I. P. C. C.

- ACCOUNTANCY

J. K. SHAH CLASSES

CHAPTER-4
Ans. 1.

INTERNAL RECONSTRUCTIONS

Journal Entries In The Books of Paradies Ltd.

Date Particulars
L.F.
31/3/11 Preference Share Capital A/c (1500 x 100) Dr.

Amt (Dr.) Amt (Cr.)

1,50,000

To Capital Reduction A/c

37,500

To Preference Share Capital A/c (1500 x 75)

Equity Share Capital A/c (2000 x 100)

1,12,500

Dr.

2,00,0000

To Capital Reduction A/c

1,75,000

To Equity Share Capital A/c (2000 x 12.50)

Capital Reduction A/c

25,000

Dr.

3,375

To Equity Share Capital A/c (270 x 12.50)

Capital Reserve A/c

3,375

Dr.

36,000

To Capital Reduction A/c

36,000

Capital Reduction A/c

Dr.

To Plant & Machinery (PFD) A/c

Capital Reduction A/c

77,500
77,500

Dr.

1,67,625

To P/L A/c

1,10,375

To Preliminary Expenses A/c

7,250

To Goodwill A/c

50,000

Cash A/c

Dr.

62,500

To Equity Share Capital (5000 x 12.50)

62,500

Paradise Ltd. (And reduced)

Balance Sheet as at 1.4.2011
Note
(I)

Equity and liabilities

1. Share holders fund
Share Capital

Reserve & Surplus

2,03,375
-----

2. Share app. Money pending allotment

-----

3. Non - current Liabilities

-----

4. Current Liabilities

2
Total

(II)

C.Y.

42,500
2,45,500

Assets
1. Non-current Assets

1,25,000

2. Current Assets

1,20,875

Total
: 35 :

2,45,875

P.Y.

I. P. C. C.- ACCOUNTANCY

J. K. SHAH CLASSES
Notes to A/cs

C.Y.

1. Share Capital
Authorized
1,500 6% Pref. Shares of ` 75 each

1,12,500

19,000 Eq. Shares of ` 12.5 each

2,37,500
3,50,000

Issued, Subscribed & paid up

1,500 6% Preference Share capital of ` 75 each fully paid
7,270 Equity Share of ` 12.5 each, fully paid

1,12,500
90,875
2,03,375

Note : of the above 270 Equity Share are

Issued for consideration other that cash
2. Current Liabilities
Trade Creditors

42,500
42,500

3. Non-current Assets
Lease Hold Property (Cost)

80,000

Less : Provision for Depreciation

(30,000)

Plant & Machinery (Cost)

2,10,000

Less : Provision for Depreciation

(1,35,000)

50,000

75,000
1,25,000

5. Current Assets
Debtors

30,200

Stock

79,175

Cash / Bank

11,500
1,20,875
: 36 :

P.Y.

I. P. C. C.- ACCOUNTANCY

J. K. SHAH CLASSES
Ans. 2.

Journal of Goenka Ltd.

Land & Building A/c

Dr.

25,000

To Capital Reduction A/c

25,000

Capital Reduction A/c

Dr.

70,000

To Plant & Machinery

30,000

To Patents & Trade marks

20,000

To Stock

15,000

To Debtors

5,000

6% Preference Share Capital A/c (2,000 x 100)

Dr.

2,00,000

To 71/2% Preferance Share Capital (2,000 x 30)

60,000

To Capital reduction

1,40,000

Equity Share Capital A/c (3,000 x 100)

Dr.

3,00,000

To Equity Share Capital A/c (3,000 x 5)

15,000

To Capital Reduction

2,85,000

Sundry Creditors A/c

Dr.

1,50,000

To Equity Share Capital (10,000 x 5)

50,000

To Cash / Bank A/c

50,000

To Capital Reduction

50,000

Cash / Bank A/c

Dr.

85,000

To Equity Share Capital (17,000 x 5)

Equity Share Capital A/c (30,000 x 5)

85,000
Dr.

1,50,000

To Equity Share Capital A/c (15,000 x 10)

Capital Reduction A/c

1,50,000
Dr.

4,56,000

To Goodwill A/c

60,000

To Preliminary Expenses A/c

10,000

To Profit & Loss A/c

3,86,000

Provision for Tax A/c

Dr.

