Corporate Financial Reporting - Capital Reduction

 

Corporate Financial Reporting

Capital Reduction

 

Part A: Discussion of basic theories including (1) What is Capital Reduction, (2) What are the different forms of Capital Reduction, and (3) What are the different journal entries necessary to be made for different forms of Capital Reduction.

Part B: Four Illustrations with Solutions.

Part A

Introduction

Capital reduction is the process of writing down or repayment of a company’s different classes of capital, as a result of large accumulated losses or an excess of funds without profitable use.

 

Although capital reduction process may be undertaken when a company accumulates huge surplus funds far in excess of its requirements, it is more usually followed when a company passes through a period of financial difficulties, accumulates large amount of losses or has its assets over-valued.

 

Capital reduction may take any of the following three forms:

     1)        Reducing the liability of the shareholders in respect of any unpaid amount on the shares held by them.

     2)        Paying back any paid-up share capital which is in excess of the requirements.

     3)        Cancelling any paid-up share capital which is lost or unrepresented by available assets.

 

 

Reduction in the liability of the shareholders in respect of any unpaid amount on the shares held by them

 

JOURNAL ENTRY:

Date	Particulars		Debit (Rs)	Credit (Rs)
1	Share capital (partly paid-up) A/c	Dr
	To  Share capital    (fully paid up) A/c

 

 

Paying back the excess paid-up share capital

 

JOURNAL ENTRIES:

Date	Particulars		Debit (Rs)	Credit (Rs)
1	Share capital A/c	Dr
	To  Shareholders A/c
2	Shareholders A/c	Dr
	To  Bank A/c

 

Cancelling the paid-up share capital which is lost or unrepresented by available assets

 

JOURNAL ENTRIES:

Date	Particulars		Debit (Rs)	Credit (Rs)
1	Share capital (old denomination) A/c	Dr
	To Share capital (new denomination) A/c
	To  Capital reduction A/c
	(Shares of one denomination replaced by the shares of another denomination without changing the number of shares)
2	Share capital A/c	Dr
	To  Capital reduction A/c
	(Called-up share capital reduced without changing denomination)
3	Individual fixed assets A/c	Dr
	To  Capital reduction A/c
	(Value of fixed assets increased on revaluation generating surplus)
4	Capital reduction A/c	Dr
	To  Individual fixed assets A/c
	(Value of overvalued fixed assets written down)
5	Equity share capital A/c	Dr
	To  Shares surrendered A/c
	(Equity shares surrendered for conversion or cancellation)
6	Shares surrendered A/c	Dr
	To Preference share capital A/c
	To  Equity share capital A/c
	(Shares surrendered converted into preference shares or new equity shares)
7	Shares surrendered A/c	Dr
	To  Capital reduction A/c
	(Shares surrendered cancelled)
8	Debentures A/c	Dr
	Sundry creditors A/c	Dr
	To  Capital reduction A/c
	(Outside liabilities written down when their claims are reduced)
9	Capital reduction A/c	Dr
	To  Share capital A/c
	To  Debentures A/c
	(Preference dividend arrears waived by issue of shares or debentures)
10	Interest payable A/c	Dr
	To  Share capital A/c
	To  Debentures A/c
	To  Capital reduction A/c
	(Shares or debentures issued against interest payable already provided in the balance sheet)
11	Reserves A/c	Dr
	To  Capital reduction A/c
	(Reserves transferred to capital reduction account)
12	Capital reduction A/c	Dr
	To  Bank A/c
	(Expenses incurred in connection with the reconstruction)
13	Capital reduction A/c	Dr
	To  Profit & loss (Dr. bal.) A/c
	To  Prelim. expenses A/c
	To  Goodwill A/c
	To  Patents A/c
	(Intangible assets, fictitious assets and debit balance of profit and loss account written off)
14	Capital reduction A/c	Dr
	To  Capital reserves A/c
	(Surplus on capital reduction account capitalised)

