TUTOR MARKED ASSIGNMENT
Course Code: ECO - 14
Course Title: Accountancy - II
Assignment Code: ECO – 14/TMA/2015-16
Coverage: All Blocks
Maximum Marks: 100
Attempt all the questions.
1. (a)
Give specimen of company’s balance sheet as per part I of schedule VI of Indian
Companies Act, 1956. (10×2)
Ans:
Format of Company’s balance sheet:
Proforma
of Balance Sheet
Name of
the Company …………………………………….
Balance
Sheet as at……………………………………..
Particulars
|
Note
No.
|
Amount
(Current
Year)
|
Amount
(Previous
Year)
|
I. EQUITY
AND LIABILITIES
(1) Shareholders’ Funds
(a) Share
capital
(b) Reserves
and surplus
(c) Money
received against share Warrants
(2) Share application money pending
allotment
(3) Non – current liabilities
(a) Long term
borrowings
(b) Deferred
tax liabilities (net)
(c) Other long
term liabilities
(d) Long term
provisions
(4) Current liabilities
(a) Short term
borrowings
(b) Trade
payables
(c) Other
current liabilities
(d) Short term
provisions
|
|||
Total
|
|||
II ASSETS
(1) Non-Current
Assets
(a) Fixed
assets
(i) Tangible
assets
(ii) Intangible
assets
(iii) Capital
work in progress
(iv) Intangible
assets under development
(b) Non-current
investments
(c) Deferred
tax assets (net)
(d) Long term
loans and advances
(e) Other
non-current assets
(2) Current
Assets
(a) Current
investments
(b) Inventories
(c) Trade
receivables
(d) Cash and
cash equivalents
(e) Short term
loans and advances
(f) Other
current assets
|
|||
Total
|
(b) Differentiate between Profit
& Loss Account and Profit & Loss Appropriation Account.
Ans: Profit
and loss account records all the operating and non operating incomes and
expenses and incomes to arrive at net profit. This is Net Profit before tax. Further,
we record provision for tax on the debit side of the Profit and loss account
and get net profit after tax. Profit and Loss Appropriation account show the
appropriation of profit. In case of Companies, only transfer to the various
reserves and proposed dividend is recorded on the debit side. Whereas, on the
credit side appears Net profit after tax brought down from the profit and loss
account and the balance brought down from the last year's profit and loss
appropriation account. Some of the important difference of profit and loss
account and profit and loss appropriation account are given below:
Profit
and loss account
|
Profit
and loss appropriation account
|
It is prepared
to show operating efficiency of a firm.
|
It is prepared
for distribution of profit.
|
It is prepared
after trading.
|
It is prepared
after the preparation of profit and loss account.
|
Profit and loss
account is not dependent on profit and loss appropriation account.
|
Profit and loss
appropriation account is dependent of profit and loss account.
|
Sales and/or
Service Revenue, Other income, Operating, Administration, marketing/Selling
& other expenses for the period are shown in the P&L A/c
|
Transfer of
Profit to Reserves, Proposed Dividend, Taxes, etc., is shown in Profit and
loss Appropriation A/c
|
It is prepared
on accrual basis of accounting.
|
It is not
prepared on accrual basis of accounting.
|
In the vertical
format P&L A/c items are referred to as
'Above the Line' items |
In the vertical
format P&L Appropriation items are
referred to as 'Below the Line' items. |
Profit and loss
account is known as income statement.
|
Profit and loss
appropriation account is known as statement of retained earnings.
|
2. X Ltd. sends goods to its
Karnal branch at cost plus 25%. All expenses are paid by H.O. From the
following particulars you are required to show Branch Debtors Account, Branch
Stock Account, Stock Adjustment Account and Branch Profit & Loss Account in
the books of Head Office:
Particulars
|
Amount (Rs.)
