Company final accounts

1. UNIT III
COMPANY FINAL ACCOUNTS
Statement of Profit and Loss
Particulars Note no Amount
Revenue from operation
other income
TOTAL REVENUE (A)
EXPENSES:
Costof material consumed
Purchase of stock- in – trade
Changes in inventories of finished
goods/wip/stockin trade
Employee benefits expenses
Finance cost
Depreciation and amortisation expenses
Other expenses
TOTAL EXPENSES (B)
Profit before extraordinary items and tax (A-B)
Less: Extraordinary items
Tax
Profit or loss for the period
1
2
3
4
5
6
7
XXX
XXX
XXX
XXX
XXX
XXX
XXX
XXX
XXX
XXX
XXX
XXX
XXX
XXX
XXXX
Notes to accounts:
REVENUE FROM OPERATION:
Particulars Amount
Gross profit – manufacturing/trading company XXX
Fees earned – service company XXX
Interest and dividend earned – financial company XXX
OTHER INCOME

2. Particulars Amount
Sale of fixed asset XXX
Interest earned on fixed asset XXX
Interest on investment XXX
Dividend earned XXX
Commission received XXX
Refund of income tax XXX
Excess provision written off XXX
Export subsidy and duty drawback XXX
Miscellaneous income XXX
COST OF MATERIAL CONSUMED
Particulars Amount
Opening stockof raw materials XXX
Add: purchases,carriage inwards,other expenses incurred on
purchase of material
XXX
XXX
Less:purchase return XXX
Less: Closing stockof raw materials XXX
XXX
PURCHASE OF STOCK- IN – TRADE
Particulars Amount
Goods purchased forreselling XXX
CHANGES IN INVENTORIES OF FINISHED
GOODS/WIP/STOCKIN TRADE
Particulars Amount
Opening stock XXX
Less: closing stock XXX
+/-

3. EMPLOYEE BENEFITSEXPENSES
Particulars Amount
Wages XXX
Add: outstanding wages XXX
Less: Prepaid expenses XXX
XXX
Salaries add o/s
Bonus
Leave encashment
gratuity
Medical expenses
FINANCE COST
Particulars Amount
Interest on bank overdraft/ Discount on issue of debentures
w/off
XXX
Interest of debentures/term loans XXX
Interest on bonds/cashcredit XXX
Interest on public deposit XXX
DEPRECIATIONAND AMORTISATION EXPENSES
Particulars Amount
Depreciation on plant and machinery,building,loose tools XXX
Furniture,computer,patent , goodwill,copy
write,preliminary expenses
XXX
OTHER EXPENSES
Particulars Amount
Administrative expenses XXX
Selling expenses XXX
Carriage outwards XXX
Telephone/stationary expenses XXX
Electricity expenses XXX

4. Rent and rates paid XXX
Sundry expenses XXX
Commission paid XXX
EXTRAORDINARYITEMS
Particulars Amount
Loss on account of fire XXX
Loss on clamaties like earthquake,floods XXX
Speculation loss or gain XXX
Salaries or wages paid for previous period due to agreement
with retrospective effect
XXX
FORM OF THE BALANCESHEET
Particulars Note
no
Amount
I.EQUITY AND LIABILITIES
( I ) sharesholders funds:
Share capital
Reserves & surplus
Money received against sharewarrants
(ii) Non Current liabilities:
Long term borrowings
Deferred tax labilities
Other long term liabilities
Long term provisions
(iii) Current liabilities:
Short term borrowings
Trade payables
Other current liabilities
Short term provisions
TOTAL
1
2
3
4
5
6
7
8
9
10
11
II.ASSETS
(i) Non current assets:
(a) Fixed assets:
Tangible assets
Intangible assets
12
13

5. Capital work in progress
Intangible assets under development
(b)Non current investments
(c)Deferred tax assets(net)
(d)Long term loans and advances
(e) Other non current assets
(ii) Current assets
Current investment
Inventories
Trade receivables
Cash and cash euivalents
Short term loans and advances
Othr current assets
TOTAL
14
15
16
17
18
19
20
21
22
23
24
25
Notes to accounts
Share capital
Authorised capital XXX
Issued capital
Subscribed capital and paid up capital
Less: calls in arrear
Add: forfeited shares
Reserves and surplus
PARTICULARS AMT AMT
General reserve (op)
Add: Addition during the year
XXXX
XXXX
XXXXX

