ANS-1

Balance sheet of Om Ltd. as at 31st March, 2023

Note (Rs.)

I Equity and Liabilities

(1) Shareholders’ funds:

(a) Share capital 1 12,00,000

(b) Reserves and surplus 2 1,14,150

(2) Non-current liabilities:

Long term borrowings 3 4,50,000

(3) Current liabilities:

(a) Short term borrowings 4 4,50,000

(b) Trade payables 2,63,550

(c) Other current liabilities 5 11,250

Total 24,88,950

II ASSETS

(1) Non- Current Assets:

(a) Property, plant and equipment 6 11,49,900

(b) Intangible assets 7 4,05,000

(c) Non-current investments (Shares at cost) 1,50,000

(2) Current Assets:

CATESTSERIES.ORG
 (a) Inventories 4,27,500

(b) Trade receivables 8 2,72,550

(c) Cash and Cash equivalents – Cash on hand 84,000

Total 24,88,950

Note: There is a Contingent liability for Bills receivable discounted with Bank Rs.6000.

Statement of Profit and Loss of Om Ltd. for the year ended 31st March, 2023

Particulars Note Rs.

I Revenue from Operations 20,11,050

II Other Income (Dividend income) 12,750

III Total Revenue (I &+ II) 20,23,800

IV Expenses:

(a) Purchase of Inventory (14,71,500 – Advertisement Expense 14,56,500

15,000)

(b) Changes in Inventories of finished Goods / Work in progress 8,100

& inventory (4,35,600 – 4,27,500)

(c) Employee Benefit expense 9 1,20,000

(d) Finance costs 10 51,900

(e) Depreciation & Amortization Expenses [10% of (1,05,000 + 11,100

6,000)]

(f) Other Expenses 11 3,47,550

CATESTSERIES.ORG
 Total Expenses 19,95,150

V Profit before exceptional, extraordinary items and tax 28,650

VI Exceptional items -

VII Profit before extra-ordinary items and tax 28,650

VIII Extraordinary items -

IX Profit before tax 28,650

Notes to accounts

(Rs.)

1. Share Capital

Authorized capital:

90,000 Equity Shares of Rs. 10 each. 9,00,000

6,000 6% Preference shares of Rs. 100 each 6,00,000

Issued, subscribed & called up:

60,000, Equity Shares of Rs. 10 each 6,00,000

6,000 6% Redeemable Preference Shares of 100 each 6,00,000

12,00,000

2. Reserves and Surplus

Balance as on 1st April, 2022 85,500

Add: Surplus for current year 28,650

CATESTSERIES.ORG
 Balance as on 31st March, 2023 1,14,150

3. Long Term Borrowings

5% Mortgage Debentures (Secured against Freehold 4,50,000

Properties)

4. Short Term Borrowings

Secured Borrowings: Loans Repayable on Demand 4,50,000

Overdraft from Banks (Secured by Hypothecation of
Stocks & Receivables)

5. Other Current liabilities

Interest due on Borrowings (5% Debentures) 11,250

6. Property, plant and equipment Furniture

Furniture at Cost Less depreciation Rs. 45,000 (as given 1,05,000

in Trail Balance)

Add: Depreciation 45,000

Cost of Furniture 1,50,000

Add: Installation charge of Electrical Fittings wrongly 6,000

included under the heading Salaries and Wages

Total Gross block of Furniture A/c 1,56,000

Accumulated Depreciation Account:

Opening Balance-given in Trail Balance 45,000

Depreciation for the year:

On Opening WDV at 10% i.e. (10% × 1,05,000) 10,500

CATESTSERIES.ORG
 On additional purchase during the year at 10% i.e.

