NCERT Solutions for Class 12 Accountancy Part 2 Chapter 3 Financial Statements of a Company

Exercises

Short Answer Type Questions

1. State the meaning of financial statements?

Ans. Financial statements of a company present a true and fair picture of the results of a company’s operations
to the various users of an accounting information. Financial Statements are the end products of the accounting process. These are the annual formal statements that are prepared by various enterprises or organisations for a particular accounting period. They provide information about the profitability and the financial position of a business. As per section 2(40) of the companies Act 2013, the “Financial statement” in relation to a company, include the following:

(i) A balance sheet

(ii) A statement of profit and loss

(iii) Cash flow statement

(iv) A statement of changes in equity, if applicable and

(v) Explanatory notes.

‘‘The financial statement are a summary of accounts of a business enterprises, the balance sheet sharing the assets, liabilities and capital as on a certain date and income stalement showing the result, i.e., profit or loss for the period’’. —John N. Nyer

2. What are limitations of financial statements?

Ans. The limitations of the financial statements are as follows:

(i) Historical Data: The items recorded in the financial statements reflect their original cost i.e. the cost at which they were acquired. Consequently, financial statements do not reveal the current market price of the items. Further, financial statements fail to capture the inflation effects. Thus, it can be concluded
that financial statements reflect the data and information of historical nature.

(ii) Ignorance of Qualitative Aspects: The qualitative aspects such as colour, size and brand position in
the market, employees’ qualities and capabilities are not disclosed by the financial statements. These statements record only those transactions that are quantitative in nature and can be expressed in the monetary terms.

(iii) Biased: Financial statements are based on the personal judgments regarding the use of methods of
recording. For example, the choice of practice in the valuation of inventory, method of depreciation, amount of provisions, etc. are based on the personal value judgments, which may differ from person to person. Thus, the financial statements reflect the personal value judgements of the concerned
accountants and experts.

(iv) Inter-firm Comparison: Usually, it is difficult to compare the financial statements of two companies
(either in the same business or in different businesses). This is basically because of the difference in
the methods and practices followed by them in preparing their respective financial statements.

(v) Window Dressing: The possibility of window dressing is highly probable. This might be because of the motive of the company to overstate or understate its assets and liabilities to attract more investors or to reduce taxable profit. For example, Satyam showed high fixed deposits in the Assets side of its
Balance Sheet for better liquidity that gave false and misleading signals to the investors.

(vi) Difficulty in Forecasting: Since the financial statements is based on the historical data, so they fail to reflect the effect of inflation. This drawback makes the forecasting difficult.

3. List any three objectives of financial statements?

Ans. The financial statements are basically the accounts that are prepared for providing the true financial information to the internal as well as external users. These statements lay the base for the decision making process and policy designing by different users. The following are the various objectives for preparing financial statements.

(i) To Provide Information about Economic Resources: Financial statements provide adequate, accurate, reliable and periodical information about the employment of economic resources. It also specifies the obligation of a business to its external users who do not have the powers or authority to access the information directly.

(ii) To Ascertain the Financial Position: These statements help to reveal the true financial position of an enterprise. In other words, it discloses the performance and position of an organisation in terms of their profitability, solvency, liquidity, financial viability, etc.

(iii) To Ascertain the Earning Capacity: These statements are prepared with an objective of providing useful information to compare, predict and evaluate the earning capacity of a business firm. Thus, it helps in ascertaining the earning capacity of firms.

4. State the importance of financial statements to:

(i) shareholders

(ii) creditors

(iii) government

(iv) investors

Ans. Importance of financial statements to its various users is given below:

(i) Shareholders: They are interested in assessing the profitability and viability of the capital invested by them in the business. The financial statements prepared by the business concerns enable them to have sufficient information to assess the financial performance and financial health of the business.

(ii) Creditors: These are those individuals and organisations to whom a business owes money on account of credit purchases of goods and services. Hence, the creditors require information about the credit worthiness and liquidity position of the business.

(iii) Government: It needs information to determine various macroeconomic variables such as national income, GDP, industrial growth, etc. The accounting information assist the government in the formulation of various policies measures and to address various economic problems such as unemployment, poverty, etc

(iv) Investors: These are the parties who have invested or are planning to invest in the business of an enterprise. Hence, in order to assess the viability and prospects of their investments, they need information about the profitability and solvency position of the business.

