COMPANY FINAL ACCOUNTS SPECIMEN QUESTIONS WITH ANSWER

Question 5 :

On 1st December, 1999 Mehul Ltd. was incorporated with authorised capital of Rs. 1 core. On 30th November, 2000 the following is its Trial Balance :

	Dr.	Cr.
	Rs.	Rs.
Equity share capital (fully paid up shares of
Rs. 10 each of which 1,00,000 shares are issued
for consideration other than cash Rs. 10,00,000)		25,00,000
Capital reserve		2,00,000
Fixed assets — cost	8,00,000
Purchases (net)	60,00,000
Sales (net)		75,00,000
Expenses	4,00,000
Depreciation	1,00,000
Provision for depreciation		1,00,000
Bank — current account — scheduled bank	2,00,000
Interim dividend	3,00,000
Liability for interim dividend		1,80,000
Creditors for goods		10,00,000
Creditors for expenses		20,000
Prepaid expenses	50,000
Advance from customers		1,00,000

Advance to suppliers	1,50,000
Customers dues	32,00,000
Tax payment	4,00,000	.
	1,16,00,000	1,16,00,000

On 30th November, 2000, the cost of unsold stock is Rs. 3,50,000. Customers dues are unsecured but considered good and are due for less than six months. Provide for taxation at 35%. Directors have proposed final dividend of Rs. 2,00,000 and appropriation to general reserve of Rs. 2,50,000.

Prepare the final accounts.

Answer :
Mehul Ltd Revenue statement for the year ended 30th November, 2000
	Rs.	Rs.
Sales
75,00,000
Cost of sales :
Purchases	60,00,000
Less : Inventory-year end	3,50,000
Expenses	56,50,000
	4,00,000
Depreciation	1,00,000	61,50,000
Profit before tax		13,50,000
Provision for tax @ 35%		4,72,000
Profit after tax		8,77,500
Less :	Appropriation to :
General reserve	2,50,000
Interim dividend	3,00,000
Proposed dividend	2,00,000	7,50,000
Balance carried forward		1,27,500
	Mehul Ltd.
Balance Sheet as at 30th November 2,000
	Schedule	Rs.	Rs.
Sources of funds :
Shareholder’s fund :
Share Capital	A		25,00,000
Reserves and surplus :
Capital reserve		2,00,000
General reserve		2,50,000
Surplus		1,27,500	5,77,500
			30,77,500

Funds employed in :
Fixed assets : Cost		8,00,000
Less : Provision for depreciation		1,00,000	7,00,000
Current assets :
Inventory at cost		3,50,000
Dues from customers-unsecured but considered good for less than 6 mths		32,00,000
Balance with scheduled bank in current account		2,00,000
Advances recoverable in cash or in kind (50,000 + 1,50,000)		2,00,000
Tax payment pending assessment		4,00,000
		43,50,000
Less : Current liabilities and provisions
Creditors for goods	10,00,000
Creditors for expenses	20,000
Advances from customers	1,00,000
Interim dividend	1,80,000
	13,00,000
Provision for taxation	4,72,500
Proposed dividend	2,00,000
	6,72,000	19,72,500	23,77,500
			30,77,500

Schedule attached to balance sheet as at 30th November, 2000.

Schedule A : Schedule Capital :	Rs.
Authorised :
10,00,000 equity shares of Rs. 10 each	1,00,00,000
Issued :
2,50,000 equity shares of Rs. 10 each fully paid –	25,00,000

including 1,00,000 equity shares of Rs. 10 each issued for consideration other than cash.

Question 6 :

On 30th November, 2001 the following was the balance sheet of XY and Co. a partnership firm where X Ltd. and Y Ltd. were partners sharing profits and losses in the ratio of 3 : 2 after payment of interest on fixed capitals at 12% per annum :

	Rs.	Rs.
	(in crores)
Fixed assets : Cost	60
Less : Accumulated depreciation	40	20
Investments at cost in equity shares of :	30
A Ltd. (market value Rs. 80 Cr.)
B Ltd. (market value of Rs. 70 Cr.)	25	55
Current assets	140
Less : Current liabilities	65	75
		150
Financed by :
Loan from Zed Ltd. carrying interest at 15% p.a.		40
Reserves		30
Current accounts of partners :	3
X Ltd.
Y Ltd.	2	5
Capital accounts of partner(s)
X Ltd.	40
Y Ltd.	35	75
		150

On 1st December, 2001 they decided to admit Z Ltd. as a partner. The following terms were agreed upon :

(i)       Zed Ltd.’s loan is to be converted into fixed capital.

