Unit -1

Company Accounts

1.1           Company Accounts : Preparation of Final Accounts of a company including accounting for dividends and managerial remuneration as per company’s Act 2013

INTRODUCTION:

As per Section 128 of the Companies Act, 2013, every company should prepare and keep, at its registered office, books of accounts and other relevant books financial statement for every financial year, which give a true and fair view of the state of the affairs of the company, including that of its branch office or offices, if any.

As per the latest developments, the company may keep such books of accounts or other relevant papers in electronic mode and in such manner, as may be prescribed.

FINAL ACCOUNTS:

Under Section 129 of the Companies Act, 2013, at the Annual General Meeting of a company, the Board of Directors of the company should present financial statements before the company. As per section 2(40) of the Companies Act, 2013, Financial statements includes- i) a balance sheet as at the end of the financial year, ii) a profit and loss account and iii) cash flow statement for the financial year.

Schedule III of the Companies Act, 2013:

As per section 129 of the Companies Act, 2013, the financial statements should give a true and fair view of the state of affairs of the company and comply with the accounting standards notified under Section 133 and should be in form or forms as may be provided for different classes of companies in Schedule III under the Act.

Q 1) The following is draft Profit and Loss A/c of Mudra Ltd. The year ended on 31st March, 2001.

Depreciation on Fixed Assets as per Schedule II of the Companies Act, 2013 was Rs. 5,75,345. You are required to calculate the maximum limits of the managerial remuneration as per the Companies Act, 2013.

Solution:      Calculation of Net Profit u/s 198 of the Companies Act, 2013

Maximum Managerial Remuneration under Companies Act, 2013 = 11% of 27,35,383 = Rs. 3,00,892.

Q 3) Kumar Ltd., a non-investment A/c has been incurring losses for the past few years. The company provides the following information for the current year:

Kumar Ltd. Has only one whole-time director, Mr. X. You are required to calculate the amount of maximum remuneration that can be paid to him if no special resolution is passed at the general meeting of the company in respect of payment of remuneration for a period not exceeding three years.

Solution: Calculation of effective capital and maximum amount of monthly remuneration

Since Kumar Ltd. Is incurring losses and no special resolution has been passed by the company for payment of remuneration, managerial remuneration will be calculated on the basis of effective capital of the company, therefore maximum remuneration payable to the Managing Director should be Rs. 60,00,000 per annum.

Q 3) Due to inadequacy of profits during the year ended 31st March, 2012, XYZ Ltd. Proposes to declare 10% dividend out of general reserves. From the following particulars, ascertain the amount that can be utilised from general reserves, according to the Companies Rules.

Solution:

Conditions as per Companies Rules:

CONDITION I:

Since 10% is lower than the average rate of dividend (which is 12%), 10% dividend can be declared.

CONDITION II:

Maximum amount that can be drawn from the accumulated profits and reserves should not exceed 10% of paid up capital plus free reserves i.e. Rs. 12,25,000 [10% of (80 lacs + 17.50 lacs + 25 lacs)]

CONDITION III:

The balance of Reserves after withdrawal Rs. 18,42,500 (Rs. 25,00,000 – 6,57,500) should not fall below 15% of its paid up capital i.e. Rs. 14,62,500 (15% of Rs. 97,50,000)

Since all the three conditions are satisfied, the company can withdraw Rs. 6,57,500 from accumulated reserves (as per Companies Rules).

Q 4) The following is Trial Balance of Omega Ltd. As on 31.3.2012

Additional Information:

1. The authorised share capital of the company is 40,000 shares of Rs. 10 each.
2. The company on advice of independent valuer wish to revalue the land at Rs. 3,60,000.
3. Declared final dividend @ 10%.
4. Suspense A/c of Rs. 4,000 represents cash received for the sale of some machinery on 1.4.2011. The cost of machinery was Rs. 10,000 and the accumulated depreciation thereon being Rs. 8,000.
5. Depreciation is to be provided on Plant and Machinery at 10% on cost.