6. SECURITIES PREMIUM
LESS: Premium on redemption of pref shares
XXXX
Xxx
xxxx
Capital redemption reserve Xxxx
Capital reserve Xxxxx
Debenture redemption reserve Xxxxx
Surplus i.e balance in statement of profit and loss
Add: Profit for the year
XXX
Xxxx
xxxx
Less: Appropriations:
Transfer to general reserve
Final dividend
Interim dividend
Proposed dividend
Corporate dividend tax@17% on interim dividend and
proposed dividend
Xxxx
Xxx
Xxx
Xxxx
xxxx
(c) Money received against share warrants: Share warrants are the financial
instruments which give the holder right to acquire equity shares. These are
financial instruments which will be converted into equity shares at a later date at
a predetermined price. Since these will be converted into equity shares, these
are classified as shareholders' funds.
II .Non-current liabilities
Long term borrowings: Amount taken as loan by company is termed as
borrowings. The borrowings are considered long term when the loan is repayable
by the company after 12 months from the date of balance sheet or after the
operating cycle period from the date of loan. Debentures, Bonds, Term loans
from banks and other parties, Public deposits and other loans and advances
are categorized as long term borrowings. These items are shown in the Notes to
Accounts on Long term borrowings.
Debentures
bonds
Term loan
Public deposit
Other loans and advances
5. Deferred tax liability
Accounting income

7. Taxable income
Income tax on the difference is termed as deferred tax
6. Other long term liability
Premium payable on redemption on debentures/ pref shares
7. Long term provisions
Provision on retirement benefits payable to
employees who will retire after 12 months of
the date of balance sheet
Provision for warranty claims that relates to the
period after 12 months of the date of the B/s
8. Short term borrowings
Bank overdraft
Cash credit
Deposits
Loan from other parties
9. Trade payables
Sundry creditors
Trade creditors
Bills payable
10. Other current liabilities
Outstanding expense
Unpaid dividend
Income received in advance
Calls in advance
Providend fund payable
ESI payable
VAT payable
Central sales tax payable
11. Short term provision

8. Provision for tax
Proposed dividend
Provision for employee benefit
Provision for expenses
Asstes
12. Tangible asset
Land and building
Plant and machinery
Vehicles
Office euipments
Furniture
13. Intangible asset
Goodwill
Brand/trademarks
Computer software
Mining rights
copyrights
Patents
Formulae
License ,franchise
14. Capital work in progress
It means tangible asstes under construction
15. Intangible assets under development:
It means intangible asstes like patents,intellectual rights
16.Non current investment
Investment in property
Invt in equity instruments
Invt in pref shares
Invt in govt or trust securities
Invt in debentures or bonds
Invt in mutual fund
Invt in partnership firms

9. Managerial remuneration
The companies act lays down a number of restrictions on managerial remuneration
payable by a public company or a private company which is a subsidiary of a public
company. The term managerial remuneration includes remuneration payable to the: a)
managing director b) manager c) part time directors and d) whole time directors

10. The following statement showing the maximum remuneration payable to the different
categories of managerial personnel:
S.NO MANAGERIAL PERSONNEL
MAXIMUM %
ON NET
PROFITS
a Maximum remuneration to all the managerial personnel 11%
b manager 5%
c managing director or whole time director 5%
d managing director or whole time director when there is more than one 10%
e
part time directors when the company is not having managing director,
whole time director or manager 3%
f
part time directors when assisted by a managing director, whole time
director or manager 1%
Calculation of Managerial Remuneration
Format for statement ofprofit for the purpose ofmanagerial remuneration
PARTICULARS AMOUNT AMOUNT
NET PROFITS(GIVEN) xxx
Add: capital expenditure xxxx
special depreciation xxxx
Provision for income tax/taxation xxxx
ex - gratia payment to employee xxxx XXX
XXX
Less: Capital profit on sale of asset xxxx
profit on sale of investment xxxx XXX
Net profit for managerial remuneration XXX
1. From the following particular, determine the maximum remuneration available to a
full time director of a manufacturing company. The profit and loss account of the
company showed a net profit of Rs.40,00,000 after taking into account the following
items:
a) Depreciation (incluing special depn of rs.40,000) rs.1,00,000