(ii)      The goodwill of the firm is considered to be worth Rs. 50 crores; however the necessary adjustment should be recorded through fixed capital accounts of the partners.

(iii)      The fixed assets are considered to be worth Rs. 50 crores. However they are to continue to appear in the books at the present cost of Rs. 60 crores and the present accumulated provision for depreciation of Rs. 40 crores. The necessary adjustment is to be done through fixed capital accounts.

(iv)       There is no change in the valuations of current assets and current liabilities.

(v)       Reserves are to continue to appear at the balance sheet figures. However necessary adjustment is to be done through fixed capital accounts.

(vi)       The investments in A Ltd. are to be taken over by X Ltd. at Rs. 70 crores. The investments in B Ltd. are to be taken over by Y Ltd. at Rs. 60 crores.

(vii)      X Ltd., Y Ltd. and Z Ltd. are to bring in such amounts as fixed capital as would enable combined balance of Rs. 120 crores in the fixed capital accounts carried forward in revised profit sharing ratio.

(viii)      Interest at 1% per month is to be calculated on the fixed capitals and credited to partner’s current accounts.

(ix)       10% of annual profit (after considering interest on fixed capitals) is to be credited to reserves.

(x)       The balance 90% of annual profit is to be shared by X Ltd., Y Ltd. and Z Ltd. in the ratio of 5:3:2. The same is to be credited to current accounts.

(xi)       Drawings of the partners during the year are to be within the upper ceiling of credit to current accounts. The same is to be credited to current accounts.

You are asked to pass necessary accounting entries through the journal of the firm on the morning of December 1, 2001 and prepare the balance sheet before any other transaction takes place on December 1, 2001. The balance sheet should also show the comparative position before admission of Zed Ltd.

Answer :

JOURNAL

						(Rs. in Crores)
DateE. No.			Particulars		Dr.	Cr.
2001
Dec.	1	Zed Ltd. Loan			Dr.	40
		To Zed Ltd. – Capital				40
		(Being transfer of loan balance into fixed capital on
		admission of Zed Ltd. as a partner)
	2	Zed Ltd. – Capital			Dr.	10
		To X Ltd. – Capital				5
		To Y Ltd. – Capital				5
		(Being 1/5th share of goodwill purchased by
		incoming partner Zed Ltd. from the old partners X
		Ltd. and Y Ltd.)
	3	Zed Ltd. Capital			Dr.	6
		To X Ltd.– Capital				3
		To Y Ltd. – Capital				3
		(Being the purchase of 20% share of latent increase
		in the value of fixed assets by Zed Ltd. from X Ltd.
		and Y Ltd. on admission as a partner)

4	Zed Ltd. – Capital			Dr.	6
	To X Ltd. – Capital				3
	To Y Ltd. – Capital				3
	(Being 20% share in existing reserves purchased by
	incoming partner Zed Ltd. from X Ltd. and Y Ltd.)
5	X Ltd. – Capital			Dr.	70
	To Investment in A Ltd.				30
	To Realisation A/c				40
	(Being investments in A Ltd. taken over by X Ltd.)
6	Y Ltd. – Capital			Dr.	60
	To Investments in B Ltd.				25
	To Profit on take over				35
	(Being investments in B Ltd. taken over Y Ltd.)
7	Realisation A/c			Dr.	75
	To Capital A/cs
		X Ltd.			45
		Y Ltd.			30
	(Being profit on take over of investments credited to
	partners’ capitals in old profit sharing ratio.)
8	Bank A/c (Current asset)			Dr.	60
	To Fixed capitals :
		X Ltd.			34
		Y Ltd.			20
	Z Ltd.				6
	(Being fixed capital introduced by the three partners
	in pursuance of clause of partnership deed dated
	Dec. 1, 2001)

Working Notes :

(A)       Change in Partners’ Profit Sharing Ratio on admission of Z Ltd. :

	Old	New	Change
	Ratio	Ratio
X Ltd.	3/5	5/10	(–) 1/10
Y Ltd.	2/5	3/10	(–) 1/10
Z Ltd.	–	2/10	+ 2/10
	1	1	0

