Company Accounts - Company Final Accounts

 

Company Accounts

Company Final Accounts

 

Part A: Discussion of basic theories including various relevant rules and provisions of the Companies Act, 2013 along with different important formats like format of company balance sheet and company profit and loss statement

Part B: Four Illustrations with Solutions

Part A

Important notes to profit and loss statement:

1. Revenue from operations, in case of a finance company, shall include revenue   from:

    (a)  Interest, and

    (b)  Other financial services.

 

2. Finance costs shall be classified as:

    (a)  Interest expenses,

    (b)  Other borrowing costs, and

    (c)  Net loss on foreign currency transactions.

 

3. Employee benefits expenses shall be classified as:

    (a)  Salaries and wages,

    (b)  Contribution to provident and other funds,

   (c)  Expenses on employee stock option scheme (ESOP) and employee stock purchase plan (ESPP), and

    (d)  Other staff welfare expenses.

 

4. Income or expense which exceeds

    (a)  1% of revenue from operations, or

    (b)  Rs 1, 00,000,

    Whichever is higher is needed to be disclosed separately.

 

5. A.   DEFERRED TAX ASSET (when accounting income < taxable income)

          = Tax on taxable income – Tax on accounting income

    B.   DEFERRED TAX LIABILITY (when taxable income < accounting income)

          = Tax on accounting income – Tax on taxable income

6. DILUTED EPS

    EPS (i.e. earnings per equity share) based on the maximum potential number of shares outstanding (taking into consideration the right of option given to the preference shareholders or debenture holders to convert their security holdings either partly or fully into equity shares) is known as diluted earnings per equity share.

 

  OVERALL MAXIMUM LIMITS OF MANAGERIAL REMUNERATION

  Payable by Companies having Adequate Profits

  U/S 197 AND SCHEDULE: V (PART: II SECTION: I)

  OF THE COMPANIES ACT, 2013

 

Sl. No.	Managerial Personnel	Maximum % of Net Profits
1.	The total managerial remuneration payable by a public company to its directors including managing director and whole-time director, and its manager in respect of any financial year (excluding fees for attending meetings of the Board)	11%
2.	The remuneration payable to any one managing director or any one whole-time director or any one manager	5%
3.	If there is more than one managing director and/or more than one whole-time director, the remuneration payable to all such directors and manager taken together	10%
4.	The remuneration payable to directors who are neither managing directors nor whole-time directors: (a)  If there is a managing director or whole-time director   or manager (b)In any other case	1% 3%

 

Important notes:

Under Section 198 of the Companies Act, 2013

(1)    In computing the net profits of a company in any financial year for the purpose of section 197, -

(a) credit shall be given for the sums specified in sub-section (2), and credit shall not be given for those specified in sub-section (3); and

(b) The sums specified in sub-section (4) shall be deducted, and those specified in sub-section (5) shall not be deducted.

 

(2) In making the computation aforesaid, credit shall be given for the bounties and subsidies received from any Government, or any public authority constituted or authorised in this behalf, by any Government, unless and except in so far as the Central Government otherwise directs.

 

(3) In making the computation aforesaid, credit shall not be given for the following sums, namely:—

(a) profits, by way of premium on shares or debentures of the company, which are issued or sold by the company [unless the company is an investment company as referred to in clause (a) of the Explanation to section 186];

     (b) Profits on sales by the company of forfeited shares;

     (c) Profits of a capital nature including profits from the sale of the undertaking or any of the undertakings of the company or of any part thereof;

     (d) profits from the sale of any immovable property or fixed assets of a capital nature comprised in the undertaking or any of the undertakings of the company, unless the business of the company consists, whether wholly or partly, of buying and selling any such property or assets: Provided that where the amount for which any fixed asset is sold exceeds the written-down value thereof, credit shall be given for so much of the excess as is not higher than the difference between the original cost of that fixed asset and its written down value;

     (e) any change in carrying amount of an asset or of a liability recognised in equity reserves including surplus in profit and loss account on measurement of the asset or the liability at fair value;

     (f) Any amount representing unrealised gains, notional gains or revaluation of assets.