 

Part B

Corporate Financial Reporting

Capital Reduction

Selected Problems and Solutions

 

Illustration: 1

Abridged Balance Sheet of Z Ltd. as on 31.03.2022 is as under:

Liabilities	Rs	Assets	Rs
30,000 Equity Shares of Rs 100 each	30,00,000	Goodwill	5,00,000
10,000 11% Prefe. Shares of Rs 100 each	10,00,000	Fixed Assets	30,00,000
15% Debentures	10,00,000	Current Assets	10,90,000
Interest due on Debentures	3,00,000	Profit and Loss A/c	15,50,000
Sundry Creditors	8,40,000
	61,40,000		61,40,000

 

Following scheme of reconstruction has been passed and approved by the Court:

            (i)        The equity shares are to be subdivided into shares of Rs 10 each, and each shareholder shall surrender 70% of his holdings.

          (ii)        Out of the surrendered shares, 50,000 shares shall be issued to preference shareholders in full settlement of their claims.

        (iii)        Debenture holders’ total claim shall be reduced to Rs 7, 00,000 and shall be satisfied by issue of 70,000 equity shares, out of surrendered shares.

        (iv)        Creditors’ claims are to be reduced by 50% and in consideration the creditors shall receive 20,000 equity shares out of the surrendered shares.

          (v)        The remaining surrendered shares shall be cancelled.

        (vi)        Goodwill and Profit and Loss Account are to be written off completely and fixed assets are to be depreciated by Rs 10, 00,000.

 

You are required to prepare journal entries in the books of Z Ltd and a Balance Sheet after affecting the scheme.

 

Solution: 1

 

Journal entries in the books of Z Ltd.

Date	Particulars		Dr. (Rs)	Cr. (Rs)
1.	Equity share capital (Rs 100) A/c         To Eq. Sh. Cap. (Rs 10) A/c (Being 30,000 equity shares of Rs 100 each fully paid subdivided into 3,00,000 equity shares of Rs 10 each fully paid as per special resolution no. ...... Dated...... Approved by the Court vide order no. ...... Dated ......)	Dr	30,00,000	30,00,000
2.	Equity share capital (Rs 10) A/c         To  Share surrender A/c (Being 70% of equity share capital surrendered by the equity shareholders for conversion or cancellation as per special resolution no. ...... Dated ...... approved by the Court vide: order no. ...... Dated ......)	Dr	21,00,000	21,00,000
3.	11% Pref. share capital A/c 15% Debentures A/c Int. due on debentures A/c Sundry creditors A/c         To  Capital reduction A/c (Being the entire balance of 11% Preference Share Capital A/c, 15% Debentures A/c, Interest Due on Debentures A/c and Sundry Creditors A/c transferred to Capital Reduction A/c as per the approved scheme of reconstruction)	Dr Dr Dr Dr	10,00,000 10,00,000 3,00,000 4,20,000	27,20,000
4.	Share surrender A/c         To  Equity share capital A/c (Being 50,000 surrendered equity shares re-issued to 11% pref. shareholders)	Dr	5,00,000	5,00,000
5.	Share surrender A/c         To  Equity share capital A/c (Being 70,000 surrendered equity shares re-issued to 15% debenture holders)	Dr	7,00,000	7,00,000
6.	Share surrender A/c         To  Equity share capital A/c (Being 20,000 surrendered equity shares re-issued to sundry creditors)	Dr	2,00,000	2,00,000
7.	Share surrender A/c         To  Capital reduction A/c (Being the balance of share surrender A/c transferred to capital reduction A/c)	Dr	7,00,000	7,00,000
8.	Capital reduction A/c         To  Goodwill A/c         To  Profit and loss A/c         To  Fixed assets A/c         To  Capital reserve A/c (Being the balance of capital reduction A/c used for writing off the debit balance of profit and loss A/c and the entire amount of goodwill and for writing down fixed assets as per the approved scheme of reconstruction and the final balance in the capital reduction A/c transferred to capital reserve A/c)	Dr	34,20,000	5,00,000 15,50,000 10,00,000 3,70,000

