8 As 21 Consolidated Financial Statements

CA NITIN GOEL AS 21: CONSOLIDATED FINANCIAL STATEMENTS
AS 21: CONSOLIDATED FINANCIAL STATEMENTS
“What you do makes a difference, and you have to decide what kind of difference
you want to make.”
Holding As per Section 2(46) of the Companies Act, 2013,

“Holding company”, in relation to one or more other companies, means a
Company
company of which such companies are subsidiary companies.
Section 2(87) of the Companies Act, 2013 defines “subsidiary company” as a

company in which the holding company -
(i) controls the composition of the Board of Directors; or
(ii) exercises or controls more than 50% of total voting power either at its
own or together with 1 or more of its subsidiary companies
Section 19 prohibits a subsidiary company from holding shares in the
holding company. According to this section, no company shall, either by
itself or through its nominees, hold any shares in its holding company and
Subsidiary no holding company shall allot or transfer its shares to any of its subsidiary
Company companies and any such allotment or transfer of shares of a company to
its subsidiary company shall be void.
However, a subsidiary may continue to be a member of its holding company
when:
a) the subsidiary company holds such shares as legal representative of a
deceased member of the holding company; or
b) the subsidiary company holds such shares as a trustee; or
c) the subsidiary company is a shareholder even before it became a
subsidiary company of the holding company.
Section 129 (3) of the Companies Act, 2013 mandated the companies having
one or more subsidiaries, to prepare Consolidated Financial Statements.
According to this section, where a company has one or more subsidiaries,
it shall, in addition to separate financial statements will prepare a
consolidated financial statement of the company and of all the subsidiaries
in the same form and manner as that of its own.
Purpose of
Accounting Standard (AS) 21 also lays down the accounting principles and
Preparing the
procedures for preparation and presentation of consolidated financial
Consolidated
statements. Consolidated financial statements are presented by the parent
Financial
(holding company) to provide financial information about the economic
Statements activities of the group as a single economic entity.
AS 21 is mandatory if an enterprise presents consolidated financial
statements. In other words, the accounting standard does not mandate an
enterprise to present consolidated financial statements but, if the
enterprise presents consolidated financial statements for complying with
the requirements of any statute or otherwise, it should prepare and present
consolidated financial statements in accordance with AS 21.
Page 8.1
This Standard does not deal with:

(a) methods of accounting for amalgamations and their effects on
Non
consolidation, including goodwill arising on amalgamation (see AS 14),
Applicability
(b) accounting for investments in associates and
of AS 21
(c) accounting for investments in joint ventures
As per AS 21, a subsidiary should be excluded from consolidation when:

• control is intended to be temporary because the subsidiary is acquired
Exclusion and held exclusively with a view to its subsequent disposal in the near
From future; or
Preparation • it operates under severe long-term restrictions which significantly
Of impair its ability to transfer funds to the parent.
Consolidated
Financial Investments in such subsidiaries should be accounted for in accordance
Statements with AS 13, Accounting for Investments. The reasons for not consolidating a
subsidiary should be disclosed in the consolidated financial statements.
Under AS 21, as per the definition of subsidiary, an enterprise controlled by

Consolidation
the parent is required to be consolidated. The term ‘enterprise’ includes a
of subsidiary
company and any enterprise other than a company. Therefore, LLPs and
which is a
partnership firms are required to be consolidated.
LLP or a
Accordingly, in the given case, holding company is required to consolidate
Partnership
its subsidiary which is an LLP or a partnership firm.
Firm
a) Single source document: From consolidated financial statements, the
users of accounts can get an overall picture of the Group. Consolidated
profit and loss account gives the overall profitability of the group.
b) Intrinsic value of share: Intrinsic share value of the holding company can
be calculated directly from the Consolidated Balance Sheet.
c) Acquisition of subsidiary: The minority interest data of the consolidated

Advantages
financial statement indicates that the amount payable to the outside
of
shareholders of the subsidiary company at book value which is used as
Consolidation
the starting point of bargaining at the time of acquisition of a subsidiary
by the holding company.
d) Evaluation of holding company in the market: The overall financial health

of the holding company can be judged using consolidated financial
statements. Those who want to invest in the shares of the holding
company or acquire it, need such consolidated statement for evaluation.
As per AS 21, consolidated financial statements normally include

Components a) Consolidated Balance Sheet
Of b) Consolidated Statement of Profit and Loss Account
Consolidated c) Consolidated Cash Flow Statement (in case parent presents cash flow
Financial statement) and
Statements d) Notes and statements and explanatory schedules that form the integral
part thereof.
Page 8.2
The various steps involved in the consolidation process are as follows:

1) the carrying amount of the parent’s investment in each subsidiary and
the parent’s portion of equity of each subsidiary are eliminated. In case
cost of acquisition exceeds or is less than the acquirer’s interest,
goodwill or capital reserve is calculated retrospectively.
2) intragroup transactions, including sales, expenses and dividends, are
eliminated, in full
3) unrealised profits resulting from intragroup transactions that are
included in the carrying amount of assets, such as inventory and fixed
assets, are eliminated in full
Consolidation 4) unrealised losses resulting from intragroup transactions that are
Procedures deducted in arriving at the carrying amount of assets are also eliminated
unless cost cannot be recovered;
5) minority interest in the net income of consolidated subsidiaries for the
reporting period are identified and adjusted against the income of the
group in order to arrive at the net income attributable to the owners of
the parent; and
6) minority interests in the net assets of consolidated subsidiaries are
identified and presented in the consolidated balance sheet separately
from liabilities and the parent shareholders’ equity.
Calculation Goodwill = Cost of Investment - Parent’s share in the equity of the

Of Goodwill/ subsidiary on date of investment
Capital
Reserve Capital Reserve = Parent’s share in the equity of the subsidiary on date of
(Cost Of investment – Cost of investment
Control)
Minority interest is that part of the net results of operations and of net
assets of a subsidiary attributable to interests which are not owned, directly
or indirectly through subsidiaries, by the holding (parent) company.
In short, It represents claims of the outside shareholders of a subsidiary.
The losses applicable to the minority in a consolidated subsidiary may

Minority exceed the minority interest in the equity of the subsidiary. The excess, and
Interests any further losses applicable to the minority, are adjusted against the
majority interest except to the extent that the minority has a binding
obligation to and is able to make good the losses. If the subsidiary
subsequently reports profit, all such profits are allocated to the majority
interest until the minority’s share of losses previously absorbed by the
majority has been recovered.
All the revenue items are to be added on line by line basis and from the
consolidated revenue items, inter-company transactions should be
Consolidated eliminated.
Profit & Loss If there remains any unrealized profit in the inventory of goods, of any of
Account the Group Company, such unrealized profit should be eliminated from the
value of inventory to arrive at the consolidated profit.
Page 8.3
All the items of Cash flow from operating activities, investing activities and
Consolidated
financing activities are to be added on line by line basis and from the
Cash Flow
consolidated items, inter-company transactions should be -eliminated.
Statement
AS 21 states that consolidated financial statements shall be prepared using
uniform accounting policies for like transactions and other events in similar
circumstances.
If any company in the same group uses accounting policies other than those
adopted in consolidated financial statements for like transactions and
Uniform events in similar circumstances, appropriate adjustments are made to its
Accounting financial statements when they are used in preparing the consolidated
Policies financial statements.
If it is not practicable to use uniform accounting policies in preparing the
consolidated financial statements, the fact should be disclosed together
with the proportions of items to which different accounting policies have
been applied.
The financial statements used in the consolidation should be drawn up to

the same reporting date. If it is not practicable to draw up the financial
statements of one or more subsidiaries to such date and, accordingly, those
financial statements are drawn up to different reporting dates, adjustments
Alignment of
should be made for the effects of significant transactions or other events
Reporting
that occur between those dates and the date of the parent’s financial
Dates
statements.
In any case, the difference between reporting dates should not be more
than six months.
Page 8.4
ASSIGNMENT QUESTIONS
TOPIC 1 CONSOLIDATED BALANCE SHEET
Question 1 (ICAI Study Material) Pg no._____