11. b) Provision for income tax rs.2,00,000
c) Donation to political parties rs.50,000
d) Ex – gratia payment to a worker Rs.10,000
e) Capital profit on sale of asstes rs.15,000
solution:
Format for statement ofprofit for the purpose ofmanagerial remuneration
PARTICULARS AMOUNT AMOUNT
NET PROFITS(GIVEN) 40,00,000
Add: capital expenditure -
special depreciation 40,000
Provision for income tax/taxation 2,00,000
ex - gratia payment to employee 10,000 2,50,000
42,50,000
Less: Capital profit on sale of asset 15,000
profit on sale of investment - 15,000
Net profit for managerial remuneration 42,35,000
Managing Director Or Whole Time Director 5% is permitted by law
= 42,35,000x 5/100 = Rs.2,11,750
Comprehensive problem
1.Moon and Star Co. Ltd. Is a company with an authorized capital of
5,00,000 divided into 5,000 equity shares of Rs.100 each on 31.12.2013
of which 2,500 shares were fully called up. The following are the
balances extracted from the ledger as on 31.12.2013
Trial balance of Moon & Star Co. Ltd
Debit Rs. Credit Rs.
Opening stock(P&L) 50,000 Sales (P&L) 3,25,000

12. Purchases ( P&L) 2,00,000
Discount
received (P&L)
3150
Wages (P&L) 70,000
Profit & Loss
A/c (B/s)
6220
Discount allowed (P&L) 4,200 Creditors(B/s) 35,200
Insurance(upto Reserves(B/s) 25,000
31.3.14) (P&L) 6,720
Loan from
managing
director (B/s)
15,700
Salaries (P&L) 18,500
Share capital
(B/s)
2,50,000
Rent (P&L) 6,000
General expenses(P&L) 8,950
Printing (P&L) 2,400
Advertisements(P&L) 3,800
Bonus (P&L) 10,500
Debtors (B/s) 38,700
Plant (B/s) 1,80,500
Furniture(B/s) 17,100
Bank (B/s) 34,700
Bad debts (P&L) 3,200
Calls-in-arrears (B/s) 5,000
6,60,270 6,60,270
You are required to prepare Profit & Loss Account for the year ended
31.12.2013 and a balance sheet as on that date. The following further
information is given:
(a) Closing stockwas valued at Rs.1,91,500
(b)Depreciation on plant at 15% and on furniture at 10% should be
provided
(c)A tax provision of Rs. 8,000 is considered necessary
(d)The directors declared an interim dividend on 15.8.13 for 6 months
ending June 30, 2013@ 6%.

13. (e) provide corporatedividend tax @17%.
SOLUTION:
Statement of Profit and Loss ACCOUNT OF MOON AND STAR LTD
Particulars
Note
no
Amount
Revenue from operation 1 3,25,000
other income 2 3,150
TOTAL REVENUE (A) 3,28,150
EXPENSES:
Costof material consumed 3 58,500
Purchase of stock- in – trade NIL
Changes in inventories of finished goods/wip/stockin trade NIL
Employee benefits expenses 99,000
Finance cost 4 NIL
Depreciation and amortisation expenses 5 28,785
Other expenses 6 33,590
TOTAL EXPENSES (B) 7 2,19,875
Profit before extraordinary items and tax (A-B) 1,08,275
Less: Extraordinary items NIL
Tax 8,000
Profit or loss for the period 1,00,275
Balance sheet of moon and star Ltd as on 31.12.2013
Particulars Note no Amount
I.EQUITY AND