 

Balance sheet of Z Ltd. (and reduced) as at 31-03-2022

Sl. No.		Particulars	Note No.	Figures as at the end of the current reporting period (Rs)
I		Equity and Liabilities
	1	Shareholders’ funds
		(a) Share capital	1	23,00,000
		(b) Reserves and surplus	2	3,70,000
	2	Current liabilities
		(a) Trade payables		4,20,000
		TOTAL		30,90,000
II		Assets
	1	Non-current assets
		(a) Fixed assets		20,00,000
	2	Current assets		10,90,000
		TOTAL		30,90,000

 

Notes to and forming part of balance sheet of Z Ltd. (and reduced) as at 31-03-2022

Note No.	Particulars	Figures as at the end of the current reporting period (Rs)
1	SHARE CAPITAL:
	(a) Authorised capital	N.A.
	(b) Issued, Subscribed and fully paid: 2,30,000 equity shares of Rs 10 each	23,00,000
2	RESERVES AND SURPLUS:
	(a) Capital reserves	3,70,000

 

Illustration: 2

Following is the Balance Sheet of JDN Ltd. as on 31.03.2022:

Liabilities	Rs	Assets	Rs
Authorised Capital:		Goodwill	80,000
5,000 Equity Shares of Rs 100 each	5,00,000	Land & Buildings	75,000
5,000 6% Preference Shares of Rs 100 each	5,00,000	Plant & Machinery	90,000
Subscribed Capital:		Patents & Trade Marks	20,000
3,000 Equity Shares of Rs 100 each fully paid	3,00,000	Stock at cost	40,000
2,000 6% Preference Shares of Rs 100 each	2,00,000	Sundry Debtors	39,000
5% Debentures	1,00,000	Cash at Bank	6,000
Interest due on Debentures	10,000	Preliminary Exp.	20,000
Sundry Creditors	1,50,000	Profit & Loss A/c	3,90,000
	7,60,000		7,60,000

 

It is believed that the worst is over and that the time has arrived to effect reconstruction. A revaluation of assets reveals the following:

Land and Buildings are revalued at Rs 95,000; Plant and Machinery at Rs 1, 12,000; Patents and Trade Marks at Rs 5,000; Stock at Rs 25,000; and Debtors at Rs 32,000.

 

The following scheme is framed and approved by the Court:

         1)        The preference shares are converted into 7.5% preference shares of Rs 30 each fully paid.

         2)        The equity shares are converted into shares of Rs 5 each fully paid.

         3)        The sundry creditors are given the option to either accept 50% of their claims in cash in full satisfaction or to convert their claims into equity shares of Rs 5 each.

         4)        The revaluation of assets is adopted.

 

One-third (in value) of the creditors accepted equity shares for their claims. The rest was paid cash which was raised by issuing 17,000 fully paid equity shares to the existing equity shareholders. All shares including preference shares were then consolidated (or sub-divided) into equity shares of Rs 10 each. In view of the unsatisfactory state of affairs of the company the debenture holders agreed to forego the interest due on debentures.

 

Pass journal entries and prepare the Balance Sheet after the scheme is put into effect.

 

Solution: 2 

Journal entries in the books of JDN Ltd.

