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TS Grewal Vol. ii 2018 Solutions for Class 12-commerce Accountancy Chapter 1 Company
Accounts Financial Statements Of Not For Profit Organizations are provided here with simple
step-by-step explanations. These solutions for Company Accounts Financial Statements Of Not
For Profit Organizations are extremely popular among class 12-commerce students for
Accountancy Company Accounts Financial Statements Of Not For Profit Organizations
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Page No 7.51:
Question 1:
From the following particulars of Evergreen club, prepare Receipts and payments Account for
the year ended 31st March,2018:
₹ ₹
st
Cash in Hand on 1 April,2017
50,000 Newspaper and Magazines 87,000
Cash at Bank on 1st April,2017
3,40,000 Sale of Old Newspaper 12,000
Subscriptions Received
15,70,000 Books purchased 3,40,000
Donations Received
2,80,000 Sports Materials Purchased 4,70,000
Investments purchased
5,00,000 Interest on Investments Received 50,000
Rent paid
50,000 Honorarium to coaches 1,50,000
General Expenses
2,30,000 Cash in Hand on 31st March,2018 30,000
Postage and stationery
25,000 Cash at Bank on 31 st March ,2018 ?
Answer:
Books of Evergreen Club
Receipts and Payments Account
Page No 7.51:
Question 2:
How are the following items shown in the accounts of a Not-for-Profit Organisation ?
₹
Tournament Fund 50,000
Tournament Expenses 15,000
Receipts from Tournament 20,000
Answer:
Balance Sheet
Amount Amount
Liabilities Assets
(Rs) (Rs)
Tournament Found 50,000
Add: Tournament Receipts 20,000
Less: Tournament Expenses (15,000) 55,000
Page No 7.52:
Question 3:
How are the following dealt with in the accounts of a Not-for-Profit Organisation ?
Answer:
Case 1
Balance Sheet
Amount Amount
Liabilities Assets
(Rs) (Rs)
Prize Fund 50,000
Less: Prize Paid (12,000) 38,000
Note: Match Expenses of Rs 15,000 are not deductible from the Prize Fund. This is because the
Prize Fund is maintained only to meet the expenses relating to the Prize. However, the match
expenses (i.e. Rs 15,000) will be debited to the Income and Expenditure Account as there is no
specific fund is maintained to meet such expenses.
Case 2
Balance Sheet
Amount Amount
Liabilities Assets
(Rs) (Rs)
Match Fund 1,00,000 Match Fund Investments 60,000
Less: Match Expenses (35,000)
Add: Interest on Match Fund Investments 3,000 68,000
Note: Prizes paid worth Rs 19,000 are not deductible from the Match fund because the Match
Fund. This is because Match Fund is maintained only to meet the expenses relating to the Match.
However, the prizes paid (i.e. Rs 19,000) will be debited to the Income and Expenditure Account
as there is no specific fund is maintained for distributing the prizes. Also, the interest on Match
Fund Investments is added to the Match Fund because it is an income related to this particular
fund.
Page No 7.52:
Question 4:
How are the following dealt with while preparing the final accounts of a club?
Answer:
Balance Sheet
Amount Amount
Liabilities Assets
(Rs) (Rs)
Match Fund 80,000 Match Fund Investment 72,000
Add: Interest on Match Fund Investment 2,880 Match Fund Bank Balance 3,500
Less: Match Expenses (5,500) 77,380
Page No 7.52:
Question 5:
From the following information of a club show the amounts of match expenses and match fund
in the appropriate Financial Statements of the club for the year ended on 31st March, 2018:
Details ₹
Match expenses paid during the year ended 31st March, 2018
Match Fund as on 31st March, 2017 1,02,000
Donation for Match Fund (Received during the year ended 31st March, 2018) 24,000
proceeds from the sale of match tickets (Received during the year ended 31st March, 40,000
2018) 15,000
Answer:
Balance Sheet
Amount Amount
Liabilities Assets
(Rs) (Rs)
Match Fund 24,000
Add: Donation for Match Fund 40,000
Add: Proceed from Sale of Tickets 15,000
Less: Match Expenses (Note) (79,000) NIL
Note: The total Match expenses amounts to Rs 1,02,000 whereas the total amount available in
the Match Fund is only Rs 79,000 (i.e. Rs 24,000 + Rs 40,000 +Rs 15,000). This implies that
expenses of Rs 79,000 is met through the Fund while the remaining expenses of Rs 23,000 (i.e.
Rs 1,02,000 – Rs 79,000) are debited to the Income and Expenditure Account.
Page No 7.52:
Question 6:
Show how are the following items dealt with while preparing the final accounts for the year
ended 31st March , 2018 of a Not-for-profit Organisation:
Answer:
Case 1
Balance Sheet
Case 2
Balance Sheet
Case 3
Balance Sheet
Page No 7.53:
Question 7:
How is Entrance Fees dealt with while preparing the final accounts for the year ended 31st
March, 2018 in each of the following alternative cases?
Case I During the year ended 31st March, 2018, Entrance Fees received was ₹ 1,00,000.
Case II During the year ended 31st March, 2018, Entrance Fees received was ₹ 1,00,000.Out
of this , ₹ 25,000 was received from individuals whose membership is not yet approved.
Answer:
Case 1
Case 2
Page No 7.53:
Question 8:
In the year ended 31st March , 2018, the subscriptions received by the jaipur Literary Society
were ₹ 4,20,000. These subscriptions include ₹ 14,000 received for the year ended 31st March ,
2017. On 31st March, 2018, subscriptions due but not received were ₹ 10,000.What amount
should be credited to Income and Expenditure Account for the year ended 31st March, 2018 as
subscription ?
Answer:
Income and Expenditure Account
Page No 7.53:
Question 9:
Subscriptions received during the year ended 31st March , 2018 are:
₹ ₹
For the year ended 31st March, 2017 1,600
For the year ended 31st March,2018 84,400
For the year ended 31st March,2019
3,200
89,200
There are 450 members , each paying an annual subscription of ₹ 200; ₹ 1,800 were in arrears for
the year ended 31st March, 2017.
calculate amount of subscriptions to be credited to Income and Expenditure Account for the year
ended 31st March, 2018.
Answer:
Question 10:
In the year ended 31st March , 2018 , subscriptions received by Kings Club, Delhi were ₹
4,09,000 including ₹ 5,000 for the year ended 31st March, 2017 and ₹ 10,000 for the year ended
31st March , 2019. At the end ₹ 15,000. The subscriptions due but not received at the end of the
previous year, i.e., 31st March, 2017 were ₹ 8,000, while subscriptions received in advance on
the same date were ₹ 18,000.
Calculate amount of subscriptions to be credited to Income and Expenditure Account for the year
ended 31st March, 2018.
Answer:
Statement of Subscription
Page No 7.53:
Question 11:
From the following information, calculate amount of subscriptions to be credited to the Income
and Expenditure Account for the year ended 31st March, 2018:
₹
1st April, 2017 Subscriptions in Arrears 50,000
Subscriptions Received in Advance 30,000
31st March, 2018 Subscriptions in Arrears 25,000
Subscriptions Received in Advance 70,000
Subscriptions received during the year ended 31st March, 2018 - ₹ 3,00,000
Answer:
Statement of Subscription
Page No 7.54:
Question 12:
Calculate amount of subscriptions which will be treated as income for the year ended 31st
March, 2018 for each of the following cases:
Particulars ₹
(i) Subscriptions collected during the year ended 31st March, 2018
2,50,000
Case I. (ii) Subscriptions in arrears for the year ended 31st March, 2018 6,000
(iii) Subscriptions received in advance for the year ended 31st March, 5,000
2019
(i) Subscriptions collected during the year ended 31st March, 2018
49,000
(ii) Subscriptions for the year ended 31st March, 2018 collected in the year
Case II. 3,000
ended 31st March, 2017
2,000
(iii) Subscriptions unpaid for the year ended 31st March, 2018
(i) Subscriptions received during the year ended 31st March, 2018
25,000
(ii) Subscriptions outstanding in the beginning of the year ended 31st
Case III. 3,000
March, 2018
5,000
(iii) Subscriptions not yet collected for the year ended 31st March, 2018
(i) Subscriptions received during the year ended 31st March, 2018 80,000
Case (ii) Subscriptions outstanding in the beginning of the year ended 31st 5,000
IV. March, 2018 8,000
(iii) Subscriptions not yet collected for the year ended 31st March, 2018 2,000
(iv) Subscriptions for the year ended 31st March, 2019 received in
advance
(i) Subscriptions received during the year ended 31st March, 2018 90,000
(ii) Subscriptions outstanding at the end of the year ended 31st March, 5,000
2017 3,000
Case V.
(iii) Subscriptions received in advance on 31st March, 2017 4,000
(iv)Subscriptions received in advance on 31st March, 2018
(v) Subscriptions not yet collected for the year ended 31st March, 2018 6,000
Answer:
Case 1
Statement of Subscription
Case 2
Statement of Subscription
Case 3
Statement of Subscription
Case 4
Statement of Subscription
Case 5
Statement of Subscription
Question 13:
From the following particulars , calculate amount of subscriptions to be credited to the Income
and Expenditure Account for the year ended 31st March, 2018:
₹
(a) Subscriptions in arrears on 31st March
,2017 500
(b) Subscriptions received in advance on 31st March, 2017 for the year ended on 31st March,
2018 1,100
(c) Total Subscriptions received during the year ended 31st March ,
2018 35,400
(including ₹ 400 for the year ended 31st March , 2017, ₹ 1,200 for the year ended
31st March, 2019 and ₹ 300 for the year ended 31st March, 2020)
(d) Subscriptions outstanding for year ended 31st March ,
2018 400
Answer:
Statement of Subscriptions
Page No 7.54:
Question 14:
Receipts and Payments Account of Friends Club showed that ₹ 6,85,000 were received by way
of subscriptions for the year ended on 31st March, 2018.
The additional information was as under :
(a) Subscription outstanding as on 31st March, 2017 were ₹ 65,000 .
(b) Subscription received in advance as on 31st March , 2017 were ₹ 41,000.
(c) Subscription outstanding as on 31st March, 2018 were ₹ 54,000 .
(d) Subscription received in advance as on 31st March , 2018 were ₹ 25,000.
Show how the above information would appear in the final accounts for the year ended on 31st
March, 2018 of Friends Club.
Answer:
Balance Sheet
Balance Sheet
Working Notes:
Amount
Particulars
(₹)
Subscription received during 2017-18 6,85,000
Subscription outstanding in 2017-18 54,000
Subscription received in advance in 2016-17 41,000
Subscription outstanding in 2016-17 (65,000)
Subscription received in advance in 2017-18 (25,000)
Credited to Income and Expenditure Account 6,90,000
Page No 7.55:
Question 15:
How are the following items of subscriptions shown in the Income and Expenditure Account for
the year ended 31st March, 2018 and Balance Sheets as at 31st March, 2017 and 2018 ?
₹
Subscriptions received during the year ended 31st March, 2018 3,58,500
Subscriptions outstanding on 31st March ,2017 30,000
Subscriptions received in Advance on 31st March,2017 22,500
Subscriptions received in Advance on 31st March,2018 13,500
Subscriptions outstanding on 31st March ,2018 37,500
(including ₹ 12,500 for the year ended 31st March, 2017)
Answer:
Balance Sheet
as on March 31, 2017
Amount Amount
Liabilities Assets
(Rs) (Rs)
Subscription received in Subscriptions
2,250 3,000
Advance Outstanding
Balance Sheet
Page No 7.55:
Question 16:
From the following information , calculate amount of subscriptions outstanding for the year
ended 31st March, 2018:
A club has 200 embers each paying an annual subscription of ₹ 1,000 . The Receipts and
Payments Account for the year showed a sum of ₹ 2,05,000 received as subscriptions . The
following additional information is provided :
₹
Subscriptions Outstanding on 31st March, 2017 30,000
Subscriptions Received in Advance on 31st March, 2018 40,000
Subscriptions Received in Advance on 31st March, 2017 14,000
Answer:
Subscriptions Account
Amount Amount
Particulars Particulars
(Rs) (Rs)
Page No 7.55:
Question 17:
On the basis of information given below , calculate the amount of medicines to be debited to the
Income and Expenditure Account of Good Health Hospital for the year ended 31st March, 2018:
Medicines purchased during the year ended 31st March, 2018 were ₹ 60,80,700 .
Answer:
Page No 7.55:
Question 18:
Calculate amount of medicines consumed during the year ended 31st March,
2018: ₹
Opening Stock of
Medicines 1,00,000
Opening Creditors for
Medicines 90,000
Cash purchases of Medicines during the
year 3,00,000
Closing Stock of
Medicines 1,50,000
Closing Creditors for
Medicines 1,30,000
Answer:
Page No 7.55:
Question 19:
Calculate amount to be posted to the Income and Expenditure Account for the year ended 31st
March, 2018:
(i) Amount paid for stationery during the year ended 31st March , 2018 —₹5,400; Stock of
Stationery in Hand on 31st March, 2018 —₹250.
(ii) Stock of Stationery in Hand on 1st April, 2017—₹ 1,500; Payment made for Stationery
during the year ended 31st March, 2018—₹5,400; Stock of Stationery in Hand on 31st March,
2018—₹250.
₹
(iii) Stock of Stationery on 1st April, 2017 1,500
Creditors for Stationery on 1st April, 2017 1,000
Amount paid for Stationery during the year 5,400
Stock of Stationery on 31st March, 2018 250
Answer:
(a)
(b)
(c)
Question 20:
On the basis of the following information, calculate amount that will appear against the term '
Stationery Used' in the Income and Expenditure Account for the year ended 31st March , 2018:
₹
Stock of Stationery as at 1st April, 2017 12,000
Creditors for Stationery as at 1st April, 2017 25,600
Amount paid for Stationery during the year ended 31st March,2018 1,40,000
Stock of Stationery as at 31st March,2018 23,200
Creditors for Stationery as at 31st March,2018 24,000
Answer:
Page No 7.56:
Question 21:
Calculate the amount that will be posted to the income and Expenditure Account for the year
ended 31st March, 2018:
₹
Stock of Stationery on 1st April, 2017 30,000
Creditors for Stationery on 1st April, 2017 20,000
Advances paid for Stationery carried forward from the year ended 31st March, 2017 2,000
Amount paid for Stationery during the year ended 31st March,2018 1,08,000
Stock of Stationery on 31st March,2018 13,000
3,000
Advance paid for Stationery on 31st March,2018
Answer:
Statement of Stationery
Page No 7.56:
Question 22:
How are the following dealt with while preparing the final accounts for the year ended 31st
March , 2018?
Liabilities ₹ Assets ₹
Additional information :
(i) Sports Materials in Hand on 31st March, 2018—₹ 22,000
Answer:
Balance Sheet
1,40,000 1,40,000
Sports Material Consumed = Opening Stock + Purchases – Closing Stock = 8,000 + 1,34,000 –
22,000 = Rs 1,20,000
Page No 7.56:
Question 23:
How are the following dealt with while preparing the final accounts for the year ended 31st
March , 2018?
Additional information :
Answer:
Income and Expenditure Account
Balance Sheet
Balance Sheet
Page No 7.57:
Question 24:
How are the following dealt with while preparing the final accounts of a sports club for the year
ended 31st March , 2018?
Additional information :
Answer:
Balance Sheet
Balance Sheet
Page No 7.57:
Question 25:
From the following information of a Not-for-Profit Organisation, show the 'Sports Materials'
item in the Income and Expenditure Account for the year ended 31st March, 2018 and Balance
Sheets as at 31st March , 2018:
Answer:
Balance Sheet
as on March 2015
Amount Amount
Liabilities Assets
(Rs) (Rs)
Creditors for Sports Materials 9,800 Stock of Sports Materials 6,200
Advance paid for Sports Materials 11,000
Balance Sheet
as on March 2016
Amount Amount
Liabilities Assets
(Rs) (Rs)
Creditors for Sports Materials 7,200 Stock of Spors Materials 4,800
Advance paid for Sports Materials 19,000
Working Note:
Amount
Particulars
(Rs)
Sports Material 1,02,000
Add: Opening Stock 6,200
Less: Closing Stock (4,800)
Less: Creditors in the beginning (9,800)
Add: Creditors at the end 7,200
Less: Advance at the end (19,000)
Add: Advance in the beginning 11,000
92,800
Alternatively, Sports Material consumed can also be calculated as.
Sports Material Consumed = Opening Stock + Purchases – Closing Stock = 6,200 + 91,400 –
4,800 = Rs 92,800
Page No 7.57:
Question 26:
The book value of furniture on 1st April, 2017 is ₹ 60,000. Half of this furniture is sold for ₹
20,000 on 30th September,2017. Depreciation is to be charged on furniture @ 10% p.a.
Calculate loss on sale of furniture . Show how the loss on sale and depreciation on furniture will
be shown in the Income and Expenditure Account for the year ended 31st March, 2018.
Answer:
Furniture Account
Dr. Cr.
Amount Amount
Date Particulars Date Particulars
(Rs) (Rs)
2017 2017
April 01 Balance b/d Sept.30 Depreciation (i) (for 6 Months) 1.500
(i) 30,000 Sept.30 Bank (Sale) (i) 20,000
(ii) 30,000 60,000 Sept.30 Income and Expenditure (Loss on Sale) 8,500
2018
March 31 Depreciation (ii) (for whole year) 3,000
Balance c/d (ii) (30,000 – 3,000) 27,000
60,000 60,000
Working Note:
Amount
Particulars
(Rs)
Book Value of Furniture Sold as on April 01, 2018 30,000
Less: Depreciation (for 6 Months) (3,000 × 10% × 6/12) 1,500
Book Value of Furniture as on Sept. 30, 2017 28,500
Less: Sale Value 20,000
Loss on Sale of Furniture 8,500
Page No 7.58:
Question 27:
Delhi Youth Club has furniture at a value of ₹ 2,20,000 in its book on 31st March, 2017. It sold
old furniture , having book value of ₹ 20,000 as at 1st April , 2017 at a loss of 20% on 31st
December, 2017 . Furniture is to be depreciated @ 10% p.a. Furniture costing ₹ 1,50,000 was
also purchased on 1st October, 2017.
Prepare Furniture Account for the year ended 31st March, 2018.
Answer:
Furniture Account
Dr. Cr.
Amount Amount
Date Particulars Date Particulars
(Rs) (Rs)
2015 2015
Apr. 01 Balance b/d Dec. 31 Depreciation (ii) (for 9 Months) 1,500
(i) 2,00,000 Dec. 31 Bank (Sale (ii)) 14,800
(ii) 20,000 2,20,000 Dec. 31 Income and Expenditure (Loss on Sale) 3,700
Oct. 01 Bank (iii) 1,50,000 2016
Mar. 31 Depreciation
(i) 20,000
(iii) 7,500 (for 6 Months) 27,500
Mar. 31 Balance c/d
(i) 1,80,000
(iii) 1,42,500 3,22,500
3,70,000 3,70,000
Working Note:
Amount
Particulars
(Rs)
Book Value of Furniture (i) as on April 01, 2015 20,000
Less: Depreciation (for 9 Months) [20,000 × 10% × 9/12] (1,500)
Book Value on December 31, 2015 18,500
Less: Loss on Sale of Furniture (18,500 × 20%) (3,700)
Sale Value of Furniture 14,800
Page No 7.58:
Question 28:
In the year ended 31st March, 2018, salaries paid amounted to ₹ 2,04,000. Ascertain the amount
chargeable to the Income and Expenditure Account for the year ended 31st March ,2018 from the
following additional information:
₹
Prepaid Salaries on 31st March, 2017 24,000
Prepaid Salaries on 31st March, 2018 12,000
Outstanding Salaries on 31st March, 2017 18,000
Outstanding Salaries on 31st March, 2018 15,000
Answer:
Statement of Salaries
Page No 7.58:
Question 29:
How are the following items dealt with while preparing Income and Expenditure Account of a
club for the year ended 31st March, 2018?
Locker Rent received during the year ended 31st March, 2018— ₹ 52,000.
Answer:
Page No 7.58:
Question 30:
Prepare Income and Expenditure Account for the year ended 31st March, 2018 from the
following:
RECEIPTS AND PAYMENTS ACCOUNT for the year ended 31st March, 2018
Dr. Cr.
Receipts ₹ Payments ₹
To Balance b/d (cash)
4,80,000
To Subscriptions By Salaries
1,80,000 50,000
To Sale of Investments By Rent
9,00,000 20,000
To Sale of Old By Stationery
2,00,000 3,00,000
Furniture By Defence Bonds
30,000 2,00,000
( Book Value ₹ By Furniture
30,000
40,000) By Bicycles
10,000 2,40,000
To Donations By Balance c/d (Cash)
13,20,000 13,20,000
Answer:
Page No 7.58:
Question 31:
Prepare Income and Expenditure Account from the following Receipts and Payments Account
of Delhi Nursing Society for the year ended 31st March, 2018:
RECEIPTS AND PAYMENTS ACCOUNT for the year ended 31st March, 2018
Dr. Cr.
Receipts ₹ Payments ₹
To Balance b/d (Cash at
Bank) 65,600
By Salaries of Nurses
To Subscriptions 2,01,000 38,000
By Board , Laundry and Domestic Help
To Fees from Non- 1,11,500 20,000
By Rent, Rates and Taxes
members 27,000 2,00,000
By Cost of Car
To Government Grant 1,00,000 84,000
By Expenses of Car
To Donations for Building 1,56,000 67,000
By Drugs and Incidental Expenses
Fund 3,800 1,24,700
By Balance c/d (Cash at Bank)
To Interest
5,99,300 5,99,300
Donation of ₹10,000 received for Building Fund was wrongly included in the Subscriptions
Account . A bill of medicines purchased during the year amounted to ₹12,800 was outstanding .
Government Grant is not for a specific purpose.
Answer:
Page No 7.59:
Question 32:
Following is the Receipts and Payments Account of You Bee Forty Club for the year ended 31st
March, 2018:
RECEIPTS AND PAYMENTS ACCOUNT for the year ended 31st March, 2018
Dr. Cr.
Receipts ₹ Payments ₹
To Balance b/d 1,50,000
1,60,000
(cash) By Salaries and Wages
35,000
To Subscriptions 60,000 By Office Expenses
3,40,000
2016-2017 3,50,000 By Sports Equipments
24,000
2017-2018 50,000 By Telephone Charges
32,000
80,000 By Electricity Charges
65,000
To Donations By Travelling Expenses
34,000
To Entrance Fees By Balance c/d (Cash)
6,90,000 6,90,000
Additional information :
(a) Outstanding Subscriptions for the year ended 31st March, 2018—₹ 55,000.
(b) Outstanding Salaries and Wages—₹ 40,000.
(c) Depreciate Sports Equipments by 25%.
Prepare Income and Expenditure Account of the club from the above particulars.
Answer:
Page No 7.59:
Question 33:
From the following Receipts and Payments Account of Jaipur Sports Club , prepare Income and
Expenditure Account for the year ended 31st March, 2018:
5,80,000 5,80,000
Answer:
Working Notes:
Page No 7.60:
Question 34:
Following is the Receipts and Payments Account of Delhi Football Club for the year ended 31st
March ,2018:
RECEIPTS AND PAYMENTS ACCOUNT for the year ended 31st March , 2018
Dr. Cr.
Receipts ₹ Payments ₹
To Opening Cash 18,000 By Building 4,00,000
By Project Expenses(Young Talent Search
To Donations for Building 4,50,000 90,000
and Development)
To Donations 50,000
To Government Grant
(Young Talent By Match Expenses 90,000
1,00,000
Search and By Match Furniture 1,21,000
Development)
To Life Membership Fees 40,000 By 10% Investments 1,60,000
To Match Fund 80,000 ( Purchased on 1st July,2017)
To Subscriptions 52,000 By Salaries 70,000
To Locker Rent 4,000 By Insurance 3,500
To Interest on Investments 10,000 By Sundry Expenses 4,700
To Sale of Furniture 1,00,000 By Closing Cash 4,800
(Book value ₹ 80,000) By Bank (Young Talent 10,000
To Entrance Fees 50,000 Search and Dev
3,000
9,54,000 9,54,000
Additional Information:
(i) During the year ended 31st March , 2018, the club had 550 members and each paying an
annual subscription of ₹ 100.