To Capital Reduction A/c

26,000
26,000

: 37 :

I. P. C. C.- ACCOUNTANCY

J. K. SHAH CLASSES

Goenka Ltd. (And Reduced)

Balance Sheet as at 01.04.2011
C.Y.
I.

II.

1.

Equity and Liabilities

1. Shareholder's fund
Share Capital
Reserves and Surplus
2. Share application money pending allotment
3. Non Current liabilities
4. Current Liabilities
Total
Assets
1. Non Current Assets
2. Current Assets
Total

1
2
3
4

5
6

Share Capital
Authorised
5,000 6% Preference Share of ` 100 each
5,000 Equity Share Of `100 each
Issued, Subscribed and Paid up
2,000 7 % Preference Shares of 30 each, fully paid
15,000 Eq. Sh. of ` 10 each fully paid
(Note : of the under 10,000 shares are issued for
Consideration other than cash)

2,10,000
15,000
---1,00,000
19,000
3,44,000
1,85,000
1,59,000
3,44,000

5,00,000
5,00,000
10,00,000
60,000
1,50,000

2,10,000
2.

Reserve & Surplus

Profit Prior to incorporation

15,000
15,000

3.

Non Current Liabilities

5% Debenture

1,00,000
1,00,000

4.

Current Liabilities
Liabilities for taxation

19,000
19,000

5.

6.

Non-current Assets
Land and Building
Plant and Machine
Patents & Take marks

1,00,000
80,000
5,000
1,85,000

Current Assets
Stock
Debtors
Cash

65,000
55,000
39,000
1,59,000
: 38 :

P.Y.

I. P. C. C.- ACCOUNTANCY

J. K. SHAH CLASSES
Ans. 3.

Journal Entries In the books of A Co.Ltd.

Date

Particulars

LF Amt. (Dr.) Amt. (Cr.)

Preference Share Capital A/c (4,000 x 100)

Dr.

4,00,000

Equity Share Capital A/c (75,000 x 10)

Dr.

7,50,000

To 6% Preference Share Capital A/c (4,000 x 75)

3,00,000

To Equity Share Capital (75,000 x 2)

1,50,000

To Capital Reduction A/c

7,00,000

Capital Reduction A/c

Dr.

24,000

To Equity Share Capital A/c (12,000 x 2)

Accrued Interest A/c

24,000
Dr.

22,500

To Cash / Bank A/c

22,500

Freehold Property A/c

Dr.

20,000

To Capital Reduction A/c

20,000

6% Debenture A/c

Dr.

1,20,000

To Freehold Property A/c

1,20,000

Cash A/c

Dr.

1,30,000

To 8% Debenture A/c

1,30,000

Capital Reduction A/c

Dr.

2,67,500

To Patent A/c

37,500

To Goodwill A/c

1,30,000

To Deffered Advertising A/c

1,00,000

Capital Reduction A/c

Dr.

65,000

To Stock A/c

65,000

Free hold Property A/c

Dr.

62,500

To Capital Reduction A/c

62,500

Capital Reduction A/c

Dr.

68,500

To RDD A/c

68,500

Bank A/c

Dr.

1,40,000

To Trade Investment A/c

55,000

To Capital Reduction A/c

85,000

Directors Loan A/c

Dr.

1,00,000

To Equity Share Capital A/c (45,000 x 2)

90,000

To Cash A/c

5,000

To Capital Reduction A/c

5,000

Capital Reduction A/c

Dr.

12,500

To Cash & Bank A/c

12,500

Capital Reduction A/c

Dr.

To Profit and Loss A/c

4,35,000
4,35,000

: 39 :

I. P. C. C.- ACCOUNTANCY

J. K. SHAH CLASSES

A Co. Ltd. (And Reduced)

Balance Sheet as at 01.04.2011
C.Y.
I.

II.