Prepare Consolidated balance sheet of H Ltd. and its subsidiary S Ltd. as at 31st March, 2021
H Ltd. S Ltd.
Property, Plant & Equipment 1,00,000 1,30,000
Investments (8,000 equity shares of S Ltd.) 1,26,000 -
Current Assets 74,000 70,000
Share Capital (Fully paid equity shares of 10 each) 1,50,000 1,00,000
Profit and Loss Account 50,000 40,000
Trade Payables 1,00,000 60,000
H Ltd. acquired the shares of S Ltd. on 01.07.2020 and Balance of Profit & Loss Account of S
Ltd. on 01.04.2020 was 30,000
Question 2 Pg no._____
From the following balance sheets of Exe Ltd. and Wye Ltd. as on 31st March, 2020, work out:
(i) Net amount due to minority interest and (ii) Cost of control
Balance Sheets of Exe Ltd. & Wye Ltd. as on 31st March, 2020
Equities & Liabilities Exe Ltd. (₹) Wye Ld. (₹)
Shares of ₹100 each 15,00,000 5,00,000
General Reserve 1,50,000 1,00,000
Profit & Loss Account 2,00,000 75,000
Creditors 1,87,500 1,20,000
20,37,500 7,95,000
Assets
Sundry Assets 14,77,500 7,95,000
4,000 Shares of ₹100 each 5,60,000
20,37,500 7,95,000
The assets of Wye Ltd. included equipments worth ₹ 1,50,000 which was revalued at ₹ 1,25,000.
The investments of Exe Ltd. were in shares of Wye Ltd. and the same were acquired on 31 st
March, 2020.
Question 3 (RTP May 2020) (Similar) / (ICAI Study Material) Pg no._____

From the following summarized balance sheets of H Ltd. and its subsidiary S Ltd. drawn up
at 31st March, 2020, prepare a consolidated balance sheet as at that date, having regard to
the following:
a) Reserves and Profit and Loss Account of S Ltd. stood at ₹25,000 and ₹ 15,000 respectively
on the date of acquisition of its 80% shares by H Ltd. on 1st April, 2019.
b) Machinery (Book-value ₹ 1,00,000) and Furniture (Book value ₹ 20,000) of S Ltd. were
revalued at ₹ 1,50,000 and ₹ 15,000 respectively on 1st April, 2019 for the purpose of fixing
the price of its shares. [Rates of depreciation computed on the basis of useful lives:
Machinery 10%, Furniture 15%.]
Summarised Balance Sheet of H Ltd. as on 31st March, 2020
Note No. H Ltd. S Ltd.
Equity & Liabilities
Page 8.5
(1) Shareholders' Funds

(a) Share Capital 1 6,00,000 1,00,000
(b) Reserves and Surplus 2 3,00,000 1,00,000
(2) Current Liabilities
(a) Trade Payables 1,50,000 57,000
10,50,000 2,57,000
Assets
(1) Non-Current Assets
(a) PPE & Intangible Assets
i. Property, Plant & Equipment 3 4,50,000 1,07,000
(b) Non Current Investments 4 6,00,000 1,50,000
10,50,000 2,57,000
Notes to Accounts:
H Ltd. S Ltd.
1. Share Capital
6,000 equity shares of 100 each, fully paid up 6,00,000
6,00,000 1,00,000
2. Reserves & Surplus
General Reserve 2,00,000 75,000
Profit and Loss A/c 1,00,000 25,000
3,00,000 1,00,000
3. Property, Plant & Equipment
Machinery 3,00,000 90,000
Furniture 1,50,000 17,000
4,50,000 1,07,000
4. Non Current Investments
Non Current Investments 4,40,000 1,50,000
Shares in S Ltd.: 800 shares at ₹ 200 each 1,60,000
6,00,000 1,50,000
Balance sheets of H Ltd. and S Ltd. as at 31 March, 2021 are given below:
st
Equities & Liabilities H Ltd. ₹ S Ltd. ₹

Shareholder’s Funds
Share Capital of ₹ 10 each, fully paid 5,00,000 2,00,000
Profit & Loss Account 60,000 35,000
Current Liabilities:
Creditors 80,000 60,000
7,40,000 3,45,000
Assets
60% Shares in S Ltd., at cost 1,62,400 -
Current Assets 2,77,600 2,39,000
Preliminary Expenses - 6,000
7,40,000 3,45,000
Page 8.6
H Ltd. acquired the shares on 1st April, 2020 and on that date general reserve and profit and
loss account of S Ltd. showed balances of ₹ 40,000 and ₹8,000 respectively. No part of
preliminary expenses was written off during the year ended 31st March, 2021.
Prepare a consolidated balance sheet of H Ltd. and its subsidiary S Ltd. as on 31st March, 2021.
Question 5 (RTP May 2019) / (ICAI Study Material) Pg no._____

From the following data, determine in each case:
1) Minority interest at the date of acquisition and at the date of consolidation.
2) Goodwill or Capital Reserve.
3) Amount of holding company’s profit in the consolidated Balance Sheet assuming holding
company’s own Profit & Loss Account to be ₹2,00,000 in each case:
Date of acquisition Consolidation Date
%
Subsidiary 01.01.2020 31.12.2020
Case shares Cost
Company Share Profit & Share Profit &
owned
Capital Loss A/c Capital Loss A/c
Case 1 A 90% 1,40,000 1,00,000 50,000 1,00,000 70,000
Case 2 B 85% 1,04,000 1,00,000 30,000 1,00,000 20,000
Case 3 C 80% 56,000 50,000 20,000 50,000 20,000
Case 4 D 100% 1,00,000 50,000 40,000 50,000 55,000
Question 6 (Inter July 2021) (5 Marks) Pg no._____

Long Limited acquired 60% stake in Short Limited for a consideration of ₹ 112 lakhs. On the
date of acquisition Short Limited's Equity Share Capital was ₹ 100 lakhs, Revenue Reserve
was ₹ 40 lakhs and balance in Profit & Loss Account was ₹ 30 lakhs.
From the above information you are required to calculate Goodwill / Capital Reserve in the
following situations:
(i) On consolidation of Balance Sheet.
(ii) If Long Limited showed the investment in subsidiary at a carrying amount of ₹ 104 lakhs.
(iii) If the consideration paid for acquiring the 60% stake was ₹ 92 lakhs.
On 31 March, 2020 the balance sheet of H Ltd. and its subsidiary S Ld. stood as follows:
st
H Ltd. S Ltd.
EQUITIES & LIABILITIES
Shareholder’s Funds:
Equity Share Capital 8,00,000 2,00,000
Current Liabilities:
Creditors 1,20,000 80,000
11,60,000 4,05,000
ASSETS
75% Shares in S Ltd. (at cost) 2,80,000 -
Stock 1,05,000 1,77,000
Other Current Assets 2,25,000 1,28,000
11,60,000 4,05,000
Draw consolidated balance sheet as at 31st March, 2020 after considering the following:
(1) H Ltd. acquired the shares on 31st July, 2019.
Page 8.7
(2) S Ltd. earned a profit of ₹ 45,000 for the year ended 31st March, 2020.
(3) In January, 2020 S Ltd. sold to H Ltd. goods costing ₹ 15,000 for ₹ 20,000. On 31st March,
2020 half of these goods were lying as unsold in godown of H Ltd.
Give your working notes.
Question 8 (RTP Nov 2021) / (ICAI Study Material) Pg no._____

On 31st March, 2021, P Ltd. acquired 1,05,000 shares of Q Ltd. for ₹ 12,00,000. The position of
Q Ltd. on that date was as under:
₹
Property, plant and equipment 10,50,000
Current Assets 6,45,000
1,50,000 equity shares of ₹ 10 each fully paid 15,00,000
Pre-incorporation profits 30,000
Profit and Loss Account 60,000
Trade payables 1,05,000
P Ltd. and Q Ltd. give the following information on 31st March, 2023:
P Ltd. ₹ Q Ltd. ₹
Equity shares of ₹ 10 each fully paid (before bonus issue) 45,00,000 15,00,000
Securities Premium 9,00,000 –
Pre-incorporation profits – 30,000
Profit and Loss Account 15,75,000 4,20,000
Trade payables 5,55,000 2,10,000
Property, plant and equipment 79,20,000 23,10,000
Investment: 1,05,000 Equity shares in Q Ltd. at cost 12,00,000 –
Current Assets 44,10,000 17,55,000
Directors of Q Ltd. made bonus issue on 31.3.2023 in the ratio of one equity share of ₹ 10 each
fully paid for every two equity shares held on that date. Bonus shares were issued out of
post-acquisition profits by using General Reserve. Calculate as on 31st March, 2013:-
(i) Cost of Control/Capital Reserve; (ii) Minority Interest; (iii) Consolidated Profit and Loss
Account in each of the following cases:
a. Before issue of bonus shares;
b. Immediately After issue of bonus shares.

