Snes NO. OF PROBLEMS IN 43e OF CA INTER: WWW.MASTERMINDSINDIA.COM | 9885125025 / 26 ME em asrernnosnonncon | asst a0ns a5 12. PREPARATION OF FINANCIAL STATEMENTS NO. OF PROBLEMS IN 41e OF CA INTER: CLASSROOM - 10, ASSIGNMENT - 11 NO. OF PROBLEMS IN 42e OF CA INTER: CLASSROOM - 10, ASSIGNMENT - 11 MODEL WISE ANALYSIS OF PAST EXAM PAPERS OF IPCC AND CA INTER LASSROOM - 15, ASSIGNMENT - 18 woe |S SS Se )e S/o 2 ss Se SSS cece ‘NO. zlelzls|2lel2\s/2/sl2)i2 EIS|E/E/E/E/E/E modl-1]-|-|-1-1-1-1-1-1-1-]-1-1-1-1-1-[51-1-1- 15 wodel-2(5|-|-1|-|-1-1-l-1-|-1-|-|-1-1-1-1-1-1- |] wodel-3(-|-|-[-|-|-|-|-|-|-|---1-TEEELEeeE- model-4|- | - |4|- [te] 6 |t0|-|-|-|-|-|- |e] -|-|-|e]-|-|- Model- 1: Schedule-ti Model-2 : Managerial Remuneration Model-3 : Dividend Model-4 — : Balance sheet Problems & BT teeta Pa aT > ProblemNo in| ProblemNo. | Problem No, | Problem No, Previous this material_| inNEWSM | inoLosM | inotppm | RIP ae Exams —_| Remarks crt 5 : : : : RZ 5 5 5 Fi ‘ cR3 5 5 5 5 5 Ni8-5M 5 cRe Bel Ba 5 5 : CRS Ex 5 5 5 5 = CRE EX 5 5 5 5 = CRT 5 5 5 5 5 = CRE 5 5 5 5 = CRS i Ed 5 5 5 ‘ : RIO iLL=2 Ex-4 5 = WB NEO] | zi CRI iLL-4 Ex-5 5 5 7 ‘i : CRI EXAMPLE | EXAMPLE 5 5 5 ‘i = R13 PQ-4 5 = MB (NAO) | NFB (NEO) | ———- 5 R14 a5 5 5 zi 5 5 : CRIS iLL-T i -5 5 5 5 zi : ASG 1 A 5 5 5 5 5 5 ASG? : 5 5 5 : ASG EXD Ext 5 5 5 zi ‘ ASG 4 5 5 5 5 = : ASGS 5 5 5 5 : ASGE 5 5 5 5 - 5 ASGT 5 5 5 5 ASG E 5 5 5 5 5 ‘ ASG 9 5 5 5 5 5 Nin) | ASG 10 5 5 5 5 : CAINTER | ACCOUNTS| 43E 1aiB (N&O), ASG it IL-3 : : I : : ; ASG 12 PQ-2 = a 5 : é ; ‘ASG 13 i 5 5 i : Nf9(0) 5 ‘ASG 14 > = : 5 - Noo - at : ‘ASG 15 PQ-3 5 4 : 5 E 5 ASG 16 - = : 5 =| wfa(0)= fem | ASG 17 POS = 5 : i 5 5 ASG 18 TLL 6 WL -2 : : i 5 5 THEORY } INTRODUCTION: Company is a form of business organisation wherein two or more individuals join together and create a separate legal entity distinct from them. Separate legal identity and framework for this form of organisation makes it unique and a popular form of business organisation. Presently Companies are governed by “The Companies Act, 2013" and thus compliance under the Act is inevitable. DEFINITION: As per section 2(20) of the Companies Act, 2013, “Company” means a company incorporated under this Act or under any previous company law. CHARACTERSTICS OF COMPAN’ + Voluntary Association of Persons + Separate legal Entity © Limited Liability & + Perpetual Succession * Common seal * Transferability of Shares MAINTENANCE OF BOOKS OF. scgpans a) As per Section 128 of the Companits Act, 2013, Every company shall prepare and keep at its registered office books of account and other relevant books and papers and financial statements for every financial year which give a true and fair view of the state of the affairs of the company, and b) Such books shall be kept on accrual basis and according to the double entry system of accounting} ©) Section 128(5) further states that the books of account of every company relating to a period of not less than eight financial years immediately preceding a financial year, or where the company had been in existence for a period less than eight years, in respect of all the preceding years together with the vouchers relevant to any entry in such books of account shall be kept in good order. PREPARATION AND PRESENTATION OF FINANCIAL STATEMENTS: 4. Final Accounts: Under Section 129 of the Companies Act, 2013, at the annual general meeting of a company, the Board of Directors of the company shall lay financial statements before the company, Financial Statements as per Section 2(40) of the Companies Act, 2013, inter-alia include - a) A Balance Sheet as at the end of the financial year, b) A Profit and Loss Account, or in the case of a company carrying on any activity not for profit, an Income and Expenditure account for the financial year; ) Cash Flow Statement for the financial year; 4) A Statement of Changes in Equity, if applicable; and PREPARATION OF FINANCIAL STATEMENTS | 43E 12.2Coo \WWW.MASTERMINDSINDIA.COM | 98851 25025 /26 e) Any explanatory note annexed to, or forming part of, any document referred to in sub Clause (i) to sub-clause (iv): Requisites of Financial Statements: It shall give a true and fair view of the state of affairs of the company as at the end of the financial year. Provisions Apy Except in case of Companies for which Specific Act is applicable, all other Companies shall prepare and present Balance Sheet as per Form set out in Part | of Schedule Ill and Statement of Profit and Loss as per Part II of Schedule III Points to be kept in mind: a) Requirements of Schedule Ill to the Companies Act; b) Other statutory requirements; ¢) Accounting Standards issued by the Institute of Chartered Accountants of India on different accounting matters and notified by the Central Government (AS 1 to AS 32); d) Statements and Guidance Notes issued by the Institute of Chartered Accountants of India; Which are necessary for understanding the accounting treatment / valuation / disclosure suggested by the ICAI. e) The Electricity Act, 2003 does not specify any format for presentation of Financial Statements. Therefore, Schedule III of the Companies Act, 2013 is followed by Electricity Companies in preparation of their financial statements. Schedule II: It consists of general instructions for preparation ae" Sheet and Statement of Profit and Loss of a Company e a) The disclosure requirements speci addition to and not in substit Accounting Standards prescribe specified in the Accounting Stan rt - | and Part Il of this Schedule are in disclosure requirements specified in the the Companies Act, 2013, Additional disclosures all be made in the notes to accounts or by way of additional. statement unless sd to be disclosed on the face of the Financial Statements. Similarly, all ot ‘closures as required by the Companies Act shall be made in the notes to accounts if addition to the requirements set out in this Schedule. b) Notes to accounts shall conta ion to that presented in the Financial Statements and shall provide where required (a) narrative descriptions or desegregations of items recognized in those statements and (b) information about items that do not qualify for recognition in this statements, ¢) Each item on the face of the Balance Sheet and Statement of Profit and Loss shall be cross-reference to any related information in the notes to accounts. 4) Depending upon the turnover of the company, the figures appearing in the Finance ‘Statements may be rounded off as below: Turnover Rounding off Less than one hundred core rupees. |7o.te nearest hundreds, las of milfons or To the nearest, lakhs, millions or crore, or| ii) one hundred crore rupees or more | decimals thereof Once a unit measurement is used, it should be used uniformly in the financial statements. e) Except in the case of the first Financial Statements laid before the Company (after its incorporation) the corresponding amounts (comparatives) for the immediately preceding reporting period for all items shown in the Financial Statements including notes shall also be given f)_As vs Schedule Ill: where compliance with the requirements of the Act Including Accounting Standards as applicable to the Companies, require any change in treatment or disclosure CAINTER | ACCOUNTS] 43E 12.3including addition, amendment, substitution or deletion in the head / sub — head or any changes inter se, in the Financial Statements or Statements forming part thereof, the same shall be made and the requirements of the Schedule III shall stand modified accordingly. Definition of Terms: Terms Description Current & Non — | Current Assets: An Asset shall classified as Current when it satisfies any of Current Assets | the following criteria — a) tis expected to be realized in, or is intended for sale or consumption in the Company's normal Operating Cycle, b) itis held primarily for the purpose of being traded, c) Itis expected to be realized within 12 months after the Reporting date. ) tis cash or cash Equivalent unless it is restricted from being exchanged or used to settle a Liability for at least 12 months after the Reporting Date ‘ssets: All other Assets shall be classified as Non — Current. A Liability shall classified as Current when it satisfies & Non - Current | any of the following — Liabilities a) Itis expected to be settled in the Company's normal Operating Cycle, b) It is held primarily for the purpose of being traded, ¢) It is due to be settled within 12 months after the Reporting Date, or d) The Company does not have an unconditional right to defer settlement of the Liability for at least 12 months after the reporting date (Terms of a Liability that could, at the option of the counterparty, result in its settlement by the issue of Equity Instruments do not affect its classification). Non — Current Liabilities: Al oé{{ Bites shall be ciassifed as Non — Curent Operating Cycle | An Operating Cycle is th&Nip® between the Acquisition of Assets for (oc) processing & their res in cash or cash Equivalents. Where the Normal Operating Cyolg Rannot be identified, itis assumed to have duration of 12 months. S | Payable (TR /| of the am: ie on account of Goods Sold or Services Rendered in TP) the normal cdurse of Business. + Apayable shall be classified as a Trade payable, if it is in respect of the amount due on account of Goods Purchased or Services Received in the Normal Course of business. Trade Receivable |~* A meant 9 Classified as a Trade Receivable, if it is in respect Other Terms: For the purpose of this Schedule, the terms used herein shall be as per the applicable Accounting Standards. 