Corporate Financial Statement:

The final accounts/ financial statements of a limited companies have to be prepared as per the provisions of the Companies Act 1956. The Companies Act 1956 has detailed provisions regarding maintenance of books of account and preparation of financial statements. Section no. 11 of the Companies Act. 1956 deals !ith the form and contents of financial statements i.e. "rofit # $oss A/c or %ncome Statement and &alance sheet. Schedule '% of the Companies Act( 1956 la)s do!n that the final accounts ma) be presented either in the hori*ontal form + T,-orm. or 'ertical form( as per the option of the compan). Financial Statements/ According to Section 11( ever) balance sheet and profit and loss account of the compan) shall give/ A. Horizontal Form: (T-Form) + 0ive pro,forma of " # $ a/c and &alance sheet.

Profit & Loss A/c 1r. Particulars To 2pening stock To "urchases $ess/ "urchase 3eturn To Carriage %n!ard To 4ages +5. 2utstanding !ages To -actor) 67penses To "o!er and fuels To 3o)alties To 8otive po!ers To 1irect 67penses To "roduct 67penses To !ross Profit c/" To office Salaries To "rinting # Stationeries To 0eneral 67penses To Telephones and fa7es To 3ent and rates s. #$ #$$ #$ #$ #$ #$ #$ #$ # #$ #$ #$ #$ #$ #$ $$$ #$ #$ #$ #$ #
1

s.

Particulars &) Sales $ess/ Sales 3eturn &) Closing stocks &) 0oods distributed as free samples &) 0oods lost in fire/Transit

s. #$$ #$

Cr. s. #$$ #$ #$ #$ $$

$$$ %& !ross Profit '/" &) %nterest on %nvestment &) 1ividend 3eceived &) Commission( 3ent( $$$ $$ $$ $$ $$

To commission and discounts To &ad,debts +5. -urther bad,debts +5. 311 +ne!. +,. 311 +old. To 1epreciation To Advertisement To Selling and 1istribution To sales promotions To %nterest on bank $oan To loss b) fire To Traveling and conve)ance To 3epairs and maintenance To administration e7penses To 8iscellaneous e7penses To 1irectors remuneration To Audit -ees To $egal Charges To Carriage 2ut!ards To Trade 67penses To "reliminar) 67p. !/off To %nterest on debentures To -ines( "enalties etc. To "rovision for Ta7 To (et Profit c/"

#$ # #$ #$ #$ #$$ ($) #$ $$ $$ $$ $$ $$ $$ $$ $$ $$ $$ $$ $$ $$ $$ $$ $$ $$ $$ $$ $$ $$

1iscount received &) "rofit on sale of Assets.

$$ $$

To Transfer to 03( STo %nterim dividend To "roposed dividend To %alance c/f to %/s

$$ $$ $$$$

%& (et Profit c/" &) " # $ a/c +$9,Cr &al.

#$ $$ $$$$

%alance s)eet Lia'ilities S)are Capital: 1:; "reference Capital 6<uit) Share capital eser*es & Surplus: 0eneral 3eserves Capital reserves Securities "remium Sinking -und 1ebenture 3edemption fund 4C-( " # $ A/c. Secure" Loan : 1 ; 1ebentures &ank $oan +n-secure" Loan: Customers 1eposits &ank $oan $oan from 1irectors( subsidiaries cos. Current Lia'ilities & Pro*isions: Creditors &ills "a)ables 2utstanding 67penses "re,received advances "rovision for ta7 "roposed dividend Contin,ent Lia'ilities: Cancellation of Contract claim 4orkmen=s Claim s. 77 77 77 7 77 77 77 77 77 77 77 77 77 77 77 77 77 77 77 77 77 77 77 77 77 77 77 7
3

s. 777

777

Assets Fi$e" Assets: Tan,i'le Assets: $and # &uildings "lant # 8achiner) -urniture # -i7tures 8otor 'ehicles 2ffice 6<uipments -actor) Assets $oose Tools -ntan,i'le Assets: 0ood!ill "atents and "atterns Trade 8arks -n*estments: Trade %nvestments %nvestments in Shares( 1ebentures 15; 0ovt. &onds 0.". >otes 2ther %nvestments Current Assets & Loans & A"*ances: Li.ui" Assets: Cash in hand Cash at &ank Sr. 1ebtors &ills 3eceivables 2utstanding %ncomes 8arketable Securities (on-Li.ui" Assets: Stocks( %nventories "repaid 67penses /iscellaneous 0$penses: "reliminar) e7penses 1iscount on issue of shares ?nder !riters commission

s. 77 77 77 77 77 77 77 77 77 77 77 77 77 77 77 77

s.

