FINAL ACCOUNTING - SPECIMEN QUESTION WITH ANSWERS

SPECIMEN QUESTION WITH ANSWERS

Question 1 :

S. Ltd. keeps no running stock records but a physical inventory of stock is made at the end of each quarter and evaluated at cost. The company's year ends on 31st March, 1997 and draft accounts have been prepared to that date. The stock inventory taken on 31st March, 1997 was accidentally destroyed before the items had been evaluated, the closing stock figure used in the draft accounts being that shown by the inventory taken on 31st December, 1996. The gross margin earned by company is 25% of cost. During your audit you discovered the following:

(a)       The cost of the stock on 31st December, 1996 as shown by the inventory was Rs. 40,525.

(b)       On 31st December, 1996 stock sheets showed the following discrepancies:

(i)       A page total of Rs. 5,059 had been carried to the summary as Rs. 5,509.

(ii)       The total of a page had been undercast by Rs. 98.

(iii)      100 items which had cost Rs. 5 each had been taken at 25 paise each.

(c)        Invoice for purchases entered in the Purchases Book during the month of January, February and March, 1997 totalled Rs. 38,560. Of this total Rs. 2,800 related to goods received on or prior to 31st December, 1996. Invoices entered in April,

1997 relating to goods received in March, 1997 totalled Rs. 3,700.

(d)        Sales invoiced to customers in January, February and March, 1997 totalled Rs. 51,073. Of this total Rs. 3,824 related to goods despatched on or before 31st December, 1996. Goods despatched to customers before 31st March, 1997 but invoiced in April, 1997 totalled Rs. 5,241.

(e)         During the final quarter to the company's year, credit notes at invoiced value of Rs. 1,280 had been issued to customers in respect of goods returned during that period.

You are required to prepare a statement showing the amount of the stock at cost as on 31st March, 1997.

Answer :

Statement showing the amount of Physical Stock at Cost as on 31st March, 1997.

a)  Adjusted Stock as on 31.12.96		Rs.
Stock at cost as on 31.12.96.		40,525
Add :	Cost of 100 items wrongly undercast by
	Rs. 4.75 (5.00 – 0.25) each 100×4.75	475
	Under cast in total of a page by Rs. 98	98
Less :	Errors in carry forward of a page total	41,098
	by Rs. 450 (Rs. 5509 – Rs. 5059) – overcast	450
		40,648

b)        Adjusted cost of sales as on 31.3.97.

Sales from 1.1.97 to 31.3.97		51,073
Add :	Goods despatched before 31.3.97 but invoice
	raised in April, 97	5,241
Less :	Goods despatched before 31.12.96 included	56,314
	in sales of Rs. 51,073	3,824
Less :	Credit Note issued to customers for sales return	52,490
	during final quarter i.e. January to March, ’97	1,280
		51,210
Less :   Gross margin @ 25% on cost i.e., 20% on sale Rs. 51,210		10,242
c)  Adjusted Purchase as on 31.3.97.		40,968
Purchase from 01.01.97 to 31.3.97		38,560
Add :   Goods purchased before 31.3.97 but recorded in April, ’97		3,700
		42,260
Less :   Goods received before 31.12.96 included in purchase of Rs. 38,560		2,800
		39,460

d)  Stock (Physical) as on 31.3.97
Adjusted Stock as on 31.12.96 — (a)	40,648
Add :   Adjusted purchase as on 31.3.97 — (c)	39,460
	80,108
Less :   Adjusted cost of sales as on 31.3.97 — (b)	40,968
Physical stock balance as on 31.3.97 at Cost	39,140

Question 2 :

The Balance in Profit & Loss Account as per Balance Sheet as at 31st March, 1997 is Rs. 32,600, whereas the balance on Balance Sheet as at 31st March, 1998 is Rs. 38,100. The following facts are ascertained :

(i)       Rs. 8,500 depreciation has been charged ;

(ii)      Provision for dividend Rs. 15,000 has been made ;

(iii)      Rs. 4,500 has been transferred to General Reserve ;

(iv)       Rs. 1,000 Dividend (gross) has been credited ;

(v)       Rs. 2,300 Loss on Sale and Fixed Assets has been debited ;

(vi)       Indirect Expenses debited amount to Rs. 30,500 in total. Find out Gross Profit, Trading Profit and Net Profit.