(B)       Adjustment in Fixed Capital of Partners on account of goodwill :

			(Rs. in Crores)
Goodwill raised	X Ltd.	Y Ltd.	Z Ltd.
	Rs. 30 (CR)	Rs. 20 (CR)	–
Goodwill w/off	Rs. 25 (DR)	Rs. 15 (DR)	10 (DR)
Net effect	5 (CR)	5 (CR)	10 (DR)

(C)  Adjustment in Fixed Capital due to revaluation of Fixed Assets :

			(Rs. in Crores)
	X Ltd.	Y Ltd.	Z Ltd.
Fixed Assets revalued at Rs. 50000
instead of Rs. 20000 (book value)
Difference Rs. 30000.	18	12	–
Written Back to book value of 20000	15	9	6
	3(CR)	3 (CR)	6 (DR)
(D)  Adjustment on A/c of Reserves due to admission of Z Ltd.:
	X Ltd.	Y Ltd.	Z Ltd.
Reserves as per old Ratio	18	12	–
Reversal as per new Ratio	15	9	6
	3 (CR)	3 (CR)	6 (CR)
(E)  Adjustment on A/c of takeover of Investment :
			(Rs. in Crore)
Profit on sale of Investment in A Ltd. (Rs. 70 – 30) =		40
Profit on sale of Investment in B Ltd. (Rs. 60 – 25) =		35
		75

This profit will be allocated amongst the erstwhile partners i.e. X Ltd. and Y Ltd. in their old profit sharing ratio i.e. 3 : 2, Rs. 45 and Rs. 30.

(F)  Net effect of changes :
					(Rs. in Crores)
		X Ltd.		Y Ltd.	Z Ltd.
Goodwill	DR	CR	DR	Cr	DR	CR
		5		5	10
Fixed Assets		3		3	6
Reserve		3		3	6
Sale of investment	70	45	60	30	–	–
	70	56	60	41	22
Capital before changes		40		35		40
Capital after changes		26		16		18
Capital as per partnership deed		60		36		24
Amount to be brought in		34		20		6

XY and Co.

Balance sheet as on the morning of 1st Dec. 2001

	After admission		Before admission
(in crores)	Rs.	Rs.	Rs.	Rs.
Fixed assets :
Cost	60		60
Less : Accumulated depreciation	40		40
		20		20
Investment at cost in
equity shares of :
A Ltd.	–		30
B Ltd.	–		25
		–		55
Current assets :
Bank	60		–
Other	140		140
	200		140
Less : Current liabilities	65		65
		135		75
		155		150
Financed by :
Borrowing :
Loan from
Zed Ltd.		Nil		40

Owners’ funds
Reserves	30	30
Current accounts :
X Ltd.	3	3
Y Ltd.	2	2
	5	5
Fixed capitals :
X Ltd.	60	40
Y Ltd.	36	35
Zed Ltd.	24	–
	120	75
	155	150

Question 7 :

X Co. Ltd. was registered with an authorised Capital of Rs. 10.00.000 divided into shares of Rs. 10 each, of which 40,000 shares had been issued and fully paid.

The following is the Trial Balance extracted on 31st march 2002 :

	Dr.	Cr.
	Rs.	Rs.
Stock (1.4.2004)	1,86,420
Returns	12,680	9,850
Sundry manufacturing expenses	19,240
18% Bank Loan (secured)		50,000
Office salaries and Expenses	17,870
Directors’ Remuneration	26,250
Freehold premises	1,64,210
Furniture	5,000
Debtors and Creditors	1,05,400	62,220
Cash at Bank	96,860
Profit and Loss Account on 1.4.2001		38,640
Share Capital		4,00,000
Purchases and sales	7,18,210	11,69,900
Manufacturing Wages	1,09,740
Carriage Inwards	4,910
Interest on bank loan	4,500
Auditors’ Fees	8,600
Preliminary Expenses	6,000
Plant and machinery	1,28,400
Loose Tools	12,500
Cash in hand	19,530
Advance payment of Tax	84,290
	17,30,610	17,30,610

You are required to prepare Profit and Loss Account for the year ended 31st March 2002 and a Balance Sheet as at that date after taking into consideration the following adjustments :

(i)       On 31st March 2002, outstanding manufacturing wages and outstanding office salaries stood at Rs. 1,890 and Rs. 1,200 respectively. On the same date stock was valued at Rs. 1,24,840 and loose tools at Rs. 10,000.

