J.K.

SHAH CLASSES CA INTERMEDIATE - ADVANCED ACCOUNTING

INTERNAL RECONSTRUCTION

Q.9 In the books of A & Co. Ltd.

Journal Entries
L. Debit Credit
No. Particulars F. ` `
1. 6% Cum. Pref. Share capital A/c (FV 100) Dr. 4,00,000
To 6% Cum. Pref. Share capital A/c (FV 75)A/c 3,00,000
To Capital Reduction A/c 1,00,000
(Being reduction of preference shares of
` 100 each to shares of ` 75 each)

2. Equity Share Capital A/c (` 10) Dr. 7,50,000

To Equity Share Capital A/c (` 2) 1,50,000
To Capital Reduction A/c 6,00,000
(Being reduction of equity shares of ` 10
each to equity shares of ` 2 each)

3. Capital Reduction A/c Dr. 24,000

To Equity Share Capital A/c (FV2) 24,000
(Being arrears of preference dividend
satisfied by issue of equity shares to the
extent of 25% and balance amount waived)

4. Accrued Interest A/c Dr. 22,500

To Bank A/c 22,500
(Being debenture interest paid)

5. Freehold Property A/c Dr. 20,000

To Capital Reduction A/c 20,000
(Being freehold property revalued)

6. 6% Debenture A/c Dr. 1,20,000

To Freehold Property A/c 1,20,000

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J.K.SHAH CLASSES CA INTERMEDIATE - ADVANCED ACCOUNTING

(Being freehold property taken over by

debenture holders in part payment of their
claim)
7. Bank A/c Dr. 1,30,000
To 8% Debenture A/c 1,30,000
(Being 8% debenture issued for cash)

8. Freehold Property A/c Dr. 62,500

To Capital Reduction A/c 62,500
(Being balance freehold property revalued)

9. Bank A/c Dr. 1,40,000

To Trade Investment A/c 55,000
To Capital Reduction A/c 85,000
(Being sale of trade investments at profit)

10. Directors loan A/c Dr. 1,00,000

To Equity Share Capital A/c (FV 2) 90,000
To Bank A/c 5,000
To Capital Reduction A/c 5,000
(Being directors claims settled)

11. Capital Reduction A/c Dr. 12,500

To Bank A/c 12,500
(Being penalty paid @ 5% of contract price)

12. Capital Reduction A/c Dr. 8,36,000

To Patents A/c 37,500
To Goodwill A/c 1,30,000
To Inventory A/c 65,000
To Provision for doubtful debts A/c 68,500
To Profit / Loss A/c 5,35,000
(Being assets revalued & losses written off)

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J.K.SHAH CLASSES CA INTERMEDIATE - ADVANCED ACCOUNTING
Balance sheet of A & Co. Ltd. (And Reduced) as at 01.01.2012
Particulars Notes No. `
I. EQUITY AND LIABILITIES
(1) Shareholders fund
(a) Share Capital 1 5,64,000
(2) Non Current Liabilities
(a) Long term borrowings 2 3,85,000
(3) Current Liabilities
(a) Short term borrowings (Bank overdraft) 1,95,000
(b) Trade payables 3,00,000
Total 14,44,000

II. ASSETS
(1) Non Current Assets
(a) Property, Plant and Equipments
(i) Tangible Assets 3 4,37,500
(2) Current Assets
(a) Inventories 3,60,000
(b) Trade Receivables 4 4,16,500
(c) Cash & Cash Equivalents (Bank) 2,30,000
Total 14,44,000

Notes to Accounts:
(1) Share Capital
Authorized Share Capital ?
Issued, Subscribed and paid up capital
1,32,000 equity shares of ` 2 each fully paid. 2,64,000
(of the above 57,000 shares have been issued for
consideration other than cash)

4,000, 6% Preference shares of ` 75 each fully paid 3,00,000

5,64,000

(2) Long term borrowings

6% debentures 2,55,000
8% debentures 1,30,000
3,85,000

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J.K.SHAH CLASSES CA INTERMEDIATE - ADVANCED ACCOUNTING
(3) Tangible Assets
Freehold property 4,25,000
(+) Appreciation 82,500
(-) Disposed off (1,20,000) 3,87,500
Plant 50,000
4,37,500