 

(4) In making the computation aforesaid, the following sums shall be deducted, namely:—

     (a)       All the usual working charges;

     (b)       Directors' remuneration;

    (c)       Bonus or commission paid or payable to any member of the company's        staff, or to any engineer, technician or person employed or engaged            by the company, whether on a whole-time or on a part-time basis;

     (d)     Any tax notified by the Central Government as being in the nature of a       tax on excess or abnormal profits;

   (e)       Any tax on business profits imposed for special reasons or in special           circumstances and notified by the Central Government in this behalf;

   (f)       Interest on debentures issued by the company;

  (g)       Interest on mortgages executed by the company and on loans and              advances secured by a charge on its fixed or floating assets;

  (h)       Interest on unsecured loans and advances;

  (i)        Expenses on repairs, whether to immovable or to movable property,            provided the repairs are not of a capital nature;

  (J)       Outgoings inclusive of contributions made under section 181;

 (K)       Depreciation to the extent specified in section 123;

 (l)    The excess of expenditure over income, which had arisen in computing the  net profits in accordance with this section in any year [***], in so far as such excess has not been deducted in any subsequent year preceding the year in respect of which the net profits have to be ascertained;

(m)  Any compensation or damages to be paid in virtue of any legal liability including a liability arising from a breach of contract;

 (n)   Any sum paid by way of insurance against the risk of meeting any liability such as is referred to in clause (m);

  (o)  Debts considered bad and written off or adjusted during the year of account.

 

(5)    In making the computation aforesaid, the following sums shall not be deducted, namely:—

     (a) Income-tax and super-tax payable by the company under the Income-tax Act, 1961 (43 of 1961), or any other tax on the income of the company not falling under clauses (d) and (e) of sub-section (4);

     (b) Any compensation, damages or payments made voluntarily, that is to say, otherwise than in virtue of a liability such as is referred to in clause (m) of sub-section (4);

     (c) Loss of a capital nature including loss on sale of the undertaking or any of the undertakings of the company or of any part thereof not including any excess of the written-down value of any asset which is sold, discarded, demolished or destroyed over its sale proceeds or its scrap value;

   (d) Any change in carrying amount of an asset or of a liability recognised in equity reserves including surplus in profit and loss account on measurement of the asset or the liability at fair value.

 

NET PROFIT FOR MANAGERIAL REMUNERATION

a)      On the basis of gross profit

Sl. No.	Particulars	Rs	Rs
	Gross profit		×××
	ADD:
1.	Bounties and subsidies received from any Government or public authority	×××
2.	Revenue profit on sale of fixed assets (original cost – written-down value)	×××	×××
			×××
	LESS:
1.	All the usual operating expenses (e.g. staff salaries, rent and rates, insurance premiums, etc.)	×××
2.	Directors’ remuneration	×××
3.	Bonus / commission paid / payable to any employee of the company (as per the legal requirement)	×××
4.	Repairs to buildings, plant and machinery, etc. (not being repairs of a capital nature)	×××
5.	Outgoings inclusive of contributions made under section 181	×××
6.	Bad debt written off	×××
7.	Depreciation to the extent specified in section 123 the Companies Act	×××
8.	Interest on debentures issued by the company	×××
9.	Interest on mortgages executed by the company and on loans and advances secured by a charge on its fixed or floating assets	×××
10.	Interest on unsecured loans and advances	×××
11.	Compensation or damages for breach of contract	×××
	any sum paid by way of insurance against the risk of meeting any liability in the form of Compensation or damages for breach of contract	×××
12.	Donations to charitable institutions	×××
13.	Remuneration of debenture trustees	×××
	Any tax notified by the Central Government as being in the nature of a tax on excess or abnormal profits	×××
14.	Any tax on business profits notified by the Central Government imposed for special reasons or in special circumstances	×××
15.	General expenses	×××	×××
	Net profit for managerial remuneration		×××