6. Form of preparing a Balance Sheet: Line items, sub-line items and sub-totals shall be presented as addition or substitution on the face of the Financial Statements when such presentation is relevant to an understanding of the company's financial position or performance or to cater to industry / sector-specific disclosure requirements or when required for compliance with the amendments to the Companies Act or under the Accounting Standards. PART - 1 - Form of BALANCE SHEET Name of the Company Balance Sheet as at : Figures as at” [Figures as atthe Notes) theendof | endof the een No. current previous reporting period | reporting period i z 3 4 EQUITY AND LIABILITIES: 4 Shareholder's funds a Share capital PREPARATION OF FINANCIAL STATEMENTS | 43E 12.4Coo \WWW.MASTERMINDSINDIA.COM | 98851 25025 /26 | |Reserves and Surplus c | _ |Money received against share warrants Share application money pending allotment Non-current liabilities Long term borrowings Deferred tax liabilities (Net) Other long term liabilities Long term provisions ory Current liabilities Short term borrowings Trade Payable Other current liabilties Short - term provisions aoc TOTAL, ASSETS: Non-current assets a| [Fixed assets Tangible assets Intangible assets Capital Work - in progress Intangible assets under development Non current investments Deferred tax assets (Net) Long term loans and advances Other non-current assets oaoe Current Assets Current Investments Inventories ‘Trade receivables GS Cash and cash equivalents Qs Short - term loans and a S Other current assets TOTAL, onoce General instructions on preparation of Balance Sheet: a) Share Capital: i) The number and amount of shares authorized; )_ The number of shares issued, subscribed and fully paid, and subscribed but not fully paid; Par value per share; ) A reconciliation of the number of shares outstanding at the beginning and at the end of the reporting period. v) The rights, preference and restrictions attaching to each class of shares including restrictions on the distribution of dividends and the repayment of capital. vi) Shares in the company held by each shareholder holding more than 5 percent shares specifying the number of shares held vii) Shares reserved for issue under options and contracts / commitments for the sale of shares / disinvestments, including the terms and amounts. For the period of five years immediately preceding the date as at which the Balance Sheet is prepared: ‘* Aggregate number and class of shares allotted as fully paid up pursuant to contacts without payment being received in cash. ‘* Aggregate number and class of shares allotted as fully paid up by way of bonus shares. CAINTER | ACCOUNTS] 43E 125‘* Aggregate number and class of shares bought back. ix) Calls unpaid (showing aggregate value of calls unpaid by directors and officers) X) Forfeited shares (amount originally paid up) b) Reserves and Surplus: i) Reserves and surplus shall be classified as * Capital Reserve; + Capital Redemption Reserve; + Securities Premium Reserve; ‘* Debentures Redemption Reserve; + Revaluation Reserve ‘+ Share Options Outstanding Account ‘+ Other Reserves - (specify the nature and purpose of each reserve and the amount in respect thereof); * Surplus i.e. balance in Statement of Profit & Loss disclosing allocation and appropriations such as dividend, bonus shares and transfer to / from reserves etc. (Additions and deductions since last balance sheet to be shown under each of the specified heads) ii) Areserve specifically represented by earmarked investments shall be termed as a fund’. iii) Debit balance of statements of profit and loss shall be shown as negative figure under the head ‘Surplus’, Similarly, the balanos@fReserves’ and Surplus’, after adjusting negative balance of surplus, if any, ‘Surplus’ even if the resulting one isteh ¢) Long - term Borrowings: i) Long - term borrowings shal ere as: + Bonds / debentures Term loans - From banks - From other parties * Deferred payment liabilities. * Deposits + Loans and advances from related parties + Long term maturities of finance lease obligations. ‘* Other loans and advances (specify nature) i) Borrowings shall further be sub-classified as secured and unsecured. Nature of security shall be specified separately in each case. Where loans have been guaranteed by directors and others, the aggregate amount of ‘such loans under each head shall be disclosed. iv) Terms of repayment of term loans and other loans shall be stated. v) Period and amount of continuing default as on the balance sheet date in repayment of loans and interest shall be specified separately in each case. d) Other Long Term Li oH Other Long term Liabilities shall be classified as i) Trade payable i) Others, PREPARATION OF FINANCIAL STATEMENTS | 43E 126Coo \WWW.MASTERMINDSINDIA.COM | 98851 25025 /26 @) Long - term provisions: The amounts shall be classified as i) Provision for employee benefits i) Others (specify nature) f) Short - term borrowings: i) Short - term borrowings shall be classified as: Loans repayable on demand - From banks - From Other parties ‘Loans and from related parties + Deposits ‘+Other loans and advances (specify nature) !) Borrowings shall further be sub-classified as secured and unsecured. Nature of security shall be specified separately in each case i) Where loans have been guaranteed by directors or others, the aggregate amount of such loans under each head shall be disclosed. iv) Period and amount of default as on the balance sheet date in repayment of loans and interest shall be specified separately in each case. 9) Other Current liabilities: The amounts shall be classified as: ey i) Current maturities of long term debt; LY ii) Current maturities of finance lease fons. Interest accrued but not due or Swings; iv) Interest accrued and due Qrowings; S ¥) Income received in wean vi) Unpaid dividends Applications money received for allotment of securities and due for refund and interest accrued thereon. Share application money not exceeding the issued capital and to the extent not refundable shall be shown under the head Equity and share application money to the extent not refundable shall be shown under the head Equity and share application money to the extent refundable i.e., the amount in excess of subscription or in case the requirements of minimum subscription are not met, shall be separately shown under ‘Other current liabilities’ vili) Unpaid matured deposits and interest accrued thereon ix) Unpaid matured debentures and interest accrued thereon. x) Other payments (specify nature) Interest on debentures h) Short - term provisions The amounts shall be classified as: i) Provision for employee benefits i) Tangible Assets: i) Classification shall be given as: + Land. + Buildings Others (specify nature) CAINTER | ACCOUNTS] 43E 127* Plant and Equipment. * Office equipment. * Furniture and Fixtures. * Others (specify nature). * Vehicles. ji) Assets under lease shall be separately specified under each class of asset. ili) A reconciliation of the gross and net carrying amounts of each class of assets at the beginning and end of the reporting period showing additions, disposals, acquisitions through business combinations and other adjustments and the related depreciation and impairment losses/reversals shall be disclosed separately. iv) Where sums have been written off on a reduction of capital or revaluation of assets or where sums have been added on revaluation of assets, every balance sheet ‘subsequent to date of such write-off, or addition shall show the reduced or increased figures as applicable and shall by way of a note also show the amount of the reduction or increase as applicable together with the date thereof for the first five years ‘subsequent to the date of such reduction or increase. i) Intangible assets: i) Classification shall be given as: + Goodwill + Brands/trademarks. + Computer software + Mastheads and publishing tiles. © Mining rights. & + Copyrights, and patents and a@f@Witellectual property, rights, services and operating rights. + Recipes, formulae designs, + Licenses and franchise. © Others (specify natures ii) A reconciliation of the gros$ and net carrying amounts of each class of assets at the beginning and end of the reporting period showing additions, disposals, acquisitions through business combinations and other adjustments and the related amortization and impairment lossesireverse shall be disclosed separately. i) Where sums have been written off on a reduction of capital or revaluation of assets or Where sums have been added on revaluation of assets, every balance sheet subsequent to date of such write-off, or addition shall show the reduced or increased figures as applicable and shall by way of a note also show the amount of the reduction or increase as applicable together with the date thereof for the first five years subsequent to the date of such reduction or increase. k) Non-current investments i) Non-current investments shall be classified as trade investments and other investments further classified as: + Investment property; Investments in Equity Instruments; Investments in preference shares Investments in Government or trust securities; Investments in debentures or bonds; Investments in Mutual Funds; Investments in partnership firms Other non-current investments (specify nature) PREPARATION OF FINANCIAL STATEMENTS | 43E 128Coo \WWW.MASTERMINDSINDIA.COM | 98851 25025 /26 Under each classification, details shall be given of names of the bodies corporate (indicating separately whether such bodies are (i) subsidiaries, (ji) associates, (ii) joint ventures, or (iv) controlled special purpose entities) in whom investments have been ‘made and the nature and extent of the investment so made in each such body corporate (showing separately investments which are partly-paid). In regard to investments in the capital of partnership firms, the names of the firms (with the names of all their partners, total capital and the shares of each partner) shall be given. ii) Investments carried at other than at cost should be separately stated specifying the basis for valuation thereof. iii) The following shall also be disclosed: ‘+ Aggregate amount of quoted investments and market value thereof; * Aggregate amount of unquoted investments; * Aggregate provision for diminution in value of investment 1) Long -term loans and advances: i) Long-term loans and advances shall be classified as: * Capital Advances; + Security Deposits; ‘+ Loans and advances to related parties (giving details thereof); ‘+Other loans and advances (specify nature). i) The above shall also be separately wae as’ S + Secured, considered good; «Unsecured, considered good; YY + Doubtful Allowance for bad and doyattihfoans and advances shall be disclosed under the relevant heads separatel S iv) Loans and advances due N rectors or other officers of the company or any of them either severally or jointly with any other persons or amounts due by firms or private companies respectively in which any Director is a partner or a director or a member should be separately stated. m) Other non-current assets: Other non-current assets shall be classified as: i) Long Term Trade Receivables (including trade receivables on deferred credit terms); li) Others (specify nature) Long term Trade Receivables, shall be sub-classified as: » Secured, considered good: > Unsecured considered good; > Doubtful ‘+ Allowance for bad and doubtful debts shall be disclosed under the relevant heads separately + Debts due by directors or other officers of the company or any of them either severally or jointly with any other person or debts due by firms or private companies respectively in which any director is a partner or a director or a member should be separately stated CAINTER | ACCOUNTS] 43E 129n) Current Investments i) Current investments shall be classified as: + Investments in Equity Instruments; ‘* Investment in Preference Shares Investments in government or trust securities; Investments in debentures or bonds; Investments in Mutual Funds; ‘Investments in partnership firms ‘© Other investments (specify nature). Under each classification, details shall be given of names of the bodies corporate (indicating separately whether such bodies are (i) subsidiaries, (i) associates, (i) joint ventures, or (iv) controlled special purpose entities) in whom investments have been made and the nature and extent of the investment so made in each such body corporate (showing separately investments which are partly-paid). In regard to investments in the capital of partnership firms, the names of the firms (with the names of all their partners, total capital and the shares of each partner) shall be given. ii) The following shall also be disclosed: ‘The basis of valuation of individual investments * Aggregate amount of quoted investmepts and market value thereof aN * Aggregate amount of unquoted invest Ww * Aggregate provision made for sn in value of investments. 