(ii) Salaries Outstanding as at 1st April , 2017 were ₹ 10,000 and as at 31st March ,2018 were ₹
5,000.
Prepare Income and Expenditure Account of the Club for the year ended 31st March , 2018.
Answer:
Working Notes:
Page No 7.60:
Question 35:
Following is the information given in respect of certain items of a Sports club . Show these items
in the Income and Expenditure Account and the Balance Sheet of the club as at 31st March ,
2018:
Particulars ₹
Sports Fund as on 1st April, 2017 3,50,000
Sports Fund Investments 3,50,000
Interest on Sports Fund Investments 40,000
Donations for Sports Fund 1,50,000
Sports Prizes awarded 1,00,000
Expenses on Sports Events 40,000
General Fund 8,00,000
General Fund Investments 8,00,000
Interest on General Fund Investment 80,000
Answer:
Balance Sheet
Working Notes:
Amount
Particulars
(₹)
Opening Balance in Sports Fund as on April 01, 2017 3,50,000
Add: Interest on Sports Fund Investments 40,000
Add: Donation for Sports Fund 1,50,000
Less: Sports Prizes Awarded (1,00,000)
Less: Expenses on Sports Events (40,000)
Closing Balance of Sports Fundas on March 31, 2018 4,00,000
Page No 7.61:
Question 36:
Following is the summary of cash transactions of the Royal Club for the year ended 31st March,
2018:
2,64,500 2,64,500
In the beginning of the year , the club possessed Books of ₹ 2,00,000 and Furniture of ₹ 85,000.
Subscriptions in arrears in the beginning of the year amounted to ₹ 3,500 and at the end of the
year ₹ 4,500 and six months Rent ₹ 6,000 was due both in the beginning of the year and at the
end of the year.
Prepare Income and Expenditure Account of the club for the year ended 31st March , 2018 and
ist Balance Sheet as at that date after writing off ₹ 5,000 and ₹ 11,300 on Furniture and books
respectively.
Answer:
Balance Sheet
Balance Sheet
Page No 7.61:
Question 37:
From the following Receipts and Payments Account of City Club and from the information
supplied , prepare Income and Expenditure Account for the year ended 31st March , 2018 and
Balance Sheet as at that date:
RECEIPTS AND PAYMENTS ACCOUNT for the year ended 31st March ,2018
Dr. Cr.
Amount Amount
Receipts Payments
(₹) (₹)
To Balance b/d 7,000 By Salaries 28,000
To Subscriptions: By General Expenses 6,000
2016-17 5,000 By Electricity Charges 4,000
2017-18 20,000 By Books 10,000
2018-19 4,000 29,000 By Newspapers 8,000
To Rent 14,000 By Balance c/d 4,000
(Received from the Use of Hall)
To Profit from Entertainment 8,000
To Sale of Old Newspapers 2,000
60,000 60,000
(a) The club has 50 members each paying an annual subscription of ₹ 500. Subscriptions
Outstanding on 31st March,2017 were ₹ 6,000.
(b) On 31st March, 2018, Salries Outstanding amounted to ₹ 2,000 . Salaries paid in the year
ended 31st March, 2018 included ₹ 6,000 for the year ended 31st March , 2017.
(c) On 1st April , 2017, the club owned Building valued at ₹ 2,00,000; Furniture ₹ 20,000 and
Books ₹ 20,000.
(d) Provide depreciation on Furniture at 10%.
Answer:
Balance Sheet
Balance Sheet
Page No 7.62:
Question 38:
From the following Receipts and Payments Account and additional information given below ,
prepare Income and Expenditure Account and Balance Sheet of Rural Literacy Society as on 31st
March, 2018:
RECEIPTS AND PAYMENTS ACCOUNT for the year ended 31 st March, 2018
Dr. Cr.
Amount Amount
Receipts Payments
(₹) (₹)
To Balance b/d By General Expenses 32,000
Cash in Hand 40,000 By Newspaper 18,500
Cash at Bank 1,55,500 By Electricity 30,000
To Subscriptions: By Fixed Deposit with Bank 1,80,000
2016-17 12,000 (On 30th September, 2017 @ 10%p.a.)
2017-18 2,65,000 By Books 70,000
2018-19 5,000 2,82,000 By Salary 36,000
To Sale of Old Newspaper 12,500 By Rent 65,000
To Government Grant 1,20,000 By Postage Charges 3,000
To Sale of Old Furniture 37,000 By Furniture (purchased) 1,05,000
(Book value ₹50,000) By Balance c/d:
To Interest received on Fixed Deposit 4,500 Cash in Hand 30,000
Cash at Bank 82,000
6,51,500 6,51,500
Additional information:
(i) Subscription outstanding as on 31st March, 2017 ₹ 20,000 and on 31st March, 2018 ₹ 15,000.
(ii) On 31st March , 2018, salary outstanding ₹ 6,000 and one month rent paid in advance.
(iii) On 1st April, 2017, society owned furniture ₹ 1,20,000 and books ₹ 50,000.
Answer:
Balance Sheet
Working Notes
Balance Sheet
Page No 7.62:
Question 39:
Liabilities ₹ Assets ₹
Capital Fund 2,00,000 Sports Equipments 50,000
Tournament Fund 60,000 Grounds 1,20,000
Subscriptions in Advance 6,000 Billiards Table 60,000
Salaries Unpaid 11,000 Subscriptions Outstanding 8,000
Cash and Bank Balances 39,000
2,77,000 2,77,000
The Receipts and Payments Account for the year ended 31st March, 2018 was:
2,99,500 2,99,500
Subscriptions still to be received are ₹ 5,500 but subscriptions already received include ₹ 4,000
for next year. Salaries still unpaid are ₹ 6,000 . Sports Equipments are now valued at ₹ 45,000.
Prepare Income and Expenditure Account and the Balance Sheet , after charging 10%
depreciation on Billiards Tables.
Answer:
Balance Sheet
Page No 7.63:
Question 40:
From the following information relating to the Ganesh Cricket Club, prepare Income and
Expenditure Account for the year ended 31st March, 2018 and Balance Sheet as at that date. The
summary of cash transactions is:
1,96,500 1,96,500
₹
Stock of Bats and Balls 15,000
Printing and Stationery 2,000
Subscription Due 5,000
Subscriptions due on 31st March, 2018 amounted to ₹ 7,500 . Write off 50% of Bats, Balls (not
considering sale ) and 25% of Printing and Stationery.
Answer:
Balance Sheet
Balance Sheet
as on March 31,2018
Amount Amount
Liabilities Assets
(Rs) (Rs)
Subscription for Tournament 10,000 Subscriptions Outstanding 7,500
Less: Tournament Expenses 7,000 3,000 Bats and Balls 15,000
Capital Fund 52000 Add: Purchases 7,000
22,000
Add: Surplus 1,22,250 1,74,250 Less: 50% Written-off 11,000 11,000
Printing and Stationery 2,000
Add: Purchases 1,000
3,000
Less: 25% Written-off 750 2,250
Bank 1,56,500
1,77,250 1,77,250
Page No 7.63:
Question 41:
From the following Receipts and Payments Account of Mumbai Theatre Club, prepare Income
and Expenditure Account for the year ended 31st March, 2018 and Balance Sheet as at that date.
3,37,000 3,37,000
Additional information :
(i) Subscriptions in arrear for the year ended 31st March, 2018 ₹ 9,000 and subscriptions in
advance for the year ended 31st March , 2019 ₹ 3,500.
(ii) Insurance Premium outstanding ₹ 400.
(iii) Miscellaneous expenses prepaid ₹ 900.
(iv) 8% interest has accured oninvestment for five months.
(v) Billiard Table costing ₹ 3,00,000 was purchased during last year and ₹ 2,20,000 were paid for
it.
Answer:
Balance Sheet
Balance Sheet
Page No 7.64:
Question 42:
Following Receipts and Payments Account was prepared from the Cash Book of Delhi
Charitable Trust for the year ending 31st March , 2018:
9,86,000 9,86,000
Prepare Income and Expenditure Account for the year ended 31st March , 2018 , and Balance
Sheet as on that date after the following adjustments:
(i) Insurance premium was paid in advance for three months.
(ii) Interest on investment ₹ 11,000 accrued was not received.
(iii) Rent ₹6,000; Salary ₹9,000 and advertisement expenses ₹ 10,000 outstanding as on 31st
March, 2018.
Answer:
Working Notes
Balance Sheet
Page No 7.64:
Question 43:
Given Below is the Receipts and Payments Account of a Mayur Club for the year ended 31st
March , 2018:
4,71,000 4,71,000
Prepare club's Income and Expenditure Account for the year ended 31st March , 2018 and
Balance Sheet as at that date after taking the following information into account:
(i) There are 500 members, each paying an annual subscription of ₹ 500, ₹ 5,000 are still in
arrears for the year ended 31st March, 2017.
(ii) Municipal Taxes amounted to ₹ 4,000 per year is paid up to 30th June and ₹5,000 are
outstanding of salaries.
(iii) Building stands in the books at ₹ 5,00,000.
(iv) 6% interest has accrued on investments for five months.
Answer:
Balance Sheet
Balance Sheet
Page No 7.65:
Question 44:
From the following information and Receipts and Payments Account of Delhi Medical Society,
prepare Income and Expenditure Account for the year ended 31st March, 2018 and Balance
Sheet as at that date.
4,84,500 4,84,500
Other information:
On 31st March, 2017, the club possessed books of ₹ 2,00,000 and Furniture of ₹ 85,000. Provide
depreciation on these assets @ 10% including the purchases during the year.
Subscriptions in arrears in the beginning of the year amounted to ₹ 3,500 and at the end of the
year ₹ 5,500 were outstanding.
The Club paid three months' rent in advance both in the beginning and at the end of the year.
Answer:
Balance Sheet
Balance Sheet
Working Note:
Page No 7.65:
Question 45:
From the following Receipts and Payments Account of Imran Khan club and from the given
additional information , prepare Income and Expenditure Account for the year ending 31st
December, 2015 and the Balance Sheet as at that date:
RECEIPTS AND PAYMENTS ACCOUNT for the year ended 31st March, 2018
Dr. Cr.
Receipts ₹ Payments ₹
To Balance b/d
3,30,000
To Subscriptions 1,90,000 By Salaries
4,00,000
To Interest on Investment @ 8% p.a. 6,60,000 By Sports Material
1,60,000
for full year 40,000 By Balance c/d
8,90,000 8,90,000
Additional Information:
(i) The club had received ₹ 20,000 for subscription in 2014 for 2015.
(ii) Salaries had been paid onl;y for 11 months
(iii) Stock of sports materials on 31st December , 2014 was ₹ 3,00,000 and on 31st December,
2015 ₹ 6,50,000
Answer:
Balance Sheet
as on December 31,2015
Amount
Liabilities Assets Amount (Rs)
(Rs)
Investments
Outstanding Salaries 30,000 5,00,000
(WN4)
Capital Stock of Sports
9,70,000 6,50,000
Fund Material
Add: Surplus 3,10,000 12,80,000 Cash 1,60,000
13,10,000 13,10,0000
Working Notes:
Amount
Particulars
(Rs)
Sports Material Purchased 4,00,000
Add: Opening Stock of Sports Material 3,00,000
Less: Closing Stock of Sports Material 6,50,000
Balance Sheet
as on January 01,2015
Amount
Amount
Liabilities Assets
(Rs)
(Rs)
Subscription Received in Advance 20,0000 Investments 5,00,000
Capital Fund (Balancing Figure) 9,70,000 Stock of Sports Material 3,00,000
Cash 1,90,000
9,90,000 9,90,0000
Investments = 40,000×1008=5,00,000
Page No 7.66:
Question 46:
From the following particulars relating to the Ramakrishna Mission Charitable Hospital , prepare
Income and Expenditure Account for the year ended 31st March, 2018 and Balance Sheet as at
that date.
RECEIPTS AND PAYMENTS ACCOUNT for the year ended 31st March, 2018
Dr. Cr.
Receipts ₹ Payments ₹
To Cash in Hand on 1st
3,05,900
April, 2017 By Medicines
71,300 90,000
To Subscriptions By Doctor's Honorarium
4,79,960 2,75,000
To Donations By Salaries
1,45,000 4,610
To Interest on Investment By Petty Expenses
1,50,000
@ 7% for full year By Equipments
70,000 7,500
To Proceeds from Charity By Expenses on Charity Show
1,04,500 37,750
Show By Cash in Hand on 31st March, 2018
8,70,760 8,70,760
Additional Information:
Answer:
Balance Sheet
Working Note:
Page No 7.66:
Question 47:
Following is the Receipt and Payment Account of Women's Welfare Club for the year ended
31st March, 2018:
RECEIPTS AND PAYMENTS ACCOUNT for the year ended 31st March, 2018
Dr. Cr.
Receipts ₹ Payments ₹
By Salary
To Cash in Hand 22,500 By Stationery 1,25,000
To Cash at Bank 50,000 By Electric Charges 17,000
To Subscriptions 8,17,500 By Insurance 95,500
To Donations 30,000 By Equipments 75,000
To Government Grant 1,50,000 By Petty Expenses 3,00,000
To Sale of Newspapers 3,000 By Expenses on Charity Show 5,000
To Proceeds of Charity Show 1,65,000 By Newspapers 1,29,000
To Interest on Investments @ 70,000 By Lectures Fee 10,000
10% for full year 4,000 By Honorarium to secretary 1,65,000
To Sundries Income By Cash in Hand 1,20,000
By Cash at Bank 20,500
2,50,000
13,12,000 13,12,000
Prepare Income and Expenditure Account for the year ended 31st March, 2018,and Balance
Sheet as on that date.
Answer:
Balance Sheet
Balance Sheet
Page No 7.67:
Question 48:
Receipts and Payments Account of Shankar Sports Club is given below, for the year ended 31st
March, 2018:
RECEIPTS AND PAYMENTS ACCOUNT for the year ended 31st March, 2018
Dr. Cr.
Receipts ₹ Payments ₹
To Cash in Hand (Opening) 2,600
To Entrance Fee 3,200 By Rent 18,000
To Donation for Building 23,000 By Wages 7,000
To Locker Rent 1,200 By Billiard Table 14,000
To Life Membership Fee 7,000 By Furniture 10,000
To Profit from 3,000 By Interest 2,000
Entertainment 40,000 By Postage 1,000
To Subscription By Salary 24,000
By Cash In Hand (closing) 4,000
80,000 80,000
Prepare Income and Expenditure Account and Balance Sheet with the help of following
information:
Subscription outstanding on 31st March, 2017 is ₹ 1,200 and ₹ 2,300 on 31st March, 2018;
opening stock of postage stamps is ₹ 300 and closing stock is ₹ 200; Rent ₹ 1,500 related to the
year ended 31st March, 2017 and ₹ 1,500 is still unpaid. On 1st April, 2017 the club owned
furniture ₹ 15,000, Furniture valued at ₹ 22,500 on 31st March, 2018. The club has a loan of
₹ 20,000(@ 10% p.a.) which was taken , in year ended 31st March,2017.
Answer:
54,600 54,600
Balance Sheet
Working Notes
Balance Sheet
Note: The total of Closing Balance Sheet in the textbook is Rs 51,500. However, as per the
above solution, the total of Closing Balance Sheet stands at Rs 44,500
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Page No 8.117:
Question 1:
Gopal Ltd. was registered with an authorised capital of ₹ 50,00,000 divided into Equity Shares
of ₹ 100 each . The company offered for public subscription all the shares . Public applied for
45,000 shares and allotment was made to all the applicants. All the calls were made and were
duly received except the final call of ₹ 20 per share on 500 shares.
Prepare the Balance Sheet of the company showing the different types of share capital.
Answer:
Gopal Ltd.
Balance Sheet
Amount
Particulars Note No.
(Rs)
I. Equity and Liabilities
1. Shareholders’ Funds
a. Share Capital 1 44,99,000
2. Non-Current Liabilities
3. Current Liabilities
Total 44,99,000
II. Assets
1. Non-Current Assets
2. Current Assets
a. Cash and Cash Equivalents 2 44,99,000
Total 44,99,000
NOTES TO ACCOUNTS
Amount
Note No. Particulars
(Rs)
1 Share Capital
Page No 8.117:
Question 2:
Himmat Ltd has authorised share capital of ₹ 50,00,000 divided into 5,00,000 Equity Shares
of ₹ 10 each . It has existing issued and paid up capital of ₹ 5,00,000. It further issued to public
1,50,000 Equity Shares at par for subscription payable as under:
On Application: ₹3
On Allotment: ₹ 4 and
The issue was fully subscribed and allotment was made to all the applicants . Call was made
during the year and was duly received.
Show share capital of the company in the Balance Sheet of the Company.
Answer:
1. Shareholders’ Funds
a. Share Capital 1 20,00,000
Total 20,00,000
II. Assets
2. Current Assets
a. Cash and Cash Equivalents
2 20,00,000
Total 20,00,000
Notes to Accounts
Amount
Particulars
(Rs)
1. Share Capital
Page No 8.117:
Question 3:
Lennova Ltd. has authorised share capital of ₹ 1,00,00,000 divided into 1,00,000 Equity Shares
of ₹ 100 each . It has existing issued and paid up capital of ₹ 25,00,000. It further issued to
public 25,000 Equity Shares at a premium of 20% for subscription payable as under:
On Application: ₹ 30
On Allotment: ₹ 60 and
Answer:
1. Shareholders’ Funds
a. Share Capital 1 42,50,000
b. Reserves and Surplus 2 5,00,000
Total 47,50,000
II Assets
2. Current Assets
a. Cash and Cash Equivalents
3 47,50,000
Total 47,50,000
Notes to Accounts
Amount
Particulars
(Rs)
1. Share Capital
Page No 8.117:
Question 4:
A company issued 2,50,000 Equity Shares of ₹ 10 each to public. All amounts have been
received in lump sum. Pass necessary journal entries in the books of the company.
Answer:
Journal
Debit Credit
Rs Rs
Page No 8.117:
Question 5:
The authorised capital of ₹ 16,00,000 of XYZ Ltd. is divide into 1,60,000 Equity Shares of ₹ 10
each. Out of these shares , 80,000 Equity Shares were issued at par to public for subscription .
The full nominal value is payable on application . All the shares were subscribed by the public
and total amount was paid for . Pass necessary journal entries in the books of the company .
Answer:
Journal
Debit Credit
Rs Rs
Page No 8.117:
Question 6:
XYZ Ltd. invited applications for 10,000 shares of ₹ 100 each payable as follows:
₹ 20 on application, ₹ 30 on allotment , ₹ 20 on first call and the balance on final call.
All the shares were applied and allotted . All the money was duly received .
You are required to journalise these transactions .
Answer:
Payable as:
Rs 20 on application
Rs 30 on allotment
Rs 20 on first call
Rs 30 on final call
100
Books of XYZ Limited
Journal
Debit Credit
Rs Rs
Page No 8.117:
Question 7:
Marigold Ltd . was registered with the authorized capital of ₹ 3,00,000 divided into 3,000 shares
of ₹ 100 each, which were offered to the public . Amount payable as ₹ 30 per share on
application , ₹ 40 per share on allotment and ₹ 30 per share on first and final call . These shares
were fully subscribed and all money was dully received . Prepare journal and Cash Book.
Answer:
Journal
Debit Credit
(₹) (₹)
Share Application A/c Dr. 90,000
To Share Capital 90,000
(Share application money transferred)
3,00,000 3,00,000
Page No 8.117:
Question 8:
A company was registered with an authorised capital of ₹10,00,000 divided into 7,500 Equity
Shares of ₹ 100 each and, 2,500 Preference Shares of ₹100 each. 1,000 Equity and 500; 9%
Preference Shares were offered to public on the following terms —Equity Shares payable
₹10 on application, ₹40 on allotment and the balance in two calls of ₹ 25 each. Preference
Shares are payable ₹ 25 on application , ₹ 25 on allotment and ₹50 on first and final call. All the
shares were applied for and allotted . Amount due was duly received . Prepare Cash Book and
pass necessary journal entries to record the above issue of shares and show how the Share
Capital will appear in the Balance Sheet.
Answer:
Authorised Capital:
Issued Capital:
Payable as
Rs 10 on Application
Rs 40 on Allotment
Rs 25 on First Call
Rs 25 on Final Call
Payable as
Rs 25 on application
Rs 25 on allotment
Cash Book
Dr. Cr.
Bank Bank
Date Particulars L.F. Date Particulars L.F.
Rs Rs
1,50,000 1,50,000
Journal
Debit
Credit
Amount
Particulars L.F. Amount
Rs
Rs
Balance Sheet
Amount
Particulars Note No.
(Rs)
I. Equity and Liabilities
1. Shareholders’ Funds
a. Share Capital 1 1,50,000
2. Non-Current Liabilities
3. Current Liabilities
Total 1,50,000
II. Assets
1. Non-Current Assets
2. Current Assets
a. Cash and Cash Equivalents 2 1,50,000
Total 1,50,000
NOTES TO ACCOUNTS
Amount
Note No. Particulars
(Rs)
1 Share Capital
Page No 8.118:
Question 9:
Shiva Ltd . issued 1,00,000 Equity Shares of ₹ 10 each at a premium of ₹ 5 per share . The whole
amount was payable on application. The issue was fully subscribed . Pass necessary Journal
entries.
Answer:
Journal
Debit Credit
Rs Rs
Page No 8.118:
Question 10:
A limited company offered for subscription 10,000 shares of ₹ 25 each , payable ₹ 5 per share on
application , ₹ 10 per share on allotment ( including ₹ 5 per share as premium), ₹ 5 per share as
first call on the shares and the balance in two equal amounts at intervals of three months . All the
shares were applied for and allotted . All the money was received except the second call and final
call on 200 and 400 shares respectively.
You are asked to show the entries in the company 's Journal , Cash Book and the ledger . Also
show the company's Balance Sheet oncompletion of the above transaction.
Answer:
Application Rs 5
Allotment Rs 10 (5 + 5)
First Call Rs 5
Second Call Rs 5
Final Call Rs 5
Rs 30 (25 + 5)
Cash Book
Dr. Cr.
Bank Bank
Date Particulars L.F. Date Particulars L.F.
Rs Rs
2,97,000 2,97,000
Journal
Debit Credit
Rs Rs
at Rs 5 each)
50,000 50,000
1,00,000 1,00,000
50,000 50,000
Calls-in-Arrears 1,000
50,000 50,000
Calls-in-Arrears 2,000
50,000 50,000
Call-in-Arrears Account
Dr. Cr.
Amount Amount
Date Particulars L.F. Date Particulars L.F.
Rs Rs
3,000 3,000
50,000 50,000
As per the Schedule III of Companies Act, 2013, the Company's Balance Sheet is presented as
follows.
Balance Sheet
Amount
Particulars Note No.
(Rs)
I. Equity and Liabilities
1. Shareholders’ Funds
a. Share Capital 1 2,47,000
b. Reserves and Surplus 2 50,000
2. Non-Current Liabilities
3. Current Liabilities
Total 2,97,000
II. Assets
1. Non-Current Assets
2. Current Assets
a. Cash and Cash Equivalents 3 2,97,000
Total 2,97,000
NOTES TO ACCOUNTS
Amount
Note No. Particulars
(Rs)
1 Share Capital
Page No 8.118:
Question 11:
X Ltd., was incorporated with a capital of ₹ 2,00,000 divided into shares of ₹ 10 each . 2,000
shares were offered to the public and out of these , 1,800 shares were applied for and allotted .₹ 3
per share ( including ₹ 1 premium) was payable on application , ₹ 4 per share (including ₹ 1
premium ) on allotment, ₹ 2 per share on first call and v 3 per share on final call . All the money
was received . Give necessary journal entries and the Balance Sheet .
Answer:
Payable as:
Application Rs 3 (2+1)
Allotment Rs 4 (3+1)
First Call Rs 2
Final Call Rs 3
12 (10+2)
Books of X Limited
Journal
Debit Credit
Rs Rs
As per the Schedule III of Companies Act, 2013, the Company's Balance Sheet is presented as
follows.
X Ltd.
Balance Sheet
Amount
Particulars Note No.