14. LIABILITIES
( I ) shareholder’s funds:
Share capital 1 2,45,000
Reserves & surplus 2 1,14,296
Money received against share
warrants
3
(ii) Non-Current liabilities:
Long term borrowings 4 15,700
Deferred tax liabilities 5
Other long term liabilities 6
Long term provisions 7
(iii) Current liabilities:
Short term borrowings 8
Trade payables 9 35,200
Other current liabilities 10 17,199
Short term provisions 11 18,000
TOTAL 4,35,395
II.ASSETS
(i) Non - current assets:
(a) Fixed assets:
Tangible assets 12 1,68,815
Intangible assets 13
Capital work in progress 14
Intangible assets under development 15
(b)Non-current investments 16
(c) Deferred tax assets(net) 17
(d)Long term loans and advances 18
(e) Other non-current assets 19
(ii) Current assets
Current investment 20
Inventories (closing stock) 21 1,91,500
Trade receivables 22 38,700

15. Cash and cash euivalents(bank) 23 34,700
Short term loans and advances 24 1,680
Othr current assets 25
TOTAL 4,35,395
NOTES TO ACCOUNT
REVENUE FROM OPERATION:
Particulars Amount
Gross profit/Sales – manufacturing/trading company 3,25,000
OTHER INCOME
Particulars Amount
Discount received 3,150
COST OF MATERIAL CONSUMED
Particulars Amount
Opening stockof raw materials 50,000
Add: purchase 2,00,000
2,50,000
Less: purchase return -
Less: Closing stockof raw materials 1,91,500
58,500.00
EMPLOYEE BENEFITSEXPENSES
Particulars Amount
Wages 70,000
Salaries 18,500
Bonus 10,500

16. 99,000
DEPRECIATIONAND AMORTISATION
EXPENSES
Particulars Amount
Depreciation on plant 15% on 180500 27,075
Furniture 10% on 17,100 1,710
28,785
OTHER EXPENSES
Particulars Amount
Discount allowed 4,200
Insurance
less: Prepaid(6720x3/12)
6720
1,680
5,040
printing 2400
General expenses 8950
Rent 6,000
Advirtising 3800
bad debts 3200
33,590
Notes to account to balance sheet
Share capital
Authorised capital 5,000 eq shares of Rs.100 each
5,00,000
Issued capital,Subscribed capital up:
2,500 shares of Rs.100 each
Less: calls in arrears
2,50,000
5,000

17. Paid up capital
2,45,000
Reserves and surplus
PARTICULARS AMT AMT
General reserve (op) 25,000
Add: Addition during the year -
25,000
Surplus i.e balance in statement of profit
and loss
6,220
Add: Profit for the year 1,00,275
1,06,495
Less: Appropriations:
Interim dividend (2,45,000x6%) 14,700
Corporate dividend tax@17% (14700x17%) 2,499 89,296
1,14,296
Long term borrowings
Unsecured loan
Loan from managing director
15,700
Trade payables
Sundry creditors 35200
Short term provision
Provision for tax 8,000
Other current liabilities
Interim dividend payable 14,700
Dividend tax payable 2,499
Tangible assets
Plant 1,80,500 1,53,425

18. Less: Depreciation 15% 27,075
Furniture 17,100
Less: Depreciation 10% 1,710
15390
1,68,815
Trade receivables:
Debtors 38,700
Short term loans and advances
Prepaid insurance 1,680
ANSWER:
Rs.
Gross profit c/d
Net profit c/d
Interim dividend
Corporate dividend tax at 10%
Balance carried forward to Balance sheet
Balance sheet total
1,96,500
1,00,275
14,700
1,470
90,325
4,35,395
1.Amount realized from sale of goods is shown in the statement of profit
and loss as
 Other income

19.  Revenue from operation
 Any of the above
 None of the above
2. Gain on sale of fixed assets is shown in the statement of profit and loss
as
 Other income
 Revenue from operation
 Any of the above
 None of the above
3. Dividend received by a financial company is shown in the statement of
profit and loss as
 Other income
 Revenue from operation
 Any of the above
 None of the above
4. Raw materials purchased is shown in the statement of profit and loss
 Costof material consumed
 Purchase of stockin trade
 Changes in inventories
 None of these
5. Goodspurchased for reselling is shown in the statement of profit and
loss as
 Costof material consumed
 Purchase of stock in trade
 Changes in inventories
 None of these
6. Payment of wages and salaries is shown in the statement of profit and
loss under