777

777

777

777

777

77 77 77 77 77 77 77 77 77 77

77 777

" # $ a/c +debit balance. Amalgamation 67penses

77 77 77

777 7777

Total

777 7

Total

a. 1ertical Form: (1-Form)

i)

Pro-forma of P & L A/c:

"articulars -ncome: Sales 2ther %ncome %ncrease/1ecrease in 4%" and -0 stocks Total 0$pen"itures: Cost of 3a! 8aterials and Spares 6mplo)ee=s 3emuneration and &enefits Administrative( Selling and 1istribution # other 67penses 1epreciation %nterest Total Profit %efore Ta$ation an" 0$tra2r"inar& -tems 67tra 2rdinar) %tems/ "rofit &efore Ta7 "rovision for Ta7 "rofit After Ta7 $ast 9ear "rofit/$oss "rofit Available for Appropriations Appropriations/ Transfer to 03/S-/4C-/163 "roposed 1ividend &alance c/f to >e7t 9ear/ &alance sheet
4

Schedule >o 1: 11 1

Amount 777 77 77 $$$$ 77 77 77 77 77 77 $$$ 7777 77 777 77 777 77 777 77 77 $$$

1@ 1A 15 , 16

ii)

!i*e Proforma of %alance s)eet:

Particulars - Sources of Fun"s/ 1. a. b. . S)are)ol"er3s Fun"s/ Share Capital 3eserve # Surplus Loan Fun"s/ a. Secured $oans b. ?nsecured $oans Total -- Application of Fun"s/ 1. Fi$e" Assets/ 0ross &locks $ess/ 1epreciation "rovision >et &lock 4. -n*estments 5. (et 6or7in, Capital a. Current Assets( $oans # Advances/ b. Current $iabilities # "rovision 8. /iscellaneous 0$pen"itures

Sc)e"ule (o

s.

s.

1 @ A

77 77 77 77

777 777 $$$$ DDDDDDD

5 77 7 6 B C 9 77 77 ,,,,,,, , 777 77

777 77 $$$$

Total

DDDDDDDDDD

iii. i.

!i*e Proforma of all Sc)e"ules/ + -or &alance sheet. Sc)e"ule (o.9: S)are Capital "articulars Aut)orize" Capital/ ,,,,,,1:; "reference shares of 3s. 1:: each ,,,,, 6<uit) Shares of 3s. 1: each -ssue": Su'scri'e" & Pai" up Capital: ,,,,,,,,1:; "ref. shares of 3s. 1:: each full) paid ,,,,,,,, 6<uit) shares of 3s. 1: each full) paid E 777 +,. Calls in Arrears 77 +5. -orfeited Shares 77 Total +>ote/ if ,,,, e<uit) shares are allotted for consideration other than cash. ii. Sc)e"ule (o.4: eser*e an" Surplus "articulars Capital 3eserve +5. Transfer/Addition during the )ear Capital 3edemption 3eserve Securit) premium/share premium Sinking -und 4orkmen Compensation -und 1ebenture 3edemption 3eserve %nvestment -luctuation -und Statutor) 3eserve 67port "romotion 3eserve
6

Amount 777 777

777

777 7777

Amount 77 7 77 77 77 77 77 77 77 77 77

"rofit # $oss A/c +Cr bal.. Total

77 7777

iii.

Sc)e"ule (o.5: Secure" Loans "articulars Amount 77 77 77 77 77 77 777 DDDDDDDDDDDD

9; 1ebentures $oan from &anks $oan from Subsidiaries $oan from 1irectors 2ther $oans and Advances An) %nterest accrued/outstanding on above Total

i*.

Sc)e"ule (o.8: +nsecure" Loans "articulars Amount 77 77 77 77 77 ,,,,,,,,,,,,,,,, 777 DDDDDDDDDD

-i7ed 1eposits $oan from Subsidiaries Short term loans from &anks/2thers $oan from 1irectors An) interest accrued on above Total

v. Assets

Sc)e"ule (o. ;: Fi$e" Assets <epreciation Pro*ision 1edn Cl.&al 2p.&al Addn 1edn Cl.&al , 77 , , , , , 77 7 7 , 77 7 77 7 7 7 77 , 77 7 7 , 77 , 77 7 7 , 77 7 77 , 7 7 77 $$$ $$ $$ (et %loc7 2p.&al Cl.&al 77 77 77 77 77 77 77 77 77 77 77 77 $$$

!ross %loc7 2p.&al Addn 0ood!ill 77 , $#& 77 , "#8 77 7 -#77 , 'ehicles 77 , 6<uipts 77 ,

*i.

Sc)e"ule (o.=: -n*estments Amount 77 77 77 77 777 DDDDDDDDDDD

"articulars Trade %nvestments %nvestment in 0ovt. Securities 9; 0ovt. "romissor) >otes 2ther %nvestments Total

*ii.

Sc)e"ule (o.>: Current Assets & Loans & A"*ances Amount 77 77 77 77 77 77 77 77 77 77 777 DDDDDDDDDD

"articulars %nventories,38/4%"/-0/Stores Sundr) 1ebtors, a. 1ue for more than 6 months, 77 b. 1ue fro less than 6 months ,77 Cash # &ank &alance 2utstanding incomes Short term investments 2ther current assets Advances # loans given &ills 3eceivables "repaid 67penses Advances !ith port trusts/customs Total

*iii.

Sc)e"ule (o. ?: Current Lia'ilities & Pro*isions "articulars Amount 77 77 77 77 77 77 77 77 77 77 77 777 DDDDDDDDD

Sundr) Creditors Advance pa)ment from customers ?nclaimed 1ividend &ills "a)able 2utstanding/Accrued 67penses $iabilit) for ta7 2ther $iabilit) "rovision for Ta7ation "roposed 1ividend "rovision for "rovident -und/"ension etc. 2ther "rovisions Total
8

i$.

Sc)e"ule (o. @: /iscellaneous 0$penses ( not Aritten off) Amount 77 77 77 77 77 777 DDDDDDD

"articulars "reliminar) 67penses Shares/1ebentures issue e7penses ?nder!riters Commission 1evelopment e7penditures 1iscount on issue of shares/debentures Total

$.