0) Inventories i) Inventories shall be casstege> + Raw materials; YW * Work-in-progress; + Finished goods; * Stock-in-trade (in respect of goods acquired for trading); + Stores and spares; * Loose tools; + Others (specify nature) i) Goods-in-transit shall be disclosed under the relevant sub-head of inventories. iii) Mode of valuation shall be stated p) Trade Receivables: i) Aggregate amount of Trade Receivables outstanding for a period exceeding six months from the Date they are due for payment should be separately stated. li) Trade receivables shall be sub-classified as: + Secured, considered good; ‘+ Unsecured considered good; © Doubtful iil) Allowance for bad and doubtful debts shall be disclosed under the relevant heads separately. nents; PREPARATION OF FINANCIAL STATEMENTS | 43E 12.10Coo \WWW.MASTERMINDSINDIA.COM | 98851 25025 /26 ® n s) t) iv) Debts due by directors or other officers of the company or any of them either severally or jointly with any other person or debts due by firms or private companies respectively in which any director is a partner or a director or a member should be separately stated, v) Bills receivable Cash equivalents: i) Cash and cash equivalents shall be classified as: * Balances with banks; * Cheques, drafts on hand; + Cash on hand; + Others (specify nature). ji) Earmarked balances with banks (for example, for unpaid dividend shall be separately stated iii) Balances with banks to the extent held as margin money or security against the borrowings, guarantees, other commitments shall be disclosed separately. iv) Repatriation restrictions, if any, in respect of cash and bank balances shall be separately stated. v) Bank deposits with more than 12 months maturity shall be disclosed separately. Short-term loans and advances: © Others (specify nature). ii) The above shall also be sub-cl * Secured, considered EVs © Unsecured, conser Net + Doubtful i) Allowance for bad and doubtful loans and advances shall be disclosed under relevant heads separately. iv) Loans and advances due by directors or other officers of the company or any them either severally or jointly with any other person or amounts due by firms or private companies respectively in which any is a partner or a director a member shall be separately stated. Other current assets (specify nature): This is an_all-inclu incorporates current assets that do not fit into any other asset categories Contingent liabilities and commitments: (To the extent not provided for) heading which i) Contingent liabilities shall be classified as: + Claims against the company not acknowledged as debt; * Guarantees; + Other money for which the company is contingently liable ii) Commitments shall be classified as * Estimated amount of contracts remaining to be executed on capital account and not provided for; CAINTER | ACCOUNTS] 43E 12.41Co \WWW.MASTERMINDSINDIA.COM | 98851 25025 /26 ‘+ Uncalled liability on shares and other investments partly paid ‘+ Other commitments (specify nature) u) The amount of dividends proposed to be distributed to equity and preference shareholders for the period and the related amount per share shall be disclosed separately. Arrears of fixed cumulative dividends on preference shares shall also be disclosed separately. v) Where in respect of an issue of securities made for a specific purpose, the whole or part of the amount has not been used for the specific purpose at the balance sheet date, there shall be indicated by way of note how such unutilized amounts have been used or invested. w) If, in the opinion of the Board, any of the assets other than fixed assets and non-current investments do not have a value on realization in the ordinary course of business at least equal to the amount at which they are stated, the fact that the Board is of that opinion, shall be stated PART - Il - FORM OF STATEMENT OF PROFIT AND LOSS: Name of the Company: Profit and Loss Statement for the year ended: Note] Figures forthe | Figures for the Particulars, No. (current reporting! previous 3 period _| reporting period | ]Revenue from operations 70K 70K I | Other Income rox 20K | Total Revenue (1+ 11) ed 70K IV |Expenses: Cost of materials consumed 20x 20x Purchases of Stock in Trade ed 20K Changes in inventories of finished g 20K 20K Changes in Work in progress and Employee benefits expense Finance costs y Depreciation and amortization expenses Other expenses Total Expenses \V_ | Profit before exceptional and extraordinary items and tax (Ill -IV) vox 20K Vi | Exceptional items ed 20K VIL |Profit before extraordinary items and tax (V - VI) ed 20K VIII | Extraordinary items 20K 20K 1X. | Profits before tax (VII - Vill) xx 20K X | Tax Expense: (1) Current tax od 20K (2) Deferred tax 2x 20K X1_ | Profit (Loss) for the period (IX - X) xxx] xxx| XII |Earnings per equity shar (1) Basic XXX 0x (2) Diluted 20x 20K 8. General instructions on preparation of Profit & Loss Statement: a. In respect of a company other than a finance company revenue from operations Shall disclose separately in the notes revenue from CAINTER | ACCOUNTS] 43E 12.12PIONEER FOR MEC/ CECTO CA/ CMA FINAL fi PANE i) Sale of products; i) Sale of services; Other operating revenues; Less: iv) Excise duty. In respect of a finance company, revenue from operations shall include revenue from: i) Interest; and i) Other financial services Revenue under each of the above heads shall disclose separately by way of notes to accounts to the extent applicable. c. Finance Costs: Finance costs shall be classified as: i) Interest expense; Other borrowing costs; Applicable net gain/loss on foreign currency transactions and translation. d. Other Income: Other income shall be classified as: i) Interest Income (in case of a company ate finance company); Dividend Income; & Net gairvoss onsale of investments iv) Other non-operating income (neteteSiSenses directly attributable to such income) e. Additional Information: S ‘A Company shall disclose by way of notes addi expenditure and income on the following items: i) nal information regarding aggregate > Employee Benefits Expense [separately (i) salaries and wages, (ii) contribution to provident and other funds, (iii) expense on Employee Stock Option Scheme (ESOP) and Employee Stock Purchase Plan (ESPP), (iv) staff welfare expenses] > Depreciation and amortization expense; Any item of income or expenditure which exceeds one per cent of the revenue from operations or Rs.1,00,000, whichever is higher, Interest Income; Interest Expense; Dividend income; Net gain/loss on sale of investments; Adjustments to the carrying amount of investments; Net gain or loss on foreign currency transaction and translation (other than considered as finance cost); > Payments to the auditor as ~ auditor, - for taxation matters, PREPARATION OF FINANCIAL STATEMENTS | 43E 12.13Co \WWW.MASTERMINDSINDIA.COM | 98851 25025 /26 - for company law matters, ~ for management services, - for other services, ~ for reimbursement of expenses; Details of items of exceptional and extraordinary nature;, )) Prior period items; In the case of manufacturing companies, - Raw materials under broad heads. - Goods purchased under broad heads. In the case of trading companies, purchases in respect of goods traded in by the company under broad heads. In the case of companies rendering or supplying services, gross income derived from services rendered or supplied under broad heads. iv) Inthe case of all concems having works in progress, works-in-progress under broad heads. v)_ Expenditure incurred on each of the following items, separately for each items: vi) > > Consumption of stores and spare parts. Power and fuel Rent Repairs to buildings Repairs to machinery Insurance Rates and taxes, excluding, income. Miscellaneous expenses we Dividends from sxbsitsS Srnparies Provisions for losses of subsidiary companies Note: Broad heads shall be decided taking into account the concept of materiality and presentation of true and fair view of financial statements. D. COMPUTATION Of JANAGERIAL REMUNERATION: a) Managerial Remuneration is calculated as a percentage on profi. b) Managerial remuneration payable by a company is governed by various sections (Sec. 197, 198) of the Companies Act, 2013 and Schedule - V under the Companies Act, 2013. ©) Overall Limit: As per Sec. 197, total managerial remuneration payable by a public company, to its directors, including managing director and whole time director, and its manager in respect any financial year shall not exceed 11% of net profits. i) Net profit basing on which the remuneration is payable shall be computed in the manner laid down in Sec. 198 ji) For calculation of Net profits, the remuneration of the directors shall not be deducted from the gross profits. With the approval of central government, the company in general meeting may authorize the payment of remuneration exceeding 11%. d) Indi jual : As per Sec. 197 of Companies Act 2013 CAINTER | ACCOUNTS] 43E 12.14PIONEER FOR MEC/ CECTO CA/ CMA FINAL fi PANE i) The remuneration payable to any one managing director or whole time director or manager shall not exceed 5% of net profits. If there is more than one such director remuneration shall not exceed 10% of net profits to all such directors and manager taken together. The remuneration payable to directors who are neither managing directors nor whole time directors shall not exceed: ‘+ 1% of net profits - If there is a managing director or whole time director or manager. ‘+ 3% of net profits - In any other case e) Provisions of Schedule V of the Companies Act,2013: It consists of totally four parts. Part - | deals with the conditions to be fulfiled for the appointment of a Managing Director (or) Whole time Director (or) Manager without approval of the Central Government. Part - Il deals with remuneration payable to managerial person by companies having profits and having no profits or inadequate profits. Part - Ill specifies the provisions applicable to part I and I Part - IV deals with the Central Government power to relax any rules. f) Part- Il of Schedule - V consists of five sections: Section - |: Remuneration payable by companies having profits: This section specifies that remuneration # ee by companies having profits will be subject to the provisions of Sec. 197 Section - II: Remuneration payable by ra ies having no profits or inadequate profit without central government approvals 5 Maximum Managerial Where the effective capital* is See 1. | Negative or less than 5 OS 60 lakhs 2. _|5 crores and above but less than 100 crores 84 lakhs 3.