You are required to Prepare Balance Sheet of Omega Ltd. As on 31st March, 2012 and Statement of Profit and Loss as per Schedule III.

Solution:                                                   Omega Limited

Balance Sheet as on 31st March, 2012

Statement of Profit and Loss for the year ended on 31st March, 2012

Notes to Accounts:

Note No.	Particulars	Amount	Amount
1	Share Capital Equity Share Capital Authorised 40000 shares of Rs. 10 each Issued, Subscribed and Called up 30000 shares of Rs. 10 each		400000
			300000
	TOTAL		300000
2	Reserves and Surplus Securities Premium A/c Revaluation Reserve (360000-220000) General Reserve Profit and Loss Balance     Opening Balance     Profit for the current period       Less: Appropriations                Interim Dividend                Final Dividend (300000 x 10%)	72000 166000 238000   (18000) (30000)	40000 140000 130000   190000
	TOTAL		500000
3	Long term Borrowings     10% Debentures		200000
4	Other Current Liabilities      Dividend		30000
5	Tangible Assets Land      Opening Balance      Add: Revaluation Adjustment      Closing Balance Plant and Machinery      Opening Balance      Less: Disposed off        Less: Depreciation (172000-8000+76000)      Closing Balance	220000 140000   770000 (10000) 760000 (240000)	360000   520000
	TOTAL		880000
6	Other Income Profit on Sale of Machinery:      Sale Value of Machinery      Less: Book Value of Machinery (10000-8000)	4000 (2000)	2000
7	Finance Costs Debenture Interest		20000
8	Other Expenses:      Factory Expenses      Selling Expenses      Administrative Expenses	60000 30000 30000	120000

1.2           A brief study on International Accounting Standards (IAS) and Accounting Standards (AS) of India and its convergence into I.F.R.S.

Introduction to IAS and IFRS:

The International Accounting Standards (IAS) are older accounting standards issued by the International Accounting Standards Board (IASB) based in London. The IAS were replaced in 2001 by International Financial Reporting Standards (IFRS).

The International Accounting Standards (IAS) were the first international accounting standards.

The goal then, as it remains today, was to make it easier to match businesses around the world, increase transparency and confidence in financial reporting, and raise global trade and investment.

International Financial Reporting Standards (IFRS) set common rules so that financial statements can be consistent, transparent and comparable in all the countries around the globe. IFRS are issued by the International Accounting Standards Board (IASB). They specify how organisations must maintain and report their accounts and other events with financial impact.

History of IFRS

IFRS originated in the European Union, with the intent to make business affairs and accounts accessible across the continent. The very same notion quickly spread globally, because experts knew that a shared language allows greater communication worldwide. Although the U.S. And some other countries don't use IFRS, most of the countries do, making IFRS the most common global set of standards.

IFRS were established to create a common accounting language, so that various businesses and their financial statements can be not only reliable but also consistent and comparable from one company to another and from one country to another country.

Following quote is taken from the official website of IFRS.

“Our mission is to develop IFRS Standards that bring transparency, accountability and efficiency to financial markets around the world. Our work serves the public interest by fostering trust, growth and long-term financial stability in the global economy.”

Benefits of IFRS:

-          Globally comparable accounting standards promote transparency, accountability, and efficiency in financial markets around the world.

-          Universal standards also significantly reduce reporting and regulatory costs, especially for companies with international operations and subsidiaries in multiple countries.

IFRS are sometimes confused with International Accounting Standards (IAS), which were the older standards that IFRS replaced. IAS were in practise from the year 1973 till 2000. Later, the International Accounting Standards Board (IASB) replaced the International Accounting Standards Committee (IASC) in 2001.

Standard IFRS Requirements:

1)     Statement of Financial Position: This is also known as a balance sheet. IFRS guides the ways in which the components of a balance sheet can be reported to the users of the financial statements.

