SUGGESTED SOLUTION

CA INTERMEDIATE
SUBJECT- ADVANCE ACCOUNT

Test Code – AA_02

BRANCH - () (Date :)

Head Office : Shraddha, 3rd Floor, Near Chinai College, Andheri (E), Mumbai – 69.
Tel : (022) 26836666

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MULTIPLE CHOICE QUESTION :

1. C Nearest lakhs or thousands or decimals thereof

2. Closing WDV = (Opening Gross Block + Assets Purchased – Assets Sold) – (Opening
C
Depreciation + Depreciation during current Year – Depreciation on assets sold)
3. D Is shown by way of a note to the balance sheet of a company under Contingent
4. C The amount is debited to Tax paid Account and credited to Provision for Tax A/c.
(4 * 2 MARKS = 8)

ANSWER : 1
Statement of Profit & Loss for the year ended 31.3.2014
Particulars Rs.
(1) Profit 10,00,000
(2) Expenses : Depreciation & Amortization (37,500)
(3) Profit Before tax (1 – 2) 9,62,500
(4) Provision for tax (1,20,000)
(5) Profit /(loss) for the period 8,42,500
Notes to Accounts
Profit / (Loss) for the period 8,42,500
(+) Opening Balance of Profit & Loss A/c. 1,50,000
Total (A) 9,92,500
Appropriations
Transfers to Reserves (8,42,500  25%) (2,10,625)
Proposed Preference Dividend (1,80,000 + 84,023) (2,64,023)
Proposed Equity Dividend (1,50,000 + 1,68,047) (3,18,047)
Bonus to Employees (15,000 + 16,805) (31,805)
Balance Carried to Balance Sheet (12,00,000  14%) 1,68,000
(9,92,500- 8,24,500)

Working Note :
Balance of amount available for preference & Equity shareholders & Bonus for employees
Credit Side 9,92,500
(-) : Debit site
(210,625 + 1,80,000 + 1,50,000 + 1,50,000 + 1,68,000) (7,32,625)
2,68,875

 Remaining Balance will be ‘x’

1
 Preference share holders will get 3x &
2
 Equity Share holders will get 3x
2𝑥 10 2
 Bonus to Employees = × 100 = 30x
3
2 1 2
 3x + 3x + 30x = 2,68,875

 x = 2,52,070
1
Share of Preference share holders = 2,52,070  3
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 = Rs. 84,023

2
Share of Equity Share holders = 2,52,070  3

= Rs. 1,68,047
2
Bonus to Employees = 2,52,070  30

= Rs. 16,805
(6 MARKS)

ANSWER : 2
Prashant Ltd.
Balance Sheet as at 31st March, 2019
Particulars Notes Rs.
Equity and Liabilities
1 Shareholders’ Funds
(a) Share Capital 1 14,95,000
(b) Reserve and Surplus 2 3,76,800
2 Non – current liabilities
Long – term borrowings 3 3,65,000
3. Current liabilities
(a) Trade Payables 2,67,000
(b) Other current liabilities 4 10,000
(c) Short – term provisions 5 72,000
Total 25,85,800
Assets
1 Non – current assets
Property, plant and Equipment
(a) Tangible Assets 6 15,95,000
2 Current assets
(a) Inventories 3,15,000
(b) Trade receivables 7 2,95,000
(c) Cash and Cash Equivalents 8 3,22,300
(d) Short – term loans and advances 58,500
Total 25,85,800

Notes to accounts
Rs.
(1) Share Capital
Issued & subscribed & fully paid up
1,50,000 Equity Shares of Rs. 10 each 15,00,000
(of the above 10,000 shares have been issued for (5,000) 14,95,000
consideration other than cash)
(2) Reserves and Surplus
General Reserve 2,70,000

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 Profit & Loss balance 1,06,800
Total 3,76,800
(3) Long – term borrowings
Secured
Loan from state Financial Corporation (2,10,000 –
10,000)
(Secured by hypothecation of Plant and Machinery) 2,00,000
Unsecured Loan 1,65,000
Total 3,65,000
(4) Other current liabilities
Interest accrued but not due on loans(SFC) 10,000
(5) Short – term provisions
Provision for taxation 72,000
(6) Tangible Assets
Land 5,50,000
Building 5,50,000
Less : Depreciation (b.f.) (65,000) 4,85,000
Plant & Machinery 6,25,000
Less : Depreciation (b.f.) (65,000) 5,60,000
Total 15,95,000
(7) Trade receivables
Outstanding for a period exceeding six months 55,000
Other 2,40,000
Total 2,95,000
(8) Cash and cash equivalents
Cash at bank
With scheduled Banks 2,70,000
With other Banks (Aakahs Bank Ltd.) 15,000
Cash in hand 37,300
Total 3,22,300
(10 MARKS)

ANSWER : 3
Journal Entries
Sr. L.F. Debit Credit
No. Particulars Rs. Rs.
1. Profit & Loss A/c. Dr. 1,50,000

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 To Debenture Interest A/c. 1,50,000
(Being transfer of debenture interest to Profit &
Loss A/c.)
2. Profit & Loss A/c. Dr. 3,00,000
To Provision for Taxation A/c. 3,00,000
(Being provision for tax made @ 30% on
10,00,000) [11,50,000 – 1,50,000 = 10,00,000]
3. Profit & Loss A/c. Dr. 35,000
To General Reserve A/c. 35,000
(Being creation of general reserve @ 5% of net
profit [i.e. Rs. 7,00,000])[10,00,000 – 3,00,000]

Balance Sheet (Extracts) as on 31.03.2014

Particulars Notes No. Rs.
EQUITY AND LIABILITIES
(1) Shareholders funds
(a) Share capital 1 14,00,000
(b) Reserve and Surplus 2 14,00,000
(2) Non Current Liabilities
(a) Long term borrowings 3 10,00,000

Notes to Accounts :

(1) Share Capital

Issued, subscribed and called up
Equity Share Capital fully paid up 10,00,000
13 ½% Preference share capital 4,00,000 14,00,000
(2) Reserve and Surplus
Securities Premium 7,00,000
General Reserve 35,000
Surplus (Profit / Loss)
Profit for the period 7,00,000
(-) Transfer to General Reserve (35,000) 6,65,000 14,00,000
(3) Long term Borrowings
(A) Secured loan
15% Debentures 10,00,000
(6 MARKS)

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