__|100 crores and above but less than 250 crores 120 lakhs 120 lakhs plus 0.01% of the effective pee | eee oe capital in excess of Rs 250 crores. Notes: 1. Above limits shall be doubled if special resolution is passed by shareholders 2. Itis hereby clarified that for a period less than one year, the limits shall be pro-rated. 3. * Effective Capital: Explanation | - For the purposes of Section II of this Part, Paid-up share capital (excluding share application money or advances against XXX shares) ‘Add: Share premium XXX Reserves and surplus (excluding revaluation reserve) XXX Long-term loans and deposits repayable after one year (Note) XXX Less: Investments (Other than investments held by an investment company) XXX ‘Accumulated losses XXX Preliminary expenses not written off XXX Effective Capital XXX, Note: Long-term loans do not include working capital loans, over drafts, interest due on loans unless funded, bank guarantee, etc., and other short-term arrangements, PREPARATION OF FINANCIAL STATEMENTS | 43E 12.15Co \WWW.MASTERMINDSINDIA.COM | 98851 25025 /26 g) Sec 198: Ascertainment of profit for managerial remuneration: Computation of Net Profits: In computing “Net Profits Treatment Items, ‘A. Credit shall be given for ‘Subsidies received from Government / Public Authority. for B. Credit shall not be given 1. Premium on Issue or Sale of Shares or Debentures. 2. Profit on Sale of Forfeited Shares 3. Profits of capital nature, including profit from sale of whole or part of undertaking(s). 4, Profits from Sale of any Immovable Property or Fixed Assets of Capital Nature (See Note below) 5. Change in carrying amount of an Asset or liability recognised in Equity Reserves, including Surplus in P&L Alc, on measurement of the Asset or Liability at Fair Value, iC. Deductible Items 7. All usual working charges. 2. Directors’ Remuneration. 3. Bonus or Commission Payable to Employees / Technicians, etc. 4. Any tax on excess or abnormal profits notified by Central Govt. 5. Any tax on business profits imposed for special reasons and notified by Central Govt 6. Interest on Debentures issued by the Company. 7. Interest on Mortgages executed by the Company. 8. Interest on Loans & Advances secured by a charge on its Fixed or Floating Assets. 9. Interest on Up Loans and Advances. . (excluding Repairs of capital nature.) 11. Outgoing Sgstucing contribution to Charitable Funds wis to the extent specified ws 123, ie Sation in the manner specified in Schedule ight forward Unabsorbed Losses of earlier years [Loss of lier years mall be computed in accordance with Sec. 198) 14. Compensation or Damages paid on account of any legal liability including a liability arising from a breach of contract. 15. Insurance against risk of meeting liability arising from breach of contracts 416. Bad Debts written off or adjusted. D. Non-deductible Items 4. Income Tax, Super Tax or any other Tax on Income Payable 2. Any compensation, damages or payments made voluntarily 3. Loss of capital nature, including Loss on Sale of part or whole of undertaking(s) other than Loss on Sale of Assets where WDV> Sale Value. 4. Change In carrying amount of an Asset or Liability recognised in Equity Reserves, including Surplus in P & L| Alc, on measurement of the Asset or Liability at Fair Value, Notes: 1. "Remuneration" means any money or its equivalent given or passed to any person for services rendered by him and includes perquisites as defined under the Income Tax Act, 1961 and includes reimbursement of any Direct Taxes to the managerial person 2. A director may receive a fee for each met 1g of the board or a committee thereof, attended by him. But the remuneration referred to above shall not include such fees. It should be noted here that no fee is payable to whole - time director or managing director for attending the meeting of the board or committee thereof, CAINTER | ACCOUNTS] 43E 12.163. The provision of this Section shall not apply to a private company unless it is a subsidiary of a public company. 4. The amount of depreciation to be deducted shall be the amount of depreciation on assets as shown by the books of the company at the end of financial year as per part ‘C’ of Schedule - II of the Companies Act, 2013 5. If any asset is sold or discarded before depreciation has been provided in full, the excess, if any, of the written down value over sale proceeds or scrap value shall be written off in the financial year in which it is sold or discarded. E. DIVIDEND DISTRIBUTION RULES: 1. Meaning of Dividend: a) Dividend ordinarily means that portion of divisible profits or reserves which is distributed among the shareholders of a company according to the no. of shares held by each of them and the rights attached thereto. b) Such a distribution may involve payment of cash i.e. Dividend or may not ie. in the form of Bonus shares. 2. Sources for Dividend Distribution: As per Section 123 (1) dividend shall be declared or paid by a company for any financial year only out of the following a) Out of the profits of the company for that financial year arrived at after providing for depreciation in accordance with the provisions of section 123(2), or and payment of Dividend) Rules,2014, c) Out of both the above; S d) Out of the moneys provided wggstonta Government or any State Government for the payment of dividend by Where the profit on SQ8'of a fixed asset has not been realized; or > Where the profit on sale of fixed assets though realize, the deficiency on revaluation of other assets; or > Where the Articles of Association do not permit distribution of such profit as a dividend. iii) The excess of the value of net assets over the price paid for the acquisition of a business. iv) Profit on re-issue of forfeited shares. v) The credit balance in the Capital Reduction Account Dividend on preference shares: a) Holders of preference shares are entitled to receive a dividend at a fixed rate before any dividend is declared on equity shares. b) But such a right can be exercised subject to there being profits and the Directors recommending payment of the dividend. Dividend on partly paid shares: a) Provision in Articles: Dividend is payable depending on the provision in this regard that there may be in the Articles. b) No Such Provision: i) Insuch a case the amount of dividend payable will be calculated on the amount paid up on shares, and while doing so, the dates on which the amounts were paid must be taken into account. likely to be wiped out by CAINTER | ACCOUNTS] 43E 12.18PIONEER FOR MEC/ CECTO CA/ CMA FINAL fi PANE i) Amount of dividend payment will have to be calculated on nominal portion of the amount paid up on those shares, ii) If and so long as nothing is paid upon any of the shares in the company, dividends may be declared and paid according to the nominal amounts of the shares, iv) In the case of fresh issue of capital, the holders thereof, unless precluded by the terms of issue, are entitled to receive dividend pari passu with the shares already issued, 9. Gi in Advance: Calls paid in advance do not rank for payment of dividend. 10. Payment of Dividend: a) As per Section 124 of the Companies Act, 2013 where a dividend has been declared by a company but has not been paid or claimed within thity days from the date of the declaration to any shareholder entitled to the payment of the dividend, the company shall, within seven days from the date of expiry of the said period of thirty days, transfer the total amount to a special account called the Unpaid Dividend Account. b) If it remains unpaid or unclaimed for a period of seven years from the date of such transfer then the amount shall be transferred by the company along with interest accrued, if any, thereon to the Fund “Investor Education and Protection Fund” established under section 126. 11. Dividend distribution tax: i) DDT is chargeable on any amount declared, distributed or paid as dividends (whether interim or otherwise). a iS i) The dividends chargeable to DDT may be outa rent profits or accumulated profits iii) The rate of DDT is fifteen per cent (exck’ education cess is (2+1) 3%). Note: As per the Finance Act, 2 place of Secondary and Higher education cess, Health and education cess hi introduced @ 4% iv) DDT shall be payable oven NS total income. turcharge of 12% plus secondary and higher income-tax is payable by the domestic company on its v) DDT is payable to the credit of the Central Government within 14 days of declaration, distribution or payment whichever is earliest vi) As per AS 4 (Revised), Final dividend declared after the balance sheet date is recognised in the financial year in which it has been approved by the shareholder, ie., there is no provision for dividend on the balance sheet date (to be disclosed by way of note only) In view of this, DDT on dividend, being directly linked to the amount of the dividend concerned, should also be reflected in the accounts of the same financial year even though the actual tax liability in respect thereof may arise in a different year. viii) _ With effect from 1st Oct, 2014 dividend and income distribution tax is leviable on gross dividend / income and not on the net dividend / income distributed to shareholders and unit holders as per Income- tax Act, 1961. Example: X Ltd., a domestic company, has distributed on 5” April 2015, dividend of Rs. 230 lakh to its shareholders. Compute the Dividend Distribution tax payable by X Lid. Answer: Calculation of Corporate dividend tax Particulars Rs. in lakh. Dividend distributed by X Ltd. 230 ‘Add: Increase for the purpose of grossing up of dividend (15 X230/100-15) Gross dividend IS is Is |S la Is Is PREPARATION OF FINANCIAL STATEMENTS | 43E 12.19WWW.MASTERMINDSINDIA.COM | 98851 25025 / 26 Dividend distribution tax @ 15% [15% of Rs. 270.59 lakh] 40.59 Add: Surcharge @ 12% 4.88 45.47 Add: Health and Education cess @ 4% 1.8188 Dividend Distribution tax 47.2888 closure and Presentation of DDT in Financial Statements Since the DDT liability relates