CHAPTER – 01

Introduction to Indian Accounting Standards

Introduction:
An accounting standard is a set of practices and policies used to
systematize bookkeeping and other accounting functions across firms
and over time. Accounting standards apply to the full breadth of an
entity’s financial picture including assets, liabilities, revenue, expenses
and shareholder’s equity. These are the rules to be followed by
accountants to maintain books of accounts which are comparable,
understandable, reliable and relevant for both internal and external
users.

Meaning of Accounting Standards:

Accounting standards are written policy documents issued by
expert accounting body or by government or other regulatory body
covering the aspects of recognition, treatment, measurement,
presentation and disclosure of accounting transactions and events in
the financial statements.

Definition of Accounting Standards:

According to T.P. Ghosh defines as, “Accounting standards are
the policy documents issued by the recognised expert accountancy
body relating to various aspects of measurement, treatment and
disclosure of accounting transactions and events”.
Nature and Scope of Accounting Standards:
On the basis of forgoing discussion, we can say that accounting
standards are guide, dictator, service provider and harmonizer in the
field of accounting process.
1) Serve as a guide to the accountants:
Accounting standards serve the accountants as a guide in
the accounting process. They provide basis on which accounts are
prepared. For example, they provide the method of valuation of
inventories.
2) Act as a dictator:
Accounting standards act as a dictator in the field of
accounting. Like a dictator, in some areas accountants have no
choice of their own but to opt for practices other than those stated
in the accounting standards. For example, Cash Flow Statement
should be prepared in the format prescribed by accounting
standard.
3) Serve as a service provider:
Accounting standards comprise the scope of accounting by
defining certain terms, presenting the accounting issues,
specifying standards, explaining numerous disclosures and
implementation date. Thus, accounting standards are descriptive
in nature and serve as a service provider.

4) Act as a harmonizer:
Accounting standards are not biased and bring uniformity in
accounting methods. They remove the effect of diverse accounting
practices and policies. On many occasions, accounting standards
develop and provide solutions to specific accounting issues. It is
thus clear that whenever there is any conflict on accounting
issues, accounting standards act as harmonizer and facilitate
solutions for accountants.

5) Flexible in Nature:
Accounting standards provide flexibility to the business.
These do not compel companies to follow their instructions in
every matter. In many cases, companies are free to adopt any
method when the option of different accounting practices is
available.

6) Avoids frauds and manipulations:

Accounting standards provide guidelines for each and every
accounting treatment. It aims at reducing the errors and chances
of manipulation of data by management.

7) Helps in easy comparability:

Accounting standards helps in easy comparability of
financial statements of different companies. These standards
generally bring uniformity in the whole accounting process.

8) Provide accounting norms:

Accounting standards provide norms which serve as the
basis for preparation of financial statements of company. It gives
a complete guide for accounting processes to accountants. All
transactions are recorded and presented in account of business
as per the guidelines provided by accounting standards.
Objectives of Accounting Standards:
In earlier days, accounting was just used for recording business
transactions of financial nature. Its main emphasis now lies on
providing accounting information in the process of decision making.
Following are the objectives of accounting standards: ……
1) To bring uniformity in accounting methods:
Accounting standards are required to bring uniformity in
accounting methods by proposing standard treatments to the
accounting issue. For example, AS-6(Revised) states the methods
for depreciation accounting.

2) To improve the reliability of the financial statements:

