Advanced Accounts - Additional Booklet

CA Inter Advanced Accounts | Dissolution of Firm 1.
DISSOLUTION OF A FIRM
Attempt Wise Analysis

May May
May 2018 Nov 2018 May 2019 Nov 2019 Nov Jan June Dec Nov
202 23
(Group 1) (Group 1) (Group 1) (Group 1) 2020 2021 2021 2021 22
2
Dissolution
5 25 5 25 15 5 20 20 10
of Firm
Dissolution of Firm
30
25 25
25
20 20
20
15
15
10
10
5 5 5
5
0
May 2018 Nov 2018 May 2019 Nov 2019 Nov 2020 Jan 2021 June 2021 Dec 2021 May 2022 Nov 2022 May 2023
(Group 1) (Group 1) (Group 1) (Group 1)
www.Swapnilpatni.com CA Anandh R Bhanggariya

CA Inter Advanced Accounts | Dissolution of Firm 1.2
No. R1 R2 R3 Special Point

Class Work
1 ICAI PQ 1
2 ICAI Illustration No 1
3 Additional Question
11 ICAI PQ 4
16 Exam Nov 18
17 RTP May 20
18 ICAI PQ 3, RTP Nov 20
22 ICAI PQ 5
My Career My Responsibility
1 RTP Nov 19 MOCK TEST 1
2 RTP Nov 18
3 Exam May 18
4 Exam Nov 18

5 Exam Nov 19
6 Exam Nov 19
7 RTP May 21
8 Exam Jan 21
9 RTP May 19
10 RTP Nov 21
11 RTP Nov 21
12 Exam Nov 20
13 RTP May 21
14 Exam Dec 21
15 May 22 RTP
16 May 22 RTP
17 May 22 Exam
18 May 22 Exam
19 MTP March 2022 Test Series 1
21 RTP Nov 22
22 RTP Nov 22
23 MTP Sep 22 Test Series 1
24 Exam Nov 22
25 Exam Nov 22
26 RTP May 23
27 RTP May 23
28 QP May 23
29 QP May 23
Test In Time…Pass In Time
2 ICAI PQ 2
3 ICAI PQ 5

26. RTP May 23

P, Q and R are sharing profits and losses in the ratio 5:3:2. Due to finding of frauds committed by R during the
year, it was decided to dissolve the partnership on 31st March, 2022. As on 31st March, 2022 their Balance Sheet
was as under:
Equity & Liabilities Amount (`) Assets Amount (`)
Partner's Capital A/c Plant & Machinery 6,00,000
P 4,50,000 Stock 4,27,500
Q 4,50,000 Investments 1,45,000
R - Debtors 2,10,000
General reserve 1,20,000 Cash 72,500
Trade creditors 2,35,000 R's Capital 75,000
Bills payable 1,00,000
Mrs. Q's loan 1,75,000
Total 15,30,000 Total 15,30,000
Additional information are given as under:
(i) During the year R sold Investments costing of ` 45,000 at ` 56,000 and the said funds were transferred to his
personal account. This transaction was not recorded in the firm's books.
(ii) A cheque for ` 30,000 was received from debtor, not recorded in the books and was misappropriated by R.
(iii) A Trade creditor agreed to takeover stock of the book value of ` 25,000 at
` 26,500. The rest of the Trade creditors were paid off at a discount of 2%.
(iv) The bills payable were settled at a discount of 2%.
(v) The expenses of dissolution amounted to ` 15,900.
(vi) The other assets realized were as follows:
Plant & Machinery 5% above the book value
Stock Rest of the stock realized at a loss of ` 15,000
Investments Rest of investments were sold at a profit of ` 5,600
Debtors Rest of the debtors were realized at a discount of 12%.
(vii) Q agreed to takeover loan of Mrs. Q of ` 1,75,000.
(viii) The realizable value of R's private assets would only be ` 20,000.
Applying the principles laid down in Gamer vis. Murray, prepare Realization Account, Cash Account and Partner's
Capital Accounts.
Solution
Realization account

Particulars Particulars
To Plant and Machinery 6,00,000 By Trade creditors 2,35,000
To Stock 4,27,500 By Bills payable 1,00,000
To Investment 1,45,000 By Cash-
To Debtors 2,10,000 Plant and machinery 6,30,000
To Cash-creditors paid (W.N.1) 2,04,330 Stock (W.N.4) 3,87,500
To Cash-expenses 15,900 Investments (W.N.2) 1,05,600
To Cash-bills payable (1,00,000-2,000) 98,000 Debtors (W.N. 3) 1,58,400 12,81,500
To Q’s capital account 1,75,000 By Mrs. Q’s Loan account 1,75,000
To Partners’ Capital A/cs: By Debtors-unrecorded 30,000
P 885 By Investments- unrecorded 56,000

Q 531
R 354 1,770
18,77,500 18,77,500
Cash Account
Particulars Amount ` Particulars Amount `
To Balance b/d 72,500 By Realization A/c- creditors paid 2,04,330
To Realization A/c– assets realized By Realization A/c- bills payable 98,000
Plant and machinery 6,30,000 By Realization A/c- expenses 15,900
Stock 3,87,500 By Capital accounts:
Investments (W.N.2) 1,05,600 P 4,51,157
Debtors (W.N. 3) 1,58,400 Q 6,04,613 10,55,770
To R’s capital A/c 20,000
13,74,000 13,74,000
Partners’ Capital Accounts
Particulars P Q R Particulars P Q R
` ` ` ` ` `
To Balance b/d 75,000 By Balance b/d 4,50,000 4,50,000 -
To Debtors- misappropriation 30,000 By General reserve 60,000 36,000 24,000
To Investment- misappropriation 56,000 By Mrs. Q loan 1,75,000
To R’s capital A/c (W.N. 5) 59,728 56,918 By Realization A/c 885 531 354
(profit)
To Cash A/c 4,51,157 6,04,613 By Cash A/c 20,000
By P’s capital A/c 59,728
By Q’s capital A/c 56,918
5,10,885 6,61,531 1,61,000 5,10,885 6,61,531 1,61,000

Working Notes:
1. Amount paid to creditors
`
Book value 2,35,000
Less: Creditors taking over Stock (26,500)
2,08,500
Less: Discount @ 2% (4,170)
2,04,330
2. Amount received from sale of investments
`
Book value 1,45,000
Less: Misappropriated by R (45,000)
1,00,000
Add: Profit on sale of investments 5,600
1,05,600
3. Amount received from debtors
`
Book value 2,10,000
Less: Unrecorded receipt (30,000)
1,80,000
Less: Discount @ 12% (21,600)
1,58,400
4. Amount received from sale of stock
`
Book value 4,27,500
Less: Taken by creditors (25,000)
4,02,500
Less: Loss on stock (15,000)
3,87,500
5. Deficiency of R
`
Balance of capital as on 31st March, 2022 75,000
Debtors-misappropriation 30,000
Investment-misappropriation 56,000
1,61,000
Less: Realization profit (354)
General reserve (24,000)

Contribution from private assets (20,000)

Net deficiency of capital 1,16,646
The deficiency of ` 1,16,646 in R’s capital account has been shared by other partners P, Q in their capital ratio (after
transfer of general reserve to capital accounts i .e. 5,10,000: 4,86,000). Hence, P’s share of deficiency = [1,16,646 x
(510/996)] = ` 59,728 and Q’s share of deficiency = [1,16,646 x (486/996)] = `56,918.
27. RTP May 23

Under what circumstances, an LLP can be wound up by the Tribunal?
Solution
An LLP may be wound up by the Tribunal in the following circumstances:
• If the LLP decides that it should be wound up by the Tribunal;
• If for a period of more than six months, the number of partners of the LLP is reduced below two;
• If the LLP is unable to pay its debts;
• If the LLP has acted against the interests of the integrity and sovereignty of India, the security of the state
or public order;
• If the LLP has defaulted in the filing of the Statement of Account and Solvency with the Registrar for five
consecutive financial years;
If the Tribunal is of the opinion that it is just and equitable that the LLP be wound up.
28. QP May 23
State the circumstances when Garner v/s. Murry Rule is not applicable.
29. QP May 23
What are the requirements an LLP regarding Financial Disclosures, Books of Accounts, Audits, and
Annual returns?