to distribution of profits as dividends which are disclosed as appropriation /allocation of profit in the ‘Notes to Accounts’ of ‘Reserves and Surplus’, it is appropriate that the liability in respect of DDT should also be disclosed therein b) DDT liability should be recognised in the accounts of the same financial year in which the dividend concerned is recognised. ¢) DDT liability should be disclosed separately in the ‘Notes to Accounts’ of ‘Reserves and Surplus’, as follows d) Dividend XX Dividend Distribution tax thereon OOK 000K @) Provision for Dividend Distribution tax should be disclosed separately under the head “Short Term Provisions’ in the balance sheet, PROBLEMS FOR CLASSROOM DISCUSSION PROBLEM 1: State under which head these ACcOURRR ld be classified in Balance Sheet as per ‘Schedule ill of the Companies Act WS ‘Share Application Money received in exces Sees Share Capital. ii) Share Option Outstanding Account i) Unpaid Matured Debentures and int ued thereon. iv) Uncalled Liability on Shares and ot jartly paid investments. v) Calls Unpaid vi) intangible Assets under Development Money received against Share Warrants viii) Long Term Maturity of Finance Lease Obligation ix) Current Maturity of long term Debt x) Claims against the Company not acknowledged as debt. xi) Bank Overdraft, xii) Preliminary Expanses. xii) Employee's earned leave payable on retirement xiv) Cheques / Drafts on hand. xv) Calls - in - Advance. xvi) Bills payables Outstanding expenses xviii) Cheques/drafts on hand xix) Bill Discounted but not yet matured. (SOLVE PROBLEM NO 1 ASSIGNMENT PROBLEMS AS REWORK) Note: CAINTER | ACCOUNTS | 43E 12.20PIONEER FOR MEC/ CECTO CA/ CMA FINAL fi PANE PROBLEM 2: Schedule - III - Operating cycle, WIP disclosure Vasudha Ltd provides following information: i) Raw Material Stock Holding Period: 3.5 months, — Work-in-Progress Holding Period: 1 month Finished Goods Holding Period: 4.5 months, Debtors Collection Period: 6 months You are required to compute the Operating Cycle of Vasudha Ltd, What would happen if the Trade Payables of the Company are paid in 14 months - whether these should be classified as Current or Non-Current Liability? ii) The Management of Kshitij Ltd contents that the Work-in-Progress is not valued since it is difficult to ascertain the same in view of the multiple processes involved. They opine that the value of Opening and Closing Work-in-Progress would be more or less than same, Accordingly, the Management had not separately disclosed the Work-in-Progress in its Financial Statements. Comment in line with Schedule Ill (ANS.: OPERATING CYCLE: 15 MONTHS; I) SCHEDULE it REQUIRES DISCLOSURE OF CHANGES IN INVENTORIES IN WIP IN P&L. 4/0) (SOLVE PROBLEM NO 2,3 ASSIGNMENT PROBLEMS AS REWORK) Note: PROBLEM 3: Sagar Ltd has issued convertible bonds for Rs. 65 Crores which are due to mature on 30th September, 2018. While preparing financial statements for the year e} bond holders will not exercise their option of cor company classify the convertible bond as per r. as on 31st March, 20187 NS Also state, whether classification of conv Gena as per schedule-Ill to the companies Act will changes if the company expects that le bond holders will convert their holdings into equity shares of Sagar Ltd. (A) (N18 (N) - 5M) (SOLVE PROBLEM NO 4 ASSIGNMENT PROBLEMS AS REWORK) . '1* March, 2018, company expects that bonds to equity shares. How should the int of Schedule-III to the Companies Act, 2013 Note: PROBLEM 4: In the financial statements of the financial year 2014-15, Alpha Ltd. has mentioned in the notes to accounts that during financial year, 24,000 equity shares of Rs. 10 each were issued as fully paid bonus shares. However, the source from which these bonus shares were issued has not been disclosed. Is such non-disclosure a violation of the Schedule III to the Companies Act? Comment. (NEW SM) (SOLVE PROBLEM NO 5 ASSIGNMENT PROBLEMS AS REWORK) Note: PROBLEM 5: Futura Ltd. had the following items under the head “Reserves and Surplus” in the Balance Sheet as on 31st March, 20X1 Amount (Rs in lakhs) Securities Premium Account 80 Capital Reserve 60. General Reserve 90. The company had an accumulated loss of Rs 250 lakhs on the same date, which it has disclosed under the head “Statement of Profit and Loss’ as asset in its Balance Sheet. Comment on accuracy of this treatment in line with Schedule III to the Companies Act, 2013. (NEW SM) (MTP N17) (SOLVE PROBLEM NO 6 ASSIGNMENT PROBLEMS AS REWORK) PREPARATION OF FINANCIAL STATEMENTS | 43E 12.21Co \WWW.MASTERMINDSINDIA.COM | 98851 25025 /26 Note: PROBLEM 6: Sumedha Ltd. took a loan from bank for Rs 10,00,000 to be settled within 5 years in 10 equal half yearly installments with interest. First installment is due on 30.09.20X1 of Rs.1,00,000. Determine how the loan will be classified in preparation of Financial Statements of Sumedha Ltd. for the year ended 31® March, 20X1 according to Schedule III (NEW SM) (SOLVE PROBLEM NO 7 ASSIGNMENT PROBLEMS AS REWORK) PROBLEM 7: From the following information, prepare the relevant notes to accounts: Amount (Rs in lakhs) Closing stock of materials 39.8 Closing stock of WIP 200.00 Closing stock of finished goods 400.00 Loose tools 12.00 Stores & spares 8.00 Sundry Debtors 80.00 Provision for doubtful debts 8.00 Premium on Red. of debentures 20.00 Buildings 200.00 Plant and equipment 100.00 Vehicles 25.00 Fumiture and fixtures 30.00 Provision for Depreciation: Buildings 40.00 Plant and equipment S 20.00 Vehicles 5.00 Fumiture and fixtures G&S 3.00 \S” (SOLVE PROBLEM NO 8 ASSIGNMENT PROBLEMS AS REWORK) Note: PROBLEM 8: X Itd .is a group engaged in manufacture and sale of industrial and FMCG products ‘one of their division also deals in leasing of properties mobile towers. the accountant showed the rent arising from leasing of such properties as other income in the statement of profit and loss. Comment whether the classification of the rent income made by the accountant is correct or not in schedule III to the Company Act 2013, (19(n)-5M) (SOLVE PROBLEM NO 9 ASSIGNMENT PROBLEMS AS REWORK) Note: PROBLEM 9: (PRINTED SOLUTION AVAILABLE) The following is the Draft Profit & Loss A/c of Mudra Ltd., the year ended 31" March, 2015: Particulars: ‘Amount Particulars: Amount To Administrative, Selling and 8,22,542| By Balance b/d 5,72,350 distribution expenses To Directors fees 1,34,780 | By Balance from Trading A/c 40,25,365) To Interest on debentures 31,240 |[By Subsidies received from Govt._| _ 2,73,925 [To Managerial remuneration 285,350 [To Depreciation on fixed assets 5,22,543 [To Provision for Taxation 42,42,500 CAINTER | ACCOUNTS] 43E 12.22PIONEER FOR MEC/CECTO CA/CMA FINAL FLA PAT § [To General Reserve 4,00,000 To Investment Revaluation Reserve 12,500 To Balance c/d 14,20,185 48,71,640 48,71,640| Depreciation on fixed assets as per Schedule Il of the Companies Act, 2013 was Rs. 5,75,345 You are required to calculate the maximum limits of the managerial remuneration as per Companies Act, 2013. (A) (NEW SM) (ANS.: PROFIT U/S 198: RS. 27,35,383; MAXIMUM MANAGERIAL REMUNERATION: RS. 3, 2) (SOLVE PROBLEM NO. 10 OF ASSIGNMENT PROBLEMS AS REWORK) CONCEPT QUESTIONS: What would be the impact on the above question? 4. instead of Directors foes It is Director's remuneration. Note: PROBLEM 10: The following extract of Balance Sheet of X Ltd. was obtained: Balance Sheet (Extract) as on 31" March, 2015 Particulars: ‘Amount Liabilities: ‘Authorized capital: 20,000, 14% preference shares of Rs. 100 20,00,000] '2,00,000 Equity shares of Rs.100 each 2,00,00,000 S 2.20,00,000 Issued and subscribed capital: QV 15,000, 14% preference shares of Rs.100 each fay paid 15,00,000_ 4,20,000 Equity shares of Rs.100 each id-up '96,00,000] Share suspense account EN 20,00,000| Reserves and surplus: Capital reserves (Rs. 1,50,000 is revaluation reserve) 7,95,000 Securities premium 50,000] ‘Secured loans: 15% Debentures 65,00,000] Unsecured loans: Public deposits 3,70,000 Cash credit loan from SBI (short term) 4,865,000 [Current Liabilities: Trade Payables 3,45,000 Asset Investment in shares, debentures, etc. 75,00,000] Profit and Loss account 15,25,000 Share suspense account represents application money received on shares, the allotment of which is not yet made. You are required to compute effective capital as per the provisions of Schedule V. Would your answer differ if X Ltd. is an investment company? (A) (NEWSM, SIMILAR: MTP1 M18 (N&O)) (ANS.: WHERE X LTD. IS A NON-NVESTMENT COMPANY RS. 90,40,000, WHERE X LTD. IS AN INVESTMENT COMPANY RS. 1,85,40,000) (SOLVE PROBLEM NO. 11, 12 OF ASSIGNMENT PROBLEMS AS REWORK) PT ‘What would be the impact on the above question? 1. CAR OF Rs.1,20,000 is also given in the question Note: PREPARATION OF FINANCIAL STATEMENTS | 43E 12.23Co \WWW.MASTERMINDSINDIA.COM | 98851 25025 /26 PROBLEM 41: Due to inadequacy of profits during the year ended 31st March, 2015, XYZ Ltd. proposes to declare 10% dividend out of general reserves. From the following particulars, ascertain the amount that can be utilized from general reserves, according to the Companies (Declaration of dividend out of Reserves) Rules, 2014: Particulars Rs, 17,500 9% Preference shares of Rs.100 each, fully paid up 17,50,000 8,00,000 Equity shares of Rs.10 each, fully paid up 80,00,000 General Reserves as on 1.4.2014 25,00,000 Capital Reserves as on 1.4.2014 3,00,000 Revaluation Reserves as on 14.2014 3,50,000 Net profit for the year ended 31st March, 2015 3,00,000 Average rate of dividend during the last five year has been 12% (©) (NEWsM) (ANS: AMOUNT CAN BE UTILIZED FROM RESERVES RS. 6,57,500) (SOLVE PROBLEM NO. 13 OF ASSIGNMENT PROBLEMS AS REWORK) CONCEPT QUESTIONS: What would be the impact on the above question? 1. tt Average rate of dividend during the last five year has boon 9%. 2. if General Reserve balance is Rs.15,00,000 instead of Rs.25,00,000 Note: S PROBLEM 12: X Ltd. proposed to distribute di ‘amounting to Rs. 425 lacs for the year ended 31st March, 2015. The Dividend Distributio bility (@ 17.304%) arises as per Income-tax Act, 1961. In this case, calculate the grossing ividend and separately disclosed the charge for DDT in the ‘Notes to Accounts’ of ‘Reserves (©) (NEW Sm) (ANS: DDT RS. 88.8 'S.) (SOLVE PROBLEM NO. 14 OF ASSIGNMENT PROBLEMS AS REWORK) Note: PROBLEM 13: From the following particulars furnished by Alpha Ltd., prepare the Balance Sheet as. on 31" March 2014 as required by Part |, revised Schedule Ill of the Companies Act. Particulars Debit Rs. | Credit Rs. Equity Share Capital (Face value of Rs. 100 each) '50,00,000! Call in Arrears 5,000 Land & Building 27,50,000' Plant & Machinery 26,25,000| Furniture 2,50,000 General Reserve 10,50,000 Loan from State Financial Corporation 7,50,000 Stock: Raw Materials 2,50,000 Finished Goods 10,00,000 12,50,000 Provision for Taxation 6,40,000 Sundry Debtors 10,00,000 CAINTER | ACCOUNTS] 43E 12.24PIONEER FOR MEC/ CECTO CA/ CMA FINAL fi PANE Advances 2,13,500 Profit & Loss Account 4,33,500| Cash in Hand 150,000 Cash at Bank 12,35,000 Unsecured Loan 6,05,000 Trade payables (for Goods and Expenses) 8,00,000 Loans & advances from related parties 2,00,000 The following additional information is also provided: 4. 