|
Opening Stock
|
36,000
|
Closing Stock
|
42,000
|
Opening Debtors
|
27,500
|
Closing Debtors
|
41,100
|
Goods Supplied to Branch
|
1,94,000
|
Cash received from Customers
|
98,800
|
Bad Debts
|
6,000
|
Discount
|
1,600
|
Expenses
|
5,200
|
Cash Sales
|
58,400
|
Goods returned by Branch
|
8,000
|
Branch’s Furniture (Provide 20% Depreciation)
|
10,000
|
Ans:
Branch
Stock A/c
To
Balance b/d
To
Goods sent to Branch A/c
|
36,000
1,94,000
|
By
Goods sent to Branch A/c (Return)
By
Branch Cash A/c (Cash Sales)
By
Branch Debtors A/c (Credit Sales)
By
Shortage of Goods A/c
By
Balance c/d
|
8,000
58,400
1,20,000
1,600
42,000
|
2,30,000
|
2,30,000
|
Branch
Debtors A/c
To
Balance b/d
To Branch
Stock (Credit Sales)
|
27,500
1,20,000
|
By
Cash
By Bad
Debts
By Discount
By
Balance c/d
|
98,800
6,000
1,600
41,100
|
1,47,500
|
1,47,500
|
Branch
Adjustment A/c
To
Stock Reserve A/c ( 42,000x25/125)
To
Shortage of goods A/c ( 1,600x25/125)
To
Gross Profit
|
8,400
320
35,680
|
By
Goods sent to Branch A/c (1,86,000x25/125)
By
Stock reserve A/c( 36,000x25/125)
|
37,200
7,200
|
44,400
|
44,400
|
Branch
P/L Account
To
Expenses
To
Depreciation on furniture
To Bad
Debt
To
Discount
To
Shortage of goods (Cost) ( 1,600 - 320)
To Net
Profit
|
5,200
2,000
6,000
1,600
1,280
19,600
|
By
Gross Profit
|
35,680
|
35,680
|
35,680
|
3. M/s Raj and Bros. purchased a
motor car from Sanjaya Automobiles on 1st Jan. 2012 on the hire-purchase
system. The cash price of the motor car was Rs. 11,170. Rs. 3,000 was to be
paid on signing the agreement and the balance in the three annual installments
of Rs. 3,000 each. Interest @ 5% p.a. is charged by the vendor. The purchaser
had decided to write off 10% depreciation annually on the written down value
method. The purchaser could not pay off the installment due on 31st Dec., 2013
and as a result of this, the vendor took possession of the motor-car and the
vendor estimated its value Rs. 5,500 and spent Rs. 400 on it. Later on, this
motor-car was sold for Rs. 6,400. Prepare necessary accounts in the books of
both the parties. (20)
Ans:
In the Books of Sanjaya Automobiles
M/S Raj & Bros.
1-1-2
31-12-12
1-113
31-12-13
|
To H.P.Sales A/C
To Interest A/C (8170ᵡ5%)
To Balanced
TO Mutual A/C
|
11,170
409
|
1-1-12
31-12-12
31-12-12
31-12-13
31-12-13
|
By Bank A/C (Down
Payment)
By Bank A/C (1st
installment)
By Balance c/d
By Goods repossessed A/C
By Balanced
|
3,000
3,000
5579
|
11, 579
|
|||||
11, 579
|
5500
358
|
||||
5579
279
|
|||||
5858
|
5858
|
Goods Repossessed A/C
31-12-13
31-12-13
31-12-13
|
TO M/S Raj & Bros
To Bank A/C (Experts)
To Profit loss A/C (profit Sale)
|
5500
400
5500
|
31-12-13
|
By Bank A/C ( Sale of goods repossessed)
|
6,400
|
6,400
|
6,400
|
In the Books of M/S
Raj and Bros
Sanjaya Automobiles
1-1-12
31-12-12
31-12-12
31-12-13
31-12-13
|
TO Bank A/C ( Down payment)
To Bank
To Balanced
To Motor Car A/C
To Balanced
|
3,000
3,000
5,579
|
1-1-12
31-12-12
1-1-13
31-12-13
|
By Motor-Car A/C
By Motor-Car A/C (8170ᵡ5%)
BY Balanced
By interest
|
11,170
409
|
11,579
5500
358
|
11,579
5579
279
|
||||
5,858
|
5,858
|
Motor Car Account
1-1-12
1-1-13
|
To Sanjaya Automobiles
To Balanced
|
11,170
|
31-12-13
31-12-13
31-12-13
31-12-13
31-12-13
|
By Reprising A/C
(11,170ᵡ10%)
By Balanced
By Reprising A/C
(10053ᵡ10%)
By Sanjaya Automobiles
By Profit& loss A/C
|
1,117
10,053
|
11,170
10,053
|
11,170
5500
3548
|
||||