CA Inter Accounts | Amalgamation and Sale of Firm 2.1
AMALGAMATION AND SALE OF A FIRM

Ma
Nov
May 2018 Nov 2018 May 2019 Nov 2019 Nov Jan June Dec May y
22
(Group 1) (Group 1) (Group 1) (Group 1) 2020 2021 2021 2021 2022 23
Amalgamation and
Sale of Firm 15 20 20 15 15
Amalgamation and Sale of Firm

25
20 20
20
15 15 15
15
10
0
(Group 1) (Group 1) (Group 1) (Group 1)

Q. No. R1 R2 R3 Special Point

Class Work
7 ICAI PQ 3
9 ICAI PQ 4
10 ICAI PQ 1
11 ICAI PQ 2
12 ICAI PQ 5
MCMR
1 Mock Test 2
2 RTP May 21
3 RTP May 18
4 Exam May 19
7 RTP May 20
8 Exam Nov 20
9 RTP May 20
10 RTP Nov 21
11 Exam July 21
12 Exam Dec 21
13 May 22 RTP

14 April 2022 MTP Test

Series 2
15 RTP Nov 22
17 MTP Oct 22 Test Series 2
18 RTP May 23
1 RTP Nov 18
2 Mock Test 1
3 Exam May 18

18. RTP May 23

M/s Happy Makers is a partnership firm consisting of Mr. Happy, Mr. Yuvi and Mr. Mohan who share profits and
losses in the ratio of 2:2:1 and Global Ltd. is a company doing similar business.
Following is the summarized Balance Sheet of the firm and that of the company as at 31.3.2022:
Equity & Liabilities M/s Happy Makers Global Ltd. Assets M/s Happy Global Ltd.
(`) (`) Makers (`) (`)
Equity share capital: Plant & Machinery 7,50,000 24,00,000
Equity shares of ` 10 each 30,00,000 Furniture & Fixtures 75,000 3,37,500
Partners’ capitals: Inventories 3,00,000 12,75,000

Mr. Happy 3,00,000 Trade receivables 3,00,000 12,37,500
Mr. Yuvi 4,50,000 Cash at bank 15,000 6,00,000
Mr. Mohan 1,50,000 Cash in hand 60,000 1,50,000
General reserve 1,50,000 10,50,000
Trade payables 4,50,000 19,50,000
15,00,000 60,00,000 15,00,000 60,00,000
On the Balance Sheet date it was decided that the firm M/s Happy Makers be dissolved and all the assets (except
cash in hand and cash at bank) and all the liabilities of the firm be taken over by Global Ltd. by issuing 75,000
shares of ` 10 each at a premium of ` 2 per share.
Partners of M/s Happy Makers agreed to divide the shares issued by Global Ltd. in the profit sharing ratio and bring
necessary cash for settlement of their capital.
The trade payables of M/s Happy Makers includes ` 1,50,000 payable to Global Ltd. An unrecorded liability of ` 37,500 of
M/s Happy Makers must also be taken over by Global Ltd. Assumed that cash at bank has been withdrawn to
pay to Partner Mr. Yuvi.
Prepare:
1) Realisation account, Partners' capital accounts and Cash in hand/Bank account in the books of M/s
Happy Makers.
2) Pass journal entries in the books of Global Ltd. for acquisition of M/s Happy Makers and draw the Balance
Sheet of Global Ltd. after the takeover.
solution
(i) In the books of M/s Happy Makers
Realisation Account
` `
To Plant & Machinery 7,50,000 ByTrade payable 4,50,000
To Furniture & Fixture 75,000 ByGlobal Ltd. (Refer W.N.) 9,00,000
To Inventories 3,00,000 ByPartners’ Capital Accounts (loss):
To Trade receivables 3,00,000 Mr. Happy’s Capital A/c 30,000

Mr. Yuvi’s Capital A/c 30,000

Mr. Mohan’s Capital A/c 15,000 75,000
14,25,000 14,25,000
Partners’ Capital Accounts

Mr. Happy Mr. Yuvi Mr. Mohan Mr. Happy Mr. Yuvi Mr. Mohan
` ` ` ` ` `
To Realisation A/c 30,000 30,000 15,000 By Balance b/d 3,00,000 4,50,000 1,50,000
To Shares in Global Ltd. 3,60,000 3,60,000 1,80,000 By General Reserve 60,000 60,000 30,000
To Cash - 1,20,000 - By Cash 30,000 - 15,000
3,90,000 5,10,000 1,95,000 3,90,000 5,10,000 1,95,000
Cash and Bank Account
Cash ` Bank ` Cash ` Bank `
To Balance b/d 60,000 15,000 By Cash A/c (Contra) 15,000
To Bank A/c (Contra) 15,000 By Mr. Yuvi 1,20,000
To Mr. Happy 30,000
To Mr. Mohan 15,000
1,20,000 15,000 1,20,000 15,000
(ii) Journal Entries in the Books of Global Ltd.
Dr. (`) Cr. (`)
1. Business Purchase Account Dr. 9,00,000
To Liquidators of M/s Happy Makers 9,00,000
(Being business of M/s Happy Makers purchased and payment due)
2. Plant and Machinery A/c Dr. 7,50,000
Furniture and Fixture A/c Dr. 75,000
Inventories A/c Dr. 3,00,000
Trade Receivables A/c Dr. 3,00,000
To Trade Payables 4,50,000
To Unrecorded Liability 37,500
To Business Purchase Account 9,00,000
To Capital Reserve (B.F.) 37,500
(Being take over of all assets and liabilities)
3. Liquidators of M/s Happy Makers Dr. 9,00,000
To Equity Share Capital Account 7,50,000
To Securities Premium Account 1,50,000
(Being purchase consideration discharged in the form of shares of ` 10 each issued
at a premium of ` 2 each)
4. Trade Payables Account a Dr. 1,50,000

To Trade Receivables Account 1,50,000

(Being mutual owing eliminated)
Working Note:
Computation of purchase consideration:
75,000 Equity shares of ` 12 each = ` 9,00,000
Equity shares to be given to partners :
Mr. Happy = 30,000 Shares @ ` 12 = ` 3,60,000
Mr. Yuvi = 30,000 shares @ ` 12 = ` 3,60,000
Mr. Mohan = 15,000 shares @ ` 12 = ` 1,80,000
Balance Sheet of Global Ltd. (After takeover of M/s Happy Makers) As on 31st March, 2022
Particulars Notes `
Equity and Liabilities
1 Shareholders' funds
A Share capital 1 37,50,000
B Reserves and Surplus 2 12,37,500
2 Non-current liabilities
3 Current liabilities
A Trade Payables 22,50,000
B Others (Unrecorded liability) 37,500
Total 72,75,000
Assets
1 Non-current assets 35,62,500
A Property, Plant and Equipment 3
2 Current assets 4
A Inventories 15,75,000
B Trade receivables 13,87,500
C Cash and cash equivalent 7,50,000
Total 72,75,000
Notes to accounts
`
1 Share Capital
Equity share capital
3,75,000 Equity Shares of ` 10 each fully paid 37,50,000
(75,000 shares were issued in consideration other than for cash)
2 Reserves and Surplus
Securities Premium 1,50,000
General Reserve 10,50,000

Capital Reserve 37,500

12,37,500
Property, Plant and Equipment
3 Plant & Machinery 31,50,000
Furniture & Fixtures 4,12,500
35,62,500
4. Cash & Cash Equivalent 6,00,000
Cash at Bank 1,50,000
Cash in Hand 7,50,000

CA Inter Advanced Accounts | ESOP 3.1
EMPLOYEE STOCK OPTION PLANS

May Nov May Nov Nov Jan June Dec May Nov May
2018 2018 2019 2019 2020 2021 2021 2021 2022 22 23
ESOP 5 10 5 5 10 5 5 5 5 5 5
ESOP
12
10 10
10
6
5 5 5 5 5 5 5 5 5
0