Sc)e"ule (o.9B. Contin,ent Lia'ilities ( For foot (otes) "articulars Claims not ackno!ledged as debts ?ncalled amounts on partl) paid shares Arrears of cumulative dividends ?ne7ecuted contract on capital account 1iscounted bill not matured 2ther contingent liabilities Total Amount 77 77 77 77 77 77 777 DDDDDDDD

Sc)e"ule for Profit & Loss Account: $i. Sc)e"ule (o.99: Sales "articulars 0ross Sales +,. Sales 3eturn/3eturn %n!ard/3eturn +1r. +5. unrecorded Sales +,. 4rongl) included in sales >et Sales Amount 77 77 77 77 777 DDDDDDDDDD

$ii.

Sc)e"ule (o94: 2t)er -ncome Amount 77 77 77 77 777 DDDDDDDDDDDD

"articulars %ncome from %nvestments 1ividend from subsidiar) companies "rofit from investments 2ther incomes, rent( commission received Total

$iii.

Sc)e"ule (o.95: <ifference in stoc7 of 6-P & F! Amount 77 77 777 DDDDDDDDDDD

"articulars Closing Stock of 4%" and -0 +,. 2pening Stock of 4%" and -0 Total

$i*.

Sc)e"ule (o.98: Cost of /aterials & Spare parts. Amount 77 77 77 77 77 77 77 ,,,,,,,,,,, 777 D,DDDDDDDDDD

"articulars 2pening stock of 3a! materials +5. "urchases of 3a! 8aterials +,. Closing stock of 3a! 8aterials +,. "urchase 3eturns/3eturn 2ut!ards Carriage in!ards Custom dut)( dock charges on ra! materials 3o)alt) for ra! materials Total

$*.

Sc)e"ule (o. 9;: 0mplo&ees emuneration & 2t)er %enefits "articulars Amount 77 77 77 77 77 77

4ages( Salaries 4ages and Salaries Salaries # 4ages &onus 2utstanding Salaries( !ages etc.
10

Contribution to "Staff !elfare e7penses 2ther benefits to emplo)ees Total $*i.

77 77 ,,,,,,,, 77 DDDDDDDDDDD

Sc)e"ule (o. 9=: 2ffice A"ministration: Sellin, & <istri'ution an" ot)er e$penses Amount 77 77 77 77 77 77 77 77 77 77 77 77 ,,,,,,,,,,,, 77 DDDDDDDDDDDD

"articulars "o!er # -uel 3epairs to &uilding( 8achiner) %nsurance 3ates and Ta7es Selling e7penses &ad debts( 311( 1iscount on sales "a)ment to auditors/ a. Ta7ation 77 b. Audit fees 77 2ffice e7penses Advertisement e7penses "rinting # Stationer) 4arehouse and distribution e7penses 2ther office and selling e7penses Total

$*ii.

Sc)e"ule (o.9>: -nterest Pai". Amount 77 77 77 77 777 DDDDD

"articulars %nterest on 1ebentures 2utstanding interest on debentures %nterest on fi7ed loans 2ther interest on an) loans Total

11

--. P 2-F2 /A 2F %ALA(C0 SH00TS Particulars 0C+-TD A(< L-A%-L-T-0S: S)are)ol"ers3 Fun"s: Share Capital 3eserves # Surplus (on-Current Lia'ilities: $ong term borro!ings Trade "a)ables 2ther $ong term liabilities $ong term "rovisions Current Lia'ilities: Short term borro!ings Trade "a)ables 2ther current liabilities Short term "rovisions Total
5 6 7 8 9 10 11 12

(otes

@ A

77 77

77 77 77 77 77 77 77 77 77 $$$

ASS0TS:
(on-current Assets: -i7ed Assets Tangible assets %ntangible assets Capital !ork in progress >on Current %nvestments 1eferred Ta7 Assets $ong term loans # Advances Trade 3eceivables 2ther non,current assets Current Assets: Current %nvestments %nventories Trade receivables Cash # &ank &alances 2ther current assets Total
13 14 15 16 17 18 19 19 20 21 22 23 24

77 77 77 77 77 77 77 77 77 77 77 77 77 77 77 $$$

12

A""itional A"Eustments: 48. !oo"s sent on appro*al/ 4hen goods are sent on approval basis and consent is not received at the end of financial )ear then it has to be recorded at A places/ a. b. $ess from Sales at sales price $ess from 1ebtors at sales price.

c. Add to closing stock at cost price in trading account Cr. Side.

13

d. Add to closing stock at cost price in Asset side of &alance sheet. 4;. !oo"s sent on consi,nment 'asis/ %f the goods received on Consignment basis from the consignor and it is included in the sales/ %t is to be recorded as follo!/ a. $ess from the sales as amount of goods included in the sales b. Credit to "rofit # $oss A/c as Commission on Consignment goods. c. Sho! the actual amount as due to consignor + Consignment sale, commission. 4=. %ills ecei*a'le "is)onore"/ %t is to be effected on, a. $ess from &ills 3eceivable on Asset side of &alance sheet. b. Add to the Sundr) 1ebtors on Asset side of &alance sheet. 4>. %ills pa&a'le "is)onore"/ %t is to be effected on/ a. $ess from &ills "a)able on $iabilities side of &alance sheet. b. Adds to Sundr) Creditors on $iabilit) side of &alance sheet. 4?. <iscounte" 'ill recei*a'le is "is)onore"/ %f the &ills 3eceivable accepted b) 1ra!ee and discounted b) 1ra!er !ith bank before the maturit) and the same is dishonored then it has effected on the follo!ing/ a. $ess from &ank on asset side of &alance sheet. b. Add to Sundr) 1ebtors on asset side of &alance sheet.