10,000 Equity shares were issued for consideration other than cash. 2. Debtors of Rs. 2,60,000 are due for more than 6 months. 3. The cost of the Assets were: Building Rs. 30,00,000, Plant & Machinery Rs. 35,00,000 and Fumiture Rs. 3,12,500 4. The balance of Rs. 7,50,000 in the Loan Account with State Finance Corporation is inclusive of Rs. 37,500 for Interest Accrued but not Due. The loan is secured by hypothecation of Plant & Machinery. 5. Balance at Bank includes Rs. 10,000 with omega Bank Ltd., which is not a Scheduled Bank 6. Transfer Rs 20,000 to general reserve is proposed by Board of directors. Board of directors has declared dividend of 5% on the paid up capital (SOLVE PRGA RD WO. 15,18 OF ASSIGNMENT PROBLEMS AS REWORK) conceer questions: mS gets annn 2 eer pe eee ana omen ag PROBLEM 14: The following is the Trial Balance of Omega Limited as on 31.3.20X2: (Figures in Rs.‘000) Particulars Debit Particulars Credit Land at cost 220| Equity Capital (Shares of Rs. 10 each) 300) Plant & Machinery at cost 770|10% Debentures 200) Trade Receivables ‘96 | General Reserve 130) Inventories (31.3.X2) 86 | Profit & Loss Alo 72| Bank 20| Securities Premium 40| Adjusted Purchases 320|Sales 700) Factory Expenses 60| Trade Payables 52 | Administration Expenses 30 Provision for Depreciation 172 Selling Expenses 30| Suspense Account 4 Debenture Interest 20) Interim Dividend Paid 18 1670 1670) Additional Information: i) The authorized share capital of the company is 40,000 shares of Rs 10 each. The company on the advice of independent valuer wish to revalue the land at Rs 3,60,000. )) Declared final dividend @ 10%. PREPARATION OF FINANCIAL STATEMENTS | 43E 12.25Co \WWW.MASTERMINDSINDIA.COM | 98851 25025 /26 }) Suspense account of Rs 4,000 represents cash received for the sale of some of the machinery on 1.4.20X1. The cost of the machinery was Rs 10,000 and the accumulated depreciation thereon being Rs 8,000. v) Depreciation is to be provided on plant and machinery at 10% on cost. You are required to prepare Omega Limited's Balance Sheet as on 31.3.20X2 and Statement of Profit and Loss with notes to accounts for the year ended 31.3.20X2 as per Schedule Ill. Ignore previous years’ figures & taxation. (©) (NEW SM) (ANS.: BALANCE SHEET TOTAL: RS. 10,82,000) (SOLVE PROBLEM NO. 17 OF ASSIGNMENT PROBLEMS AS REWORK) ‘CONCEPT QUESTIONS: What would be the impact on the above question? 4. If itis given in the additional information that,” On 31% March, the Company issued bonus shares fo shareholders on 1:3, basis. No entry relating fo this has yet been made.” 2. Ifitis given in the additional information that, Bills Discounted but not matured amounted to Rs.2,00,000 Note: PROBLEM 15: (PRINTED SOLUTION AVAILABLE) You are required to prepare a Profit and Loss Account and Balance Sheet from the following Trial Balance extracted from the books of the international Hotels Ltd., on 31° March, 2015, Particulars. Debit (Rs.) | Credit (Rs.) ‘Authorized Capital divided into 5,000 6% Preference Shares of Rs. 100 15,00,000 each and 10,000 equity shares of Rs.100 each Subscribed Capital: Y 5,000 6% Preference Shares of Rs.100 each 5,00,000 Equity Capital Ss 8,05,000 Purchases - Wines, Cigarettes, Cigars etc «© 45,800 Foodstuffs z@ 36,200 Wages and Salaries LS 28,300 Rent, Rates and Taxes 8,900 Laundry 750) Sales - Wines, Cigarettes, Cigars, etc. 68,400 ~Food 57,600] Coal and Firewood 3,290 Carriage and Cooliage 810 ‘Sundry Expenses 5,840 Advertising 8,360 Repairs 4,250 Rent of Rooms 48,000 Billiard 5,700 Miscellaneous Receipts 2,800 Discount received 3,300 Transfer fees 700) Freehold Land and Building 50,000 Fumiture and Fittings 86,300 Stock on hand, 1" April, 2014: Wines, Cigarettes, Cigars etc 72,800 Foodstuffs 5,260 Cash in hand 2,200 Cash with Bankers 76,380 Preliminary and formation expenses 8,000 2,000 Debentures of Rs.100 each (6%) 2,00,000 Profit and Loss Account 41,500) CAINTER | ACCOUNTS] 43E 12.26Trade payables 42,000) Trade receivables 79,260 Investments 2,72,300 Goodwill at cost 5,00,000 General Reserve 2,00,000 19,75,000| _ 49,75,000) [Wages and Salaries Outstanding 1,280 Stock on 31% March, 2015: (Wines Cigarettes and Cigars, ete. 22,500 Foodstuffs 16,400 Depreciation: Furniture and Fittings @ 5% p.a.: Land & Buildings @ 2% pa The Equity capital on 1st April, 2014 stood at Rs.7,20,000, that is 6,000 shares fully paid and 2,000 shares Rs.60 paid. The directors made a call of Rs.40 per share on 1st October 2014. A shareholder could not pay the call on 100 shares and his shares were then forfeited and reissued @ Rs.90 per share as fully paid. The Directors declare a dividend of 8% on equity shares, transferring any amount that may be required from General Reserve. Ignore Taxation. ((Newsm (ANS.: NET PROFIT FOR THE PERIOD RS. 22,245) (SOLVE PROBLEM NO. 18 OF ASSIGNMENT PROBLEMS AS REWORK) ‘CONCEPT QUESTIONS: What would be the impact on the above question? 4. fMarket Value of investments is Rs.2,50,000. 2. If Proliminary Expenses included Rs.2,000 aucit fees. Ye Note: S ~ EU ET eit ata ky PROBLEM NUMBERS TO WHICH SOLUTIONS ARE PROVIDED: 9, 15. PROBLEM NO. 9 Calculation of Net Profit u/s 198 of the Companies Act, 2013: Particulars ‘Amount | Amount Balance from Trading Alc 40,25,365| ‘Add: Subsidies received from Government 2.73,925 42,99,290| Less: Administrative, selling and distribution expenses 822,542 Director's fees 1,34,780 Interest on debentures 31,240 Depreciation on fixed assets as per Schedule Il 5,75,345 | (15,63,907) Profit u/s 198 27,35,383| Maximum Managerial remuneration under Companies Act, 2013 = 11% of Rs.27,35,383 = Rs. 3,00,892 PROBLEM NO: 15 Statement of Profit and Loss of International Hotels Ltd. for the year ended 31st March, 2015 Particulars Note [Amount |._Revenue from operations 1 1,83,200 ,_Other income (Discount received) 3,300) Ill, Total Revenue (I+ I!) 7,86,500 PREPARATION OF FINANCIAL STATEMENTS | 43E 12.27Co \WWW.MASTERMINDSINDIA.COM | 98851 25025 /26 IV. Expenses: Cost of materials consumed 2 25,060) Purchases of Inventory-in-Trade 13, 45,800) Changes in inventories of finished goods work-in-progress and] 44 (9,700) Inventory-in-Trade " Employee benefits expense 5 29,580) Other operating expenses 16 18,000| Selling and administrative expenses 7 14,200 Finance costs 18 12,000) Depreciation and amortization expense 19 21,315) Other expenses 10 8,000 Total expenses 1,64,255 \V._ Profit (Loss) for the period (III - IV) 22,245) Balance Sheet of International Hotels Ltd. as on 31st March, 2015, Particulars Note | Amount Equity and Liabilities 4. Shareholders’ funds ‘a)_ Share capital 7 13,00,000 b)_Reserves and Surplus 2 1,74,745| 2._ Non-current ies a) Long-term borrowings 3 2,00,000 3._Current liabilities a) Trade Payables 4 42,000) b) Other current liabilities 5 13,280 ‘e)_ Short-term provisions 6 94,000 S Total 18,24,025 ASSETS Q 4._Non-current assets e a) Fixed assets SS i) Tangible assets Sw 7 914,985 ii) Intangible assets (Goodwill 5,00,000 b)_Non-current investments 2,72,300 2. Current assets ‘a)_Inventories 8 38,900 b) Trade receivables 19,260 ‘¢) Cash and cash equivalents a 78,580| Total 18,24,025 Notes to Accounts Particulars Amount | Amount 4. Share Capital Equity share capital Authorised: 10,000 Equity shares of Rs. 100 each 10,00,000 Issued & subscribed 8,000 Equity Shares of Rs. 100 each 8,00,000 Preference share capital ‘Authorised: 5,000 6%Preference shares of Rs. 100 each 5,00,000 Issued & subscribed 5,000 6%Preference shares of Rs. 100 each 5,00,000 Total 13,00,000 2._Reserves and Surplus CAINTER | ACCOUNTS] 43E 12.28PIONEER FOR MEC/CECTO CA/CMA FINAL FLA PAT § Capital reserve 5,000 General reserve 2,00,000 Less: Amount used to pay dividend (30,255)|1,69,745 Surplus (Profit & Loss A/c) 22,245) ‘Add: Balance from previous year 41,500 Transfer from General Reserve 30,255 ‘Appropriations Proposed Dividend (94,000) - Profit (Loss) carried forward to Balance Sheet 0 0 Total 4,74,745 3._Long-term borrowings Secured 6% Debentures 2,00,000 Total 2,00,000 4. Trade Payables 42,000) 5._Other current liabilities ‘Wages and Salaries Outstanding 7,280 Interest on debentures 12,000| 13,280 (6. Short-term provisions Proposed dividend Preference Dividend 30,000 Equity Dividend 64,000) Total 94,000 7. Tangible assets ) Freehold land & Buildings 8,50,000 Less: Depreciation Qs (17,000)| _ 8,33,000 Fumiture and Fittings aw 86,300) Less: Depreciation (4.315)| 81,985) Total 9,14,985 8. Inventories Wines, Cigarettes & Cigars, etc. 22,500 Foodstuffs 16,400 Total 38,900| ._ Cash and cash equivalents Cash at bank. 76,380| Cash in hand 2,200 Total 78,580 410. Other expenses Preliminary Expenses 8,000 Total 8,000 14. Revenue from operations Sale of products ‘Wines, Cigarettes, Cigars etc. 68,400) Food 57,600] _ 1,26,000) Sale of services Room Rent 48,000 Billiards 5,700 Miscellaneous Receipts 2,800 Transfer fees 700| 7,200 Total 483,200 12. Cost of materials consumed Opening Inventory 5,260 PREPARATION OF FINANCIAL STATEMENTS | 43E 12.29Co \WWW.MASTERMINDSINDIA.COM | 98851 25025 /26 Add: Purchases during the year 36,200 Less: Closing Inventory (16,400)| 25,060 Total 25,060 13. Purchases of Inventory-in-Trade Wines, Cigarettes etc. 45,800 Total 45,800 14. Changes in inventories of finished goods work-in-progress and Inventory-in-Trade: Wines, Cigarettes etc. Opening Inventory 12,800 Less: Closing Inventory (22,500)| (9.700) Total (9,700). 