 

b)      On the basis of net profit as disclosed by the profit and loss account

Sl. No.	Particulars	Rs	Rs
	Net profit		×××
	ADD:
1.	Provision for tax	×××
2.	Provision for bad and doubtful debts	×××
3.	Provision for repairs to buildings, plant and m/c, etc.	×××
4.	Capital expenditure on scientific research	×××
5.	Managing director’s remuneration	×××
6.	Bonus (taken separately)	×××
7.	Depreciation (taken separately)	×××
8.	Preliminary expenses written off	×××
9.	Ex-gratia payment to employees	×××
10.	Manager’s salary	×××
11.	Manager’s commission	×××
12.	Capital loss on sale of fixed assets (original cost – sale proceeds)	×××	×××
			×××
	LESS:
1.	Actual expenses on repairs (if not already charged to profit and loss a/c)	×××
2.	Bonus (as per the Payment of Bonus Act, 1965)	×××
3.	Depreciation (as required by the Companies Act)	×××
4.	Capital profit on sale of fixed assets (sale proceeds – original cost)	×××
5.	Bad debt (actual amount, if not already charged to profit and loss account)	×××
6.	Profit on sale of investment	×××	×××
	Net profit for managerial remuneration		×××

 

Managerial remuneration payable by companies having no profits or inadequate profits

U/S 197 AND SCHEDULE: V (PART: II SECTION: II)

OF THE COMPANIES ACT, 2013

Where in any financial year during the currency of tenure of a managerial person, a company has no profits or its profits are inadequate, it may, without Central Government approval, pay remuneration to the managerial person not exceeding the limits under (A) and (B) given below:

 

 (A):

	Where effective capital of the company is −	Remuneration p.a. shall not exceed −
(i)	Negative or less than Rs 5 crores	Rs 60,00,000
(ii)	Rs 5 crores or more but less than Rs 100 crores	Rs 84,00,000
(iii)	Rs 100 crores or more but less than Rs 250 crores	Rs 120,00,000
(iv)	Rs 250 crores or more	Rs 120,00,000 + 0.01% of the effective capital in excess of Rs 250 crores

Provided that the above limits should be doubled if the resolution to that effect passed by the shareholders is a special resolution.

 

Note:

In case of remuneration for a period less than one year, the limits should be pro-rated.

(B)

In the case of a managerial person who was not a security holder holding securities of the company of nominal value of rupees five lakh or more or an employee or a director of the company or not related to any director or promoter at any time during the two years prior to his appointment as a managerial person, — 2.5% of the current relevant profit:

 

Provided that if the resolution passed by the shareholders is a special resolution, this limit shall be doubled:

 

Provided further that the limits specified under this section shall apply, if—

(i)      Payment of remuneration is approved by a resolution passed by the Board and, in the case of a company covered under sub-section (1) of section 178 also by the Nomination and Remuneration Committee;

(ii)     The company has not made any default in repayment of any of its debts (including public deposits) or debentures or interest payable thereon for a continuous period of thirty days in the preceding financial year before the date of appointment of such managerial person;

(iii)    A special resolution has been passed at the general meeting of the company for payment of remuneration for a period not exceeding three years;

(iv)   A statement along with a notice calling the general meeting referred to in clause (iii) is given to the shareholders containing the following information, namely:—

 

I. General Information:

(1)  Nature of industry

(2) Date or expected date of commencement of commercial production

(3)  In case of new companies, expected date of commencement of activities as per project approved by financial institutions appearing in the prospectus

(4)  Financial performance based on given indicators

(5)  Foreign investments or collaborations, if any.

 

          II. Information about the appointee:

(1)    Background details

(2)    Past remuneration

(3)    Recognition or awards

(4)    Job profile and his suitability

(5)    Remuneration proposed

(6)    Comparative remuneration profile with respect to industry, size of the company, profile of the position and person (in case of expatriates the relevant details would be with respect to the country of his origin)

(7)    Pecuniary relationship directly or indirectly with the company, or relationship with the managerial personnel, if any.

 

          III. Other information:

(1)    Reasons of loss or inadequate profits

(2)    Steps taken or proposed to be taken for improvement

(3)    Expected increase in productivity and profits in measurable terms.

 

          IV. Disclosures:

          The following disclosures shall be mentioned in the Board of Director’s report under the heading “Corporate Governance”, if any, attached to the financial statement:—

(i)      All elements of remuneration package such as salary, benefits, bonuses, stock options, pension, etc., of all the directors;

(ii)     Details of fixed component and performance linked incentives along with the performance criteria;

(iii)    Service contracts, notice period, severance fees;

(iv)   Stock option details, if any, and whether the same has been issued at a discount as well as the period over which accrued and over which exercisable.