-mportant points to 'e consi"ere" 'efore t)e calculation of "epreciation/ 1. Accounting )ear/ %f accounting )ear is not mentioned in the problem then it is assumed as calendar )ear. +Fanuar) E 1ecember. . 1epreciation rate/ %f rate of depreciation is not mentioned in the problem then it is considered G 1:;. @. 1epreciation 8ethod/ %f method is not mentioned in the problem then it is taken as -i7ed %nstallment 8ethod. A. 1epreciation is calculated ever) )ear as per the e7istence period or ph)sicall) available period of Asset in the accounting )ear. 5. %f the asset sold then it is necessar) to evaluate the profit or loss on sale of asset.
14

6. "rofit or loss on sale of asset D 1ifference bet!een 41'/ Selling price of asset and Sold price of Asset. %f Selling "rice H Sold "rice D $oss on sale of Asset. %f Selling "rice I Sold "rice D "rofit on sale of Asset.

+41' D Cost of asset at the time of purchase , Total 1epreciation of asset from the date of purchase to the date of sale of asset.. ?.4.99: e*erse atio/ 4hen !e calculate ratios !ith the help of financial statements i.e. profit and loss a/c and balance sheet then it is called direct ratio but !ith the help of ratios( !e prepare income statement and balance sheet then it is called reserve ratio. %n this reverse ratio method the calculation procedure is in reverse order. The main obJective of this indirect ratio is to understand the overall effect and clarit) of entire ratio anal)sis. The reverse ratio is complicated and little confusing method than the direct ratio !here the students re<uired thorough anal)tical and conceptual understanding about ratio anal)sis. To prepare the financial statements it is essential to kno! the interrelation amongst the ratios and heads of financial statement.

Pa,e (o. ?.=: Classification of atios: There are different classification of ratios as per its purposes and needs of accounting information to the business for the future plan and polic). A. %alance s)eet atios: 1. Current 3atio . Kuick 3atio @. 1ebt Assets 3atio A. 1ebt 6<uit) 3atio 5. Stock to 4orking Capital 3atio 6. "roprietor=s 3atio
15

B. Capital 0earing 3atio %. e*enue Statement atios: 1. 0ross "rofit 3atio . 2perating 3atio @. 67penses 3atio a. Administrative 67penses 3atio b. Selling and 1istribution 67penses 3atio c. -inancial 67penses 3atio d. 8aterial Consumed 3atio e. >on,operating 67penses 3atio A. >et "rofit 3atio 5. >et 2perating "rofit 3atio 6. Stock Turnover 3atio C. Com'ine" atios: 1. 3eturn on Capital 6mplo)ed 3atio . 3eturn on "roprietor=s -unds @. 3eturn on 6<uit) Share Capital A. 6<uit) per share 5. 1ividend "a)out 3atio 6. 1ebtor=s Turnover 3atio/1ebtors 'elocit) B. Creditor=s Turnover 3atio/ Creditors 'elocit)

0$amples: (To 'e inserte" on pa,e no. ?.;9) 1. -ollo!ing are the ratios relating to S!araJ $td. 1ebtors 'elocit) , @ months.
16

Stock 'elocit)

, 6 months.

Creditors 'elocit) , @ months 0ross "rofit 3atio , 5;

0ross profit for the )ear amounted to 3s. 5( ::(:::. Closing stock for the )ear is 3s. :(::: above the opening stock. &ills 3eceivable amounted to 3s. A:(::: and &ills "a)able 3s. 5(:::. Calculate the valueL a. Sundr) Creditors b. Sundr) 1ebtors c. Closing Stock d. Sales

. -rom the follo!ing information( prepare a summari*ed balance sheet as on @1 st 8arch :1 . a. 4orking Capital 3s. (A:(::: b. &ank 2verdraft 3s. 5:(:::

c. 3eserves # Surplus 3s. 1(5:(:::. d. Assets to "roprietar) 3atio e. Current 3atio f. $i<uidit) 3atio .5/ 1 /1 :.6:

@. -rom the follo!ing information( prepare a summari*ed balance sheet as on @1 st 8arch :11. a. -i7ed Assets 3s. 15( ::(:::. b. >et !orking capital 3s. 6( 5:(:::. c. 3eserve and Surplus to Share Capital 3atio , 1/1 d. Sales to >et !orth 3atio , 1.5/1
17

e. Sales to 1ebtors 3atio , 6/1 f. 0ross profit 3atio 5; g. Stock Turnover 3atio 6 times. h. Current 3atio D .5/1 i. $i<uid 3atio D 1.5/1

Compan& Final Account:

1. The follo!ing balances have been e7tracted from the books of 0lor) $td. as on @1st 8arch :1:. Particulars s. Particulars s.