Answer :
Dr.	Profit & Loss Account (Includes)
To Indirect expenses	30,500		By	Gross Profit. (3)
To Trading Profit c/d (2)	34,800
	65,300
To Loss on sale of Fixed Assets	2,300		By	Trading Profit b/d (2)
To Depreciation	8,500		By	Dividend (Gross)
To Net Profit c/d (1)	25,000
	35 800
To Provision for dividend	15,000		By	Balance b/d
To General Reserve	4,500		By	Net Profit c/d. (1)
To Balance c/d	38,100
	57,600

Cr.

65,300

65,300

34,800

1,000

35,800

32,600

25,000

57,600

Note : The missing figures marked 1, 2 and 3 have been found out in the same order.

Question 3 :

P.K. commenced business in a retail shop on 1st July, 1997 in premises for which he paid a rent of Rs. 320 per month. The only records he kept, apart from his bank statements, were files of paid invoices and unpaid invoices for goods purchased, together with a notebook in which he recorded a few sales on credit to special customers who paid him by cheques. Cash received from cash sale was paid into the till out which he paid certain amounts, of which he kept a rough record, and he made weekly bankings out of the balance in the till. He paid all suppliers for goods purchased by cheque.

An analysis of the bank statements for the six months ended 31st December, 1997 was as follows :

	Rs.		Rs.
Capital paid in	6,400	Shop fixtures and fittings	3,200
Loan (interest free)	3,200	Household furniture	2,880
Suppliers cheque for goods returned	448	Suppliers (for purchases)	15,744
Special customers	480	Rent	1,600
Total of weekly cash bankings	19,088	Rates	480
		Insurance on stocks	320
		Electricity	288
		Balance on 31st December, 1997	5,104
	29,616		29,616

P.K. estimates that the total amounts paid out of the till before making the weekly bankings for the six months were :

Drawings - Rs. 3,200, Wages - Rs. 2,240 and Sundry shop expenses - Rs. 1,280. You ascertain that as on 31st December, 1997 :–

(i)       Stocks, correctly taken at cost, were Rs. 2,752.

(ii)       The balance in the till was Rs. 416, including a post dated cheque for Rs. 200, cashed for a customer.

(iii)      Cheques for Rs. 272 from special credit customers paid into the bank have not been cleared. One for Rs. 112 was cleared on 3rd January, 1998 and the other for Rs. 160 was returned dishonoured and the customer could not be traced. This sum is considered as bad. Other special customers owned Rs. 384.

(iv)       The following cheques had been issued but had not been presented—rent for December Rs. 320 and lighting charges Rs. 240.

(v)        The cash paid into the bank included Rs. 480 from a sale of surplus shop fittings. There was no profit or loss on this transaction.

(vi)       Suppliers’ unpaid invoices amounted to Rs. 3,584 and there was Rs. 64 owing for electricity.

You are required to prepare the Balance Sheet as at 31st December, 1997 and the Trading and Profit and Loss Account for the half-year ended on that date.