Equity and Liabilities

1.
Shareholder's Fund
Share Capital
Reserve & Surplus
2.
Share app. money pending allotment
3.
Non-current Liabilities
4.
Current Liabilities
Total
Assets
1.
Non-Current Assets
2.
Current Assets
Total

2
3

4
5

Notes To A/c's
1. Share Capital
Authorised
Issued, Subscribed & Paid up
4,000 6% cum - Preference Shares of ` 75
each fully paid up
1,32,000 Equity Shares of ` 2 each fully paid up
(Note : Of the above 57,000 Equity Share are issue for
Consideration other than cash)
2. Non Current Liabilities
8% Debentures
6% Debentures
3. Current Liabilities
Bank Overdraft
Creditors

5,64,000
--------3,85,000
4,95,000
14,40,000
4,37,500
10,06,500
14,40,000
C.Y.
?
3,00,000
2,64,000
5,64,000

1,30,000
2,56,000
3,85,000
1,95,000
3,00,000
4,95,000

4. Non-current Assets
Freehold Property
Plant

3,87,500
50,000
4,37,500

5. Current Assets
Stock
Debtors
Less : RDD
Cash / Bank Balance

3,60,000
4,85,000
(68,500)

: 40 :

P.Y.

4,16,500
2,30,000
10,06,500

P.Y.

I. P. C. C.- ACCOUNTANCY

J. K. SHAH CLASSES
Ans. 4.

Journal of Limited Liability Co.

Date
1

Particulars

L.F.

6% Preference Share Capital

Dr.

Dr.
3,00,000

To 8% Preference Share Capital A/c

2,25,000

To Capital Reduction A/c

2

75,000

Equity Share Capital (45,000 x 10)

Dr.

4,50,000

To Equity Share Capital (45,000 x 8)

3,60,000

To Capital Reduction A/c

3

Capital Reduction

90,000
Dr.

1,30,800

To Goodwill

42,300

To Land & Building

40,500

To Plant and Machinery

48,000

Capital Reduction A/c

Dr.

7,200

To Debtors A/c
5

7,200

Capital Reduction A/c

Dr.

15,000

To Profit & Loss A/c (1,50,000-1,35,000)

6

Bank A/c

15,000

Dr.

2,40,000

To 12% Secured Loan A/c

7

Bank Overdraft

2,40,000
Dr.

1,00,000

To Bank A/c
8

Cr.

1,00,000

Capital Reduction A/c

Dr.

12,000

To Patents A/c

12,000

Limited Liabilities Ltd. (And Reduced)

Note
(I)

C.Y.

Equity and Liabilities

(1) Shareholders Funds
Share Capital

Reserves and surplus

(1,35,000)

(2) Share application money pending allotment

----

(3) Non Current liabilities

2,40,000

(4) Current liabilities

1,10,000

Total
(II)

5,85,000

8,00,000

Assets
(1) Non-Current Assets

4,27,500

(2) Current Assets

3,72,500

Total
: 41 :

8,00,000

P.Y.

I. P. C. C.- ACCOUNTANCY

J. K. SHAH CLASSES
Notes to Accounts

C.Y.
(1)

Share capital
Authorised

Issued, subscribed & paid up

(2)

(3)

2,250 8% Preferance share of 100 each, fully paid

2,25,000

45,000 Equity shares of 8 each, fully paid.

3,60,000

Reserves & Surplus

5,85,500

P & L A/c

(1,35,000)

Non Current Liabilities

(1,35,000)

12% Secured Loans

(4)

2,42,000
2,40,000

Current liabilities
Creditors

60,000

Bank overdraft

50,000
1,10,000

(5)

Non-Current Assets
Patents

(6)

6,000

Land & Building

2,29,500

Plant & Machinery

1,92,000
4,27,500

Current Assets
Stock

88,800

Debtors

1,43,700

Cash / Bank / Balance

1,40,000
3,72,500
: 42 :

P.Y.

I. P. C. C.- ACCOUNTANCY

J. K. SHAH CLASSES
Ans. 5.

Journal entries in the books of Baroda Chemicals

Date
(a)

Particulars

LF

Interest Due A/c

Dr.

Amt (Dr.) Amt. (Cr.)

1,50,000

To Capital Reduction A/c

(b)

O/s Debentures Interest A/c

1,50,000
Dr.

55,000

To Capital Reduction A/c

(c)

(d)

55,000

11% Preference Share Capital A/c (5,000 x 100) Dr.

5,00,000

To 15% Debenture A/c

2,50,000

To Capital Reduction A/c

2,50,000

Current Liability A/c

Dr.