18

"reference shares 3edemption $and +cost. &uildings +cost less dep.. -urniture +cost less depn. 8otor vehicles +cost less dep. 6stablishment e7penses 3ates( Ta7es and %nsurance Commission 1irectors -ees 1epreciation Sundr) e7penses "a)ment to Auditors Sundr) 1ebtors %nterim 1ividend Cash in hand Cash at &ank 0" >otes Stocks %ncome ta7 Advance "a)ment of Ta7 Securit) 1eposit

A(C:: :(::: B:(::: (::: @(5:: 5(::: 1( :: A:: :: 6(::: 6(::: A:: @(::: B(66: 1( :: 19(5:: :(::: @5(@:: 1:(::: (::: 1(::: 4:;@:9=B

Share Capital +Authori*ed and issued 6<uit) shares + 15(::: shares. C; 3edeemable "reference shares + A: shares. Securities "remium Trading A/c 1iscount received %nterest on %nvestments "rofit # $oss Sundr) Creditors ?npaid 1ividend 2utstanding e7penses "rovision for Ta7ation 0eneral 3eserve

1(5:(::: A(::: (5:: C:(::: 5:: C:: 1(::: (56: :: 6:: B(::: 1:(:::

4:;@:9=B

The follo!ing additional information is available/ 1. The preference shares !ere redeemed on 1.A. ::9 at a premium of :;( but no entries !ere passed for given effect thereto( e7cept pa)ment standing to the debit of preference share redemption account. . 1epreciation as per income ta7( rules provided up to @1st 8arch :1: as follo!s/ &uilding 3s. 1( :::( -urniture 3s. (:::( 8otor vehicles 3s. 6(:::. @. "a)ment to Auditors includes 3s. 1:: for ta7ation !ork in addition to audit fees. A. 8arket value of investment on @:.9. ::9 3s. 1C(:::. 5. %nterim dividend includes dividend on e<uit) shares 3s. B(5:: and dividend on preference shares 3s. 16: 6. Sundr) debtors include 3s. ::: due for a period e7ceeding si7 months. B. All receivables and deposits are considered good.

19

C. %ncome ta7 demands for the )ear ended @1.@. ::9 for 3s. 1:(::: has not been provided for in full against !hich an appeal is pending. 9. %ncome ta7 to be provided at 55;. 1:. 1irectors have recommended pa)ment of a further dividend on e<uit) shares at 5: paise per share after appropriating 3s. 5(::: to 0eneral 3eserves. 11. 2ne of the emplo)ees !ho !ere inJured !hile !orking in the compan) has filed a suit for damages of 3s. 1( ::(:::. The compan) has not made an) provision. 9ou are re<uired to prepare financial statements in prescribed form. . A compan) !as registered !ith a nominal capital of 3s. 5( ::(::: divided into shares of 3s. 1: each of !hich :(::: shares had been issued and full) paid. The follo!ing is the trial balance e7tracted on 1ecember @1( :1 . "articulars Stock + 1st Fanuar) :1 . 8anufacturing !ages 8anufacturing e7penses "urchases and sales 8achiner) repairs Carriage in!ards Carriage out!ards Advance pa)ment of %ncome ta7 5; &ank $oan %nterest on $oan 1ebtors and Creditors "rofit and loss a/c +Fanuar) 1( :1 . &ank current account Cash in hand $easehold -actor) "lant # 8achiner) $oose Tools Share capital Calls in arrears 3ate # electricit) 1irector=s fees and remuneration 2ffice salaries and e7penses Auditors fees 2ffice furniture Commission 3eturns "reliminar) e7penses Transfer fees
20

1ebit +3s. 9@( 1: 5A(CB: 9(6 : A(1:(B@: A(@:5 (A55 A(6@: B(1A5 6 5 C ( :: @(A@: 96: @ (1:5 @9( :: 6( 5:

Credit +Cr.

5(CA(95:

5(::: A6(11: A(@ :

(::(::: 5:: CC:5 6(::: 6(5:: 6 5 5:: A(@ : 6(@ : @(:::

A(9:5 ::

0ood!ill

B5(::: C(65(@:5 C(65(@:5

9ou are re<uired to prepare "rofit and $oss a/c and balance sheet as on that date after taking into consideration the follo!ing adJustments/ 1. . @. A. 5. 6. B. 4rite off one,third preliminar) e7penses. 1epreciation on plant and machiner) at :;( on office furniture at 1:;. 8anufacturing !ages 3s. 95: and office salaries 3s. 6:: had accrued due. "rovide for interest on bank loan for 6 months. The stock !as valued at 3s. 6 (5:: and loose tools at 3s. 5(:::. 3eserve 3s. A(5:: on debtors for doubtful debts. The directors recommended dividend at 5; for the )ear ending 1ecember @1( :1 after providing for ta7es amounting to 3s. 1 (:::.

@. -rom the follo!ing trial balance of a compan) as on @1st 8arch :1 ( prepare profit and loss a/c for the )ear ending @1st 8arch :1 and balance sheet as on that date. "articulars "aid up share capital +issued share capital of @:(::: shares of 3s. @: each. 0ross "rofit 0eneral 3eserve "rovision for ta7ation "rofit # $oss a/c Ta7 "aid 1A; 1ebentures &ills 3eceivable %nterim dividend 1ebenture 3edemption 3eserves Securities "remium account 1irector=s -ees "repaid 67penses 1ebentures %nterest +less ta7G :;. Creditors Cash in Mand Cash at &ank T1S on income from investment %ncome from %nvestments %nvestments +8arket value 3s. AB(@B5. 1ebtors +%ncluding 3s. @(::: due for more
21

1ebit +3s.