Answer :

Trading and Profit & Loss Account for the half year ended 31st December, 1997

Particulars	Rs.		Rs.	Particulars	Rs.	Rs.
To Purchases	19,328			By sales —
Less : Returns	448		18,880	Cash sales	25,744
				Sales to Spl. customers	1,136	26,880
’’ Wages			2,240	By Closing Stock		2,752
’’ Gross Profit c/d			8,512			.
			29,632			29,632
			Rs.			Rs.
To Shop Expenses			1,280	By Gross Profit b/d		8,512
’’ Rent (1600+320)			1,920
’’ Rates			480
’’ Insurance			320
’’ Electricity (Rs.288+64)			352
’’ Reserve for Bad debts			160
’’ Lighting charges			240
’’ Net Profit transferred to Capital A/c		.	3,760
			8,512			8,512
	Balance Sheet as at 31st December, 1997
Liabilities	Rs.		Rs.	Assets	Rs.	Rs.
Creditors for expenses—Electricity			64	Cash in hand		416
Trade Creditors			3,584	Cash at Bank		4,816
Loan Account			3,200	Sundry Debtors	384
Capital Account —				Less : Reserve for B.D.	160	224
Amount deposited	6,400
Add : Profit	3,760
	10,160			Stock		2,752
Less : Drawings				Shop, fixture and fittings	3,200
(Household				Less : Sold	480	2,720
furniture	2,880
Cash drawing	3,200   6,080		4,080
			10,928			10,928

Working Notes :

1)	Cash Sales :		Rs.
	Total of weekly cash bankings		19,088
	Add : Payments made out of till -
	Drawings	3,200
	Wages	2,240
	Shop expenses	1,280	6,720
	Balance on hand		416
			26,224
	Less : Sale of surplus shop fittings included in weekly bankings		480
			25,744
2)  Sales to special customers :			Rs.
	Cheques received from special customers and banked		480
	Add : Chqs. recd. from sp. customers paid in but not collected		272
	Amount due from special customers		384
			1,136
3)	Purchases :		Rs.
	Payment to suppliers (for purchases)		15,744
	Add : unpaid invoices		3,584
			19,328
4)  Bank balance as per Cash Book :
	Balance as per Pass Book		5,104
	Add : Cheques paid in but not credited		272
			5,376
	Less : Cheques issued but not yet presented for payment
	Rent	320
	Lighting	240	560
	Bank balance as per Cash Book		4,816

Since the cheque in the till is a postdated cheque, it is not considered and is treated as cash.

5)        The cheque for Rs. 160 received from special customers which was dishonoured subsequently can not be considered as bad debts during the current accounting period. Assuming that P.K. had the knowledge of the cheque being dishonoured at the time of preparing the accounts, provision for bad debts is made so that during the next accounting period, this can be written off against the Reserve.

Question 4 :

The Profit and Loss Account of Sampat for the year ended 31st March, 1998 showed a Net Profit of Rs. 2,500 after taking into account the closing Stock of Rs. 4,720.

On a scrutiny of the books the following information could be obtained :

(i)       Purchases of the year included Rs. 500 spent on acquisition of a ceiling fan for his shop.

(ii)      Sampat has taken goods valued at Rs. 1,800 for his personal use without making entry in the books.

(iii)      Invoices for goods amounting to Rs. 4,000 have been entered on 29th March, 1998 but such goods were not included in stock.

(iv)       Sale of goods amounting to Rs. 700 sold and delivered in March, 1998 had been entered in April,1998 sales.

(v)       Rs. 500 had been included in closing stock in respect of goods purchased and invoiced on 28th March, 1998 but included in purchase for April, 1998.

You are required to ascertain the correct amount of Closing Stock as on 31st March, 1998 and the adjusted Net Profit for the year ended on that date.

Answer :
		In the Books of Sampat :
	(i)  Calculation of stock as on 31st March, 1998 :			Rs.
	Stock as already given			4,720
	Add : Purchases not included			4,000
				8,720
	(ii)
Dr.	Profit & Loss Adjustment Account				Cr.
	Particulars	Rs.		Particulars	Rs.
To	Suppliers A/c	500	By	Profit (as already calculated)	2,500
’’	Net Profit (Balancing figure)	9,000	’’	Drawing	1,800
			’’	Furniture & fittings (Ceiling Fan)	500
			’’	Closing Stock (Goods in Transit)	4,000
			’’	Customers A/c	700
		9,500			9,500

Question 5 :

Mr. Clarence starts a business on 1.1.98 with Rs. 10,000 and purchases furniture and equipments for Rs. 1,000 and starts a Current Account with the balance.

