Paper/Subject Code:44802 Financial Accounting: VI Q.P.

CODE: 75847

Q 1) Fill in the blanks with the correct alternative (1 mark each) [08]

1. Other liabilities
2. Substandard
3. 15
4. all of the above
5. RBI
6. 60 months
7. future maintainable profit
8. 2 partners
9. all of the above
10. location of the customers

Q 1 B) State whether the following statements are true or false.(1 mark each) [07]

1. False
2. False
3. True
4. True
5. True
6. True
7. True
8. True
9. True
10. True

Q.2) Bank Ltd.

Profit and loss account for the year ending 31st March, 2019:

Particulars Schedule Amount Marks

No
I. Income
Interest Earned 13 7,600 1
Other Income 14 618 2
Total 8,218 ½
II. Expenses
Interest Expenses 15 4,000 1
Operating expenses 16 1,250 3
Provisions and contingencies 1,323 2
Total 7,273 ½
 III. Profit/ Loss(I-II)
Net profit for the year 1,645 1
Profit Brought forward 1,000 ½
Total 2,645 ½
IV. Appropriations
Transfer to Statutory Reserve 411.25 1
(25% of Rs.1,645)
Proposed dividend and dividend tax 200 1
Balance carried over to balance sheet 2,033.75 1
2645

Schedules

Particulars Amount ‘000

Schedule 13: Interest Earned
Interest earned 5,000
Discount earned 2,600
7,600
Schedule 14: other Income
Commission, exchange and brokerage 390
Add: Profit on sale of Investments 180
Less: loss on sale of assets 76
Rent 124
Total 618
Schedule 15: interest expenses
Interest Paid 4000
Schedule 16: other expenses
Payment and provisions for employees 420
Rent and taxes 140
Stationery 120
Directors fees 70
Auditors fees 16
Depreciation 62
Postage, telegrams 122
Printing and Stationery 300
Total 1,250

Working Notes
Calculation of Amount of Income Tax Rs
Income 8,218
Less-Interest Expenses 4,000
Operating Expenses 1,250
2,968
Provision for IncomeTax@35% 1,039
2. Provision and Contingencies
Provision for Doubtful Debts 284
Provision for Income Tax 1,039
1,323

Q 2) Prateeth Bank Ltd.

Balance Sheet as on 31st March, 2019.

Particulars Schedule Amount Marks

No
Capital and Liabilities:
Capital 1 1,000 1
Reserves and Surplus 2 2,398 1½
Deposits 3 32,000 1
Borrowings 4 200 1
Other liabilities and provision 5 11,202 1½
Total 46,800 ½

Assets
Cash and balance with Reserve Bank of India 6 3,400 1
Balance with bank and Money at call and short notice 7 1,400 1
Investments 8 12,800 1
Advances 9 10,900 1
Fixed Assets 10 12,000 1
Other Assets 11 6,300 1
Total 46,800 ½

Contingent liabilities 12 1,700 1

Bill for collection 8,000 1

Schedules

Particulars Amount ‘000

Schedule1 : Share Capital
Share Capital 1,000
1,000
Schedule 2: Reserves and surplus
Statutory Reserves
Opening Balance 1,600
Additions 42
1,642
Dividend Equalisation Reserve 400
Profit and loss account 356
2398
Schedule 3: Deposits
Demand deposits 22,000
Savings bank deposits 6,000
Term deposits 4,000
32,000
Schedule 4: Borrowings
Borrowings 200
200
Schedule 5: Other Liabilities and Provisions
Bills Payable 2,000
Unexpired discount(50000 + 2000) 52
Unclaimed dividend 150
Depreciation fund(80,00,000 + 10,00,000 ) 9,000
11,202
Schedule 6 : Cash and balance with Reserve Bank of India
Balance with RBI 3,400
3,400
Schedule 7: Balance with bank and Money at call and
short notice
Balance with bank 1,200
Money at call and short notice 200
1,400
Schedule 8: Investments
Government Securities 10,000
Debentures and bond 400
Bullion 2,400
12,800

Schedule 9: Advances
Bills discounted and purchased 900
Loans and Advances 10,000
10,900
Schedule 10: Fixed Assets
Premises 10,000
Addition 2,000
12,000
Schedule 11: Other Assets
Inter- office Adjustments 5,700
Interest accrued 250
Non-Banking Assets 100
Advance payment of Tax 50
Others (silver) 200
6,300
Schedule 12: Contingent Liabilities
 Acceptances 500
Claim against the Bank but not acknowledged as a debt 200
Liabilities for forward exchange contract 1,000
1,700
Bills discounted 32,000
Q.3 A)

Form B-RA (Prescribed by IRDA)