(4) Trade Receivable 4,85,000

(-) Provision for bad debts (68,500)
4,16,500
Working Note
1.
Capital Reduction A/c
3 24,000 1 1,00,000
11 12,500 2 6,00,000
12 8,36,000 5 20,000
8 62,500
9 85,000
10 5,000
8,72,500 8,72,500

2. Bank Overdraft & Bank Balance can be set off against each other. In that case
either Bank overdraft or bank Balance will appear in balance sheet.
3. Combined Entry can be passed for Entry No. 5 & 6

Q.10 In the books of Rebuilt Ltd.

Journal Entries
L. Debit Credit
Date Particulars F. ` `
1 Equity Share Capital A/c (FV 50) Dr. 7,50,000
To Equity Share Capital A/c (FV 2.50) 37,500
To Capital Reduction A/c 7,12,500
(Being reduction of equity shares of ` 50
each to shares of ` 2.5 each)

2 Bank A/c Dr. 1,12,500

To Equity Share Capital A/c (FV 2.50) 1,12,500
(Being 3 new equity share of ` 2.5 each
subscribed by 15,000 shareholders)
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J.K.SHAH CLASSES CA INTERMEDIATE - ADVANCED ACCOUNTING

3 7% Preference Share Capital A/c (FV 50) Dr. 6,00,000

Capital Reduction A/c Dr. 60,000
To 5% Preference Share Capital A/c(FV 10) 4,80,000
To Equity Share Capital A/c (FV 2.50) 1,80,000
(Being 7% preference share cancelled and
4, 5% preference share of ` 10 each issued
along with 6 equity shares of ` 2.5 each
against each preference share)

4 Loan A/c Dr. 1,50,000

To 5% Preference Share Capital A/c (FV 10) 1,20,000
To Equity Share Capital A/c (FV 2.50) 30,000
(Being loan settled partly by issue of
preference shares & equity shares)

5 Bank A/c Dr. 1,00,000

To Equity Share Capital A/c (FV 2.50) 1,00,000
(Being 40,000 equity shares subscribed by
directors of company)
6 Loan A/c Dr. 2,00,000
To Bank A/c 2,00,000
(Being loan repaid partly)

7 Capital Reduction A/c Dr. 4,86,000

To Profit / Loss A/c 4,51,000
To Plant A/c 35,000
(Being assets revalued & losses written off)
8 Capital Reduction A/c Dr. 1,66,500
To Trademark & Goodwill A/c 1,66,500
(Being Value of Trademark & Goodwill written
off)

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J.K.SHAH CLASSES CA INTERMEDIATE - ADVANCED ACCOUNTING
Balance sheet of Rebuilt Ltd. (And Reduced) as at 31.03.2011
Particulars Notes No. `
I. EQUITY AND LIABILITIES
(1) Shareholders fund
(a) Share Capital 1 10,60,000
(2) Non Current Liabilities
(a) Long term borrowings (Loan) 2,23,000
(3) Current Liabilities
(a) Trade payables 2,07,000
(a) Other Current Liabilities 35,000
Total 15,25,000

II. ASSETS
(1) Non Current Assets
(a) Property, Plant and Equipments
(i) Tangible Assets 2 6,33,000
(ii) Intangible Assets 3 1,51,500
(2) Current Assets
(a) Inventories 4,00,000
(b) Trade Receivables 3,28,000
(c) Cash & Cash Equivalents 4 12,500
Total 15,25,000

Notes to Accounts:
(1) Share Capital
Authorized Share Capital
65,000, 5% preference shares of ` 10 each 6,50,000
3,00,000 equity shares of ` 2.5 each 7,50,000 14,00,000
Issued, Subscribed and paid up capital
1,84,000 equity shares of ` 2.5 each fully paid up 4,60,000
60,000, 5% Preference shares of ` 10 each
fully paid up 6,00,000
10,60,000