He employs one salesman for Rs. 100 p.m. payable in the first week of the month following. He also rents a house at Rs. 70 p.m. payable in the last week of the month concerned.

He cannot stand paper work and he does not maintain any books of account, whatsoever. He prepares challans which are handed over on payment. All purchases are paid for by bearer or crossed cheques from Current Account. All collections are deposited intact in Current Account.

Rs. 500 p.m. is transferred to a Saving Account wherefrom other expenses and drawings @ Rs. 250 p.m. are made.

He keeps petty cash box from which direct charges on purchase as carriage, etc. are met and periodically it is reimbursed from Current Account.

On 31.12.98 the following balances are there : Stock Rs. 5,000; Current Account Rs. 7,000; Saving Account Rs. 300; Petty Cash Box Rs. 20; Cash Rs. 500 collected and to be deposited, already entered in pay-in-slips; Challans in hand Rs. 1,000.

It is found that Rs. 10 has been credited as interest in Savings Account. A challan showing Rs. 50 is not recoverable. Prepare Profit and Loss Account for the year and Balance Sheet as on 31.12.98 taking the following points into consideration :

(a)        Depreciation @10% p.a. on Furniture and Fixture is to be provided.

(b)        10% Reserve for Bad Debt is to be created.

Answer :

Dr.	Profit and Loss Account for the year ended 31st December, 1998				Cr.
	Particulars	Rs.		Particulars	Rs.
To	Salary (1,100+100)	1,200	By	Gross Profit	10,520
’’	Rent	840	’’	Bank Interest	10
’’	Petty Expenses	770
’’	Depreciation	100
’’	Bad Debts	50
’’	Provn. for Bad Debts on Rs. 950	95
’’	Net Profit	7,475
		10,530			10,530

Balance Sheet as at 31st December, 1998

Liabilities	Rs.	Rs.	Assets	Rs.	Rs.
Outstanding Salary		100	Furniture & Equipments	1,000
Capital	10,000		Less : Depreciation	100	900
Add : Profit for the year	7,475		Closing Stock		5,000
	17,475		Debtors	950
Less : Drawings	3,000	14,475	Less : Provision for B. Debts	95	855
			Cash at Banks :
			Current Account	7,000
			Savings Account	300	7,300
			Cash in Hand :
			Petty Cash	20
			Cash (for depositing)	500	520
		14,575			14,575

Working Note :

1)  Statement for finding out Gross profit (From Current Account and allied items)

Initial Deposit (Capital)	9,000
Gross Profit b/d	10,520

19,520

Closing Balance in Current Account	7,000
Last day’s cash sales & credit collection	500
Closing Stock	5,000
Challans in hand (gross)	1,000
Petty Cash Balance	20
Transfers to Savings A/c (Rs.500×12)	6,000
	19,520

The Petty Expenses from Savings Accounts are found from an analysis of Savings Account

Dr.		Savings Account			Cr.
	Particulars	Rs.		Particulars	Rs.
To	Total Deposits into Savings A/c	6,000	By	Rent Paid (Rs.70×12)	840
	(Rs.500×12)		’’	Salary paid (Rs.100×11)	1,100
’’	Bank Interest	10	’’	Drawings (Rs.250×12)	3,000
			’’	Petty Exp. (Balancing figure)	770
			’’	Closing Balance	300
		6,010			6,010

Question 6 :

From the following details of a partnership firm prepare Manufacturing, Trading and Profit and Loss Account and P/L Appropriation Account for the year ending 31st March, 1998, and a Balance Sheet as on 31st March, 1998.