2)     Statement of Comprehensive Income: As per the guidelines issued under IFRS, this can take the form of one statement, or it can be separated into a profit and loss statement and a statement of other income, including property and equipment.

3)     Statement of Changes in Equity: Also known as ‘Statement of Retained Earnings’, this statement produce the company's change in earnings or profit for the given financial period.

4)     Statement of Cash Flow: This report summarizes the company's financial transactions in the given period, separating cash flow into Operations, Investing, and Financing.

To conclude, IFRS were established to form a common accounting language, so that business and accounts can be understood from company to company and country to country in a similar way. Both companies and investors benefit from IFRS because people are more assured investing in a company if its business practices are transparent and reliable and can be understood by all of them in the same sense.

Introduction to Accounting Standards of India:

Indian Accounting Standard (abbreviated as Ind-AS) is the Accounting standard adopted by the companies in India and issued under the supervision of Accounting Standards Board (ASB) which was constituted as a body in the year 1977. ASB is a committee formed under the Institute of Chartered Accountants of India (ICAI). The committee consists of various representatives from government department, academicians and other professional bodies.

The Ind AS are named and numbered in the same way as the International Financial Reporting Standards (IFRS). National Financial Reporting Authority (NFRA) recommends these standards to the Ministry of Corporate Affairs (MCA). MCA has to spell out the Accounting Standards applicable for companies in India.             

Convergence of Indian AS into IFRS:

IND AS standards are framed keeping in mind the economic environment and practices of India. They are made to suit the Indian companies and the disclosure requirements as per the various laws practised in India. The IFRS, on the other hand, are made keeping global standards and environment in mind.

So, convergence would mean bridging the gap between the two, i.e. the IFRS and the Indian AS. Convergence will involve alignment of these two sets of standards.

Following are the few benefits of Convergence:

1) Beneficial to the Economy

If the accounting standards are converged it will promote international business and increase the influx of foreign capital into the country. This will help India’s economy to grow and expand. International investing will also mean more capital for domestic companies as well.

2) Beneficial to Investors

Convergence is a boon for investors who wish to invest in foreign markets. It makes it much easier for them to study and compare the financial statements of foreign companies. Since the financial statements are made using the same set of standards it is also easier for the investors to understand and analyse them.

3) Beneficial to the Industry

With globally accepted standards, the industry can also move ahead. So convergence is important for the industry as well. It will allow the industry to lower the cost of foreign capital. If companies are not burdened by adopting two different sets of standards, it will allow them to enter easily into the market.

4] More Transparency

Convergence will benefit the users of the financial statements as well. It will make it easier for them to understand the financial statements. This will generate better transparency and raise the confidence of the foreign investors to invest funds.

It will be especially helpful for those companies that have subsidiaries and branches in many countries.

Some of the difficulties of convergence with the IFRS:

There are some significant challenges of converging the IFRS and the Indian AS. Some of them are as follows:

1)     Other than the Accounting Standards, India has many rules and regulations to implement them. These rules will need to be updated as well.

2)     Accounting is done via software these days, like Tally. Convergence with IFRS means this software will have to be updated which is a costlier affair.

3)     Also, there is a lack of trained and efficient personnel. The accountants, auditors, etc. will have to undergo training and learning programmes for the updated standards.

1.3           Accounting for underwriting of shares.

Underwriting Commission:

The Underwriter provides an assurance to the company that it would be able to raise the required amount of capital and on this basis; the risk of under subscription would be avoided and the company can proceed further in its Investment programme.

In consideration of Underwriter’s services, they receive ‘Underwriting Commission’ from the company.

The Companies Act, 2013 provides the rules for the rate of commission to be paid to the underwriters.

It provides that the rate of commission can be paid only at the rate prescribed in the Articles, not exceeding 2.5% on issue price of debentures and 5% on issue price of shares.