Class Work
1 ICAI PQ 2
2 ICAI Illustration No 1 (Old
Module)
4 ICAI PQ 1
5 Additional Qn
6 ICAI PQ 4
8 Exam Jan 21
MCMR
2 ICAI PQ 3
4 ICAI PQ 5, RTP Nov 18
5 RTP Nov 18
6 RTP May 19
7 RTP May 18
8 Exam Nov 18
9 Exam May 18
10 Exam May 19
11 RTP Nov 19
13 RTP May 20
14 RTP Nov 20
15 RTP May 21
16 Exam Nov 19
17 Exam Nov 20
18 RTP Nov 21
19 RTP Nov 21
20 QP July 21

21 Mock test 1 Oct 21 Serie 1

22 Mock Test 2 Oct 21 Serie 2
23 Exam Dec 21
24 RTP May 22
25 Exam May 22
26 March 22 MTP Test Series 1
27 April 22 MTP Test Series 2
28 RTP Nov 22
30 Exam Nov 22
31 RTP May 23
32 QP May 23

31. RTP May 23

A Limited grants 5,000 options to its employees on 1.04.2018 at ` 90/-, when the market price was ` 150/-. The
vesting period is 3 years. The maximum exercise period is one year. 4,500 options were exercised on 31.03.2022, the
remaining options lapsed. Journalize the transactions, if the face value of equity shares is ` 10/- per share.
Solution
Journal Entries in the books of A Ltd.
Date Particulars Dr. (`) Cr. (`)
31.3.2019 Employees compensation expenses account Dr. 1,00,000
To Employee stock option outstanding account 1,00,000
(Being compensation expenses recognized in respect of the employee stock
option i.e. 5,000 options granted to employees at a discount of ` 60 each,
amortized on straight line basis over 3 years - 5,000 stock options x ` 60/3 years)
Profit and loss account Dr. 1,00,000
To Employees compensation expenses account 1,00,000
(Being expenses transferred to profit and loss account at year end)
31.3.2020 Employees compensation expenses account Dr. 1,00,000
(Being compensation expense recognized in respect of the employee stock
amortised on straight line basis over 3 years - 5,000 stock options x ` 60/3
years)
Profit and loss account Dr. 1,00,000
31.3.2021 Employees compensation expenses account 1,00,000
(Being compensation expenses recognized in respect of the employee stock
amortized on straight line basis over 3 years - 5,000 stock options x ` 60/3
years)
31.3.2022 Profit and loss account 1,00,000
31.3.2022 Bank A/c (4,500 × ` 90) Dr. 4,05,000
Employee stock option outstanding account (4,500 × ` 60) Dr. 2,70,000
To Equity share capital account (4,500 × ` 10) 45,000

To Securities premium account (4,500 x ` 140) 6,30,000
(Being 4,500 employee stock option exercised at an exercise price of `

90 each)
Employee stock option outstanding account (500x `60) Dr. 30,000
To General reserve account 30,000
(Being ESOS outstanding A/c on lapse of 500 options at the end of exercise
of option period transferred to General Reserve A/c)
32. QP May 23
ABC Ltd. has its share capital divided into Equity Shares of ` 10 each. On 1 April, 2022, the company
offered 150 share option to each of its 250 employees at ` 70 per share, when the market price was
` 160 per share. Fair value per option was ` 90. The options were to be exercised between 01-03-2023
and 31-03-2023. 200 employees accepted the offer and paid ` 70 per share and the remaining
options lapsed. The company closes its books on 31 March every year. You are required to show
Journal entries as would appear in the books of ABC Ltd. for the year ended 31 March, 2023 with
regards to employee stock options.

CA Inter Advanced Accounts | Buyback And Equity Shares With Differential Rights 4.1
BUYBACK AND EQUITY SHARES WITH

DIFFERENTIAL RIGHTS
May Nov May 23
May Nov May Nov Nov Jan June Dec
2022
2018 2018 2019 2019 2020 2021 2021 2021 2022
Buy Back and 15

Equity Shares with 10 5 10 15 5 10 20 20 15 5
Differential Rights
Buy Back and Equity Shares with Differential Rights

25
20 20
20
15 15 15
15
10 10 10
10
5 5 5
5
0


Class Work
6 ICAI PQ 2
7 ICAI PQ 3
8 ICAI PQ 4
MCMR
1 ICAI PQ 1
2 RTP May 18
3 RTP May 19, Exam May 18
4 RTP Nov 18
5 RTP May 18, RTP Nov 19
6 Exam Nov 18
7 Mock Test Paper
8 Exam May 19
9 RTP Nov 19
10 RTP Nov 19
11 ICAI Illustration No 5, RTP Nov 20
12 RTP May 20
13 RTP May 20
14 RTP Nov 20
15 RTP May 21
16 Exam Nov 19
17 Exam Nov 20
18 Exam Jan 21

19 Exam Jan 21
20 RTP Nov 21
21 RTP Nov 21
22 Exam July 21
23 Exam July 21
24 Mock Test Series 1
25 Mock Test Series 2
26 Exam Dec 21
27 Exam Dec 21
28 Exam Dec 21
29 RTP May 22
30 RTP May 22
31 RTP May 22
32 Exam May 22
33 Exam May 22
34 MTP March 22 Series 1
35 RTP Nov 22
36 RTP Nov 22
37 MTP Oct 22 Series 2
38 Exam Nov 22
39 RTP May 23
40 RTP May 23
41 QP May 23
42 QP May 23


39. RTP May 23

Pay Limited provides you with the following information as at 31st March, 2022:
(` in Lakhs)
Share Capital:
Authorised 300
Issued:
11% Redeemable preference shares of ` 100 each fully paid 125
Equity shares of ` 10 each fully paid 175 300
Reserves and surplus:
Capital reserve 35
Securities premium 105
Revenue reserves 460
Profit and loss account 50 650
Current liabilities and provisions 50
Fixed assets: cost 100
Less: Accumulated depreciation (90) 10
Non-current investments at cost (Market value` 400 Lakhs) 200
Current assets 790
(i) The company redeemed preference shares at a premium of 4% on 1st April, 2022.
(ii) It also bought back 2.5 lakhs equity shares of ` 10 each at ` 40 per share. The payments for the above were made
out of the bank balances, which appeared as a part of current assets.
You are asked to:
(1) Pass journal entries to record the above.
(2) Prepare balance sheet as at 01.04.2022.
Solution
(i) Journal entries in the books of Pay Ltd. ` in lakhs
Particulars Debit Credit
1st 11% Preference share capital A/c Dr. 125
April, 2022 Premium payable on Redemption of Preference Shares Dr. 5
To Preference shareholders A/c 130
(Being preference share capital account transferred to shareholders account)

Preference shareholders A/c Dr. 130

To Bank A/c 130
(Being payment made to shareholders)
Shares buy back A/c Dr. 100
To Bank A/c 100
(Being 2.5 lakhs equity shares bought back @ ` 40 per share)
Equity share capital A/c (2.5 lakh х ` 10) Dr. 25
Premium payable on buyback A/c (2.5 lakh x ` 30) Dr. 75
To Shares buy back A/c 100
(Being cancellation of shares bought back)
Revenue reserve A/c Dr. 150
To Capital Redemption Reserve A/c (125 + 25) 150
(Being creation of capital redemption reserve to the extent of the face value of
preference shares redeemed and equity shares bought back)
Securities Premium Dr. 80
To Premium payable on Redemption of Pref. Shares 5
To Premium payable on buyback A/c 75
(Being premium on preference shares redeemed* and equity shares bought back
charged to securities premium account)
*Securities premium utilized for premium on preference shares redeemed assuming that the company is not
governed under section 133 of the Companies Act. Alternatively, it may not be utilized assuming otherwise.
(ii) Balance Sheet of Pay Ltd as at 1.4.2022
Particulars Note No ` In lakhs
I. Equity and Liabilities
(1) Shareholder’s Funds
(a) Share Capital 1 150
(b) Reserves and Surplus 2 570
(2) Current Liabilities 50
Total 770
II. Assets
(1) Non-current assets
(a) Property, plant and Equipment 3 10
(b)Non-current investments -Investment at cost Market value ` 400 crores) 200
(2) Current assets 4 560
Total 770
Notes to Accounts
1. Share Capital ` In lakhs