	Dr.	Cr.
Opening Stock :	Rs.	Rs.
Raw Material	60,000
Work-in-Progress	5,000
Finished Goods	20,000
Purchases :
Raw Material	2,10,000
Finished Goods	10,000
Cash	2,000
Factory Rent	12,000
Office Rent, Rate and Taxes	3,000
Factory Salary	18,000
Office Salary	12,000
Debtors and Creditors	78,000	56,000
Sales		3,30,000
Selling Expenses	8,000
Interest on Loan paid	4,000
Discount Allowed	3,000
Discount Received		1,100
Capital and Partnership Salary (drawn) :
Sita	6,000	68,000
Gita	3,000	30,000
Loan		50,000
Wages	30,000
Interest on Partner’s Capital (drawn) :
Sita	500
Gita	600
Machinery	45,000
Furniture	5,000
	5,35,100	5,35,100

(a)        Provide 10% depreciation on Machinery and Furniture.

(b)        Loan carries 10% interest and the amount is brought forward from earlier year.

(c)        Provide 6% interest on Partners’ Capital

(d)       Closing Stocks are :

	Rs.
Materials	50,000
Work-in-Progress	10,000
Finished Goods	35,000

(e)       Salary Outstanding as on 31st March, 1998 :

Factory	2,000
Office	1,000

(f)       Sita and Gita share profits and losses as 3:2 after charging salary @ Rs. 500 and Rs. 250 p.m. to Sita and Gita respectively.

(g)       Outstanding Factory Rent Rs. 1,000.

Answer :
Dr.	Manufacturing Account for the year ended 31st March, 1998						Cr.
	Particulars	Rs.	Rs.		Particulars	Rs.	Rs.
To	Opening Stock :			By	Closing Stock :
	Raw Materials	60,000			Raw Materials	50,000
	Work-in-progress	5,000	65,000		Work-in-progress	10,000	60,000
To	Purchases — Raw Materials		2,10,000
To	Wages		30,000	By	Cost of Production transferred		2,82,500
To	Factory Expenses and charges :
	Factory Salary (18,000+2,000)		20,000
	Factory Rent (12,000+1,000)		13,000
	Deprn. on Machinery (10%)		4,500
			3,42,500				3,42,500
Dr.	Trading Account for year ended 31st March, 1998						Cr.
	Particulars	Rs.	Rs.		Particulars	Rs.	Rs.
To	Opening stock of Finished Goods		20,000	By	Sales		3,30,000
To	Purchase of Finished Goods		10,000	By	Closing Stock of Finished Goods		35,000
To	Cost of Prod.-b/d from Mfg. A/c		2,82,500
To	Balance – Gross Profit c/d		52,500
			3,65,000				3,65,000

Dr.		Profit and Loss Account for the year ended 31st March, 1998						Cr.
		Particulars	Rs.	Rs.		Particulars	Rs.	Rs.
	To	Office Salaries (12,000+1,000)		13,000	By	Balance b/d-Gross Profit		52,500
	To	Office Rent, Rates and Taxes		3,000	By	Discount Received		1,100
	To	Selling Expenses		8,000
	To	Discount Allowed		3,000
	To	Interest on loan : 10% of Rs.50,000		5,000
	To	Depreciation on Furniture 10%		500
	To	Balance-Net Profit c/d		21,100
				53,600				53,600
Dr.		Profit & Loss Appropriation Account for the year ended 31st March, 1998						Cr.
		Particulars	Rs.	Rs.		Particulars	Rs.	Rs.
	To	Interest of Capital :			By	Balance b/d - Net Profit		21,100
		Sita	4,080
		Gita	1,800	5,880
To		Partner’s Salary :
		Sita	6,000
		Gita	3,000	9,000
To		Share of Profit :
		Sita (3)	3,732
		Gita (2)	2,488	6,220
				21,100				21,100
			Balance Sheet as at 31st March, 1998
		Particulars	Rs.	Rs.		Particulars	Rs.	Rs.
	Capital Accounts :		68,000		Machinery		45,000	40,500
		Sita :			Less : Depreciation		4,500
		Add : Salary	6,000		Furniture		5,000
		Interest on Capital	4,080		Less : Depreciation		500	4,500
		Share of Profit	3,732		Stock :
		Less : Drawings (6000+500)		81,812		Finished Goods		35,000
			6,500	75,312		Raw Materials		50,000
Gita :			30,000			Work-in-Progress		10,000
		Add : Salary	3,000		Debtors			78,000
		Interest on Capital	1,800		Cash			2,000
		Share of profit	2,488
			37,288
		Less : Drawings (3000+600)	3,600	33,688

