ACCOUNTING FOR PUBLIC

COMPANIES

by :
DR. T.K. JAIN
AFTERSCHO☺OL
centre for social entrepreneurship
sivakamu veterinary hospital road
bikaner 334001 rajasthan, india
FOR – PGPSE PARTICIPANTS
mobile : 91+9414430763

5 DECEMBER 09 www.afterschool.tk 1
 ACCOUNTING STANDARDS

Framed by ICAI
AS 1 to AS 31 (AS 8 is withdrawn)

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 Standards

AS 1- accounting policies
AS 2 : - inventory
AS 3 : Cash flow statement
AS 4 : events after balance sheet dates
AS 5 : profit
AS 6 : depreciation
AS 7 : construction contracts
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 standards...

AS 9 : revenue recognition
AS 10 : fixed assets
AS 11 : foriegn exchange
AS 12 : Govt. Grants
AS 13 : Investments
AS 14 : amalgamation
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 standards...

AS 15: employee benefits

AS 16 : borrowing costs
AS 17 : segment reporting
AS 18 : related party disclosure
AS 19 : lease
AS 20 : EPS
AS 21 : consolidated financial statement
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 Standards
AS 22: taxation
AS 23 : investment in association
AS 24 discounting of issue
AS 25 : interim financial reporting
AS 26: intangible assets
AS 27 : joint venture
AS 28 : impairment of assets
AS 29 : contingent liability
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 standards....

AS 30 : financial instruments – recognition and

measurement
AS 31 : financial instruments – presentation

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International accounting standards
Formed by IASB
IAS 1 : financial statements
IAS 2 : Inventory
IAS 7 : cash flow statement
IAS 8 : accounting policies
IAS 10 : events after balance sheet date
IAS 11 : construction contracts
IAS 12 : Income tax
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 IAS....
IAS 14 : segment reporting
IAS 16: property plant and equipment
IAS 17 : lease
IAS 18 : revenue
IAS 19 : employee benefit
IAS 20 : govt. Grants
IAS 21 : foreign exchange
IAS 23: Borrowing cost
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 IAS
IAS 24 : related party disclosure
IAS 26: retirement benefit plans
IAS 27 : consolidated financial statement
IAS 28 : investment in association
IAS 29 : hiper-inflationary economy
IAS 31: Joint venture
IAS 33 : EPS
IAS 34: interim financial reporting
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 IAS

IAS : 36 : impairment of assets

IAS 37 : contingent liaiblities
IAS 38 : Intangible assets
IAS 39 : financial instruments
IAS 40 : investment inproperties
IAS 41 : agriculture

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 IFRS : INTERNATIONAL
FINANCIAL REPORTING
STANDARDS
IFRS 1 : first time adoption
IFRS 2 : share based payments
IFRS 3: business combination
IFRS 4 : Insurance contracts
IFRS 5: non -current assets
IFRS 6: mineral resources
IFRS 7 : financial instruments
IFRS 8 : operating segments

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 A company issued 10,000 shares of Rs. 10 each. Total
applications were for 12,000 shares; allotment was made
pro-rata. Application money was Rs. 2 per share and
allotment money Rs. 3 per share. Goti failed to pay the
allotment money on his 300 shares. How much is due
from Goti for allotment?

Goti must have applied for 12/10*300= 360

shares. He must have paid : 360*2 = 720, out
of which (300*2) = 600 have been adjusted in
application money and remaining 120 adjusted
in allotment. The total money due on allotment
is 3*300 = 900, so (900-120) = 780 is due from
Goti. Answer.
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 A company offers two shares for every five held to its
shareholders. The issue price is Rs. 14 and the rights
price in the market is Rs. 19. What is the market value
of a right?

Formula : new shares/total shares *( cum rights price – new

issue price)
=2/7 * (19-14)
=10/7 = 1.43
or
market value – average value
average value (19* 5 + 14*2) = 123 /7 = 17.57
(19 – 17.57) = 1.43 answer

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 Z Ltd. forfeited 150 shares of Rs. 10, issued at a
premium of Rs. 2, for non-payment of the final call of
Rs. 3. Of these 100 shares were re-issued @ Rs. 11
per share. How much is transferred to capital reserve?

We had received (10-3) = 7 per share, thus 150

* 7 = 1050. now 100 of these shares are
reissued at premium again, so all the amount
related to these 100 shares will be transferred
to capital reserve. So 100 * 7 = 700 will be
transferred to capital reserve.

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 The authorised capital of a company is 1,00,000 shares of Rs. 10 each. On April 10, 2008,
50,000 shares are issued for subscription at a premium of Rs. 2 per share. The share money is
payable as follows : Rs. 5 (including the premium of Rs. 2) with application, Rs. 3 on allotment;
Rs. 2 on first call and Rs. 2 on second call. The subscription list closes on May 11, 2008 and
directors proceed to allotment on May 18, 2008. The shares are fully subscribed and the
application money (including the premium) is received in full. The allotment money is received
by June 30, 2008, except as regards 500 shares. It is expected that the allotment money on these
500 shares will not be received. The first call and second call money is received by September
30, 2008 and December 31, 2009 respectively, barring the second call money on 200 shares
which is not received and which is not likely to be received.

1. Bank ac dr. 2.5 lakh

To share application 1.5 lakh
to share premium 1 lakh
2. share application dr. 1.5 lakhs
To share capital 1.5 lakhs

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 continued...
3. Share allotment dr. 1.5 lakh
To share capital cr. 1.5 lakh
4. bank dr. 1,48,500
To share allotment 1,48,500
5. first call dr. 100000
to share capital 100000
6. bank dr. 99000
to first call credit 99000
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 continued...