There are two types of Underwriting Contract –

1. Normal Underwriting
2. Firm Underwriting

1. Questions on Normal Underwriting-

In this method, the allocation of unmarked applications can be done in two ways:

a)      Unmarked applications are allotted in the proportion of Gross Amount of capital underwritten or

b)     Unmarked applications are allotted in the proportion of Gross Amount of capital underwritten as reduced by Marked Applications.

In absence of information in the question, Students are advised to adopt any method and provide a suitable note for the same.

ALSO NOTE – If in the Question, following is mentioned:

‘Credit of Marked Application is not given to Individual Underwriter’ – Solve ONLY as per ‘a’ above.

‘Credit of Marked Application is given to Individual Underwriter’ – Solve ONLY as per ‘b’ above.

Q 1) New Ltd. Incorporated on 1st January, 2013 issued a prospectus inviting applications for 20,000 equity shares of Rs. 10 each. The whole issue was fully underwritten by Aman, Boman and Chintaman as follows:

Aman  10,000 shares

Boman  6,000 shares

Chintaman 4,000 shares

Applications were received for 16,000 shares of which marked applications were as follows:

Aman  8,000 shares

Boman  2,850 shares

Chintaman 4,150 shares

You are required to find out the liabilities of individual underwriters.

Solution:

Computation of Net Liability of Underwriters

2.      Questions on Firm Underwriting-

Q 2) A company made a public issue of Rs. 1,25,000 equity shares of Rs. 100 each, out of which Rs. 50 is payable on application. The entire issue was underwritten by four parties: A, B, C and D in the proportion of 30%, 25%, 25% and 20% respectively. Commission of 2% was payable on the amounts underwritten.

A, B, C and D also agreed on firm underwriting of 4,000, 6,000, Nil and 15,000 shares respectively.

The total subscriptions excluding firm underwriting but including marked applications were for 90,000 shares. Marked applications were as under:

A 24,000   B 12,000   C 20,000   D 24,000

Ascertain the liability of each underwriter.

Solution:

It is assumed that benefit of firm underwriting is given to individual underwriters:

1 – Total Marked Application: 80,000 shares

2 – Shares subscribed excluding firm underwriting:

Total Applications    90,000

Less: Marked Applications   80,000

So, Unmarked Applications   10,000 shares

3 –     Statement showing Liability of Underwriters

4 –     Amount due to/from Underwriters 

1.4           Accounts relating to Amalgamation and re-construction of companies

Amalgamation

Amalgamation is the combination of two existing companies. It is the pooling of assets and liabilities of two companies.

In other words, Amalgamation involves combination of two companies into a new entity. Amalgamation is distinct from merger because neither company involved in the process survives as a legal entity.

Usually, the two companies being amalgamated are of same size and both look out for expansion in the new market.

Why the companies amalgamate?

As said earlier, two companies amalgamate to enter in a new market, geographically or product wise. In other words, amalgamation takes place for the following reasons:

-          To diversify the activities

-          To gain financially

Example: Maruti Motors of India and Suzuki of Japan were amalgamated in 1982 to form Maruti Suzuki.

Re-construction

It includes a) Internal Reconstruction and b) External Reconstruction.

Internal Reconstruction is the process in which alterations are done to the Share Capital and some debts are waived off. In this process, the company is neither               liquidated nor is a new company formed.

External Reconstruction is the process in which a new company is formed to takeover all the assets and liabilities of the old company. In the process, the old company is liquidated and the new company is formed deliberately to buy the assets and liabilities of the old company.

SYMBOLICALLYAMALGAMATION:

SYMBOLICALLY ABSORPTION:

Difference between Amalgamation and Absorption:

Q1) A Ltd. And B Ltd. Carrying on similar business decided to amalgamate and for this purpose a new company AB Ltd. Was formed to take over assets and liabilities of both the companies. It is agreed that fully paid shares of Rs.100 each shall be issued by the new Co. To the value of net assets of each of the old companies.