A Ltd acquired 1,600 ordinary shares of ₹100 each of B Ltd on 1st July, 2021. On 31st December,
2021, the balance sheets of the two companies were as given below:
Balance Sheet of A Ltd. and its subsidiary, B Ltd. as at 31st December, 2021
Particulars Note No. A Ltd. (₹) B Ltd. (₹)
Equity and Liabilities
(1) Shareholder's Funds
a) Share Capital 1 5,00,000 2,00,000
b) Reserves and Surplus 2 2,97,200 1,82,000
a) Trade Payables 47,100 17,400
b) Short term borrowings 3 80,000
Total 9,24,300 3,99,400
Assets
(1) Non-current assets
Page 8.8
(a) Property, Plant and Equipment 4 3,90,000 3,15,000

(b) Non-current Investments 5 3,40,000 --
(2) Current assets
(a) Inventories 1,20,000 36,400
(b) Trade receivables 59,800 40,000
(c) Cash & Cash equivalents 6 14,500 8,000
Total 9,24,300 3,99,400
Notes to Accounts
A Ltd. ₹ B Ltd. ₹
1. Share Capital
5,000 shares of ₹ 100 each, fully paid up 5,00,000 -
2,000 shares of ₹ 100 each, fully paid up - 2,00,000
Total 5,00,000 2,00,000
2. Reserves and Surplus
General Reserves 2,40,000 1,00,000
Profit & loss 57,200 82,000
Total 2,97,200 1,82,000
3. Short term borrowings
Bank overdraft 80,000 --
4. Property plant and equipment
Land and building 1,50,000 1,80,000
Plant & Machinery 2,40,000 1,35,000
Total 3,90,000 3,15,000
5. Non-current Investments
Investment in B Ltd (at cost) 3,40,000 --
6. Cash & Cash equivalents
Cash 14,500 8,000
The Profit & Loss Account of B Ltd. showed a credit balance of ₹30,000 on 1st January, 2021
out of which a dividend of 10% was paid on 1st August, 2021; A Ltd. credited the dividend
received to its Profit & Loss Account. The Plant & Machinery which stood at ₹ 1,50,000 on 1st
January, 2021 was considered as worth ₹ 1,80,000 on 1st July, 2021; this figure is to be
considered while consolidating the Balance Sheets. The rate of depreciation on plant &
machinery is 10% (computed on the basis of useful lives).
Prepare consolidated Balance Sheet as at 31st December, 2021.
On 31st March, 2021, the Balance Sheets of H Ltd. and its subsidiary S Ltd. stood as follows:
Particulars Note H Ltd. S Ltd.
No. (₹ in Lacs) (₹ in Lacs)
Equity and Liabilities
(1) Shareholder's Funds
a) Share Capital 1 12,000 4,800
b) Reserves and Surplus 2 5,499 3,000
a) Trade payables 3 1,833 1,014
b) Short term provisions 4 855 394
c) Other current liabilities (Dividend payable) 1,200 -
Total 21,387 9,208
Page 8.9
Assets
a) Property, Plant and Equipment 5 9,468 5,486
b) Non-current Investments (Shares in S Ltd.) 3,000
(2) Current assets
a) Inventories 3,949 1,956
b) Trade receivables 6 2,960 1,562
c) Cash and cash equivalents 1,490 204
d) Short term loans and advances 7 520
Total 21,387 9,208
Notes to Accounts
H Ltd. (₹ in lacs) S Ltd. (₹ in lacs)
1 Share Capital
Authorized share capital:
Equity shares of ₹ 10 each, fully paid up 15,000 6,000
Issued and Subscribed:
Equity shares of ₹ 10 each, fully paid up 12,000 4,800
2 Reserves and surplus
General Reserve 2,784 1,380
Profit and Loss Account: 2,715 1,620
Total 5,499 3,000
3 Trade Payables
Creditors 1,461 854
Bills Payable 372 160
1,833 1,014
4 Short term provisions
Provision for Taxation 855 394
5 Property, plant and equipment
Land and Buildings 2,718 -
Plant and Machinery 4,905 4,900
Furniture and Fittings 1,845 586
Total 9,468 5,486
6 Trade receivables
Debtors 2,600 1,363
Bills Receivable 360 199
Total 2,960 1,562
7 Short term loans and advances
Sundry Advances 520 --
The following information is also provided to you:
a. H Ltd. purchased 180 lakh shares in S Ltd. on 31st March, 2020 when the balances of
General Reserve and Profit and Loss Account of S Ltd. stood at ₹ 3,000 lakh and ₹ 1,200
lakh respectively.
b. On 1st April, 2020, S Ltd. declared a dividend @ 20% for the year ended 31st March, 2020.
H Ltd. credited the dividend received by it to its Profit and Loss Account.
c. On 1st January, 2021, S Ltd. issued 3 fully paid-up bonus shares for every 5 shares held
out of balances of its general reserve as on 31st March, 2020.
d. On 31st March, 2021, all the bills payable in S Ltd.’s balance sheet were acceptances in
favour of H Ltd. But on that date, H Ltd. held only ₹ 45 lakh of these acceptances in hand,
the rest having been endorsed in favour of its trade payables.
Page 8.10
e. On 31st March, 2021, S Ltd.’s inventory included goods which it had purchased for ₹ 100
lakh from H Ltd. which made a profit @ 25% on cost.
Prepare Consolidated Balance Sheet of H Ltd. and its subsidiary S Ltd. as at 31st March, 2021.
Question 11 (Inter Nov 2020) (15 Marks) Pg no._____

H Limited acquired 64000 Equity Shares of ₹ 10 each in S Ltd. as on 1st October, 2019. The
Balance Sheets of the two companies as on 31st March, 2020 were as under:
H Ltd. S Ltd.
Equity Share Capital: Shares of ₹ 10 each 20,00,000 8,00,000
General Reserve (1st April, 2019) 9,60,000 4,20,000
Preliminary Expenses (1 April, 2019)
st
- (20,000)
Bank Overdraft 3,00,000 -
Bills Payable - 52,000
Total 36,55,200 16,60,000
Assets:
Land and Building 7,20,000 7,60,000
Plant & Machinery 9,60,000 5,40,000
Investment in Equity Shares of S Ltd. 12,27,200 -
Inventories 4,56,000 1,68,000
Trade Receivables 1,76,000 1,60,000
Bills Receivable 59,200 -
Cash in Hand 56,800 32,000
Total 36,55,200 16,60,000
Additional Information:
(1) The Profit & Loss Account of S Ltd. showed credit balance of ₹ 1,20,000 on 1st April, 2019.
S Ltd. paid a dividend of 10% out of the same on 1st November, 2019 for the year 2018-19.
The dividend was correctly accounted for by H Ltd.
(2) The Plant & Machinery of S Ltd. which stood at ₹ 6,00,000 on 1st April, 2019 was considered
worth ₹ 5,20,000 on the date of acquisition by H Ltd. S Ltd. charges depreciation @ 10%
per annum on Plant & Machinery.
Prepare consolidated Balance Sheet of H Ltd. and its subsidiary S Ltd. as on 31st March, 2020.
Question 12 (RTP Nov 2018) Pg no._____