(ii)       Provide for interest on bank loan for 6 months.

(iii)      Depreciation on plant and machinery is to be provided @ 15% while on office furniture it is to be @ 10%.

(iv)       Write-off one-third of balance of preliminary expenditure.

(v)        Make a provision for income tax @ 50%.

(vi)       The directors recommended dividend @ 15% for the year ending 31st March 2002 after a transfer of 5% of the profits to general reserve.

Answer :

In the books of X Co. Ltd.

Dr.	Profit and Loss A/c for the year ended 31.3.2002			Cr.
Particulars		Rs.	Particulars
Rs.
Opening Stock		1,86,420	By Sales	11,69,900
Purchase	7,18,210		Less: Return	12,680  11,57,220
Less : Returns	9,850	7,08,360
Wages	1,09,740		By Closing Stock	1,24,840
Add : Outstanding wages	1,890	1,11,630
Sundry Mfg. expenses		19,240
Carriage inward		4,910
Gross Profit c/d		2,51,500
		12,82,060		12,82,060
Int. on Bank loan	4,500		By Gross Profit b/d	2,51,500
Add : Outstanding	4,500	9,000
Office salaries & expenses	17,870
Add : Outstanding	1,200	19,070
Auditors’ Fees		8,600
Directors’ remuneration		26,250
Provisions for depreciation
Plant and Machinery	19,260
Furniture	500
Loose tools	2,500	22,260
Preliminary expenses		2,000
Income Tax		82,160
Net Profit c/d		82,160
		2,51,500		2,51,500

Directors’ Fees (15% of 400000)		60000	By Balance b/d		38640
General Reserve (5% of 82160)		4108	By Net profit b/d		82160
Balance c/d		56692
		1,20,800			1,20,800
	Balance Sheet of X Co. Ltd as at 31.3.2002
Liabilities	Rs.	Rs.	Assets	Rs.	Rs.
Share Capital			Fixed Assets		1,64,210
Authorised, issued, subscribed and Paid up:			Freehold Premises
40000 Eq. Shares			Plant and Machinery	1,28,400
Rs.10 each, fully paid up		4,00,000	Less: Provision for deprn.	19,260	1,09,140
				Furniture	5000
Reserves and Surplus			Less: Provision for deprn.	500	4,500
General Reserve		4,108	Investments
Profit and Loss Account		56,692			NIL
Secured loans			Current Assets, loans and Advances
18% Bank loan		50,000	Current Assets
			Loose Tools		10,000
Unsecured loans		Nil	Stock-in-Trade		1,24,840
Current Liabilities and Provisions			Debtors
			Outstanding for
Current Liabilities			More than 6 months	?
Creditors		62,220	Others	?	1,05,400
Manufacturing Wages		1,890
Office Salaries		1,200	Cash at Bank		96,860
Interest on Bank loan		4,500	Cash in hand		19,530
Provisions			Loans and Advances
Provision for Taxation		82,160	Advance payment of		84,290
Proposed Dividend		60,000	Income tax
			Miscellaneous Expenditure
			Preliminary Exp.(Rs.6000 – 2000)		4,000
		7,22,770			7,22,770

Question 8 :

The Balance Sheet of X & Y Ltd. as on 31st December, 1999 is given below :

Liabilities	Rs.	Assets	Rs.
Share Capital		Fixed Assets
a) Authorised :		Land & Building	2,00,000
50,000 Eq. Sh. @ Rs. 10 each	5,00,000	Current Assets, Loans & Advances
b) Issued & Paid up Capital :		Stock in Trade	2,00,000
40,000 Eq. Sh. of Rs. 10 each	4,00,000	Sundry Debtors	60,000
Reserve & Surplus		Cash and Bank Balance	2,40,000
Reserve	20,000
Profit & Loss A/c	1,30,000
Secured Loan
7% Debenture	1,00,000
Current Liabilities & Provisions
Sundry Creditors	50,000
	7,00,000		7,00,000

At the Annual General Meeting it is resolved :–

(i)       to pay a dividend of 15% .

(ii)       to issue one bonus share for every five shares held.

(iii)      to give existing shareholders the option to purchase one of Rs. 10 share at Rs. 14 for every five shares held prior to the Bonus distribution.