20.  Employee benefit expenses
 Other expenses
 Finance cost
 None of these
7. Payment of interest on debenture and bank overdraft is shown in
statement of profit and loss under
 Employee benefit expenses
 Other expenses
 Finance cost
 None of these
8. Carriage outwards is shown in statement of profit and loss under
 Employee benefit expenses
 Other expenses
 Finance cost
 Depreciation and amortization expenses
9. Preliminary expenses written off is shown in statement of profit and
loss under
 Employee benefit expenses
 Other expenses
 Finance cost
 Depreciationand amortization expenses
10. Which one of the following assets could be described as a
current asset?
 Machinery to manufacture goods forresale
 Stock of goods forresale
 Buildings to house the machinery
 Land on which the buildings stand

21. 11. Retained Earnings is classified as which type of account?
 Asset
 Liability
 Expense
 Stockholders'equity
12. Wages is an example of?
 Capital expenses
 Indirect expenses
 Directexpenses
 All of before
13. Profit and loss account would not include?
 Salaries
 Drawings
 Rent received
 Carriage outwards
14. Current liabilities are those obligations which are to be satisfied
within?
 6 months
 1 year
 2 year
 Both A & B
15. All of the following are property, plant, and equipment except?
 Machinery
 Supplies
 Land
 Buildings
16. Debentures redeemable after 10 years of issue are shown as

22.  Long term borrowings
 Short term borrowings
 Other current liabilities
 None of these
17. Bank overdraft is shown in the balance sheet of a company as
 Long term borrowings
 Short term borrowings
 Other current liabilities
 None of these
18. Dividend is paid on
 Authorized capital
 Issued capital
 Called up capital
 Paid up capital
19. Securities is shown in the balance sheet of a company as
 Share capital
 Reserves andsurplus
 Long term borrowings
 None of these
20. The assets that can be easily converted into cashwithin a short
period, i.e., 1 year or less are known as
 Current assets
 Fixed assets
 Intangible assets
 Investments
21. Copyrights, Patents and Trademarks are,
 Current assets

23.  Fixed assets
 Intangible assets
 Investments
22. In order to find out the value of the closing stockduring the end of
the financial year we,
 do this by stocktaking
 deductthe costof goods sold from sales
 deductopening stockfrom the costof goods sold
 look in the stock account
23. Opening stock+ …………………+ Direct Expenses (Carriage on
Raw material)-Closing Stock = …………………
 Sales, Purchases
 Sales, Sales return
 Purchases, Costof goods produced
 Purchases, Costofgoods sold
24. What is deferred tax liability?
Difference betweenaccounting income and taxable income
25. Maximum remuneration to all the managerial personnel
 11%
 5%
 3%
 1%
26. Maximum remuneration payable to the manager and managing director or whole
time director
 11%
 5%
 3%
 1%
27. Maximum remuneration payable to the managing director or whole time director
when there is more than one

24.  11%
 10%
 3%
 1%
28. Maximum remuneration payable to the part time directors when the company is not
having managing director, whole time director or manager
 11%
 10%
 3%
 1%
29. Maximum remuneration payable to the part time directors when assisted by a
managing director, whole time director or manager