10,053
|
10,053
|
4. Why are assets and
liabilities revalued at the time of admission of a new partner? Prepare a
Revaluation Account with the help of imaginary figures. (20)
Ans: Revaluation
of Assets and Liabilities on admission of a new partner:
Whenever a new partner is admitted, it is desirable to
revalue the assets and liabilities of the firm to show them at their true and
fair values. Revaluation of assets and liabilities is necessary because with
the passage of time the value of some assets might have been increased while
the value of some assets might have been decreased; the same is the case with
the liabilities. Generally, no adjustments are made in this respect. Therefore,
the actual values of various assets and liabilities may be different from the
values stated in the balance sheet. It is, therefore, desirable from the point
of view of the new partner as well as old partners the value of assets and
liabilities should be revalued.
For the purpose of revaluation, a separate account is opened
which is called Revaluation Account. It is a nominal account. The Revaluation
account is credited if there is an increase in the value of assets or decrease
in the value of liabilities. On the other hand it is debited if there is any
decrease in the value of assets or an increase in the value of liabilities.
This account is a nominal account and is sometimes also called Profit and Loss
adjustment account. The profit or Loss arising due to revaluation is divided
among the old partners in their old ratio. A Proforma of revaluation account is
given below:
Revaluation Account
Particulars
|
Amount
|
Particulars
|
Amount
|
Assets [decrease in
value]
Liabilities [increase in
value]
Liabilities[unrecorded]
Profit transferred
to Capital A/c
[Individually in existing
ratio]
|
Assets [Increase in
value]
Liabilities[Decrease in
value]
Assets [unrecorded]
Loss transferred to
Capital A/c
[Individually in existing
ratio]
|
Example of Revaluation Account
Manu and Tanu are partners sharing profit and losses in the
ratio of 5:4. Their Balance Sheet was as
follows:
Balance Sheet of Manu and Tanu as on December 31, 2013
Liabilities
|
Amount
(Rs.)
|
Assets
|
Amount
(Rs.)
|
Creditors
Bills Payable
Capital:
Manu
Tanu
|
10,000
7,000
40,000
30,000
|
Cash in hand
Building
Machinery
Investments
Debtors
Stock
|
7,000
30,000
20,000
10,000
10,000
10,000
|
87,000
|
87,000
|
Nikhil is admitted as a partner and assets are revalued and
liabilities reassessed as follows:
(i) Create a Provision for doubtful
debt on debtors at Rs.800.
(ii) Building and investment are appreciated
by 10%.
(iii) Machinery is deprecated by 5%
(iv) Creditors were overestimated
by Rs.500.
Prepare revaluation account on the admission of Nikhil.
Revaluation Account
Particulars
|
Amount
|
Particulars
|
Amount
|
To Provision for doubtful debts
To Machinery
To Profit on Revaluation
- Manu = (2700*5/9)
- Tanu = (2700*4/9)
|
800
1,000
1,500
1,200
|
By Building
By Investments
By Creditors
|
3,000
1,000
500
|
4,500
|
4,500
|
5. Write short notes on the
following: (4×5)
(a) Pro-rata Allotment of Shares
Ans:
There are instances when applications for more shares of a company are received than
the number offered to the public for subscription. This usually happens in respect
of share issues of well-managed and financially strong companies and is
said to be a case of ‘Over Subscription’.