 

MANAGERIAL REMUNERATION PAYABLE BY COMPANIES HAVING NO PROFITS OR INADEQUATE PROFITS WITHOUT CENTRAL GOVERNMENT APPROVAL IN CERTAIN SPECIAL CIRCUMSTANCES AS PER THE SCHEDULE: V (PART: II SECTION: III)

 

In the following circumstances a company may, without the Central Government approval, pay remuneration to a managerial person in excess of the amounts provided in SCHEDULE: V (PART: II SECTION: II) above:—

(a)    Where the remuneration in excess of the limits specified in Section I or II is paid by any other company and that other company is either a foreign company or has got the approval of its shareholders in general meeting to make such payment, and treats this amount as managerial remuneration for the purpose of section 197 and the total managerial remuneration payable by such other company to its managerial persons including such amount or amounts is within permissible limits under section 197.

 

(b)    Where the company is –

      (i)   A newly incorporated company, for a period of seven years from the date of its incorporation, or

      (ii)  A sick company, for whom a scheme of revival or rehabilitation has been ordered by the Board for Industrial and Financial Reconstruction or National Company Law Tribunal, for a period of five years from the date of sanction of scheme of revival,

      It may pay remuneration up to two times the amount permissible u/s II.

 

(c)     Where remuneration of a managerial person exceeds the limits in Section II but the remuneration has been fixed by the Board for Industrial and Financial Reconstruction (BIFR) or the National Company Law Tribunal:

Provided that the limits under this Section shall be applicable subject to meeting all the conditions specified under Section II and the following additional conditions:—

(i)      Except as provided in para (a) of this Section, the managerial person is not receiving remuneration from any other company;

(ii)     The auditor or Company Secretary of the company or where the company has not appointed a Secretary, a Secretary in whole-time practice, certifies that all secured creditors and term lenders have stated in writing that they have no objection for the appointment of the managerial person as well as the quantum of remuneration and such certificate is filed along with the return as prescribed under sub-section (4) of section 196.

(iii)    The auditor or Company Secretary or where the company has not appointed a secretary, a secretary in whole-time practice certifies that there is no default on payments to any creditors, and all dues to deposit holders are being settled on time.

 

(d)    A company in a Special Economic Zone (SEZ) as notified by Department of Commerce from time to time which has not raised any money by public issue of shares or debentures in India, and has not made any default in India in repayment of any of its debts (including public deposits) or debentures or interest payable thereon for a continuous period of thirty days in any financial year, may pay remuneration up to ` 2, 40, 00,000 per annum.

 

Perquisites not included in managerial remuneration:

1.   A managerial person shall be eligible for the following perquisites which shall not be included in the computation of the ceiling on remuneration specified in Section II and Section III (of Schedule: V Part: II):

(a)   Contribution to provident fund, superannuation fund or annuity fund to the extent these either singly or put together are not taxable under the Income-tax Act, 1961.

(b)   Gratuity payable at a rate not exceeding half a month’s salary for each completed year of service; and

(c)   Encashment of leave at the end of the tenure.

 

2.   In addition to the perquisites specified in paragraph 1 of this section, an expatriate managerial person (including a non-resident Indian) shall be eligible to the following perquisites which shall not be included in the computation of the ceiling on remuneration specified in Section II or Section III (of Schedule: V Part: II):

          (a)   Children’s education allowance: In case of children studying in or outside India, an allowance limited to a maximum of ` 12,000 per month per child or actual expenses incurred, whichever is less, is admissible up to a maximum of two children.

         (b)   Holiday passage for children studying outside India or family staying abroad: Return holiday passage once in a year by economy class or once in two years by first class to children and to the members of the family from the place of their study or stay abroad to India if they are not residing in India, with the managerial person.

        (c)   Leave travel concession: Return passage for self and family in accordance with the rules specified by the company where it is proposed that the leave be spent in home country instead of anywhere in India.