Authorised, Issued and Subscribed:

Equity shares of ` 10 each 150
2. Reserves and Surplus
Capital reserve 35
Capital redemption reserve 150
Securities premium 105
Less: Utilisation for buy back and redemption of shares (80) 25
Revenue Reserve 460
Less: transfer to Capital redemption reserve (150) 310
Profit and Loss Account balance 50 570
3. Property, plant and equipment
Cost 100
Less: Provision for depreciation (90) 10
4. Current assets
Current assets as on 31.3.2022 790
Less: Bank payment for redemption and buy back (230) 560
40. RTP May 23

Explain the meaning of equity shares with differential rights. Also explain the conditions under Rule 4 under
Companies (Share Capital and Debentures) Rules, 2014, to deal with equity shares with differential rights.
Solution
Equity shares with Differential Rights means the share with dissimilar rights as to dividend, voting or otherwise.
In exercise of the power conferred under the Companies Act, the Central Government announced Companies (Share
Capital and Debentures) Rules, 2014, to deal with equity shares with differential rights.
The rules lay down the following conditions to be compulsorily complied with:
• The articles of association of the company authorizes the issue of shares with differential rights;
• The issue of shares is authorized by an ordinary resolution passed at a general meeting of the shareholders:
Provided that where the equity shares of a company are listed on a recognized stock exchange, the issue of such
shares shall be approved by the shareholders through postal ballot;
• The voting power in respect of shares with differential rights shall not exceed seventy four percent of the total
voting power including voting power in respect of equity shares with differential rights issued at any point of
time;
• The company has not defaulted in filing financial statements and annual returns for three financial years
immediately preceding the financial year in which it is decided to issue such shares;

• The company has no subsisting default in the payment of a declared dividend to its shareholders or repayment
of its matured deposits or redemption of its preference shares or debentures that have become due for redemption or
payment of interest on such deposits or debentures or payment of dividend;
• The company has not defaulted in payment of the dividend on preference shares or repayment of any term loan
from a public financial institution or State level financial institution or scheduled Bank that has become repayable
or interest payable thereon or dues with respect to statutory payments relating to its employees to any authority
or default in crediting the amount in Investor Education and Protection Fund to the Central Government;
Provided that a company may issue equity shares with differential rights upon expiry of five years from the end
of financial year in which such default was made good.
The company has not been penalized by Court or Tribunal during the last three years of any offence under the
Reserve Bank of India Act, 1934, the Securities and Exchange Board of India Act, 1992, the Securities Contracts
Regulation Act, 1956, the Foreign Exchange Management Act, 1999 or any other special Act, under which such
companies being regulated by sectoral regulators.
41. QP May 23
VIJ Ltd. has the following capital structure as on 31st March, 2022:
Particulars (In Lakhs)
Equity share capital (Shares of ` 10 each, fully paid) 990
Reserve and Surplus:
General Reserve 720
Securities Premium Account 270
Profit & Loss Account 270
Infrastructure development Reserve 540 1800
Loan Funds 5400
On the recommendation of the Board of Directors, the shareholders of the company have approved
on 2nd September 2022 a proposal to buyback the maximum permissible number of equity
shares, considering the sufficient funds available at the disposal of the company.
The current market value of the company's shares is ` 25 per share and in order to induce the
existing shareholders to offer their shares for buyback, it was decided to offer a price of 20%
over market value.
You are also informed that the Infrastructure Development Reserve is created to satisfy income
tax requirements. You are required to compute the maximum permissible number of equity shares
that can be brought back in the light of the above information and also under a situation where
the loan funds of the company were either ` 3600 lakh or ` 4500 lakh.
The entire buy-back is completed by 09/12/2022, show the accounting entries with full narrations
in the company's books in each situation.

42. QP May 23
What are the conditions to be fulfilled by a Joint Stock Company to buy-back its equity shares
as per Companies Act, 2013? Explain.

CA Inter Advanced Accounts | Internal Reconstruction 5.1
INTERNAL RECONSTRUCTION
2018 2018 2019 2019 2020 2021 2021 2021 2022 2022 23
Internal
10 15 5 20 5
Reconstruction
Internal Reconstruction
25
20
20
15
15
10
10
5 5
5
0


Class Work
9 ICAI PQ 3
10 ICAI PQ 4
11 ICAI PQ 5
12 ICAI PQ 2
13 ICAI PQ 1
MCMR
1 RTP May 19/ Mock Test
2 RTP May 18
3 RTP Nov 18
4 Mock Test
5 Exam Nov 18
6 RTP Nov 19
7 RTP May 20
8 RTP Nov 20
9 RTP May 21
10 Exam Nov 19
11 RTP Nov 21
12 Exam July 21
13 RTP May 22
15 MTP April 22 Test Series 2
16 RTP Nov 22
18 Exam Nov 22
19 RTP May 23
20 QP May 23

19. RTP May 23

The following information is being provided by Fortunate Ltd. as on 31st March, 2022.
Particulars Amount (`)
Authorized and Issued Share Capital
(a) 15,000 8% Preference shares of ` 50 each 7,50,000
(b) 18,750 Equity shares of ` 50 each 9,37,500
Profit and Loss Account (Dr. balance) 5,63,750
Loan 7,16,250
Trade Payables 2,58,750
Other Liabilities 43,750
Building at cost less depreciation 5,00,000
Plant at cost less depreciation 3,35,000
Trademarks and goodwill at cost 3,97,500
Inventory 5,00,000
Trade Receivables 4,10,000
(Note: Preference shares dividend is in arrear for last five years).
The Company is running with the shortage of working capital and not earnings profits. A scheme of reconstruction
has been approved by both the classes of shareholders. The summarized scheme of reconstruction is as follows:
(i) The equity shareholders have agreed that their ` 50 shares should be reduced to
` 5 by cancellation of ` 45.00 per share. They have also agreed to subscribe for three new equity shares of ` 5.00 each
for each equity share held.
(ii) The preference shareholders have agreed to forego the arrears of dividends and to accept for each ` 50
preference share, 4 new 6% preference shares of ` 10 each, plus 3 new equity shares of ` 5.00 each, all credited as
fully paid.
(iii) Lenders to the company for ` 1,87,500 have agreed to convert their loan into shares and for this purpose
they will be allotted 15,000 new preference shares of ` 10 each and 7,500 new equity shares of ` 5.00 each.
(iv) The directors have agreed to subscribe in cash for 25,000 new equity shares of
` 5.00 each in addition to any shares to be subscribed by them under (i) above.
(v) Of the cash received by the issue of new shares, ` 2,50,000 is to be used to reduce the loan due by the
company.
(vi) The equity share capital cancelled is to be applied:
(a) To write off the debit balance in the Profit and Loss A/c, and
(b) To write off ` 43,750 from the value of plant.
Any balance remaining is to be used to write down the value of trademarks and goodwill. The nominal capital, as
reduced, is to be increased to ` 8,12,500 for preference share capital and ` 9,37,500 for equity share capital.