Date	Particulars		Dr. (Rs)	Cr. (Rs)
1.	Land and buildings A/c Plant and machinery A/c         To  Capital reduction A/c	Dr Dr	20,000 22,000	42,000
2.	Capital reduction A/c         To  Patents/Trademarks A/c         To  Stock A/c         To  Debtors A/c	Dr	37,000	15,000 15,000 7,000
3.	6% Pref. Sh. Cap. (Rs 100) A/c To 7.5% Pref. Sh. Cap. (Rs 30) A/c To Capital reduction A/c	Dr	2,00,000	60,000 1,40,000
4.	Equity share capital (Rs 100) A/c         To Eq. Sh. Cap. (Rs 5) A/c         To  Capital reduction A/c	Dr	3,00,000	15,000 2,85,000
5.	Sundry creditors A/c         To  Bank A/c         To Eq. Sh. Cap. (Rs 5) A/c         To  Capital reduction A/c	Dr	1,50,000	50,000 50,000 50,000
6.	Bank A/c         To Eq. Sh. Cap. (Rs 5) A/c	Dr	85,000	85,000
7.	Int. due on debentures A/c         To  Capital reduction A/c	Dr	10,000	10,000
8.	7.5% Pref. Sh. Cap. (Rs 30) A/c Equity share capital (Rs 5) A/c         To Eq. Sh. Cap. (Rs 10)	Dr Dr	60,000 1,50,000	2,10,000
9.	Capital reduction A/c         To  Goodwill         To  Preliminary expenses         To  Profit and loss A/c	Dr	4,90,000	80,000 20,000 3,90,000

 

Capital reduction A/c

Particulars	Rs	Particulars	Rs
To  Patents/Trademarks	15,000	By  Land and buildings	20,000
To  Stock	15,000	By  Plant and machinery	22,000
To  Debtors	7,000	By 6% Pref. Sh. Cap. (Rs 100)	1,40,000
To  Goodwill	80,000	By Eq. Sh. Cap. (Rs 100)	2,85,000
To Prelim. Expenses	20,000	By  Sundry creditors	50,000
To  Profit and loss A/c	3,90,000	By  Int. due on deb.	10,000
	5,27,000		5,27,000

 

Balance sheet of JDN Ltd. (and reduced) as at 31-03-22

Sl. No.		Particulars	Note No.	Figures as at the end of the current reporting period (Rs)
I		Equity and Liabilities
	1	Shareholders’ funds
		(a) Share capital	1	2,10,000
	3	Non-current liabilities
		(a) Long-term borrowings	2	1,00,000
		TOTAL		3,10,000
II		Assets
	1	Non-current assets
		(a) Fixed assets
		(i) Tangible assets	3	2,07,000
		(ii) Intangible assets	4	5,000
	2	Current assets
		(b) Inventories	5	25,000
		(c) Trade receivables	6	32,000
		(d) Cash and cash equivalents	7	41,000
		TOTAL		3,10,000

 

Notes to and forming part of balance sheet of

JDN Ltd. (and reduced) as at 31-3-2022

Note No.	Particulars	Figures as at the end of the current reporting period (Rs)
1	SHARE CAPITAL:
	(a) Authorised capital:      5,000 Pref. shares of Rs 100 each      5,000 Equity shares of Rs 100 each	5,00,000 5,00,000
	(b) Issued, Subscribed and fully paid:      21,000 Equity shares of Rs 10 each	2,10,000
2	LONG-TERM BORROWINGS:
	(a) Bonds/debentures:      1,000 5% debentures of 100 each	1,00,000
3	TANGIBLE ASSETS:
	(a) Land and buildings	95,000
	(b) Plant and machinery	1,12,000
4	INTANGIBLE ASSETS:
	(a) Patents and trademarks	5,000
5	INVENTORIES:
	(a) Finished goods (other than those acquired for trading)	25,000
6	TRADE RECEIVABLES:
	(a) Sundry debtors	32,000
7	CASH AND CASH EQUIVALENTS:
	(a) Balances with banks	41,000

 

Illustration: 3

The Balance Sheet of Multiverse Ltd. before reconstruction is as follows:

Liabilities	Rs	Assets	Rs
Share Capital:		Buildings at cost less depreciation	4,00,000
15,000 Equity Shares of Rs 50 each	7,50,000	Plant at cost less depreciation	2,68,000
12,000 7% Preference Shares of Rs 50 each	6,00,000	Goodwill at cost	3,18,000
Loans	5,73,000	Stock	4,00,000
Creditors	2,07,000	Debtors	3,28,000
Other Liabilities	35,000	Preliminary Exp.	11,000
		Profit & Loss A/c	4,40,000
	21,65,000		21,65,000

 

Note: Preference dividend is in arrear for five years.