Loan		50,000
Sundry Creditors		56,000
Liabilities for Expenses :
Salaries	3,000
Interest on Loan (5000–4000)	1,000
Factory Rent	1,000	5,000
		2,20,000	2,20,000

Question 7 :

Arvind operates a warehouse selling wall papers direct to the public on a strictly cash basis. On Ist April 1999, a serious fire at his premises destroyed or damaged all his stock and most of his accounting and stock records. He has asked you to calculate the cost of stocks so that he can make an insurance claim. He has also asked you to establish whether he has trading profitability in the period from 1st October 1998 to the date of fire, so that he can decide whether to start trading again in this line.

You obtain the following information in connection with his trading activities:

(1)       Arvind obtains supplies of wall papers from two companies only Tee Ltd. and Dee Ltd. Both the companies supply Arvind with goods at recommended retail price(R.R.P.) less 331/3%. A cash discount of 10% is given on this net price for payment within two weeks, which Arvind always takes.

(2)       Both suppliers give an extra bulk rebate based on the value of goods purchased over the winter months from Ist October to 31st March. The rebate from Tee Ltd. amount to 5% R.R.P. for goods purchased excluding the first Rs. 25,000 in the winter months. Dee Ltd. gives a rebate of 8% on R.R.P. for goods purchased excluding the first Rs. 37,500 in those months.

(3)       The bulk rebate for the six months to 31st March 1999 was received in April 1999 and amounted to Rs. 4,100 in respect of purchases from Tee Ltd. and Rs. 3,800 in respect of purchases from Dee Ltd.

(4)       Arvind sells all goods at a price which gives a gross profit equal to 25% of the cost of goods, before deducting either the cash discount or the bulk rebate.

(5)       General expenses paid out of cash sales prior to banking are estimated at the following monthly amounts :–

	Rs.
Wages & salaries	1,470
Motor expenses	218
Sundry expenses	105
Drawings by Arvind	150

(6)        Information obtained from paid cheques and bank statements showed bank deposits from sale of Rs. 1,62,362, general overheads of Rs. 27,452 and two quarterly rent payments of Rs. 1,500 each.

(7)        Fixtures which cost Rs. 8,000 and vehicles which cost Rs. 7,600 are to be depreciated at the rate of 15% and 25 % per annum respectively.

(8)        In January 1999 Arvind used wall paper which cost before deducting either the bulk rebate or the cash discount Rs. 180 in decorating his own house.

(9)        The stock held by Arvind on 30th September 1998 had a cost before deduction of any rebates or discounts of Rs. 56,807.

You are required to :–

(a)        calculate the cost before deduction of any rebate or discounts of Arvind’s stock on 31.3.99.

(b)        prepare a trading and profit and loss account for the six months to 31.3.1999.

Answer :
		In the books of		ARVIND
Dr.	Trading and profit and loss account for the period ended 31.03.99						Cr.
	Particulars	Rs.	Rs.		Particulars	Rs.	Rs.
To	Opening stock		56,807	By	Sales (W.N.1)		1,74,020
To	Purchases		1,28,000	By	Goods taken by proprietor		180
To	Gross profit (20% on sales)		34,804	By	Closing stock (bal. fig.)		45,411
			2,19,611				2,19,611
To	Wages & salaries (1,470×6)		8,820	By	Gross profit b/d		34,804
To	Motor expenses (218×6)		1,308	By	Discount received (1,28,000×10%)		12,800
To	Sundry expenses (105×6)		630	By	Bulk rebate
To	General overhead		27,452		Tee Ltd.	4,100
To	Rent (1,500×2)		3,000		Dee Ltd.	3,800	7,900
To	Depreciation	600
	Fixtures
	Vehicles	950	1,550
To	Net Profit c/d		12,744
			55,504				55,504

