dr.

15/12 Own Debentures A/c Dr.

Illustration 5 Redemption by payment in lumpsum

Accounts of Banking Company

FORMAT OF BALANCE SHEET

CAPITAL & LIABILITIES SCHEDULE AS ON 31.3. AS ON 31.3

Rates of Provisioning for Non-Performing Assets.

4. Loss Assets: 100% of the outstanding amount.

Value of security held ₹1.50 lakhs