GENERAL INSURANCE COMPANY

REVENUE ACCOUNT FOR THE YEAR ENDED 31st MARCH, 2019

Particulars Marks Schedule ₹

1. Premiums earned (Net) 5 1 75,56,000
2. Interest, Dividend and Rent ...
3. Other Income ...

Total (A) 1 75,56,000

4. Claims incurred (Net) 2 2 51,63,000

5. Commission 2 3 1,57,000
6. Operating Expenses Related to Insurance Business 3 4 1,90,000
7. Bad Debts ...

Total (B) 1 55,10,000

Operating Profit (A-B) 1 20,46,000

Schedules Forming Part of Revenue Account

Particulars ₹
Schedule 1 : Premium Earned (Net)
Premium from Direct Business 75,25,000
Add: Premium on Reinsurance Accepted 8,25,000
Less: Premium on Reinsurance Ceded (4,90,000)
Net Premium 78,60,000
Adjustment for change in Reserve for unexpired risks (WN 2) (3,04,000)
Total Premium Earned (Net) 75,56,000
 Schedule 2 : Claims Incurred (Net)
Claims paid on Direct Business (WN 1) 51,23,000
Add: Reinsurance Accepted (WN 1) 4,85,000
Less: Reinsurance Ceded (WN 1) (4,45,000)
Net Claims Paid 51,63,000

Schedule 3 : Commission
Commission paid on Direct Business 1,60,000
Add: Commission on Reinsurance Accecpted 15,000
Less: Commission on Reinsurance Ceded (18,000)
1,57,000
Schedule 4 : Operating Expenses related to Insurance Business
Expenses of Management (2,90,000 - 45,000 - 55,000) 1,90,000
1,90,000
Working Notes :
1. Claims Incurred
Particulars Direct Re-insurance Re-insurance
Business Accepted Ceded
₹ ₹ ₹
Paid / Received 49,50,000 5,10,000 3,95,000
Add: Outstanding at the end of the year 70,000 1,25,000
7,38,000
Add: Expenses in connection with settlement of Claim
(45000 + 55000) 1,00,000
Less: Outstanding at the beginning of the year (6,85,000) (95,000) (75,000)
51,23,000 4,85,000 4,45,000

2. Change in Reserve for Unexpected Risk

Particulars ₹
Opening Reserve as on 31st March, 2018 ....................... 28,40,000
Less: Closing Reserve as on 31st March, 2019 (₹ 78,60,000 × 40% ) ........................ (31,44,000)
(3,04,000)

Q. 3)B. Form B - RA

REVENUE ACCOUNT FOR THE YEAR ENDED 31st MARCH, 2019 (3 Marks)

Particulars Schedule Current Year

₹
 1. Premium earned (net) 1 2,22,475
Total (A) 2,22,475
1. Claims incurred (Net) 2 68,100
2. Commission 3 31,170
3. Operating Expenses related to Insurance Business 4 48,480
Total (B) 1,47,750
Operating Profit / Loss from Fire Insurance Business (A - B) 74,725

Form B - PL
Profit and Loss Account for the year ended 31st March, 2019 (3 Marks)
Particulars Schedule Current Year ₹
1. Operating Profit / (Loss)
Fire Insurance 74,725
2. Income from Investments 15,300
3. Other Income (to be specified) -
Total (A) 90,025
4. Provision (other than taxation) -
5. Other Expenses -
Total (B) Nil
Profit before tax A – B 90,025
Provision for taxation 31,400
Profit after tax 58,625
Appropriations
Transfer to General Reserve (20,000)

Balance of Profit / Loss brought from last year 7,500

Balance carried forward to Balance Sheet 31,125

Schedules Forming Part of Revenue Account

Schedule 1 : Premium Earned (Net)(3 marks)

Particulars Current Year Current Year

₹ ₹
 Premium Received (Note 3) 2,70,150
Less : Re - insurance 11,200 2,58,950
Adjustment for Changes in Reserve for Unexpired Risk
Opening Balance of Reserve (₹ 93,000 + 33,000) 1,26,000
Less : Closing Balance of Reserve (50% of 2,58,950) 1,62,475 (36,475)
(₹ 1,29,475 + 33,000) 2,22,475

Schedule 2 : Claims Incurred (Net) (2 ½ marks )

Particulars Current Year Current Year

₹ ₹
Claims Paid during the year
Direct 60,200
Add : Survey Fees 3,600
Legal Expenses 2,000 65,800
Less : Received from Re - insurance 2,100
Add : Claims outstanding at the end of the year
10,4000
74,100
Less : Outstanding claims at the beginning of the year 6,000
68,100

Schedule 3 : Commission (1 ½ marks )