Working Notes : Calculation of purchases —
	Tee Ltd.	Dee Ltd.
	Rs.	Rs.
Bulk rebate	4,100	3,800
Rebate rate (on M.R.P.)	5%	8%
Bulk purchase	82,000	47,500
Basic purchase	25,000	37,500
Total purchase	1,07,000	85,000

	Rs.
Total purchases at R.R.P.—	1,92,000
Less : Trade discount (1/3)	64,000
Purchase cost	1,28,000
Cash Sales —
Amount deposited in the bank	1,62,362
Wages & salaries	8,820
Motor car expenses	1,308
Sundry expenses	630
Drawings	900
	1,74,020

Question 8 :

On 30th November l999 the balance sheet of Colourful & Co., a firm, is as under :–

Creditors		Rs.	Cash/bank	Rs.
		60,000		50,000
Reserves		40,000	Customers	40,00,000
Capitals:			Inventories	2,50,000
Green	12,00,000		Fixed assets WDV	2,00,000
Yellow	12,00,000		Investments at cost
Blue Ltd.	25,00,000	49,00,000	(market value Rs.15,00,000)	5,00,000
		50,00,000		50,00,000

Green, Yellow and Blue Ltd. shared profit and losses in the ratio of 1:1:2.

On 1st December 1999 Green and Yellow retired and Blue Ltd. continued the business.

Blue Ltd. paid Rs. 18,00,000 to Green and Rs. 18,00,000 to Yellow in full and final discharge of their claim in the partnership. This amount was brought in by Blue Ltd. for the purpose of payment to the retiring partners. None of the asset and liabilities are to be revalued.

You are asked to :

(a)        pass accounting entries in relation to the above in the books of the business unit.

(b)        prepare the balance sheet of the business unit after the above transactions are recorded.

Answer :

Entries in the books of the Business Unit

Date			Particulars			Dr. (Rs.)	Cr. (Rs.)
Dec. 1	Bank A/c				Dr.	36,00,000
1999	To Blue Ltd.’s Capital A/c						36,00,000
	(Being capital brought in by Blue Ltd. for payment to
	Green and Yellow.)
	Green’s Capital A/c				Dr.	18,00,000
	Yellow‘s Capital A/c				Dr.	18,00,000
	To Bank A/c						36,00,000
	(Being capitals paid off on retirement.)
	Blue Ltd.’s Capital A/c				Dr.	12,00,000
	To Green’s Capital A/c						6,00,000
	To Yellow’s Capital A/c						6,00,000
	(Being purchase by Blue Ltd. of shares of goodwill,

unrecorded increase in value of assets and reserves from Green and Yellow on their retirement.)

Balance sheet of Business Unit after retirement of Green and Yellow (Rs.’000)

	Liabilities			Assets
	Net worth being excess of assets			Fixed assets W.D.V.		200
over liabilities comprising of				Investment at cost		500
Blue Ltd.’s capital contribution		4900		(Market value Rs. 15,00,000)
Reserves		40	4940	Current assets
Current liabilities :				Inventories	250
Creditors			60	Customers dues	4000
				Cash/bank	50	4300
			5000			5000

Question 9 :

Ashoka Ltd. was incorporated on l. l. l999 with an authorised capital of Rs. 25 crores. The subscribers to the memorandum and articles of association subscribed for 1000 equity shares of Rs. 10 each. The promoters and well wishers subscribed and paid for Rs. 4,99,000 equity shares of Rs. 10 each. The company took over running business of Magadha Bros. and allotted 15,00,000 equity shares of Rs. 10 each at par. The company made a public issue of 80,00,000 equity shares of Rs. 10 each at par, Rs. 5 being payable on application, Rs. 3 on allotment and Rs. 2 on call. Application monies were receivable by 28.2.1999, allotment was made on 31.3.1999, allotment moneys were due by 30.4.99, first call was made on 31.5.1999; first call was due by 30.6.1999.

