TYBCOM Sem 5 Financial Accounting Question Paper 2019
April 2019
[3 Hours] [Total Marks 100]
N.B.
1) All questions are compulsory. Questions 2 to 6 have an internal choice
2) Figures to the right indicate full marks.
3) Use of simple calculators is allowed.
4) Working notes should form part of your answer.
Q1 A) State whether the following statements are True or False (Any 10) (10 Marks)
- In Fixed Assets Note, Opening Net Block = Opening Gross Block — Opening Depreciation.
- Shareholders’ Funds are always non-current Liabilities.
- Goodwill is classified as Fixed Asset under Schedule III of the Companies Act
- Security Premium can be transferred to Capital Reduction Account.
- A company can subdivide shares of large denomination into shares of smaller denomination.
- After buy back of equity shares, the debt-equity ratio should not exceed 2:1.
- Only fully paid-up equity shares can be bought back.
- Interest is calculated on Market Value of securities.
- Ex-Interest price Less Accrued interest = Cost of the investment.
- Corporate Social Responsibility policy to be undertaken by the company are specified in the Companies Act, 2013.
- The Professional Code of Ethics is voluntary for professional body members.
- Lowest degree of accountants’ ethical behaviour leads to creative accounting
Q1 B) Match the following Column A with Column B (any 10) (10 Marks)
| COLUMN A | COLUMN B |
| Sundry Creditors | Company is liquidated |
| Currents Assets | Variable Income Bearing Securities |
| Internal Reconstruction | Shares of ₹1 each converted into shares of ₹10 each |
| Consolidation | Is credited to Profit and Loss A/c |
| No Journal entry is required | Investment Accounting |
| Surrender of shares | For cancelling un-issued shares |
| Equity shares | Source of Buy-Back |
| Profit on Sale of Investments | Giving up possession of shares |
| Accounting Standard 13 | Current Liabilities |
| One of the Objective of Buy-Back of Equity Shares | Rules expected to be followed by all |
| Free reserve + Securities Premium | Advance recoverable in Cash |
| Ethics | Increase in the earning per share Company is not liquidated |
| Rules that must be followed by all |
Q2) Following Is the Summarized Balance Sheet of Tiger Ltd. As on 31-03-2018:(15 Marks)
| Liabilities | ₹ | Assets | ₹ |
| 6,000 10% Cumulative Preference Shares of ₹100 each, fully paid up | 6,00,000 | Goodwill | 2,00,000 |
| 15,000 Equity Shares of ₹100 Each, fully paid up | 15,00,000 | Building | 19,50,000 |
| Loan | 2,22,000 | Machinery | 70,000 |
| Creditors | 7,50,000 | Debtors | 2,88,000 |
| Stock | 4,00,000 | ||
| Cash and Bank Balance | 1,26,000 | ||
| Profit & Loss A/c | 38,000 | ||
| TOTAL | 30,72,000 | TOTAL | 30,72,000 |
Note: Preference Dividend was in arrears for 2 years.
The Board of Directors of the company decided to go for internal reconstruction, which was
approved by the court and carried on as follows:
- Paid up value of Equity Shares shall be reduced by 50%, face value being ₹ 100/-
- The Machinery was revalued at 90,000
- The value of stock was reduced by ₹ 1,00,000
- Building shall be written down to ₹ 15,50,000
- Creditors agreed to forego their claims by 10%
- Loan was fully settled for ₹ 2,00,000
- Intangible and fictitious assets to be written off.
- Cost of reconstruction expenses was paid ₹ 5,000.
- Arrears of preference dividend are to be settled by issuing 13% debentures of ₹ 100 each fully paid with regard to 80% of their dues and for the balance equity shares of ₹ 100 each ( ₹ 50 paid up) shall be issued.
- Preference share are to be converted into 13% debentures of ₹100 each fully paid with regard to 80% of their dues and for the balance equity shares of ₹100 each (₹50 paid up) shall be issued.
- All equity shareholders agreed to pay the balance amount, making shares fully paid
You are required to:
1) Pass Journal Entries in the books of the Company (Narration not required)
2) Prepare Capital Reduction A/c
OR
Q2) The Balance sheet of Aza Ltd as on 31st March 2018 (15 Marks)
| Liabilities | ₹ | Assets | ₹ |
| 10,000 6% Preference Shares of ₹100 each, fully paid up | 10,00,000 | Goodwill | 1,60,000 |
| 80,000 Equity Shares of ₹10 each, fully paid up | 8,00,000 | Patents and Trade Marks | 40,000 |
| Capital Reserve | 50,000 | Building | 4,30,000 |
| 5% Bank Loan | 4,00,000 | Plant & Machinery | 5,10,000 |
| Accrued interest on Bank Loan | 60,000 | Furniture | 1,20,000 |
| Creditors | 3,10,000 | Stock | 1,80,000 |
| Debtors | 1,50,000 | ||
| Cash at Bank | 25,000 | ||
| Cash in Hand | 5,000 | ||
| Profit & Loss A/c | 8,00,000 | ||
| Share Issue Expenses | 2,00,000 | ||
| TOTAL | 26,20,000 | TOTAL | 26,20,000 |
Note: The Preference Dividend is in arrears for 4 years.