Particulars Current Year

₹
Commission Paid :
Direct 29,970
Add : Re - insurance accepted 6,000
35,970
Less : Commission on Re - insurance ceded (4,800)
Net Commission 31,170

Schedule 4 : Operating Expenses (2 marks )

Particulars Current Year Current Year

₹ ₹
Expenses of Management 43,180
Rates and Taxes 550
Rent 6,750
Audit Fees 3,600 54,080
 Less : Survey fees relating to claims 3,600
Legal Expenses relating to claims 2,000 (5,600)
48,480

Working Notes :

1. Reserves for Unexpired risk = 50% of ₹ 2,58,950= ₹ 1,29,475

The total closing balance of reserve for unexpired risk will be : ₹ 1,29,475+ ₹ 33,000 =

₹ 1,62,475

Q.4)

Statement of Assets and Liabilities as at 31st March, 2019 (8 Marks)

Particulars Sch. ₹
I. Contribution and Liabilities
1. Partners; Funds
Contribution Received 1 71,000
2. Liabilities
Secured Loans 2 22,000
Creditors / Trade/ Payables 3 29,500
Total 1,22,500
II. Assets
Gross Fixed Assets 71,000
Less : Depreciation and Amortization (4,000)
Net Fixed Assets 4 67,000
Loans and Advances 5 3,000
Inventories 6 30,000
Debtors / Trade Receivables 7 17,500
Cash and Cash Equivalents 5,000
Total 1,22,500

Statements of Income and Expenditure for the period from 1-4-2018 to 31-3-2019 (7 Marks)

Particulars Sch. ₹
Income
Net Turnover 60,000
Other Income 8 5,500
Increase / (Decrease) in Stock 9 10,000
Total 75,500
Expenses
Purchases made for Resale 10 30,000
Power and Fuel 11 3,000
Personnel Expenses 12 16,000
Administrative Expenses 13 7,000
Selling Expenses 14 5,500
Insurance Expenses 2,000
Depreciation and Amortization 15 4,000
Interest 16 2,000
Total 69,500
Profit transferred to Partners' Account 17 6,000

Schedules / Notes to Accounts ₹

Contribution
Alex
Balance b/d (Opening) 40,000
Add / (Less) : Net Profit / (Loss) 3,000
Less : Drawings (2,000)
Net Balance 41,000
Rex
Balance b/d (Opening) 30,000
Add / (Less) : Net Profit / (Loss) 3,000
Less : Drawings (3,000)

Net Balance 30,000

Total 71,000
Secured Loans
Bank Loans 20,000
Add: Interest Accrued 2,000
Total 22,000
Creditors / Trade Payables
Sundry Creditors ---------------------- 20,000
Add: Unrecorded Purchases ------------------------ 5,000
O/s Wages 25,000
O/s Salary 1,000
O/s Rent 2,000
Total 1,500
29,500
Fixed Assets

Fixed Assets Gross Depr. WDV

Tangible Assets
Land and Building 30,000 (1,500) 28,500
Plant and Machinery 25,000 (2,500) 22,500
Furniture 16,000 -- 16,000
Total 71,400 (4,000) 67,000

5. Loans and Advances

Prepaid Advertisements 3,000
6. Inventories
Closing Stock 30,000
7. Debtors / Trade Receivable
Debtors 12,000
Less: Bad Debts (2,000)
Less: Reserve for Doubtful Debts (500) 9,500
Bills Receivable 8,000
Total 17,500
8. Other Income
Commission 5,000
Discount 500
Total 5,500
9. Increase / Decrease In Stock
Closing Stock 30,000
Less: Opening Stock (20,000)
Total 10,000
10.Purchases
Purchases (Gross) 25,000
Add: Unrecorded 5,000
Total 30,000

11. Power and Fuel

Electricity 3,000
12. Personnel Expenses
Wages 5,000
Add: Outstanding 1,000 6,000
Salaries 8,000
Add: Outstanding 2,000 10,000
Total 16,000
13. Administrative Expenses
Rent 7,000
14. Selling Expenses
Advertisement 6,000
Less : Prepaid (3,000) 3,000
Bad Debts 2,000
New Reserve for DD 500 2,500
Total 5,500
15. Depreciation and Amortization
Land and Building 1,500
Plant and Machinery 2,500
Total 4,000
16. Interest
Interest on Loan 2,000
2,000
17. Profit Transferred From P&L A/c
6,000
Alex 3,000
Rex 3,000
Profit Transferred To Partners 6,000