Credit +3s. @(::(::: @(::(::: @:(::: AA(1:: 5B(@C5

@6(5A: 1(::(::: AA(C:: 1B( 5: :(::: 5(::: (::: @(::: 11( :: (1:(6C: 5:: 5(C:: 1(5B5 5(::: 5:(::: (A5(5::

than 9 months. Stock &uildings "lant # 8achiner) Total

1(66(::: 1(:6(::: (1 (::: 9( (165 9( (165

The follo!ing information is relevant/ a. 1irector=s remuneration amounting to 3s. 11(5:: !as charg@d against trading account. b. 1epreciation is to be provided on building G5; and "lant # 8achiner) G1:; c. Ta7ation provision re<uired for the )ear 3s. 5:(::: d. 3s. @5(::: is to be transferred to general reserve e. 1irectors recommended dividend of 1:; on paid,up capital subJect to deduction of ta7 at appropriate rates. f. Authori*ed share capital of the compan) is 3s. 5(::(::: +5:(::: shares of 3s. 1: each. g. Assets are sho!n at their !ritten,do!n values. The method of depreciation adopted b) the management is !ritten do!n value method. A. The follo!ing is the trial balance of %deal 8anufacturing $td. as on @:th September :1@. 1ebit &alance 2pening stock "urchases Stores and Spares consumed 8anufacturing # 8isc. 67p. Salaries( !ages etc. -reight # %nsurance Transfer to repairs reserves %nterest on loans 1epreciation %nterim dividend -i7ed assets at cost Addition of fi7ed assets %nvestments 1ebtors %nterest on Capital +during construction from last )ear. 1eposits Cash at &ank Cash in hand 81=s 3emuneration 3s. 1(@ (::: 1(CA(::: 1:(::: 1(65(::: 1(9:(::: 5B(::: 5 (::: (5:: 51(5:: C(::: 1 (6:(::: 6B(::: 6(::: 1(: (A:: 15(::: A:(::: 1(A:(::: (::: 6(::: 5(5:(A:: The follo!ing further information is available/
22

Credit &alance Sales 1epartmental orders and items used in !orks 1ividends "rofit on block sold Sundr) receipts "rofit # $oss a/c "rovision for 1epreciation on fi7ed assets Share capital Securities "remium 0eneral 3eserves 1evelopment rebate reserves 3epairs reserves Secured $oans ?nsecured $oans Creditors "rovision for ta7ation 2utstanding e7penses

3s. B(B6(::: 9:(A:: @:(::: @(::: :(::: 1(1:(::: 5(6:(:: (C:(::: :(::: C:(::: 1( :(::: A:(::: (@:(::: 5:(::: 1(B:(::: B5(::: 5(::: 5(5:(A::

a. b. c. d. e.

Closing stock !as valued at 3s. 1( A5(:::. 8anaging director is entitled to 5; remuneration on the net profits of the compan). "rofits on block sold u/s @A9 of the Companies Act.1956 3s. :(:::. 1epreciation allo!ed under %ncome ta7 la!s 3s. 65(:::. 3epairs reserve balance of 3s. A:(::: has been arrived at as follo!s/ 2pening balance @C(::: Add/ transfer during the )ear 5 (::: $ess/ Actual e7penses 5:(::: ,,,,,,,,,,, A:(::: f. -inal dividend making a total of :; on the paid up capital of the coJmp:an) less interim dividend alread) declared has been proposed b) the board of directors. g. Amount of share capital is composed of shares of 3s. 1: each full) paid. "repare profit and loss account and balance sheet of %deal 8anufacturing $td.

C2 P2 AT0 F-(A(C-AL 0P2 T-(!: -. Cas) FloA Statement: 1.. The &alance Sheets of Sumeet $td. are as follo!s/ $iabilities 6<uit) Share Capital 0eneral 3eserve "rofit # $oss A/c 1:; 1ebentures Sundr) Creditors &ills "a)able "rovision for Ta7 "roposed 1ividend Capital 3eserve ::9 1(5:(::: , , 1(::(::: 5B(::: 1:(::: :(::: , , @(@B(::: :1: (5:(::: :(::: 9(::: , A6(::: 6(::: 5(::: :(::: 1:(::: A(:6(::: Assets 0ood!ill $and # &uilding "lant # 8achiner) Stock 1ebtors &ills 3eceivables "repaid 67penses Cash in hand "rofit # $oss A/c ::9 55(::: C:(::: A:(::: A (::: 9:(::: C(::: 6(::: 1:(::: 6(::: @(@B(::: :1: A5(::: 9:(::: 1(::(::: 5@(::: 9C(::: 1 (::: A(::: A(::: , A(:6(:::

Additional %nformation/ 1. 1uring the )ear :1: 1epreciation of 3s. 1:(::: and 3s. 15(::: have been charged on land # &uilding and "lant and 8achiner) respectivel). . An interim dividend of 3s. 1:(::: !as paid during the )ear :1:. @. 1uring the )ear :1: 8achiner) having a book value of 3s. :(::: !as sold for 3s @:(::: and profit on sale credited to 0eneral 3eserve a/c.
23

"repare a Cash -lo! statement for the )ear ended @1st 1ecember :1:.