 

Explanation I —

For the purposes of Section II of this Part, “effective capital” means the aggregate of the paid-up share capital (excluding share application money or advances against shares); amount, if any, for the time being standing to the credit of share premium account; reserves and surplus (excluding revaluation reserve); long-term loans and deposits repayable after one year (excluding working capital loans, over drafts, interest due on loans unless funded, bank guarantee, etc., and other short-term arrangements) as reduced by the aggregate of any investments (except in case of investment by an investment company whose principal business is acquisition of shares, stock, debentures or other securities), accumulated losses and preliminary expenses not written off.

 

Explanation II—

(a)    Where the appointment of the managerial person is made in the year in which company has been incorporated, the effective capital shall be calculated as on the date of such appointment;

(b)    In any other case the effective capital shall be calculated as on the last date of the financial year preceding the financial year in which the appointment of the managerial person is made.

 

Explanation III—

For the purposes of this Schedule, ‘‘family’’ means the spouse, dependent children and dependent parents of the managerial person.

 

Explanation IV—

The Nomination and Remuneration Committee while approving the remuneration under Section II or Section III, shall—

(a)    Take into account, financial position of the company, trend in the industry, appointee’s qualification, experience, past performance, past remuneration, etc.;

(b)    Be in a position to bring about objectivity in determining the remuneration package while striking a balance between the interest of the company and the shareholders.

 

Explanation V—

For the purposes of this Schedule, “negative effective capital” means the effective capital which is calculated in accordance with the provisions contained in Explanation I of this Part is less than zero.

 

Explanation VI—

For the purposes of this Schedule:—

(A)  “current relevant profit” means the profit as calculated under section 198 but without deducting the excess of expenditure over income referred to in sub-section 4 (l) thereof in respect of those years during which the managerial person was not an employee, director or shareholder of the company or its holding or subsidiary companies.

(B)  “Remuneration” means remuneration as defined in clause (78) of section 2 and includes reimbursement of any direct taxes to the managerial person.

 

Remuneration payable to a managerial person in two companies:

Subject to the provisions of sections I to IV, a managerial person shall draw remuneration from one or both companies, provided that the total remuneration drawn from the companies does not exceed the higher maximum limit admissible from any one of the companies of which he is a managerial person.

 

Provisions applicable to Parts I and II of this Schedule

1.   The appointment and remuneration referred to in Part I and Part II of this Schedule shall be subject to approval by a resolution of the shareholders in general meeting.

2.   The auditor or the Secretary of the company or where the company is not required to appointed a Secretary, a Secretary in whole-time practice shall certify that the requirement of this Schedule have been complied with and such certificate shall be incorporated in the return filed with the Registrar under sub-section (4) of section 196.

 

The Central Government may, by notification, exempt any class or classes of companies from any of the requirements contained in this Schedule.

    AMOUNT TO BE TRANSFERRED TO RESERVES

	Where the proposed dividend −	Amount to be transferred to reserves
(i)	exceeds 10% but does not exceed 12.5% of the paid-up equity capital	Not less than 2.5% of the current year’s net profit
(ii)	exceeds 12.5% but does not exceed 15% of the paid-up equity capital	Not less than 5% of the current year’s net profit
(iii)	exceeds 15% but does not exceed 20% of the paid-up equity capital	Not less than 7.5% of the current year’s net profit
(iv)	exceeds 20% of the paid-up equity capital	Not less than 10% of the current year’s net profit

 

Important notes:

(i)      Proposed dividend will include both interim and final equity dividend.

(ii)     If the rate of proposed dividend does not exceed 10% of the paid-up equity capital, company can declare or pay dividend without transferring anything to reserves; although, if the company wish, it can transfer an amount, as it deems suitable, to reserves.