Second call dr. 100000

To share capital credit 100000
bank dr. 98600
to second call cr. 98600

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 Balance sheet
Liability side
Autorised capital : 10 lakhs
issued capital : 5 lakhs
paid up capital : 4,96,100
(due amount 3900)
Assets side
bank account : 4,96,100
both sides total 496100
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X Ltd. forfeited 100 shares of Rs. 10 each for non-
payment of the final call of Rs. 2; the shares were
re-issued @ Rs. 9 per share. How much was
credited to shares forfeited account and what
amount was transferred to capital reserve?

We had received : 8*100 = 800 (transferred to

share forfeiture account).
we gave discount of 1*100 = 100
so 700 will be transferred to capital reserve.

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A company having free reserves of Rs. 30,000 wants to
redeem rupees one lakh preference shares. Calculate the
face value of fresh issue of shares of

Rs. 10 each to be made at a premium of 10%.

Total money to be paid : 1 lakh

reserves available : 30000
so issue shares for 70000. Premium on shares
can be used only for premium on redemption,
so the face value of shares to be issued must be
70000. answer

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 Redemption of 10,000 preference shares of
Rs. 10 each was carried out by utilisation of
reserves and by issue of 4,000 equity shares
of Rs. 10 each at Rs. 12.5. How much should
be credited to capital redemption reserve
account?
Total money to be paid : 10*10000 = 1,00,000
money from share issue : 4000 * 10 = 40,000
remaining money 60000 has to come reserves,
so we will redit CRR ac by 60000. We will not
use premium received for this purpose.

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 DB corp Ltd. had allotted 10,000 shares to applicants for
14,000 shares on a pro rata basis. The amount payable was
Rs. 2 on application, Rs. 5 on allotment (including
premium of Rs. 2 each), Rs. 3 on first call and Rs. 2 on
final call. Rahul Borar failed to pay the first call and final
call on his 300 shares. All the shares were forfeited and
out of these 200 shares were re-issued @ Rs. 9 per share.
What is the amount credited to capital reserve?

Amount transferred to forfeiture a/c 5*300 = 1500, 200

shares were reissued, so discount of 1*200 was deducted
out of this, now remaining amount relating to 200 shares
can be transferred to capital reserve : 4*200=800

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TRF Ltd. had issued equity shares of Rs. 10 each at a
discount of 6%. 200 of these shares had been forfeited
for non-payment of the first and final call of Rs. 2
each; 150 of these shares were later re-issued @ Rs. 9
per share. Indicate the balance in the Share Forfeited
Account and the Capital Reserve Account, resulting
from the above.

Amount tranferred to share forfeiture a/c : 200*5.4 = 1080

discount on share issued : 150*.4 =60
amt. Transferred to capital reserve : 5 * 150 = 750
balance in forfeiture a/c : 1080-(60+750) = 270

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 A company issues early in 2004 13% Rs. 20,00,000
debentures at Rs. 96 but redeemable at Rs. 103.
Redemption will be carried out by annual drawings of Rs. 4
lacs (face value) commencing at the end of 2008. What do
you recommend as the amount to be charged to the profit
and loss account, apart from that of interest?

We have got 1920,000 but we will pay 2060,000, the difference is

140,000, out of this 80,000 is discount and 60,000 is premium.
There are two methods to transfer loss of debentures to P & L
a/c – fixed instalment 2. fluctuating method. Here our balances
are reducing in annual drawings so we will use fluctuating
method. The balance of debenture outstanding each year is :
20,20,20,20,20,16,12,8,4, so first year's amount is : 20/140*140 =
20000 and last year's amount is : 4/140*140000 = 4000.

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 Rs. 40 lakhs 10% debentures are outstanding in the
balance sheet of a company on 31st March, 2007. The
company had not paid the six months interest after 30th
June, 2007. State the amount of interest on debentures
accrued and due as well as interest accrued but not due on
31st March, 2008.

Interest acrued and due 10%*40 lakhs* ½ =

2lakhs on 30 June 2007 now interest will be
due on Jan. 2008 and June 2008. so Interest
acrued but not due on 31 March = 10%*40
lakhs * 3/12 = 1 lakhs

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 Calculate the amount of discount to be written off
each year on the debentures of Rs. 60,00,000 issued
on 1.1.2008 at a discount of 5% repayable in annual
drawings of Rs. 10,00,000 each year. Accounting
period ends on 31st December.

Total discount to be transferred to P & L a/c 3

lakhs and we have 6 years.
Here we have to use fluctuating method. So
here balance at the beginning of the year would
be : 60,50,40,30,20,10, so discounts allowed
will be : 6/21 *3 lakhs = 85500 and so on.

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 Rajasthan Punjab Roadlines Ltd. shows in its balance
sheet 9% Rs.30,00,000 Debentures; interest on these is
payable on 31st March and 30th September. On 1st June,
2007 the company purchased as investment Rs. 50,000 of
the debentures @ 89. What will the company show in
balance sheet?

The company will show in the liabilities side :

Rs. 30 Lakhs and in the assets side 89/100 *
50000 = 44500.

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 P. Ltd. issued Rs. 10,00,000 13.5% Debentures at a discount of
5%; the debentureholders have an option of converting the amount
into Rs. 10 equity shares at a premium of 10%. A debentureholder
holding Rs. 40,000 debentures wishes to exercise the option. How
many shares will he get?

40000*100/110*1/10 = 3636 shares

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