The Balance Sheet of X Ltd. and its subsidiary Y Ltd. as on 31st March, 2020 are as follows:
X Ltd. Y Ltd.
(in Lakhs) (in Lakhs)
Liabilities
Share Capital:
Authorized 20,000 8,000
Issued and Subscribed:
Equity Shares of ₹ 10 each, fully paid up 15,000 6,000
15% preference shares of ₹ 10 each, fully paid up 4,000 1,000
Profit and Loss Account 2,750 1,250
Trade Payables 1,646 1,027
25,896 10,727
Page 8.11
Assets
Land and Buildings 3,550 1,510
Furniture and Fittings 1,945 655
Investment in Y Ltd.: 450 Lakh Equity share in Y 6,800 -
Ltd. purchased on 1st April, 2019
Inventory 4,142 2,520
Trade Receivables 3,010 1,882
Cash and Bank Balances 1,174 560
25,896 10,727
The following information is also given to you
(a) 10% dividend on Equity shares was declared by Y Ltd. on 31st May, 2019 for the year ended
31st March, 2019. X Ltd. credited the dividend received to its Profit & Loss Account.
(b) Credit Balance of Profit & Loss account of Y Ltd. as on 1st April, 2019 was ₹ 650 Lakhs.
(c) General Reserve of Y Ltd. stood at same ₹ 1,450 Lakhs as on 1st April, 2019.
(d) Y Ltd.’s Plant & machinery showed a balance of ₹ 4,000 Lakh on 1st April 2019. At the time
of purchase of shares in Y Ltd., X Ltd. revalued Y’s Ltd. Plant & Machinery upward by ₹
1,000 Lakh.
(e) Included in Trade Payables of Y Ltd. are ₹ 50 Lakh for goods supplied by X Ltd.
(f) On 31st March, 2020, Y’s ltd. inventory included goods for ₹ 150 lakhs which it had
purchased from X Ltd. X Ltd. sold goods to Y Ltd. at cost plus 25%.
You are required to prepare a Consolidated Balance Sheet of X Ltd. and its subsidiary Y Ltd.
as on 31st March, 2020 giving working notes. (Ignoring dividend on preference shares)

H Ltd. acquired 3,000 shares in S Ltd., at a cost of ₹4,80,000 on 31.7.2020. The capital of S Ltd.
consisted of 5,000 shares of ₹ 100 each fully paid. The Profit & Loss Account of this company
for 2020 showed an opening balance of ₹1,25,000 and profit for the year was ₹ 3,00,000. At
the end of the year, it declared a dividend of 40%. Record entry in the books of H Ltd., in respect
of the dividend. Assume the profit is accruing evenly & calendar year as financial year.
XYZ Ltd. purchased 80% shares of ABC Ltd. on 1st January, 2020 for ₹ 1,40,000. The issued
capital of ABC Ltd., on 1st January, 2020 was ₹ 1,00,000 and the balance in the Profit & Loss
Account was ₹ 60,000. During the year ended 31st December, 2020, ABC Ltd. earned a profit
of ₹ 20,000 and at year end, declared and paid a dividend of ₹ 15,000.
Show by an entry how the dividend should be recorded in the books of XYZ Ltd.
What is the amount of minority interest as on 1st January, 2020 and 31st December, 2020?
Also compute Goodwill/Capital reserve at the date of acquisition.

Exe Ltd. acquires 70% of equity shares of Zed Ltd. as on 31st March, 2020 at cost of ₹ 70 lakhs.
The following information is available from balance sheet of Zed Ltd. as on 31st March, 2020:
₹ in Lakhs
Property, Plant & Equipment 120
Investments 55
Current Assets 70
Loans & Advances 15
15% Debentures 90
Current Liabilities 50
Page 8.12
The following revaluations have been agreed upon (not included in the above figures):
Property, Plant & Equipment Up by 20% Investments Down by 10%
Zed Ltd. declared and paid dividend @ 20% on its equity shares as on 31st March, 2020 (Face
value ₹ 10 per share). Exe Ltd. purchased the shares of Zed Ltd. @ ₹20 per share.
Calculate the amount of goodwill/capital reserve on acquisition of shares of Zed Ltd.

A Ltd. and B Ltd. provide the following information:
₹ (in ‘000s)
A Ltd. B Ltd.
Equity Shares 6,000 5,000
6% Preference Shares Nil 1,000
General Reserve 1,200 800
Trade Payables 3,850 3,410
Dividend Payable 600 500
Goodwill 100 20
Property, Plant & Equipment 3,850 2,750
Investments 1,620 1,100
Inventory 1,900 4,150
Trade Receivables 4,600 4,080
Cash & Bank 600 400
A Ltd. purchased 3/4th interest in B Ltd. at the beginning of the year at the premium of 25%.
Following other information is available:
a. Profit & Loss Account of B Ltd. includes ₹ 1,000 thousands bought forward from the
previous year.
b. The General Reserve balance is brought forward from the previous year.
c. The directors of both the companies have declared a dividend of 10% on equity share
capital for the previous and current year. From the above information calculate Pre- and
Post-acquisition Profits, Minority Interest and Cost of Control.

A Ltd. acquired 70% of equity shares of B Ltd. on 1.4.2013 at cost of ₹ 10,00,000 when B Ltd.
had an equity share capital of ₹ 10,00,000 and reserves and surplus of ₹ 80,000. In the four
consecutive years, B Ltd. fared badly and suffered losses of ₹ 2,50,000, ₹ 4,00,000, ₹ 5,00,000
and ₹ 1,20,000 respectively. Thereafter in 2017-18, B Ltd. experienced turnaround and
registered an annual profit of ₹ 50,000. In the next two years i.e. 2018-19 and 2019-20, B Ltd.
recorded annual profits of ₹ 1,00,000 and ₹ 1,50,000 respectively. Show the minority interests
and cost of control at the end of each year for the purpose of consolidation.
Question 18 (RTP May 2018) Pg no._____

From the following summarised Balance Sheets of A Ltd. and its subsidiary B Ltd., prepare
Consolidated Balance Sheet:
Balance Sheet as on 31st March, 2020
Equity & Liabilities A Ltd. B Ltd. Assets A Ltd. B Ltd.
Equity shares of ₹ 1,00,000 20,000 Sundry Assets 93,000 32,000

10 each fully paid
Profit on sale of 3,000 - Shares in B Ltd 18,000 -
shares
Page 8.13
1,200 shares at 15
each
Profit and Loss A/c
Brought forward 6,000 7,200
For the year 2,000 4,800
1,11,000 32,000 1,11,000 32,000
A Ltd. bought in earlier year 1,600 equity shares in B Ltd. @ ₹ 15 when the Profit & Loss A/c
balance in B Ltd. was ₹4,400. A Ltd. sold 400 shares @ ₹22.50, credited difference between
the sale proceeds and cost to “Profit on sale of investment account” on 30th September, 2019
and crediting the balance to the investment account. Profit during the year accrued uniformly.

Consider the following summarized balance sheets of subsidiary B Ltd.:
Equity & Liabilities 2019 2020
Amount in ₹ Amount in ₹
Share Capital
Issued and subscribed
5,000 Equity Shares of ₹100 each 5,00,000 5,00,000
Reserve and Surplus
Current Liabilities and Provisions
Trade Payables 4,90,000 4,94,000
Bank Overdraft - 1,70,000
Provision for Taxation 3,10,000 4,30,000
15,86,000 23,08,000
Assets
Property, Plant & Equipment (Cost) 3,20,000 3,20,000
Less: Accumulated Depreciation (48,000) (96,000)
2,72,000 2,24,000
Investment at Cost - 4,00,000
Current Assets
Inventory 5,97,000 7,42,000
Trade Receivable 5,94,000 8,91,000
Prepaid expenses 72,000 48,000
Cash at Bank 51,000 3,000
15,86,000 23,08,000
Also consider the following information:
a) B Ltd. is a subsidiary of A Ltd. Both the companies follow calendar year as accounting year.
b) A Ltd. values inventory on weighted average basis while B Ltd. used FIFO basis. To bring B
Ltd.’s values in line with those of A Ltd. its value of inventory is required to be reduced by
₹ 12,000 at the end of 2019 and ₹ 34,000 at the end of 2020.
c) B Ltd. deducts 1% from Trade Receivables as a general provision against doubtful debts.
d) Prepaid expenses in B Ltd. include advertising expenditure carried forward of ₹ 60,000 in
2019 and ₹ 30,000 in 2020, being part of initial advertising expenditure of ₹ 90,000 in 2019
which is being written off over three years. Similar amount of advertising expenditure of A
Ltd. has been fully written off in 2019.
Restate the balance sheet of B Ltd. as on 31st December, 2020 after considering the above
information, for the purpose of consolidation. Would restatement be necessary to make the
accounting policies adopted by A Ltd. and B Ltd. uniform.
Page 8.14