Long Answer Type Questions

1. Explain the nature of financial statements.

Ans. Financial statements are the summarised reports of recorded facts and are prepared following the accounting concepts, conventions and requirements of law. The following points explain the nature of financial statements:

(i) Recorded Facts: This team means that the data used for preparing financial statements are drawn from accounting records. For e.g., figures relating to cash in hand, cash at bank, trade receivable, cost of fixed assets etc. are recorded facts. The financial statements do not include such facts which are not recorded in the book whether or not such facts are significant.

(ii) Accounting Conventions: Accounting conventions imply certain fundamental accounting principles which have gained wide acceptance and which are followed while preparing financial statements.
For e.g., the convention of valuing inventory at cost or market price, whichever is lower, is followed.

(iii) Base on concepts: Financial statements are prepared on certain basic assumptions (pre-requisites) known as concepts such as going concern concept, money measurement concept, realisation concept etc.

(iv) Personal Judgements: Even though certain accounting conventions are followed while preparing the financial statements, still personal judgement of the accountant plays an important role in accounting. For e.g., the accountant has to decide whether the asset is to be depreciated on straight line method, written down value method or some other method. He is to apply his personal judgement in deciding the rate of depreciation also.

2. Explain in detail about the significance of the financial statements.

Ans. The importance of financial statements is mentioned below:

(i) Provides Information: Financial statements provide information to various accounting users both internal as well as external users. It acts as a basic platform for different accounting users to derive information according to varying needs. For example, the financial statements on one hand help the shareholders and investors in assessing the viability and return on their investments, while on the other hand, the financial statements help the tax authorities in calculating the amount of tax liability of the company.

(ii) Cash Flow: Financial statements provide information about the cash flows of the company. The financial statements help the creditors and other investors in determining solvency of company.

(iii) Effectiveness of Management: The comparability feature of the financial statements enables management to undertake comparisons like inter-firm and intra-firm comparisons. This not only helps in assessing the viability and performance of the business but also helps in designing policies and drafting policies. The financial statements enhance the effectiveness and efficiency of the management.

(iv) Disclosure of Accounting Policies: Financial statements provide information about the various accounting policies, important changes in the methods, practices and process of accounting by the company. The disclosure of the accounting policies makes financial statements simple, true and enables different accounting users to understand without any ambiguity.

(v) Policy Formation by Government: It needs information to determine national income, GDP, industrial growth, etc. The accounting information assist the government in the formulation of various policy measures and to address various economic problems like employment, poverty etc.

(vi) Attracts Investors and Potential Investors: They invest or plan to invest in the business. Hence, in order to assess the viability and return on their investment, investors need information about profitability and solvency of the business which is provided by financial statements.

3. Explain the limitations of financial statements.

Ans. The following are the limitations of financial statements of a company:

(ii) Ignorance of Qualitative Aspect: The qualitative aspects like colour, size and brand position in the market, employee’s qualities and capabilities are not disclosed by the financial statements.

(iii) Biased: Financial statements are based on the personal judgments regarding the use of methods of recording. For example, the choice of practice in the valuation of inventory, method of depreciation, amount of provisions, etc. are based on the personal value judgments and may differ from person to person. Thus, the financial statements reflect the personal value judgments of the concerned accountants and clerks.

(iv) Inter-firm Comparisons: Usually, it is difficult to compare the financial statements of two companies because of the difference in the methods and practices followed by their respective accountants.

(v) Window dressing: The possibility of window dressing is probable. This might be because of the motive of the company to overstate or understate the assets and liabilities to attract more investors or to reduce taxable profit. For example, Swivam showed high fixed deposits in the Assets side of its Balance Sheet for better liquidity that gave false and misleading signals to the investors.

(vi) Difficulty in Forecasting: Since the financial statements is based on historical data, so they fail to reflect the effect of inflation. This drawback makes forecasting difficult.

4. Prepare the format of statement of profit and loss and explain its items upto the ascentainment of profit before tax.

Ans.

Statement of Profit and Loss

for the year ended......

Particulars	Note No.	Figures for current year	Figures for previous year
I. Revenue from operations		-	-
II. Other income		-	-
III. Total Revenue (I + II)		-	-
IV. Expenses		-	-
Cost of material consumed		-	-
Purchases of stock in Trade		-	-
Changes in inventeries of finished goods,		-	-
Work in progrss and stock in Trade		-	-
Employees Benefit Expenses		-	-
Finance costs		-	-
Depreciation and Amortisation Expenses		-	-
Other Expenses		-	-
Total Expenses		-	-
V. Profit before Tax (III – IV)		-	-
VI. Less : Tax		-	-
VII. Profit or loss for the period (V – VI)		-	-

I. Revenue from Operations: It refers to the revenue earned from the basic operating business activities of an organisation. For Non-financing companies, it consists of the following.