Pass the appropriate Journal Entries to record the above transactions and also draw up Balance Sheet. 10+10

Answer :

IN THE BOOKS OF X & Y LTD.

JOURNAL ENTRIES

DateParticulars		L.F.		Rs.	Rs.
Profit & Loss Appropriation A/c				Dr.	60,000
	To Equity Dividend A/c				60,000
	(Being a dividend @15% declared as per share
	holder’s resolution No....... Dated......)
Equity Dividend A/c				Dr.	60,000
	To Bank A/c				60,000
	(Being equity dividend paid off)

P/L A/c			Dr.	70,000
Reserve A/c			Dr.	10,000
To Bonus Dividend A/c				80,000
(Being bonus declared as per member’s Resolution
Dated......)
Bonus Dividend A/c			Dr.	80,000
To Equity Share Capital A/c				80,000
(Being Bonus utilized for the issue of 8,000 Equity
Shares of Rs. 10 each distributed in the ratio of one
share for every 5 share held)
Bank A/c			Dr.	1,12,000
To Equity Share Capital A/c				80,000
To Share Premium A/c				32,000

(Being amount received on issue of 8,000 Equity
Share @ Rs. 10 each at a premium Rs. 4 per share as
per members Resolution Dated......		)
Dr.	X&Y Ltd.		Cr.
	Balance Steet as at 31.12.99
Liabilities	Rs.	Assets	Rs.
Share Capital		Fixed Assets :
a. Authorised :		Land & Building	2,00,000
50,000 Equity Shares @ Rs. 10 each	5,00,000	Current Assets :
		Stock in Trade	2,00,000
		Sundry Debtors	60,000
b. Issued & Paid up Capital :
48,000 Equity Share @ Rs. 10 each	4,80,000	Cash & Bank Balance	1,80,000
Reserve & Surplus :		(2,40,000 – 60,000)
Reserve (20,000 – 10,000)	10,000
P/L A/c (1,30,000 – 60,000 – 70,000)	Nil
Secured Loan :
7% Debentures	1,00,000
Current Liabilities :	50,000		.
Sundry Creditors
	6,40,000		6,40,000

Working Notes :

1.        Amount required for Dividend

(a)        Cash Dividend = 15% of Subscribed Capital = Rs. 60,000

(b)        Bonus Dividend = 1/5 × 40,000 × 10 = Rs. 80,000

2.        Utilization of Profits/Reserve

(a)        Cash Dividend should be declared out of P/l A/c

(b)        Bonus Dividend should be declared out of – :

i.       Rs. 70,000 from P/L A/c

ii.       Rs. 10,000 for Reserve A/c.

Question 9 :

The Balance Sheet of Sayan Ltd. as on 31.12.98 is given below :

Liabilities	Rs.	Assets	Rs.
12% Pref. sh. of Rs.100 each, fully paid up	6,50,000	Sundry Assets	8,50,000
30,000 eq. sh. of Rs.5 each fully paid	1,50,000	Investment	3,75,000
General Reserve	1,60,000	Sundry Debtors	47,500
Profit & Loss Account	3,00,000	Bills Receivable	60,000
10% Debenture	1,00,000	Cash at Bank	67,500
Sundry Creditors	40,000
	14,00,000		14,00,000

The preference shares are to be redeemed on 1st January 1999 at a premium of 7.5% . In order to facilitate redemption of the company has decided —

(i)       To sell the investment for Rs. 3,60,000.

(ii)       To finance part of the Company’s fund and to issue sufficient Equity shares at a premium of Re. 1 per share to raise the balance of funds required.

(iii)      Minimum bank balance to be retained at Rs. 5,127.

(iv)       The investments were sold, the equity shares were fully subscribed and all payments were made except to holders of 50 shares who could not be traced.

Give the necessary entries and the new Balance Sheet as on 1.1.1999.

Answer :

In the Book of Sayan Ltd.