You are required to pass journal entries to show the effect of above scheme and prepare the Balance Sheet of the
Company after reconstruction.
Solution
In the books of Fortunate Ltd.
Journal Entries
Particulars Debit Credit
(`) (`)
1. Equity share capital A/c (` 50) Dr. 9,37,500
To Equity share capital A/c (` 5) 93,750
To Capital r e d u c t i o n A/c* 8,43,750
(Being equity capital reduced to nominal value of ` 5 each)
2. Bank A/c Dr. 2,81,250
To Equity s h ar e capital 2,81,250
(Being 3 right shares against each share was issued and subscribed)
3. 8% Preference share capital A/c (` 50) Dr. 7,50,000
Capital reduction A/c Dr. 75,000
To 6% Preference share capital (` 10) 6,00,000
To e q u it y share capital (` 50) 2,25,000
(Being 8% preference shares of ` 50 each converted to 6% preference shares
of ` 10 each and also given to them 3 equity shares for every share held)
4. Loan A/c Dr. 1,87,500
To 6% P r e f e r e nc e share capital A/c (15,000 x ` 10) 1,50,000
To Equity share capital A/c (7,500 x ` 5) 37,500
(Being loan to the extent of ` 1,50,000 converted into share capital)
5. Bank A/c (25,000 x `5) Dr. 1,25,000
To E q u it y share application A/c 1,25,000
(Being shares subscribed by the directors)
6. Equity share application A/c Dr. 1,25,000
To Equity share capital A/c 1,25,000
(Being application money transferred to capital A/c)
7. Loan A/c Dr. 2,50,000
To B a n k A/c 2,50,000
(Being loan repaid)
8. Capital reduction A/c Dr. 7,68,750
To P r o f it and loss A/c 5,63,750
To P l a n t A/c 43,750

To T r a d e m a r k s and Goodwill A/c (Bal. fig.) 1,61,250

(Being losses and assets written off to the extent required)
Balance sheet of Fortunate Ltd. (and reduced) as on 31.3.2022
Particulars Notes `
1. Equity and Liability
a. Shareholders funds
Share capital 1 15,12,500
2. Non-Current liabilities
a. Long-team borrowing 2,78,750
(7,16,250,-,1,87,500-2.50,000
3 current liabilities
a. Trade Payable 2,58,750
b. Other current liabilities 43,750
Total 20,93,750
Assets
1. Non-current assets
a Property, Plant and Equipment 2 7,91,250
b Intangible assets 3 2,36,250
2. Current assets
a. Inventories 5,00,000
b. Trade receivables 4,10,000
c. Cash and cash equipment 4 1,56,250
Total 20,93,750
Notes to accounts :
1. Share Capital
Authorized capital:
81,250 Preference shares of 10 each 8,12,500
1,87,500 Equity shares of 5 each 9.37.500 17.50.000
Issued, subscribed and paid up:
1,52,500 equity shares of 5 each 7,62,500
75,000, 6% Preference shares of 10 each 17.50.000 15,12,500
2. Property, Plant and Equipment
Building at cost less depreciation 5,00,000
Plant at cost less depreciation 2,91,250 7,91,250
3. Intangible assets
Trademarks and goodwill 2,36,250
4. Cash and cash equivalents
Bank (2.81,250+1,25,000-2,50,000) 1,56,250

Note: "In place of Capital Reduction Account, Reconstruction Account or Internal Reconstruction
Account may also be used.
20.QP May 23
X Ltd had ` 1,00,000 equity share capital divided into 1,000 shares of ` 100 each out of which ` 80 per
share was called up and paid up. It has 1,500 cumulative preference shares of ` 100 each fully paid
up Intangible assets include Goodwill of ` 80,000 and patents of ` 27,800. Preference dividends are
in arrears of ` 33,000,
You are required to show the entries Ignore dates) under each of the following conditions :
i. If X Ltd. resolves to subdivide the equity shares into 10,000 equity shares of ` 10 each of which
& ` 8 per share is called up and paid up
ii. If X Ltd. resolves to convert its 1,000 equity shares of ` 100 each (assume fully-paid) into & `
1,00,000 worth of stock.
iii. The preference shares are to be converted into 11% unsecured debentures of ` 100 each (including
arrears of dividends),
iv. Patents and Goodwill to be written-off

CA Inter Advanced Accounts | Financial Statement of Banking Companies 6.1
FINANCIAL STATEMENT OF BANKING COMPANIES

2018 2018 2019 2019 2020 2021 2021 2021 22 22 23
Banking 10
10 5 10 15 10 10 10 10 15 15
Companies
Banking Companies
16 15 15 15
14
12
10 10 10 10 10 10 10
10
6 5
0

No. R1 R2 R3 Special Point

Class Work
1 ICAI Practical Q 3 Unit 6
2 ICAI Illustration Unit 3
4 ICAI Illustration 2 Unit 6
10 ICAI Practical Q 5 Unit 6 / RTP Nov 20
12 ICAI Illustration 4
13 ICAI Practical Q 4 UNIT 6
MCMR
1 ICAI Illustration 1 - Unit 4 (8.41)
8 ICAI Illustration 2 - Unit 5

14 ICAI Practical Question 2 - Unit 6

15 ICAI Practical Question 7 – unit 6
20 RTP May 18
21 RTP May 19
22 RTP Nov 18
23 Exam Nov 18 / RTP May 21
24 Exam May 18
25 Exam May 19
26 RTP Nov 19
27 RTP May 20
28 RTP Nov 20
29 RTP May 21
30 Exam Nov 20
31 Exam Jan 21
32 Exam Nov 19
33 RTP Nov 21
34 Exam July 21
35 Mock Test Oct 21 Series 1
39 Exam Nov 19
40 Exam Dec 21
42 RTP May 22
43 Exam May 22
44 Exam May 22


48 RTP Nov 22
53 Exam Nov 22
54 RTP May 23
55 QP May 23

54. RTP May 23

(i) The following is an extract of Trial Balance of SM Bank, an overseas bank as on 31st March, 2022.
Dr. ` Cr. `
Bill Discounted 15,16,800
Discount Received 1,26,859
Rebate on Bills discounted not due on 31st March, 21 26,592
An analysis of bill discounted is as follows :
Amount in ` Due Date Rate of Discount
1,46,200 4th May, 2022 15
2,30,400 12th May, 2022 15
4,35,900 28th May, 2022 15
4,36,200 18th June, 2022 16
2,68,100 4th July, 2022 16
You are required to calculate Rebate on Bills Discounted as on 31st March, 2022 and show necessary Journal
Entries.
(ii) The following information are also given for SM Bank :
Assets ` in Lakhs
Standard 75,000
Sub-Standard 6000
Doubtful: for 1 year (Fully Secured) 1200
For 1 to 3 Year (Fully Secured) 900
For more than 3 years 900
Loss Assets 1500
Additional Information:
(1) Standard Assets includes ` 15,00 Lakhs Advances to Commercial Real Estate (CRE).
(2) Out of ` 60,00 Lakhs of Sub-Standard Asset ` 20,00 Lakhs are unsecured. Unsecured amount includes `
5,00 Lakhs in respect of Infrastructure Loan Accounts with ESCROW safeguard.
(3) Doubtful Asset for more than 3 Years includes ` 4,00 Lakhs, which is covered by 50% ECGC, value of security of
which is ` 150 Lakhs.
You are required to find out the amount of provision to be shown in the Profit & Loss Account of SM Bank.
Solution
(i) Statement showing rebate on bills discounted
Value Due Date Days after 31.3.2022 Rate of discount Discount Amount
1,46,200 4.5.22 (30+ 4) = 34 15% 2,043
2,30,400 12.5.22 (30+12) = 42 15% 3,977
4,35,900 28.5.22 (30+28) = 58 15% 10,390

4,36,200 18.6.22 (30+ 31+ 18) = 79 16% 15,106

2,68,100 4.7.22 (30+ 31+30+4) = 95 16% 11,165
15,16,800 Rebate on bills discounted on 31.3.2022 42,681
In the books of SM Bank Ltd.
Journal Entries
(i) Rebate on bills discounted Account Dr. 26,592
To Discount on bills Account 26,592
(Being opening balance of rebate on bills discount account transferred to
discount on bill account)
(ii) Bills purchased & discounted Account Dr. 15,16,800
To Discount on bills Account 1,26,859
To Clients Account 13,89,941
(Being bills purchased and discounted during the year)
(iii) Discount on bills Account Dr. . 42,681
To Rebate on bills discounted Account 42,681
(Being provision made on 31st March, 2022)
(iv) Discount on bills Account Dr. 1,10,770
To Profit and loss Account* 1,10,770
[Being transfer of discount on bills, of the year, to profit and loss account]
*Credit to Profit and Loss A/c will be as follows:
` (1,26,859 + 26,592 – 42,681) = ` 1,10,770
(ii) Statement showing the amount of provisions on Assets
(` in lakhs)
Assets Amount % of provision Provision
Standard:
Advances to CRE 15,00 1 15
Others 60,00 .4 24
Sub-standard:
Secured 40,00 15 6,00
Unsecured- Others 15,00 25 3,75
Unsecured infrastructure 5,00 20 1,00
Doubtful Secured:
up to one year 12,00 25 3,00
For more than 1 year up to 3 years 9,00 40 3,60
More than 3 years 4,00 W.N.1 2,75
Doubtful unsecured (more than 3 years) 5,00 100 5,00
Loss 15,00 100 15,00
Total Provision Required 40,49