(2) Tangible Assets

Building at cost less depreciation 4,00,000
Plant at cost less depreciation (2,68,000 – 35,000) 2,33,000
6,33,000

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J.K.SHAH CLASSES CA INTERMEDIATE - ADVANCED ACCOUNTING
(3) Intangible Assets
Trademarks and Goodwill (3,18,000- 1,66,500) 1,51,500

(4) Cash & Cash equivalents

Bank (1,12,500 + 1,00,000 – 2,00,000) 12,500

Working Notes:
1. Adjustment (a)
New Equity shares subscribed = 15,000 x 3 = 45,000

2. Adjustment (b)

One 7% Pref. 4 new 5% pref. 6 new equity Loss

share. shares of `10 shares of 2.50
50 40 15 5
Total 6,00,000 ? 4,80,000 ? 1,80,000 60,000

3. Capital Reduction A/c

3 60,000 1 7,12,500
7 4,86,000
To trademark and 1,66,500
goodwill (Bal. fig.)
7,12,500 7,12,500

Q.11 In the books of Fortune Ltd.

Journal Entries
L. Debit Credit
Date Particulars F. ` `
1 5% First Debenture A/c Dr. 3,00,000
6% Second Debenture A/c Dr. 3,00,000
Unsecured Creditors A/c Dr. 90,000
Bank A/c Dr. 30,000
To Capital Reduction A/c 2,10,000
To 7% Debenture A/c 5,10,000
(Being Mr. Simple’s claims settled by issuing
7% debenture partly and balance claim
waived off)

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J.K.SHAH CLASSES CA INTERMEDIATE - ADVANCED ACCOUNTING

2 6% Second Debenture A/c Dr. 3,00,000

Unsecured Creditors A/c Dr. 60,000
To Bank A/c 90,000
To Capital Reduction A/c 2,70,000
(Being Ms. Dimple’s claims settled by giving
her cash partly and balance waived off)
3 Unsecured Creditors A/c Dr. 2,25,000
To Equity Share Capital A/c (FV 7.50) 1,50,000
To Capital Reduction A/c 75,000
(Being equity shares issued to 75% creditors
and their balance claim waived off)

4 Equity Share Final Call A/c Dr. 1,80,000

To Equity Share Capital A/c 1,80,000
(Being final call made on partly paid equity
shares)

5 Bank A/c Dr. 1,80,000

To Equity Share Final Call A/c 1,80,000
(Being money received against final call)

6 Equity Share Capital A/c (60) Dr. 3,60,000

To Equity Share Capital A/c (7.5) 45,000
To Capital Reduction A/c 3,15,000
(Being reduction of equity shares of ` 60
each to ` 7.5 each)

7 Capital Reduction A/c Dr. 8,60,000

To Profit / Loss A/c 8,60,000
(Being Profit / Loss balance written off
against Capital Reduction A/c)

8 Capital Reduction A/c Dr. 10,000

To Capital Reserve A/c 10,000
(Being profit transferred to Capital
Reserve A/c)
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J.K.SHAH CLASSES CA INTERMEDIATE - ADVANCED ACCOUNTING
Balance sheet of Fortune Ltd. (And Reduced ) as at 01.04.2011
Particulars Notes No. `
I. EQUITY AND LIABILITIES
(1) Shareholders fund
(a) Share Capital 1 1,95,000
(b) Reserve & Surplus 2 10,000
(2) Non Current Liabilities
(a) Long term borrowings 3 5,10,000
(b) Other long term liability (unsecured creditors) 75,000
(3) Current Liabilities
(a) Other current liabilities (Creditors for Exp.) 1,24,000
Total 9,14,000

II. ASSETS
(1) Non Current Assets
(a) Property, Plant and Equipments 5,14,000
(2) Current Assets
(a) Cash & Cash Equivalents (Bank) 4,00,000
(2,80,000 + 30,000 – 90,000 + 1,80,000)
Total 9,14,000

Notes to Accounts:
(1) Share Capital
Authorized Share Capital
50,000 equity shares of `7.50 each 3,75,000
Issued, Subscribed and Paid up
26,000 equity shares of ` 7.5 each, fully paid up 1,95,000
(of above 20,000 equity shares are issued for
consideration other than cash)