(Rs)
I. Equity and Liabilities
1. Shareholders’ Funds
a. Share Capital 1 18,000
b. Reserves and Surplus 2 3,600
2. Non-Current Liabilities
3. Current Liabilities
Total 21,600
II. Assets
1. Non-Current Assets
2. Current Assets
a. Cash and Cash Equivalents 3 21,600
Total 21,600
NOTES TO ACCOUNTS
Amount
Note No. Particulars
(Rs)
1 Share Capital
Page No 8.118:
Question 12:
Authorized capital of Suhani Ltd . is ₹ 45,00,000 divided into 30,000 shares of ₹ 150 each . Out
of these company issued 15,000 shares of ₹ 150 each at a premium of ₹ 10 per share . the
amount was payable as follows:
₹ 50 per share on application , ₹ 40 per share on allotment (including premium ), ₹ 30 per share
on firs t call and balance on final call . Public applied for 14,000 shares. All the money was duly
received .
Prepare an extract of Balance Sheet of Suhani Ltd . as per Schedule III , Part I of the companies
Act, 2013 disclosing the above information . Also prepare 'Notes to Accounts ' for the same.
Answer:
Suhani Ltd.
Balance Sheet
Amount
Particulars Note No.
(Rs)
I. Equity and Liabilities
1. Shareholders’ Funds
a. Share Capital 1 21,00,000
b. Reserves and Surplus 2 1,40,000
2. Non-Current Liabilities
3. Current Liabilities
Total 22,40,000
II. Assets
1. Non-Current Assets
2. Current Assets
a. Cash and Cash Equivalents 3 22,40,000
Total 22,40,000
NOTES TO ACCOUNTS
Amount
Note No. Particulars
(Rs)
1 Share Capital
Page No 8.118:
Question 13:
SRCC Ltd. was registered with a capital of ₹ 25,00,000 in shares of ₹ 10 each. It issued a
prospectus inviting applications for 25,000 shares at 40% premium payabl;e as follows :
On application ₹ 5 (including ₹ 1 premium) , on Allotment ₹ 4 (including ₹ 1 premium) , on first
call ₹ 3 (including ₹ 1 premium) , on second and final call ₹ 2 (including ₹ 1 premium) .
Applications were received for 25,000 shares . All money was duly received . Pass the necessary
Journal entries.
Answer:
Journal
Debit Credit
(Rs) (Rs)
Bank A/c (25,000×5) Dr. 1,25,000
Page No 8.118:
Question 14:
X Ltd. invited application for 10,000 Equity Shares of ₹ 10 each issued at par . The amount was
payable on application . The issue was oversubscribed by 2,000 shares and allotment was made
on pro rata basis. Pass necessary Journal entries.
Answer:
Books of X Limited
Journal
Debit
Credit
Amount
Date Particulars Amount
Rs
Rs
Page No 8.118:
Question 15:
Citizen Watches Ltd. invited applications for 50,000 shares of ₹ 10 each payable ₹ 3 on
application , ₹ 4 on allotment and balance on first and final call . Applications were received for
60,000 shares . Applications were accepted for 50,000 shares and remaining applications were
rejected . All calls were made and received except First and Final call on 500 shares .
Answer:
Journal
Debit Credit
(Rs) (Rs)
Bank A/c (60,000×3) Dr. 1,80,000
(Allotment received)
Page No 8.118:
Question 16:
Answer:
Payable as:
Rs 3 on application
Rs 5 on allotment
8 Called-up
Cash Book
Dr. Cr.
Bank Bank
Date Particulars L.F. Date Particulars L.F.
Rs Rs
1,75,000 1,75,000
Journal
Debit
Credit
Amount
Date Particulars L.F. Amount
Rs
Rs
II. Assets
1. Non-Current
Assets
2. Current Assets
a. Cash and Cash
2 1,60,000
Equivalents
Total 1,60,000
NOTES TO ACCOUNTS
…… shares of Rs 10 each –
Page No 8.118:
Question 17:
Eastern Company Limited , having an authorised capital of ₹ 10,00,000 divided into shares
of ₹ 10 each , issued 50,000 shares at a premium of ₹ 3 per share payable as follows:
₹ 3 per share;
On first call (due three months after allotment )and the balance as when required.
Applications were received for 60,000 shares and the directors allotted the shares as follows:
(i) Applicants for 40,000 shares received in full.
(ii) Applicants for 15,000 shares received an allotment of 8,000 shares.
(iii) Applicants for 5,000 shares received 2,000 shares on allotment , excess money being
returned.
All amounts due on allotment were received.
The first call was made and the money was received except on 100 shares.
Give journal and cash book entries to record these transactions of the company . Also prepare the
Balance Sheet of the company.
Answer:
(₹) (₹)
Share Application A/c Dr. 1,80,000
To Share Capital A/c 1,50,000
To Share Allotment A/c 30,000
(Share Application money for 50,000 shares transferred To Share
Capital Account and the excess money transferred To Share Allotment
Account)
5,49,700 5,49,700
1. Shareholders’ Funds
a. Share Capital 1 3,99,700
b. Reserves and Surplus 2 1,50,000
2. Non–Current Liabilities
3. Current Liabilities
Total 5,49,700
II. Assets
1. Non–Current Assets
2. Current Assets
a. Cash and Cash Equivalents 3 5,49,700
Total 5,49,700
NOTES TO ACCOUNTS
Amount
Note No. Particulars
(₹)
1 Share Capital
Page No 8.119:
Question 18:
X company issued ₹ 10,00,000 shares for subscription of ₹ 100 each at a premium of ₹ 20 per
share payable as:
₹ 10 per share on application,
₹ 40 per share and ₹ 10 premium on allotment, and
₹ 50 per share and ₹ 10 premium on final payment.
Over-payments on application were to be applied towards amount due on allotment and over-
payments on application exceeding amount due on allotment was to be returned. Issue was
oversubscribed to the extent of 13,000 shares . Applicants for 12,000 shares were allotted only
1,000 shares and applicants for 2,000 shares were sent letters of regret. All the money due on
allotment and final call was duly received .
Pass necessary entries in the company 's books to record the above transactions. Also, prepare
company's Balance Sheet on completion of the above transactions.
Answer:
Journal
Debit Credit
Rs Rs
X Ltd.
Balance Sheet
Amount
Particulars Note No.
(Rs)
I. Equity and Liabilities
1. Shareholders’ Funds
a. Share Capital 1 10,00,000
Total 12,00,000
II. Assets
1.Non-Current Assets
2.Current Assets
a. Cash and Cash Equivalents 3 12,00,000
Total 12,00,000
NOTES TO ACCOUNTS
Amount
Note No. Particulars
(Rs)
1 Share Capital
Working Notes:
Money
Money Allotment
transferred Excess
Applied Issued received on due Excess
to Share money
Application Excess money after
Capital adjusted on
Shares Shares @ Rs 50 Allotment
Allotment
@ Rs 10 each each
@ Rs 10 each
60,000
12,000 1,000 1,20,000 10,000 1,10,000 50,000 50,000
(return)
20,000
2,000 NIL 20,000 –
(return)
9,000 9,000 90,000 90,000 – 4,50,000 – –
23,000 10,000 2,30,000 1,00,000 5,00,000 50,000 60,000
Page No 8.119:
Question 19:
Sugandh Ltd. issued 60,000 shares of ₹ 10 each at a premium of ₹ 2 per share payable as ₹ 3 on
application, ₹ 5(including premium) on allotment and the balance on first and final call.
Applications were received for 92,000 shares. The Directors resolved to allot as:
Payable as:
Rs 3 on Application
on Allotment (Including Rs 2
Rs 5
premium)
Rs 4 on First and Final Call
Rs 12 (10 + 2)
Excess money
Money Received Money adjusted Allotment
adjusted on
on Application on Appliction due
Applied Allotted Excess Allotment
@ Rs 3 @ Rs 3 @ Rs 5
@ Rs 5
40,000 30,000 1,20,000 90,000 30,000 1,50,000 30,000
50,000 30,000 1,50,000 90,000 60,000 1,50,000 60,000
2,000 NIL 6,000 – 6,000
(Bank)
Mohan
Sohan
Page No 8.119:
Question 20:
Answer:
Journal
Debit Credit
Date Particulars L.F.
Amount Amount
(Rs) (Rs)
Bank A/c (1,00,000×3) Dr. 3,00,000
Working Notes:
Rs.1,50,000
Rs.50,
000
Less: Amount due but not received on shares of Anupam
1,000
Rs.49,000
Page No 8.119:
Question 21:
The Kalyan Cotton Mills Ltd.was registered on 1st January,2011 with a capital of ₹10,00,000
divided into 1,00,000 shares of ₹ 10 each . The company issued 42,000 shares of which 40,000
shares were taken up by the public and ₹ 1 per share was received with application. On 1st
February , these shares were allotted and ₹ 2 per share was duly received on 28th February as
allotment money. A first call of ₹ 3 per share was made on 1st March and the call money on all
shares with the exception of 100 shares was received . The final call of ₹ 4 per share was made
on 1st June and the amount due, with the exception of 400 shares , was received by 30th June.
Pass necessary journal ands Cash Book entries and prepare the Balance Sheet as at 30th June,
2011.
Answer:
Payable as:
Rs 1 on application
Rs 2 on allotment
Rs 3 on first call
Rs 4 on final call
Books of Kalyan Cotton Mills Ltd.
Cash Book
Dr. Cr.
Bank Bank
Date Particulars L.F. Date Particulars L.F.
Rs Rs
2011 2011
Feb Share
40,000
01 Application
Feb
Share Allotment 80,000
28
May
Share First Call 1,19,700
01
June
Share Final Call 1,58,400 Balance c/d 3,98,100
30
3,98,100 3,98,100
Journal
Debit Credit
Rs Rs
2011
Feb
Share Application A/c Dr. 40,000
01
To Share Capital A/c 40,000
(Share application of 40,000 shares at Re 1 each transferred to
Share Capital Account)
Feb
Share Allotment A/c Dr. 80,000
01
To Share Capital A/c 80,000
May
Calls-in-Arrears A/c Dr. 300
30
To Share First Call A/c 300
June
Share Final Call A/c Dr. 1,60,000
01
To Share Capital A/c 1,60,000
June
Calls-in-Arrears A/c Dr. 1,600
30
To Share Final Call A/c 1,600
As per the Schedule III of Companies Act, 2013, the Company's Balance Sheet is presented as
follows.
1. Shareholders’ Funds
a. Share Capital 1 3,98,100
2. Non-Current Liabilities
3. Current Liabilities
Total 3,98,100
II. Assets
1. Non-Current Assets
2. Current Assets
a. Cash and Cash Equivalents 2 3,98,100
Total 3,98,100
NOTES TO ACCOUNTS
Amount
Note No. Particulars
(Rs)
1 Share Capital
Question 22:
Ghosh Ltd. made the second and final call on its 50,000 Equity Shares @ ₹ 2 per share on 1st
January, 2016. The entire amount was received on 15th January, 2016 except on 100 shares
allotted to Venkat. Pass necessary journal entries for the call money due and received by opening
Calls-in-Arrears Account.
Answer:
Journal
Debit Credit
Rs Rs
2016
Jan.
Share Second and Final Call A/c Dr. 1,00,000
01
To Equity Share Capital A/c 1,00,000
(Share second and final call due on 50,000 shares at Rs 2 per
share)
Jan.
Bank A/c Dr. 99,800
15
Calls-in-Arrears A/c Dr. 200
Page No 8.120:
Question 23:
A Ltd was registered with a capital of ₹ 5,00,000 in shares of ₹ 10 each and issued 20,000 such
shares at a premium of ₹ 2 per share , payable as ₹ 2 per share on application, ₹ 5 per share on
allotment (including premium) and ₹ 2 per share on first call made three months later. All the
money payable on application and allotment was duly received but when the first call was made,
one shareholder paid the entire balance on his holding of 300 shares and another shareholder
holding 1,000 shares failed to pay the first call money.
Pass journal entries to record the above transactions and show how they will appear in the
company's Balance Sheet.
Answer:
Application Rs 2
Allotment Rs 5 (3+2)
First Call Rs 2
Called-up Rs 9 (7+2)
Books of A Ltd.
Journal
Debit Credit
Rs Rs
As per the Schedule III of Companies Act, 2013, the Company's Balance Sheet is presented as
follows.
A Ltd.
Balance Sheet
Amount
Particulars Note No.
(Rs)
I. Equity and Liabilities
1. Shareholders’ Funds
a. Share Capital 1 1,38,000
b. Reserves and Surplus 2 40,000
2. Non-Current Liabilities
3. Current Liabilities
a. Other Current Liabilities 3 900
Total 1,78,900
II. Assets
1. Non-Current Assets
2. Current Assets
a. Cash and Cash Equivalents 4 1,78,900
Total 1,78,900
NOTES TO ACCOUNTS
Amount
Note No. Particulars
(Rs)
1 Share Capital
Calls-in-Advance 900
Page No 8.120:
Question 24:
XYZ Ltd.issued 8,000 Equity Shares of ₹ 10 each. ₹ 5 per share was called, payable ₹ 2 on
application , ₹ 1 on allotment , ₹ 1 on first call and ₹ 1 on second call. All the money was duly
received with the following exceptions:
A who holds 250 shares paid nothing after application.
B who holds 500 shares paid nothing after allotment.
C who holds 1,250 shares paid nothing after first call.
Prepare journal and the Balance Sheet .
Answer:
Journal
Debit Credit
Amount Amount
Date Particulars L.F.
Rs Rs
As per the Schedule III of Companies Act, 2013, the Company's Balance Sheet is presented as
follows.
XYZ Ltd.
Balance Sheet
Amount
Particulars Note No.
(Rs)
I. Equity and Liabilities
1. Shareholders’ Funds
a. Share Capital 1 37,000
2. Non-Current Liabilities
3. Current Liabilities
Total 37,000
II. Assets
1. Non-Current Assets
2. Current Assets
a. Cash and Cash Equivalents 2 37,000
Total 37,000
NOTES TO ACCOUNTS
Amount
Note No. Particulars
(Rs)
1 Share Capital
Page No 8.120:
Question 25:
Bharat Ltd made the first call of ₹ 2 per share on its 1,00,000 Equity Shares on 1st March , 2006.
Ashok, a shareholder, holding 800 shares paid the second and final call amount along with the
first call money. The second and final call amount was ₹ 3 per share. Pass necessary journal
entries for recording the above using the Calls-in Advance Account.
Answer:
Journal
Debit Credit
Rs Rs
2006
Mar
Bank A/c Dr. 2,02,400
01
To Equity Share First Call A/c 2,00,000
Page No 8.120:
Question 26:
2,000 Equity Shares of ₹ 10 each were issued to Limited from whom assets of ₹ 25,000 were
acquired .
Pass Journal entry.
Answer:
Journal
Debit Credit
Rs Rs
To X Ltd. 25,000
Page No 8.120:
Question 27:
A limited company issued 800 Equity Shares of ₹ 100 each at a premium of 25% as fully paid-up
in consideration of the purchase of plant and machinery of ₹ 1,00,000.
Pass entries in company's journal
Answer:
Journal
Debit Credit
(Rs) (Rs)
Plant & Machinery A/c Dr. 1,00,000
Page No 8.120:
Question 28:
Rajan Ltd . purchased assets from Geeta & Co . for ₹ 5,00,000. A sum of ₹ 1,00,000 was paid by
means of a bank draft and for the balance due Rajan Ltd. issued equity Shares of ₹ 10 each at a
premium of 25%. journalise the above transactions in the books of the company.
Answer:
Journal
Debit Credit
Rs Rs
Working Note-
Page No 8.120:
Question 29:
Z Ltd . purchased furniture costing ₹ 2,20,000 from C.D Ltd. The payment was to be made by
issue of 9% Preference Shares of ₹ 100 each ata premium of ₹ 10 per share . Pass necessary
Journal entries in the books of Z Ltd.
Answer:
Books of Z Ltd.
Journal
Debit Credit
Amount Amount
Date Particulars L.F.
Rs Rs
Working Note:
Page No 8.120:
Question 30:
Goodluck Ltd purchased machinery costing ₹ 10,00,000 from Fair Deals Ltd. The company paid
the price by issue of Equity Shares of ₹ 10 each at a premium of 25%.
Pass necessary Journal entries for the above transactions in the books of Goodluck Ltd.
Answer:
Journal
Debit Credit
Rs Rs
Working Note:
Page No 8.120:
Question 31:
Jain Ltd purchased machinery costing ₹ 10,00,000 from Ayer Ltd. 50% of the payment was
made by cheque and for the remaining 50% , the company issued Equity Shares of ₹ 100 each at
a premium of 25% . Pass necessary Journal entries in the books of Jain Ltd . for the above
transaction.
Answer:
Journal
Debit Credit
Rs Rs
Working Note-
Page No 8.120:
Question 32:
Sona Ltd. purchased machinery costing ₹ 17,00,000 from Mona Ltd. Sona Ltd. paid 20% of the
amount by cheque and for the balance amount issued Equity Shares of ₹ 100 each at a premium
of 25% . Pass necessary Journal entries for the above transactions in the books of Sona Ltd
.Show your working notes clearly.
Answer:
Journal
In the Books of Sona Ltd.
Debit Credit
(Rs) (Rs)
Working Notes: *
Page No 8.120:
Question 33:
Light Lamps Ltd. issued 50,000 shares of ₹ 10 each as fully paid-up to the promoters for their
services to set-up the company . It also issued 2,000 shares of ₹ 10 each credited as fully paid-up
to the underwriters of shares for their services . journalise these transactions.
Answer:
Journal
Debit Credit
Date Particulars L.F.
Amount Amount
(Rs) (Rs)
Page No 8.121:
Question 34:
Better Prospect Ltd. acquired land costing ₹ 1,00,000 and in payment allotted 1,000 Equity
Shares of ₹ 100 each as fully paid. Further, the company issued 4,000 Equity Shares to public .
The shares were payable as: ₹ 30 on application ; ₹ 30 on allotment; ₹ 40 on first and final call.
Applications were received for all shares which were allotted . All the money was received
except the call on 200 shares.
Pass journal entries and prepare Balance Sheet of the company.
Answer:
Rs 30 on application
Rs 30 on allotment
Rs 40 first and final call
Rs 100 Called-up
Books of Better Prospect Ltd.
Journal
Debit Credit
Amount Amount
Date Particulars L.F.
Rs Rs
To Vendor 1,00,000
As per the Schedule III of Companies Act, 2013, the Company's Balance Sheet is presented as
follows.
1. Shareholders’ Funds
a. Share Capital 1 4,92,000
2. Non-Current Liabilities
3. Current Liabilities
Total 4,92,000
II. Assets
1. Non-Current Assets
a. Fixed Assets
i. Tangible Assets 2 1,00,000
2. Current Assets
a. Cash and Cash Equivalents 3 3,92,000
Total 4,92,000
NOTES TO ACCOUNTS
Amount
Note No. Particulars
(Rs)
1 Share Capital
1,000 shares of Rs 100 each (for consideration other than cash) 1,00,000
2 Tangible Assets
Land 1,00,000
3 Cash and Cash Equivalents
Page No 8.121:
Question 35:
A company issued 30,000 fully paid-up shares of ₹ 100 each for purchase of the following assets
and liabilities from Sharma Co:
Answer:
Journal Entries
Debit Credit
Rs Rs
Page No 8.121:
Question 36:
A company purchased a running business from M/s. Rai Brothers for a sum
of ₹ 15,00,000 payable ₹ 12,00,000 in fully paid shares of ₹ 10 each and balance through
cheque.
The assets and liabilities consisted of the following:
You are required to pass necessary journal entries in the company's books.
Answer:
Journal
Debit Credit
Rs Rs
Page No 8.121:
Question 37:
Sandesh Ltd. took over the assets of ₹ 7,00,000 and liabilities of ₹ 2,00,000 from Sanchar Ltd.
for a purchase consideration of ₹ 4,59,500. ₹ 8,500 were paid by accepting a draft in favour of
Sanchar Ltd. payable after three months and the balance was paid by issue of equity shares of ₹
10 each at a premium of 10% in favour of Sanchar Ltd.
Pass necessary journal entries for the above transactions in the books of Sandesh Ltd.
Answer:
Sandesh Ltd.
Journal
Debit Credit
(Rs) (Rs)
(i) Sundry Assets A/c Dr. 7,00,000
Working Notes:
WN1: Calculation of Number of Equity Shares
Page No 8.121:
Question 38:
Z Ltd. issued 20,000 Equity Shares of ₹ 10 each at par payable: On application ₹ 2 per share; on
allotment ₹ 3 per share; on first call ₹ 3 per share; on second and final call ₹ 2 per share .
Mr Gupta was allotted 100 shares . Pass necessary journal entry relating to the forfeiture of
shares in each of the following alternative cases:
Case I If Mr Gupta failed to pay the allotment money and his shares were forfeited.
Case II If Mr Gupta failed to pay allotment money and on his subsequent failure to pay the
first call , his shares were forfeited.
Case III If Mr Gupta failed to pay the first call and on his subsequent failure to pay the second
and final call, his shares were forfeited.
Answer:
Application Rs 2
Allotment Rs 3
First Call Rs 3
Final Call Rs 2
10
Journal
Credit
Debit
Amount
Date Particulars L.F. Amount
Rs
Rs
Page No 8.121:
Question 39:
A Co Ltd. was registered with a nominal capital of ₹ 1,00,000 in Equity Shares of ₹ 10 each. It
offered to the public 6,000 shares for subscription . The applications were received for 8,000
shares. The Directors rejected applications for 1,000 shares and returned the money received
thereon. The application money received on the other 1,000 shares was adjusted towards
allotment money. The amount payable on shares was: ₹ 2 per share on application, ₹ 4 per share
on allotment and the balance on first call . One shareholders holding 100 shares failed to pay the
first call money and as a result his shares were forfeited .
Pass necessary journal entries and prepare Cash Book to record the above transactions.
Answer:
Cash Book
Dr. Cr.
Bank
Date Particulars Bank Rs Date Particulars
Rs
Equity Share
Equity Share Application 16,000 2,000
Application
Equity Share Allotment 22,000
Equity Share First and Final
23,600 Balance c/d 59,600
Call
61,600 61,600
Journal
Debit Credit
Rs Rs
Page No 8.122:
Question 40:
U.P. Sugar Works Ltd . was registered on 1st January, 2014 with an authorised capital of ₹
15,00,000 divided into 15,000 shares of ₹ 100 each. The company issued on 1st April, 2014,
5,000 shares of ₹ 100 each at a premium of ₹ 5 per share payable ₹ 25 per share on application
, ₹ 30(including premium) on allotment and the balance in two equal installments of ₹ 25 each
on 1st July ad 1st October respectively .All the allotments and call moneys were paid when due ,
except in case of one shareholder who failed to pay the final call on 100 shares held by him . His
shares were forfeited on 1st November after giving him a due notice . Show necessary entries in
the books of the company to record these transactions.
Answer:
Application = Rs 25
Allotment = Rs 30 (25+5)
First Call = Rs 25
Final Call = Rs 25
105 (100+5)
Books of U.P. Sugar Works Limited
Journal
Debit Credit
Date Particulars L.F.
Amount Amount
Rs Rs
2014
Page No 8.122:
Question 41:
A company issued 10,000 Equity Shares of ₹ 10 each at a premium of ₹ 3 per share payable ₹ 5
on application, ₹ 5 (including premium) on allotment and the balance on first call . All the shares
offered were applied for and allotted. All the money due on allotment was received except on
200 shares. Call was made. All the amount due thereon was received except on 300 shares.
Directors forfeited 200 shares on which both allotment and call money were not received.
Pass necessary journal entries to record the above.
Answer:
Issued and Applied 10,000 Shares at Rs 10 each at a premium of Rs 3 per share
Application Rs 5
Allotment Rs 5 (2+3)
First and Final
Rs 3
Call
Rs 13 (10+3) Called-up
Journal
Debit Credit
Rs Rs
Page No 8.122:
Question 42:
Answer:
Journal
Debit Credit
Rs Rs
Working Note
Page No 8.122:
Question 43:
X Ltd. forfeited 900 Equity Shares of ₹ 100 each for the non-payment of allotment money of ₹
30 per share and the first call of ₹ 20 per share. The second and final call of ₹ 25 per share has
not been made . The forfeited shares were reissued for ₹ 90 per share , ₹ 75 paid-up. Journalise
the above.
Answer:
First Call 20
Final Call 25 Un-called
100
Books of X Limited
Journal
Debit Credit
Amount Amount
Date Particulars L.F.