.. -ollo!ing are balance sheets of the t!o companies A $td. and & $td. as on @1st 8arch :1:. $iabilities 6<uit) Share Capital "ref. Share Capital 0eneral 3eserve "rofit # $oss A/c "roposed dividend Sundr) Creditors &ills "a)able 2utstanding Salar) "rovision for Ta7 A $td. A(C:(::: (6:(::: AC(::: , 6B( :: B:(::: 1B( :: @9( :: 6B( :: 1:(AC(C: : & $td. B( :(::: 1( :(::: B (::: 6A(C:: 9@(6:: 1(::(::: B( :: 1A(A:: B6(C:: 1 (CC(C: : Assets A $td. %nvestments A@( :: 1iscount on issue 1( :(::: of shares (::(::: -actor) &uilding (16(::: -i7ed 1eposits A(::: "reliminar) e7p. A(::: Sundr) 1ebtors 1(C:(::: Stock (:A(::: &ank @:(6:: Cash B(::: 1:(AC(C:: & $td. , 96(::: 1( :(::: A(5C(::: CA(::: 16(C:: (59( :: 1(CB( :: 5:(::: 1B( :: 1 (CC(C::

"repare the Cash flo! statement from the above balance sheets of A $td. and & $td. @. . -ollo!ing balance sheets of Cosmos $td are given belo!/ $iabilities 6<uit) Share Capital "ref. Share Capital Capital 3edemption 3eserve "rofit # $oss A/c 3eserve -und Share "remium 1 ; 1ebentures Sundr) Creditors "rovision for Ta7 :1: @(::(::: (::(::: , 1( :(::: (::(::: @:(::: (::(::: C:(::: B:(::: 1 (::(:: : :11 A(::(::: 1(5:(::: 1(::(::: 1( :(::: @:(::: @:(::: @(::(::: 1(A:(::: C:(::: 1@(5:(:: : Assets %nvestments -actor) &uilding -urniture "reliminar) e7p. Sundr) 1ebtors Stock Cash # &ank &al. 6<uipments :1: :11 (::(:: 1(C:(::: : @(::(::: (5:(::: 1C(::: :(::: @:(::: :(::: (5:(::: @(::(::: (::(::: 1(A:(::: @ (::: :(::: @(A:(::: (5:(::: 1 (::(::: 1@(5:(:::

The follo!ing transactions took place during the )ear :11/ 1. "reference shares !ere redeemed at 1:; "remium. . %nvestments of 3s. A:(::: !ere sold for 3s. C5(:::. @. 1epreciation provided on &uilding( 8achiner) and -urniture 3s. 15(:::( 3s( 5(::: and 3s. (5:: respectivel).
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A. 1ividends paid 3s. 55(::: and income ta7 "rovision of 3s. B5(:::. "repare Cash -lo! Statement. --. Fun" FloA Statement: . 1. -ollo!ing are the balance sheet of S!araJa) $td Lia'ilities 6<uit) share Capital "rofit # $oss A/c 1:; 1ebentures &ank 2verdraft Sundr) Creditors "rovision for Ta7ation "roposed 1ividend ?npaid 1ividend 4BB@ s. 5(::(::: 1(B:(::: 5(::(::: 1(::(::: 9(C:(::: (5:(::: 1(::(::: B:(::: 4B9B s. 1:(::(::: A(65(::: , B5(::: 6(5:(::: (9:(::: (::(::: 1(6:(::: 1:(::: 4?:;B:BBB Assets -i7ed Assets %nvestments Advance to suppliers Closing Stock Sundr) 1ebtors Advance %ncome Ta7 "repaid 67penses Cash &alance "reliminar) 67p. 4BB@ s. C(5:(::: @(::(::: 1(@@(::: 5(::(::: B(1 (::: C:(::: 5:(::: 5(::: :(::: 4=:>B:BBB 4B9B s. 9(5:(::: @(::(::: @6(::: A(B1(::: 6(C (::: 1(6:(::: 6:(::: 1(B5(::: 16(::: 4?:;B:BBB

4=:>B:BBB Additional information

a. 2n 1.A. ::9( 1:; convertible 1ebentures !ere converted into e<uit) shares. b. 1uring the )ear ::9,1:( a fi7ed asset having original cost of 3s. 5:(::: !hich !as full) depreciated !as sold off for 3s. 1:(:::. c. %nvestment costing 3s. 1( ::(::: !as sold for 3s. 9:(::: and ne! investment !as made during the )ear ::9,1:. d. "roposed dividend for ::C,:9 !as paid on 5.A. ::9. e. %ncome Ta7 for ::C,:9 !as assessed at 3s. B:(::: on @1st 8arch :1:. "repare the -und flo! statement for the )ear ended 8arch :1:. . -ollo!ing are &alance sheets of 3anbir $td. As on @1st 8arch :1: and :11. Lia'ilities 4B9B s. 6<uit) Share Capital 1:; "reference share Capital 1 (:: (::: 4B99 s. 16(:: (::: $and # &uilding 8achiner) 0ood!ill Assets 4B9B s. A(:A(::: C(A:(::: 5:(::: 4B99 s. A(@ (::: 1:( :(::: A:(:::

25

1 ; 1ebentures "rofit # $oss A/c 0eneral 3eserves Share "remium Creditors &ills "a)able &ank 2verdraft "roposed 1ividend "rovision for Ta7.