(2) Reserve and Surplus

Capital Reserve 10,000

(3) Long term borrowings

7% debentures 5,10,000

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J.K.SHAH CLASSES CA INTERMEDIATE - ADVANCED ACCOUNTING
Working Notes:
1. Adjustment 3
Unsecured creditors other than Simple & Dimple (4,50,000 – 90,000 – 60,000)

3,00,00
0

75% of claims 25% to be Payable at the end of 2 years

2,25,000 75,000

Other long term

20,000 equity shares of ` 7.50 Balance sacrifice liabilities in balance
1,50,000 75,000 sheet

2. Capital Reduction A/c

7 8,60,000 1 2,10,000
To capital Reserve (Bal. fig) 10,000 2 2,70,000
3 75,000
6 3,15,000
8,70,000 8,70,000

Q.12 In the books of Green Ltd.

Journal Entries
L. Debit Credit
Date Particulars F. ` `
1 Equity Share Final Call A/c Dr. 10,00,000
To Equity Share Capital A/c 10,00,000
(Being final call made on partly paid equity
Share)
2 Bank A/c Dr. 10,00,000
To Equity Share Final Call A/c 10,00,000
(Being money received against final call)

3 Equity Share Capital A/c (FV 50) Dr. 75,00,000

To Equity Share Capital A/c (FV 20) 30,00,000

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J.K.SHAH CLASSES CA INTERMEDIATE - ADVANCED ACCOUNTING

To Capital Reduction A/c 45,00,000

(Being equity shares of ` 50 each reduced to
equity shares of ` 20 each)

4 12% First Debenture A/c Dr. 3,00,000

12% Second Debenture A/c Dr. 7,00,000
Trade Payables A/c Dr. 2,00,000
Bank A/c Dr. 2,00,000
To Capital Reduction A/c 7,00,000
To 14% First Debenture A/c 7,00,000
(Being claim of Mr. X cancelled to the extent
` 7,00,000 and 14% debenture issued for
balance)

5 12% First Debenture A/c Dr. 2,00,000

12% Second Debenture A/c Dr. 3,00,000
Trade Payables A/c Dr. 1,00,000
To Capital Reduction A/c 3,00,000
To 14% First Debenture A/c 3,00,000
(Being claim of Mr. Y cancelled to the extent
of ` 3,00,000 and 14% debentures issued for
balance)

6 Capital Reduction A/c Dr. 40,00,000

To Goodwill A/c 20,00,000
To Profit / Loss A/c 20,00,000
(Being assets revalued & losses written off)

7. Capital Reduction A/c Dr. 15,00,000

To computers A/c 15,00,000
(Being computers revalued)

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J.K.SHAH CLASSES CA INTERMEDIATE - ADVANCED ACCOUNTING
Balance sheet of Green Ltd. (And Reduced) as at 31.03.2011
Particulars Notes No. `
I. EQUITY AND LIABILITIES
(1) Shareholders fund
(a) Share Capital 1 30,00,000
(2) Non Current Liabilities
(a) Long term borrowings 2 10,00,000
(3) Current Liabilities
(a) Trade Payables 2,00,000
Total 42,00,000

II. ASSETS
(1) Non Current Assets
(a) Property, Plant and Equipments
(i) Tangible Assets 3 30,00,000
(2) Current Assets
(a) Cash and Cash Equivalents 12,00,000
Total 42,00,000

Notes to Accounts:
(1) Share Capital
Authorized Share Capital 75,00,000

Issued, Subscribed and Paid up capital

1,50,000 equity shares of ` 20 each, fully paid up 30,00,000

(2) Long term borrowings

14% First debentures 10,00,000

(3) Tangible Assets

Building 10,00,000
Plant 10,00,000
Computers 10,00,000
30,00,000

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J.K.SHAH CLASSES CA INTERMEDIATE - ADVANCED ACCOUNTING
Working Notes:
1. Capital Reduction A/c
6 40,00,000 3 45,00,000
To Computers (Bal. fig.) 15,00,000 4 7,00,000
5 3,00,000
55,00,000 55,00,000

Q.13 In the books of M/S Ice Ltd.