Rs Rs
Working Notes-
Page No 8.122:
Question 44:
The Directors of M Ltd resolved on 1st May, 2015 that 2,000 Equity Shares of ₹ 10 each , ₹ 7.50
paid be forfeited for non-payment of final call of ₹ 2.50 . On 10th June, 2015, 1,800 of these
shares were reissued for ₹ 6 per share . Give necessary Journal entries .
Answer:
Books of M Limited
Journal
Debit
Credit
Amount
Date Particulars L.F. Amount
Rs
Rs
2012
May
Equity Share Capital A/c Dr. 20,000
01
To Share Forfeiture A/c 15,000
June
Bank A/c Dr. 10,800
10
Share Forfeiture A/c Dr. 7,200
Working Notes:
Capital Reserve = No. of Shares reissued × Balance in Share Forfeiture Account after reissue
(per share)
= Rs 6,300
Page No 8.122:
Question 45:
Super Star Ltd. makes an issue of 10,000 Equity Shares of ₹ 100 each, payable as:
Members holding 400 shares did not pay the second and final call and the shares are duly
forfeited, 200 of which are reissued as fully paid-up @₹ 50 per share. Pass journal entries in the
books of the company.
Answer:
Journal
Debit Credit
Rs Rs
Working Note-
Capital Reserve = Balance in Share Forfeiture Account for re-issued shares × Number of Share
reissued
= Rs 25 × 200 = Rs 5,000
Page No 8.122:
Question 46:
A company issued 20,000 shares of ₹ 100 each payable ₹ 25 per share on application , ₹ 25 per
share on allotment and the balance in two calls of ₹ 25 each. The company did not make the
final call of ₹ 25 per share. All the money was duly received with the exception of the amount
due on the first call on 400 shares held by Mr. Modi. The Board of Directors forfeited these
shares and subsequently reissued them @ ₹ 75 per share paid-up for a sum of ₹ 28,000.
journalise the above transactions and prepare Share Capital Account .
Answer:
Payable as:
Application Rs 25
Allotment Rs 25
First Call Rs 25
Called-up Rs 75 per share
Final Call Rs 25
Bank 28,000
15,30,000 15,30,000
Working Note-
= Rs 18,000
Page No 8.122:
Question 47:
The Hindustan Manufacturing Ltd. had a total subscribed capital of ₹ 10,00,000 in Equity Shares
of ₹ 10 each of which ₹ 7.50 were called-up. A final call of ₹ 2.50 was made and all amount paid
except two calls of ₹ 2.50 each in respect of 100 shares held by D . These shares were forfeited
and reissued at ₹ 8 per share .
Pass necessary journal entries (including that of cash) to record the transactions of final call ,
forfeiture of shares and reissue of forfeited shares . Also, prepare the Balance Sheet of
the company.
Answer:
Rs Rs
Equity Share Final Call A/c Dr. 2,50,000
As per the Schedule III of Companies Act, 2013, the Company's Balance Sheet is presented as
follows.
Hindustan Manufacturing Ltd.
Balance Sheet
Amount
Particulars Note No.
(Rs)
I. Equity and Liabilities
1. Shareholders’ Funds
a. Share Capital 1 10,00,000
b. Reserves and Surplus 2 300
2. Non-Current Liabilities
3. Current Liabilities
Total 10,00,300
II. Assets
1. Non-Current Assets
2. Current Assets
a. Cash and Cash Equivalents 3 10,00,300
Total 10,00,300
NOTES TO ACCOUNTS
Amount
Note No. Particulars
(Rs)
1 Share Capital
Working Notes:
Page No 8.123:
Question 48:
On 1st May,2014, Directors of a Limited Company forfeited 200 shares of ₹ 20 each , ₹ 15 per
share called-up, on which ₹ 10 per share has been paid by A , the amount of the first call of ₹ 5
per share being unpaid . Ten days Later, the Directors reissued the forfeited shares to B credited
as ₹ 15 per share paid-up , for a payment of ₹ 10 per share.
Give journal entries in the company's books to record the forfeited shares and their reissue.
Answer:
Journal Entries
Debit Credit
Rs Rs
2014
May
Share Capital A/c (15 × 200) Dr. 3,000
01
To Share Forfeiture A/c (10 × 200) 2,000
May
Bank A/c (10 × 200) Dr. 2,000
11
Share Forfeiture A/c (5 × 200) Dr. 1,000
May
Share Forfeiture A/c Dr. 1,000
11
To Capital Reserve A/c 1,000
(Balance in share forfeiture after re-issue transferred to Capital
Reserve)
Working Note-
Page No 8.123:
Question 49:
X Ltd . forfeited 100 shares of ₹ 10 each (₹ 8 called-up) issued at a premium of ₹ 2 per share to
Mr. R, on which he had paid applications money of ₹ 5 per share , for non-payment of allotment
money of ₹ 5 per share (including premium). Out of these, 70 shares were reissued to Mr .
Sanjay as ₹ 8 called-up for ₹ 7 per share. Give necessary journal entries relating to forfeiture and
reissue of shares.
Answer:
Books of X Limited
Journal
Debit Credit
Rs Rs
Working Note-
Share Forfeiture Credit 5 per share
Less: Share Forfeiture Debit 1 per share
Balance in Share Forfeiture of re-issued shares 4 per share
Capital Reserve = Balance in Share Forfeiture Account of re-issued shares × No. of shares re-
issued
= 70 × 4
= Rs 280
Page No 8.123:
Question 50:
A Limited Company forfeited 100 Equity Shares of the face value of ₹ 10 each, ₹ 6 per share
called-up, for non-payment of first call of ₹ 2 per share . The forfeited shares were subsequently
reissued as fully paid-up @ ₹ 7 each.
Give necessary entries in the company's journal.
Answer:
Journal
Debit Credit
Rs Rs
Working Note-
Page No 8.123:
Question 51:
Answer:
Rs Rs
2010
Jan.
Equity Share Capital A/c Dr. 1,000
01
To Share Forfeiture A/c 800
Feb.
Bank A/c Dr. 420
01
Share Forfeiture A/c Dr. 180
Working Note:
General Reserve = Balance in Share Forfeiture after re-issue (per share) × No. of shares reissued
= Rs 5 × 60
= Rs 300
(ii) Book of Virender Limited
Journal
Debit Credit
Rs Rs
Working Note:
= Rs 5 × 15 Shares
= Rs 75
Page No 8.123:
Question 52:
Show the forfeiture and reissue entries under each of the following cases:
(i) X Ltd. forfeited 300 shares of ₹ 10 each, ₹ 8 called-up held by Mr . A for non-payment of
second call money of ₹ 3 per share. These shares were reissued to Mr. Z for ₹ 10 per share as
fully paid-up.
(ii) Y Ltd. forfeited 400 shares of ₹ 10 each, fully called-up , held by Mr. B for non-payment of
final call money of ₹ 4 per share . These shares were reissued to Mr. T at ₹ 12 per share as fully
paid-up.
(iii) Z Ltd. forfeited 250 shares of ₹ 10 each, fully called-up held by Mr. C for non-payment of
allotment @ ₹ 8 per share as fully paid-up to Mr.P.
Answer:
Books of X Limited
(i)
Journal
Debit Credit
Rs Rs
Working Notes-
= Rs 1,500
Books of Y Limited
(ii)
Journal
Debit Credit
Rs Rs
Working Notes-
= Rs 2,400
Books of Z Limited
(iii)
Journal
Debit Credit
Rs Rs
Working Notes-
Page No 8.123:
Question 53:
Record the journal entries for forfeiture and reissue of shares in the following cases:
(i) X Ltd. forfeited 20 shares of ₹ 10 each, ₹ 7 called-up on which the shareholder had paid
application and allotment money of ₹ 5 per share . Out of these, 15 shares were reissued to
Naresh as ₹ 7 per share paid-up for ₹ 8 per share.
(ii) Y Ltd. forfeited 90 shares of ₹ 10 each, ₹ 8 called-up issued at a premium of ₹ 2 per share to
'R' for non-payment of allotment money of ₹ 5 per share (including premium) . Out of these , 80
shares were reissued to Sanjay as ₹ 8 called-up for ₹ 10 per share.
Answer:
Journal
Credit
Debit
Date Particulars L.F. Amount
Amount Rs
Rs
(i) Share Capital A/c (20 Shares × 7) Dr. 140
Working Notes-
Note 1
Note 2
Page No 8.123:
Question 54:
Star Ltd. forfeited 500 Equity Shares of ₹ 100 each for non-payment of first call of ₹ 30 per share
. The final call of ₹ 10 per share was not yet made. Out of these, 60% shares were reissued for ₹
39,000 fully paid. journalise the forfeiture and reissue of shares.
Answer:
Journal
Debit Credit
(Rs) (Rs)
Equity Share Capital A/c (500×90) Dr. 45,000
Working Note:
= 30,000×300500=18,000
Page No 8.123:
Question 55:
A holds 100 shares of ₹ 10 each on which he has paid ₹ 1 per share on application.
B holds 200 shares of ₹ 10 each on which he has paid ₹ 1 and ₹ 2 per share on application and
allotment respectively.
C holds 300 shares of ₹ 10 each and has paid ₹ 1 on application, ₹ 2 on allotment and ₹ 3 on first
call. They all fail to pay their arrears and the second call of ₹ 2 per share . Shares are forfeited
and subsequently reissued @ ₹ 11 per share as fully paid-up.
journalise the above.
Answer:
Application Rs 1
Allotment Rs 2
First Call Rs 3
Second
Rs 2
Call
Rs 8 Called-up
Journal Entries
Debit Credit
Rs Rs
Forfeiture of Shares
Shares of A
Shares of B
Shares of C
Working Note:
Total Share Forfeiture (at the time of cancellation of shares) = Rs 2,500 Cr.
Less: Total Share Forfeiture (at the time of re-issue of shares) = (NIL) Dr.
Page No 8.124:
Question 56:
A Ltd. company with registered capital of ₹ 5,00,000 in shares of ₹ 10 each issued 20,000 of such
shares payable ₹ 2 on application , ₹ 4 on allotment , ₹ 2 on final call . All the money payable on
allotment was duly received but on the first call being made, one shareholder paid the entire
balance on his holding of 300 shares and five shareholders with a total holding of 1,000 shares
failed to pay their dues on the first call. These shares were forfeited for non-payment of first call
money . Final call was made and all the money due was received . Later on, forfeited shares
were reissued @ ₹ 6 per share as fully paid-up.
Record the above in the company's journal and prepare the Balance Sheet.
Answer:
Amount payable as
Application Rs 2
Allotment Rs 4
First Call Rs 2
Final Call Rs 2
10
Journal
Debit Credit
Rs Rs
As per the Schedule III of Companies Act, 2013, the Company's Balance Sheet is presented as
follows.
A Ltd.
Balance Sheet
Amount
Particulars Note No.
(Rs)
I. Equity and Liabilities
1. Shareholders’ Funds
a. Share Capital 1 2,00,000
b. Reserves and Surplus 2 2,000
2. Non-Current Liabilities
3. Current Liabilities
Total 2,02,000
II. Assets
1. Non-Current Assets
2. Current Assets
a. Cash and Cash Equivalents 3 2,02,000
Total 2,02,000
NOTES TO ACCOUNTS
Amount
Note No. Particulars
(Rs)
1 Share Capital
Working Notes:
Page No 8.124:
Question 57:
New Company Ltd. has a nominal capital of ₹ 2,50,000 in shares of ₹ 10. Of these, 4,000 shares
were issued as fully paid in payment of building purchased , 8,000 shares were subscribed by the
public and during the first year ₹ 5 per share were called-up, payable ₹ 2 on application , ₹ 1 on
allotment, ₹ 1 on first call and ₹ 1 on second call . The amounts received in respect of these
shares were:
The Directors forfeited the 750 shares on which less than ₹ 4 had been paid . The shares were
subsequently reissued at ₹ 3 per share .
Pass journal entries recording the above transactions and prepare the company's Balance Sheet.
Answer:
Issued Capital:
Journal
Debit Credit
Rs Rs
To Vendor 40,000
(Building purchased)
As per the Schedule III of Companies Act, 2013, the Company's Balance Sheet is presented as
follows.
1. Shareholders’ Funds
a. Share Capital 1 78,750
b. Reserves and Surplus 2 500
2. Non-Current Liabilities
3. Current Liabilities
Total 79,250
II. Assets
1. Non-Current Assets
a. Fixed Assets
i. Tangible Assets 3 40,000
2. Current Assets
a. Cash and Cash Equivalents 4 39,250
Total 79,250
NOTES TO ACCOUNTS
Amount
Note No. Particulars
(Rs)
1 Share Capital
3 Tangible Assets
Building 40,000
Working Notes:
1.
Share Forfeiture of 250 shares (on which Rs 2 per share paid) Rs 500 Cr.
Share Forfeiture of 500 shares (on which Rs 3 per share paid) Rs 1,500 Cr.
Total Share Forfeiture credit (on 750 shares) Rs 2,000
Page No 8.124:
Question 58:
X Ltd. invited applications for 10,000 Equity Shares of ₹ 10 each for public subscription. The
amount of these shares was payable as:
On application ₹ 1 per share, on allotment ₹ 2 per share , on first call ₹ 3 per share and on second
and final call ₹ 4 per share.
All sums payable on application, allotment and calls were duly received with the following
exceptions:
(i) A, who held 200 shares, failed to pay the money on allotments and calls.
(ii) B, to whom 150 shares were allotted, failed to pay the money on first call and final call.
(iii) C, who held 50 shares , did not pay the amount of second and final call.
The shares of A,B and C were forfeited and were subsequently reissued for cash as fully paid-up
at a discount of 5%.
Pass necessary journal entries to record these transactions in the books of X Ltd.
Answer:
Paid-up
A B C
Shares
Application Rs 1 (10,000 = 10,000)
Journal
Debit Credit
Rs Rs
Working Note:
Less: Total Share Forfeiture (at the time of re-issue of shares) = Rs (200)
Page No 8.124:
Question 59:
Answer:
Journal
Debit Credit
Rs Rs
To Calls-In-Arrears A/c 20
(A share of Rs 100 on which Rs 70 called excluding the amount of
securities premium Rs 10, forfeited for non-payment of Rs 20)
Page No 8.124:
Question 60:
M Ltd forfeited 200 Equity Shares of ₹10 each , issued at a premium of ₹ 5 per share , held by
Ram for non-payment of the final call of ₹ 3 per share . Of these , 100 shares were reissued to
Vishu at a discount of ₹ 4 per share .
Answer:
Journal
Debit Credit
Rs Rs
Working Note-
Capital Reserve = Balance in Share Forfeiture after re-issue × No. of shares re-issued
= Re 3 × 100 shares
= Rs 300
Page No 8.124:
Question 61:
VT Ltd forfeited 200 shares of ₹ 10 each , issued at a premium of ₹ 5 per share , held by Mohan
for non-payment of the final call of ₹ 3 per share . 100 out of these shares were reissued to
Narendra at a discount of ₹ 4 per share . Journalise.
Answer:
Books of VT Limited
Journal
Debit Credit
Rs Rs
Working Notes:
= Rs 300
Page No 8.124:
Question 62:
The Directors of a company forfeited 300 shares of ₹ 10 each issued at a premium of ₹ 3 per
share , for the non-payment of the first call money of ₹ 2 per share . The final call of ₹ 2 per
share has not been made. Half the forfeited shares were reissued at ₹ 1,500 as fully paid-up.
Record the journal entries for the forfeiture and reissue of shares.
Answer:
Journal Entries
Debit Credit
Rs Rs
Working Notes
= Rs 6 × 150
= Rs 900
Page No 8.125:
Question 63:
JCV Ltd., forfeited 200 shares of ₹ 10 each issued at a premium of ₹ 2 per share for the non-
payment of allotment money of ₹ 3 per share (including premium). The first and final call of ₹ 4
per share has not been made as yet . 50% of the forfeited shares were reissued at ₹ 8 per share as
fully paid-up . Pass necessary Journal entries for the forfeiture and reissue of shares.
Answer:
Application Rs 5
Allotment Rs 3 (1+2)
First and Final Call Rs 4
12 (10+2)
= Rs 5 + 3 (including premium Rs 2)
Journal
Debit Credit
Rs Rs
Working Note
Capital Reserve
Page No 8.125:
Question 64:
Pass necessary journal entries in the books of the company for the following transactions:
Vishesh Ltd. forfeited 1,000 Equity Shares of ₹ 10 each issued at a premium of ₹ 2 per share for
non-payment of allotment money of ₹ 5 per share including premium. The final call of ₹ 2 per
share was not yet called on these shares. Of the forfeited shares 800 shares were reissued at ₹ 12
per share as fully paid-up.
The remaining shares were reissued at ₹ 11 per share fully paid-up.
Answer:
Journal
In the books of Vishesh Ltd.
Debit
Credit
Amount
Date Particulars L.F. Amount
Rs
Rs
Equity Share Capital A/c (8×1,000) Dr. 8,000
To Calls-in-Arrears 5,000
(1,000 shares of Rs 10 each issued at premium of Rs 2
forfeited for non payment of allotment money of Rs 5
including premium, final call of Rs 2 not yet made)
Page No 8.125:
Question 65:
150 shares of ₹ 10 each issued at a premium of ₹ 4 per share payable with allotment were
forfeited for non-payment of allotment money of ₹ 8 per share including premium. The first and
final call of ₹ 4 per Pass Journal entries in the books of X Ltd. for the above.
Answer:
Debit Credit
(₹) (₹)
Share Capital A/c Dr. 900
Securities Premium A/c Dr. 600
To Share Allotment A/c 1,200
To Share Forfeiture A/c 300
(150 shares of Rs 10 each forfeited for non–payment of allotment
money of Rs 8 per share including premium of Rs 4 per share)
Page No 8.125:
Question 66:
Commence Publications Ltd. issued 50,000 Equity Shares of ₹ 10 each at a premium of 10%
payable as under:
The calls were made by the company and all the money was duly received except the allotment
and call money on 500 shares. These shares were, therefore, forfeited and later reissued @ ₹ 9
per share as fully paid-up.
Pass necessary journal entries to record the above transactions.
Answer:
Application Rs 2
Allotment Rs 5 (4+1)
First Call Rs 2
Final Call Rs 2
Rs 11 (10+1) called-up
Books of Commerce Publications Ltd.
Journal
Debit Credit
Rs Rs
Bank A/c Dr. 1,00,000
Working Note:
= Rs 500
Page No 8.125:
Question 67:
Gaurav applied for 5,000 shares of ₹ 10 each at a premium of 2.50 per share. But he was allotted
only 2,500 shares on pro rata basis . After having paid ₹ 3 per share on application, he did not
pay allotment money of ₹ 4.50 per share (including premium) and on his subsequent failure to
pay the first call of ₹ 2 per share, his shares were forfeited. These shares were reissued at the rate
of ₹ 8 per share credited as fully paid .
Pass journal entries to record the forfeiture and reissue of shares.
Answer:
Journal
Debit Credit
(Rs) (Rs)
Equity Share Capital A/c (2,500×7) Dr. 17,500
Working Notes:
Note:
Rs 7,500 received on application will be transferred to allotment, but first of all we have to
transfer such amount to Capital A/c and rest would be transferred to Securities Premium A/c.
Capital on allotment is Rs 5,000 (2,500×2) that is fully received and balance amount of advance
Rs 2,500 will be transferred to Securities Premium A/c. So, amount of premium unpaid is Rs
3,750 (2,500×2.5 –2,500).
Page No 8.125:
Question 68:
A Ltd issued 20,000 Equity Shares of ₹ 10 each at a premium of ₹ 5 per share, payable as ₹ 7
(including premium) on application , ₹ 5 on allotment and the balance after three months of
allotment.
A shareholder to whom 200 shares were allotted failed to pay the allotment and call money and
his shares were forfeited. 160 of the forfeited shares were reissued for ₹ 1,600.
Give necessary entries in company's journal and the Balance Sheet.
Answer:
Application Rs 7 (2+5)
Allotment Rs 5
First and
Rs 3
Final Call
15 (10+5) per share
Journal Entries
Debit Credit
Rs Rs
As per the Schedule III of Companies Act, 2013, the Company's Balance Sheet is presented as
follows.
A Ltd.
Balance Sheet
Amount
Particulars Note No.
(Rs)
I. Equity and Liabilities
1. Shareholders’ Funds
a. Share Capital 1 1,99,680
b. Reserves and Surplus 2 1,00,320
2. Non-Current Liabilities
3. Current Liabilities
Total 3,00,000
II. Assets
1. Non-Current Assets
2. Current Assets
a. Cash and Cash Equivalents 3 3,00,000
Total 3,00,000
NOTES TO ACCOUNTS
Amount
Note No. Particulars
(Rs)
1 Share Capital
Share Forfeiture (at the time of forfeiture after deducting premium) Cr. 2 (7 – 5)
Less: Share Forfeiture (at the time of re-issue) Dr. NIL
Balance in Share Forfeiture after re-issue Cr. 2 per share
Capital Reserve = Balance in Share Forfeiture after reissue (per share) × Number of Shares Re-
issued = Rs 2 × 160 = Rs 320
2. Calculation of balance remaining in Share Forfeiture Account (to be shown in the Balance
Sheet)
Share Forfeiture (at the time of forfeiture of 200 shares) = 400 Debit
Less: Share Forfeiture (at the time re-issue of 160 shares) = (320) Credit
Balance in Share Forfeiture Account (for 40 shares which are not re-issued) = Rs 80 Debit
Page No 8.125:
Question 69:
Kamal Ltd. was formed on 1st April, 2010 with an authorised capital of ₹ 2,00,000 , divided into
2,000 Equity Shares of ₹ 100 each. 1,000 shares were issued as fully paid to the vendors of
building for payment of the purchase consideration. The remaining 1,000 shares were offered or
public subscription at a premium of ₹ 5 per share payable as:
Applications were received for 900 shares which were duly allotted and the allotment money was
received in full . At the time of the first call, a shareholder who held 100 shares failed to pay the
first call money and his shares were forfeited. These shares were reissued @ ₹ 60 per share , ₹ 70
per share paid-up.
Final call has not been made.
You are required to
(i) give necessary journal entries to record the above transactions and
(ii) show how share capital would appear in the Balance Sheet of the company.
Answer:
Issued Capital:
Application Rs 10
Allotment Rs 25 (20+5)
First Call Rs 40
Called-up 75 (70+5)
Final Call Rs 30
Rs 105 (100+5)
Books of Kamal Limited
Journal
Debit Credit
Rs Rs
As per the Schedule III of Companies Act 2013, the Company's Balance Sheet is presented as
follows.
Kamal Ltd.
Balance Sheet
Amount
Particulars Note No.
(Rs)
I. Equity and Liabilities
1. Shareholders’ Funds
a. Share Capital 1 1,63,000
b. Reserves and Surplus 2 6,500
2. Non-Current Liabilities
3. Current Liabilities
Total 1,69,500
II. Assets
1. Non-Current Assets
a. Fixed Assets
i. Tangible Assets 3 1,00,000
2. Current Assets
a. Cash and Cash Equivalents 4 69,500
Total 1,69,500
NOTES TO ACCOUNTS
Amount
Note
Particulars
No.
(Rs)
1 Share Capital
Building 1,00,000
Working Notes:
Page No 8.126:
Question 70:
Krishna & Co. Ltd. with an authorised capital of ₹ 2,00,000 divided into 20,000 Equity Shares
of ₹ 10 each, issued the entire amount of the shares payable as:
₹ 5 on application (including premium ₹ 2 per share),
₹ 4 on allotment, and
₹ 3 on call.
All share money is received in full with the exception of the allotment money on 200 shares and
the call money on 500 shares (including the 200 shares on which the allotment money has not
been paid).
The above 500 shares are duly forfeited and 400 of these( including the 200 shares on which
allotment money has not been paid) are reissued at ₹ 7 per share payable by the purchaser as
fully paid-up. Pass journal entries(including cash transactions) and show the balances in the
Balance Sheet giving effect to the above transactions.
Answer:
Payable as:
Application = Rs 5 (3+2)
Allotment = Rs 4
First and Final
= Rs 3
Call
Rs 12 (10+2)
Books of Krishna & Co. Ltd.
Journal
Debit Credit
Rs Rs
As per the Schedule III of Companies Act, 2013, the Company's Balance Sheet is presented as
follows.