Q.4. A)
Adjusted Past Profits before Tax for the Last Five Years (3marks)
Year ended Given Profit Rate of Profit before Adjustment Adjusted
after tax income tax tax of Abnormal Profits
items before tax
31-03-10 1,80,000 40% 3,00,000 (+) 30,000 3,30,000
31-03-11 3,38,000 35% 5,20,000 - 5,20,000
31-03-12 3,64,000 35% 5,60,000 - 5,60,000
31-03-13 2,60,000 35% 4,00,000 (-) 40,000 3,60,000
31-03-14 4,20,000 30% 6,00,000 6,00,000
23,70,000

Capital Employed (3marks)

Particulars Working Amount (Rs.)
Assets
Freehold property 3,00,000*110% 3,30,000
Plant 3,00,000*110% 3,30,000
Furniture 2,00,000*110% 2,20,000
Car 50,000* 110% 55,000
Stock 2,50,000
Debtors 3,50,000
Cash 50,000
Total assets 15,85,000
 Liabilities
10% debenture 2,00,000
Bills payable 2,50,000
Total Liabilities 4,50,000
Closing Average capital 11,35,000

Working (2marks)
Particulars Working Amount(Rs.)
(iii)Future Maintainable profit
Average Past Profits 23,70,000 / 5 474,000
Less: Income -tax @ Future Rate 4,74,000*30% 142,200
Future Maintainable Profits (FMP) 331,800
Less: Return on capital Employed 16%*11,35,000 181,600

(iv)Super Profits FMP-ROC 150,200

(v) Goodwill @3 years Purchase 1,50,200*3 450,600

Q.4) B)
Net Assets (3 Marks)
Particulars ₹ ₹
Assets
Machinery 6,37,200
Furniture 2,00,000
Stock 12,40,000
Debtors 4,12,000
Cash 6,800
Bank 8,68,000 33,64,000
Less : Liabilities
Sundry Creditors 8,81,000
Provision for Taxation 3,96,000 12,14,000
Amount available to equity shareholder 21,50,000

Value of Equity Share as per Intrinsic value method

AMOUNT PROFIT 21,50,000
= = = Rs. 43
SHARE CAPITAL 50,000
(b) Value of Equity Shares as per Yield Value (4 Marks)

Year Profit
31-3-2012 5,44,000
31-3-2013 7,32,000
31-3-2014 7,88,000
20,64,000
Average Profit before Tax 6,88,000
Less : Provision after Tax 3,44,000
Average Profit after Tax 3,44,000
Less : Transfer to General Reserves @20% 68,800
2,75,200

AMOUNT PROFIT
Expected rate of return = SHARE CAPITAL
x 100

21,50,000
x100 = 27.52%
50,000

Expected rate or return

Value of Share= x Paid up value
NRR

27.52
x 20 = 27.52%
20

OR

Profit available to Equity Shareholders 2,75,200

Normal rate of Return 20%
Capitalised Earning (Future Maintainable Profit) 13,76,000
No. of Equity Shares of ₹ 20 each 50,000
Value of Equity Shares ₹27.52

Q 5A) Meaning of NBFCs. (1 mark)

Types : (7 marks , 1 Mark each point)

1. Asset finance company

2. Investment Company

3.Loan Company

4. Infrastructure Finance Company

5. Infrastructure Debts Fund

6. Factors
7. Core investment Company

8. Others

B)Distinguish between Banks & NBFCs.: (7 marks , 1 Mark each point)

1. Meaning

2.Demand Deposit

3. Issue Cheques

4. Payment and settlement system

5. Deposit Insurance

6. Licensing Requirement

7. Priority Sector Lending Requirement

8. Others

Q 5 Write Short notes on:

1. Capitalization method: .Capitalization value of average profit method Under

this method we calculate the average profits and then assess the capital needed for
earning such average profits on basis of normal rate of return. such capital is
calledcapitalization value of average profit.

2. Designated partner: In case of a LLP in which all the partners are bodies corporate
or in which one or more partners are individuals and bodies corporate, at least two
individuals who are partners of such LLP or nominees of such bodies corporate shall
act as designated partners.

3. Factors affecting share valuation

Demand and supply.

Bank rate.
Market players.
Dividend /announcements.
Management profile.
Trade cycle.
Speculation.
Political factors.

4. Reinsurance
Reinsurance is insurance that an insurance company purchases from another
insurance company to insulate itself (at least in part) from the risk of a major claims
event. With reinsurance, the company passes on ("cedes") some part of its own
insurance liabilities to the other insurance company. The company that purchases the
reinsurance policy is called a "ceding company" or "cedent" or "cedant" under most
arrangements. The company issuing the reinsurance policy is referred simply as the
"reinsurer".

5. Non-Performing assets of Bank.

A non performing asset (NPA) is a loan or advance for which the principal or interest
payment remained overdue for a period of 90 days. Description: Banks are required to
classify NPAs further into Substandard, Doubtful and Loss assets.