The company is now earning profits but is short of working capital. A reconstruction scheme has, therefore, been approved which is as follows:

         1)        Equity shareholders have agreed that their Rs 50 shares be reduced to Rs 2.50 per share and they have agreed to subscribe in cash for 3 equity shares of Rs 2.50 each for every equity shares held.

         2)        Preference shareholders have agreed to cancel the arrears of preference dividend and to accept for each Rs 50 preference shares 4 new 5% preference shares of Rs 10 each plus 6 new equity shares of Rs 2.50 each, all credited as fully paid.

         3)        Lenders to the company of Rs 1, 50,000 have agreed to convert their loan into shares and, for this purpose, they will be allotted 12,000 new 5% preference shares of Rs 10 each and 12,000 new equity shares of Rs 2.50 each, all credited as fully paid.

         4)        The directors have agreed to subscribe in cash for 40,000 new equity shares of Rs 2.50 each in addition to any shares to be subscribed for by them under (1) above.

         5)        Of the cash received, Rs 2, 00,000 is to be used to reduce loans due by the company.

         6)        Authorised capital is to be increased to the old figure of Rs 6, 00,000 for preference capital and Rs 7, 50,000 for equity capital.

         7)        The equity share capital cancelled is to be applied to write-off preliminary expenses and debit balance of Profit and Loss Account, to reduce Rs 35,000 from the value of plant and any balance remaining to be used to write-down the value of goodwill.

 

Pass journal entries and re-draft the Balance Sheet after the approved reconstruction scheme is carried out.

 

Solution: 3

Journal entries in the books of Multiverse Ltd.

Date	Particulars		Dr. (Rs)	Cr. (Rs)
1.	Eq. Sh. Cap. (Rs 50) A/c To Eq. Sh. Cap. (Rs 2.5) A/c To  Capital reduction A/c	Dr	7,50,000	37,500 7,12,500
2.	Bank A/c To  Eq. Sh. Ca. (Rs 2.5) A/c	Dr	1,12,500	1,12,500
3.	7% Pref. Sh. Cap. (Rs 50) A/c Capital reduction A/c To 5% Pref. Sh. Cap. (Rs 10) A/c To Eq. Sh. Cap. (Rs 2.5) A/c	Dr Dr	6,00,000 60,000	4,80,000 1,80,000
4.	Loans A/c To 5% Pref. Sh. Cap. (Rs 10) A/c To Eq. Sh. Cap. (Rs 2.5) A/c	Dr	1,50,000	1,20,000 30,000
5.	Bank A/c To Eq. Sh. Cap. (Rs 2.5) A/c	Dr	1,00,000	1,00,000
6.	Loans A/c         To  Bank A/c	Dr	2,00,000	2,00,000

 

Capital reduction A/c

Particulars	Rs	Particulars	Rs
To  Share capital A/c	60,000	By  Equity share capital	7,12,500
To Prelim. Expenses	11,000
To  Profit and loss A/c	4,40,000
To  Plant	35,000
To  Goodwill	1,66,500
	7,12,500		7,12,500

 

Balance sheet of Multiverse Ltd. (And reduced) as at.....