1. Shareholders’ Funds
a. Share Capital 1 1,99,700
b. Reserves and Surplus 2 40,800
2. Non-Current Liabilities
3. Current Liabilities
Total 2,40,500
II. Assets
1. Non-Current Assets
2. Current Assets
a. Cash and Cash Equivalents 3 2,40,500
Total 2,40,500
NOTES TO ACCOUNTS
Amount
Note No. Particulars
(Rs)
1 Share Capital
Working Notes:
= Rs 800
Page No 8.126:
Question 71:
Midee Ltd. invited applications for issuing 27,000 shares of ₹ 100 each payable as follows:
₹ 50—per share on application;
₹ 10—per share on allotment; and
Balance—on First and Final call.
Applications were received for 40,000 shares. Full allotment was made to the applicants of 7,000
shares. The remaining applicants were allotted 20,000 shares on pro rata basis. Excess money
received on applications was adjusted towards allotment and call.
Asha, holding 600 shares was belonged to the category of applicants to whom full allotment was
made ,paid the call money at the time of allotment . Ankur, who belonged to the category of
applicants to whom shares were allotted on pro rata basis did not pay anything after application
on his 200 shares . Ankur's shares were forfeited after the First and Final call. These shares were
later reissued at ₹ 105 per share as fully paid-up.
Pass necessary journal entries in the books of Midee Ltd . for the above transactions, by opening
Calls-in-Arrears and Calls-in-Advance Accounts wherever necessary.
Answer:
Journal
Debit Credit
(₹) (₹)
Bank A/c (40,000 × 50) Dr. 20,00,000
To Equity Share Application A/c 20,00,000
(Application money received)
Page No 8.126:
Question 72:
VXN Ltd. invited applications for issuing 50,000 equity shares of ₹ 10 each at a premium
of ₹ 8 per share . The amount was payable as follows:
The issue was fully subscribed . Gopal, a shareholder holding 200 shares, did not pay the
allotment money and Madhav, a holder of 400 shares, paid his entire share money along with the
allotment money. Gopal's shares were immediately forfeited after allotment . Afterwards, the
first call was made. Krishna, a holder of 100 shares , failed to pay the first call money and
Girdhar, a holder of 300 shares, paid the second call money also along with the first call .
Krishna's shares were forfeited immediately after the first call. Second and final call was made
afterwards and was duly received . All the forfeited shares were reissued at ₹ 9 per share fully
paid-up.
Pass necessary journal entries for the above transactions in the books of the company.
Answer:
Journal
Debit Credit
Date Particulars L.F. Amount Amount
(₹) (₹)
Bank A/c (50,000 × 4) Dr. 2,00,000
To Equity Share Application A/c 2,00,000
(Application money received on 50,000 shares)
Equity Share Second and Final Call A/c (49,700 × 3) Dr. 1,49,100
To Equity Share Capital A/c 49,700
To Securities Premium A/c 99,400
(Call money due on 49,700 shares)
Question 73:
Sukanya Ltd. invited applications for issuing 1,00,000 equity shares of ₹ 10 each. The shares
were issued at a premium of ₹ 20 per share. The amount was payable as follows:
Applications for 96,000 shares were received. Rohit , a shareholder holding 7,000 shares, failed
to pay both the calls and Namit , a holder of 5,000 shares , did not pay the final call.
Shares of Rohit and Namit were forfeited . Of the forfeited shares 8,000 shares including all the
shares of Rohit were reissued to Reena at ₹ 8 per share fully paid-up.
Pass necessary journal entries for the above transactions in the books of Sukanya Ltd.
Answer:
Journal
Debit Credit
(Rs) (Rs)
Bank A/c (96,000×14) Dr. 13,44,000
(Shares Forfeited)
(Shares Reissued)
Working Notes:
=35,000×1,0005,000=7,000
Page No 8.127:
Question 74:
Alfa Ltd. invited applications for issuing 75,000 equity shares of ₹ 10 each. The amount was
payable as follows:
Applications for 1,00,000 shares were received. Shares were allotted to all the applicants on pro
rata basis and excess money received with applications was transferred towards sums due on
first call. Vibha who was allotted 750 shares failed to pay the first call . Her shares were
immediately forfeited . Afterwards the second call was made. The amount due on second call
was also received except on 1,000 shares applied by Monika . Her shares were also forfeited. All
the forefited shares were reissued to Mohit for ₹9,000 as fully paid-up.
Pass necessary journal entries in the Books of Alfa Ltd . for the above transactions.
Answer:
Journal Entry
Debit Credit
Amount Amount
Date Particulars L.F.
Rs Rs
Bank A/c Dr. 4,00,000
Working Notes:
Page No 8.127:
Question 75:
Himalaya Company Limited issued for public subscription 1,20,000 equity shares of ₹ 10 each
at a premium for ₹ 2 per share payable as under:
Applications were received for 1,60,000 shares . Allotment was made on pro rata basis . Excess
money on application were adjusted against the amount due on allotment.
Rohan to whom 4,800 shares were allotted failed to pay for the two calls. These shares were
subsequently forfeited after the second call was made . All the shares forfeited were reissued to
Teena as fully paid at ₹ 7 per share.
Record journal entries and show the transactions relating to share capital in the company's
Balance Sheet.
Answer:
Journal
Debit Credit
(₹) (₹)
Bank A/c Dr. 4,80,000
To Share Application A/c 4,80,000
(Share Application money received for 1,60,000 shares @ Rs 3 per
share)
1. Shareholders’ Funds
a. Share Capital 1 12,00,000
b. Reserves and Surplus 2 2,54,400
2. Non-Current Liabilities
3. Current Liabilities
Total 14,54,400
II. Assets
1. Non-Current Assets
2. Current Assets
a. Cash and Cash Equivalents 3 14,54,400
Total 14,54,400
NOTES TO ACCOUNTS
Amount
Note No. Particulars
(₹)
1 Share Capital
Page No 8.127:
Question 76:
H Limited issued a prospectus inviting applications for 20,000 shares of ₹ 10 each at a premium
of ₹ 2 per share payable as follows:
On application ₹ 2 ; on allotment ₹ 5 (including premium) ; on first call ₹ 3 ; on second and final
call ₹ 2.
Applications were received for 30,000 shares and pro rata allotment was made on the
applications for 24,000 shares. Money overpaid on applications was adjusted against amount due
on allotment.
Ramesh, to whom 400 shares were allotted , failed to pay the allotment money and on his
subsequent failure to pay first call his shares were forfeited . Mohan , the holder of 600 shares,
failed to pay two calls and his shares were forfeited after the second call.
Of the shares forfeited, 800 shares were sold to Krishna credited as fully paid-up for ₹ 9 per
share, the whole of Ramesh's shares being included .
Pass journal entries and prepare the Balance Sheet.
Answer:
Journal
Debit Credit
(Rs) (Rs)
Bank A/c (30,000×2) Dr. 60,000
Total 2,40,360
2. Assets
Current Assets
a. Cash and Cash
3 2,40,360
Equivalents
Total 2,40,360
Notes to Accounts
Amount
Particulars
(Rs)
1. Share Capital
Page No 8.128:
Question 77:
Dogra Ltd. had an authorised capital of ₹ 1,00,00,000 divided into Equity Shares of ₹ 100 each.
The company offered 84,000 shares to the public at premium.
The amount was payable as follow:
₹ 50 per share.
On First and Final call —
Answer:
Journal
Debit Credit
(Rs) (Rs)
Equity Share Application A/c (80,000×30) Dr. 24,00,000
Equity Share First and Final Call A/c (80,000×50) Dr. 40,00,000
96,10,000 96,10,000
Page No 8.128:
Question 78:
Jeevan Dhara Ltd. invited applications for issuing 1,20,000 equity shares of ₹ 10 each at a
premium of ₹ 2 per share. The amount was payable as follows:
Balance.
On first and final call —
Applications for 1,50,000 shares were received . Shares were allotted to all the applicants on pro
rata basis. Excess money received on applications was adjusted towards sums due on allotment .
All calls were made. Manu who had applied for 3,000 shares failed to pay the amount due on
allotment and first and final call Madhur who was allotted 2,400 shares failed to pay the first and
final call . Shares of both Manu and Madhur were forfeited . The forfeited shares were reissued
at ₹ 9 per share as fully paid-up .
Pass necessary journal entries for the above transactions in the books of Jeevan Dhara Ltd.
Answer:
Journal Entry
Debit Credit
Amount Amount
Date Particulars L.F.
Rs Rs
Bank A/c Dr. 3,00,000
Working Notes:
WN1: Calculation of Amount not received on Allotment and First and Final Call
WN2: Calculation of amount not received from Madhur
Page No 8.128:
Question 79:
JJK Ltd. invited applications for issuing 50,000 equity shares of ₹ 10 each at par. The amount
was payable as follows:
The issue was oversubscribed three times. Applications for 30% shares were rejected and money
refunded .Allotment was made to the remaining applicants as follows:
I 80,000 40,000
II 25,000 10,000
Excess money paid by the applicants who were allotted shares was adjusted towards sums due
on allotment .
Deepak, a shareholder belonging to Category I , who had applied for 1,000 shares ,failed to pay
the allotment money. Raju, a shareholder holding 100 shares, also failed to pay the allotment
money. Raju belonged to Category II. Shares of both Deepak and Raju were forfeited
immediately after allotment . Afterwards, first and final call was made and was duly received .
The forfeited shares of Deepak and Raju were reissued at ₹11 per share fully paid-up.
Pass necessary journal entries for the above transactions in the books of company.
Answer:
Journal
Debit Credit
(₹) (₹)
Bank A/c (1,50,000 × 2) Dr. 3,00,000
To Share Application A/c 3,00,000
(Application money received on 1,50,000 shares)
Working Notes:
WN1:Computation Table
Money Money
received on transferre Amount
Shares Application d to Share Excess adjusted Money
Categorie Shares Applie
Allotte Capital Applicatio on refunde
s d
d n Money Allotment d
@ Rs 2 @ Rs 2
each each
I 80,000 40,000 1,60,000 80,000 80,000 80,000 –
II 25,000 10,000 50,000 20,000 30,000 30,000 –
III 45,000 – 90,000 – – – 90,000
1,50,000 50,000 3,00,000 1,00,000 1,10,000 1,10,000 90,000
Page No 8.129:
Question 80:
Nitro Paints Ltd. invited applications for issuing 1,60,000 equity shares of ₹ 10 each at a
premium of ₹ 3 per share. The amount was payable as follows:
Applications for 1,80,000 shares were received .Applications for 10,000 shares were rejected
and pro rata allotment was made to the remaining applicants.Over payment received on
application was adjusted towards sums due on allotment . All calls were made and were duly
received except allotment and final call from Aditya who was allotted 3,200 shares. His shares
were forfeited . Half of the forfeited shares were reissued for ₹ 43,000 as fully paid-up .
Pass necessary journal entries for the above transactions in the books of Nitro Paints Ltd.
Answer:
Journal
Debit Credit
Date Particulars L.F.
Amount Amount
(₹) (₹)
Bank A/c (1,80,000 × 6) Dr. 10,80,000
To Equity Share Application A/c 10,80,000
(Application money received)
Working Notes:
Shares Applied by Aditya=1,70,0001,60,000×3,200=3,400
Page No 8.129:
Question 81:
Raja Ltd. invited applications for issuing 50,000 Equity Shares of ₹ 10 each . The amount was
payable as follows:
Applications for 70,000 shares were received . Allotment was made to all applicants on pro rata
basis. Excess money received on application was adjusted towards sums due on allotment .
Ramesh, who had applied for 700 shares , did not pay the allotment money and on his failure to
pay the allotment money his shares were forfeited. Afterwards , the first and the final call was
made . Adhar, who had been allotted 500 shares, did not pay the first and final call . His shares
were also forfeited . Out of the forfeited shares 900 shares were reissued at ₹ 8 per share as fully
paid-up . The reissued shares included all the shares of Ramesh.
Pass necessary journal entries for the above transactions in the books of the company.
Answer:
Journal
Debit
Credit
Amount
Date Particulars L.F. Amount
Rs
Rs
Bank A/c (3×70,000) Dr. 2,10,000
Working Note:
Page No 8.129:
Question 82:
XYZ Ltd . is registered with an authorised capital of ₹ 2,00,000 divided into 2,000 shares of ₹ 100
each of which , 1,000 shares were offered for public subscription at a premium of ₹ 5 per share ,
payable as:
Answer:
Rs 75 Called-up
Final Call Rs 30
Journal
Debit Credit
Rs Rs
Cash Book
Dr. Cr.
Bank Bank
Date Particulars Date Particulars
Rs Rs
78,000 78,000
Working Notes:
= 150 shares
Sunder
Allotment
Capital Reserve
= Rs 500
Page No 8.130:
Question 83:
Prince Limited issued a prospectus inviting applications for 20,000 equity shares of ₹10 each at a
premium of ₹ 3 per share payable as follows:
With application —
₹2,
Applications were received for 30,000 shares and allotment was made on pro rata basis. Money
overpaid on application s was adjusted to the amount due on allotment.
Mr Mohit whom 400 shares were allotted , failed to pay the allotment money and the first call ,
and his shares were forfeited after the first call . Mr Joly, whom 600 shares were allotted , failed
to pay for the two calls and hence, his shares were forfeited .
Of the shares forfeited, 800 shares were reissued to Supriya as fully paid for ₹ 9 per share , the
whole of Mr Mohit's shares being included.
Answer:
Journal
Debit Credit
Rs Rs
Bank A/c Dr. 60,000
To Share Application A/c 60,000
(Application money received on 30,000 shares @ Rs 2 per share)
Balance Sheet
Amount
Particulars Note No.
(₹)
I. Equity and Liabilities
1. Shareholders’ Fund
a. Share Capital 1 1,98,800
b. Reserves and Surplus 2 60,800
2. Non-Current Liabilities
3. Current Liabilities
Total 2,59,600
II. Assets
1. Non-Current Assets
2. Current Assets
a. Cash and Cash Equivalents 3 2,59,600
Total 2,59,600
NOTES TO ACCOUNTS
Working Notes:
Page No 8.130:
Question 84:
XYZ Ltd. invited applications for issuing 50,000 Equity Shares of ₹10 each . The amount was
payable as:
Applications were received for 75,000 shares and pro rata allotment was made as:
Applicants for 40,000 shares were allotted 30,000 shares on pro rata basis.
Applicants for 35,000 shares were allotted 30,000 shares on pro rata basis.
Ramu, to whom 1,200 shares were allotted out of the group applying for 40,000 shares, failed to
pay the allotment money. His shares were forfeited immediately after allotment .
Shamu, who had applied for 700 shares out of the group applying for 35,000 shares , failed to
pay the first and final call . His shares were also forfeited. Out of the forfeited shares, 1,000
shares were reissued @ Applicants for 40,000 shares were allotted 30,000 shares on pro rata
basis. 8 per share as fully paid-up. The reissued shares included all the forfeited shares of
Shamu.
Pass necessary Journal entries to record the above transactions.
Answer:
Allotment
Amount payable per shares as:
made as:
Applied Allotted Application Rs 3
1,800 1,000 Rs 10
Books of XYZ Limited
Journal Entries
Debit Credit
Rs Rs
Working Notes-
Rumu’s Share
Share Allotment
Shamu’s Shares
Number of shares allotted to Shamu
Capital Reserve
Shares re-issued out the shares forfeited from Ramu = 1,000 shares − Shamu’s shares
= 1,000 − 400
= 600 shares
= Rs 4
Share Forfeiture Cr.
Share Forfeiture Dr. = Rs 2
Capital Reserve after re-issue of 600 shares = Share Forfeiture after re-issue (per share) × 600
shares
= Rs 2 × 600
= Rs 1,200
Capital Reserve after re-issue of 400 shares = Share Forfeiture after re-issue (per share) × 600
shares
= Rs 5 × 400
= Rs 2,000
Total amount of Capital Reserve = Capital Reserve of 600 shares + Capital Reserve of 400
shares
Total amount of Capital = Capital Reserve of 600 shares + Capital Reserve of 400
Reserve shares
= Rs 1,200 + Rs 2,000
= Rs 3,200
Page No 8.130:
Question 85:
A company issued for public subscription 40,000 Equity Shares of ₹ 10 each at a premium
of ₹ 2 per share payable as:
Applications were received for 60,000 shares . Allotment was made on pro rata basis to the
applicants for 48,000 shares, the remaining applications being refused . Money overpaid on
application was utilised towards sums due on allotment . Ram to whom 1,600 shares were
allotted failed to pay the allotment money and Shyam to whom 2,000 shares were allotted failed
to pay the two calls. These shares were subsequently forfeited after the second and final call was
made . All the forfeited shares were reissued as fully paid-up @ ₹ 8 per share.
Give necessary Journal entries for the above transactions.
Answer:
Rs Rs
Working Notes:
Ram’s shares
Share Allotment
Capital Reserve
13,840 Cr.
Less: Share Forfeiture 7,200 Dr.
Capital Reserve 6,640
Page No 8.130:
Question 86:
X Ltd . issued a prospectus inviting applications for 50,000 Equity Shares of ₹ 10 each,
payable ₹ 5 as per application (including ₹ 2 as premium), ₹ 4 as per allotment and the balance
towards first and final call.
Applications were received for 65,000 shares. Application money received on 5,000 shares was
refunded with letter of regret and allotments were made on pro rata basis to the applicants of
60,000 shares. Money overpaid on applications including premium was adjusted on account of
sums due on allotment.
Mr Sharma to whom 700 shares were allotted failed to pay the allotment money and his shares
were forfeited by the Directors on his subsequently failure to pay the call money.
All the forfeited shares were subsequently sold to Mr.Jain credited as fully paid-up for ₹ 9 per
share .
You are required to set out the journal entries and the relevant entries in the Cash Book.
Answer:
6,27,100 6,27,100
Books of X Limited
Journal
Debit Credit
Rs Rs
Working Notes-
Share Allotment
Capital Reserve
Page No 8.131:
Question 87:
Super Star Ltd. issued a prospectus inviting applications for 2,000 shares of ₹ 10 each at a
premium of ₹ 2 per share , payable as:
Applications were received for 3,000 shares and pro rata allotment was made on the applications
for 2,400 shares . It was decided to utilise excess application money towards the amount due on
allotment .
Ramesh, to whom 40 shares were allotted , failed to pay the allotment money and on his
subsequent failure to pay the first call, his shares were forfeited.
Rajesh, who applied for 72 shares failed to pay the two calls and on such failure, his shares
were forfeited .
Of the shares forfeited, 80 shares were sold to Krishan credited as fully paid-up for ₹ 9 per
share, the whole of Ramesh's shares being included.
Give journal entries to record the above transactions ( including cash transactions).
Answer:
Issued capital 2,000 shares of Rs 10 each at premium of Rs 2
Final Call Rs 2
(10 + 2) per
3,000 2,000 Rs 12
share
Books of Super Star Ltd.
Journal
Debit Credit
Rs Rs
Ramesh’s Shares
Rajesh’s Shares
Share Allotment
Ramesh
Rajesh
Capital Reserve on Rajesh’s shares = Share Forfeiture after re-issue (per share) × No. of shares
re-issued
= Rs 4 × 40
= Rs 160
shares of Rajesh
= 64 + 160
= Rs 224
Page No 8.131:
Question 88:
Bharat Ltd . invited applications for issuing 2,00,000 Equity Shares of ₹ 10 each. The amount
was payable as:
On application ₹ 3 per share , on allotment ₹ 5 per share and on first and final call ₹ 2 per
share. Applications for 3,00,000 shares were received and pro rata allotment was made to all the
applicants on the following basis:
Applicants for 2,00,000 shares were allotted 1,50,000 shares on pro rata basis.
Applicants for 1,00,000 shares were allotted 50,000 shares on pro rata basis.
Bajaj, who was allotted 3,000 shares out of group applying for 2,00,000 shares failed to pay the
allotment money. His shares were forfeited immediately after allotment . Sharma, who
had applied for 2,000 shares out of the group applying for 1,00,000 shares failed to pay the first
and final call . His shares were also forfeited.
Out of the forfeited shares 3,500 shares were reissued as fully paid-up @ ₹ 8 per share . The
reissued shares included all the forfeited shares of Bajaj.
Give necessary journal entries to record the above transactions.
Answer:
Journal
Debit Credit
Rs Rs
Working Note:
Bajaj’s Share
Share Allotment
Sharma’s shares
Capital Reserve
= Rs 4 per shares
Share Forfeiture Credit
Share Forfeiture Debit on re-issue = Rs 2 per share
Share Forfeiture after re-issue Rs 2 per share
Capital Reserve on re-issue of Bajaj’s shares = Rs 2 × 3,000 (no. of shares re-issued)
= Rs 6,000
Capital Reserve on re-issue of 500 Shares of Sharma = Rs 6 × 500 (no. of shares re-issued) = Rs
3,000
Total Capital Reserve on 3,500 shares = 6,000 (re-issue of Bajaj’s) + 3,000 (re-issue of
Sharma’s) = Rs 9,000
Page No 8.131:
Question 89:
Amrit Ltd. issued 50,000 shares of ₹ 10 each at a premium of ₹ 2 per share payable as ₹ 3 on
application, ₹ 4 on allotment (including premium) , ₹ 2 on first call and the remaining on second
call.
Applications were received for 75,000 shares and pro rata allotment was made to all the
applicants.
All moneys due were received except allotment and first call from Sonu who applied for 1,200
shares. All his shares were forfeited. The forfeited shares were reissued for ₹ 9,600. Final call
was not made . Pass necessary Journal entries.
Answer:
Journal
Debit Credit
(Rs) (Rs)
Page No 8.132:
Question 90:
The Directors of Super Star Ltd. invited applications for 2,00,000 Equity Shares of ₹ 10 each to
be issued at 20% premium. The money payable per shares was: on application ₹ 5 , O
allotment ₹ 4 (including premium of ₹ 2), first call ₹ 2 and final call ₹ 1.
Applications were received for 2,40,000 shares and allotment was made as:
(i) to applicants for 1,00,000 shares— in full,
(ii) to applicants for 80,000 shares—60,000 shares,
(iii) to applicants for 60,000 shares—40,000 shares.
1,300 shares[1,000 of Category(i) and 300 of Category (ii)] were reissued at ₹ 8 per share as
fully paid-up.
Journalise the above transactions. Prepare Cash book and Balance Sheet.
Answer:
23,95,000 23,95,000
Journal
Debit Credit
Rs Rs
As per the Schedule III of Companies Act, 2013, the Company's Balance Sheet is presented as
follows.
1. Shareholders’ Funds
a. Share Capital 1 19,94,400
b. Reserves and Surplus 2 4,00,600
2. Non-Current Liabilities
3. Current Liabilities
Total 23,95,000
II. Assets
1. Non-Current Assets
2. Current Assets
a. Cash and Cash Equivalents 3 23,95,000
Total 23,95,000
NOTES TO ACCOUNTS
Amount
Note No. Particulars
(Rs)
1 Share Capital
Working Notes:
2. Share Allotment
Capital Reserve
Capital Reserve of 300 shares = Capital Reserve (per share) × No. of shares re-issued = Rs 4.67
× 300 shares = Rs 1,400
Total Capital Reserve of 1,300 shares = Capital Reserve of 1,000 shares of category (i) +
Capital Reserve of 300 shares of category (ii) = 3,000 + 1,400 = Rs 4,400
Page No 8.132:
Question 91:
XYZ Ltd . issued a prospectus inviting applications for 2,000 shares of ₹ 10 each at a premium
of ₹ 4 per share , payable as:
On application — ₹ 6 (including ₹ 1 premium)
Applications were received for 3,000 shares and pro rata allotment was made on the applications
for 2,400 shares. It was decided to utilise excess application money towards the amount due on
allotment .
X, to whom 40 shares were allotted, failed to pay the allotment money and on his subsequent
failure to pay the first call , his shares were forfeited.
Y, who applied for 72 shares failed to pay the two calls and on his such failure , his shares were
forfeited.
Of the shares forfeited , 80 shares were sold to Z credited as fully paid-up for ₹ 9 per share , the
whole of Y's shares being included . Prepare Journal , Cash Book and the Balance Sheet .