15. Employee benefits expense ‘Wages and Salaries 28,300) ‘Add: Wages and Salaries Outstanding 1,280| 29,580 Total 29,580, 16. Other operating expenses Rent, Rates and Taxes 8,900 Coal and Firewood 3,290) Laundry 750! Carriage and Cooliage 810 Repairs 4,250 Total 18,000, 17. Selling and administrative expenses ‘Advertising 8,360 ‘Sundry Expenses Ss 5,840 R Total 14,200 48. Finance costs g Interest on Debentures S 42,000) Total 12,000 19. Depreciation and amortization expense. Land and Buildings 17,000) Furniture & Fittings 4,315 21,315 Total 21,315) ASSIGNMENT PROBLEMS PROBLEM 1: State under which head these Accounts should be classified in Balance Sheet as per ‘Schedule ill of the Companies Act i) Share Application Money pending allotment. Revaluation Reserve. i) Proposed Dividend. iv) Bills Receivable. v) Dividend Distribution Tax @ 20% vi) Arrears of Fixed Cumulative Dividends on Preference Shares. vii) Proposed Dividend viii) Debt Balance of Profit & Loss A/c ix) Computer Software under Development CAINTER | ACCOUNTS] 43E 12.30PIONEER FOR MEC/ CECTO CA/ CMA FINAL fi PANE x) Building under construction xi) Uncalled Liability on Partly paid Debentures held as investments. xii) Calls unpaid PROBLEM 2: KAY Ltd is in the process of finalizing its accounts for year ended 31st March, 2014 and furnishes the following information. a) Finished Goods normally are held for 30 days before sale. b) Sales realization from Debtors usually takes 60 days from date of Credit Invoice. ¢) Raw Materials are held in stock to cover one month's production requirements. d) The holding period in respect of Unfinished Goods is 30 days e) Being a monopoly, KAY Ltd enjoys a credit period of 12.5 months from its suppliers who sometimes at the end of their credit period opt for conversion of their dues into long term debt of KAY Ltd. Compute the Operating Cycle of KAY Ltd as per Schedule III of Companies Act. As the suppliers of the Company are paid off after a credit period of 12.5 months should this be part of Current Liability? Would your answer be the same if the Creditors are settled in 330 days? PROBLEM 3: The management of Loyal Ltd. contends that the work in process is not valued since it is difficult to ascertain the same in view of the multiple processes involved. They opine that the value of opening and closing work in process would be or less the same. Accordingly, the management had not separately disclosed work in its financial statements. Comment in line with Schedule II WS (new su FEE are eee crst eee hee ee 2016. While preparing the financial stater for the year ending 3ist March, 2016, it is expected that the FCCB holders will not exerci ption of converting the same to equity shares. How should the company classify the FCCBSN8A 31st March, 2016? Will your answer be different if the company expects that FCCB holders will convert their holdings into equity shares of Astha Ltd.? PROBLEM 5: In the financial statements of the financial year 2014-15, Beta Ltd. has mentioned in the notes to accounts that during financial year, 96,000 equity shares of Rs. 40 each were issued as fully paid bonus shares. However, the source from which these bonus shares were issued has not been disclosed. Is such non-disclosure a violation of the Schedule Ill to the Companies Act? Comment PROBLEM 6: Past Ltd. had the following items under the head “Reserves and Surplus” in the Balance Sheet as on 31st March, 20X1 ‘Amount (Rs in lakhs) ‘Securities Premium Account 160 Capital Reserve 120 General Reserve 180 The company had an accumulated loss of Rs 500 lakhs on the same date, which it has disclosed under the head “Statement of Profit and Loss’ as asset in its Balance Sheet. Comment on accuracy of this treatment in line with Schedule III to the Companies Act, 2013. PROBLEM 7: Ideal Quality Ltd. took a loan from bank for Rs 35,00,000 to be settled within 5 years in 10 equal half yearly installments with interest. First installment is due on 30.09.2019 of Rs.3,50,000. Determine how the loan will be classified in preparation of Financial Statements of Ideal Quality Ltd. for the year ended 31st March, 2019 according to Schedule Il PROBLEM 8: (a) From the following information, prepare the relevant Notes to Accounts: PREPARATION OF FINANCIAL STATEMENTS | 43E 12.31Co \WWW.MASTERMINDSINDIA.COM | 98851 25025 /26 Particulars Gent | Provision for Depreciation, Buildings 400 20 Plant and Equipment 200 40 Vehicles 50 10 Furniture and Fixtures 60 6 Brands 200 20 Computer Software 90 54 (b) Bills discounted but not yet matured 300 Lakhs Share of X Itd of Rs. 10 each, Rs. 8 paid up held as investments. 6 Lakhs, 14% Debentures of Rs. 100 each, Rs. 80 paid up held as Investments. PROBLEM 9: Combine Ltd. is a group engaged in manufacture and sale of industrial and consumer products. One of its division deals with the real estate. The real estate division is continuously engaged i leasing of real estate properties. The accountant showed the rent arising from leasing of real estate as ‘other income’ in the Statement of Profit and Loss. State, whether the classification of the rent income made by the accountant is correct or not in light of Schedule III to the Companies Act. 2013? PROBLEM 10: The following is the Profit and Loss Account of the Lalataksha Papers Ltd for the year ending 31° March. Particulars Rs. Particulars Rs. ‘To Admin Selling & Finance Expenses |_5,75,804|By@alance b/d 4,12,632 To National Defense Fund 20,009 &yBSlance from Trading Account | 38,35,414 To Directors Fees 5480 S8y Interest on Investments 10,964 To Interest on Debentures Pxg80 | By Transfer fee 537 To Managing Director's Remuneration 500| By Profit on Sale of Plant Amount Realized 40,000 ‘To Depreciation of Fixed Assets 4,69,713| Less: Book Value (32,000) 8,000 ‘To Provision for Taxation 11,40,000 To General Reserve 5,00,000| [To Debenture Sinking Fund 4,800 To Investment Revaluation Reserve 9,800 To Balance o/d 11,00,770 42,67,547 42.67,547| As an Auditor you are required to comment on the Managerial Remuneration (ANS: MAXIMUM REMUNERATION PAYABLE TO THE MANAGING DIRECTOR U/S 197: RS.1,25,662; MAXIMUM REMUNERATION PAYABLE UNDER SCHEDULE V: RS.8,00,000) CONCEPT QUESTIONS: What would be the impact on the above question? 4. Winstead of Directors foes it fs Director's remuneration. PROBLEM 44: Kumar Ltd., a non-investment company has been incurring losses for the past few years. The company provides the following information for the current year: (Rs in lakhs) Paid up equity share capital 120) Paid up Preference share capital 20 CAINTER | ACCOUNTS] 43E 12.32PIONEER FOR MEC/CECTO CA/CMA FINAL FLA PAT § Reserves (including Revaluation reserve Rs 10 lakhs) cE) Securities premium 40 Long term loans 40 Deposits repayable after one year 20 [Application money pending allotment 720 Accumulated losses not written off 20 Investments 180) Kumar Ltd. has only one whole-time director, Mr. X. You are required to calculate the amount of maximum remuneration that can be paid to him as per provisions of Part Il of Schedule XIll, if no special resolution is passed at the general meeting of the company in respect of payment of remuneration for a period not exceeding three years, (A) (NEWSM, RTP N17) (ANS.: EFFECTIVE CAPITAL: RS. 1,80,00,000) CONCEPT QUESTIONS: ‘What would be the impact on the above question? 1. Ifin addition Short term deposit of 5 lakhs also given in above question. PROBLEM 42: The following extract of Balance Sheet of Star Ltd. (Non-investment) company was obtained: Balance Sheet (Extract) as on 31st March, 20X1 Particulars, ‘Amount Liabilities: © (Authorized capital: (60,000, 14% preference shares of Rs.100 S 60,00,000] (6,00,000 Equity shares of Rs.100 each J 6,00,00,000 es 6,60,00,000 Issued and subscribed capital '45,000, 14% preference shares of Rs. 1@Qeaeh fully paid 45,00,000| 3,60,000 Equity shares of Rs.100 each, 8-80 paid-up '2,88,00,000) Share suspense account 60,00,000} Reserves and surplus: Capital reserves (Rs. 4,50,000 is revaluation reserve) 5,85,000 Securities premium 1,50,000 Secured loans: 15% Debentures 7,95,00,000 Unsecured loans Public deposits 17,10,000 Cash credit loan from SBI (short term) 3,95,000 Current Liabilities: Trade Payables 10,35,000 Assets: Investment in shares, debentures, etc. 2,25,00,000 Profit and Loss account (Dr. balance) 45,75,000| Share suspense account represents application money received on shares, the allotment of which is not yet made. You are required to compute effective capital as per the provisions of Schedule V. Would your answer differ if Star Ltd. is an investment company? (A) (NEW SM, RTP N16) (ANS.: WHERE STAR LTD. IS A NON-INVESTMENT COMPANY RS.2,71,20,000, WHERE STAR LTD. [S AN INVESTMENT COMPANY RS. 4,96,20,000) CONCEPT QUESTIONS: What would be the impact on the above question? 1. WCRR of Rs.3,00,000is also given in the question. PREPARATION OF FINANCIAL STATEMENTS | 43E 12.33Co \WWW.MASTERMINDSINDIA.COM | 98851 25025 /26 PROBLEM 13: XYZ Ltd. Proposes to declare 10% dividend out of general reserves due to inadequacy of profits in the year ending 31-03-2019. From the following particulars, ascertain the amount that can be utilized from general reserves. According to the companies Rules, 2014: 800,000 Equity shares of Rs.10 each fully paid up 80,00,000] General reserves 25,00,000| Revaluation Reserves 6,50,000 Net profit for the year 1,42,500) Average rate of dividend during the last five years has been 12% (19 (0)- 4M) ‘CONCEPT QUESTIONS: ‘What would be the impact on the above question? 1. Average rate of dividend during the last five year has been 9% 2._ If General Reserve balance is Rs15,00,000 instead of Rs.25,00,000. PROBLEM 14: A company provided Rs.10,00,000 for dividend payment. Is the corporate Dividend tax payable in this case? If yes, please compute corporate dividend and disclose as it would appear in Profit and Loss Account of the company. (C) (Noo) (ANS.: DOT RS. 203,576.47) PROBLEM 15: On 31" March, 2015 Bose and Sen Ltd. provides to you the following ledger balances after preparing its Profit and Loss Account for the year ended 31st March, 2015: Credit Balances: Particulars: ‘Amount Equity shares capital, fully paid shares of Rs. 10 each 70,00,000} General Reserve 15,49,100 Loan from State Finance Corporation (Secured DeReecation of Plant & Machinery —10,50,000) Repayable within one-year Rs. 12,00,000) Loans: Unsecured (Long term) © 847,000 Sundry Creditors for goods & expenses (Pagal? within 6 months) 14,00,000 Profit & Loss Account S 7,00,000 Provision for Taxation 8,16,900 1,33,63,000 Debit Balances: Particulars, ‘Ainount Calls in arrear 7,000 Land 14,00,000 Buildings 20,50,000| Plant and Machinery 36,75,000| Furniture & Fixture 3,50,000 Inventories: Finished goods 14,00,000 Raw Materials 3,50,000 Trade Receivables 14,00,000 Advances: Short-term 2,98,900 Cash in hand 2,10,000 Balances with banks 17,29,000 Preliminary Expenses 93,100] Patents & Trade marks 4,00,000 1,33,63,000 The following additional information is also provided in respect of the above balances: 4. 4,20,000 fully paid equity shares were allotted as consideration for land & buildings. 2. Cost of Building Rs. 28,00,000 CAINTER | ACCOUNTS] 43E 12.34PIONEER FOR MEC/ CECTO CA/ CMA FINAL fi PANE 3. Cost of Plant & Machinery Rs. 49,00,000 Cost of Furniture & Fixture Rs. 4,37,500 4, Trade receivables for Rs. 3,80,000 are due for more than 6 months, 5. The amount of Balances with Bank includes Rs. 18,000 with a bank which is not a scheduled Bank and the deposits of Rs. 5 lakhs are for a period of 9 months. 