It was decided to reconstruct the Company for which the following Scheme was approved by the Court.
1.The 6% Preference Shares shall be converted into 7% Preference Share of ₹50 each, the number of preference shares remaining the same.
2.The Equity Shares shall be reduced to 3 each.
3.The amount of bank loan shall be converted into 6% Debentures at 75% of its bcok value.
4. 50% of the accrued interest on bank loan is waived off.
5. Arrears of Preference Dividend to be cancelled.
6. Intangible and fictitious assets are to be written of completely.
7.The Creditors agreed to waive 30% of their claims and to accept equity shares for 360, 000 in part settlement of their renewed claims.
8.The assets are to be revalued as follows:
Building ₹5,00,000
Plant & Machinery ₹4,50,000
Furniture & Fixtures ₹1,10,000
Stock ₹1,60,000
Debtors ₹1,40,000
Give journal entries (without narration) and show Notes to Accounts on Share Capital and Reserves & Surplus forming part of Balance Sheet after reconstruction.
Q3 A) The following are the balances extracted from the books of Nayantara Ltd. as on 31st March, 2018. (15 Marks)
| Particulars | Debit | Particulars | Credit |
| Premises | 18,00,000 | Provision for Depreciation on | |
| Furniture | 42,000 | -Premises | 36,000 |
| Calls-in-Arrears | 45,000 | -Machinery | 99,000 |
| Plant and Machinery | 19,80,000 | -Furniture | 7,200 |
| Interim Dividend Paid | 2,25,000 | 10% Bank Loan (Long Term) | 18,00,000 |
| Sundry Debtors | 5,22,000 | Surplus A/c (Opening Balance) | 87,000 |
| Goodwill | 2,28,000 | Profit for the year | 4,50,000 |
| Cash and Bank Balance | 2,28,200 | Sundry Creditors | 3,00,000 |
| Stock | 2,69,350 | Bills Payables | 2,28,000 |
| General Reserve | 1,50,000 | ||
| Provisions for Doubtful Debts | 24,900 | ||
| Equity Paid up Capital | 21,00,000 | ||
| Outstanding Salaries | 3,000 | ||
| Outstanding Directors Fees | 1,650 | ||
| Outstanding Debenture Interest | 54,000 | ||
| Total | 53,40,750 | Total | 53,40,750 |
Additional Information:
1. The authorized capital of the Company was ₹36,00,000 in Equity Shares of ₹100 each.
2. The Company proposed a final dividend of 10% (excluding interim dividend paid)
3. 10% Bank Loan is secured against Premises.
4. Sundry Debtors include 350,000 due for more than six months.
5. Sundry Creditors include ₹60,000 for expenses.
You are required to prepare the Balance Sheet of Nayantara Ltd. in vertical format along with its notes to accounts as at 31st March, 2018.
Q3 B) The following is the trial balance of Payal Ltd. as on 31st March, 2018. You are required to prepare a statement of Profit and Loss in vertical format along with its notes to accounts as on that date.
(15 Marks)
| Debit Balances | ₹ | Credit Balances | ₹ |
| Calls-in-Arrears | 10,000 | 30,000 Equity Shares of ₹10 | 3,00,000 |
| Building | 2,00,000 | each, fully called up | 1,20,000 |
| Machinery | 1,50,000 | Surplus A/c (1-4-2017) | 1,50,000 |
| Bills Receivables | 6,200 | Capital Redemption Reserve | 3,50,000 |
| Investment | 50,000 | Sales | 400 |
| Sundry Debtors | 79,800 | Commission | 800 |
| Bad Debts | 500 | Provision for Bad Debts | 28,700 |
| Printing and Stationery | 8,000 | Sundry Creditors | 10,000 |
| Freight Outward | 6,000 | Bills Payables | |
| Wages | 11,200 | ||
| Salaries | 18,700 | ||
| Rent | 7,500 | ||
| Advertisement | 12,000 | ||
| Purchases | 80,000 | ||
| Cash at Bank | 1,00,000 | ||
| Cash in Hand | 70,000 | ||
| Opening Stock | 1,50,000 | ||
| TOTAL | 9,59,000 | TOTAL | 9,59,000 |
Additional Information:
1. Charge depreciation- Building at 5%, Machinery at 10%
2. Write off further ₹1,000 and make 5% provision for bad debts.
3. Bills Receivable included dishonored bill of ₹1,200 not yet recorded.
4. Goods destroyed by fire were 3,000, and insurance company accepted claim for ₹1,800 only.
5. Goods costing ₹1,500 sent on sale or return basis for which no intimation is received from
customer, have been treated as sales at a price of ₹2,000.
6. 20% dividend is proposed after transfer of ₹40,000 to tax provision.