Journal Entries

		Particulars		L.F.	Rs.		Rs.
	Bank A/c			Dr.	3,60,000
	P/L A/c			Dr.	15,000
	To Investment A/c						3,75,000
	(Being investment sold and transferred the loss on
	sale to P/L A/c)
	12% Pref. Share Capital A/c			Dr.	6,50,000
	Premium on Redemption of Pref. Share			Dr.	48,750
	To 12% Pref. Share Holder A/c						6,98,750
	(Being amount payable on Redemption of 6,500, 12%
	Pref. Share with a premium of 7 &1/ %)
			2
	Bank A/c			Dr.	2,71,002
	To Equity Share Capital A/c						2,25,835
	To Share Premium A/c						45,167
	(Being 45,767 equity share of Rs.5 each were issued
	at a premium of Rs. 1 per share as per Board resolution
	No........... Dated.........)
	12% Pref. Shareholder A/c			Dr.	6,93,375
	To Bank						6,93,375
	(Being amount due to preference share holders paid
	off expect to the holders of 50 shares)
	General Reserve A/c			Dr.	1,60,000
	P/L A/c			Dr.	2,64,165
	To Capital Redemption of Pref. Share						4,24,165
	(Being necessary amounts transferred out of profit
	and Reserve for Capital Redemption)
	Share Premium A/c			Dr.	45,167
	P/L A/c			Dr.	3,583
	To Premium on Redemption of Pref. Share						48,750
	(Being premium payable on redemption were
	adjusted)

SAYAN LTD.

Balance Sheet as on 1.1.99

Liabilities	Rs.		Assets	Rs.
Share Capital			Sundry Assets	8,50,000
Issued and Subscribed			Current Assets
75,167 Equity Share of Rs. each		3,75,835	Sundry Debtors	47,500
RESERVE AND SURPLUS			Bills Receivable	60,000
P/L A/c		17,252	Cash at Bank	5,127
(3,00,000 – 2,64,165 – 15,000 – 3,583)
Capital Redemption Reserve		4,24,165
Secured Loan
10% Debenture		1,00,000
Current Liabilities
Sundry Creditors		40,000
12% Red. Pref. Share Holder		5,375		.
		9,62,627		9,62,627

Working Notes :

1)        Cash to be raised through issue of Equity Share.

Dr.	Bank Account		Cr.
Particulars	Rs.	Particulars	Rs.
To Balance b/d	67,500 By Preference Shareholder A/c		6,93,375
To Investment	3,60,000	(6,98,750 – 50/6,500 × 6,98,750)
To Eq. Sh. Holder A/c (Balancing Figure)	2,71,002	By Balance c/f	5,127
	6,98,502		6,98,502

2) . Equity Shares of Rs.5 each to be issued to a Premium of Re.1 per share. So No. of Equity Shares to be issued = Rs.2,71,002/6 = 45,167

3) .  Arrangement of funds :

Payable on Redemption	New Issue	Reserve & Surplus
Preference Share	Equity Share Capital	Amount Required
Capital = Rs. 6,50,000	45,167 × 5 = 2,25,835	6,50,000–2,25,835 = Rs.4,24,165
Premium on Redemption	Share Premium	General Reserve	1,60,000
@7 & 1/ % = Rs.48,750	47,167 × 1 = 45,167	P/L A/c	2,64,165
2			4,24,165

P/L A/c = Rs.3,583

Question 10 :

Ram and Shyam are partners of Ram Shyam & Co. sharing profits and losses in the ratio of 3: 2. Sita and Gita are partners of Sita Gita & Co. sharing profits and losses in the ratio of 5 :3.

The balance sheets of the two firms as on 31st May, 2001 was as under:

	Ram Shyam	Sita Gita
	& Co.	& Co.
	Rs.	Rs.
Capitals:	5,00,000	—
Ram
Shyam	3,00,000	—
Sita	—	6,00,000
Gita	—	4,00,000
Loan from Sita Gita & Co.	2,00,000	—
	Rs. 10,00,000	10,00,000
Fixed assets:
Cost	4,00,000	5,00,000
Less: Depreciation to date	3,00,000	4,00,000
	1,00,000	1,00,000
Loan to Ram Shyam & Co.	—	2,00,000
Current assets	21,00,000	7,50,000
Less: Current liabilities	12,00,000	50,000
	9,00,000	7,00,000
	Rs.10,00,000	10,00,000

Kuber Ltd. was incorporated on 1st April, 2001 with an authorised capital of Rs. I crore. The subscribers to the memorandum and articles of association took up 3,00,000 equity shares of Rs. 10 each and paid for same on formation of the company. Formation expenses amounted to Rs. 1,00,000 and were paid off.