Journal Entries
L. Debit Credit
Date Particulars F. ` `
1 8% Preference Share Capital A/c (100) Dr. 4,00,000
To 8% Preference Share Capital A/c (80) 3,20,000
To Capital Reduction A/c 80,000
(Being preference share of ` 100 each
reduced to preference shares of ` 80 each)

2 Equity Share Capital A/c (10) Dr. 10,00,000

To Equity Share Capital A/c (2) 2,00,000
To Capital Reduction A/c 8,00,000
(Being equity shares of ` 10 each reduced to
equity shares of ` 2 each)

3 Capital Reduction A/c Dr. 32,000

To Equity Share Capital A/c (2) 32,000
(Being 2/3rd of preference dividend waived
off and for balance 1/3rd equity shares of
` 2 each issued)

4 6% Debentures A/c Dr. 3,00,000

To Freehold Property A/c 3,00,000
(Being freehold property takenover by
debenture holders in part payment of their
claims)

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J.K.SHAH CLASSES CA INTERMEDIATE - ADVANCED ACCOUNTING

5 Arrears of Interest A/c Dr. 24,000

To Bank A/c 24,000
(Being interest paid)

6 Freehold Property A/c Dr. 1,50,000

To Capital Reduction A/c 1,50,000
(Being freehold property revalued)
7 Bank A/c Dr. 2,50,000
To Trade Investment A/c 2,00,000
To Capital Reduction A/c 50,000
(Being investments sold at profit)

8 Directors Loan A/c Dr. 3,00,000

To Capital Reduction A/c 2,25,000
To Equity Share Capital A/c 75,000
(Being 75% of loan waived and balance
settled through issue of equity share of ` 2
each)

9 Capital Reduction A/c Dr. 9,45,000

To Trade Receivable A/c 1,80,000
To Inventories A/c 2,40,000
To Profit / Loss A/c 5,25,000
(Being assets revalued & losses written off)

10 Capital Reduction A/c Dr. 30,000

To Bank A/c 30,000
(Being penalty paid @ 5%)

11 Capital Reduction A/c Dr. 2,98,000

To Capital Reserve A/c 2,98,000
(Being balance transferred to capital reserve)

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J.K.SHAH CLASSES CA INTERMEDIATE - ADVANCED ACCOUNTING
Balance sheet of M/S Ice Ltd. (And Reduced) as at 31.03.2015
Particulars Notes No. `
I. EQUITY AND LIABILITIES
(1) Shareholders fund
(a) Share Capital 1 6,27,000
(b) Reserve & Surplus 2 2,98,000
(2) Non Current Liabilities
(a) Long term borrowings 3 1,00,000
(3) Current Liabilities
(a) Trade Payables 1,01,000
Total 11,26,000
II. ASSETS
(1) Non Current Assets
(a) Property, Plant and Equipments
(i) Tangible Assets 4 6,00,000
(2) Current Assets
(a) Inventories 60,000
(b) Trade Receivable 2,70,000
(c) Cash & Cash Equivalents (Bank) 1,96,000
(2,50,000 – 24,000 – 30,000)
Total 11,26,000

Notes to Accounts:
(1) Share Capital
Authorized Share Capital ?

Issued, Subscribed and Paid up Capital

1,53,500 equity shares of ` 2 each fully paid up 3,07,000
(of the above 53,500 equity shares are issued for
consideration other than cash)

4,000, 8% preference share of ` 80 each fully paid up 3,20,000

6,27,000
(2) Reserve and Surplus
Capital Reserve 2,98,000

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J.K.SHAH CLASSES CA INTERMEDIATE - ADVANCED ACCOUNTING
(3) Long term borrowings
6% debentures 1,00,000

(4) Tangible Assets

Freehold property 4,00,000
Plant & Machinery 2,00,000
6,00,000

Working Notes:
1. Capital Reduction A/c
3 32,000 1 80,000
9 9,45,000 2 8,00,000
10 30,000 6 1,50,000
To Capital Reserve (Bal. fig.) 2,98,000 7 50,000
8 2,25,000
13,05,000 13,05,000

Q.14 In the books of M/S Raman Ltd.