Answer:
Final Call Rs 3 (2 + 1)
(80 shares × Rs 9)
31,688 31,688
Journal Entries
Debit Credit
Rs Rs
As per the Schedule III of Companies Act, 2013, the Company's Balance Sheet is presented as
follows.
XYZ Ltd.
Balance Sheet
Amount
Particulars Note No.
(Rs)
I. Equity and Liabilities
1. Shareholders’ Funds
a. Share Capital 1 19,920
b. Reserves and Surplus 2 8,168
2. Non-Current Liabilities
3. Current Liabilities
Total 28,088
II. Assets
1. Non-Current Assets
2. Current Assets
a. Cash and Cash Equivalents 3 28,088
Total 28,088
NOTES TO ACCOUNTS
Amount
Note No. Particulars
(Rs)
1 Share Capital
Working Notes:
1. X’s Shares
2. Share Allotment
3. Y’s Shares
X’s shares
= Rs 6 per share
Share Forfeiture Credit
Share forfeiture Debit = Rs 1 per share
Rs 5 per share
Y’s Shares
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Page No 9.54:
Question 1:
Answer:
Page No 9.54:
Question 2:
Answer:
Books of A Ltd.
Journal
Debit Credit
Amount Amount
Date Particular L.F.
Rs Rs
Bank A/c Dr. 48,000
To 9% Debenture Application A/c 48,000
(Debenture application money received for 2,400 debentures at
Rs 20 each)
Page No 9.54:
Question 3:
ABC Ltd. issued 40,000; 10% Debentures of ₹ 100 each at par for cash payable in full along with
the application. Applications were received for 60,000 debentures . Debentures were allotted
and excess application money was refunded. Pass Journal entries in the books of the company.
Answer:
Journal
Debit Credit
(Rs) (Rs)
Bank A/c (60,000 ×100) Dr. 60,00,000
Page No 9.54:
Question 4:
Narain Laxmi Ltd. invited applications for issuing 7,500; 12% Debentures of ₹ 100 each at a
premium of ₹ 35 per debenture . The full amount was payable on application. Applications were
received for 10,000 Debentures. Allotment was made to all the applications on pro rata.
Pass necessary Journal entries for the above transactions in the books of Narain Laxmi Ltd.
Answer:
Journal
Debit
Credit
Amount
Date Particulars L.F. Amount
Rs
Rs
Bank A/c (10,000 debentures × 135) Dr. 13,50,000
Question 5:
Raj Ltd . issued 5,000; 8% Debentures of ₹ 100 each at a premium of 5% payable as follows:
₹ 10 on application ; ₹ 20 along with premium on allotment and balance on first and final call.
Pass necessary Journal entries.
Answer:
Page No 9.55:
Question 6:
Nipa Limited issued ₹ 10,00,000 Debentures of ₹ 100 each at a premium of 10% , payable 25%
on application (including premium) and the balance on allotment . The debentures were applied
for and the amount was dully received.
You are required to give Journal entries and prepare Cash Book.
Answer:
Cash Book
Dr. Cr.
Bank Bank
Date Particulars L.F. Date Particulars L.F.
Rs Rs
Debenture Application 2,50,000
11,00,000 11,00,000
Page No 9.55:
Question 7:
Alok Ltd. issued 7,000, 10% Debentures of ₹ 500 each at a premium of ₹ 50 per debenture
redeemable at a premium of 10% after 5 years. According to the terms of issue, ₹ 200 was
payable on application and balance on allotment.
Record necessary Journal entries at the time of issue of 10% Debentures.
Answer:
Journal
Debit Credit
(Rs) (Rs)
Bank A/c (7,000×200) Dr. 14,00,000
Question 8:
Vijay Laxmi Ltd. invited applications for 10,000; 12% Debentures of ₹ 100 each at a premium
of ₹ 70 per debenture .The full amount was payable on application.
Applications were received for 13,500 debentures. Applications for 3,500 debentures were
rejected and application money was refunded . Debentures were allotted to the remaining
applications .
Answer:
Journal
Debit
Credit
Amount
Date Particulars L.F. Amount
Rs
Rs
Bank A/c Dr. 22,95,000
Question 9:
Iron Products Ltd. issued 5,000; 9% Debentures of ₹ 100 each at a premium of ₹ 40 payable as
follows;
(i) ₹ 40 , including premium of ₹ 10 on applications;
(ii) ₹ 45, including premium of ₹ 15 on allotment ; and
(iii) Balance as first and final call.
The issue was subscribed and allotment made. Calls were made and due amount was received .
Pass Journal entries .
Answer:
Journal
Debit Credit
(Rs) (Rs)
Bank A/c (5,000×40) Dr. 2,00,000
Page No 9.55:
Question 10:
Answer:
∴ Issue Price = Rs 95
On Application
Rs 25 per debenture
(25%)
On Allotment
Rs 20 (25 – 5) per debenture
(20%)
On First and Final
Rs 50 per debenture
Call (50%)
Journal
Debit Credit
Amount Amount
Date Particulars L.F.
Rs Rs
Bank A/c Dr. 3,00,000
8% Debenture
Dr. 3,00,000
Application A/c
To 8% Debentures A/c 3,00,000
(Debenture application money transferred to
8% Debentures account)
8% Debentures
Dr. 2,40,000
Allotment A/c
Discount on Issue of
Dr. 60,000
Debentures A/c
To 8% Debentures A/c 3,00,000
(Allotment money due on 12,000 8%
Debentures at Rs 20 each at discount of Rs 5)
Page No 9.55:
Question 11:
Alka Ltd . issued 5,000, 10% Debentures of ₹ 1,000 each at a discount of 10% redeemable at a
premium of 5% after 5 years . According to the terms of issue ₹ 500 was payable on application
and the balance amount on allotment of debentures. Record necessary entries regarding issue of
10% Debentures.
Answer:
Journal
Debit Credit
(Rs) (Rs)
Bank A/c (5,000×500) Dr. 25,00,000
Page No 9.55:
Question 12:
Amrit Ltd . was promoted by Amrit and Bhaskar with an authorised capital of ₹ 10,00,000
divide into 1,00,000 shares of ₹ 10 each.
The company decided to issue 1,000,6% Debentures of ₹ 100 each to Amrit and Bhaskar each
for their services in incorporating the company.
Pass journal entry.
Answer:
Journal
Debit Credit
(Rs) (Rs)
Page No 9.55:
Question 13:
A limited company bought a Building for ₹ 9,00,000 and the consideration was paid by issuing
10% Debentures of the normal (face) value of ₹ 100 each at a discount of 10%.
Give journal entries.
Answer:
Journal
Debit Amount Credit Amount
Date Particulars L.F.
Rs Rs
Building A/c Dr. 9,00,000
(Building purchased)
Working Note:
Page No 9.55:
Question 14:
Wye Ltd . purchased an established business for ₹ 2,00,000 payable as ₹ 65,000 by cheque and
the balance by issuing 9% Debentures of ₹ 100 each at a discount of 10%.
Give journal entries in the books of Wye Ltd.
Answer:
(Business purchased)
Working Note:
Page No 9.56:
Question 15:
Newton Ltd. purchased a Machinery from B for ₹ 5,76,000 to be paid by the issue of 9%
Debentures of ₹ 100 each at 4% discount. Journalise the trasactions.
Answer:
To B 5,76,000
B Dr. 5,76,000
Working Note:
Page No 9.56:
Question 16:
Reliance Ltd. purchased machinery costing ₹ 1,35,000 . It was agreed that the purchase
consideration be paid by issuing 9% Debentures of ₹ 100 each . Assume debentures have been
issued
(i) at par and
(ii)at a discount of 10%.
Give necessary journal entries.
Answer:
Case 1
(Machinery Purchases)
Working Note:
Case 2
Journal
Debit Amount Credit Amount
Date Particulars L.F.
Rs Rs
Machinery A/c Dr. 1,35,000
(Machinery purchased)
Working Note:
Page No 9.56:
Question 17:
Deepak Ltd purchased furniture of ₹ 2,20,000 from M/s. Furniture Mart. 50% of the amount was
paid to M/s. Furniture Mart by accepting a Bill of Exchanged and for the balance the company
issued 9% Debenture of ₹ 100 each at a premium of 10% in favour of M/s. Furniture Mart.
Pass Journal entries in the books of Deepak Ltd.
Answer:
Working Note:
Page No 9.56:
Question 18:
X Ltd . took over the assets of ₹ 6,00,000 and liabilities of ₹ 80,000 of Y Ltd for an agreed
purchase consideration of ₹ 6,00,000 payable 10% in cash and the balance by the issue of 12%
Debentures of ₹ 100 each . Give necessary journal entries in the books of X Ltd., assuming that:
Case (a): The debentures are issued at par.
Case (b): The debentures are issued at 20% premium.
Case (c): The debentures are issued at 10% discount.
Answer:
Journal
Debit Credit
(Rs) (Rs)
Assets A/c Dr. 6,60,000
60,000
To Cash A/c
Working Note:
Question 19:
X Ltd. took over the assets of ₹ 6,60,000 and liabilities of ₹ 80,000 of Y Ltd . for ₹ 6,00,000.
Give necessary journal entries in the books of X Ltd. assuming that:
Case (a): The purchase consideration was payable 10% in cash and the balance in 5,400; 12%
Debentures of ₹ 100 each.
Case (b): The purchase consideration was payable 10% in cash and the balance in 4,500; 12%
Debentures of ₹ 100 each issued at 20% premium.
Answer:
Journal
Debit Credit
(Rs) (Rs)
Assets A/c Dr. 6,60,000
To Y Ltd. 6,00,000
Page No 9.56:
Question 20:
Perfect Barcode Ltd. purchased computers from M/s. Computer Mart and paid the consideration
as follows:
(a) 1,000 , 10% Debentures of ₹ 100 each at a discount of 10% ; and
(b) Issued a cheque for ₹ 80,000 for the balance amount.
Pass the journal entry in the books of Perfect Barcode Ltd.
Answer:
Journal
Debit Credit
(Rs) (Rs)
Computers A/c Dr. 1,70,000
Page No 9.56:
Question 21:
Lotus Ltd. took over assets of ₹ 2,50,000 and liabilities of ₹ 30,000 of Goneby Company for the
purchase consideration of ₹ 3,30,000. Lotus Ltd. paid the purchase consideration by issuing
debentures of ₹ 100 each at 10% premium.
Give journal entries in the books of Lotus Ltd.
Answer:
Working Note:
Page No 9.57:
Question 22:
Exe Ltd. purchased the assets of the book value ₹4,00,000 and took over the liabilities of ₹
50,000 from Mohan Bros.It was agreed that the purchase consideration ,settled at ₹3,80,000 be
paid by issuing debentures of ₹ 100 each.
Pass journal entries if debenture are issued:
(a) at par
(b) at a discount of 10% and
(c) at a premium of 10%.
It was agreed that any fraction of debentures be paid in cash.
Answer:
Journal
Debit
Credit Amount
Date Particulars L.F. Amount
Rs
Rs
Assets A/c Dr. 4,00,000
Journal
Debit Amount Credit Amount
Date Particulars L.F.
Rs Rs
Mohan Bros. Dr. 3,80,000
Working Note:
Case 2 When Debentures are issued at 10% discount
Journal
Debit Credit
Amount Amount
Date Particulars L.F.
Rs Rs
Mohan Bros. Dr. 3,80,000
To Bank A/c 20
(Issued 4,222 Debentures of Rs 100 each at 10% discount to
Mohan Bros. and fraction of debentures is paid in cash)
Working Note:
Journal
Debit Credit
Amount Amount
Date Particulars L.F.
Rs Rs
Mohan Bros. Dr. 3,80,000
To Bank A/c 60
(Issued 3,454 Debentures of Rs 100 each at 10% premium
to Mohan Bros. and fraction of debentures is paid in cash)
Working Note:
Page No 9.57:
Question 23:
R Ltd. purchased the assets of S Ltd. for ₹5,00,000. It also agreed to take over the liabilities of S
Ltd. amounted to ₹ 2,00,000 for a purchase consideration of ₹2,80,000 . The payment of S Ltd.
was made by issue of 9% Debentures of ₹ 100 each at par.
Pass necessary journal entries in the books of R Ltd.
Answer:
Books of R Ltd.
Journal
Debit Credit
Amount Amount
Date Particulars L.F.
Rs Rs
Assets A/c Dr. 5,00,000
To S Ltd. 2,80,000
Page No 9.57:
Question 24:
Romi Ltd. acquired assets of ₹ 20 lakhs and took over creditors of ₹ 2 lakhs from Kapil
Enterprises.
Romi Ltd. issued 8% Debentures of ₹ 100 each at a discount of 25% as purchase consideration.
Record necessary journal entries in the books of Romi Ltd.
Answer:
Page No 9.57:
Question 25:
Romi Ltd. acquired assets of ₹ 20 lakhs and took over creditors of ₹ 2 lakhs from Kapil
Enterprises.
Romi Ltd. issued 8% Debentures of ₹ 100 each at a discount of 10% as purchase consideration.
Record necessary journal entries in the books of Romi Ltd.
Answer:
Page No 9.57:
Question 26:
Answer:
Journal
Debit Credit
(Rs) (Rs)
Bank A/c Dr. 5,00,000
Page No 9.57:
Question 27:
Best Barcode Ltd. took a loan of ₹ 5,00,000 from a bank giving ₹ 6,00,000; 9% Debentures as
collateral security. Pass journal entries regarding issue of debentures , if any, and show this loan
in the Balance Sheet of the company.
Answer:
1. Shareholders’ Funds
2. Non-Current Liabilities
a. Long-Term Borrowings 1 5,00,000
3. Current Liabilities
Total 5,00,000
II. Assets
1. Non-Current Assets
2. Current Assets
a. Cash and Cash Equivalents 2 5,00,000
Total 5,00,000
NOTES TO ACCOUNTS
Amount
Note No. Particulars
(Rs)
1 Long-Term Borrowings
Loan (Secured by issue of 9% Debentures of Rs 6,00,000 as
5,00,000
Collateral Security)
2 Cash and Cash Equivalents
Credit
Debit Amount
Amount
Date Particulars L.F.
Rs
Rs
Bank A/c Dr. 5,00,000
Alternative Method:
Debit Credit
Amount Amount
Date Particulars L.F.
Rs Rs
Bank A/c Dr. 5,00,000
1. Shareholders’ Funds
2. Non-Current Liabilities
a. Long-Term Borrowings 1 5,00,000
3. Current Liabilities
Total 5,00,000
II. Assets
1. Non-Current Assets
2. Current Assets
a. Cash and Cash Equivalents 2 5,00,000
Total 5,00,000
NOTES TO ACCOUNTS
Amount
Note No. Particulars
(Rs)
1 Long-Term Borrowings
Secured:
Loan (Secured by issue of 9% Debentures of
5,00,000
Rs 6,00,000 as Collateral Security)
9% Debentures (Issued as Collateral Security to Bank against loan) 6,00,000
Page No 9.57:
Question 28:
A company took a loan of ₹ 4,00,000 from Bandhan Bank Ltd. and issued 8% Debentures of ₹
4,00,000 as a collateral security.
Answer:
Debit Credit
Amount Amount
Date Particulars L.F.
Rs Rs
Bank A/c Dr. 4,00,000
Posting in the Company's Balance Sheet (When Debentures Issued as Collateral Security are
shown separately)
Balance Sheet
Amount
Particulars Note No.
(Rs)
I Equity and Liabilities
1.Shareholders’ Funds
2.Non-Current Liabilities
a. Long-Term Borrowings 1 4,00,000
3.Current Liabilities
Total 4,00,000
II Assets
1. Non-Current Assets
2. Current Assets
a. Cash and Cash Equivalents 2 4,00,000
Total 4,00,000
NOTES TO ACCOUNTS
Amount
Note
Particulars
No.
(Rs)
1 Long-Term Borrowings
Secured:
4,00,000
2 Cash and Cash Equivalents
Alternative Method: When debentures Issued as Collateral Security are not shown separately
Debit Credit
Amount Amount
Date Particulars L.F.
Rs Rs
Bank A/c Dr. 4,00,000
Balance Sheet
Amount
Particulars Note No.
(Rs)
I. Equity and Liabilities
1. Shareholders’ Funds
2. Non-Current Liabilities
a. Long-Term Borrowings 1 4,00,000
3. Current Liabilities
Total 4,00,000
II. Assets
1. Non-Current Assets
2. Current Assets
a. Cash and Cash Equivalents 2 4,00,000
Total 4,00,000
NOTES TO ACCOUNTS
Amount
Note
Particulars
No.
(Rs)
1 Long-Term Borrowings
Secured:
Loan from Bandhan Bank (Secured by issue of 8% Debentures of Rs
4,00,000
4,00,000 as Collateral Security)
Page No 9.57:
Question 29:
X Ltd. took a loan of ₹ 3,00,000 from IDBI Bank . The company issued 4,000; 9% Debentures
of ₹ 100 each as a collateral security for the same . Show how these items will be presented in
the Balance Sheet of the company.
Answer:
X Ltd.
Balance Sheet
Amount
Particulars Note No.
(Rs)
I. Equity and Liabilities
1. Shareholders’ Funds
2. Non-Current Liabilities
a. Long-Term Borrowings 1 3,00,000
3. Current Liabilities
Total 3,00,000
II. Assets
1.Non-Current Assets
2.Current Assets
a. Cash and Cash Equivalents 2 3,00,000
Total 3,00,000
NOTES TO ACCOUNTS
Amount
Note No. Particulars
(Rs)
1 Long-Term Borrowings
Secured:
3,00,000
Alternative Method: When Debentures Issued as Collateral Security are not shown separately
X Ltd.
Balance Sheet
Amount
Particulars Note No.
(Rs)
I. Equity and Liabilities
1. Shareholders’ Funds
2. Non-Current Liabilities
a. Long-Term Borrowings 1 3,00,000
3.Current Liabilities
Total 3,00,000
II. Assets
1. Non-Current Assets
2. Current Assets
a. Cash and Cash Equivalents 2 3,00,000
Total 3,00,000
NOTES TO ACCOUNTS
Amount
Note
Particulars
No.
(Rs)
1 Long-Term Borrowings
Secured:
Loan From IDBI (Secured by issue of 9% Debentures of Rs 4,00,000 as
3,00,000
Collateral Security)
Page No 9.57:
Question 30:
Answer:
Journal
Debit
Credit
Amount
Date Particulars L.F. Amount
Rs
Rs
(a) Bank A/c Dr. 95
Page No 9.58:
Question 31:
Pass journal entries in the following cases:
(a) A Co.Ltd. issued ₹40,000; 12% Debentures at a premium of 5% redeemable at par.
(b) A Co.Ltd. issued ₹40,000; 12% Debentures at a discount of 10% redeemable at par.
(c) A Co.Ltd. issued ₹40,000; 12% Debentures at par redeemable at 10% premium.
(d) A Co.Ltd. issued ₹40,000; 12% Debentures at a discount of 5% and redeemable at 5%
premium.
(e) A Co.Ltd. issued ₹40,000; 12% Debentures at a premium of 10% redeemable at 110%.
Answer:
Journal
Debit Credit
Amount Amount
Date Particulars L.F.
Rs Rs
(a) Bank A/c Dr. 42,000
Journal
Debit Credit
Amount Amount
Date Particulars L.F.
Rs Rs
(b) Bank A/c Dr. 36,000
Journal
Credit
Debit Amount
Amount
Date Particulars L.F.
Rs
Rs
(c) Bank A/c Dr. 40,000
Journal
Debit Credit
Amount Amount
Date Particulars L.F.
Rs Rs
(d) Bank A/c Dr. 38,000
Journal
Debit Credit
Amount Amount
Date Particulars L.F.
Rs Rs
(e) Bank A/c Dr. 44,000
Page No 9.58:
Question 32:
Footfall Ltd.issues 10,000 Debentures of Pass necessary journal entries relating to the issue
of Debentures for the following:
(a) Issued ₹ 28,000; 10% Debentures of ₹ 100 each at a premium of 15% redeemable at par.
(b) Issued ₹30,000; 10% Debentures of ₹ 100 each at a premium of 10% and redeemable at a
premium of 15%.
(c) Issued ₹ 80,000; 10% Debentures of ₹ 100 each at par repayable at a premium of 10% . 100
each at a discount of 10% redeemable at a premium of 5% after the expiry of three years.
Pass journal entries for the issue of these debentures.
Answer:
Page No 9.58:
Question 33:
Pass necessary journal entries relating to the issue of Debentures for the following:
(a) Issued ₹ 4,00,000; 9% Debentures of ₹ 100 each at a premium of 8% redeemable at 10%
premium.
(b) Issued ₹6,00,000; 9% Debentures of ₹ 100 each at par,repayable at a premium of 10% .
(c) Issued ₹ 10,00,000; 9% Debentures of ₹ 100 each at a premium of 5%,redeemable at par.
Answer:
Journal
Debit Credit
Rs Rs
(a) Bank A/c Dr. 4,32,000
Page No 9.58:
Question 34:
Pass necessary journal entries relating to the issue of Debentures for the following:
(a) Issued ₹ 28,000; 10% Debentures of ₹ 100 each at a premium of 15% redeemable at par.
(b) Issued ₹30,000; 10% Debentures of ₹ 100 each at a premium of 10% and redeemable at a
premium of 15%.
(c) Issued ₹ 80,000; 10% Debentures of ₹ 100 each at par repayable at a premium of 10% .
Answer:
Journal
Debit Credit
Rs Rs
(a) Bank A/c (280 debentures × 115) Dr. 32,200
Page No 9.58:
Question 35:
Answer:
Journal
Debit Credit
(₹) (₹)
Bank A/c Dr. 85,500
To Debenture Application and Allotment A/c 85,500
(Money received on the issue of debentures)
Page No 9.58:
Question 36:
Pass necessary journal entries for the issue of Debentures in the following cases:
(a) ₹ 40,000; 12% Debentures of ₹ 100 each issued at a premium of 5% redeemable at par.
(b) ₹70,000; 12% Debentures of ₹ 100 each issued at a premium of 5% redeemable at a
premium of 110.
Answer:
(a)
Journal
Debit
Credit
Amount
Date Particulars L.F. Amount
Rs
Rs
Bank A/c Dr. 42,000
Journal
Debit
Credit
Amount
Date Particulars L.F. Amount
Rs
Rs
Bank A/c Dr. 73,500
Page No 9.58:
Question 37:
Pass necessary journal entries for the issue of Debentures in the following cases:
(a) ₹ 40,000; 15% Debentures of ₹ 100 each issued at a discount of 10% redeemable at par.
(b) ₹80,000; 15% Debentures of ₹ 100 each issued at a premium of 10% redeemable at a
premium of 10%.
Answer:
(a)
Journal
Debit
Credit
Amount
Date Particulars L.F. Amount
Rs
Rs
Bank A/c Dr. 36,000
(b)
Journal
Debit
Credit
Amount
Date Particulars L.F. Amount
Rs
Rs
Bank A/c Dr. 88,000
Page No 9.58:
Question 38:
XYZ Ltd.issued 5,000 , 10% Debentures of ₹ 100 each on 1st April, 2015 at a discount of 10%
redeemable at a premium of 10% after 4 years. Give journal entries for the year ended 31st
March, 2016, assuming that the interest was payable half-yearly on 30th September and 31st
March. Tax is to be deducted @ 10%.
Answer:
April
Debenture Application A/c Dr. 4,50,000
01
Loss on Issue of Debentures A/c Dr. 1,00,000
Sept.
Debentureholders’ A/c Dr. 22,500
30
To Bank A/c 22,500
2016
March
Interest on Debentures A/c Dr. 25,000
31
To Debentureholders’ A/c 22,500
To Income Tax Payable A/c 2,500
March
Debentureholders’ A/c Dr. 22,500
31
To Bank A/c 22,500
(Debenture Interest paid to Debenture holders)
March
Income Tax Payable A/c Dr. 2,500
31
March
Profit and Loss A/c Dr. 50,000
31
To Interest on Debentures A/c 50,000
(Interest on debentures transferred to Profit and Loss
Account)
Working Note:
Page No 9.58:
Question 39:
Bright Ltd. issued 5,000; 10% Debentures of ₹ 100 each on 1st April, 2015 . The issue was fully
subscribed . According to the terms of issue, interest on the debentures is payable half-yearly on
30th September and 31st March and the tax deducted at source is 10%.