Balance Sheet of A Ltd. As at 31st December 2012

Balance Sheet of B Ltd. As at 31st December 2012

The following is the accepted scheme of valuation of business of the two companies:

A Ltd:  a) to provide for reserve for bad debts at the rate of 5% on debtors

b) to write off Rs.400 from stock; and

c) to write off 33-1/3% from plant & machinery

B Ltd:  a) to eliminate its goodwill and profit & loss a/c balances;

b) to write off bad debts Rs.1000 and to provide reserve of 5% on balances of debtors;

c) to write down plant & machinery by 10%; and

d) to write off Rs.1,400 from the value of stock.

You are required to pass the Journal entries and prepare the Ledger Accounts in the books of A Ltd. & B Ltd. Giving effect to the above transactions. Also pass the journal entries in the books of AB Ltd. And prepare opening Balance Sheet of AB Ltd.

SOLUTION:   Statement of Purchase Consideration (Net Asset Method)

Note: Assets for which valuation is not given are taken at book values. E.g. Land & Buildings, Furniture etc.

Journal of A Limited

LEDGER OF A LIMITED

Realisation Account

Equity Shareholders Account

AB Limited Account

Journal of B Limited

LEDGER OF B LIMITED

Realisation Account

Equity Shareholders Account

AB Limited Account

Journal of AB Limited

AB Limited

Balance Sheet as on 31-12-2012

Notes to Accounts

Q2) BK Ltd. Is formed to take over Bunty Ltd. And Kuber Ltd. Their balance Sheets on the date of amalgamation are as below:

Balance Sheets as on 31st March, 2012

BK Ltd. Issued 10,000 Equity shares of Rs.10 each to the public at a premium of 10%. Bunty Ltd. And Kuber Ltd were taken over by BK Ltd. On the following terms.

Re: Bunty Ltd.

a)      Equity Shareholders are to be issued 7 Equity Shares of Rs.10 at par in BK Ltd. And are to be paid Rs.5 in cash for surrender of each 6 shares.

b)     Preference shareholders are to be paid at 10% premium by 12.5% preference shares in BK Ltd. Issued at par.

c)      All Assets and liabilities are valued at book value except Machinery which is valued at 10% below book value and Debtors are worth Rs.1,60,000.

d)     Liquidation expenses of Rs.12,500 are to be borne by BK Ltd.

e)     Discharge the debentures of Bunty Ltd. At a discount of 10% by the issue of 13% Debentures of Rs.100 each in BK Ltd.

Re: Kuber Ltd.

a)      Cash Rs.3,000 is to be retained for liquidation expenses.

b)     Debtors and Investments are valued at 90% of cost.

c)      Machinery and stock are valued at 10% above cost and other assets and liabilities are valued at book value except Fictitious Assets.

d)     Preference shareholders are to be paid at 10% premium by 12.5% preference shares in BK Ltd. Issued at par.

e)     Balance of Purchase consideration is payable in equity shares at par.

f)       Discharge the debentures of Kuber Ltd. At par by the issue of 13% Debentures of Rs.100 each in BK Ltd.

The Face value of Equity shares and Preference shares in BK Ltd. Is Rs.10 each.

Show the necessary Ledger Accounts in the books of Bunty Ltd. Also calculate purchase consideration.

SOLUTION:             CALCULATION OF PURCHASE CONSIDERATION

Bunty Ltd. (Net Payment Method)

Kuber Ltd. (Net Asset Method)

Settlement of Purchase Consideration (Kuber Ltd.)

IN THE BOOKS OF BUNTY LTD.

Realisation A/c

Equity Shareholders A/c

11% Preference Shareholders A/c

B.K. Ltd A/c

Equity Shares in B.K. Ltd A/c

12.5% Preference Shares in B.K. Ltd A/c

Cash A/c

NOTE for Students - Similar ledgers will be prepared in the books of Kuber Ltd.