Journal Entries
L. Debit Credit
Date Particulars F. ` `
1 Equity Share Capital A/c (100) Dr. 8,00,000
To Equity Share Capital A/c (10) 8,00,000
(Being equity share sub divided)
 1 eq sh × ` 100 FV = ` 100 
 
  
 10 eq sh × ` 100 FV = ` 100 
 

2 Equity Share Capital A/c (10) Dr. 7,20,000

To Share Surrender A/c 7,20,000
(Being 90% shares surrender)

3 8% Debenture A/c Dr. 14,00,000

Interest due on Debenture A/c Dr. 70,000
To Capital Reduction A/c 14,70,000
(Being total claim of debenture holders
cancelled)

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J.K.SHAH CLASSES CA INTERMEDIATE - ADVANCED ACCOUNTING

4 Share Surrender A/c Dr. 5,00,000

To 8% Preference Share Capital A/c 5,00,000
(Being preference share issued to
debentures out of share surrender)

5 Sundry Creditors Dr. 4,50,000

To Capital Reduction A/c 4,50,000
(Being total claim of creditors cancelled)

6 Share Surrender A/c Dr. 90,000

To Equity Share Capital A/c (10) 90,000
(Being equity shares issued to creditors out
of share surrender)
7 Share Surrender A/c Dr. 1,30,000
To Capital Reduction A/c 1,30,000
(Being balance in share Surrender A/c
cancelled and transferred to Capital
Reduction A/c)

8 Capital Reduction A/c Dr. 10,70,000

To Profit & Loss A/c 10,70,000
(Being accumulated losses written off)

9 Capital Reduction A/c Dr. 9,80,000

To Land, Building & Machinery A/c 9,80,000
(Being overstated asset record at proper
amount)

Balance sheet of M/S Raman Ltd. (And Reduced) as at 31.03.2011

Particulars Notes No. `
I. EQUITY AND LIABILITIES
(1) Shareholders fund
(a) Share Capital 1 6,70,000
(b) Reserve & Surplus -

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J.K.SHAH CLASSES CA INTERMEDIATE - ADVANCED ACCOUNTING

(2) Non Current Liabilities -

(3) Current Liabilities
(a) Other current liabilities(Income Tax Liability) 10,000
Total 6,80,000
II. ASSETS
(1) Non Current Assets
(a) Property, Plant and Equipments
(i) Tangible Assets 2 4,20,000
(ii) Intangible Assets Nil
(2) Current Assets
(a) Current Investments 15,000
(b) Inventory 1,00,000
(c) Trade Receivable 1,43,000
(d) Cash & Cash Equivalents 2,000
Total 6,80,000

Notes to Accounts:
(1) Share Capital
Authorized Share Capital ?
Issued, Subscribed and Paid up Capital
50,000 8% pref. shares of ` 10 each fully paid 5,00,000
17,000 equity share of ` 10 each fully paid 1,70,000
6,70,000
(2) Tangible Assets
Land, Building & Machinery (14,00,000 – 9,80,000) 4,20,000

Working Notes:
1. Capital Reduction A/c
8 10,70,000 3 14,70,000
To land, Building & Machinery 9,80,000 5 4,50,000
(Bal. fig.) 7 1,30,000
20,50,000 20,50,000

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J.K.SHAH CLASSES CA INTERMEDIATE - ADVANCED ACCOUNTING
Q.15 In the books of ABC Ltd.
Journal Entries
L. Debit Credit
Date Particulars F. ` `
1 8% Preference Share Capital A/c Dr. 6,00,000
To Capital Reduction A/c 1,80,000
To 11% Debentures A/c 4,20,000
(Being 30% reduction in liability of preference
Share capital and the issue of debentures to
preference shareholders)