50,000

To Capital Reduction A/c

(e)

Cash / Bank A/c

50,000
Dr.

1,00,000

To Equity Share Capital A/c (10,000 x 10)

(f)

Equity Share Capital A/c

Dr.

1,00,000
15,00,000

To Equity share capital (50,000 x 10)

5,00,000

To Capital Reduction A/c

(g)

Capital Reduction A/c

10,00,000
Dr.

19,00,000

To Profit & Loss A/c

16,40,000

To RDD A/c
(h)

2,60,000

Fixed Asset A/c

Dr.

4,00,000

To Capital Reduction A/c

Capital Reduction A/c

4,00,000
Dr.

To Capital Reserve A/c

: 43 :

5,000
5,000

I. P. C. C.- ACCOUNTANCY

J. K. SHAH CLASSES

I.

II

Boroda Chemicals Ltd. (And Reduced)

Balance Sheet as at 1.4.2011
Note
Equity and Liabilities
1. Shareholder's Fund
Share Capital
1
Reserve & Surplus
2
2. Share application money pending allotment
3. Non current Liabilities
3
4. Current Liabilities
4
Total
Assets
1. Non - current Assets
5
2. Current Assets
Total

Notes To A/c's
1. Share Capital
60,000 Equity Share Capital of ` 10 each fully paid up
2. Reserve & Surplus
Capital Reserve

C.Y.

6,00,000
5,000
---12,50,000
10,30,000
28,85,000
9,00,000
19,90,000
28,85,000
C.Y.
6,00,000
6,00,000
5,000
5,000

3. Non Current Liabilities

Unsecured loan
15% Debenture
11% Debenture

5,00,000
2,50,000
5,00,000
12,50,000

4. Current Liabilities
Other Current liabilities
Bank O/d

5,00,000
5,30,000
10,30,000

5. Non-current Assets
Fixed Assets
Gross Block
Less : Depreciation

---20,00,000
(11,00,000)

6. Current Assets
Stock and Stores
Receivable
Less : Doubtful Debt
Other Current Assets

9,00,000
9,00,000
6,00,000

14,50,000
2,60,000

: 44 :

P.Y.

11,90,000
2,00,000
19,90,000

P.Y.

I. P. C. C.- ACCOUNTANCY

J. K. SHAH CLASSES
Ans. 6.

Journal of Bhansali Ltd.

8% Preference Share Capital A/c

Dr.

6,00,000

To Cash / Bank A/c

4,20,000

To Capital Reduction A/c

1,80,000

Capital Reduction A/c

Dr.

33,600

To Cash / Bank A/c

33,600

Outstanding Debentures Interest A/c

Dr.

1,08,000

9% Debentures A/c

Dr.

6,00,000

To Capital Reduction A/c

1,08,000

To 10% Debenture A/c

6,00,000

Loan from ICICI

Dr.

1,50,000

Outstanding Interest

Dr.

15,000

To Cash / Bank A/c

1,57,500

To Capital Reduction A/c

7,500

Sundry Creditors A/c

Dr.

69,000

To Cash / Bank A/c

65,550

To Capital Reduction A/c

3,450

Capital Reduction A/c

Dr.

5,38,000

To Profit / Loss A/c

4,20,000

To Goodwill A/c

80,000

To Debtors

30,000

Capital Reduction A/c

Dr.

14,000

To Fixed Assets

14,000

Capital Reduction A/c

Dr.

10,000

To Investments A/c

10,000

Capital Reduction A/c

Dr.

3,350

To Cash / Bank A/c

3,350

Equity share capital

Dr.

3,00,000

To capital Reduction A/c

3,00,000

Cash Bank A/c

Dr.

To Equity share capital

7,00,000
7,00,000

: 45 :

I. P. C. C.- ACCOUNTANCY

J. K. SHAH CLASSES

Bhansali Ltd. (And Reduced)

Balance - sheet As on 31.3.2011
Note

C.Y.

P.Y.

(I) Equity and Liabilities

(1) Shareholders Funds
Share Capital

Reserves and Surplus

14,00,000
----

(2) Share application money pending allotment

(3) Non Current liabilities
(4) Current liabilities

---2

Total

6,00,000
---20,00,000

(II) Assets
(1) Non-Current Assets

11,61,000

(2) Current Assets

8,39,000

Total

20,00,000

Notes to Accounts
C.Y.