Q3) Long Limited has agreed to acquire Goodwill and assets (except investments and Bank Balances) of Short Limited as at 31st March, 2012. The Balance Sheet of Short Limited as on that date was as follows:

Long Ltd. Will:

a)      Discharge the Debentures @ 8% premium by issue of 7% Debentures in Long Ltd. At 10% discount.

b)     Issue 3 shares of Long Ltd. At market price of Rs.11 for 2 shares of Short Ltd.

c)      Pay Rs.2 in cash for each share of Short Ltd.

d)     Re-imburse absorption expenses of Rs.3,000

Short Ltd. Sells investments for Rs.32,000; one third of the shares received from Long Ltd. Are sold @ Rs.10.50 each. Tax liability is determined at Rs.24,000. Before transfer, Short Ltd. Declares and pays 10% dividend. Long Ltd. Values Land and Building at Rs.1,00,000, Plant at 10% below book value, stock at Rs.35,000, and debtors subject for 5% provision.

Show a) Ledger accounts in the books of Short Ltd. And b) Journal entries in the books of Long Ltd.

SOLUTION:          Calculation of Purchase consideration (Net Payment Method)

LEDGER OF SHORT LTD.

Realisation Account

Equity Shareholders Account

Bank Account

Long Ltd. Account

Equity Shares in Long Ltd. Account

Journal of Long Limited

Note: Discount on issue of debentures may be adjusted against Security Premium.

Q4) The following Balance Sheet of X Ltd. Is given as on 31 -3-2012

Balance Sheet

A scheme of reconstruction was framed as under:

1)     Y Ltd. Was formed with an authorized capital of Rs.3,25,000 in equity shares of Rs.10 each.

2)     One equity share of Rs.5 paid in Y Ltd. To be issued for each equity share in X Ltd. And also one equity share for each preference share respectively.

3)     Arrears of dividends are cancelled.

4)     Creditors are taken over by Y Ltd.

5)     Debenture holders to receive 3,000 equity shares in Y Ltd. Credited as full paid.

6)     Remaining unissued shares of Y Ltd. To be taken up and paid in full by public in cash.

7)     Y Ltd. To be take over all assets except patents subject to writing down, Sundry assets by Rs.53,000.

8)     Patents realized Rs.1,000 and expenses of X Ltd. Amounted to Rs.1,000.

Prepare the following: 1) Journal entries in X Ltd. 2) Journal entries in Y Ltd. 3) Balance Sheet of Y Ltd.

SOLUTION:          Calculation of Purchase Consideration (Net Payment Method)

Journal of X Limited

Journal of Y Limited

Y Ltd

Balance Sheet as on 31st March 2012

Note: Arrears of Preference Dividends (see Balance Sheet of X Ltd) are cancelled vide the scheme of reconstruction. No entry is required for such cancellation in the books of X Ltd. Or Y Ltd.

1.5           Accounts on the Liquidation of a company

Introduction:

A company comes into existence through a legal process and also it comes to end by law. The legal procedure through which the existence of a company comes to an end is known as ‘Liquidation’.

Definition:

As per Sec 2(94A) of the Companies Act, 2013, winding up means winding up under this Act or liquidation under the Insolvency and Bankruptcy Code, 2016.

A Company may be liquidated

-          Voluntarily

-          Compulsorily

A company can be voluntarily wounded

-          If the company passes a resolution in general meeting

• As the period has expired of its duration, if any, fixed by its Articles or
• On occurrence of some event and on happening of which, the Articles provide for its dissolution

-          If the company passes a special resolution for voluntarily winding up of the company.

A company can be compulsorily wounded by

-          Tribunal

-          Filing a petition

• By Contributory
• By Registrar
• By the Company

To the tribunal.

IMPORTANT NOTE for Students:

In case of voluntary winding up, the statement prepared by the liquidator to show Receipts and Payment of Cash is called as ‘Liquidator’s Statement of Account’ and in case of Compulsory winding up, it is called ‘Official Liquidator’s Final Account’.