6. Unsecured loan includes Rs. 2,00,000 from a Bank and Rs. 1,00,000 from related parties. You are not required to give previous year figures. You are required to prepare the Balance Sheet of the Company as on 31% March, 2015 as required under Schedule III of the Companies Act, 2013. (6) (NEW SM) (ANS.: BALANCE SHEET TOTAL: RS.1,32,62,900) CONCEPT QUESTIONS: ‘What would be the impact on the above question? 1.__Ifitis given inthe additional information that, Bills Discounted but not matured amounted to Rs.2,00,000. PROBLEM 16: On 31" March, 2018, SR Ltd. Provides the following ledger balances after preparing its profit and loss account for the year ended 31 March, 2018. Particulars ‘Amount (Rs.) Debit Credit Equity share capital, fully paid shares of Rs.50 each 80,00,000 Calls in arrear 15,000 Land 25,00,000| Buildings 30,00,000| Plant & Machinery 24,00,000| Furniture & Fixture WS 13,00,000 ‘Securities Premium 15,00,000 General Reserve 9,41,000 Profit & Loss Account 5,80,000 Loan from Public Finance Corporation (SeqleGpy Hypothecation of Land) 26,30,000 Other Long-Term Loans 22,50,000 ‘Short Term Borrowings S 4,60,000 Inventories: Finished goods 45,00,000) Raw materials 13,00,000 Trade Receivables 17,50,000 ‘Advances: Short Term 3,75,000 Trade Payables 8,13,000 Provision for Taxation 3,80,000 ‘Unpaid Dividend 70,000 (Cash in Hand 70,000] Balances with Banks 414,000) 1,76,24,000|1,76,24,000 The following additional information was also provided in respect of the above balances: 1. 50,000 fully paid equity shares were allotted as considered for land. 2. The cost of assets were: Building Rs.32,00,000 Plant and Machinery Rs.30,00,000 Furiture and Fixture Rs. 16,50,000 3. Trade Receivables for Rs.4,86,000 due for more than 6 months. 4. Balances with banks include Rs. 56,000 with Naya Bank, which is not a scheduled bank. 5. Loan from Public Finance Corporation repayable after 3 years. PREPARATION OF FINANCIAL STATEMENTS | 43E 12.35Co \WWW.MASTERMINDSINDIA.COM | 98851 25025 /26 The balance of Rs.26,30,000 in the loan amount with public finance corporation is inclusive of Rs. 1,34,000 for interest accrued but not due. The loan is secured by hypothecation of land. 7. Other long term loans (unsecured) includes: Loan taken from Nixes Bank Rs.13,80,000 (Amount repayable within one year Rs.4,80,000) Loan taken from Directors Rs.8,50,000, 8. Bills receivable for Rs. 1,60,000 maturing on 15th June, 2018 has been discounted. 9. Short term borrowings includes: Loan from Naya bank Rs.1,16,000 (Secured) Loan from directors, Rs. 48,000 10. Transfer of Rs. 35,000 to general reserve has been proposed by the board of directors out of the profits for the year. 11. Inventory of finished goods includes loose tools costing Rs.5 lakhs (which do not meet definition of property, plant & equipment as per AS - 10) You are required to prepare the Balance sheet of the company as on March 31%, 2018 as required under Part - | of schedule Ill of the companies Act, 2013, You are not required to give previous year figures. (18 0)- 16M) (ANS.: BALANCE SHEET TOTAL: RS. 1,76,09,000) CONCEPT QUESTIONS: What would be the impact on the above question? 1. Ifthe Loose toots met the definition of PPE as per AS-10. PROBLEM 17: Ring Ltd. was registered with a nor pital of Rs 10,00,000 divided into shares of Rs 100 each. The following Trial Balance is extr; ym the books on 31st March, 20X2: Particulars Rs Particulars Rs. Buildings S000 |Sales 10,40,000 Machinery 000 | Outstanding Expenses 4,000 Closing Stock ‘\¥,80,000 | Provision for Doubtful Debts 6,000 Loose Tools 46,000} (1-4-20X1) Purchases (Adjusted) 4,20,000| Equity Share Capital 4,00,000| Salaries 1,20,000| General Reserve 80,000 Directors’ Fees 20,000|Profit and Loss Alc 50,000 Rent 52,000) (1-4-20X1) Depreciation 40,000} Creditors 1,84,000) Bad Debts 12,000| Provision for depreciation: Investment 2,40,000|On Building 1,00,000 Interest accrued on investment 4,000|On Machinery 1,10,000 2,10,000| Debenture Interest 56,000) 14% Debentures 4,00,000 [Advance Tax 1,20,000| interest on Debentures accrued but| 28,000] not due ‘Sundry expenses 36,000| interest on Investments 24,000] Debtors 2,50,000| Unclaimed dividend 10,000 Bank 60,000 24,36,000! 24,36,000! You are required to prepare statement of Profit and Loss for the year ending 31° March, 20X2 and Balance sheet as at that date after taking into consideration the following information: CAINTER | ACCOUNTS] 43E 12.36PIONEER FOR MEC/CECTO CA/CMA FINAL FLA PAT § a) Closing stock is more than opening stock by Rs 1,60,000; b) Provide to doubtful debts @ 4% on Debtors; c) Make a provision for income tax @ 30%. 4d) Depreciation expense included depreciation of Rs 16,000 on Building and that of Rs 24,000 on Machinery, e) The directors declared a dividend @ 25% and transfer to General Reserve @ 10%. f) Bills Discounted but not yet matured Rs 20,000. (©) (NEW SM, SIMILAR: RTP M17) (ANS.: NET PROFIT FOR THE PERIOD RS.2,12,800) CONCEPT QUESTION: ‘What would be the impact on the above question? 4. Ifthe market value of investment is Rs.2,0,000? 2. Ian adltonal points given that, Company had a contract forthe erection of machinery a Rs.100,000 which fs stil incomplete. PROBLEM 48: Preparation of Financial Statements: You are required to prepare financial statements from the following trial Balance of Haria Chemicals Ltd. for the year ended 31" March, 2015. Haria Chemicals Ltd. Trial Balance as at 31% March, 2015 Particulars: i Particulars Rs. Stock 6,80,000| Equity Share Capital 25,00,000| (Shar@aef Rs.10 each) Furniture 2,00,000| 14% Bebentures 5,00,000 Discount 40, 0004828 loans. 6,45,000 Loan to Directors 80,090) rade payable 2,81,000 ‘Advertisement 20098] Sales 42,68,000 Bad debts SW8S00/Rent received 46,000 Commission ‘NW¥0,000| Transfer fees 40,000} Purchases 23,19,000| Profit and Loss A/c 1,39,000 Plant and Machinery 8,60,000| Depreciation provision: Rentals 25,000|Machinery 1,46,000 Current account 45,000 Cash 8,000) Interest on bank loans 1,16,000) Preliminary expenses 10,000] Fixtures 3,00,000 | Wages 9,00,000 Consumables 84,000) Freehold land 15,46,000, Tools & Equipments 2,45,000 Goodwill 2,865,000) Trade receivables 4,40,000) Dealer aid 21,000 Transit insurance 30,000) Trade expenses 37,000| Distribution freight 54,000) Debentures interest 55,000| 85,35,000) 85,35,000, PREPARATION OF FINANCIAL STATEMENTS | 43E 12.37MASTER MINDS a Additional information: Closing stock on 31.03.2015: Rs.8,23,000. () (NEWS) (ANS.: TOTAL OF BALANCE SHEET: RS.46,86,000) WWW.MASTERMINDSINDIA.COM | 98851 25025 / 26 CONCEPT QUESTION: What would be the impact on the above question? 4. Preliminary expenses include Rs.3,000 aut fee. PER ald PROBLEM 4: State giving reason whether the Trade Receivables are Current Assets or Non — Current Assets as per schedule II! in the following cases. Case Operating Cycle Period | Expected Realisation Period 1 11 Months 10 Months 2 17 Months 12 Months 3 14 Months 13 Months 4 14 Months 13 Months 5 14 Months 15 Months PROBLEM 2: State giving reason whether the Trade Payables are Current Liabilities or Non — Current Liabilities as per Schedule III in the following cases: Case ‘Operating Cycle Period | Expected Realisation Period 1 11 gatas 10 Months 2 Anas 12 Months 3 WWoonths 13 Months 4 14 Months 13 Months 5 AS" 14 Months 13 Months PROBLEM 3: H Ltd. engaged in Wrsiness of manufacturing lotus wine. The process of manufacturing this wine takes around 18 months. Due to this reason H Ltd. has prepared its financial statements considering its operating cycle as 18 months and accordingly classified the raw material purchased and held in stock for less than 18 months as current asset. Comment on the accuracy of the decision and the treatment of the asset by H Ltd., as per the Schedule Il PROBLEM 4: X Ltd paid Rs. 25 Lakhs as advance to Y Ltd. towards the purchase of printing machinery on 15-01-2018 with delivery instruction to deliver the same in the last week of June, 2018.Further on 15-02-2018 X LTD. Purchased two diesel generator sets from Y Ltd. For Rs.30 Lakhs on 90 Days credit term. In the accounts for 2017-2018, X Ltd. Intends to adjust the advance paid against credit purchased and show the net amount of R’s.5 lakhs as due from them. Comment. PROBLEM 5: The Managing Director of Anil Ltd. is entitled to 5% of the annual net profits, as his, remuneration, subject to a minimum of Rs. 25,000 per month. The net profits, for this purpose, are to be taken without charging income-tax and his remuneration itself. During the year, Anil Ltd. made net profit of Rs. 43,00,000 before charging MD's remuneration, but after charging provision for taxation of Rs. 17,20,000. Compute remuneration payable to the Managing Director. (a) MTP N18) (ANS.: MANAGERIAL REMUNERATION RS.3,01,000) PROBLEM 6: From the following particulars furnished by Pioneer Ltd., prepare the Balance Sheet as at 31" March, 2012 as required by part |, schedule III of the Companies Act, 2013. Give notes at the foot of the Balance Sheet as may be found necessary. Particulars Debit (Rs) | Credit (Rs) Equity Capital (Face value of Rs.100) 10,00,000 CAINTER | ACCOUNTS | 43E 12.38PIONEER FOR MEC/ CECTO CA/ CMA FINAL fi PANE Calls in Arrears 1,000) Land 2,00,000 Building 3,50,000 Plant and Machinery 5,25,000 Furniture 50,000 General Reserve 2,10,000 Loan from State Financial Corporation 1,50,000 Stock: Finished Goods 2,00,000 Raw Material 50,000 2,50,000 Provision for Taxation 68,000) Trade receivable 2,00,000 Advances 42,700) Dividend payable 60,000) Profit and Loss Account 86,700 Cash Balance 30,000 Cash at Bank 2,47,000 Loans (Unsecured) 1,21,000 Trade payables (For Goods and Expenses) 2,00,000 18,95,700 18,95,700 The following additional information is also provided: 4. 2,000 Equity Shares were issued for consideration ran cash. 2. Debtors of Rs. 52,000 are due for more than ee 3. The cost of assets: gy Buildings Rs.4,00,000; Plant and Machi 7,00,000; Furniture Rs. 62,500 4, The Balance of Rs. 1,50,000 in the loge SScount with State Finance Corporation is inclusive of Rs. 7,500 for interest accrued but not he loan is secured by hypothecation of the Plant and Machinery, 5. Balance at Bank includes Rs. 2,000 with Perfect Bank Ltd., which is not a Scheduled Bank. 6. The company had contract for the erection of machinery at Rs.1,50,000 which is still incomplete. (C) (NEW Sm) (ANS.: TOTAL OF BALANCE SHEET RS. 18,94,700) PROBLEM 7: The following balance appeared in the books of Oliva Company Ltd. as on 31-03-2019. Particulars: RS. Particulars Rs. Inventory 01-04-2018 Sales 17,10,000 -Raw Material 30,000 Interest 3,900 -Finished goods 46,500| _76,500|Profit and Loss Alc 48,000 Purchases 12,15,000| Share Capital 3,15,000 ‘Manufacturing Expenses 2,70,000| Secured Loans: Short-term 4,500 Long-term 21,000 25,500] Salaries and wages 40,200| Fixed Deposits (unsecured) Short -term 1,500) Long - term 3,300 4,800 General Charges 16,500| Trade payables 3,27,000 PREPARATION OF FINANCIAL STATEMENTS | 43E 12.39