Pass necessary journal entries related to the debenture interest for the year ending 31st March ,
2016 and transfer of interest on debentures of the year to the Statement of Profit and Loss .
Answer:
Journal
(Rs) (Rs)
2016
Page No 9.58:
Question 40:
On 1st April, 2015, V.V.L.Ltd issued 1,000, 9% Debentures of ₹ 100 each at a discount of 6%,
redeemable at a premium of 10% after three years. Pass necessary journal entries for the issue of
debentures and debenture interest for the year ended 31st March, 2016, assuming that interest is
payable on 30th September and 31st March and the rate of tax deducted at source is 10%. The
company closes its books on 31st March every year.
Answer:
Journal
Debit Credit
Date Particulars L.F.
Amount Amount
(₹) (₹)
2015
Apr. Bank A/c Dr. 94,000
01
To Debenture Application and Allotment A/c 94,000
(Money received on the issue of debentures)
Page No 9.59:
Question 41:
X Ltd. issued 30,000, 10% Debentures of ₹ 100 each at a discount of 5% on 1st April, 2015. As
per the terms of issue , debentures are to be redeemed at the end of five years . Show the amount
of discount to be written off from Statement of Profit and Loss every year.
Answer:
Page No 9.59:
Question 42:
Journal
Debit Credit
(Rs) (Rs)
2014
2015
Statement of P&L
2016
A/c Dr.
Mar.31
To Discount on Issue of Debenture A/c
16,000 16,000
(Proportionate discount on Issue of Debenture written off)
2017
Mar.31 12,000 12,000
Statement of P&L
A/c Dr.
2018 8,000 8,000
To Discount on Issue of Debenture A/c
Mar.31
(Proportionate discount on Issue of Debenture written off)
4,000 4,000
2019
Statement of P&L
Mar.31
A/c Dr.
To Discount on Issue of Debenture A/c
(Proportionate discount on Issue of Debenture written off)
Statement of P&L
A/c Dr.
To Discount on Issue of Debenture A/c
(Proportionate discount on Issue of Debenture written off)
Working Notes:
60,000×1030=20,000
31st March, 2015 10,00,000 10
Total 30 60,000
Page No 9.59:
Question 43:
On 1st April, 2014, Popular Ltd. issued 20,000;10% Debentures of ₹ 100 each at a discount of
10% redeemable at par. Show the 'Discount on Issue of Debentures Account ' if
(a) such debentures are redeemable after 4 years, and
(b) such debentures are redeemable by equal annual drawings in 4 years , starting from 31st
March, 2015. Popular Ltd.follows financial year as its accounting year .
Answer:
Case (a)
Apr. 01 10% Debentures 2,00,000 Mar. 31 Statement of Profit and Loss 50,000
2,00,000 2,00,000
2015-16 2015-16
Apr. 01 Balance b/d 1,50,000 Mar. 31 Statement of Profit and Loss 50,000
1,50,000 1,50,000
2016-17 2016-17
Apr. 01 Balance b/d 1,00,000 Mar. 31 Statement of Profit and Loss 50,000
1,00,000 1,00,000
2017-18 2017-18
Apr. 01 Balance b/d 50,000 Mar. 31 Statement of Profit and Loss 50,000
50,000 50,000
Working Notes:
Case (b)
Apr. 01 10% Debentures 2,00,000 Mar. 31 Statement of Profit and Loss 80,000
2,00,000 2,00,000
2015-16 2015-16
Apr. 01 Balance b/d 1,20,000 Mar. 31 Statement of Profit and Loss 60,000
1,20,000 1,20,000
2016-17 2016-17
Apr. 01 Balance b/d 60,000 Mar. 31 Statement of Profit and Loss 40,000
60,000 60,000
2017-18 2017-18
Apr. 01 Balance b/d 20,000 Mar. 31 Statement of Profit and Loss 20,000
20,000 20,000
Working Notes:
Page No 9.59:
Question 44:
On 1st April 2012, Z Ltd. issued ₹ 10,00,000, 10% Debentures of ₹ 100 each at 94%
redeemable at par. The debentures are to be redeemed by drawings method in the following
manner:
Calculate the amount of discount on issue of debentures to be written off each year.
Answer:
40
Working Notes:
Discount=10,00,000×6100=60,000
Page No 9.59:
Question 45:
Answer:
1 10,00,000 10 80,000×1040=20,000
2 10,00,000 10 80,000×1040=20,000
3 9,00,000 9 80,000×940=18,000
4 7,00,000 7 80,000×740=14,000
5 4,00,000 4 80,000×440=8,000
Total 40 80,000
Page No 9.59:
Question 46:
Kangaroo Ltd. issued 5,000, 8% Debentures of ₹ 100 each at a discount of 8%. The company
decided to write off discount in the year of loss from Capital Reserve which has a balance of ₹
1,00,000. Pass the journal entry for writing off discount.
Answer:
Journal
Debit Credit
(₹) (₹)
Capital Reserve A/c Dr. 40,000
To Discount on Issue of Debentures A/c 40,000
(Discount on 8% Debentures written off)
Working Notes:
WN1: Calculation of discount amount to be written-off
Discount=10,00,000×6100=60,000
Page No 9.60:
Question 47:
Grand Hotels Ltd.issued 30,000, 7% Debentures of ₹ 100 each at a discount of 5% redeemable
at a premium of 5% . It decided to write off loss on issue of debentures first from Capital
Reserve then from Securities Premium Reserve and balance from Statement of Profit and Loss. It
has balances as follows:
Capital Reserve— ₹ 80,000 and Securities Premium Reserve—₹ 1,00,000 .
Pass the journal entry for writing off loss on Issue of Debentures .
Answer:
Journal
Debit Credit
(₹) (₹)
Capital Reserve A/c Dr. 80,000
Securities Premium A/c Dr. 1,00,000
Statement of Profit & Loss Dr. 1,20,000
To Discount on Issue of Debentures A/c 3,00,000
(Loss on issue of debentures written off)
Working Notes:
WN1: Calculation of discount amount to be written-off
Discount=30,00,000×10100=3,00,000First Rs 80,000 will be set-
off from Capital ReserveNext Rs 1,00,000 will be set-
off from Securities PremiumRemaining Rs 1,20,000 (3,00,000−80,000−1,00,000) will be set-
off from Statement of Profit & Loss
Page No 9.60:
Question 48:
Kitply Ltd.issued ₹ 2,00,000, 10% Debentures at a discount of 5% .The terms of issue provide
the repayment at the end of 4 years . Kitply Ltd.has a balance of ₹ 5,00,000 in Securities
Premium Reserve . The company decided to write off discount on issue of debentures from
Securities Premium Reserve in the first year.
Pass the journal entry.
Answer:
Journal
Debit Credit
(Rs) (Rs)
Page No 9.60:
Question 49:
Answer:
Journal
Debit Credit
(Rs) (Rs)
Page No 9.60:
Question 50:
Tetley Ltd. issued 10,000,9% Debentures of ₹ 100 each at a discount of 5% redeemable at the
end of 5 years at a premium of 10%. Tetley Ltd. has a balance of ₹ 50,000 in Securities Premium
Reserve . Loss on Issue of debentures is to be written off equally over the life of debentures.
Pass the journal entries for writing off the Loss on Issue of Debentures.
Answer:
Journal
Debit Credit
(Rs) (Rs)
Page No 9.60:
Question 51:
Global Ltd.issued 10,000, 8% Debentures of ₹ 100 each redeemable at the end of 3 years at a
premium of ₹ 9.
Pass the journal entries for writing off the Loss on Issue of Debentures. Also prepare Loss on
Issue of Debentures Account.
Answer:
Journal
Debit Credit
(Rs) (Rs)
Year 1 8% Debentures A/c 90,000 Year 1 Statement of Profit & Loss A/c 30,000
Balance c/d 60,000
90,000 90,000
Year 2 Balance b/d 60,000 Year 2 Statement of Profit & Loss A/c 30,000
Balance c/d 30,000
60,000 60,000
Year 3 Balance b/d 30,000 Year 3 Statement of Profit & Loss A/c 30,000
30,000 30,000
Page No 9.60:
Question 52:
On 1st April, 2013, ABC Ltd. issued 10,000 , 10% Debentures of ₹ 100 each at a discount of 4%
redeemable after 5 years at a premium of 6% .
Pass the necessary journal entries for issue of debentures and writing off Loss on issue of
Debentures. Also prepare Loss on issue of Debentures Account.
Answer:
Journal
Debit Credit
(₹) (₹)
2013
Apr. Bank A/c Dr. 9,60,000
01
To Debenture Application and Allotment A/c 9,60,000
(Money received on the issue of debentures)
Debenture Application and Allotment A/c Dr. 9,60,000
Loss on Issue of Debentures A/c Dr. 1,00,000
To 9% Debentures A/c 10,00,000
To Premium on Redemption of Debentures A/c 60,000
(Debenture application and allotment money transferred to
Debentures A/c)
2014-
Statement of Profit & Loss Dr. 20,000
15
2015-
Statement of Profit & Loss Dr. 20,000
16
2016-
Statement of Profit & Loss Dr. 20,000
17
2017-
Statement of Profit & Loss Dr. 20,000
18
Working Notes:
WN1:
Calculation of discountamount to be written-off
Discount=10,00,000×10100=1,00,000
1,00,000 1,00,000
2014-15 2014-15
Apr. 01 Balance b/d 1,00,000 Mar. 31 Statement of Profit and Loss 20,000
1,00,000 1,00,000
2015-16 2015-16
Apr. 01 Balance b/d 80,000 Mar. 31 Statement of Profit and Loss 20,000
80,000 80,000
2016-17 2016-17
Apr. 01 Balance b/d 60,000 Mar. 31 Statement of Profit and Loss 20,000
60,000 60,000
2017-18 2017-18
Apr. 01 Balance b/d 40,000 Mar. 31 Statement of Profit and Loss 20,000
40,000 40,000
2018-19 2018-19
Apr. 01 Balance b/d 20,000 Mar. 31 Statement of Profit and Loss 20,000
20,000 20,000
Page No 9.61:
Question 53:
Feeble Ltd.issued 10% Debentures at 94% for ₹ 20,00,000 on 1st July, 2013 repayable by five
equal annual installments of ₹ 4,00,000 each starting from 30th June, 2014. Calculate the amount
of discount to be written off in every accounting year assuming that the company decides to
write off the debentures discount during the life of the debentures.
Answer:
Amount of Discount=20,00,000×6100=1,20,000
Total
Discount
Year Outstanding Amount Months
Period Product Ratio Discount to be
End (Rs.) Used
written
off
31st
2013-
March, 20,00,000 9 1,80,00,000 180 1,20,000×180720=30,000 30,000
14
2014
30th
2014- 1,20,000×60720=10,000
June, 20,00,000 3 60,00,000 60
15
2014
31st
March, 16,00,000 9 1,44,00,000 144 1,20,000×144720=24,000 34,000
2015
30th
2015-
June, 16,00,000 3 48,00,000 48 1,20,000×48720=8,000
16
2015
31st
March, 12,00,000 9 1,08,00,000 108 1,20,000×108720=18,000 26,000
2016
30th
2016-
June, 12,00,000 3 36,00,000 36 1,20,000×36720=6,000
17
2016
31st
March, 8,00,000 9 72,00,000 72 1,20,000×72720=12,000 18,000
2017
30th
2017-
June, 8,00,000 3 24,00,000 24 1,20,000×24720=4,000
18
2017
31st
March, 4,00,000 9 36,00,000 36 1,20,000×36720=6,000 10,000
2018
30th
2018-
June, 4,00,000 3 12,00,000 12 1,20,000×12720=2,000 2,000
19
2018
Page No 9.61:
Question 54:
On 1st May, 2016, Goodluck Ltd. issued 16,000, 9% Debentures of ₹ 100 each at a discount of
10% redeemable at a premium of 10% redeemable after five years. All the debentures were
subscribed and allotment was made . Discount on issue of Debentures is to be written off over
the life of the debentures.
Prepare the Balance Sheet (extract) as at 31st March, 2017 showing Discount on issue of
Debentures.
Answer:
Balance Sheet
II Assets
1. Non-Current
Assets
a. Other Non-
1 96,000
Current Assets
2. Current Assets
a. Other Current
2 32,000
Assets
Total 1,28,000
NOTES TO ACCOUNTS
Amount
Note No. Particulars
(Rs)
1. Other Non-Current Assets
Page No 9.61:
Question 55:
On 1st June, 2015, R Energy Ltd. issued 10,000, 7% Debentures of ₹ 100 each at a discount of
10% redeemable at a premium of 10% at the end of five years . All the debentures were
subscribed and allotment was made . Loss on issue of Debentures is to be written off over the
life of the debentures.
Prepare the Balance Sheet (extract) as at 31st March, 2016 and 31st March, 2017 showing Loss
on issue of Debentures.
Answer:
Balance Sheet
II Assets
1. Non-Current
Assets
a. Other Non-
1,20,000
Current Assets
2. Current Assets
a. Other Current
40,000
Assets
Total 1,60,000
NOTES TO ACCOUNTS
Amount
Note No. Particulars
(Rs)
1. Other Non-current Assets
Balance Sheet
II Assets
1. Non-Current
Assets
a. Other Non-
80,000
Current Assets
2. Current Assets
a. Other Current
40,000
Assets
Total 1,20,000
NOTES TO ACCOUNTS
Amount
Note No. Particulars
(Rs)
1. Other Non-current Assets
Loss on issue of
1,20,000
Debentures
Less: Shown as Other Current Assets 40,000 80,000
(To the extent to be written off after 12 months from the date of
Balance sheet )
3 Other Current Assets
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TS Grewal Vol. ii 2018 Solutions for Class 12-commerce Accountancy Chapter 19 Redemption
Of Debentures are provided here with simple step-by-step explanations. These solutions for
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Page No 10.29:
Question 1:
Answer:
Page No 10.29:
Question 2:
Answer:
(a) There is no need for creation of DRR because these debentures are fully convertible.
(b) DRR would be created for non-convertible part of debentures.
Page No 10.29:
Question 3:
Dow Ltd. issued ₹ 2,00,000; 8% Debentures of ₹ 10 each at a premium of 8% on 30th June, 2016
redeemable on 31st March, 2018. How much amount should be transferred to Debentures
Redemption Reserve before redemption of debentures?
Answer:
Section 71 (4) of the Companies Act, 2013 requires that an amount equal to at least 25% of the
value of debentures is to be transferred to the Debenture Redemption Reserve Account.
Accordingly, Rs 50,000 is required to be transferred to DRR (i.e. 25% of 2,00,000) before the
actual date of redemption of debentures.
Page No 10.29:
Question 4:
Answer:
Section 71 (4) of the Companies Act, 2013 requires that an amount equal to at least 25% of the
value of debentures is to be transferred to the Debenture Redemption Reserve Account. So, Rs 2,
50,000 is required to be transferred to DRR (i.e. 25% of 10,00,000). Further, Rule 18 (7) requires
every company that is required to create DRR to invest an amount at least equal to 15% of the
value of debentures in specified securities. So, Rs 1,50,000 is to be invested in specified
securities (i.e. 15% of 10,00,000).
Journal
(Rs) (Rs)
2016
(Debentures issued)
2017
March
Statement of Profit and Loss Dr. 2,50,000
31
To Debenture Redemption Reserve A/c 2,50,000
(DRR created)
April 30 Debenture Redemption Investment A/c Dr. 1,50,000
(Investments encashed)
Note: Entries for interest on debentures have been ignored in the above solution as the question
was silent in this regards. However, the students' may journalise the entries related to interest on
debentures as given below.
Journal
Debit Credit
Date Particulars L.F. Amount Amount
(Rs) (Rs)
2017
Page No 10.29:
Question 5:
Export-Import Bank of India (EXIM Bank) issued 20,000, 10% Debentures of ₹ 100 each
through public issue and 10,000, 10% Debentures of ₹ 100 each through private placement .
State the amount of investment to be made by EXIM Bank before redemption of debentures.
Answer:
The Companies Act, 2013 exempts Banking Companies to invest in specified securities.
Page No 10.29:
Question 6:
SRCC Ltd. has issued on 1st April, 2016, 20,000,12% Debentures of ₹ 100 each redeemable by
draw of lots as under:
During the year ended on 31st March,2017 : 15%
During the year ended on 31st March,2018 : 25%
During the year ended on 31st March,2019 : 15%
During the year ended on 31st March,2020 : 25%
During the year ended on 31st March,2021 : 20%
How much minimum investment or deposit should be made by SRCC Ltd. as per Companies
Act, 2013 before redemption of debentures? When should it be made ?
Answer:
Page No 10.30:
Question 7:
IFCI Ltd.( An All India Financial Institution) issued 10,00,000; 9% Debentures of SRCC Ltd.
₹50 each on 1st April, 2011 redeemable on 1st April, 2017. How much amount of Debentures
Redemption Reserve is required before the redemption of debentures? Also,pass journal entries
for issue and redemption of debentures.
Answer:
Rs Rs
2011
April
Bank A/c Dr. 5,00,00,000
01
To 9% Debenture Application A/c 5,00,00,000
April
9% Debenture Application A/c Dr. 5,00,00,000
01
To 9% Debentures A/c 5,00,00,000
(Debenture application money transferred to debenture
account)
2017
April
9% Debentures A/c Dr. 5,00,00,000
01
To Debentureholders’ A/c 5,00,00,000
April
Debentureholders’ A/c Dr. 5,00,00,000
01
To Bank A/c 5,00,00,000
Notes:
1. All India Financial Institutions are exempted from creating DRR. Hence, in this case, no DRR
is to be created.
2. Entries for interest on debentures have been ignored in the above solution as the question was
silent in this regards. However, the students' may journalise the entries related to interest on
debentures every year from April 01, 2011 to March 31, 2017 as given below.
Journal
Debit Credit
Date Particulars L.F. Amount Amount
(Rs) (Rs)
2011
Page No 10.30:
Question 8:
On 31st March, 2003, G Ltd. had ₹ 8,00,000;9% Debentures due for redemption. The company
had a balance of ₹ 1,40,000 in its Debentures Redemption Reserve . Pass necessary journal
entries for redemption of debentures.
Answer:
Debit Credit
Rs Rs
31/3/2002* Statement of Profit or Loss Dr. 60,000
Working Note:
Notes:
Journal
Debit Credit
Date Particulars L.F. Amount Amount
(Rs) (Rs)
2002
*As per circular no. 04/2015 issued by Ministry of Corporate Affairs (dated 11.02.2013), every
company required to create/maintain DRR shall on or before the 30th day of April of each year,
deposit or invest, as the case may be, a sum which shall not be less than fifteen percent of the
amount of its debentures maturing during the year ending on the 31st day of March next
following year. Accodingly, entries for DRR and Investment have been passed in the previous
accounting year.
Page No 10.30:
Question 9:
On 31st March, 2016, W Ltd. had the following balances in its books: ₹
9% Debentures 6,00,000
Debentures Redemption Reserve 50,000
Surplus,i.e., Balance in Statement of Profit and Loss 3,00,000
On that date, the company decided to transfer ₹ 1,00,000 to Debentures Redemption Reserve . It
also decided to redeem debentures of ₹ 3,00,000 on 30th June , 2016.
Pass necessary journal entries in the books of the company.
Answer:
Books of W Ltd.
Journal
Debit Credit
Rs Rs
31/3/16 Statement of Profit or Loss Dr. 1,00,000
Working Notes:
Note:
1. Here, the entry for transferring the amount of DRR to General Reserve A/c has been passed
with 50% of DRR amount, since the company has not fully redeemed all its debentures.
Therefore, 50% of DRR amount i.e. 50% of 1,50,000, transferred to General Reserve.
2. Entries for interest on debentures have been ignored in the above solution as the question was
silent in this regards. However, the students' may journalise the entries related to interest on
debentures as given below.
Journal
Debit Credit
Date Particulars L.F. Amount Amount
(Rs) (Rs)
2017
Mar. 31 Debenture Interest A/c Dr. 33,750
Page No 10.30:
Question 10:
A Ltd. has credit balance of ₹ 1,26,000 in Surplus, i.e., Balance in Statement of Profit and Loss .
Instead of declaring dividend it is resolved to utilize the profits to redeem its ₹ 1,20,000
Debentures redeemable at a premium of 5%.
Pass necessary journal entries in the books of the company.
Answer:
Journal
Debit Credit
Rs Rs
Previous
Year
**As per circular no. 04/2015 issued by Ministry of Corporate Affairs (dated 11.02.2013), every
company required to create/maintain DRR shall on or before the 30th day of April of each year,
deposit or invest, as the case may be, a sum which shall not be less than fifteen percent of the
amount of its debentures maturing during the year ending on the 31st day of March next
following year. Accodingly, entries for DRR and Investment have been passed in the previous
accounting year.
Page No 10.30:
Question 11:
Mansi Ltd . had 6,000; 10% Debentures of ₹ 100 each due for redemption on 31st March, 2017.
Assuming that the debentures were redeemed out of profits , pass necessary journal entries for
the redemption of debentures . There was a credit balance of ₹ 6,00,000 in Surplus, i.e,Balance in
Statement of Profit and Loss.
Answer:
Journal
Debit Credit
Rs Rs
2016
March
Statement of Profit and Loss* Dr. 6,00,000
31
To Debenture Redemption Reserve A/c 6,00,000
(Surplus amount is transferred to Debenture Redemption
Reserve)
April
Debenture Redemption Investment A/c** Dr. 90,000
30
To Bank A/c 90,000
(Investment is made in specified securities equal to 15% of the
value of debentures redeemed)
2017
March
10% Debentures A/c Dr. 6,00,000
31
To Debentureholders’ A/c 6,00,000
March
Bank A/c Dr. 90,000
31
To Debenture Redemption Investment A/c 90,000
March
Debentureholders’ A/c Dr. 6,00,000
31
To Bank A/c Dr. 6,00,000
March
Debenture Redemption Reserve A/c Dr. 6,00,000
31
To General Reserve A/c 6,00,000
(Debenture Redemption Reserve transferred to General
Reserve)
*In case of redemption of debentures by profits, 100% of the nominal value of debentures is
transferred to DRR A/c.
**As per circular no. 04/2015 issued by Ministry of Corporate Affairs (dated 11.02.2013), every
company required to create/maintain DRR shall on or before the 30th day of April of each year,
deposit or invest, as the case may be, a sum which shall not be less than fifteen percent of the
amount of its debentures maturing during the year ending on the 31st day of March next
following year. Accordingly, entries for DRR and Investment have been passed in the previous
accounting year.
Note: Entries for interest on debentures have been ignored in the above solution as the question
was silent in this regards. However, the students' may journalise the entries related to interest on
debentures as given below.
Journal
Debit
Credit
Date Particulars L.F. Amount Amount
(Rs)
(Rs)
2016 &
2017
Page No 10.30:
Question 12:
India Textiles Corporation Ltd. has outstanding ₹ 50,00,000; 9% Debentures of ₹ 100 each due
for redemption on 31st July, 2017. Pass journal entries for redemption assuming that there is a
balance of ₹ 3,00,000 in Debentures Redemption Reserve on the date of redemption .
Answer:
Rs Rs
2017 Statement of Profit and Loss Dr. 9,50,000
March
To Debenture Redemption Reserve A/c 9,50,000
31
(Profit transferred to Debenture Redemption Reserve)
2017
Working Notes:
*As per circular no. 04/2015 issued by Ministry of Corporate Affairs (dated 11.02.2013), every
company required to create/maintain DRR shall on or before the 30th day of April of each year,
deposit or invest, as the case may be, a sum which shall not be less than fifteen percent of the
amount of its debentures maturing during the year ending on the 31st day of March next
following year. Accordingly, entries for DRR and Investment have been passed in the previous
accounting year.
Note: Entries for interest on debentures have been ignored in the above solution as the question
was silent in this regards. However, the students' may journalise the entries related to interest on
debentures as given below.
Journal
Debit
Credit
Date Particulars L.F. Amount Amount
(Rs)
(Rs)
2017
Page No 10.30:
Question 13:
Manish Ltd.issued ₹ 40,00,000;8% Debentures of ₹ 100 each on 1st April, 2016. The terms of
issue stated that the debentures are to be redeemed at a premium of 5% on 30th June, 2018. The
company decided to transfer ₹ 10,00,000 out of profits to Debentures Redemption Reserve on
31st March, 2017 and ₹ 10,00,000 on 31st March, 2018.