C(::(::: 1(::(::: @(B:(::: 1(:A(::: :(::: 1(C:(::: A(::: B6(::: 1( :(::: C:(::: @:(BA (:::

6(::(::: 5:(::: @(:A(::: 1(9:(::: 6:(::: (::(::: B:(::: 1C(::: 1(6:(::: 6:(::: @@(9 (:::

"atents %nvestments %nventor) 1ebtors "repaid 67penses Cash &alance Advance Ta7

6:(::: C(: (::: 5(B:(::: (6:(::: C(::: :(::: 6:(:::

AC(::: C(: (::: 6(BA(::: (9 (::: 1:(::: A(::: B:(:::

@:(BA (:::

@@(9 ( :::

2ther %nformation/ 1. $iabilit) for ta7ation for the )ear :1: amounted to 3s. B5(:::. . 8achiner) having !.d.v. of 3s. (::: !as sold at profit of 3s. @(::: and ne! machiner) purchased at 3s. ( @:(:::. @. 6<uit) shares are issued G15; premium. A. "reference shares !ere redeemed at a premium of 1:;. 5. 1ebentures !ere redeemed at a premium of 1:;. 6. "a)ment of dividend is 3s. 1( A:(:::. 9ou are re<uired to prepare -und -lo! Statement for the )ear ended @1st 1ecember :11.

@.

-rom the follo!ing balance sheet prepare -und flo! statements/ ::@ 1(5:(:: : 1(6:(:: : C5(::: 5:(::: , 5(::: A(5:(:: : ::A 1(B5(::: 1(::(::: 9@(::: A:(::: 5(::: B(::: A(A:(::: Assets $and # &uildings 8achiner) Stock 1ebtors Cash "repaid 67penses ::@ 1(1:(:: : (::(:: : 5:(::: B:(::: 15(::: 5(::: A(5:(:: : ::A 1(5:(::: 1(A:(::: A5(::: C:(::: (::: @(::: A(A:(:::

$iabilities Share Capital $oan from &ank Creditors &ills "a)able $oan from %-C 2utstanding e7penses

Additional %nformation/ a. >et "rofit for )ear ::A amounted to 3s. B5(::: b. 1uring the )ear a machine costing 3s. @:(::: +accumulated depreciation 3s( 1:(:::. !as sold for 3s. 15(:::.

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c. The provision for depreciation against machiner) on @1/1 / ::@ !as 3s. 5:(::: and @1.1 . ::A !as 3s. 95(:::.

---. atio Anal&sis/ 1. . The &alance Sheets of Sho!,off $td. are as follo!s/ $iabilities 6<uit) Share Capital 0eneral 3eserve "rofit # $oss A/c 1:; 1ebentures Sundr) Creditors &ills "a)able "rovision for Ta7 "roposed 1ividend Capital 3eserve ::9 1(5:(::: , , 1(::(::: 5B(::: 1:(::: :(::: , , @(@B(::: :1: (5:(::: :(::: 9(::: , A6(::: 6(::: 5(::: :(::: 1:(::: A(:6(::: Assets 0ood!ill $and # &uilding "lant # 8achiner) Stock 1ebtors &ills 3eceivables "repaid 67penses Cash in hand "rofit # $oss A/c ::9 55(::: C:(::: A:(::: A (::: 9:(::: C(::: 6(::: 1:(::: 6(::: @(@B(::: :1: A5(::: 9:(::: 1(::(::: 5@(::: 9C(::: 1 (::: A(::: A(::: , A(:6(:::

Convert the above balance into vertical form and compute all balance sheet ratios !ith brief comments.

-ollo!ing are summari*ed &alance sheets of FF $td. and NN $td. as on @st 8arch :1:/ Lia'ilities FF Lt". (::(::: 1(::(::: 5:(::: B:(::: :.::: 5:(::: 6:(::: A:(::: 5(9:(::: GG Lt". (5:(::: C:(::: C:(::: 1(1:(::: 5(::: 6:(::: B5(::: @@(::: B(1@(::: Assets &ank Stock 1ebtors 8achiner) -urniture $and &uilding 0ood!ill FF Lt" @5(::: A:(::: 9:(::: B5(::: 1:(::: 1(B:(::: 1(A:(::: @:(::: 5(9:(::: GG Lt" 16(::: B5(::: 1(5:(::: 6:(::: :C(::: (C:(::: 99(::: 5(::: B(1@(:::

6<uit) Share Capital 1 ; 1ebentures 1:; "ref. Share capital &ank $oan 3eserves " # $ a/c Creditors &ills "a)able

27

"repare the above balance sheets into comparative anal)sis and compute all balance ratios !ith brief comments.

@. -rom the follo!ing information relating to 4ise $td. 9ou are re<uired to prepare its summari*ed balance sheet.
Current 3atio Acid Test 3atio 0ross "rofit/Sales 3atio >et 4orking Capital Sales to >et fi7ed Assets 3atio Sales to >et !orth 3atio 1ebtors Turnover ratio 3eserves to capital 3atio >et 4orth to $ong Term $oan 3atio Stock 'elocit) "aid up share capital .5 1.5 :. :.@ .: 1.5 6.: 1.: :.:: months 3s. 1: lakhs

A. 9ou are re<uired to complete the follo!ing balance sheet as at @1st 2ctober( :: of >e! Mori*on $td. $iabilities Share Capital 3eserves # Surplus $oans Current $iabilities 3s. + %n lakhs. 1: O 1 O O 3atios of the compan) are/ a. 3eserves and surplus to share capital ratio 1/1 b. Sales to net !orth ratio 1.5/1. c. Sales to 1ebtors ratio 6/1. d. 0ross "rofit 3atio :; on sales . e. >et !orking capital 3s. 6 lakhs f. Stock turnover ratio 6 times. g. Current ratio .5/1. h. Acid test ratio 1.5/1. i. >et !orth means total of share capital and reserves and surplus.
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Assets -i7ed Assets Current Assets Stock 1ebtors Cash

3s.+%n $akhs . 15 O O O O

29