Public applied for in full. Allotment monies were received from all members except holders of 500 shares. Call monies were received from all members except holders of 800 shares (including those who had not paid allotment monies).

Alter due notice, the 800 shares were forfeited on 30.9.1999. They were reissued on 31.10.1999 at Rs. 11 per share.

Your are asked to:

(a)       record all the above transactions through the journal of Ashoka Ltd.

(b)       show the presentation in the balance sheet as on 30.11.1999 of the company.

Answer :

JOURNAL ENTRIES (in Rs.’000)

		Particulars			Dr.	Cr.
Bank A/c				Dr.	10
To Equity Share Capital A/c						10
(Being cheques received from the subscribers to the
memorandum and articles of association in respect of
1000 equity shares no. 1 to 1000 agreed to be taken by
them)
Bank A/c				Dr.	4990
To Equity Share Capital A/c						4990
(Being application money received from promoters and
well wishers)
Equity Share Application A/c				Dr.	4990
To Equity Shares Capital A/c						4990
(Being allotment at par of 499000 equity shares vide
board resolution dtd. ....)

	Business Purchases A/c				Dr.	15000
	To Equity Share Capital A/c					15000
	(Being allotment at par of 15,00,000 equity shares to
	Magadha Bros. on take over to their business vide
	board resolution dtd. .... )
Feb. 28	Bank A/c				Dr.	40000
	To Equity Share Application A/c					40000
	(Being application monies at Rs. 5 per share received
	from applicants for 80,00,000 equity shares as per
	details in the application and allotment register.)
Mar. 31	Equity Share Aplication A/c				Dr.	40000
	Equity Share Allotment A/c				Dr.	24000
	To Equity Share Capital A/c					64000
	(Being allotment of 80,00,000 equity shares and
	recording of allotment money due at Rs. 3 per share
	vide board resolution dtd. 31.03.1999)
Apr. 30	Bank A/c				Dr.	23998.5
	To Equity Share Allotment A/c					23998.5
	(Being allotment moneys received from members
	except those owning 1500 shares)
May 31	Equity Share First Call A/c				Dr.	16000
	To Equity Share Capital A/c					16000
	(Being first call at Rs. 2 per share made from members
	holding 80,00,000 equity shares vide board resolution
	dtd. May, 31, 1999)
Sept. 30   Equity Share Capital A/c					Dr.	8.0
	To Equity Share Allotment A/c					1.5
	To Equity Share First call A/c					1.6
	To Forfeited Shares A/c					4.9
	(Being forfeiture of 800 shares for nonpayment of
	allotment & call monies as per details given : 500 shares

for nonpayment of allotment, call 300 shares for nonpayment of call vide res. dtd. 30.9.99)

Oct. 31	Bank A/c	Dr.	8.8
	Forfeited Shares A/c	Dr.	4.9
	To Equity Share Capital A/c		8.0
	To Capital Reserve A/c		5.7

(Being allotment on reissue of 800 equity shares no. ...

on receipt of Rs. 11 per share, vide board resolution dated dt.31.10. 1999)

Extracts from Balance Sheet as at 30.11.1999 (Rs. in crores)

Share Capital :
Authorised	25.00
Issued and subscribed :
For cash : 85,00,000 equity shares of Rs. 10 each fully paid	8.50
For consideration other than cash :
15,00,000 equity shares of Rs. 10 each fully
paid on purchase of business	1.50	10.00
Reserves and surplus :
Capital reserve (Rs. 5,700)		0.00