Part B

 

Company Accounts

Company Final Accounts

Selected Problems and Solutions

Illustration: 1

The following information has been extracted from the books of account of Hero Ltd. as at 31st March, 2015:   (Rs in ’000)

Particulars	Debit (Rs)	Credit (Rs)
Administration expenses	480
Cash at bank and in hand	228
Cash received on sale of fittings		10
Long term loan		70
Investments	200
Depreciation on fixed assets as at 1st April, 2014		260
Distribution costs	102
Factory closure costs	60
Fixed assets at cost	680
Profit and loss A/c balance as at 1st April, 2014		80
Purchase of equipment	120
Purchases of goods for resale	1,710
Sales (net of excise duty)		3,000
Share capital (1,00,000 equity shares of Rs 10 each)		1,000
Stock as at 1st April, 2014	140
Trade creditors		80
Trade debtors	780
	4,500	4,500

 

Additional Information:

1.   The stock at 31st March, 2015 (valued at the lower of cost or net realizable value) was estimated to be worth Rs 2, 00,000.

 

2.   Fixtures, fittings, tools and equipment all related to administration. Depreciation is charged at a rate of 20% per annum on cost. A full year’s depreciation is charged in the year of acquisition, but no depreciation is charged in the year of disposal.

 

3.   During the financial year ended 31^st March, 2015, the Company purchased equipment of Rs 1, 20,000. It also sold some fittings (which were originally purchased at a cost Rs 60,000) for Rs 10,000 and for which accumulated depreciation of Rs 30,000 had been set aside.

 

4.   The average Income tax for the Company is 50%. Factory closure cost is to be presumed as an allowable expenditure for Income tax purpose.

 

5.   The company proposes to pay a dividend of 20% per Equity Share.

 

Prepare Hero Ltd.’s Profit and Loss Account for the year ended 31st March, 2015 and Balance Sheet as at that date in accordance with the Companies Act, 2013 in the Vertical Form along with the Notes on Accounts containing only the significant accounting policies.

 

Solution: 1

Illustration: 2

The following balances are extracted from the books of Supreme Ltd., a real estate company, on 31^st March, 2015:        (Rs in '000)

Particulars	Debit (Rs)	Credit (Rs)
Sales		13,800
Purchases of materials	6,090
Share capital (fully paid up)		500
Land purchased in the year as stock	365
Leasehold premises	210
Creditors		2,315
Debtors	3,675
Directors’ salaries	195
Wages	555
WIP on 1.4.2014	1,050
Sub-contractors’ cost	4,470
Equipment, fixtures and fittings at cost on 1.4.2014	1,320
Stock on 1.4.2014	295
Profit and loss account credit balance on 1.4.2014		640
Secured loan		560
Bank overdraft		525
Interest on loan and overdraft	110
Depreciation on equipment on 1.4.2014		820
Administration expenses	735
Office salaries	90
	19,160	19,160

 

You also obtain the following information:

a.   On 31^st March, 2015, stock on hand including the land acquired during the year, is valued at Rs 7, 10,000. Work in progress at that date is valued at Rs 7, 00,000.

b.   On 1^st October, 2014 the company moved to new premises. The premises are on a 12 years lease and the lease premium paid amounted to Rs 2, 10,000. The company used sub-contract labour of Rs 2, 00,000 and materials at cost of Rs 1, 90,000 in the refurbishment of the premises. These are to be considered as part of the cost of leasehold premises.

c.   A review of the debtors reveals specific doubtful debts of Rs 1, 75,000 and the directors wish to provide for these together with a general provision based on 2% of the balance.

d.   Depreciation on equipment, fixtures and fittings is provided at 15% on the written down value.

e.   Supreme Ltd. sued Shallow Ltd. for supplying defective materials which has been written off as valueless. The Directors are confident that Shallow Ltd. will agree for a settlement of Rs 2, 50,000.

f.    The directors propose a dividend of 25%.

g.   Rs 1, 00,000 is to be provided as audit fee.

h.   The company will provide 10% of the pre-tax profit as bonus to employees in the accounts before charging the bonus.

i.     Income tax to be provided at 50% of the profits.

 

You are required:

1.   To prepare the company’s financial statements for the year ended 31^st March, 2015 as near as possible to proper form of company final accounts; and

2.   To prepare a set of Notes to accounts including significant accounting policies.

 

Notes:

i.         Workings should form part of your answer.

ii.        Previous year figures can be ignored.

iii.      Figures are to be rounded off to nearest thousands.