2 9% Debentures A/c Dr. 12,00,000

To Plant & Machinery A/c 9,00,000
To Capital Reduction A/c 3,00,000
(Being settlement of debenture holders by
giving Plant & Machinery)
3 Trade Payables A/c Dr. 5,92,000
To Inventory A/c 5,00,000
To Capital Reduction A/c 92,000
(Being settlement of creditors by giving
inventories)

4 Bank A/c Dr. 3,00,000

To 11% Debentures A/c 3,00,000
(Being fresh issue of debentures)

5 Bank Overdraft A/c Dr. 1,50,000

To Bank A/c 1,50,000
(Being settlement of bank overdraft)

6 Capital Reduction A/c Dr. 4.18000

To Investment A/c 13,000
To Profit / Loss A/c 4,05,000
(Being decrease in investment and Profit /
Loss balance written off )

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J.K.SHAH CLASSES CA INTERMEDIATE - ADVANCED ACCOUNTING
7. Capital Reduction A/c Dr. 1,54,000
To Capital Reserve A/c 1,54,000
(Being balance transferred to capital reserve)

Dr. Capital Reduction Account Cr.

Particulars ` Particulars `
To Investments 13,000 By 8% Preference Share
To Profit / Loss A/c 4,05,000 Capital A/c 1,80,000
To Capital Reserve A/c 1,54,000 By 9% Debenture 3,00,000
(Bal. Fig.) By Trade Payables 92,000
5,72,000 5,72,000

Balance sheet of ABC Ltd. (And Reduced) as at 31.03.2011

Particulars Notes No. `
I. EQUITY AND LIABILITIES
(1) Shareholders funds
(a) Share Capital 1 20,00,000
(b) Reserve & Surplus 2 1,54,000
(2) Non Current Liabilities -
(a) Long term liabilities 3 7,20,000
Total 28,74,000
II. ASSETS
(1) Non Current Assets
(a) Property, Plant and Equipments
(i)Tangible Assets (Furniture & Fixture) 2,50,000
(ii)Intangible Assets (Patents & copyrights) 70,000
(b) Non current investments 55,000
(2) Current Assets
(a) Current investments
(b) Inventories (14,00,000 – 5,00,000) 9,00,000
(c) Trade Receivable 14,39,000
(d) Cash & Cash Equivalents 1,60,000
Total 28,74,000

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J.K.SHAH CLASSES CA INTERMEDIATE - ADVANCED ACCOUNTING
Notes to Accounts:
(1) Share Capital
Authorised ?
Issued subscribed & Paid -up
2,00,000 equity shares of ` 10 each fully paid up 20,00,000

(2) Reserves and Surplus

Capital Reserve 1,54,000

(3) Long term Borrowings

11% Debentures (4,20,000 + 3,00,000) 7,20,000

Working Note:
Cash and Cash equivalent = Opening Balance + 11% debentures – Bank overdraft
= 10,000 + 3,00,000 – 1,50,000
= 1,60,000

Q.16
Journal Entries in the books of X Ltd.
Sr. L.
Date Particulars Debit (`) Credit (`)
No F
1. - 8% preference share capital A/c Dr. 3,00,000
To Cash/Bank A/c 2,10,000
To Capital Reduction A/c 90,000
[Being claim of preference shareholder settled as per
scheme of reconstruction]
2. - Capital Reduction A/c Dr. 16,800
To Cash/Bank A/c [W.N.3] 16,800
[Being arrears of preference dividend settled]
3. - Debenture Interest Accrued & due A/c Dr. 54,000
To Capital Reduction A/c 54,000
[Being claim of interest on debenture sacrificed by
debenture holder]
4. - 9% Debenture A/c Dr. 3,00,000
To 10% Debenture A/c 3,00,000