Sl. No.		Particulars	Note No.	Figures as at the end of the current reporting period (Rs)
I		Equity and Liabilities
	1	Shareholders’ funds
		(a) Share capital	A	10,60,000
	2	Share application money pending allotment
	3	Non-current liabilities
		(a) Long-term borrowings	B	2,23,000
	4	Current liabilities
		(b) Trade payables (Creditors)		2,07,000
		(c) Other current liabilities		35,000
		TOTAL		15,25,000
II		Assets
	1	Non-current assets
		(a) Fixed assets
		(i) Tangible assets	C	6,33,000
		(ii) Intangible assets	D	1,51,500
	2	Current assets
		(a) Inventories (Stock)		4,00,000
		(c) Trade receivables (Debtors)		3,28,000
		(d) Cash and cash equivalents	E	12,500
		TOTAL		15,25,000

 

Notes to and forming part of balance sheet of Multiverse Ltd. (And reduced) as at..........

Note No.	Particulars	Figures as at the end of the current reporting period (Rs)
A	SHARE CAPITAL:
	Issued, Subscribed and fully paid: 1,84,000 Eq. Sh. of Rs 2.50 each = 1,84,000 × Rs 2.50     = 4,60,000 60,000 5% Pref. Sh. of Rs 10 each = 60,000 × Rs 10           = 6,00,000	10,60,000
B	LONG-TERM BORROWINGS:
	Loans                            = 5,73,000 Less: Issued 12,000 5% Pref. Shares of Rs 10 each    = (1,20,000) Less: Issued 12,000 Equity Shares of Rs 2.50 each  =   (30,000) Less: Paid off               = (2,00,000)	2,23,000
C	TANGIBLE ASSETS:
	(a) Buildings	4,00,000
	(b) Plant (Rs 2,68,000 – 35,000)	2,33,000
D	INTANGIBLE ASSETS:
	(a) Goodwill                =   3,18,000 Less: Written off          = (1,66,500)	1,51,500
E	CASH AND CASH EQUIVALENTS:
	Issue of 85,000 Equity Shares of Rs 2.50 each                 =   2,12,500 Less: Loans paid off       =  (2,00,000)	12,500

 

Illustration: 4

The Balance Sheet of a limited liability company as on 31.12.2022 is as stated below:

Liabilities	Rs	Assets	Rs
Share Capital:		Goodwill	42,300
45,000 Equity Shares of Rs 10 each fully paid	4,50,000	Patents	18,000
3,000 6% Preference Shares of Rs 100 each	3,00,000	Land & Buildings	2,70,000
Sundry Creditors	60,000	Plant & Machinery	2,40,000
Bills Payable	50,000	Stock-in-trade	88,800
Bank Overdraft	1,00,000	Sundry Debtors	1,50,900
		Profit & Loss A/c	1,50,000
	9,60,000		9,60,000

 

Dividends on preference shares are in arrear for three years.

The company passes a Special Resolution to reduce its capital in accordance with the following scheme and the same is duly sanctioned by the Court:

(a)     The preference shares are converted from 6% to 8%, but revalued in a manner in which the total return on them remains unaffected. The value of equity shares is brought down to Rs 8 per share.

(b)     The arrears of dividend on preference shares are cancelled.

(c)      The debit balance of the Goodwill Account is written-off entirely.

(d)     Land and Buildings and Plant and Machinery are revalued at 85% and 80% of their respective book values.

(e)     Book debts to the amount of Rs 7,200 are treated as bad and hence, to be written-off.

(f)       The company expects to earn profit @ Rs 45,000 per annum from the current year which would be utilised entirely for reducing the debit balance of the Profit and Loss Account for three years. The remaining balance of the said account would be written-off at the time of capital reduction process.

(g)     The balance of total capital reduction is to be utilised in writing-down patents.

(h)     A secured loan of Rs 2, 40,000 bearing interest at 12% p.a. is to be obtained by mortgaging tangible fixed assets for procuring cash for repayment of bank overdraft and for providing additional funds for working capital.

 

Journalise the above scheme and draw a Balance Sheet after the implementation of the scheme is over.

Solution: 4

 

Journal entries in the books of...................