In such a condition, three alternatives are available to the
directors to deal with the situation:
(1) they can accept some applications in full and totally
reject the
others;
(2) they can make a pro-rata allotment to all; and
(3) they can adopt a combination of the above two alternatives
which happens to be the most common course adopted in practice.
When the directors opt to make a
proportionate allotment to all applicants (called ‘pro-rata’ allotment), the
excess application money received is normally adjusted towards the amount due
on allotment. In case, the excess application money received is more than the
amount due on allotment of shares, such excess amount may either be refunded or
credited to calls in advance.
For example, in the event of applications for 20,000 shares
being invited and those received are for
25,000 shares, it is decieded to allot shares in the
ratio of 4:5 to all applicants. It is a case of pro-rata allotment and
the excess application money received on
5,000 shares would be adjusted towards the amount
due on the allotment of 20,000 shares.
(b) Issue of shares at discount
Ans: When Shares are issued at a
price lower than their face value, they are said to have been issued at a discount.
For example, if a share of Rs 100 is issued at Rs.90, then
such an issue is called issue of shares at a discount. As a
general rule, a company cannot ordinarily issue shares at a discount, except in
case of ‘reissue of forfeited shares’ and in accordance with the provisions of
Companies Act. But according to Section 59 of company act 2013, a company is
permitted to issue shares at discount provided the following conditions are
satisfied: -
a) The issue
of shares at a discount is authorised by a resolution passed by the company in
its general meeting and sanctioned by the Central Government.
b) Maximum
rate of discount must not exceed 10 per cent of the nominal value of shares.
The rate of discount can be more than 10 per cent if the Government is
convinced that a higher rate is called for under special circumstances of a
case.
c) At least
one year must have elapsed since the company was entitled to commence the
business.
d) The shares
are of a class, which has already been issued.
e) The shares
are issued within two months from the date of sanction received from the
Government.
(c) Re-issue of forfeited shares
Ans: Forfeited shares are the property of the company. If an
article of association of a company permits, the board of directors can reissue
these forfeited shares to the third party not to the defaulting shareholders.
All the forfeited shares can be reissued at a time or they may be reissued in parts. Similarly, these shares may be reissued at par or premium or discount. Again, the amount of such reissue is collected in jump sum but not in installment.
All the forfeited shares can be reissued at a time or they may be reissued in parts. Similarly, these shares may be reissued at par or premium or discount. Again, the amount of such reissue is collected in jump sum but not in installment.
Procedure
for reissue of forfeited shares
1. The forfeited shares may then be disposed by sale or in any other manner
as directed by the Board.
2. Short particulars of reissued shares will be advised to the stock
exchange concerned.
3. To give effect to the sale of forfeited shares, the Board will authorise
some person, preferably the director or Secretary, to transfer the shares sold
to the purchaser thereof and to make a declaration in connection therewith.
4. The defaulting members will be asked to return the share certificates.
If they fail to do so fresh certificates will be issued.
5. Public and stock exchange will be advised not to deal with the old
certificates.
6. Any surplus arising out of sale after adjusting the amount due to the
company in respect of the shares will be refunded to the member concerned.
(d) Over subscription of shares
Ans: There
are instances when applications for more shares of a company are received than the number offered to the public
for subscription. This usually happens in
respect of share issues of well-managed and financially strong companies
and is said to be a case of ‘Over
Subscription’.
In such a condition, three alternatives are available to the
directors to deal with the
situation:
(1) they can accept some applications in full and totally reject the others;
(2) they can make a pro-rata allotment to all; and
(3) they can adopt a
combination of the above two alternatives which happens to be the most common course adopted in practice.
The problem of over subscription is resolved with the allotment of
shares. Therefore, from the
accounting point of view, it is better to place the situation of over subscription within the total
frame of application and allotment, i.e. receipt of application amount, amount due on allotment and its receipt
from the shareholders, and the same
has been observed in the pattern of entries.