11%
 10%
 3%
 1%

27. COMPANYFINAL ACCOUNTS
The following balances have been extracted from the books of Rama
Ltd., on 31st March 2018.
Equity share capital (1,00,000 shares of ` 10 each) ` 10,00,000; Securities
premium ` 2,00,000; Debentures ` 5,00,000; Creditors ` 2,00,000;
Proposed dividend ` 50,000; Land and Building ` 9,00,000;
Government Bonds ` 5,00,000; Capital Work-in-Progress (Buildings) `
3,50,000 and Discount on issue of 12% Debentures ` 1,00,000; Cash at
Bank ` 50,000; Furniture ` 60,000; Debtors ` 20,000.
Debentures were issued on 1st April 2017 redeemable after 5 years, on
31st March 2021.
Surplus, i.e., Balance in statement of profit and loss is before writing off
Discount on issue of Debentures. Prepare the balance sheet of a company
as per revised schedule VI.
Give the format of statement of profit and loss as per Revised schedule VI.
2. A Ltd was registered with an authorized capital of Rs. 6,00,000 in equity shares of
Rs 10 each. The following is its Trail Balance on 31 st March 2018
Trial Balance of ‘A’ Ltd
Debit Balance
Rs.
Credit Balance
Rs.
Goodwill
Cash
Bank
Purchase
Preliminary Expenses
Share capital
25,000
750
39,900
1,85,000
5,000
-
-
-
-
-
-
4,00,000

28. 12 % debentures
P&L A/c(Cr)
Calls-in-arrears
Premises
Plant & Machinery
Interim dividend
Sales
Stocks
Furniture & fixtures
Sundry debtors
Wages
General expenses
Freight and carriage
Salaries
Director’s fees
Bad debts
Debenture interest paid
Bill payable
Sundry creditors
General reserve
Provision for bad debts
-
-
7,500
3,00,000
3,30,000
39,250
-
75,000
7,200
87,000
84,865
6,835
13,115
14,500
5,725
2,110
18,000
-
-
-
-
12,46,750
3,00,000
26,250
-
-
-
-
4,15,000
-
-
-
-
-
-
-
-
-
-
37,000
40,000
25,000
3,500
12,46,750
Prepare Profit & Loss Account, Profit & Loss Appropriation A/c and Balance Sheet
in proper form after making the following adjustments:
(i)Depreciate plant and machinery by 15%
(ii) Write off Rs.500 from preliminary expense
(iii)Provide for 6 months interest on debentures
(iv) Leave bad and doubtful debts provision at 5% on sundry debtors
(v) Provide for income tax at 50%
(iv) Stock on 31.3.2018 was Rs. 95,000.
(vi) Provide for corporate dividend tax @10%
ANSWER:
Gross profit c/d 1,52,000
Provision for income tax 18,000
Net profit c/d 18,000
Interim dividend 39,250
Assume corporate dividend tax 3925
Balance carried forward to
Balance sheet 1,075
Balance sheet total 8,35,500
Moon and Star Co. Ltd. Is a company with an authorized capital of 5,00,000 divided
into 5,000 equity shares of Rs.100 each on 31.12.2003 of which 2,500 shares were

29. fully called up. The following are the balances extracted from the ledger as on
31.12.2003
Trial balance of Moon & Star Co. Ltd
Debit Rs. Credit Rs.
Opening stock
Purchases
Wages
Discount allowed
Insurance(upto
31.3.04)
Salaries
Rent
General expenses
Printing
Advertisements
Bonus
Debtors
Plant
Furniture
Bank
Bad debts
Calls-in-arrears
50,000
2,00,000
70,000
4,200
6,720
18,500
6,000
8,950
2,400
3,800
10,500
38,700
1,80,500
17,100
34,700
3,200
5,000
6,60,270
Sales
Discount received
Profit & Loss A/c
Creditors
Reserves
Loan from managing director
Share capital
3,25,000
3150
6220
35,200
25,000
15,700
2,50,000
6,60,270
You are required to prepare Profit & Loss Account for the year ended 31.12.2003 and
a balance sheet as on that date. The following further information is given:
(f) Closing stock was valued at Rs.1,91,500
(g) Depreciation on plant at 15% and on furniture at 10% should be provided
(h) A tax provision of Rs. 8,000 is considered necessary
(i) The directors declared an interim dividend on 15.8.03 for 6 months ending June
30, 2003@ 6%.Assume corporate dividend tax @10%.
ANSWER:
Rs.
Gross profit c/d
Net profit c/d
Interim dividend
Corporate dividend tax at 10%
Balance carried forward to Balance sheet
Balance sheet total
1,96,500
1,00,275
14,700
1,470
90,325
4,35,395