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J.K.SHAH CLASSES CA INTERMEDIATE - ADVANCED ACCOUNTING
[Being rate of interest enhanced as per scheme of
reconstruction]
5. - Creditors A/c Dr. 34,500
To Cash/Bank A/c 32,775
To Capital Reduction A/c 1,725
[Being Creditors paid off as per scheme of
reconstruction]
6. - Capital Reduction A/c Dr. 2,81,000
To Profit & Loss A/c 2,14,000
To Patents & Copy Rights A/c 40,000
To Sundry Debtors A/c (60,000*25%) 15,000
To Fixed Assets A/ 7,000
To Investment A/c 5,000
[Being fixed Assets, current Assets, fictitious assets
and accumulated losses write off as per scheme of
reconstruction]
7. - Capital Reduction A/c Dr. 1,675
To Cash/Bank A/c 1,675
[Being cost of reconstruction paid as per scheme
of reconstruction]
8. - Outstanding Interest on Bank O/D A/c Dr. 7,500
To Capital Reduction A/c 3,750
To Cash/Bank A/c 3,750
(Being Interest on bank overdraft paid partly as per
scheme of reconstruction]
9. - Bank Overdraft A/c Dr. 75,000
To Cash/Bank A/c 75,000
[Being bank Overdraft paid off as per scheme of
reconstruction]
10. - Equity Share Call A/c Dr. 3,50,000
To Equity Share Capital A/c 3,50,000
[Being equity share call money due] (WN1)
11. - Cash/Bank A/c Dr. 3,50,000
To Equity Share Call A/c 3,50,000
(Being Call money received) (WN1)

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J.K.SHAH CLASSES CA INTERMEDIATE - ADVANCED ACCOUNTING
12. - Equity Share Capital A/c Dr. 1,50,000
To Capital Reduction A/c 1,50,000
[Being sacrifice made by equity holder] (WN2)

Working Note 1:-

Cash/Bank A/c
Particulars Amt.(`) Particulars Amt.(`)
To Equity Share Capital 3,50,000 By 8% Pref. Share Capital A/c 2,10,000
 3,50,000  By Capital Reduction A/c 16,800
 50,000  ` 7
  By Creditors A/c 32,775
By Capital Reduction 1,675
By O/s Bank O/D Interest 3,750
By Bank Overdraft 75,000
By Balance c/d (given) 10,000

3,50,000 3,50,000

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J.K.SHAH CLASSES CA INTERMEDIATE - ADVANCED ACCOUNTING
Working Note 2:-
Capital Reduction A/c
Particulars Amt.(`) Particulars Amt.(`)
To Cash A/c 16800 By 8% Pref. Share Capital 90,000
To Profit & Loss A/c 2,14,000 By o/s Deb Interest 54,000
To Patents & Copy right 40,000 By Creditors 1,725
To Sundry Debtors 15,000 By O/s Bank O/D Interest 3,750
To Fixed Assets 7,000 By Equity Share Capital 1,50,000
To Investment 5,000
To Cash A/c 1,675
2,99,475 2,99,475

Working Note 3: Arrears of dividend on Preference shares

3,00,000 x 8% 24000

Sacrifice Paid to preference holder

30% 70%
7200 16,800

Not to be recorded To be paid

as it is unrecorded immediately in
liability Cash/Bank

Balance Sheet of X Ltd. [And reduced] as at…..

Note Note
Particulars CY (`) PY (`)
No No.
I. EQUITY AND LIABILITIES
1. Shareholders Fund
(a) Share Capital 1 7,00,000 -
2. Non-Current Liabilities
(a) Long Term borrowing (10% Deb) 3,00,000
Total 10,00,000
II. ASSETS
1. Non-Current Assets
(a) Property, Plant and Equipment
(i) Tangible Assets (5,60,000 – 7,000) 2 5,53,000 -
(b) Non-Current Investment 27,500 -
2. Current Assets
(a) Trade Receivables(60,000-15,000) 45,000 -
(b) Cash & Cash Equivalent 10,000 -
(c) Other Current Assets(4,24,500 – 60,000) 3,64,500 -

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J.K.SHAH CLASSES CA INTERMEDIATE - ADVANCED ACCOUNTING
Total 10,00,000

Notes to account:
Note Particulars CY (`) PY (`)
No
1. Share capital
Authorised capital ? -
Issued subscribed and paid up capital:-
50,000 Equity Shares of `20 each, `14 paid up 7,00,000 -
(10 original paid up + 7 called-3 sacrifice =14 new PV)

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