Date	Particulars		Dr. (Rs)	Cr. (Rs)
1.	6% Pref. Sh. Cap. (Rs 100) A/c To 8% Pref. Sh. Cap. (Rs 75) A/c To  Capital reduction A/c	Dr	3,00,000	2,25,000 75,000
2.	Eq. Sh. Cap. (Rs 10) A/c To Eq. Sh. Cap. (Rs 8) A/c To  Capital reduction A/c	Dr	4,50,000	3,60,000 90,000
3.	Capital reduction A/c     To  Goodwill A/c	Dr	42,300	42,300
4.	Capital reduction A/c     To  Land & buildings A/c     To  Plant & machinery A/c	Dr	88,500	40,500 48,000
5.	Capital reduction A/c     To  Sundry debtors A/c	Dr	7,200	7,200
6.	Capital reduction A/c     To  Profit and loss A/c	Dr	15,000	15,000
7.	Capital reduction A/c     To  Patents A/c	Dr	12,000	12,000
8.	Bank A/c     To  12% Loan A/c	Dr	2,40,000	2,40,000
9.	Bank overdraft A/c     To  Bank A/c	Dr	1,00,000	1,00,000

 

Capital reduction A/c

Particulars	Rs	Particulars	Rs
To  Goodwill	42,300	By Eq. Sh. Cap.	90,000
To Land & Bldngs A/c	40,500	By 6% Pref. Sh. Cap.	75,000
To  Plant & M/c A/c	48,000
To  Sundry debtors	7,200
To  Profit and loss A/c	15,000
To  Patents	12,000
	1,65,000		1,65,000

 

Balance sheet of...... (And reduced) as at 31.12.2022

Sl. No.		Particulars	Note No.	Figures as at the end of the current reporting period (Rs)
I		Equity and Liabilities
	1	Shareholders’ funds
		(a) Share capital	A	5,85,000
		(b) Reserves and surplus	B	(1,35,000)
	2	Share application money pending allotment
	3	Non-current liabilities
		(a) Long-term borrowings	C	2,40,000
	4	Current liabilities
		(a) Trade payables (Sundry Creditors)		60,000
		(b) Other current liabilities (Bills Payable)		50,000
		TOTAL		8,00,000
II		Assets
	1	Non-current assets
		(a) Fixed assets
		(i) Tangible assets	D	4,21,500
		(ii) Intangible assets	E	6,000
	2	Current assets
		(b) Inventories (Stock-in-trade)		88,800
		(c) Trade receivables	F	1,43,700
		(d) Cash and cash equivalents	G	1,40,000
		TOTAL		8,00,000

 

Notes to and forming part of balance sheet of....... (And reduced) as at 31-12-2022

Note No.	Particulars	Figures as at the end of the current reporting period (Rs)
A	SHARE CAPITAL:
	Issued, Subscribed and fully paid: 45,000 Eq. Sh. × Rs 8   = 3,60,000 3,000 8% Pref. Sh.× 75 = 2,25,000	5,85,000
B	RESERVES AND SURPLUS:
	P/L A/c debit balance          = (1,50,000) Less: W/Off by utilising Capital Reduction A/c balance        =    15,000	(1,35,000)
C	LONG-TERM BORROWINGS:
	12% Secured loan by mortgage of tangible fixed assets	2,40,000
D	TANGIBLE ASSETS:
	(a) Land and buildings (2, 70,000 × 85%)	2.29,500
	(b) Plant and machinery (2, 40,000 × 80%)	1,92,000
E	INTANGIBLE ASSETS:
	(a) Patents (Rs 18,000 Less W/Off Rs 12,000 by utilising Capital Reduction A/c balance)	6,000
F	TRADE RECEIVABLES:
	(a) Sundry debtors (Rs 1,50,900 Less Bad Debts W/Off Rs 7,200)	1,43,700
G	CASH AND CASH EQUIVALENTS:
	(a) Balances with banks (12% Loan taken Rs 2,40,000 Less Bank Overdraft paid off Rs 1,00,000)	1,40,000