Q1) M. Ltd. Resolved on 31st December that the company be wound up voluntarily. The following was the trail balance extracted from its books as on that date.

On 1st January, 2017 the liquidator sold M. Ltd.’s Plant for Rs.2,05,000 and Stock in trade for Rs.2,00,000. The sale was completed in January, 2017 and the consideration satisfied as to Rs.2,62,200 in cash and as to the balance in 6% Debentures of the purchasing company issued to the liquidator at the premium of 2%.

The remaining steps in the liquidation were as follows

1)     The liquidator realized Rs.52,000 out of the book debts and the cost of collection  amounted to Rs.2,000.

2)     The loan mortgaged was discharged on 31st January, 2017 along with interest from 31st July, 2016. Creditors were discharged subject to 2% and outstanding expenses excluding mortgage interest were settled for Rs.2,000

3)     On 30th June 2017 six months interest on debentures was received from M. Ltd.

4)     Liquidation expenses amounting to Rs.3,000 and liquidators remuneration of 3% on disbursements to members were paid on 30th June, 2017 when;

a)      The preference shareholders were paid out in cash; and

b)     The debentures on M. Ltd. And the balance of cash were distributed ratably among the Equity shareholders.

Prepare the Liquidators Statement of Account showing the distribution.

SOLUTION:           M. Ltd. (In Liquidation)

Liquidators Statement of Account from 1st January, 2017 to 30th June, 2017

Q2) The following is the Balance Sheet of Confidence Builders Ltd. As at 30th Sept.2016

Mortgage Loan was secured against Land and Buildings. Debentures were secured by a floating charge on all the other assets. The company was unable to meet the payments and therefore the debenture holders appointed a Receiver for the Debenture holders brought the Land and Buildings to auction and realized Rs.1,50,000. He also took charge of Sundry assets of value of Rs.2,40,000 and realized Rs.2,00,000. The Bank Overdraft was secured by a personal guarantee of two of the Directors of the Company and on the Bank raising a demand, the Directors paid off the due from their personal resources. Costs incurred by the Receiver were Rs.2,000 and by the Liquidator Rs.2,800. The Receiver was not entitled to any remuneration by the Liquidator was to receive 3% fee on the value of assets realized by him. Preference shareholders had not been paid dividend for period after 30th September 2014 and interest for the last half year was due to the debentures holders. Rest of the assets were realized at Rs.1,00,000.

Prepare the accounts to be submitted by the Liquidator and Receiver.

SOLUTION:     Receivers Receipts and Payments Account

Liquidator’s Final Statement of Account

Particulars	Amount	Particulars	Amount
Surplus received from Receiver Assets Realized Calls on Contributories: On holder of 5,000at the rate of Rs.2.17 per share	82,250 1,00,000   10,850	Cost of Liquidation Remuneration to Liquidator (1,00,000 x 3%) Unsecured Creditors For trade                              32,000 Directors for payment Of Bank O/D                        30,000 Preferential Shareholders: Principal                            1,00,000 Arrears of Dividends         22,000   Equity Shareholder: Return of money to contributors to holders of 10,000 shares at 33 paise each	2,800 3,000   62,000   1,22,000   3,300
	1,93,100		1,93,100

Working Note:

Call from partly paid shares

Deficit before call from Equity Shares (1,82,250 – 1,89,800)   =  7,550

Notional call on 5,000 shares @ Rs.2.50 each                                               12,500

Net balance after notional call                                                                      a) 4,950

No. Of shares deemed fully paid                                                                  b) 15,000

Refund on fully paid shares                        4,950                                         =      33p

15,000

Calls on partly paid share (2.50 – 0.33)                                                       =    Rs.2.17

Books recommended :

1. M. C. Shukla and T. S. Grewal —Advanced Account

2. S. M. Shukla —Advanced Accounts.

3. R. L. Gupta —Advanced Accounts.

4. Man Mohan Prasad — Advanced Accounts.

5. S. K. Singh & R. U. Singh —Specialised Accounts