Variety Ltd. holds 46% of the paid-up share capital of VR Ltd. The shares were acquired at a
market price of ₹ 17 per share. The balance of shares of VR Ltd. are held by a foreign
collaborating company. A memorandum of understanding has been entered into with the
foreign company providing for the following:
(a) The shares held by the foreign company will be sold to Variety Ltd. The price per share
will be calculated by capitalising the yield at 15%. Yield, for this purpose, would mean 40%
of the average of pre-tax profits for the last 3 years, which were ₹ 30 lakhs, ₹ 40 lakhs
and ₹ 65 lakhs.
(b) The actual cost of the shares to the foreign company was ₹ 5,40,000 only. The profit that
would accrue to them would be taxable at an average rate of 30%. The tax payable will be
deducted from the proceeds and Variety Ltd. will pay it to the Government.
(c) Out of the net consideration, 50% would be remitted to the foreign company immediately
and the balance will be an unsecured loan repayable after two years.
The above agreement was approved by all concerned for being given effect to on 1.4.20X1. The
total assets of VR Ltd. as on 31st March, 20X1 was ₹ 1,00,00,000. It was decided to write down
Property, Plant and Equipment by ₹ 1,75,000. Current liabilities of VR Ltd. as on the same date
were ₹ 20,00,000. The paid-up share capital of VR Ltd. was ₹ 20,00,000 divided into 2,00,000
equity shares of ₹ 10 each.
Find out goodwill/capital reserve to Variety Ltd. on acquiring wholly the shares of VR Ltd.
TOPIC 2 CONSOLIDATED PROFIT & LOSS ACCOUNT
Question 21 (RTP May 2018) (Similar) / (ICAI Study Material) Pg no._____

H Ltd and its subsidiary S Ltd provide the following information for the year ended 31st March,
2023:
H Ltd. (₹ in lacs) S Ltd. (₹ in lacs)
Sales and other income 5,000 1,000
Increase in Inventory (closing less opening) 1,000 200
Raw material consumed 800 200
Wages and Salaries 800 150
Production expenses 200 100
Administrative Expenses 200 100
Selling and Distribution Expenses 200 50
Interest 100 50
Depreciation 100 50
Other Information:
H Ltd. sold goods to S Ltd. of ₹ 120 lacs at cost plus 20%. Inventory of S Ltd. includes such
goods valuing ₹ 24 lacs. Administrative expenses of S Ltd. include ₹ 5 lacs paid to H Ltd. as
consultancy fees. Selling and distribution expenses of H Ltd. include ₹ 10 lacs paid to S Ltd.
as commission.
H Ltd. holds 80% of equity share capital of ₹ 1,000 lacs in S Ltd. prior to 2021-2022. H Ltd. took
credit to its Profit and Loss Account, the proportionate amount of dividend declared and paid
by S Ltd. for the year 2021-2022.
Prepare a consolidated statement of profit and loss.
Page 8.15
The Trial Balances of H Ltd. and S Ltd. as on 31.12.2020 were as under:

H Ltd. S Ltd.
Dr. Cr. Dr. Cr.
Equity Share Capital (Share of Rs. 100 10,00,000 2,00,000
each)
7% Preference Share Capital (Rs. 100 - 2,00,000
each)
Reserves 3,00,000 1,00,000
6% Debentures 2,00,000 2,00,000
Trade Receivables /Trade Payables 80,000 90,000 50,000 60,000
P&L A/c balance 20,000 15,000
Purchases/Sales 5,00,000 9,00,000 6,00,000 9,50,000
Wages & Salaries 1,00,000 1,50,000
Debenture Interest 12,000 12,000
General Expenses 80,000 60,000
Preference-Dividend up to 30.6.2020 3,500 7,000
Inventory (31.12.2020) 1,00,000 50,000
Cash at Bank 13,500 6,000
Investment in S Ltd. 5,28,000 -
25,13,500 25,13,500 17,25,000 17,25,000
Investment in S Ltd. were acquired on 1.4.2020 and consisted of 80% of Equity Capital and 50%
of Preference Capital. Depreciation on Property, Plant & Equipment is written off @ 10% p.a
(computed on the basis of useful life. After acquiring control over S Ltd., H Ltd. supplied to it
goods at cost plus 20%, the total invoice value of such goods being Rs. 60,000; 1/4 of such
goods were still in Inventory at the end of the year. Prepare the Consolidated Profit and Loss
Account for the year ended on 31.12.2020.
Page 8.16
PRACTICE QUESTIONS
TOPIC 1 CONSOLIDATED BALANCE SHEET

Prepare Consolidated balance sheet of H Ltd. and its subsidiary S Ltd. as at 31st March, 2021
from the following information
H Ltd. S Ltd.
Investments (2,000 equity shares of S Ltd.) 2,20,000 -
Share Capital (Fully paid equity shares of 10 each) 5,00,000 2,50,000
H Ltd. acquired the shares of S Ltd. on 31.03.2021
(Ans: Capital Reserve 60,000; Minority Interest 70,000; Balance Sheet Total 10,55,000)

H Ltd. and S Ltd. provide the following information as at 31st March,2022:
H Ltd.₹ S Ltd.₹
Property, Plant and Equipment 2,00,000 2,60,000
Investments (14,000 Equity Shares of S Ltd.) 2,52,000 -
Share capital (Fully paid equity shares of ₹ 10 each) 3,00,000 2,00,000
Profit and loss account 1,00,000 80,000
Additional information:
H Ltd. acquired the shares of S Ltd. on 1st July, 2021 and Balance of profit and loss account of
S Ltd. on 1st April, 2021 was ₹ 60,000. Prepare consolidated balance sheet of H Ltd. and its
subsidiary as at 31st March, 2022.
(Ans: Goodwill 66,500; Minority Interest 84,000; Balance Sheet Total 8,14,500)
From the Balance Sheets and information given below, prepare Consolidated Balance Sheet
of Virat Ltd. and Anushka Ltd. as at 31st March. Virat Ltd. holds 80% of Equity Shares in
Anushka Ltd. since its (Anushka Ltd.’s) incorporation.
Balance Sheet of Virat Ltd. and Anushka Ltd. as at 31st March, 2021
Note No. Virat Anushka
Ltd. Ltd.
(1) Shareholders' Funds
(a) Share Capital 1 6,00,000 4,00,000
(b) Reserves and Surplus 2 1,00,000 1,00,000
(2) Non Current Liabilities
(a) Long Term Borrowings 2,00,000 1,00,000
(a) Trade Payables 1,00,000 1,00,000
10,00,000 7,00,000
Page 8.17
Assets
(1) Non-Current Assets
(a) PPE & Intangible Assets
i. Property, Plant & Equipment 4,00,000 3,00,000
(b) Non Current Investments 3 3,20,000 -
(2) Current Assets
(a) Inventories 1,60,000 2,00,000
(b) Trade Receivables 80,000 1,40,000
(c) Cash & Cash Equivalents 40,000 60,000
10,00,000 7,00,000
Notes to Accounts:
Virat Anushka
Ltd. Ltd.
1. Share Capital
6,00,000 4,00,000
2. Reserves & Surplus
1,00,000 1,00,000
3. Non Current Investments
Shares in Anushka Ltd 3,20,000 -
3,20,000 -
(Ans: Cost of Control Nil; Minority Interest 1,00,000; Balance Sheet Total 13,80,000)
Question 4 (Inter Nov 2019) (5 Marks) / RTP Nov 2020 /ICAI Study Material) Pg no._____
From the following data, determine Minority interest on the date of acquisition and on the date
of consolidation in each case:
Date of acquisition Consolidation Date
%
Subsidiary 01.01.2019 31.12.2019
Case shares Cost
Company Share Profit & Share Profit &
owned
Capital Loss A/c Capital Loss A/c
Case A X 90% 2,00,000 1,50,000 75,000 1,50,000 85,000
Case B Y 75% 1,75,000 1,40,000 60,000 1,40,000 20,000
Case C Z 70% 98,000 40,000 20,000 40,000 20,000
Case D M 95% 75,000 60,000 35,000 60,000 55,000
Case E N 100% 1,00,000 40,000 40,000 40,000 65,000
(Ans: Acq: 22,500; 50,000; 18,000; 4,750; Nil Cons: 23,500; 40,000; 18,000; 5,750; Nil)
Question 5 (Inter May 2018) (20 Marks) / (RTP Nov 2019) Pg no._____
The following summarised Balance Sheets of H Ltd. and its subsidiary S Ltd. were prepared
as on 31st March, 2020:
H Ltd. S Ltd.
Shareholders' Funds
Equity Shares of ₹ 10 each, fully paid up 12,00,000 2,00,000
Reserves and Surplus
Page 8.18
Profit and Loss Account 2,80,000 65,000