Working Note:
Provision required where assets are ECGC covered
` In Lakhs
Outstanding balance (ECGC Covered) 4,00
Less: Value of security 1,50
Unrealised balance 2,50
Less: ECGC Cover @ 50% 1,25
Net Unsecured Balance 1,25
Provision for unsecured portion @100% 1,25
Provision for secured portion @100% 1,50
Total Provision to be made 2,75
55. QP May 23
The following information are available in the books of Bank.
Rebate on Bills discounted (01.04.2022) 65,500, Discount received during the year ` 1,25,000.
An analysis of the bills discounted is as follows:
Amount Due Date Rate of Discount (in %)
(i) 36000 June 7, 2023 12
(ii) 34200 June 14, 2023 12
(iii) 14000 July 19, 2023 10
(iv) 14000 August 10, 2023 15
(v) 12,500 September 5, 2023 13
(vi) 11,000 October 7, 2023 14
You are required to:
(1) Calculate the rebate on Bills Discounted as on 31-3-2023 and show necessary journal entries.
(ii) Compute the amount of discount credited to Profit and Loss Account.

CA Inter Advanced Accounts | Amalgamation 7.1
ACCOUNTING FOR AMALGAMATIONS

May Nov May
23
May Nov May Nov Nov Jan June Dec 202 202
2018 2018 2019 2019 2020 2021 2021 2021 2 2
Amalgamation of
20 15 15 20 10 15 20 20
Company
Amalgamation of Company
25
20 20 20 20
20
15 15 15
15
10
10
0


Class Work
11 ICAI Practical Question 1
15 Exam Nov 18 (AS)
16 IPCC RTP Nov 18
19 Exam May 19
MCMR
1 Mock Test 2 / Illustration 1
2 RTP May 18
3 Exam May 18, Nov 20 RTP
4 RTP Nov 18
5 RTP May 19
6 Exam May 19

7 RTP Nov 19
8 RTP May 20
9 RTP MAY 21
10 Exam Nov 20
11 Exam Jan 21
12 RTP Nov21
13 Exam July 21
14 Mock Test 1
15 Mock Test 2
16 Exam Dec 21
17 RTP May 22
18 Exam May 22
19 MTP Test Series 1 March 22
20 MTP Test Series 1 March 22
21 MTP Test Series 2 April 22
22 RTP Nov 22
25 RTP May 23
26 QP May 23

1 Mock Test

25. RTP May 23

The following information is being provided by VT Ltd. and MG Ltd. as on 31st March, 2022:
Particulars VT Ltd. (`) MG Ltd. (`)
Equity Shares of ` 10 each 12,00,000 6,00,000
10% Pref. Shares of ` 100 each 4,00,000 2,00,000
Reserve and Surplus 6,00,000 4,00,000
12% Debentures 4,00,000 3,00,000
Trade Payables 5,00,000 3,00,000
Fixed Assets 14,00,000 5,00,000
Investment 1,60,000 1,60,000
Inventory 4,80,000 6,40,000
Trade Receivables 8,40,000 4,20,000
Cash at Bank 2,20,000 80,000
Details of Trade receivables and trade payables are as under:
VT Ltd. (`) MG Ltd. (`)
Trade Receivable
Debtors 7,20,000 3,80,000
Bills Receivable 1,20,000 40,000
Trade Payables 8,40,000 4,20,000
Sundry Creditors 4,40,000 2,50,000
Bills Payable 60,000 50,000
5,00,000 3,00,000
Fixed Assets of both the companies are to be revalued at 15% above book value. Inventory in Trade and Debtors are
taken over at 5% lesser than their book value.
Both the companies are to pay 10% equity dividend, Preference dividend having been already paid.
After the above transactions are given effect to, VT Ltd. will absorb MG Ltd. on the following terms:
(i) VT Ltd. will issue 16 Equity Shares of ` 10 each at par against 12 Shares of MG Ltd.
(ii) 10% Preference Shareholders of MG Ltd. will be paid at 10% discount by issue of 10% Preference Shares
of ` 100 each, at par, in VT. Ltd.
(iii) 12% Debenture holders of MG Ltd. are to be paid at 8% premium, by 12% Debentures in VT Ltd., issued at
a discount of 10%.
(iv) ` 60,000 is to be paid by VT Ltd. to MG Ltd. for Liquidation expenses.
Sundry Debtors of MG Ltd. includes ` 20,000 due from VT Ltd.
You are required to prepare :
(1) Journal entries in the books of VT Ltd.
(2) Statement of consideration payable by VT Ltd.

Solution
1. Journal Entries in the Books of VT Ltd.
Dr. Cr.
` `
Fixed Assets Dr. 2,10,000
To Revaluation Reserve 2,10,000
(Revaluation of fixed assets at 15% above book value)
Reserve and Surplus Dr. 1,20,000
To Equity Dividend 1,20,000
(Declaration of equity dividend @ 10%)
Equity Dividend Dr. 1,20,000
To Bank Account 1,20,000
(Payment of equity dividend)
Business Purchase Account Dr. 9,80,000
To Liquidator of MG Ltd. 9,80,000
(Consideration payable for the business taken over from MG Ltd.)
Fixed Assets (115% of ` 5,00,000) Dr. 5,75,000
Inventory (95% of ` 6,40,000) Dr. 6,08,000
Debtors Dr. 3,80,000
Bills Receivable Dr. 40,000
Investment Dr. 1,60,000
Cash at Bank Dr. 20,000
(` 80,000 –` 60,000 dividend paid)
To Provision for Bad Debts (5% of ` 3,60,000) 18,000
To Sundry Creditors 2,50,000
To 12% Debentures in MG Ltd. 3,24,000
To Bills Payable 50,000
To Business Purchase Account 9,80,000
To Capital Reserve (Balancing figure) 1,61,000
(Incorporation of various assets and liabilities taken over from MG Ltd. at agreed values
and difference of net assets and purchase consideration being credited to capital
reserve)
Liquidator of MG Ltd. Dr. 9,80,000
To Equity Share Capital 8,00,000
To 10% Preference Share Capital 1,80,000
(Discharge of consideration for MG Ltd.’s business)
12% Debentures in MG Ltd. (` 3,00,000 × 108%) Dr. 3,24,000

Discount on Issue of Debentures Dr. 36,000

To 12% Debentures 3,60,000
(Allotment of 12% Debentures to debenture holders of MG Ltd. at a discount of 10%)
Sundry Creditors Dr. 20,000
To Sundry Debtors 20,000
(Cancellation of mutual owing)
Goodwill Dr. 60,000
To Bank 60,000
(Being liquidation expenses reimbursed to MG Ltd.)
Capital Reserve/P&L A/c Dr. 60,000
To Goodwill 60,000
(Being goodwill set off)
2. Statement of Consideration payable by VT Ltd. for 60,000 shares (payment method) Shares to be allotted
60,000/12 X 16 = 80,000 shares of VT Ltd.
Issued 80,000 shares of ` 10 each i.e. ` 8,00,000 (i)
For 10% preference shares, to be paid at 10% discount
` 2,00,000x 90/100 ` 1,80,000 (ii)
Consideration amount [(i) + (ii)] ` 9,80,000
26. QP May 23
X Ltd. and Y Ltd. had been carrying on business independently. They agreed to amalgamate and
form a new company XY Ltd. with an authorized share capital of ` 40,00,000 dividend into 8,00,000
equity shares of ` 5 each. On 31st March, 2023 the respective information of X Ltd. and Y Ltd. were
as follows:
X Ltd. (`) Y Ltd. (`)
Share Capital 34,25,000 36,10,000
Tarde Payable 59,70,000 18,02,500
Property, Plant and Equipment 58,25,000 37,40,000
Current Assets 31,45,000 15,99,500
Additional Information:
The following revalued figures of non-current and current assets are:
X Ltd. (`) Y Ltd. (`)
Property, Plant and Equipment 71,00,000 39,00,000
Current Assets 29,95,000 15,77,500
The debtors and creditors include ` 1,37,250 owed by X Ltd. to Y Ltd.
The purchase consideration is satisfied by issue of the following shares and debentures.