Sale of Products
Sale of Services
Other Operating Revenues

For financing companies, revenue from operations includes the following.

Interest received
Dividends received
Income from Other Financial Services

II. Other Incomes: This income includes the income earned other than from the operating activities of a business. It comprised of the following incomes.

Interest Income (in case of Non-Financing Company)
Dividend Income (in case of Non-Financing Company)
Net Gain or Loss on Sale of Investments
Other Non-Operating Incomes (i.e. after deducting expenses directly related to such income)

III. Expenses: These can be bifurcated in the following given below types.

Cost of Materials Consumed- It includes all the materials consumed during the process of manufacturing. It can also be calculated with the help of the given below formula.
Material Consumed = Opening Stock of Raw Material + Purchase of Raw Material – Closing Stock of Raw Material
Purchase of Stock-in-Trade- It includes all the goods purchased by a trading concern with an intention of re-sell.
Change in Inventories, Work-in-Progress and Stock-in-Trade- It is difference of opening and closing balance of inventories (stock), work-in-progress and stock-in-trade.

5. Prepare the format of balance sheet and the various elements of balance sheet.

Ans.

Particulars	Note No.	Current Year	Previous Year
I. EQUITY AND LIABILITIES
Shareholder’s funds
(a) Share Capital		—	—
(b) Reserves and Surplus		—	—
(c) Money received against share warrants		—	—
Share application money pending allotment
Non-current liabilities		—	—
(a) Long term borrowings		—	—
(b) Deferred tax liabilities (net)		—	—
(c) Other long term liabilities		—	—
(d) Long term provisions		—	—
Current liabilities
(a) Short term borrowings		—	—
(b) Trade payables		—	—
(c) Other current liabilities		—	—
(d) Short term provisions		—	—
Total		—	—
II. ASSETS
Non-current Assets
(a) Fixed assets
(i) Tangible assets		—	—
(ii) Intangible assets		—	—
(iii) Capital work in progress		—	—
(iv) Intangible assets under development		—	—
(b) Non-current Investments		—	—
(c) Deferred tax assets (net)		—	—
(d) Long term loans and advances		—	—
(e) Other non-current assets		—	—
Current Assets
(a) Current investments		—	—
(b) Inventories		—	—
(c) Trade receivables		—	—
(d) Cash and bank balance		—	—
(e) Short term loans and advances		—	—
(f) Other current assets		—	—
Total		—	—

A brief description of various elements of balance sheet is given below:

Description of elements at the liabilities side of Balance Sheet:

1. Share Capital: It shows the share capital of the company.

It consist of the following items:

(a) Authorised capital

(b) Issued capital

2. Reserves & Surplus: It consist of following items:

(a) Capital Reserve

(b) Capital Redemption Reserve

(d) Other Reserves

Less: Debit balance of profit & loss A/c

Add: Surplus credit balance of profit & loss A/c

(e) Sinking fund.

Non-current liabilities: Such include the liabilities due after one year. It shall include the following:

(a) Long term borrowings: Such as debentures premium on redemption of debentures, term loan from bank etc.

(b) Deferred tax liabilities.

(c) Long term provisions: Such as provisions for employee benefit, provision for provident fund, provision for warranties.

Current liabilities: Shall include the liabilities due within one year. It include the following:

(a) Short-term borrowings: To be payable within a year. Such as draft, cash credit.

(b) Trade payables: Sunday creditors and bills payable will be termed trade payables.

(c) Other current liabilities: Such as

(i) Current maturities of long term debts.

(ii) Interest accured but not due on borrowings.

(iii) Interest accured and due on borrowings.

(iv) Income received in advance, etc.

(d) Short-term provisions: Such as

(i) Provision for tax

(ii) Provision for doubtful debts.

Description of elements at the Assets side of Balance sheet:

(A) Non-current Assets: Shall include the assets held for more than one year. It shall include the following:

1. Fixed Assets: Are those assets which are held for continued use in the business and are not meant for sale.

(i) Tangible Assets: That can be seen, touchedar felt.