Pass journal entries regarding the issue and redemption of debentures , DRR and investment
without providing for the interest or loss on issue of debentures.
Answer:
Journal
Debit Credit
Rs Rs
2016
2017
March,
Statement of Profit and Loss (See Note 1) Dr. 10,00,000
31
To Debenture Redemption Reserve A/c 10,00,000
(Surplus amount is transferred to Debenture Redemption
Reserve)
2018
March
Statement of Profit and Loss (See Note 1) Dr. 10,00,000
31
To Debenture Redemption Reserve A/c 10,00,000
(Surplus amount is transferred to Debenture Redemption
Reserve)
Note:
1. As prescribed by Section 71(4) of the Companies Act, 2013, companies are required to create
DRR at 25% of the total value of debentures. However, it purely depends upon a company and
its discretion to transfer more amount to DRR than the prescribed amount of 25% in the case of
companies for whom it is mandatory to create DRR out of profits. In this case, as explicitly
specified about company's discretion, DRR has been created for a total of Rs 20,00,000 which is
50% of the total value of redeemable debentures.
2. As per circular no. 04/2015 issued by Ministry of Corporate Affairs (dated 11.02.2013), every
company required to create/maintain DRR shall on or before the 30th day of April of each year,
deposit or invest, as the case may be, a sum which shall not be less than fifteen percent of the
amount of its debentures maturing during the year ending on the 31st day of March next
following year. Accordingly, entries for DRR and Investment have been passed in the previous
accounting year.
3. As explicilty stated in the question, entries for interest on debentures has not been passed.
Page No 10.31:
Question 14:
Godrej Ltd .has 20,000;7% Debentures of ₹ 100 each due for redemption on 31st August, 2017.
There is a balance of ₹ 3,50,000 in Debentures Redemption Reserve Account as on 31st
March,2015. Investment, as required by the Companies Act, 2013 is made on 1st April, 2016 in
fixed deposit bearing interest @6%p.a. Bank deducted TDS @10% on its maturity which is 31st
March,2017.
Pass journal entries for redemption of debentures.
Answer:
Journal
(Rs) (Rs)
2016
2017
Mar.
Bank A/c (3,00,000 + 16,200) Dr. 3,16,200
31
Tax Payable A/c Dr. 1,800
To Interest on Debenture Redemption Investment A/c 18,000
Mar.
Statement of Profit & Loss A/c Dr. 1,50,000
31
To Debenture Redemption Reserve A/c 1,50,000
(DRR created)
Aug.
7% Debentures A/c Dr. 20,00,000
31
To Debentureholders' A/c 20,00,000
Aug.
Debentureholders' A/c Dr. 20,00,000
31
To Bank A/c 20,00,000
Aug.
Debenture Redemption Reserve A/c Dr. 5,00,000
31
To General Reserve A/c 5,00,000
(Transfer of Debenture Redemption Reserve to General
Reserve)
Working Notes:
Note:
1. The year of transfer to DRR and investment has been assumed to be in 2014 in order to
maintain consistency with the guidelines issued by Ministry of Corporate Affairs which requires
that every company required to create/maintain DRR shall on or before the 30th day of April of
each year, deposit or invest, as the case may be, a sum which shall not be less than fifteen
percent of the amount of its debentures maturing during the year ending on the 31st day of
March next following year. Accordingly, entries for DRR and investment if passed in any of the
year then redemption would take place in the following year.
Page No 10.31:
Question 15:
Apollo Ltd.issued 21,000;8% Debentures of ₹ 100 each on 1st April, 2011 redeemable at a
premium of 8% on 30th June , 2017. The company decided to transfer the required amount to
Debentures Redemption Reserve in three equal annual installments starting with 31st March,
2015. Required investment was made in Government Securities on 30th April, 2017. Ignore
interest on debentures and also investment .
Pass necessary journal entries regarding issue transfer to DRR , investment, and redemption of
debentures.
Answer:
Rs Rs
2011
April
Bank A/c Dr. 21,00,000
01
To 8% Debenture Application A/c 21,00,000
2015
March
Statement of Profit and Loss Dr. 1,75,000
31
To Debenture Redemption Reserve A/c 1,75,000
(Profit transferred to Debenture Redemption Reserve)
2016
March
Statement of Profit and Loss Dr. 1,75,000
31
To Debenture Redemption Reserve A/c 1,75,000
2017
Mach
Statement of Profit and Loss Dr. 1,75,000
31
To Debenture Redemption Reserve A/c 1,75,000
Working Note:
As prescribed by Section 71(4) of the Companies Act, 2013, companies are required to create
DRR at 25% of the total value of debentures. Here, debentures worth Rs 21,00,000 are to be
redeemed, so, the amount of DRR will be:
Page No 10.31:
Question 16:
Books of JB Ltd.
Journal
Debit Credit
Rs Rs
2014
April
Bank A/c Dr. 10,40,000
01
To 6% Debenture Application A/c 10,40,000
April
6% Debenture Application A/c Dr. 10,40,000
01
Loss on Issue of Debentures A/c Dr. 50,000
2018
March
6% Debentures A/c Dr. 10,00,000
31
Premium on Redemption A/c Dr. 50,000
March
Debentureholders’ A/c Dr. 10,50,000
31
To Bank A/c 10,50,000
March
Debenture Redemption Reserve A/c Dr. 2,50,000
31
To General Reserve A/c 2,50,000
(Debenture Redemption Reserve transferred to General
Reserve)
*As prescribed by Section 71(4) of the Companies Act, 2013, companies are required to create
DRR at 25% of the total value of debentures. Here, debentures worth Rs 10,00,000 are to be
redeemed, so, the amount of DRR will be:
Amount of DRR = 10,00,000 × 25100= Rs 2,50,000
However, it purely depends upon a company and its discretion to transfer more amount to DRR
than the prescribed amount of 25% in the case of companies for whom it is mandatory to create
DRR out of profits. In this case, as nothing explicit has been specified about company's
discretion, so amount equivalent to 25% of the nominal value of the redeemable debentures has
been transferred to DRR similar to the earlier questions.
**As per circular no. 04/2015 issued by Ministry of Corporate Affairs (dated 11.02.2013), every
company required to create/maintain DRR shall on or before the 30th day of April of each year,
deposit or invest, as the case may be, a sum which shall not be less than fifteen percent of the
amount of its debentures maturing during the year ending on the 31st day of March next
following year. Accordingly, entries for DRR and Investment have been passed in the previous
accounting year.
Note: Entries for interest on debentures have been ignored in the above solution as the question
was silent in this regards. However, the students' may journalise the entries related to interest on
debentures as given below.
Journal
Debit
Credit
Date Particulars L.F. Amount Amount
(Rs)
(Rs)
2015 to
2018
Page No 10.31:
Question 17:
On 1st April, 2014, following were the balances of Blue Bird Ltd.:
10% Debentures (redeemable on 30th September, 2017) ₹ 15,00,000
Debentures Redemption Reserve ₹ 2,00,000
The company met the requirements of the Companies Act, 2013 regarding Debentures
Redemption Reserve and Investment and redeemed the debentures.
Pass necessary journal entries for the above transactions in the books of the company.
Answer:
Journal
Debit Credit
(Rs) (Rs)
2017
March
Statement of Profit and Loss Dr. 1,75,000
31
To Debenture Redemption Reserve A/c 1,75,000
Working Notes:
*As per circular no. 04/2015 issued by Ministry of Corporate Affairs (dated 11.02.2013), every
company required to create/maintain DRR shall on or before the 30th day of April of each year,
deposit or invest, as the case may be, a sum which shall not be less than fifteen percent of the
amount of its debentures maturing during the year ending on the 31st day of March next
following year. Accodingly, entries for DRR and Investment have been passed a year before
redemption year.
Note: Entries for interest on debentures have been ignored in the above solution as the question
was silent in this regards. However, the students' may journalise the entries related to interest on
debentures as given below.
Journal
Debit
Credit
Date Particulars L.F. Amount Amount
(Rs)
(Rs)
2017-18
Page No 10.31:
Question 18:
Mahima Ltd.issued ₹ 38,00,000, 9% Debentures of ₹ 100 each on 1st April, 2013. The
debentures were redeemable at a premium of 5% on 30th June, 2015. The company transferred
an amount of ₹ 9,50,000 to Debentures Redemption Reserve on 31st March, 2015. Investments
as required by law were made in fixed deposit of a bank on 1st April, 2015.
Ignoring interest on fixed deposit ,pass necessary journal entries starting from 31st March, 2015
regarding redemption of debentures .
Answer:
Journal
Debit Credit
(Rs) (Rs)
2015
Mar.31 Surplus i.e., Balance in Statement of Profit & Loss A/c Dr. 9,50,000
(Debentures redeemed)
Debentures Redemption Reserve
June.30 9,50,000
A/c Dr.
To General Reserve A/c 9,50,000
(Debentures Redemption Reserve transferred to General
Reserve)
Working Note:
Page No 10.31:
Question 19:
On 1st April, 2013 the following balances appeared in the books of Blue and Green Ltd.:
12%Debentures (Redeemable on 31st August, 2015) ₹
20,00,000
Debentures Redemption Reserve ₹
2,00,000.
The company met the requirements of Companies Act, 2013 regarding Debentures Redemption
Reserve and Debentures Redemption Investments and redeemed the debentures.
Ignoring interest on investments, pass necessary journal entries for the above transactions in the
books of company.
Answer:
Journal
Debit Credit
(Rs) (Rs)
2015
Mar.31 Surplus i.e., Balance in statement of Profit & Loss A/c Dr. 3,00,000
(Debentures redeemed)
Working Notes:
Amount required to be transferred to DRR = 25% of Face Value of Debentures
Page No 10.31:
Question 20:
Rich sugar Ltd. issued ₹ 20 Lakh,8% Debentures divided into debentures of ₹ 100 each on 1st
April, 2013, redeemable in four equal annual installments starting from 31st March,2016. The
company decided to transfer to Debentures Redemption Reserve ₹ 2,50,000 each year on 31st
March,2014 and 2015.
The company invested ₹ 3,00,000 in Government securities as required by the Companies Act,
2013.
Pass necessary journal entries for the above transactions.
Answer:
Journal
Debit Credit
Rs Rs
2013
2014
March
Statement of Profit and Loss Dr. 2,50,000
31
To Debenture Redemption Reserve A/c 2,50,000
(Surplus amount is transferred to Debenture Redemption
Reserve)
2015
March
Statement of Profit and Loss Dr. 2,50,000
31
To Debenture Redemption Reserve A/c 2,50,000
(Surplus amount is transferred to Debenture Redemption
Reserve)
2016
March
8% Debentures A/c Dr. 5,00,000
31
To Debentureholders’A/c 5,00,000
March
Debentureholders’ A/c Dr. 5,00,000
31
To Bank A/c 5,00,000
(Amount of debentures paid to debentureholders)
March
Debenture Redemption Reserve A/c Dr. 1,25,000
31
2017
March
8% Debentures A/c Dr. 5,00,000
31
To Debentureholders’ A/c 5,00,000
March
Debentureholders’ A/c Dr. 5,00,000
31
To Bank A/c 5,00,000
March
Debenture Redemption Reserve A/c Dr. 1,25,000
31
2018
March
8% Debentures A/c Dr. 5,00,000
31
To Debentureholders’ A/c 5,00,000
March
Debenture Redemption Reserve A/c Dr. 1,25,000
31
2019
March
8% Debentures A/c Dr. 5,00,000
31
To Debentureholders’ A/c 5,00,000
March
Debentureholders’ A/c Dr. 5,00,000
31
To Bank A/c 5,00,000
March
Bank A/c Dr. 3,00,000
31
March
Debenture Redemption Reserve A/c Dr. 1,25,000
31
To General Reserve A/c 1,25,000
(Debenture Redemption Reserve transferred to General
Reserve)
*As per circular no. 04/2015 issued by Ministry of Corporate Affairs (dated 11.02.2013), every
company required to create/maintain DRR shall on or before the 30th day of April of each year,
deposit or invest, as the case may be, a sum which shall not be less than fifteen percent of the
amount of its debentures maturing during the year ending on the 31st day of March next
following year. Accodingly, entry for investment in Government securities has been passed a
year before first redemption year.
Note: Since the question is silent regarding the payment of interest, the following entries may be
passed at the end of every year (i.e. on 31 March before the redemption of debentures). However,
it is not essential to pass these entries unless explicitly stated in the question.
To Debentureholders’ A/c
(Interest due)
Interest Rate
×
Amt. of Debentures outstanding
Debentureholders’ A/c Dr.
To Bank A/c
Page No 10.32:
Question 21:
Hp Ltd. has 1,00,000;8% Debentures of ₹ 50 each due for redemption in five equal annual
installments starting from 30th June, 2015. Debentures Redemption Reserve has a balnce of ₹
5,00,000 on that date . Pass journal entries.
Answer:
Books of HP Ltd.
Journal
Debit Credit
Rs Rs
2015
March
Statement of Profit and Loss Dr. 7,50,000
31
To Debenture Redemption Reserve 7,50,000
(Surplus amount is transferred to Debenture Redemption
Reserve)
April
Debenture Redemption Investment A/c* Dr. 1,50,000
30
To Bank A/c 1,50,000
(Investment is made in specified securities @ 15% of the
value of debentures redeemable in first instalment, i.e. Rs
10,00,000)
June
8% Debenture A/c Dr. 10,00,000
30
To Debentureholders’ A/c 10,00,000
June
Bank A/c Dr. 1,50,000
30
To Debenture Redemption Investment A/c** 1,50,000
June
Debentureholders’ A/c Dr. 10,00,000
30
To Bank A/c 10,00,000
2016
April
Debenture Redemption Investment A/c* Dr. 1,50,000
30
To Bank A/c 1,50,000
(Investment is made in specified securities @ 15% of the
value of debentures redeemable in second instalment, i.e. Rs
10,00,000)
June
8% Debentures A/c Dr. 10,00,000
30
To Debentureholders’ A/c 10,00,000
June
Bank A/c Dr. 1,50,000
30
To Debenture Redemption Investment A/c** 1,50,000
June
Debentureholders’ A/c Dr. 10,00,000
30
To Bank A/c 10,00,000
2017
April
Debenture Redemption Investment A/c* Dr. 1,50,000
30
To Bank A/c 1,50,000
(Investment is made in specified securities @ 15% of the
value of debentures redeemable in third instalment, i.e. Rs
10,00,000)
June
8% Debentures A/c Dr. 10,00,000
30
To Debentureholders’ A/c 10,00,000
June
Bank A/c Dr. 1,50,000
30
To Debenture Redemption Investment A/c** 1,50,000
June
Debentureholders’ A/c 10,00,000
30
To Bank A/c 10,00,000
June
8% Debentures A/c Dr. 10,00,000
30
To Debentureholders’ A/c 10,00,000
June
Bank A/c Dr. 1,50,000
30
To Debenture Redemption Investment A/c** 1,50,000
June
Debentureholders’ A/c Dr. 10,00,000
30
To Bank A/c 10,00,000
2019
April
Debenture Redemption Investment A/c* Dr. 1,50,000
30
To Bank A/c 1,50,000
(Investment is made in specified securities @ 15% of the
value of debentures redeemable in fifth instalment, i.e. Rs
10,00,000)
June
8% Debentures A/c Dr. 10,00,000
30
To Debentureholders’ A/c 10,00,000
June
Bank A/c Dr. 1,50,000
30
To Debenture Redemption Investment A/c** 1,50,000
June
Debentureholders’ A/c Dr. 10,00,000
30
To Bank A/c 10,00,000
June
Debenture Redemption Reserve A/c Dr. 2,50,000
30
To General Reserve A/c 2,50,000
(Debenture Redemption Reserve transferred to General
Reserve)
*As per circular no. 04/2015 issued by Ministry of Corporate Affairs (dated 11.02.2013), every
company required to create/maintain DRR shall on or before the 30th day of April of each year,
deposit or invest, as the case may be, a sum which shall not be less than fifteen percent of the
amount of its debentures maturing during the year ending on the 31st day of March next
following year. Accodingly, entry for investment in Government securities has been passed a
year before first redemption year.
**Since nothing is specified, investments will be encashed before debentures are redeemed.
Note: Since the question is silent regarding the payment of interest, the following entries may be
passed at the end of every year (i.e. on 31 March before the redemption of debentures). However,
it is not essential to pass these entries unless explicitly stated in the question.
To Debentureholders’ A/c
(Interest due)
Interest Rate
×
Amt. of Debentures outstanding
Debentureholders’ A/c Dr.
To Bank A/c
Page No 10.32:
Question 22:
Venus Ltd. had 9,000, 9% Debentures of ₹ 100 each due for redemption . These debentures are
to be redeemed in 3 equal installments (starting from 31st March,2015) at a premium of 10%.
The company had a balance of ₹ 25,000 in the Debentures Redemption Reserve .
Pass necessary entries for redemption of debentures assuming that company transfer the balance
of DRR to General Reserve after redeeming all the debentures.
Answer:
Journal
Debit Credit
(₹) (₹)
2014
2015
2016
2017
Working Notes:
Amount to be transferred to DRR=9,00,000×25100=2,25,000Existing Balance in DRR=Rs 25,00
0Net Amount to be Transferred=2,25,000−25,000=Rs 2,00,000Amount transferred to DRI=9,00,
000×15100=1,35,000 (in three equal instalments of 45,000 each)
Page No 10.32:
Question 23:
Shakti Enterprises Ltd. issued 30,000;8% Debentures of ₹ 100 each on 1st October ,2014
redeemable in five equal annual installments starting with 31st March, 2018. The Board decides
to transfer to Debentures Redemption Reserve ₹ 50,000 and ₹ 4,00,000 on 31st March 2015 and
2016 respectively and balance required to be transferred to Debentures Redemption Reserve on
31st March, 2017.
Pass journal entries.
Answer:
Journal
Debit
Credit
Date Particulars L.F. Amount Amount
Rs
Rs
2014
(Debentures issued)
2015
March
Statement of Profit & Loss Dr. 50,000
31
(DRR created)
2016
March
Statement of Profit & Loss Dr. 4,00,000
31
(DRR created)
2017
March
Statement of Profit & Loss Dr. 3,00,000
31
(DRR created)
April
Debenture Redemption Investment A/c* Dr. 90,000
30
2018
March
8% Debenture A/c Dr. 6,00,000
31
March
Bank A/c Dr. 90,000
31
March
Debentureholders’ A/c Dr. 6,00,000
31
April
Debenture Redemption Investment A/c* Dr. 90,000
30
March
8% Debentures A/c Dr. 6,00,000
31
March
Bank A/c Dr. 90,000
31
March
Debentureholders’ A/c Dr. 6,00,000
31
April
Debenture Redemption Investment A/c* Dr. 90,000
30
2020
March
8% Debentures A/c Dr. 6,00,000
31
March
Bank A/c Dr. 90,000
31
March
Debentureholders’ A/c 6,00,000
31
April
Debenture Redemption Investment A/c* Dr. 90,000
30
2021
March
8% Debentures A/c Dr. 6,00,000
31
March
Bank A/c Dr. 90,000
31
March
Debentureholders’ A/c Dr. 6,00,000
31
April
Debenture Redemption Investment A/c* Dr. 90,000
30
2022
March
8% Debentures A/c Dr. 6,00,000
31
March
Debentureholders’ A/c Dr. 6,00,000
31
March
Debenture Redemption Reserve A/c Dr. 7,50,000
31
*As per circular no. 04/2015 issued by Ministry of Corporate Affairs (dated 11.02.2013), every
company required to create/maintain DRR shall on or before the 30th day of April of each year,
deposit or invest, as the case may be, a sum which shall not be less than fifteen percent of the
amount of its debentures maturing during the year ending on the 31st day of March next
following year. Accodingly, entry for investment in Government securities has been passed a
year before first redemption year and will be passed before redemption of debentures every year
in case of draw of lots.
Note: Since the question is silent regarding the payment of interest, the following entries may be
passed at the end of every year (i.e. on 31 March before the redemption of debentures). However,
it is not essential to pass these entries unless explicitly stated in the question.
(Interest due)
Interest Rate
×
Debentureholders’ A/c Dr. Amt. of Debentures outstanding
To Bank A/c
Page No 10.32:
Question 24:
Tata Motors Ltd. issued 40,000;7% Debentures of ₹ 100 each on 1st July,2009 redeemable at
premium of 5% as under:
Answer:
Rs Rs
2009
2012
March
Statement of Profit and Loss Dr. 2,00,000
31
To Debenture Redemption Reserve A/c 2,00,000
(Surplus amount is transferred to Debenture Redemption
Reserve)
2013
March
Statement of Profit and Loss Dr. 4,00,000
31
To Debenture Redemption Reserve A/c 4,00,000
(Surplus amount is transferred to Debenture Redemption
Reserve)
2014
March
Statement of Profit and Loss Dr. 4,00,000
31
To Debenture Redemption Reserve A/c 4,00,000
(Surplus amount is transferred to Debenture Redemption
Reserve)
April
Debenture Redemption Investment A/c Dr. 2,40,000
30
To Bank A/c 2,40,000
(Investment is made in specified securities equal to 15% of
the value of debentures redeemed on March 31, 2014)
2015
March
7% Debenture A/c Dr. 16,00,000
31
Premium on Redemption A/c Dr. 80,000
March
Debenture holders Dr. 16,80,000
31
To Bank A/c 16,80,000
March
Debenture Redemption Reserve A/c Dr. 4,00,000
31
March
Debentureholders’ A/c Dr. 16,80,000
31
To Bank A/c 16,80,000
March
Debenture Redemption Reserve A/c Dr. 4,00,000
31
2017
March
7% Debenture A/c Dr. 8,00,000
31
Premium on Redemption of Debentures A/c Dr. 40,000
March
Bank A/c Dr. 6,00,000
31
To Debenture Redemption Investment A/c 6,00,000
March
Debenture Redemption Reserve A/c Dr. 2,00,000
31
To General Reserve A/c 2,00,000
(Debenture Redemption Reserve transferred to General
Reserve)
Working Note:
WN1
Page No 10.32:
Question 25:
'Ananya Ltd.' had an authorised capital of ₹ 10,00,00,000 divided into 10,00,000 equity shares
of ₹ 100 each. The company had already issued 2,00,000 shares. The dividend paid per share for
the year ended 31st March,2007 was ₹ 30 . The management decided to export its products to
African countries . To meet the requirements of additional funds, the finance manager put up the
following three alternate proposals before the Board of Directors:
(a) Issue 47,500 equity shares at a premium of ₹ 100 per share .
(b) Obtain a long-term loan from bank which was available at 12% per annum.
(c) Issue 9% Debentures at a discount of 5%.
After evaluating these alternatives , the company decided to issue 1,00,000,9% Debentures on
1st April,2008. The face value of each debentures was ₹ 100 . These debentures were
redeemable in four installments starting from the end of third year, which were as follows:
Year III IV V VI
Prepare 9% Debenture Account form 1st April, 2008 till all the debentures were redeemed.
Answer:
9% Debentures Account
Dr. Cr.
Amount Amount
Date Particulars J.F. Date Particulars J.F.
Rs Rs
2009 2008
Mar. Apr. Debenture Application
Balance c/d 1,00,00,000 95,00,000
31 01 A/c
Apr. Discount on Issue of
5,00,000
01 Debentures A/c
1,00,00,000 1,00,00,000
2010 2009
Mar. Apr.
Balance c/d 1,00,00,000 Balance b/d 1,00,00,000
31 01
1,00,00,000 1,00,00,000
2011 2010
Mar. Debentureholders’ Apr.
10,00,000 Balance b/d 1,00,00,000
31 A/c 01
Mar.
Balance c/d 90,00,000
31
1,00,00,000 1,00,00,000
2012 2011
Mar. Debentureholders’ Apr.
20,00,000 Balance b/d 90,00,000
31 A/c 01
Mar.
Balance c/d 70,00,000
31
90,00,000 90,00,000
2013 2012
Mar. Debentureholders’ Apr.
30,00,000 Balance b/d 70,00,000
31 A/c 01
Mar.
Balance c/d 40,00,000
31
70,00,000 70,00,000
2014 2013
Mar. Debentureholders’ Apr.
40,00,000 Balance b/d 40,00,000
31 A/c 01
40,00,000 40,00,000