6,20,000 equity shares of XY Ltd. to X Ltd. and Y Ltd. in the proportion to the profitability of their
respective business based on the average net profit during the last four years which were as
follows:
X Ltd. (`) Y Ltd. (`)
2020 Profit 42,50,000 26,50,000
2021 Profit 44,45,760 27,60,000
2022 (Loss) / Profit (75,000) 34,00,000
2023 Profit 37,79,240) 35,90,000
7.5% debenture I XY Ltd. at par to provide an income equivalent to 4% return business as on
capital employed in their respective business as on 31st March, 2023 after revaluation of assets.
You are required to:
1. Compute the amount of debenture and shares to be issued to ‘X’ Ltd. and ‘Y’ Ltd.
2. A Balance sheet of XY Ltd. showing the position immediately after amalgamation.

CA Inter Advanced Accounts | Holding Company Accounts 8.1
HOLDING COMPANY ACCOUNTS

2018 2018 2019 2019 2020 2021 2021 2021 2022 2022 23
Holding
20 10 10 15 15 20 20 15 15 15 30
Company
Holding Company
35
30
30
25
20 20 20
20
15 15 15 15 15
15
10 10
10
0


Class Work
9 ICAI Illustration No 1, MOCK
TEST 2,
RTP May 19
13 PRACTICAL Question 4
15 PRACTICAL Question 5
MCMR
1 Exam May 18
2 RTP Nov 18
3 Exam May 19
4 RTP Nov 19
5 RTP May 20
6 RTP Nov 20
7 RTP Nov 20, Exam Nov 19
8 RTP May 21
9 Exam Nov 19

10 Exam Nov 20
11 Exam Jan 21
12 Exam Nov 18
13 RTP Nov 21
14 Exam July 21
15 Exam July 21
16 Mock test 1
17 Exam Dec 21
18 RTP May 22
19 Exam May 22
20 MTP March 22 Test series 1
22 RTP Nov 22
26 Exam Nov 22
27 RTP May 23
28 QP May 23
29 QP May 23
1 Exam July 21
2 Exam July 21

27. RTP May 23

H Ltd. acquired 70% of equity share of S Ltd. as on 1st January, 2016 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 2020, S Ltd. experienced turnaround and registered an annual profit of ` 25,000. In the next
two years i.e. 2021 and 2022, 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.
Solution
The losses applicable to the minority in a consolidated subsidiary may exceed the minority interest in the equity of the
subsidiary. The excess, and 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 profits, all such profits are to the majority interest until the minority's share of
losses previously absorbed by the majority has been recovered.
Year Profit / (Loss) MinorityInterest Additional Minority's Share oflosses Cost ofControl
(30%) Consolidated P & L borne by H Ltd.
(Dr.) orCr.
` Balance
At the time of acquisition on 1,62,000 (W.N.) -
1.1.2016
2016 (1,25,000) (37,500) (87,500) 1,22,000 (W.N.)
Balance 1,24,500
2017 (2,00,000) (60,000) (1,40,000) 1,22,000
Balance 64,500
2018 (2,50,000) (75,000) (1,75,000) 1,22,000
(10,500)
Loss of minority borne by 10,500 (10,500) 10,500 10,500
Holding Co.
Balance Nil (1,85,500)
2019 (60,000) (18,000) (42,000) 1,22,000
Loss of minority borne by 18,000 (18,000) 18,000 28,500
Holding Co.
Balance Nil (60,000)
2020 25,000 7500 17,500 1,22,000
Profit share of minority (7500) 7500 (7500) 21,000
adjusted against losses of
minority absorbed by
Holding Co.
Balance Nil 25,000
2021 50,000 15,000 35,000 (15,000) 6,000 1,22,000
(15,000) 15,000
Nil 50,000

Balance Nil 50,000

2022 75,000 22,500 52,500 (6000) Nil 1,22,000
(6000) 6000
Balance 16,500 58,500
Working Note:
Calculation of Minority interest and Cost of control on 1.1.2016
Share of Holding Co. Minority Interest
100% 70% 30%
(`) (`) (`)
Share Capital 5,00,000 3,50,000 1,50,000
Reserve 40,000 28,000 12,000
3,78,000 1,62,000
Less: Cost of investment (5,00,000)
Cost of Control 1,22,000
28. QP May 23
G Ltd. and its subsidiary K Ltd. give the following information for the year ended 31 st March, 2023:
Particulars G Ltd. K Ltd.
Sales and other Income 3000 750
Increase in Inventory 750 100
Raw Material Consumed 600 100
Wages and Salaries 600 75
Production Expenses 100 50
Administrative Expenses 75 50
Selling and Distribution 100 25
Expenses
Interest 75 30
Depreciation 75 30
The following information is also given:
i. G Ltd. sold goods of ` 200 crores to K Ltd. at cost plus 25%. (1/5th of such goods were still in
inventory of K Ltd. at the end of the year)
ii. G Ltd. holds 75% of the Equity Share Capital of K Ltd. and the Equity Share Capital of K
Ltd. is ` 800 crores on 01.04.2022 (date of acquisition of shares)
iii. Administrative expenses of K Ltd. include ` 5 crore paid to G Ltd. as consultancy fees. Also,
selling and distribution expenses of G Ltd. include ` 20 crores paid to K Ltd. as commission.
Prepare a consolidated statement of Profit and Loss of G Ltd. with its subsidiary K Ltd. for the
year ended 31st March, 2023.

29. QP May 23
H Ltd. acquired 15000 shares in S Ltd. for 1,55,000 on July 1, 2022. The Balance sheet of the two
companies as on 31st March, 2023 were as follows:
H Ltd. S Ltd.
Equity and Liabilities:
Equity Share Capital 9,00,000 2,50,000
(Fully paid shares of 10 each)
General Reserve 1,60,000 40,000
Surplus i.e., Balance in Statement of Profit and Loss 80,000 25,000
Bills Payable 40,000 20,000
Trade Creditors 50,000 30,000
Total 12,30,000 3,65,000
Assets
Machinery 7,00,000 1,50,000
Furniture 1,00.000 70000
Investment in Equity Share of S Ltd. 1,55.000 -
Stock-in-Trade 1,00.000 50,000
Trade Debtors 60,000 35,000
Bills Receivable 25,000 20,000
Cash at Bank 90,000 40,000
Total 12,30,000 3,65,000
The following additional information is provided to you:
(1) General reserve appearing in the Balance Sheet of S Ltd. Remained unchanged since 31 st March,
2022.
(ii) Profit earned by S Ltd. for the year ended 31 March, 2023 amounted to ` 20,000.
(iii) H Ltd. sold goods to S Ltd. costing ` 8,000 for ` 10,000, 25% of these goods remained unsold
with S Ltd. on 31 March, 2023.
(iv) Creditors of S Ltd. include ` 4000 due to H Ltd. on account of these goods.
(v) Out of Bills payable issued by S Ltd. ` 15,000 are those which have been accepted in favour of
H. Ltd. Out of these, H Ltd. had endorsed by 31 March, 2023, 8000 worth of bills receivable in
favour of its creditors.
You are required to draw a consolidated Balance Sheet as on 31 March, 2023.