For e.g., land and building, plant, furniture etc.

(ii) Intangible Assets: That cannot be seen or touched.

For e.g., goodwill, patents etc.

(iii) Capital work in progress.

(iv) Intangible assets under development.

2. Non-current Investments: Such as

(i) Investment in equity shares or preference shares.

(ii) Investment in debentures or banks etc.

3. Deferred Tax Assets

4. Long term loans and Advances: Such as security deposit with electricity co.

(B) Current Assets: Shall include the assets held for one year or less. It shall include the following:

(a) Current investments: Short term investments.

(b) Inventories: Raw materials, work in progress, finished goods etc.

(c) Trade receivables: Sundry debtors and bills receivables are termed are trade receivables.

(d) Cash and bank balance.

(e) Short term loans and advances: Such as advances recoverable in cash.

(f) Other Current Assets: Such as prepaid Exp. Divided receivable, accured income, Advance Tax.

6. Explain how financial statements are useful to the various parties who are interested in the affairs of an undertaking?

Ans. The various parties interested in financial statements directly or indirectly can be categorised in two broad categories:

(i) Internal Parties: The following are the internal parties directly related to the company and interested in financial statements.

(a) Owner : The owner/s is/are interested in the profit earned or loss incurred during an accounting period. They are interested in assessing the profitability and viability of the capital invested by them in the business.

(b) Management: Management is interested in financial statements for drafting various policies measures, facilitating planning and decision making process and also to manage business efficiently and maximise profits.

(c) Employees and Workers: The employee and workers are interested in financial statement for knowing about the timely payment of wages and salaries, bonus and appropriate increment in their wages and salaries. Financial statement enables them to know about the figure of profit earned during the year.

(ii) External Parties: There are various external parties who are interested in financial statements for a number of reasons.

The following are the various external parties:

(a) Creditors: Creditors are always interested in financial statement to gather information about credit worthiness of the business.

(b) Investors and Potential Investors: Persons who are willing to invest in any organisation always wish to know about the profitability and solvency of the business concern. Hence, in order to assess the viability and prospectus of their investment, creditors need information about profitability and solvency of the business.

(c) Consumers: The survival and growth of any organisation largely depends upon the goodwill earned in the heart of the customers. In this regards if the Business has transparent financial records it help in assisting the customers to know the correct cost of production and accordingly assess the degree of reasonability of the price charged by the business.

(d) Banks/Financial Institutions: Banks and financial institutions provide finance in the form of loans and advances to various businesses. Thus, they need information regarding liquidity, creditworthiness, solvency and profitability to advance loans.

(e) Tax Authorities: They need information about sales, revenues, profit and taxable income in order to determine and levy various types of tax on the business.

(f) Government: It needs information to determine national income, GDP, industrial growth, etc. The accounting information assist the government in the formulation of various policies measures and to address various economic problems like employment, poverty etc.

7. Financial statements reflect a combination of recorded facts, accounting conventions and personal judgements. Discuss.

Ans. The financial statements not only help in presenting the true and real financial position of the company but they also help in taking managerial decisions. The nature of the financial statements depends upon the following aspects like recorded facts, conventions, concepts and personal judgement.

(i) Recorded Facts: The items recorded in the financial statements reflect their original cost i.e., the cost at which they were acquired. Consequently, financial statements do not reveal the current market price of the items. Further, financial statements fail to capture the inflation effects.

(ii) Accounting Conventions: The preparation of financial statements is based on some accounting conventions like, Prudence Convention, Materiality Convention, Matching Concept, etc. The adherence to such accounting conventions makes financial statements easy to understand, comparable and reflects the true and fair financial position of the company.

(iii) Personal Judgements: Even though certain accounting conventions are followed while preparing the financial statements, still personal judgement of the accountant plays a decide role in accounting. For e.g., the accountant has to decide whether the asset is to be deprciated on straight line method, written down value method or some other method. He is to apply his personal judgement in deciding the rate of depreciation also.

8. Explain the process of preparing income statement and balance sheet.

Ans. The process of preparing statement of profit and loss is explained below:

(i) First of all a Trial balance is prepared on the basis of the balances of various accounts in the ledger.

(ii) After that statement of profit and loss is prepared by posting revenue from operations at first.

(iii) All other kind of incomes that a business has earned is added to revenue from operations.

(iv) In this step revenue from operational and other incomes are added to get total income.