Kuber Ltd. decided to take over the net assets of Ram Shyam & Co. at a valuation of Rs. 12,50,000 and the net assets of Sita Gita & Co. at a valuation of Rs. 14,00,000. Equity shares of Rs. 10 each were allotted at par in discharge of the consideration on Ist June, 2001.

The directors of Kuber Ltd. decided to revalue only the fixed assets taken over at Rs. 2,50,000 in respect of Ram Shyam & Co. and Rs. 3,00,000 in respect of Sita Gita & Co.

The directors of Kuber Ltd. ask you to show the ledger accounts in respect of the above transactions and extract the trial balance.

Answer :

In the books of Kuber Ltd.

Dr.		Bank A/c				Cr.
Date	Particulars	Amount (Rs.)	Date		Particulars	Amount (Rs.)
1.4.01	To Equity share capital	30,00,000	1.4.01	By	Formation exp	1,00,000
			30.6.01	By	Balance	29,00,000
		30,00,000				30,00,000

Dr.		Equity Share Capital A/c				Cr.
		Amount (Rs.)	Date		Particulars	Amount (Rs.)
Date	Particulars		1.4.01	By	Bank	30,00,000
30.6.01	To Balance	56,50,000	1.6.01	By	Business Purchase A/c	26,50,000
		56,50,000				56,50,000

Dr.				Ram Shyam A/c			Cr.
Date		Particulars		Amount (Rs.)	Date	Particulars	Amount (Rs.)
				12,00,000	1.6.01   By	Fixed assets	2,50,000
1.6.01	To	Current liabilities
	To	Business purchase A/c		2,00,000	By	Current assets	21,00,000
				9,50,000			.
				23,50,000			23,50,000

Dr.		Sita Gita & Co. A/c				Cr.
		Amount (Rs.)	Date		Particulars	Amount (Rs.)
Date	Particulars	50,000	1.6.01	By	Fixed assets	3,00,000
”	To  Business purchase	12,00,000	”	By	Loan	2,00,000
		.	”	By	Current assets	7,50,000
		12,50,000				12,50,000

Dr.		Business Purchase A/c				Cr.
Date	Particulars	Amount (Rs.)	Date		Particulars	Amount (Rs.)
1.6.01	To Equity Capital A/c	26,50,000	1.6.01	By	Ram Shyam & Co.	9,50,000
			”	By	Sita Gita & Co.	12,00,000
		.	”	By	Goodwill	5,00,000
		26,50,000				26,50,000

Dr.			Fixed Assets A/c				Cr.
Date		Particulars	Amount (Rs.)	Date		Particulars	Amount (Rs.)
1.6.01	To	Ram Shyam & Co.	2,50,000	1.6.01	By	Balance	5,50,000
	To	Sita Gita & Co.	3,00,000				.
			5,50,000				5,50,000
Dr.			Current Assets A/c				Cr.
Date		Particulars	Amount (Rs.)	Date		Particulars	Amount (Rs.)
1.6.01	To	Ram Shyam & Co.	21,00,000	30.6.01	By	Balance	28,50,000
	To	Sita Gita & Co.	7,50,000				.
			28,50,000				28,50,000
Dr.			Current Liabilities A/c				Cr.
Date		Particulars	Amount (Rs.)	Date		Particulars	Amount (Rs.)
30.6.01	To	Balance	12,50,000	1.6.01	By	Ram Shyam & Co.	12,00,000
			.		By	Sita Gita & Co.	50,000
			12,50,000				12,50,000
Dr.			Goodwill A/c				Cr.
Date		Particulars	Amount (Rs.)	Date		Particulars	Amount (Rs.)
1.6.01	To	Business Purchase	5,00,000	30.6.01	By	Balance	5,00,000
			5,00,000				5,00,000
Dr.			Formation Exps. A/c				Cr.
Date		Particulars	Amount (Rs.)	Date		Particulars	Amount (Rs.)
1.6.01	To	Bank	1,00,000	30.6.01	By	Balance	1,00,000
		Trial Balance for the period 1.4.01 to 30.6.01
		Bank			Dr. (Rs.)		Cr. (Rs.)
					29,00,000
		Equity Share Capital				—	56,50,000
		Formation Expenses			1,00,000		—
		Fixed Assets			5,50,000		—
		Current Assets			28,50,000		—
		Goodwill			5,00,000		—
		Current Liabilities					12,50,000
					69,00,000		69,00,000

Read More