P.Y.

(1) Share Capital

Authorised
Issued, subscribed & paid up
1,00,000 Equity shares of ` 20 each, ` 14 paid up

?
14,00,000
14,00,000

(2) Non Current Liabilities

10% Debentures

6,00,000
6,00,000

(3) Non-Current Assets

Fixed Assets

11,06,000

Investments

55,000
11,61,000

(4) Current Assets

Stock
Debtors

6,80,000
90,000

Bills Receivable

49,000

Cash / Bank Balance

20,000
8,39,000

Notes:
(1)
(2)

Reduction in Equity share capital is worked by preparing Capital Reduction A/c.

Call on Equity share capital is worked out by preparing Cash / Bank A/c.
: 46 :

I. P. C. C.- ACCOUNTANCY

J. K. SHAH CLASSES
Ans. 7.

Journal of Delta Ltd.

11.5% Preference Share Capital A/c (15,000 x 10)

Dr.

To 14% Preference Share Capital A/c (15,000 x 6)

1,50,000
90,000

To Capital Reduction A/c

60,000

10% Preference Share Capital A/c (13,000 x 5)

Dr.

65,000

To 13% Preference Share Capital (13,000 x 3)

39,000

To Capital Reduction A/c

26,000

Equity Share Capital A/c (20,000 x 10)

Dr.

2,00,000

To Equity Share Capital A/c (20,000 x 5)

1,00,000

To Capital Reduction A/c

1,00,000

11% Debentures

Dr.

3,00,000

To Equity Share Capital (50,000 x 5)

2,50,000

To Capital Reconstruction

50,000

Interest due on Debenture A/c

Dr.

19,500

To Capital Reduction A/c

19,500

Creditors A/c

Dr.

45,000

To Capital Reduction A/c

45,000

Cash / Bank A/c

Dr.

50,000

To Capital Reduction A/c

50,000

Capital Reduction A/c

Dr.

2,250

To Cash / Bank A/c

2,250

Capital Reduction A/c

Dr.

3,09,500

To Goodwill

80,000

To Patents

54,000

To Profit & Loss A/c

1,75,500

Capital Reduction A/c

Dr.

70,000

To Plant & Machinery A/c

50,000

To Furniture A/c

5,000

To Debtors A/c

15,000

Land & Building A/c

Dr.

75,000

Investments A/c

Dr.

15,000

To Capital Reduction A/c

90,000

Capital Reduction A/c

Dr.

To Capital Reserve A/c

1,12,750
1,12,750

: 47 :

I. P. C. C.- ACCOUNTANCY

J. K. SHAH CLASSES

Delta Ltd. (And Reduced)

Balance sheet As on 1st April, 2011
Note
(I)

(II)

Equity and liabilities

1. Share holders fund
Share Capital
Reserve & Surplus
2. Share app. Money pending allotment
3. Non-current Liabilities
4. Current Liabilities
Total
Assets
1. Non-current Assets
2. Current Assets
Total

1
2
3
4

5
6

Notes to A/cs
1. Share Capital
Authorized
Issued, subscribed & paid up
13,000 13% Preference Share of ` 10 each ` 3 paid up
15,000 11.5% Preference Share Capital of ` 10 each ` 6 paid up
70,000 Equity Share of ` 5 each fully paid
(Note : Of the above 50,000 Equity Share are issued for
consideration other than cash)
2. Reserve & Surplus
Capital Reserve
3. Non Current Liabilities
12% Debentures

C.Y.

4,79,000
1,12,750
----1,50,000
4,05,000
11,46,750
6,79,000
4,67,750
11,46,750
C.Y.
?
39,000
90,000
3,50,000
4,79,000

1,12,750
1,12,750
1,50,000
1,50,000

4. Current Liabilities
Sundry Creditors

4,05,000
4,05,000

5. Non-current Assets
Patent
Land & Building
Plant and Machinery
Furniture
Investment

54,000
2,50,000
2,75,000
10,000
90,000
6,79,000

6. Current Assets
Debtors
Bank
Bill Receivable

3,00,000
67,750
1,00,000
4,67,750
: 48 :

P.Y.

P.Y.