(v) Then, all the expenses incured are recorded in the statement and all these expenses are added to get total expenses.

(vi) Subject total expenses from total incomes to ascertain whether the company has earned profit or has incurred loss.

(vii) Then from profit or loss obtained in above step tax is deducted to get profit or loss for the period.

The process of preparing Balance Sheet is giv
en below:

(i) First of all match the total of both the side of trail balance. If there is any difference in the debit side of trail balance it will be posted in assets side of balance sheet and if there is any difference in credit side of balance sheet it will be posted in the liabilities side of the balance sheet.

(ii) Record all the debit balances of real and personal accounts on the left hand side (i.e., Assets side) of the balance sheet after making all adjustments for provision and other related items.

(iii) Record all the credit balances of real and personal accounts on the right hand side (i.e., Liabilities side) of the balance sheet after making all adjustments for interest and outstanding items.

(iv) Add Net Profit to the opening capital and deduct Net Loss, if any from the opening capital.

(v) Acertain the total of two sides, which must be equal.

Numerical Type Questions

1. Show the following items in the balance sheet as per the provisions of the Companies Act, 2013 in Schedule III:

Particulars	₹	Particulars	₹
Preliminary Expenses	2,40,000	Good will	30,000
Discount on issue of shares	20,000	Loose tools	12,000
10% Debentures	2,00,000	Motor Vehicles	4,75,000
Stock in Trade	1,40,000	Provision for tax	16,000
Cash at bank	1,35,000
Bills receivable	1,20,000

Ans.

Extract of Balance Sheet

as at March 31, 2013

Particulars	Note No.	31 March 2013	31 March 2012
I. Equity and Liabilities
Shareholder’s funds
(a) Share Capital
(b) Reserves and Surplus
Non-current liabilities
(a) Long-term Borrowings	1	2,00,000
Current Liabilities
(a) Other Current Liabilities
(b) Short-term Provisions	2	16,000
II. ASSETS	Non-current Assets
(a) Fixed assets
(i) Tangible Assets	3	4,75,000
(ii) Intangible Assets	4	30,000
Current Assets
(a) Inventories	5	1,52,000
(b) Trade Receivables	6	1,20,000
(c) Cash and Cash Equivalents	7	1,35,000
(d) Other Current Assets	8	2,60,000

Notes to Accounts:

Particulars		Amount (₹)
1. Long Term Borrowings		Amount (₹)
10% Debentures		2,00,000
2. Short Term Provisions
Provision for Tax		16,000
3. Tangible Assets
Motor Vehicles		4,75,000
4. Intangible Assets
Goodwill		30,000
5. Inventory
Loose Tools	12,000
Stock	1,40,000	1,52,000
6. Trade Receivables
Bill Receivable		1,20,000
7. Cash and Cash equivalents
Cash at Bank		1,35,000
8. Other Current Assets
Preliminary Expenses	2,40,000
Discount on Issue of Shares	20,000	2,60,000
		2,60,000

2. On April 1 , 2017, Jumbo Ltd., issued 10,000; 12% debentures of ₹100 each a discount of 20%, redeemable after 5 years. The company decided to write-off discount on issue of such debentures on March 31, 2018. Show the items in the balance sheet of the company immediately after the issue of these debentures.

Ans.

Particulars	Note No.	1^st April 2017
I. Equity and Liabilities
1. Shareholder’s funds
(a) Share Capital
(b) Reserves and Surplus
2. Non-Current Liabilities
(a) Long-term Borrowings	1	10,00,000
3. Current Liabilities
(a) Other Current Liabilities
(b) Short-term Provisions
Total		10,00,000
II. Assets
1. Non-Current Assets
(a) Other Non-Current Assets	2	1,60,000
2. Current Assets
(a) Other Current Assets	3	40,000
(b) Cash and Cash Equivalents	4	8,00,000
Total		10,00,000

Notes on Accounts

Particulars	Amount (₹)
1. Long Term Borrowings
10,000, 12% Debentures of ₹100 each	10,00,000
2. Other Non-Current Assets
Unamortized discount on issue of Debentures	1,60,000
$$\bigg(\frac{2,00,000}{5}×4\bigg)$$
3. Other Current Assets
Unamortized discount on issue of Debentures	40,000
$$\bigg(\frac{2,00,000}{5}\bigg)$$
4. Cash and Cash Equivalents
Bank	8,00,000

3. From the following information prepare the balance sheet of Gitanjali Ltd. Inventories ₹14,00,000; Equity Share Capital ₹20,00,000; Plant and Machinery ₹10,00,000; Preference Share Capital ₹12,00,000; Debenture Redemption Reserve ₹6,00,000; Outstanding Expenses ₹3,00,000; Proposed Dividend ₹5,00,000; Land and Building ₹20,00,000; Current Investments ₹8,00,000; Cash Equivalent ₹10,00,000; Short term loan from Zaveri Ltd. (A Subsidiary Company of Twilight Ltd.) ₹4,00,000; Public Deposits ₹12,00,000.

Ans.

Balance Sheetas at …

Particulars	Note No.	Amount (₹)
I. Equity and Liabilities
1. Shareholder’s funds
(a) Share Capital	1	32,00,000
(b) Reserves and Surplus	2	6,00,000
2. Non-Current Liabilities
(a) Long-term Borrowings	3	12,00,000
3. Current Liabilities
(a) Other Current Liabilities	4	3,00,000
(b) Short-term Borrowings	5	4,00,000
(c) Short-term Provision	6	5,00,000
Total		62,00,000
II. Assets
1. Non-Current Assets
(a) Fixed Assets
(i) Tangible Assets	7	30,00,000
(ii) Intangible Assets
(b) Non-Current Investments
2. Current Assets
(a) Inventories		14,00,000
(b) Current Investments		8,00,000
(c) Cash and Cash Equivalents		10,00,000
Total		62,00,000

Particulars		Amount (₹)
1. Share Capital
Equity Share Capital	20,00,000
Preference Share Capital	12,00,000	32,00,000
		32,00,000
2. Reserve and Surplus
Debenture Redemption Reserve		6,00,000
3. Long-term Borrowings
Public Deposits		12,00,000
4. Other Current Liabilities
Outstanding Expenses		3,00,000
5. Short-term Borrowings
Loan from Zaveri Ltd.		4,00,000
6. Short-term Provisions
Proposed Dividend		5,00,000
7. Tangible Assets
Land and Building	20,00,000
Plant and Machinery	10,00,000	30,00,000
		30,00,000

4. From the following information prepare the balance sheet of Jam Ltd. Inventories ₹7,00,000; Equity Share Capital ₹16,00,000; Plant and Machinery ₹8,00,000; 8% Preference Share Capital ₹6,00,000; General Reserves ₹6,00,000; Bills payable ₹1,50,000; Provision for taxation ₹2,50,000; Land and Building ₹16,00,000; Non-current Investments ₹10,00,000; Cash at Bank Rs. 5,00,000; Creditors ₹2,00,000; 12% Debentures ₹12,00,000.

Ans.

Balance Sheetas at March 31,2013

Particulars	Note No.	Amount (₹)
I. Equity and Liabilities
1. Shareholder’s funds
(a) Share Capital	1	22,00,000
(b) Reserves and Surplus	2	6,00,000
2. Non-Current Liabilities
(a)Long-term Borrowings	3	12,00,000
3. Current Liabilities
(a) Short-term Borrowings
(b) Trade Payables	4	3,50,000
(c) Short-term Provision	5	2,50,000
Total		46,00,000
II. Assets
1. Non-Current Assets
(a) Fixed Assets
(i) Tangible Assets	6	24,00,000
(b) Non-Current Investments		10,00,000
2. Current Assets
(a) Inventories		7,00,000
(b) Cash and Cash Equivalents	7	5,00,000
Total		46,00,000

Notes to Accounts

Particulars		Amount (₹)
1. Share Capital
Equity Share Capital	16,00,000
8% Preference Share Capital	6,00,0000	22,00,000
		22,00,000
2. Reserve and Surplus
General Reserve		6,00,000
3. Long-term Borrowings
12% Debentures		12,00,000
4. Trade Payables
Creditors	2,00,000
Bills Payable	1,50,000	3,50,000
		3,50,000
5. Short-term Borrowings
Provision for Taxation
		2,50,000
6. Tangible Assets
Land and Building	16,00,000
Plant and Machinery	8,00,000	24,00,000
7. Cash and Cash Equivalents
Cash at Bank		5,00,000

5. Prepare the balance sheet of Jyoti Ltd., as at March 31, 2017 from the following information.

Building ₹10,00,000; Investments in the shares of Metro Tyers Ltd. ₹3,00,000; Stores & Spares ₹1,00,000; Statement of Profit and Loss (Dr.) ₹90,000; 5,00,00 Equity Shares of ₹20 each fully paid-up; Capital Redemption Reserve ₹1,00,000; 10% Debentures ₹3,00,000; Unpaid dividends ₹90,000; Share options outstanding account ₹10,000.

Ans.

Balance Sheet

as at March 31, 2017

Particulars	Note No.	Amount (₹)
I. Equity and Liabilities
1. Shareholder’s funds
(a) Share Capital	1	10,00,000
(b) Reserves and Surplus	2	10,000
2. Non-Current Liabilities
(a) Long-term Borrowings	3	3,00,000
3. Current Liabilities
(a) Other Current Liabilities	4	1,00,000
Total		14,10,000
II. Assets
1. Non-Current Assets
(a)Fixed Assets
(i) Tangible Assets	5	10,00,000
(b) Non-Current Investments	6	3,00,000
2. Current Assets
(a) Inventories	7	1,00,000
Total		14,00,000

Notes to Accounts

Particulars		Amount (₹)
1. Share Capital
Equity Share Capital (50,000* Shares of ₹20 each)		10,00,000
2. Reserve and Surplus
Capital Redemption Reserve	1,00,000
Less: Statement of Profit or Loss (Debit)	90,000	10,000
3. Long-term Borrowings
10% Debentures
4. Other Current Liabilities
Unpaid Dividend	90,000
Share Option Outstanding	10,000	1,00,000
		1,00,000
5. Tangible Assets
Building		10,00,000
6. Non-Current Investments
Shares of Metro Tyres
7. Inventory
Stores and Spares		1,00,000
8. Other Current Assets

Note: From the information provided in the question, total of liabilities and Assets side of Balance Sheet can not be equal. Deficiency of ₹10,000 will be on the Asset side of Balance Sheet.

6. Brinda Ltd., has furnished the following information:

(a) 25,000, 10% debentures of ₹100 each;

(b) Bank Loan of ₹10,00,000 repayable after 5 years;

(c) Interest on debentures is yet to be paid.

Show the above items in the Balance Sheet of the company as at March 31, 2017.

Ans.

Balance Sheetas at March 31, 2017

Particulars	Note No.	Amount (₹)
I. Equity and Liabilities
1. Shareholder’s funds
(a) Share Capital
(b) Reserves and Surplus
2. Non-Current Liabilities
(a) Long-term Borrowings	1	35,00,000
3. Current Liabilities
(a) Other Current Liabilities	2	2,50,000

Notes to Accounts

Particulars		Amount (₹)
1. Long Term Borrowings
25,000, 10% Debentures of ₹100 each	25,00,000
Bank Loan	10,00,000	35,00,000
		35,00,000
2. Other Current Liabilities
Interest on Debentures		2,50,000

7. Prepare a balance sheet of Black Swan Ltd., as at March 31, 2017 from the following information:

₹

General Reserve : 3,000

10% Debentures : 3,000

Balance in Statement of : 1,200

Profit and Loss

Depreciation on fixed assets : 700

Gross Block : 9,000

Current Liabilities : 2,500

Preliminary Expenses : 300

6% Preference Share Capital : 5,000

Cash & Cash Equivalents : 6,100

Ans.

Extract Balance Sheet

as at March 31, 2017

Particulars	Note No.	Amount (₹)
I. Equity and Liabilities
1. Shareholder’s funds
(a) Share Capital	1	5,000
(b) Reserves and Surplus	2	4,200
2. Non-Current Liabilities
(a) Long-term Borrowings	3	3,000
3. Current Liabilities		2,500
Total		14,700
II. Assets
1. Non-Current Assets
(a) Fixed Assets
(i) Tangible Assets	4	8,300
2. Current Assets
(a) Cash and Cash Equivalents	5	6,100
(b) Other Current Assets	6	300
Total		14,700

Notes to Accounts:

Particulars		Amount (₹)
1. Share Capital
6% Preference Share Capital		5,000
2. Reserve and Surplus
General Reserve	3,000
Stateement of Profit or Loss	1,200	4,200
3. Long-term Borrowings
10% Debentures		3,000
4. Tangible Assets
Fixed Asses (Grossblock)	9,000
Less: Depreciation	700	8,300
5. Cash and Cash Equivalents
Cash		6,100
6. Other Current Assets
Preliminary Expenses		300