Company Final Accounts

Illustrations

1) Due to inadequacy of profits during the year ended 31 st March 2020, 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.

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 01.04.2019 25,00,000
Capital Reserves as on 01.04.2019 3,00,000
Revaluation Reserves as on 01.04.2019 3,50,000
st
Net profit for the year ended 31 March, 2020 3,00,000
Average rate of dividend during the last three years has been 12%

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2) On 1st April, 2014 the subscribed share capital of Surya Ltd. stood at Rs.12.5 crore divided into 1 crore fully paid
equity shares of Rs.10 each and 2.5 lakh fully paid 12% Preference shares of Rs.100 each. On the same date Profit and
loss Account showed an opening balance of 1.42 crore.

During the year ended 31st March 2015, the company paid an interim dividend @10% on its equity shares also paid
preference dividend for the entire year 2014-15. On 31 st March 2015 the company’s Profit & Loss A/c showed that the
company had earned for the year 3.70 crore as profit after tax. The Board of Directors decided to transfer 60lakhs to
Debenture Redemption Reserve and 10% of the Net Profit for the year to general reserve. The board also declared a final
dividend @11% on equity shares over and above the interim dividend. Show notes to account for Surplus i.e. balance in
statement of Profit and Loss.

1. Net Profit for the year after tax: Rs. 3.70 crore
2. Interim Dividend on Equity Shares: 10% of the total equity share capital (1 crore
shares at Rs. 10 each)

Interim Dividend on Equity Shares = 10% of (1,00,00,000 shares * Rs. 10 per share) =
Rs. 10,00,000

3. Preference Dividend: 12% of the total preference share capital (2.5 lakh shares at
Rs. 100 each)

Preference Dividend = 12% of (2,50,000 shares * Rs. 100 per share) = Rs. 3,00,000
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 4. Transfer to Debenture Redemption Reserve: Rs. 60 lakhs
5. Transfer to General Reserve: 10% of the Net Profit

Transfer to General Reserve = 10% of Rs. 3.70 crore = Rs. 37,00,000

6. Final Dividend on Equity Shares: 11% of the total equity share capital

Final Dividend on Equity Shares = 11% of (1,00,00,000 shares * Rs. 10 per share) = Rs.
11,00,000

Now, let's calculate the surplus balance in the statement of Profit and Loss:

Net Profit after Tax: Rs. 3.70 crore Less: Interim Dividend on Equity Shares: Rs.
10,00,000 Less: Preference Dividend: Rs. 3,00,000 Less: Transfer to General Reserve: Rs.
37,00,000 Less: Final Dividend on Equity Shares: Rs. 11,00,000

Surplus Balance in the Profit and Loss Account: Rs. (3,70,00,000 - 10,00,000 - 3,00,000 -
37,00,000 - 11,00,000) = Rs. 3,09,00,000

The surplus balance in the statement of Profit and Loss after accounting for dividends,
transfers, and general reserve amounts to Rs. 3.09 crore.

3)
The following balances have been extracted from the books of Arts and Crafts Limited as on 31 st March, 2020:
(Figures in ‘000)
Debit (Rs.) Credit (Rs.)
Freehold land 28,000 Income from Investment in 8% Government Bond 1,200
Buildings 7,500 Provision for doubtful debts (1st April, 2019) 200
Furniture 2,000 Creditors 2,000
Debtors 10,000 Provision for depreciation (1st April, 2019):
Stock (31st March, 2020) 4,000 - Building 500
Cash-at-bank 500 - Furniture 400
Cash-in-hand 100 Suspense 250
Purchases of stock in trade 30,000 Equity Share Capital 36,750
Salaries and wages 2,300 6% Cumulative Preference Share Capital 8,000
Advance payment of Income-tax 600 Securities Premium 1,000
Investment in 8% Government Bond 18,000 9% Debentures 5,000
Interest on Debentures 300 Sales 48,000
Bad debts 100 Profit and Loss A/c (1st April, 2019) 250

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 Repairs and maintenance 150

1,03,550 1,03,550

The following further particulars are available:

(a) The land was revalued on 1st January, 2020 at Rs. 3, 50, 00,000 by an expert valuer, but no effect has been given in the
books although the Directors have decided to adjust the relevant amount.
(b) Provision for doubtful debt is to be adjusted to 2.5% on the amount of Debtors.
(c) Equity share capital is composed of Rs. 10 face value, 36, 40,000 fully paid equity shares and 50,000 equity shares on
which final call of Rs. 3 remains unpaid. These shares were forfeited and re-issued.
(d) Suspense Account represents money received from the new allottee for re- issue of 50,000 equity shares forfeited during
the year for non-payment of the final call, but no entry for adjustment thereof has been passed.
(e) Provision for taxation is to be made at 40%.
(f) Depreciation to be charged on written down value of: Building at 5% and Furniture at 10%.
(g) The directors declared dividend @ 20% and transfer to General Reserve @ 10%.

Tentative solution

Q taken from CS material but some adjustment is different so soln will be different:

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4)

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5)

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6)

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7)

Ignore previous year figures and taxation.

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8)

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9)
Prepare the financial statements i.e. Balance sheet and Statement of Profit and Loss Account from the following trial
balance of Mehul Company Ltd. for the year ended 31st March, 2014.

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Q10) (Q 12022-23)
Following is the Trial balance and additional information of Alpha Ltd. as on 31st March 2021.
Particulars Debit (₹) Credit (₹)
Equity Share Capital (fully paid up) 10,00,000
(Authorised Share capital 2,00,000 shares of ₹ 10 each)
General Reserve 6,50,000
Securities premium 3,50,000
Sundry Debtors and Sundry Creditors 6,55,000 7,00,500
Fixed Assets (Net) 9,80,000
9% Debentures (Repayable after 5 years) 2,04,500
Investments in Equity Shares 3,50,000
Profit and Loss A/c 2,75,000
Long term secured Loans from Bank 4,30,000
Provision for Income Tax (for year ending 31.03.2020) 2,90,000
Capital reserve 1,09,000
Stock in trade 12,65,000
Cash in hand 95,000
Cash at bank 1,49,000
Income receivable 55,000
Advance Income Tax (for year ending 31.03.2021) 3,50,000
Advance Income Tax (for year ending 31.03.2020) 2,00,000
Bills Payable 90,000
40,99,000 40,99,000

Additional Information:
(a) Of the shares allotted 20,000 shares worth ₹ 2,00,000 were allotted as fully paid to vendor from whom a running
business was acquired.
(b) On 31st March ,2021 company issued bonus shares in the ratio of 1 bonus share for every 2 equity shares held. No entry
has been passed for the same.
(c) Income tax assessment for the assessment year 2020-21 is completed on 21 st March ,2021 resulting with a gross
demand of ₹ 3,30,000 but no effect has been given so far.
(d) Debentures are unsecured and interest accrued but not due on Debentures amounting to ₹ 4,500 has been included in
Debentures.
(e) Provision for Taxation for the year ending 31st March ,2021 to be made for ₹ 1,20,000.
(f) Bills payable include a bill of ₹ 40,000 which fell due on 31 st March, 2021 and was paid by the bank as per the
standing instructions. The bank charges in this connection amounted to ₹1,100. The balance as per the Bank as on 31 st
March, 2021, was ₹ 107,900.

You are required to prepare the Balance Sheet of the Company as on 31 st March, 2021 and notes thereto as required under Part-I
of Schedule III of the Companies Act,2013. Ignore previous year figures.

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