7. Stock as on 31st March, 2018 was ₹1,20,000.
Q4 A) On 1/4/2017 Dr. Jude holds 2,000 10 % Debentures of ₹100 each in JR Ltd. at a cost of ₹2,50,000. During the year he purchased and sold debentures as follows: (15 Marks)
1. On 1/6/2017, 1,000 10% Debentures of ₹100 each are purchased cum-interest at a cost of ₹1,06,000.
2. On 1/11/2017, 1,200 10% Debentures of ₹100 each are purchased ex-interest at a cost of ₹1,17,600.
3. On 30/11/2017, 1,000 10% Debentures of ₹100 each are sold ex-interest at a cost of ₹1,20,000.
4. On 1/12/2017, 1,500 10% Debentures of ₹100 each are sold cum-interest at a cost of ₹1,47,000.
5. On 1/2/2018, 500 10% Debentures of ₹100 each are purchased cum-interest at a cost of ₹51,000.
6. Interest is payable on 30th June and 31st December every year. The Books of accounts are closed on 31st March every year.
Prepare 10% Debenture Account in the books of Dr. Jude for the year ends on 31st March, 2018.
OR
Q4 B) Mss. Barkha gives you her following details of investment in equity shares of MP Ltd having face value of ₹10 each. (15 Marks)
| Date | Particulars | Numbers of Equity Shares | Market Price ₹ |
| 20/05/2017 | Purchased | 100 | 15 |
| 25/06/2017 | Purchased | 200 | 18 |
| 30/07/2017 | Purchased | 300 | 20 |
| 16/08/2017 | Sold | 200 | 25 |
| 18/09/2017 | Sold | 100 | 23 |
| 10/10/2017 | Bonus issue | One share for three held | 12 |
| 22/02/2018 | Purchased | 200 | 22 |
On 21st March, 2018 the Company announced right issue of equity shares in the ratio of 3:2. She purchased all right issues at market price of ₹24 per share.
Market Price of shares on 31st March, 2018 is ₹16.
Prepare Equity Shares Account in Ms. Barkha’s books for the year ended 31st March, 2018.
Q5 A) The summarized Balance Sheet of Bhagya Ltd. as on 31-03-2018 is as follows: (15 Marks)
| Particulars | ₹ |
| Share Capital | |
| Equity shares of ₹10 each fully paid | 50,00,000 |
| Securities Premium | 5,00,000 |
| General Reserve | 20,00,000 |
| Profit & Loss Account | 25,00,000 |
| 12% Debentures | 40,00,000 |
| Bank Loan | 10,00,000 |
| Trade Payables | 40,00,000 |
| Total | 1,90,00,000 |
| Fixed Assets (Net Block) | 60,00,000 |
| Long Term Investments | 50,00,000 |
| Cash at Bank | 30,00,000 |
| Other Current Assets | 50,00,000 |
| Total | 1,90,00,000 |
The Company decided to buy back 1,00,000 equity shares of ₹10 each at an offer price of ₹30 per share. For this purpose, the company took the following steps:
i) Issued 3,000 8% Preference shares of ₹100 each at a premium of 5%.
ii) Sold 70% of Investments at a profit of 10%.
Pass Journal entries in the books (without narration) of the Company and prepare Notes to Accounts with respect to Share Capital, Reserves & Surplus and Cash & Cash Equivalent as on 31st March 2018.
(Do not prepare Balance Sheet)
OR
Q5 B) The following is the Balance Sheet of Suyash Ltd. as on 31-03-2018: (15 Marks)
| Liabilities | ₹ | Assets | ₹ |
| Share Capital: | Fixed Assets: | ||
| Authorised: | Land and Building | 30,00,000 | |
| 10,00,000 Equity shares of ₹10 each | 1,00,00,000 | Plant & Machinery | 30,00,000 |
| Issued: | Furniture | 22,00,000 | |
| 8,00,000 Equity Shares of ₹10 each ₹8 paid up | 64,00,000 | Investments | 15,00,000 |
| Reserves and Surplus: | Current Assets, Loans & Advances | ||
| Security Premium | 20,00,000 | Stock | 19,00,000 |
| General Reserves | 15,00,000 | Accounts Receivables | 58,00,000 |
| Profit and Loss Account | 45,00,000 | Bank | 40,00,000 |
| Secured Loan: | |||
| 11% Debentures | 35,00,000 | ||
| Unsecured Loans: | |||
| Bank Term Loan | 15,00,000 | ||
| Current Liabilities & Provisions: | |||
| Accounts Payable | 20,00,000 | ||
| Total | 2,14,00,000 | Total | 2,14,00,000 |
The Company decides to buy back the maximum number of equity shares as may be permitted by law at a price of 15 per share. Find out maximum number of shares to be bought back and Pass journal entries (without narration) in the books of Suyash Ltd. and prepare Notes to Accounts with respect to Share Capital and Cash and Cash Equivalent as on 31st March 2018.
(Do not prepare Balance Sheet)
Q6 A) What is Ethical Behaviour? Explain the principles of Accounting Ethics? (10 Marks)
Q.6 B) Distinguish Between Internal and External Reconstructions? (10 Marks)
OR
Q6) Write Short Notes on (Any Four) (20 Marks)
1) Conditions for buyback of shares
2) Meaning and types of Whistle Blowing
3) Need for reconstruction of a company
4) Outstanding Expenses and Prepaid Expenses
5) Ex and Cum-Interest Purchase Price
6) Laws and Ethics
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