(10% × 6,000) 600

Less: Accumulated Depreciation 56,100 99,900

Freehold property (at cost) 10,50,000

11,49,900

7. Intangible Assets

Technical knowhow 4,50,000

Less: Written off 45,000 4,05,000

8. Trade Receivables

Sundry Debtors (a) Debt outstanding due more than six 18,000
months

(b) Other Debts (refer working note) 1,34,550

Bills Receivable (1,24,500-4,500) 1,20,000 2,72,550

9. Employee benefit expenses

Salaries & Wages 1,56,000

Less: Wages incurred for installation of electrical fittings 6,000

to be capitalised

Less: Directors’ Remuneration shown separately 30,000

Balance amount 1,20,000

10. Finance Costs

Interest on bank overdraft 29,400

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 Interest on debentures 22,500 51,900

11. Other Expenses

Payment to the auditors 18,000

Director’s remuneration 30,000

Selling expenses 2,37,300

Technical knowhow written of (4,50,000/10) 45,000

Advertisement (Goods and Articles Distributed) 15,000

Bad Debts (4,500 × 50%) 2,250 3,47,550

Working Note:

Calculation of Sundry Debtors-Other Debts

Sundry Debtors as given in Trial Balance 1,50,300

Add Back: Bills Receivables Dishonoured 4,500

1,54,800

Less: Bad Debts written off – 50% Rs. 4,500 (2,250)

Adjusted Sundry Debtors 1,52,550

Less: Debts due for more than 6 months (as per information given) (18,000)

Total of other Debtors i.e. Debtors outstanding for less than 6 months 1,34,550

(10 Marks)

CATESTSERIES.ORG
ANS-2

In the Books of Hot Ltd.

Statement showing Calculation for Profit or Loss Pre & Post Incorporation

Particulars Total (Rs.) Basis Pre – Post –

Incorporation Incorporation
(Rs.) (Rs.)

Sales 30,00,000 Sales 6,42,857 23,57,143

Bad debts recovered 10,000 Pre 10,000 -

Interest on Investment 27,000 1:1 13,500 13,500

Total (A) 30,37,000 6,66,357 23,70,643

(-) Expenses (B)

Cost of Goods Sold 21,00,000 10:33 4,88,372 16,11,628

Rent 3,00,000 W.N.4 38,076.92 2,61,923.08

Salaries 1,50,000 W.N.5 16,071.43 1,33,928.57

Travelling Expenses 20,000 W.N.6 4,732.14 15,267.86

Depreciation 9,000 W.N.7 1,500 7,500

Carriage Outward 8,000 Sales 1,714.29 6,285.71

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 Printing & Stationery 50,000 Time 12,500 37,500

Advertisement 15,000 Post - 15,000

Miscellaneous Expenses 25,000 Time 6,250 18,750

Directors Fee 1,000 Post - 1,000

Managing Director Remuneration 8,000 Post - 8,000

Bad Debts (30,000 + 10,000) 40,000 Sales 8,571.43 31,428.57

Commission & Brokerage to 70,000 Sales 15,000 55,000

Selling Expenses

Audit Fee 60,000 Post - 60,000

Interest on Debentures 12,000 Post - 12,000

Interest on Vendors 14,000 W.N.8 5,250 8,750

Selling & Distribution Expenses 24,000 Sales 5,142.85 18,857.14

Preliminary Expenses 13,000 Post - 13,000

Underwriting Commission 18,000 Post - 18,000

Pre- incorporation profit ( A- B) 63,175.94

Post- incorporation profit ( A- B) 36,824.21

CATESTSERIES.ORG
Working Notes:

1) Time Ratio:

Pre Incorporation Period = 1/4/2021 – 30/6/2021 = 3 Months

Post Incorporation Period = 1/7/2021 – 31/3/2022 = 9 Months

Time Ratio = 1:3

2) Sales Ratio:

Let us assume Monthly sales be X

Pre-Incorporation Period = 3 Months × X = 3X

Post Incorporation Period = X + 8(X + 0.25X) = 11X

Sales Ratio = 3:11

3) COGS Ratio:

Cost of goods ratio between pre and post incorporation periods can be calculated as
follows:

Let cost of goods sold in the pre-incorporation period be Rs. 100 Then cost of goods sold in
the post-incorporation period is Rs.90 Sales Ratio (as calculated above) = 3:11

Then, cost of goods sold ratio = (100 × 3): (90 × 11) = 300: 990= 10:33

4) Rent:

Total Rent = 3, 00,000

New Additional space rent from 1/7/2021 = 15,000 × 9 = 1, 35,000*

Old Space rent = 1, 65,000

Let the monthly rent of old space be X

Pre incorporation period = 3 × X = 3X

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Post Incorporation Period = 4 × X + 5 (X + 0.2X) = 10X

Monthly Rent of Old Space

13X = 1, 65,000

X = 12,692.30

Therefore,

Pre incorporation rent = 38,077

Post incorporation rent = 1, 26,923 + 1, 35,000 = 2, 61,923

5) Salaries:

Total Salary = 1, 50,000

Let us assume monthly salary be X

Pre incorporation period = 3 × X = 3X

Post incorporation period = X + 8 (3 × X) = 25X

Therefore,

Pre-Incorporation Salary = 16,071.43

Post Incorporation Salary = 1, 33,928.57

6) Travelling Expenses:

Total travelling expenses = 20,000

Sales promotion = 7,500

Pre incorporation = 7,500 × 3/14 = 1,607.14

Post incorporation = 7,500 × 11/14 = 5,892.86

CATESTSERIES.ORG
Balance Travelling Expenses = 12,500

Pre incorporation = 12,500 × 1/4 = 3,125

Post incorporation = 12,500 × ¾ = 9,375

Therefore,

Pre-Incorporation Travelling Expenses = 4,732.14

Post-Incorporation Travelling Expenses = 15,267.86

7) Depreciation:

Total Depreciation = 9,000

Depreciation on new asset acquired in the month of august, 2021 = 3,000 (Post)

Balance depreciation = 6,000

Pre incorporation = 6,000 × ¼ = 1,500

Post incorporation = 6,000 × ¾ = 4,500

Therefore,

Pre Incorporation Depreciation = 1,500

Post Incorporation Depreciation = 7,500

8) Interest on Vendors:

Purchase consideration was paid on 30th Nov, 2021

Therefore,

Pre incorporation = 14,000 × 3/8 = 5,250

Post incorporation = 14,000 × 5/8 = 8,750

CATESTSERIES.ORG
 (10 Marks)

ANS-3

Calculation of effective capital

Particulars Where Jupiter Where Jupiter

Ltd. is a non- Ltd. is an
Investment Investment
Company (Rs.) Company (Rs.)

Paid-up share capital

30,000, 14% Preference Shares 30,00,000 30,00,000

2,40,000 Equity Shares 1,92,00,000 1,92,00,000

Capital Reserves excluding revaluation reserve 2,00,000 2,00,000

Securities Premium 1,00,000 1,00,000

15% Debentures 1,30,00,000 1,30,00,000

Public Deposits 7,40,000 7,40,000

Total (A) 362,40,000 362,40,000

Investments 1,50,00,000

Profit and Loss Account (Dr. balance) 30,50,000 30,50,000

Preliminary Expenses not written off 1,10,000 1,10,000

Total (B) 181,60,000 31,60,000

Effective Capital [A – B] 1,80,80,000 3,30,80,000

Effective capital of the company for both the situations is less than 5 crores. Hence
maximum remuneration payable to director should be @ Rs. 60, 00,000 per annum.
CATESTSERIES.ORG
 (6 Marks)

ANS-4

Bumbum Limited

Journal Entries

2022 Dr. (Rs.) Cr. (Rs.)

July 1 Equity Share Capital A/c (Rs10. each) Dr. 3,00,000

To Equity share capital A/c (Rs. 2 each) 3,00,000

(Being equity share of Rs. 10 each splitted into 5

equity shares of Rs. 2 each) {1,50,000 X 2}

July Cash & Bank balance A/c Dr. 5,55,000

10
To Investment A/c 4,90,000

To Profit & Loss A/c 65,000

(Being investment sold out and profit on sale credited

to Profit & Loss A/c)

July 8% Red. pref. sh. capital A/c Dr. 5,00,000

10
Premium on red. of pref. sh. A/c Dr. 25,000

To Preference shareholders A/c 5,25,000

(Being amount payable to preference shareholders on

CATESTSERIES.ORG
 redemption)

July Preference shareholders A/c Dr. 5,25,000

10
To Cash & bank A/c 5,25,000

(Being amount paid to preference shareholders)

July General reserve A/c Dr. 5,00,000

10
To Capital redemption reserve A/c 5,00,000

(Being amount equal to nominal value of preference

shares transferred to Capital Redemption Reserve A/c
on its redemption as per the law)

Sept. Capital Redemption Reserve A/c Dr. 1,00,000

12
To Bonus to shareholders A/c 1,00,000

(Being balance in capital redemption reserve

capitalized to issue bonus shares)

Sept. Bonus to shareholders A/c Dr. 1,00,000

12
To Equity share capital A/c 1,00,000

(Being 50,000 fully paid equity shares of Rs. 2 each

issued as bonus in ratio of 1 share for every 3 shares
held)

Sept. Securities Premium A/c Dr. 25,000

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30
To Premium on redemption of preference shares A/c 25,000

(Being premium on preference shares adjusted from

securities premium account)

Balance Sheet as at 30th September, 2022

Particulars Notes Rs.

Equity and Liabilities

1 Shareholders' funds

A Share capital 1 4,00,000

B Reserves and Surplus 2 12,30,000

2 Current liabilities

A Trade Payables 4,20,000

Total 20,50,000

Assets

1 Non-current assets

A PPE 7,80,000

B Deferred tax asset 3,40,000

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2 Current assets

Trade receivables 6,20,000

Cash and cash equivalents 3,10,000

Total 20,50,000

Notes to accounts

1 Share Capital Rs. Rs.

Authorized share capital

2,50,000 Equity shares of Rs. 2 each 5,00,000

10,000 8% Preference shares of Rs. 100 each 10,00,000 15,00,000

Issued, subscribed and paid up

2,00,000 Equity shares of Rs. 2 each 4,00,000

2 Reserves and Surplus

Securities Premium A/c

Balance as per balance sheet 6,00,000

Adjustment for premium on preference Shares (25,000)

CATESTSERIES.ORG
 Balance 5,75,000

Capital Redemption Reserve (5,00,000-1,00,000 4,00,000

General Reserve (6,50,000 – 5,00,000) 1,50,000

Profit & Loss A/c 40,000

Add: Profit on sale of investment 65,000 1,05,000

Total 12,30,000

Working Notes:

Rs.

1.Redemption of preference shares

5,000 Preference shares of Rs. 100 each 5,00,000

Premium on redemption @ 5% 25,000

Amount Payable 5,25,000

2.Issue of Bonus Shares

Existing equity shares after split (30,000 × 5) 1,50,000 shares

Bonus shares (1 share for every 3 shares held) to be issued 50,000 shares

CATESTSERIES.ORG
3. Cash and Bank Balance

Balance as per balance sheet 2,80,000

Add: Realization on sale of investment 5,55,000

8,35,000

Less: Paid to preference share holders (5,25,000)

Balance 3,10,000

(8 MARKS)

ANS-5

Cash flow statement (using direct method) for the year ended 31st March, 2023

(Rs. In (Rs. in
crores) crores)

Cash flow from operating activities

Cash sales 262

Cash collected from credit customers 134

Less: Cash paid to suppliers for goods & services and to (251)
employees (Refer Working Note)

Cash from operations 145

Less: Income tax paid (26)

CATESTSERIES.ORG
Net cash generated from operating activities 119

Cash flow from investing activities

Net Payment for purchase of Machine (25 – 15) (10)

Proceeds from sale of investments 16

Net cash used in investing activities 6

Cash flow from financing activities

Redemption of Preference shares (32)

Proceeds from issue of Equity shares 24

Debenture interest paid (2)

Dividend Paid (15)

Net cash used in financing activities (25)

Net increase in cash and cash equivalents 100

Add: Cash and cash equivalents as on 1.04.2022 2

Cash and cash equivalents as on 31.3.2023 102

Working Note:

Calculation of cash paid to suppliers of goods and services and to employees

Particulars (Rs. in crores)

Opening Balance in creditors Account 84

Add: Purchases (220x .8) 176

Total 260

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Less: Closing balance in Creditors Account 92

Cash paid to suppliers of goods 168

Add: Cash purchases (220x .2) 44

Total cash paid for purchases to suppliers (a) 212

Add: Cash paid to suppliers of other consumables and services (b) 19

Add: Payment to employees (c) 20

Total cash paid to suppliers of goods & services and to employees [(a)+ 251
(b) + (c)]

(6 Marks)

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