Current Liabilities
22,37,000 5,43,000
Assets
Non-Current Assets
Property, Plant & Equipment
Machinery 6,40,000 1,80,000
Furniture 3,75,000 34,000
Non-Current Investments
Shares in S Ltd. - 16,000 shares @ ₹ 20 each 3,20,000 -
Current Assets
Inventories 2,68,000 62,000
Trade Receivables 4,70,000 2,35,000
Cash and Bank 1,64,000 32,000
22,37,000 5,43,000
H Ltd. acquired the 80% shares of S Ltd. on 1st April, 2019. On the date of acquisition, General
Reserve and Profit Loss Account of S Ltd. stood at ₹ 50,000 and ₹ 30,000 respectively.
Machinery (book value ₹ 2,00,000) and Furniture (book value ₹ 40,000) of S Ltd. were revalued
at ₹ 3,00,000 and ₹ 30,000 respectively on 1st April, 2019 for the purpose of fixing the price of
its shares (rates of depreciation computed on the basis of useful lives : Machinery 10% and
Furniture 15%). Trade Payables of H Ltd. includes ₹ 35,000 due to S Ltd. for goods supplied
since the acquisition of the shares. These goods are charged at 10% above cost. The
inventories of H Ltd. includes goods costing ₹ 55,000 purchased from S Ltd. You are required
to prepare Consolidated Balance Sheet as at 31st March, 2020.
(Ans: Goodwill 24,000; Minority Interest 99,300; Balance Sheet Total 25,25,500)
From the following information of Beta Ltd. and its subsidiary Gamma Ltd. drawn up at 31st
March, 2021, prepare a consolidated balance sheet as at that date
Beta Ltd. Gamma Ltd.
Share Capital
Shares of ₹ 100 each 15,00,000 2,50,000
Reserves 5,00,000 1,87,500
Current Liabilities
Non-Current Assets
Machinery 7,50,000 2,25,000
Furniture 3,75,000 42,500
Other Non Current Assets 11,00,000 3,75,000
Shares in Gamma Ltd. - 2,000 shares @ ₹200 each 4,00,000 -
Other information:
Reserves and Profit and Loss Account of Gamma Ltd. stood at ₹62,500 and ₹37,500
respectively on the date of acquisition of its 80% shares by Beta Ltd. on 1st April, 2020.
Machinery (Book-value ₹ 2,50,000) and Furniture (Book value ₹ 50,000) of Gamma Ltd. were
revalued at ₹ 3,75,000 and ₹ 37,500 respectively on 1st April, 2020 for the purpose of fixing
Page 8.19
the price of its shares. [Rates of depreciation computed on the basis of useful lives: Machinery
10%, Furniture 15%.]
Ans: Goodwill 30,000; Minority Interest 1,20,375; Balance Sheet Total 29,99,375)
Question 7 (Inter Jan 2021) (20 Marks) Pg no._____
On 31st March, 2020 summarised Balance Sheets of H Ltd. & subsidiary S Ltd. stood as follows:
H Ltd. S Ltd.
Shareholders' Funds
Equity Shares of ₹ 10 each, fully paid up 13,40,000 2,40,000
Reserves and Surplus 4,80,000 1,80,000
Secured Loans
12% Debentures 1,00,000 -
Current Liabilities
Bank Overdraft 1,00,000 -
Bills Payable 60,000 14,800
25,20,000 6,16,800
Assets
Non-Current Assets
Machinery 7,20,000 2,16,000
Furniture 3,60,000 40,800
Shares in S Ltd. - 19,200 shares @ ₹ 20 each 3,84,000 -
Current Assets
Inventories 6,00,000 2,00,000
Trade Receivables 3,00,000 90,000
Bills Receivables 1,00,000 30,000
Cash at Bank 56,000 40,000
25,20,000 6,16,800
The following information is also provided to you:
(a) H Ltd. purchased 19,200 shares of S Ltd. on 1st April, 2019, when the balances of Reserves
& Surplus and Profit & Loss Account of S Ltd. stood at ₹ 60,000 and ₹ 36,000 respectively.
(b) Machinery (Book value ₹ 2,40,000) and Furniture (Book value ₹ 48,000) of S Ltd were
revalued at ₹ 3,60,000 and ₹ 36,000 respectively on 1st April, 2019, for the purpose of fixing
the price of its shares. (Rates of depreciation computed on the basis of useful lives:
Machinery 10%, Furniture 15%).
(c) On 31st March, 2020, Bills payable of ₹ 12,000 shown in S Ltd.'s Balance Sheet had been
accepted in favour of H Ltd.
Prepare Consolidated Balance Sheet of H Ltd. and its Subsidiary S Ltd. as at 31st March, 2020.
(Ans: Goodwill 28,800; Minority Interest 1,15,560; Balance Sheet Total 28,67,400)
Question 8 (Inter May 2022) (15 Marks) Pg no._____
White Ltd. acquired 2,250 shares of Black Ltd. on 1st October,.2020. The summarized
balance sheets of both the companies as on 31st March, 2021 are given below:
White Ltd. Black Ltd.
(₹) (₹)
(I) Equity and Liabilities
Page 8.20
(1) Shareholder's fund

Share capital (Equity shares of ₹ 100 each fully 6,50,000 3,00,000
paid up)
Profit and loss account 1,50,000 90,000
Trade payables 1,15,000 75,000
Due to White Ltd. - 30,000
9,75,000 5,25,000
(II) Assets:
Property, Plant and Equipment 5,80,000 3,51,000
Investments
Shares in Black Ltd. (2,250 shares) 2,70,000
(2) Current assets
Inventories 50,000 1,20,000
Due from Black Ltd. 36,000
Cash and Cash equivalents 39,000 54,000
Total 9,75,000 5,25,000
Other information:
(i) During the year, Black Limited fabricated a machine, which is sold to White Ltd. for ₹
39,000, the transaction being completed on 30th March,2021.
(ii) Cash in transit from Black Ltd. to White Ltd. was ₹ 6,000 on 31st March,2021.
(iii) Profits during the year 2020-2021 were earned evenly.
(iv) The balances of Reserve and Profit and Loss account as on 1st April,2020 were as follows:
Reserves ₹ Profit and Loss A/c ₹
White Ltd. 30,000 15,000 Profit
Black Ltd. 30,000 10,000 Loss
You are required to prepare consolidated Balance Sheet of the group as on 31st March,2021 as
per the requirement of Schedule III of the Companies Act, 2013.
(Ans: Capital Reserve 7,500; Minority Interest 1,05,000; Balance Sheet Total 12,00,000)
Question 9 (RTP Nov 2022) Pg no._____

On 31st March, 2022, H Ltd. and S Ltd. give the following information:
H Ltd. (₹ in 000’s) S Ltd. (₹ in 000’s)
Equity Share Capital – Authorised 5,000 3,000
Issued and subscribed in
Equity Shares of ₹ 10 each fully paid 4,000 2,400
General Reserve 928 690
Profit and Loss Account (Cr. Balance) 1,305 810
Trade payables 611 507
Provision for Taxation 220 180
Other Provisions 65 17
Furniture and Fittings 615 298
Investment in the Equity Shares of S Ltd. 1,500 -
Inventory 983 786
Trade receivables 820 778
Page 8.21
Cash and Bank Balances 410 102

Sundry Advances (Dr. balances) 260 190
Following Additional Information is available:
a) H Ltd. purchased 90 thousand Equity Shares in S Ltd. on 1st April, 2021. On that date the
following balances stood in the books of S Ltd.:
General Reserve ₹ 1,500 thousand; Profit and Loss Account ₹ 633 thousand.
b) On 14th July, 2021 S Ltd. declared a dividend of 20% out of pre-acquisition profits. H Ltd.
credited the dividend received to its Profit and Loss Account.
c) On 1st November, 2021, S Ltd. issued 3 fully paid Equity Shares of ₹ 10 each, for every 5
shares held as bonus shares out of pre-acquisition General Reserve.
d) On 31st March, 2021, the Inventory of S Ltd. included goods purchased for ₹ 50 thousand
from H Ltd., which had made a profit of 25% on cost.
e) Details of Trade payables and Trade receivables:
H Ltd. (₹ in 000’s) S Ltd. (₹ in 000’s)
Trade payables
-Bills Payable 124 80
-Sundry creditors 487 427
611 507
Trade receivables
-Debtors 700 683
-Bills Receivables 120 95
820 778
Prepare a consolidated Balance Sheet as at 31st March, 2022.
(Ans: Capital Reserve 679.80; Minority Interest 1,560; Balance Sheet Total 10,223)
Hemant Ltd. purchased 80% shares of Power Ltd. on 1st January, 2020 for ₹ 2,10,000. The
issued capital of Power Ltd., on 1st January, 2020 was ₹ 1,50,000 and the balance in the Profit
& Loss Account was ₹ 90,000. During the year ended 31st December, 2020, Power Ltd. earned
a profit of ₹ 30,000 and at year end, declared and paid a dividend of ₹ 22,500.
What is the amount of minority interest as on 1st January, 2020 and 31st December, 2020?
Also compute goodwill/ capital reserve at the date of acquisition.
(Ans: Goodwill 18,000; Minority Interest 01.01.20: 48,000 & 31.12.20: 49,500)
King Ltd. acquires 70% of equity shares of Queen Ltd. as on 31st March, 2020 at a cost of ₹ 140
lakhs. The following information is available from the balance sheet of Queen Ltd. as on 31st
March, 2020:
₹ in Lakhs
Investments 110
Current Assets 140
Loans & Advances 30
15% Debentures 180
The following revaluations have been agreed upon (not included in the above figures):
Property, plant and equipment- up by 20% and Investments- down by 10%. King Ltd. purchased
the shares of Queen Ltd. @ ₹20 per share (Face value - ₹10).
Calculate the amount of goodwill/capital reserve on acquisition of shares of Queen Ltd.
(Ans: Capital Reserve 53.90 Lakhs)
Page 8.22

A Ltd. acquired 60% shares of B Ltd. @ ₹ 20 per share. Following is the extract of Balance
Sheet of B Ltd.:
₹
10,00,000 Equity Shares of ₹ 10 each 1,00,00,000
10% Debentures 10,00,000
Trade Payables 55,00,000
Property, Plant & Equipment 70,00,000
Investments 45,00,000
Current Assets 68,00,000
Loans & Advances 22,00,000
On the same day B Ltd. declared dividend at 20% and as agreed between both the companies
Property, Plant and Equipment were to be depreciated @ 10% and investment to be taken at
market value of ₹ 60,00,000. Calculate the Goodwill or Capital Reserve to be recorded in
Consolidated Financial Statements
(Ans: Goodwill 19,20,000)
A Ltd. acquired 70% equity shares of B Ltd. @ ₹20 per share (Face value - ₹10) on 31st March,
2021 at a cost of ₹140 lakhs. Calculate the amount of share of A Ltd. and minority interest in
the net assets of B Ltd. on this date.
Also compute goodwill/capital reserve for A Ltd. on acquisition of shares of B Ltd. from the
following information available from the balance sheet of B Ltd. as on 31st March, 2021
₹ in Lakhs
Investments 90
Current Assets 140
Loans & Advances 30
15% Debentures 180
(Ans: Capital Reserve 98 Lakhs)
Question 14 (Inter May 2019) (10 Marks) / (RTP May 2023) Pg no._____
H Ltd. acquire 70% of equity share of S Ltd. as on 1st January, 2013 at a cost of ₹ 5,00,000
when S Ltd. had an equity share capital of ₹ 5,00,000 and reserves and surplus of ₹ 40,000.
Both the companies follow calendar year as the accounting year.
In the four consecutive years, S Ltd. performed badly and suffered losses of ₹ 1,25,000, ₹
2,00,000, ₹ 2,50,000 and ₹ 60,000 respectively. Thereafter in 2017, S Ltd. experienced
turnaround and registered an annual profit of ₹ 25,000. In the next two years i.e. 2018 and
2019, S Ltd. recorded annual profits of ₹ 50,000 and ₹ 75,000 respectively.
Show the Minority Interests and Cost of Control at the end of each year for the purpose of
consolidation.
(Ans: Goodwill 1,22,000; Minority Interest 1,62,000; 1,24,500; 64,500; Nil, Nil, Nil, Nil, 16,500)
9RTO
Consider the following summarized Balance Sheets of subsidiary MNT Ltd.
Liabilities 2018-19 2019-20
Amount in ₹ Amount in ₹
Share Capital
Page 8.23
Issued and subscribed

7500 Equity Shares of ₹100 each 7,50,000 7,50,000
Reserve and Surplus
Revenue Reserve 2,14,000 5,05,000
Securities Premium 72,000 2,07,000
Current Liabilities and Provisions
Bank Overdraft - 1,70,000
Provision for Taxation 2,62,000 4,30,000
15,88,000 23,08,000
Assets
Property, Plant & Equipment (Cost) 9,20,000 9,20,000
Less: Accumulated Depreciation (1,70,000) (2,82,500)
7,50,000 6,37,500
Investment at Cost - 5,30,000
Current Assets
Inventory 4,12,300 6,90,000
Trade Receivable 2,95,000 3,43,000
Prepaid expenses 78,000 65,000
Cash at Bank 52,700 42,500
15,88,000 23,08,000
Other Information:
1) MNT Ltd. is a subsidiary of LTC Ltd.
2) LTC Ltd. values inventory on FIFO basis, while MNT Ltd. used LIFO basis. To bring MNT Ltd.'s
inventories values in line with those of LTC Ltd., its value of inventory is required to be
reduced by ₹ 5,000 at the end of 2018-2019 and increased by ₹ 12,000 at the end of 2019-
2020. (Inventory of 2018-19 has been sold out during the year 2019-20)
3) MNT Ltd. deducts 2% from Trade Receivables as a general provision against doubtful debts.
4) Prepaid expenses in MNT Ltd. include Sales Promotion expenditure carried forward of ₹
25,000 in 2018-19 and ₹ 12,500 in 2019-20 being part of initial Sales Promotion expenditure
of ₹37,500 in 2018-19, which is being written off over three years. Similar nature of Sales
Promotion expenditure of LTC Ltd. has been fully written off in 2018-19.
Restate the balance sheet of MNT Ltd. as on 31st March, 2020 after considering the above
information for the purpose of consolidation. Such restatement is necessary to make the
accounting policies adopted by LTC Ltd. and MNT Ltd. uniform.
(Ans: Adjusted Revenue Reserve 5,11,500; Balance Sheet Total 23,14,500)
TOPIC 2 CONSOLIDATED PROFIT & LOSS ACCOUNT

The Profit and Loss Accounts of A Ltd. and its subsidiary B Ltd. for the year ended 31st March,
2020 are given below:
₹ in Lakhs
Incomes
A Ltd. B Ltd.
Sales and other income 7,500 1,500
Increase in Inventory 1,500 300
Total 9,000 1,800
Expenses
Raw material consumed 1,200 300
Page 8.24
Wages and Salaries 1,200 225

Production expenses 300 150
Administrative expenses 300 150
Selling and distribution expenses 300 75
Interest 150 75
Depreciation 150 75
Total 3,600 1,050
Profit before tax 5,400 750
Provision for tax 1,800 300
Profit after tax 3,600 450
Dividend paid 1,800 225
Balance of Profit 1,800 225
The following information is also given:
a) A Ltd sold goods of ₹ 180 Lakhs to B Ltd at cost plus 25%. (1/6 of such goods were still in
inventory of B Ltd at the end of the year)
b) Administrative expenses of B Ltd include ₹ 8 Lakhs paid to A Ltd as consultancy fees.
c) Selling and distribution expenses of A Ltd include ₹15 Lakhs paid to B Ltd as commission.
d) A Ltd holds 72% of the Equity Capital of B Ltd. The Equity Capital of B Ltd prior to 2018-19 is
₹1,500 Lakhs
Prepare a consolidated Profit and Loss Account for the year ended 31st March, 2020.
(Ans: Profit after tax 4,044 Lakhs)
Question 17 (Inter Dec 2021) (15 Marks) Pg no._____
Moon Ltd. and its Subsidiary Star Ltd. provided the following information for the year ended
31st March ,2021.
Particulars Moon Ltd. (₹) Star Ltd. (₹)
Equity Share Capital 2,00,00,000 60,00,000
Finished Goods Inventory as on 01.04.2020 42,00,000 30,10,000
Finished Goods Inventory as on 31.03.2021 85,75,000 37,62,500
Dividend Income 16,80,000 4,37,500
Other Non-Operating Income 3,50,000 1,05,000
Raw Material Consumed 1,39,30,000 47,25,000
Selling & Distribution Expenses 33,25,000 15,75,000
Production Expenses 31,50,000 14,00,000
Loss on sale of Investments 2,62,500 Nil
Sales & other Operating Income 3,32,50,000 1,90,75,000
Wages & Salaries 1,33,00,000 24,50,000
General & Administrative Expenses 28,00,000 12,25,000
Royalty Paid Nil 50,000
Depreciation 3,15,000 1,40,000
Interest Expense 1,75,000 52,500
Other Information:
• On 1st September, 2018 Moon Ltd. acquired 50,000 equity shares of ₹ 100 each fully
paid up in the Star Ltd.
• Star Ltd paid Dividend of 10% for the year ended 31st March, 2020. The Dividend was
correctly accounted for by Moon Ltd.
• Moon Ltd sold goods of ₹ 17,50,000 to Star Ltd. at the profit of 20% on selling price.
Inventory of Star Ltd includes goods of ₹ 7,00,000 received from the Moon Ltd.
Page 8.25
• Selling & Distribution expense of Star Ltd. include ₹ 2,12,500 paid to the Moon Ltd. as
Brokerage Fees.
• General & Administrative Expense of Moon Ltd. includes ₹ 2,80,000 paid to Star Ltd. as
consultancy fees.
• Star Ltd. used some resources of Moon Ltd. and Star Ltd. paid ₹ 50,000 to Moon Ltd as
royalty.
Prepare Consolidated Statement of P&L of Moon Ltd. and its Subsidiary Star Ltd. for the year
ended 31.03.2021 as per Schedule III to the Companies Act, 2013.
(Ans: Profit before tax 1,10,10,000)
Question 18 (Inter July 2021) (15 Marks) Pg no._____
The Trial Balances of X Limited and Y Limited as on 31st March, 2021 were as under:
X Limited (₹ In 000) Y Limited (₹ In 000)
Dr. Cr. Dr. Cr.
Equity Share capital (Share of ₹100 each) 2,000 400
7% Preference share capital - 400
Reserves 600 200
6% Debentures 400 400
Trade Receivables/Trade Payables 160 180 100 120
Profit & Loss A/c balance 40 30
Purchases /Sales 1,000 1,800 1,200 1,900
Wages and Salaries 200 300
Debenture Interest 24 24
General Expenses 160 120
Preference share dividend upto 30.09.2020 7 14
Inventory (as on 31.03.2021) 200 100
Cash at Bank 27 12
Investment in Y Limited 1,056 -
Fixed Assets 2,200 1,580
Total 5,027 5,027 3,450 3,450
Investment in Y Limited was acquired on 1st July, 2020 and consisted of 80% of Equity Share
Capital and 50% of Preference Share Capital.
After acquiring control over Y Limited, X Limited supplied to Y Limited goods at cost plus 25%,
the total invoice value of such goods being ₹ 1,20,000, one fourth of such goods were still lying
in inventory at the end of the year.
Depreciation to be charged @ 10% in X Limited and @ 15% in Y Limited on Fixed Assets.
You are required to prepare the Consolidated Statement of Profit and Loss for the year ended
on 31st March, 2021.
(Ans: Profit tfd to Consolidated Balance Sheet 1,95,100)
Question 19 (RTP Nov 2020) (Part b) / (ICAI Study Material) Pg no._____
Suggest the accounting treatment for the below mentioned transactions in the consolidated
financial statements of A Ltd giving reference of the relevant guidance/standard.
a. A Ltd holds 80% of the equity capital and voting power in B Ltd. A Ltd sells inventories
costing ₹ 180 lacs to B Ltd at a price of ₹ 200 lacs. The entire inventories remain unsold
with B Ltd at the financial year end i.e. 31 March 2019.
b. A Ltd holds 75% of the equity capital and voting power in B Ltd. A Ltd purchases inventories
costing ₹ 150 lacs from B Ltd at a price of ₹ 200 lacs. The entire inventories remain unsold
with A Ltd at the financial year end i.e. 31 March 2019.
Page 8.26

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8 As 21 Consolidated Financial Statements

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CA NITIN GOEL AS 21: CONSOLIDATED FINANCIAL STATEMENTS

AS 21: CONSOLIDATED FINANCIAL STATEMENTS

Holding As per Section 2(46) of the Companies Act, 2013,

Section 2(87) of the Companies Act, 2013 defines “subsidiary company” as a

This Standard does not deal with:

As per AS 21, a subsidiary should be excluded from consolidation when:

Under AS 21, as per the definition of subsidiary, an enterprise controlled by

c) Acquisition of subsidiary: The minority interest data of the consolidated

d) Evaluation of holding company in the market: The overall financial health

As per AS 21, consolidated financial statements normally include

The various steps involved in the consolidation process are as follows:

Calculation Goodwill = Cost of Investment - Parent’s share in the equity of the

The losses applicable to the minority in a consolidated subsidiary may

The financial statements used in the consolidation should be drawn up to

TOPIC 1 CONSOLIDATED BALANCE SHEET

Question 1 (ICAI Study Material) Pg no._____

Question 3 (RTP May 2020) (Similar) / (ICAI Study Material) Pg no._____

(1) Shareholders' Funds

Equities & Liabilities H Ltd. ₹ S Ltd. ₹

Question 5 (RTP May 2019) / (ICAI Study Material) Pg no._____

Question 6 (Inter July 2021) (5 Marks) Pg no._____

Question 8 (RTP Nov 2021) / (ICAI Study Material) Pg no._____

Question 9 (ICAI Study Material) Pg no._____

(a) Property, Plant and Equipment 4 3,90,000 3,15,000

Question 10 (ICAI Study Material) Pg no._____

Question 11 (Inter Nov 2020) (15 Marks) Pg no._____

Question 12 (RTP Nov 2018) Pg no._____

Question 13 (ICAI Study Material) Pg no._____

Question 14 (ICAI Study Material) Pg no._____

Question 15 (ICAI Study Material) Pg no._____

Question 16 (ICAI Study Material) Pg no._____

Question 17 (ICAI Study Material) Pg no._____

Question 18 (RTP May 2018) Pg no._____

Equity shares of ₹ 1,00,000 20,000 Sundry Assets 93,000 32,000

Question 19 (ICAI Study Material) Pg no._____

Question 20 (ICAI Study Material) Pg no._____

TOPIC 2 CONSOLIDATED PROFIT & LOSS ACCOUNT

Question 21 (RTP May 2018) (Similar) / (ICAI Study Material) Pg no._____

The Trial Balances of H Ltd. and S Ltd. as on 31.12.2020 were as under:

TOPIC 1 CONSOLIDATED BALANCE SHEET

Question 1 (ICAI Study Material) Pg no._____

Question 2 (Inter Nov 2022) (15 Marks) Pg no._____

Profit and Loss Account 2,80,000 65,000

(1) Shareholder's fund

Question 9 (RTP Nov 2022) Pg no._____

Cash and Bank Balances 410 102

Question 12 (ICAI Study Material) Pg no._____

Issued and subscribed

TOPIC 2 CONSOLIDATED PROFIT & LOSS ACCOUNT

Question 16 (Inter Nov 2018) (10 Marks) Pg no._____

Wages and Salaries 1,200 225

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