CA Inter Advanced Accounts | Liquidation of Companies 9.1
LIQUIDATION OF COMPANIES
2018 2018 2019 2019 2020 2021 2021 2021 2022 2022 23
Liquidation of
5 10 10 5 10 10 5 5 5 5 5
Company
Liquidation of Company
12
10 10 10 10
10
6 5 5 5 5 5 5 5
0


Class Work
3 Mock Test Oct 21 Series I
14 ICAI Illustration No 8 /
RTP NOV 20
16 Practical Question 2
MCMR
1 RTP Nov 18
9 RTP May 18
10 RTP May 19
11 Exam Nov 18
12 Exam May 18
13 Mock test paper 2
ICAI Practical Question 3
14 Exam May 19
15 RTP Nov 19

16 RTP May 21
17 Exam Nov 19
18 Exam Nov 20
19 Exam Jan 21
ICAI Practical Question 6
20 RTP NOV 21
21 Exam July 21
22 Mock test series 2
23 Mock test series 2
24 Exam Nov 20
25 Exam Dec 21
26 RTP May 20
27 RTP May 22
28 Exam May 22
31 RTP Nov 22
34 Exam Nov 22
35 RTP May 23
36 QP May 23

35. RTP May 23

BT Ltd. went into Voluntary Liquidation on 31st March, 2022. It provides the following information on that
date:
Liabilities In `
Issued & Subscribed Capital
10,000 12% cumulative preference shares of ` 100 each, fully paid 10,00,000
10,000 Equity Shares of ` 100 each 75 per share paid up 7,50,000
20,000 Equity Shares of ` 100 each 60 per share paid up 12,00,000
Profit & Loss Account (Dr. balance) 5,25,000
12% Debentures (Secured by a floating charge) 10,00,000
Interest outstanding on Debentures 1,20,000
Creditors 8,50,000
Land & Building 17,60,000
Plant & Machinery 12,50,000
Furniture 4,75,000
Patents 1,45,000
Stock 1,80,000
Cash at Bank 75,700
Preference dividends were in arrear for 1 year. Creditors include preferential creditors of ` 75,000. Balance creditors
are discharged subject to 5% discount.
Assets are realised as under: In `

Land & Building 24,50,000
Plant & Machinery 9,00,000
Furniture 2,85,000
Patents 90,000
Stock 2,80,000
− Expenses of liquidation amounted to ` 45,000.
− The liquidator is entitled to a remuneration of 3% on all assets realised (except cash at bank).
− All payments were made on 30th June, 2022.
You are required to prepare the Liquidator's Final Statement of Account as on 30 th June, 2022. Working Notes
should form part of the answer.

Solution
BT Limited
Liquidator’s Statement of Account

Receipts ` Payments `
To Assets realized: By Liquidation expenses 45,000
Bank 75,700 By Preferential creditors 75,000
Other assets: By Liquidator’s Remuneration (W.N.1) 1,29,600
Land & building 24,50,000 By Debenture holders:
Plant & Machinery 9,00,000 Debentures 10,00,000
Furniture 2,85,000 Interest accrued 1,20,000
Patents 90,000 Interest 1-4-22 to 30-6-22 30,000 11,50,000
Stock 2,80,000 By Unsecured creditors 7,36,250
Trade receivables 3,15,000 43,20,000 By Preferential shareholders
Preference capital 10,00,000
Arrear of Dividend 1,20,000 11,20,000
By Equity shareholders - 32,55,850
` 32.995 on 20,000 shares 6,59,900
` 47.995 on 10,000 shares 4,79,950
43,95,700 43,95,700
Working Notes:
(1) Liquidator’s remuneration 43,20,000 × 3/100 =` 1,29,600
(2) As the company is solvent, interest on the debentures will have to be paid for the
period 1 4-2022 to 30-6-2022
10,00,000 x 12% x3/12 = ` 30,000
(3) Total equity capital - paid up (7,50,000 +12,00,000) ` 19,50,000
Less: Balance available after payment to unsecured and preference shares
(43,95,700 — 32,55,850) ` (11,39,850)
` 8,10,150
Loss to be born by 30,000 equity shares
Loss per share ` 27.005
Hence, Refund for share on ` 60 paid share (60 - 27.005) ` 32.995
Refund for share on ` 75 paid (75 - 27.005) ` 47.995

36. QP May 23
Following is the Balance Sheet of Hari Ltd. which is in the hands of the liquidators:
Balance Sheet as on 31/03/2023
Liability (`) Assets (`)
Share Capital: Fixed Assets 4,00,000
2,000 6% Preference Shares of ` 100 each fully paid 2,00,000 Inventory 2,40,000
4,000 Equity Shares of ` 100 each fully paid 4,00,000 Trade Receivables 4,80,000
4,000 Equity Shares of ` 100 each ` 75 paid-up 3,00,000 Cash in hand 80,000
Loan from Bank (on security of inventory) 2,00,000 Profit & Loss account 6,00,000
Trade payables 7,00,000
18,00,000 18,00,000
The assets realized the following amounts (after all costs of Realisation). Liquidator's commission
amounting to ` 10,000 paid out of
`
Fixed Assets 3,36,000
Inventory 2,20,000
Calls on partly paid shares were made out of the amounts due on 400 shares were found to be
irrecoverable.
You are required to prepare liquidator's final statement of account.

CA Inter Advanced Accounts | Non Banking Financial Companies 10.1
NON-BANKING FINANCIAL COMPANIES

May Nov Ma
May Nov May Nov Nov Jan June Dec 202 202 y
2018 2018 2019 2019 2020 2021 2021 2021 2 2 23
NBFC 5 10 5 5 10 5 5 5 5 5
NBFC
12
10 10
10
6
5 5 5 5 5 5 5 5
0


Class Work
MCMR
1 RTP May 18,
RTP Nov 20 (similar)
2 Exam May 18
3 RTP May 19, ICAI PQ 4,
RTP May 20
4 RTP Nov 18
5 ICAI Practical Question 5,
QP Nov 18
6 QP May 19,
ICAI Illustration 6
7 RTP Nov 19
similar mock test 2
8 RTP May 21
9 RTP May 21
10 Exam Nov 20
11 Exam Jan 21

12 RTP Nov 21
13 RTP Nov 21
14 Exam July 21
15 Mock test 1
16 Exam Nov 19
17 Exam Nov 20
18 Exam Dec 21
19 RTP May 22
20 RTP May 22
23 RTP Nov 22
26 Exam Nov 22
27 RTP May 23
28 QP May 23
Test in Time… Pass in Time


27. RTP May 23

Explain the criterion of income recognition in the case of non banking financial companies.
Solution
INCOME RECOGNITION IN CASE OF NBFC
(1) The income recognition shall be based on recognised accounting principles.
(2) Income including interest/ discount or any other charges on NPA shall be recognised only when it is actually
realised. Any such income recognised before the asset became non-performing and remaining unrealised shall be
reversed.
(3) In respect of hire purchase assets, where instalments are overdue for more than 12 months, income shall be
recognised only when hire charges are actually received. Any such income taken to the credit of profit and loss
account before the asset became nonperforming and remaining unrealized, shall be reversed.
(4) In respect of lease assets, where lease rentals are overdue for more than 12 months, the income shall be
recognised only when lease rentals are actually received. The net lease rentals taken to the credit of profit and loss
account before the asset became non-performing and remaining unrealised shall be reversed.
28. QP May 23
SR Finance Ltd. is a Non-Banking Finance Company. The extracts of its balance sheet are as
follows:
Particulars Amount (` in
Lakhs)
Equity and Liabilities
Shareholder’s Funds
Paid up Equity Capital 300
Free Reserves 900
Non-Current Liabilities
Loans 750
Deposits 900
2850
Assets
Non-Current Assets
Property, Plant and Equipment 1350
Investments:
In Shares of subsidiaries 375
In Debentures of group companies 600
Current Assets
Cash and Bank Balances 525
2850

You are required to compute ‘Net Owned Fund” of SR Finance Ltd. as per Non-Banking Financial
Company – Systematically Important Non- Deposit taking company and deposit taking company
(Reserve Bank) Directions, 2016.

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Partners’ capitals: Inventories 3,00,000 12,75,000

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Preference shareholders A/c Dr. 130

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Authorised, Issued and Subscribed: