ACCOUNTING ENTRIES IN THE BOOKS OF TRANSFEREE COMPANY :
A. In case the Amalgamation is in the nature of Merger: (Pooling of Interest Method)
1. On amalgamation of the business:
Business Purchase Account Dr. (with the amount of consideration)
To Liquidator of Transferor Company
2. When assets, liabilities and reserves are taken over from the transferor company and incorporated in the books:
Sundry Assets (Individually) Dr. (with the book value)
To Sundry Liabilities (Individually) (with the book value)
To Profit and Loss A/c (with the book balance)
To Reserves (with the book balance)
To Business Purchase A/c (with the consideration)
Amalgamation in the nature of merger, all the assets, written off expenses, debit balance of Profit and Loss Account, outside liabilities and reserves of the transferor company have to be recorded in the books of the transferee company in the form and at the book values as they were appearing in the books of the transferor company on the date of amalgamation. However, if there is a conflict in the accounting policies of the transferee and transferor companies, changes in the book values may be made to ensure uniformity.
While passing the above journal entry, the difference between the amount of consideration payable by the transferee company to the transferor company and the amount of the share capital of the transferor company is adjusted in the general reserve or other reserves.
3. When consideration is satisfied:
Liquidator of Transferor Company Dr. (with the purchase consideration)
To Equity Share Capital (with the paid-up value of
To Preference Share Capital shares allotted)
To Bank (with cash paid)
The shares may be allotted at premium or at discount, in which case share premium account and discount on issue of shares account should be stated. In the case of mergers the consideration receivable by those equity shareholders of the transferor company who agree to become equity shareholders of the transferee company is discharged by the transferee company wholly by issue of equity shares in the transferee company, except that cash may be paid in respect of any fractional shares. However, the transferee company may issue preference shares to the preference shareholders of the transferor company. Moreover, the transferee company may allot securities other than equity shares and give cash and other assets to satisfy the dissenting shareholders of the transferor company.
4. On discharge of liability, say, the debentures of the transferor company by the transferee company directly, say, by allotment of its own debentures, the journal entry will be:
Debentures in Transferor Company Dr. (with the paid-up value of
To Debentures debentures allotted)
5. If the liquidation expenses of the transferor company are borne by the transferee company it may be adjusted in the General Reserve:
General Reserve A/c Dr. (with the amount of expenses)
To Bank
6. For the formation expenses of the transferee company:
Preliminary Expenses Account Dr. (with the amount of expenditure)
To Bank
B. In case the Amalgamation is in the nature of Purchase:
1. On acquisition of the business from the transferor company:
Business Purchase A/c Dr. (with the amount of consideration)
To Liquidator of Transferor Company
2. When the assets and liabilities are taken over from transferor company:
Sundry Assets A/c (Individually excluding goodwill) Dr. (with their revalued figures, if any, otherwise at their book figures)
To Sundry Liabilities A/c (Individually) (with the figures at which
they are taken over)
To Business Purchase A/c (with the amount of consideration)
Notes:
(a) If the debit total is greater than the credit total, the difference has to be treated as capital profit and as such the same should be credited to Capital Reserve Account.
(b) Similarly, if the credit total is greater than the debit total, the difference should be debited to Goodwill Account.
3. When the consideration is satisfied:
Liquidator of Transferor Company Dr. (with the amount of consideration)
To Preference Share Capital A/c
To Equity Share Capital A/c (with the face value of shares allotted)
To Debentures A/c (with the face value of debentures allotted)
To Bank (with the amount paid)
The shares or debentures may be allotted at a premium or at a discount.
4. Normally when an amalgamation is in the nature of purchase, the identity of the reserves of the transferor company is not maintained. However, in order to get the advantage of provision of some statute, it is necessary to retain the identity of statutory reserves of the transferor company in the books of the transferee company. In order to record the statutory reserves of the transferor company in the books of the transferee company, the
following entry will be passed:
Amalgamation Adjustment A/c Dr. (with the amount of statutory reserve)
To Statutory Reserve A/c
It may be noted that latter, when the identity of statutory reserves of transferor company is no longer required to be maintained, the above mentioned entry will be reversed.
5. If the liquidation expenses of the transferor company are borne by the transferee company, the same is to be
debited to Goodwill Account and the following entry is to be passed:
Goodwill Account Dr. (with the amount of expenditure)
To Bank
6. With the formation expenses of the transferee company, if any:
Preliminary Expenses A/c Dr. (with the amount of expenditure)
To Bank
7. If there are both goodwill and capital reserve, Goodwill may be written off against Capital Reserve:
Capital Reserve A/c Dr. (with the amount written off)
To Goodwill A/c
Note: Either Goodwill Account or Capital Reserve Account whichever is greater will appear in the balance sheet.
8. If any liability is discharged by the transferee company:
Respective Liability A/c Dr. (with the amount payable)
To Share Capital A/c
To Debentures A/c (as the case may be)
To Bank
9. If fresh issue of shares or debentures is made to raise further capital:
(a) Bank Dr. (with the money received
To Share Application and Allotment A/c on application)
To Debenture Application and Allotment A/c
(b) Share Application and Allotment A/c Dr. (with the money received on
Debenture Application and Allotment A/c Dr. shares or debentures allotted)
To Share Capital A/c
To Debentures A/c
Illustration :
(Amalgamation in the nature of merger)
The following are the Balance Sheet of A Co. Ltd. and B Co. Ltd. as on 30th September, 2013
A Co. Ltd.
Particulars | Amount (Rs) | Amount (Rs) |
I EQUITIES AND LIABILITIES | ||
1 Shareholders’ funds | ||
(a) Share Capital | ||
Authorised, Issued subscribed and paid up capital | ||
50,000 Equity shares of ` 10 each, fully called up and paid up | 5,00,000 | |
(b) Reserve and surplus | ||
General reserve | 1,70,000 | |
Profit and Loss account | 30,000 | |
2 Non-current liabilities | ||
12% Debentures | 1,00,000 | |
Employee provident fund | 15,000 | |
3 Current Liabilities | ||
Trade Payables | 50,000 | |
TOTAL | 8,65,000 | |
II ASSETS | ||
1 Non-current Assets | ||
(a) Fixed Assets | ||
Tangible Assets | ||
Building | 1,50,000 | |
Machinery | 5,50,000 | 7,00,000 |
2 Current Assets | ||
Stock | 80,000 | |
Trade receivables | 70,000 | |
Cash | 15,000 | 1,65,000 |
TOTAL | 8,65,000 |
B Co. Ltd.
Particulars | Amount (Rs) | Amount (Rs) |
I EQUITIES AND LIABILITIES | ||
1 Shareholders’ funds | ||
(a) Share Capital | ||
Authorised, Issued subscribed and paid up capital | ||
30,000 Equity shares of ` 10 each, fully called up and paid up | 3,00,000 | |
2 Current Liabilities | ||
Trade Payables | 40,000 | |
TOTAL | 3,40,000 | |
II ASSETS | ||
1 Non-current Assets | ||
(a) Fixed Assets | ||
Tangible Assets | ||
Machinery | 2,50,000 | |
2 Current Assets | ||
Stock | 40,000 | |
Trade receivables 50,000 | ||
Less: Provision for doubtful debts 5,000 | 45,000 | |
Cash and cash equivalents | 5,000 | 90,000 |
TOTAL | 3,40,000 |
The two companies agree to amalgamate and form a new company called C Co. Ltd. which takes over all the assets and liabilities of both the companies on 1st October, 2013.
The purchase consideration is agreed at ` 6,61,500 and ` 3,15,000 for A Co. Ltd. and B Co. Ltd. respectively. The entire purchase price is to be paid by C Co. Ltd. in fully paid equity shares of ` 10 each. The debentures of A Co. Ltd. will be converted into equivalent number of debentures of C Co. Ltd.
Give journal entries to close the books of A Co. Ltd. and B Co. Ltd. and show the opening entries in the books of C Co. Ltd. Also prepare the opening Balance Sheet in the books of C Co. Ltd. as on 1st October, 2013. The authorised capital of C Co. Ltd. is 2,00,000 equity shares of ` 10 each.
Solution:
Journal Entries in the Books of A Co. Ltd.
Date | Particulars | Amount (Rs.) | Amount (Rs.) |
2013, Oct 1 | Realisation A/c Dr. | 8,65,000 | |
To Buildings A/c | 1,50,000 | ||
To Machinery A/c | 5,50,000 | ||
To Stock A/c | 80,000 | ||
To Trade receivables A/c | 70,000 | ||
To Cash A/c | 15,000 | ||
(Being the transfer of sundry assets at their book values) | |||
12% Debentures A/c Dr. | 1,00,000 | ||
Trade Payables A/c Dr. | 50,000 | ||
Employees’ Provident Fund A/c Dr. | 15,000 | ||
To Realisation A/c | 1,65,000 | ||
(Being the transfer of sundry liabilities at their book-figures) | |||
C Co. Ltd. Dr. | 6,61,500 | ||
To Realisation A/c | 6,61,500 | ||
(Being the consideration due as per agreement dated…..) | |||
Equity Shareholders A/c Dr. | 38,500 | ||
To Realisation A/c | 38,500 | ||
(Being transfer of loss on realisation) | |||
Equity Shares in C Co. Ltd. Dr. | 6,61,500 | ||
To C Co. Ltd. | 6,61,500 | ||
(Being the receipt of consideration) | |||
Equity Share Capital A/c Dr. | 5,00,000 | ||
General Reserve A/c Dr. | 1,70,000 | ||
Profit and Loss A/c Dr. | 30,000 | ||
To Equity Shareholders A/c | 7,00,000 | ||
(Being the transfer of share capital and past accumulated profits and reserves) | |||
Equity Shareholders A/c Dr. | 6,61,500 | ||
To Equity Shares in C Co. Ltd. | 6,61,500 | ||
(Being the final payment to equity shareholders) |
Journal of B Co. Ltd.
Date | Particulars | Amount (Rs.) | Amount (Rs.) |
2013 Oct 1 | Realisation A/c Dr. | 3,45,000 | |
To Machinery A/c | 2,50,000 | ||
To Stock A/c | 40,000 | ||
To Trade receivables A/c | 50,000 | ||
To Cash A/c | 5,000 | ||
(Being the transfer of sundry assets at their book-values) | |||
Provision for Doubtful Debts A/c Dr. | 5,000 | ||
Trade Payables A/c Dr. | 40,000 | ||
To Realisation A/c | 45,000 | ||
(Being the transfer of sundry liabilities at their book-figures) | |||
C Co. Ltd. Dr. To Realisation A/c (Being the consideration due as per agreement dated…..) |
3,15,000 | 3,15,000 | |
Realisation A/c Dr. | 15,000 | ||
To Equity Shareholders A/c | 15000 | ||
(Being the transfer of profit on realisation) | |||
Equity Shares in C Co. Ltd. Dr. | 3,15,000 | ||
To C Co. Ltd. | 3,15,000 | ||
(Being the receipt of consideration) | |||
Equity Share Capital A/c Dr. | 3,00,000 | ||
To Equity Shareholders A/c | 3,00,000 | ||
(Being the transfer of share capital) | |||
Equity Shareholders A/c Dr. | 3,15,000 | ||
To Equity Shares in C Co. Ltd. | 3,15,000 | ||
(Being the final payment to equity shareholders) |
Journal of C Co. Ltd.
Business Purchase A/c Dr. | 9,76,500 | ||
To Liquidator of A Co. Ltd. | 6,61,500 | ||
To Liquidator of B Co. Ltd. | 3,15,000 | ||
(Being the amalgamation of business of A Co. Ltd. and B Co. Ltd. as per agreement dated…..) |
|||
Buildings A/c Dr. | 1,50,000 | ||
Machinery A/c Dr. | 5,50,000 | ||
Stock A/c Dr. | 80,000 | ||
Trade receivables A/c Dr. | 70,000 | ||
Cash A/c Dr. | 15,000 | ||
General Reserve A/c Dr. | 1,61,500 | ||
To General Reserve | 1,70,000 | ||
To Profit and Loss A/c | 30,000 | ||
To 12% Debentures in A Co. Ltd. | 1,00,000 | ||
To Trade Payables A/c | 50,000 | ||
To Employees Provident Fund | 15,000 | ||
To Business Purchase A/c | 6,61,500 | ||
(Being the assets, liabilities, general reserve and profit and loss account of A Ltd. transferred and the difference between consideration and share capital debited general reserve account) |
|||
Machinery A/c Dr. | 2,50,000 | ||
Stock A/c Dr. | 40,000 | ||
Trade receivables A/c Dr. | 50,000 | ||
Cash A/c Dr. | 5,000 | ||
General Reserve A/c Dr. | 15,000 | ||
To Trade Payables A/c | 40,000 | ||
To Provision for Doubtful Debts A/c | 5,000 | ||
To Business Purchase A/c | 3,15,500 | ||
(Being the assets and liabilities of B Ltd. transferred and the difference between consideration and share capital debited to general reserve account) | |||
Profit and Loss A/c Dr. | 6,500 | ||
To General Reserve A/c | 6,500 | ||
(The debit balance in general reserve account is transferred to the profit and loss account) | |||
Note: The above three journal entries may be clubbed and one compound entry may be passed as under: | |||
“ Buildings A/c Dr. | 1,50,000 | ||
Machinery A/c Dr. | 8,00,000 | ||
Stock A/c Dr. | 1,20,000 | ||
Trade receivables A/c Dr. | 1,20,000 | ||
Cash A/c Dr. | 20,000 | ||
To Provision for Doubtful Debts | 5,000 | ||
To 12% Debentures in A Co. Ltd. | 1,00,000 | ||
To Trade Payables | 90,000 | ||
To Employees Provident Fund | 15,000 | ||
To Profit and Loss A/c [note] | 23,500 | ||
To Business Purchase A/c | 9,76,500 | ||
(Being the assets, liabilities, reserve and profit and loss account of A Ltd. and B Ltd. transferred and the difference between consideration and equity capital of transferor companies adjusted against the general reserve and profit and loss account) |
|||
Liquidator of A Co. Ltd. Dr. | 6,61,500 | ||
Liquidator of B Co. Ltd. Dr. | 3,15,000 | ||
To Equity Share Capital | 9,76,500 | ||
(Being the allotment of 97,650 equity shares to transferor companies as fully paid up for consideration other than cash) |
|||
12% Debentures in A Co. Ltd. Dr. | 1,00,000 | ||
To 12% Debentures A/c | 1,00,000 | ||
(Being the debentures issued in place of 12% Debentures in A Ltd.) |
Note: Profit and Loss Account balance is arrived as follows:
A Ltd. Rs. | B Ltd. Rs. |
Amount of share capital | 5,00,000 | 3,00,000 |
Less : Purchase consideration | 6,61,500 | 3,15,000 |
(1,61,500) | (-15,000) |
This total difference of ` 1, 76,500 should be adjusted against the reserves and profit and loss account.
General Reserve 1,70,000 | 1,70,000 | 1,70,000 | – |
Profit and Loss Account | 30,000 | 6,500 | 23,500 |
2,00,000 | 1,76,500 | 23500 |
Balance Sheet of C Co. Ltd.
as on 1st October, 2013
Particular | Amount in (Rs.) | Amount in (`Rs) |
I EQUITIES AND LIABILITIES | ||
1 Shareholders’ funds | ||
(a) Share Capital | ||
Authorised Capital – 2,00,000 equity shares of ` 10 each | 20,00,000 | |
Issued subscribed and paid up capital | ||
96,750 Equity shares of ` 10 each, issued to | ||
transferors as fully paid-up for consideration other | ||
than cash | 9,76,500 | |
(b) Reserve and surplus | ||
Profit and Loss account | 23,500 | |
2 Non-current liabilities | ||
12% Debentures of `100 each | 1,00,000 | |
Employee provident fund | 15,000 | |
3 Current Liabilities | ||
Trade Payables | 90,000 | |
TOTAL | 12,05,000 | |
II ASSETS | ||
1 Non-current Assets | ||
(a) Fixed Assets | ||
(i) Tangible Assets | ||
Building | 1,50,000 | |
Plant & machinery | 8,00,000 | 9,50,000 |
2 Current Assets | ||
Stock | 1,20,000 | |
Trade recievables 1,20,000 | ||
Less: Provision for Doubtful Debt 5,000 | 1,15,000 | |
Cash and Cash equivalents : Cash in hand | 20,000 | 2,55,000 |
TOTAL | 12,05,000 |
Illustration 🙁Amalgamation in the nature of merger)
Thin & Co. Ltd. was absorbed by Thick & Co. Ltd., as on 30th June, 2013. All the assets and liabilities of Thin & Co. Ltd. were taken over by Thick & Co. Ltd. The consideration was agreed at ` 3,36,600 and was paid in so many fully paid equity shares of Thick & Co. Ltd. to be distributed to the equity shareholders of Thin & Co. Ltd. The following are the balance sheets of both the companies as on 30.6.2013.
Balance Sheet
as on 30th June, 2013
Particular |
Thick & Co Ltd. |
Thin & Co Ltd. |
||
I EQUITIES AND LIABILITIES | ||||
1 Shareholders’ funds | ||||
(a) Share Capital | ||||
Authorised, Issued subscribed and paid up capital | ||||
Equity shares of ` 10 each, fully | ||||
called up and paid up |
7,50,000 |
2,00,000 |
||
(b) Reserve and surplus | ||||
General reserve |
1,50,000 |
50,000 |
||
Profit and Loss account |
_____20,502___ |
1,70,502 |
___12,900___ |
62,900 |
2 Non-current liabilities | ||||
Workman compensation fund |
12,000 |
9,000 |
||
Employee provident fund |
__10,000__ |
22,000 |
__4,000__ |
13,000 |
3 Current Liabilities | ||||
Trade Payables |
58,567 |
30,456 |
||
Provision for taxation |
__12,000__ |
__ 70,567__ |
__5,000__ |
__35,456__ |
TOTAL |
10,13,069_ |
__3,11,356__ |
||
II ASSETS | ||||
1 Non-current Assets | ||||
(a) Fixed Assets | ||||
(i) Tangible Assets | ||||
Plant & machinery |
3,12,000 |
1,00,000 |
||
(ii) Intangible Assets | ||||
Goodwill |
__2,00,000__ |
5,12,000 |
____60,000___ |
1,60,000 |
2 Current Assets | ||||
Stock |
2,65,000 |
80,000 | ||
Debtor |
2,21,200 |
56,000 |
||
Cash and Cash equivalents : Cash in hand |
869 |
356 |
||
: Cash at bank |
____14,000____ |
5,01,069 |
____8,300___ |
1,44,656 |
Other current Assets | ||||
Prepaid Insurance |
700 |
|||
Income Tax Refund claim | ——————————— |
___6,000___ |
||
TOTAL |
10,13,069 |
3,11,356 |
You are required to:
(i) Show the necessary ledger accounts in the books of Thin & Co. Ltd.;
(ii) Show the necessary journal entries in the books of Thick & Co. Ltd.; and
(iii) Prepare the Balance Sheet of Thick & Co. after the amalgamation.
Solution:
Ledger of Thin & Co. Ltd.
Realisation Account
Dr. Cr.
Particulars | Amount (Rs.) | Particulars | Amount (Rs.) |
To Goodwill | 60,000 | By Sundry Trade Payables | 30,456 |
To Plant and Machinery | 1,00,000 | By Staff Provident Fund | 4,000 |
To Stock-in-Trade | 80,000 | By Provision for Taxation | 5,000 |
To Trade receivables | 56,000 | By Thick & Co. Ltd. | 3,36,600 |
To Income-tax Refund Claim | 56,000 | ||
To Prepaid Insurance | 700 | ||
To Cash in Hand | 356 | ||
To Cash at Bank | 8,300 | ||
To Equity Shareholders (Profit) | _____64,700_____ | _______________ | |
3,76,056 | 3,76,056 |
Thick & Co. Ltd.
Particulars | Amount (Rs.) | Particulars | Amount (Rs.) |
To Realisation A/c | 3,36,600 | By Equity Shares in Thick & Co. Ltd. | 3,36,600 |
Equity Shares in Thick & Co. Ltd.
Particulars | Amount (Rs.) | Particulars | Amount (Rs.) |
To Thick & Co. Ltd. | 3,36,600 | By Equity Shareholders A/c | 3,36,600 |
Equity Shareholders Account
Particulars | Amount (Rs.) | Particulars | Amount (Rs.) |
To Equity Shares in Thick & Co. Ltd. A/c | 3,36,600 | By Equity Share Capital A/c | 2,00,000 |
By General Reserve A/c | 50,000 | ||
By Profit and Loss A/c | 12,900 | ||
By Workmen Compensation Fund | 9,000 | ||
______________ | By Realisation A/c | ___64,700__ | |
__3,36,600__ | ___3,36,600__ |
Journal Entries in the Books of Thick & Co. Ltd.
Particulars | Dr. (Rs.) | Cr.( Rs.`) |
Business Purchase A/c Dr. | 3,36,600 | |
To Liquidator of Thin & Co. Ltd. (Being the amalgamation of business of Thin & Co. Ltd. as per agreement dated…… |
3,36,600. |
Goodwill Dr. |
60,000 | |
Plant and Machinery Dr. | 1,00,000 | |
Stock in Trade Dr. | 80,000 | |
Trade receivables Dr. | 56,000 | |
Prepaid Insurance Dr. | 700 | |
Income tax Refund Claim Dr. | 6,000 | |
Cash in Hand Dr. | 356 | |
Cash at Bank Dr. | 8,300 | |
General Reserve Dr. | 73,700 | |
To Workman Compensation Fund | 9,000 | |
To Trade Payables | 30,456 | |
To Staff Providend Fund | 4,000 | |
To Provision for Taxation | 5,000 | |
To Business Purchase A/c | 3,36,600 | |
(Being the assets, liabilities and reserves of Thin Ltd. at book value transferred and the difference in consideration and equity share capital being adjusted against in the general reserve of Thin Ltd.) | ||
Liquidator of Thin & Co. Ltd. Dr. | 3,36,600 | |
To Equity Share Capital | 3,36,600 | |
(Being the allotment of 33,360 equity shares of ` 10 each to the transferor company as consideration) |
Illustration :
Under given is the balance sheet of Rajbhasha & Co as on 31st March, 2014 :
Particulars | Dr.(Rs.) | Cr.(Rs.) |
I EQUITIES AND LIABILITIES | ||
1 Shareholders’ funds | ||
(a) Share Capital | ||
Authorised, Issued subscribed and paid up capital | ||
12,500 9% preference shares of ` 8 each | 1,00,000 | |
1,50,000 equity shares of ` 1 each | ___1,50,000 __ | 2,50,000 |
(b) Reserve and surplus | ||
Profit and Loss account | (98,000) | |
2 Non-current liabilities | ||
10% debentures | 60,000 | |
3 Current Liabilities | ||
Trade Payables | 50,000 | |
Bank overdraft ( Secured by Land and building) | 20,000 | |
Debentures interest | __4,200__ | ___74,200____ |
TOTAL | __2,86,200__ | |
II ASSETS | ||
1 Non-current Assets | ||
(a) Fixed Assets | ||
Freehold Land and building | 34,000 | |
Plant | 96,000 | |
Tools and dies | __27300__ | 1,57,300 |
(b) Other non-current expenses | 18,000 | |
Research and development expenses | ||
2 Current Assets | ||
Stock | 42,500 | |
Trade receivables | 53,400 | |
Investment | ___15,000___ | |
TOTAL | ___2,86,200___ |
The scheme of re-organisation detailed below has been agreed by all the parties approved by the Court. You are required to prepare:
(a) Journal entries recording the transactions in the books, including cash;
(b) The balance sheet of the company as on 1st April, 2014 after the completion of the scheme.
(i) The following assets are to be revalued as shown below: plant Rs.59,000 tools and diesRs. 15,000; stockRs. 30,000 and debtors Rs.48,700.
(ii) The research and development expenditure and debit balance of profit and loss account are to be written off.
(iii) Price of land recorded in the books at ` 6,000 is valued at ` 14,000 and is to be taken over by the debenture holders in part repayment of principal. The remaining freehold land and buildings are to be revalued at Rs.40,000.
(iv) A creditor for Rs.18,000 has agreed to accept a second mortgage debenture of 11% per annum secured on plant for Rs.15,500 in settlement of his debt. Other creditors totaling ` 10,000 agreed to accept a payment of ` 0.85 in the rupee for immediate settlement.
(v) The investment at a valuation of ` 22,000 is to be taken over by the bank.
(vi) The ascertained loss is to be met by writing down the equity shares to ` 1 each and preference shares to ` 8 each. The authorised share capital is to be increased immediately to the original amount.
(vii) The equity shareholders agree to subscribe for two new ordinary shares at par for every share held. This cash is all received.
(viii) The costs of the scheme are ` 3,500. These have been paid and are to be written off. The debenture interest has also been paid.
Solution
Journal Entries in the books of Rajbhasha & Co
Particulars | Dr.(Rs.) | Cr.(Rs.) |
1 Freehold Land and Building A/c Dr. | 20,000 | |
Investment A/c Dr. | 7,000 | |
To Reconstruction A/c | 27,000 | |
(Book value of assets raised to their revalued worth) | ||
Trade Payables Dr. | 28,000 | |
To 11% Second Mortgage Debentures | 15,500 | |
To Bank | 8,500 | |
To Reconstruction A/c | 4,000 | |
(The discharge of part of the creditors) | ||
10% Debentures A/c Dr. | 14,000 | |
To Debenture holders A/c | 14,000 | |
(Redemption of part of the debentures) | ||
Debenture holders A/c Dr. | 14,000 | |
To Freehold Land and Building | 14,000 | |
(The discharge of amount due to debenture holders) | ||
Equity Share Capital A/c (Rs.10) Dr. | 1,50,000 | |
Preference Share Capital A/c (Rs.10) Dr. | 1,00,000 | |
To Equity Share Capital A/c (Re. 1) | 15,000 | |
To Preference Share Capital A/c (` 8) | 80,000 | |
To Reconstruction A/c | 1,55,000 | |
(The writing down of equity and preference shares) | ||
Bank Dr. | 30,000 | |
To Equity Share Capital A/c | 30,000 | |
(The subscription of 30,000 equity shares) | ||
Bank Dr. | 22,000 | |
To Investments | 22,000 | |
(Investments taken over by bank) | ||
Reconstruction A/c Dr. | 3,500 | |
Outstanding Interest on Debentures A/c Dr. | 4,200 | |
To Bank | 7,700 | |
(Payment of reorganisation expenses and outstanding interest) | ||
Reconstruction A/c Dr. | 1,82,500 | |
To Plant | 37,000 | |
To Tool and Dies | 12,300 | |
To Stocks | 12,500 | |
To Provision for Bad Debts A/c | 4,700 | |
To Reserve and Development Expenditure A/c | 18,000 | |
To Profit and Loss A/c | 98,000 | |
(Writing down of various assets and elimination of fictitious assets) |
Balance Sheet of Rajbhasha & Co.
as at 1st April, 2014
Particular | Amount(Rs.) | Amount (Rs.) |
I EQUITIES AND LIABILITIES | ||
1 Shareholders’ funds | ||
(a) Share Capital | ||
Authorised Capital | ||
12,500 9% preference shares of ` 8 each | 1,00,000 | |
1,50,000 equity shares of ` 1 each | 1,50,000 | 2,50,000 |
Issued subscribed and paid up capital | ||
10,000 9% preference shares of ` 8 each | 80,000 | |
45,000 equity shares of ` 1 each | 45,000 | 1,25,000 |
2 Non-current liabilities | ||
10% 1st Mortgage debentures | 46,000 | |
11% 2nd mortgage debentures | 15,500 | 61,500 |
3 Current Liabilities | ||
Trade Payables | 22,000 | |
TOTAL | 2,08,500 | |
II ASSETS | ||
1 Non-current Assets | ||
(a) Fixed Assets | ||
Freehold Land and building | 28,000 | |
Add: Amount of Appreciation made under scheme of reconstruction | 12,000 | 40,000 |
Plant | 96,000 | |
Less: Amount written off under scheme of reconstruction | 37,000 | 59,000 |
Tools and dies | 27,300 | |
Less: Amount written off under scheme of reconstruction | 12,300 | 15,000 |
2 Current Assets | ||
Stock 30,000 | 30,000 | |
Trade receivables 53,400 | 53,400 | |
Less: Provision for bad debts | 4,700 | 48,700 |
Cash and Cash equivalents | 15,800 | |
TOTAL | 2,08,500 |