 

Solution: 2

Illustration: 3

On 1^st November, 2014 Squash Limited was incorporated with an authorized capital of Rs 200 crores. It issued to its promoters equity capital of Rs 10 crores which was paid for in full. On that day it purchased the running business of Jam Ltd. for Rs 40 crores and allotted at par equity capital of Rs 40 crores in discharge of the consideration. The net assets taken over from Jam Ltd. were valued as follows: Fixed Assets Rs 30 crores, Inventory Rs 2 crores, Customers’ dues Rs 14 crores and Creditors Rs 6 crores. Squash Ltd. carried on business and the following information is furnished to you:

(a)    Summary of cash/bank transactions (for year ended 31^st October, 2015):

                                                                             (Rs in Crores)

Particulars	Rs	Rs
Receipts:
Equity capital raised:
Promoters (as shown above)	10
Others	50	60
Collections from customers		800
Sale proceeds of fixed assets (cost Rs 18 crores)		4
Total		864
Payments:
Payments to suppliers	400
Payments to employees	140
Payment for expenses	100	640
Investments in Upkar Limited		20
Payments to suppliers of fixed assets:
Instalment due	120
Add: Interest	10	130
Tax payment		54
Dividend payment		10
Closing cash/bank balance		10
Total		864

 

(b)    On 31^st October, 2015 Squash Ltd.’s assets and liabilities were:

                                                                              (Rs in Crores)

Particulars	Rs	Rs
Inventory at cost		3
Customers’ dues		80
Prepaid expenses		2
Advances to suppliers		8
Amounts due to suppliers of goods		52
Amounts due to suppliers of fixed assets		150
Outstanding expenses		6

 

(c)                                                                              (Rs in Crores)

1.   Depreciation for the year under the Companies Act, 2013	36
2.   Depreciation for the year under the Income Tax Act, 1961	40

 

(d)    Provide for tax at 38.5% of “total income”. There are no disallowed expenses for the purpose of income taxation. Provision for tax is to be rounded off.

 

For Squash Ltd. prepare:

1.   Revenue statement for the year ended 31^st October, 2015 and

2.   Balance Sheet as on 31st October, 2015 from the above information.

 

Solution: 3

Illustration: 4

The following balances are extracted from the books of Kolkata Traders Limited.

Particulars	Debit (Rs)	Credit (Rs)
Land and buildings	51,12,000
Furniture and fittings	2,66,000
Capital work in progress	98,000
Calls in arrear	50,000
Cash in hand	10,000
5% tax free Govt. Loan (FV Rs 2,00,000)	1,97,600
Bills receivable	2,72,000
Goodwill	3,20,000
Trade debtors	4,16,000
Trade creditors		6,12,000
General reserve		3,00,000
Profit and loss account (1.4.2017)		1,76,000
Bank overdraft		2,23,600
Purchases and returns	48,00,000	1,00,000
Sales and returns	1,40,000	61,56,000
Advertisements	1,78,000
Legal charges	20,000
Carriage on goods purchased	74,000
Wages and salaries including PF	4,64,000
Repairs and trade expenses	71,200
Opening stock (1.4.2017)	9,52,000
Income tax (advance)	56,000
Interim dividend paid	70,000
Share capital (@ Rs 10 each)		40,00,000
6% debentures of Rs 100 each		20,00,000
	1,35,67,600	1,35,67,600

Additional information:

1.   Closing stock as at 31.3.2018 was valued at Rs 10, 82,000 at cost, but market value of which was Rs 12, 10,000.

2.   Provision for doubtful debts to be created @ 5%.

3.   Depreciation on all assets was calculated for the amount of Rs 2, 86,400 for the year 2017-18.

4. Trade expenses include Rs 10,000 for audit fees and Rs 2,000 paid to the auditor for attending taxation matters of the company.

5.   Calls in arrear include Rs 4,000 due from directors.

6.   Directors declared an interim dividend @ 2.5% and recommended dividend for the amount of Rs 1, 46,260.

7.   Assume dividend tax rate is 17%.

8.   Provide for income tax of Rs 70,000 for the year 2017-18.

 

Prepare the company’s balance sheet as on 31.03.2018 and its statement of profit and loss for the year ended 31.03.2018.

Solution: 4