Accounting is a language of business. There are many users
of the information provided by accountants who take various
decisions relating to their field just on the basis of information
contained in financial statements.
3) To simplify the accounting information:
Accounting standards prevent the users from reaching any
misleading conclusions and make the financial data simpler for
everyone. For example, AS-3 (Revised) clearly classifies the flows
of cash in terms of ‘operating activities’, ‘investing activities’ and
‘financing activities’.
4) To Prevents frauds and manipulations:
Accounting standards prevent manipulation of data by the
management and others. By codifying the accounting methods,
frauds and manipulations can be minimized.
5) To determine managerial accountability:
The accounting standards helps to measure the performance
of the management of an entity. It can helps to measure the
management’s ability to increase profitability, maintain the
solvency of the firm, and other such important financial duties of
the management.
6) To help the auditors:
Accounting standards lay down the terms and conditions for
accounting policies and practices by way of codes, guidelines and
adjustments for making and interpreting the items appearing in
the financial statements. Thus, these terms, policies and
guidelines etc. become the basis for auditing the books of
accounts.
Advantages or Benefits of Accounting Standards:
Following are the important benefits of accounting standards: ….
1) Attains uniformity in accounting:
Accounting standards provides rules for standard treatment
and recording of transactions. They even have a standard format
for financial statements. These are steps in achieving uniformity
in accounting standards.
2) Improves reliability of financial statements:
There are many stakeholders of a company and they rely on
the financial statements for their information. Many of these
stakeholders base their decisions on the data provided by these
financial statements.
3) Prevents frauds and accounting manipulations:
Accounting standards lay down the accounting principles
and methodologies that all entities must follow. One outcome of
this is that the management of an entity cannot manipulate with
financial data. Following these standards is not optional, it is
compulsory.
4) Assists auditors:
Now the accounting standards lay down all the accounting
policies, rules, regulations etc., in a written format. These policies
have to be followed. So if an auditor checks that the policies have
been correctly followed he can be assured that the financial
statements are true and fair.
5) Comparability:
Since all entities of the country follow the same set of
standards their final accounts become comparable to some extent.
The users of the financial can analyze and compare the financial
performances of various companies before taking decisions.
6) Determining managerial accountability:
The accounting standards helps to measure the performance
of the management of an entity. It can helps to measure the
management’s ability to increase profitability, maintain the
solvency of the firm, and other such important financial duties of
the management.
Limitations of Accounting Standards:
Following are the limitations or disadvantages of accounting standards:
1) Rigid and flexible:
Policies have already established and must be followed by
the entity at all costs; hence, making financial statement rigid
means that no one may modify it to their liking.
2) Selecting an alternative is difficult:
There are several techniques for recording transactions in
the books of accounts, it might be difficult to decide which method
to use and which not to, which further makes it difficult to access
when it comes to qualitative analysis.
3) Time consumption is high:
The entire process of adhering to accounting standards takes
time since each note and schedule must be prepared by the user
and go through a lengthy, time consuming process.
4) Limited scope:
Accounting standards must be established following the rules in
place in the country at the time keeping in the interest of local
functionaries. They are unable to override the law. As a result, the
scope for creating policies in limited, which becomes a hurdle to
improvement.
5) Involves high costs:
Implementing accounting standards in your accounting
standards is too costly. Company need to change their entire
procedures, upgrade their systems and provide their employee’s
training accordingly.

Process of formulation of Accounting Standards in India:

Indian Accounting Standards are developed by an Accounting
Standards Board (ASB).
The due process consists of Nine main important stages: …………
1) Determining the need for the accounting standard:
First, the Accounting standard board will identify areas
where the formulation of accounting standards may be needed.
2) Constituting the study group:
After identifying the need of accounting standard, then the
ASB will constitute study group and panel to discuss the topic. It
consists of ICAI members. It supports the ASB by considering
various aspects.
3) Exposure draft:
It will be prepared by study group. It will submitted to the
ASB. The study group prepares an exposure. It contains the four
aspects i) Objectives and scope of accounting standard. ii)
Defining different terms used in accounting standard. iii)
Recognition and measurement of principles. iv) Presentation and
disclosure requirements.
4) Analysis of the draft:
Under this stage ASB considers the preliminary draft prepared
by the study group. In case anything needs to be revised than
accounting standard board takes the following steps:
a) ASB makes the revision
b) ASB refers the same to the study group.
5) Circulation of the draft:
In this step, the ASB circulates the accounting standard draft
to the council members of the ICAI and following specifies bodies
for their comments.
a) The institute of costs & works accountants of India
b) The institute of company secretaries of India
c) Ministry of company affairs
d) Controller & Auditor general of India
e) Central board of direct taxes f) Reserve bank of India
6) Discussion and finalizing exposure draft:
ASB holds meeting with the representatives of above
mentioned bodies for the purpose of determining their views on
the draft accounting standard based on analysis of the discussion.
ASB finalizes the exposure draft of proposed accounting standard.
7) Circulation of Exposure draft:
The exposure draft of the proposed standards is issued for
comments the members of the ICAI and the public.
8) Finalizing the Exposure draft:
Based on the comments received, the ASB finalizes the draft
of the proposed standards. Finally ASB submits the same to the
council of the ICAI.
9) Issue of Accounting Standard:
The council of the ICAI then considers and finalizes the draft
standard and if necessary modifies the same in consultation with
the ASB. The ICAI then issues the Accounting Standard after
modification if any on the relevant subject.
 List of Indian Accounting Standards:
Following are the important accounting standards issued by ICAI: ….
1) Ind. AS 1, Presentation of financial statements
2) Ind. AS 2, Inventories
3) Ind. AS 7, Statement of cash flows
4) Ind. AS 8, Accounting policies, changes in accounting estimates
and errors
5) Ind. AS 10, Events after the reporting period
6) Ind. AS 12, Income taxes
7) Ind. AS 16, Property plant and equipment
8) Ind. AS 17, Leases
9) Ind. AS 18, Revenue
10) Ind. AS 19, Employee benefits
11) Ind. AS 20, Accounting for government grants
12) Ind. AS 21, The effect of changes in foreign exchange rates
13) Ind. AS 23, Barrowing costs
14) Ind. AS 24, Related party disclosures
15) Ind. AS 27, Separate financial statements
16) Ind. AS 29, Financial reporting in Hyperinflationary economics
17) Ind. AS 33, Earnings per share
18) Ind. AS 34, Interim financial reporting
19) Ind. AS 36, Impairment of assets
20) Ind. AS 37, Provisions, contingent liabilities and contingent assets
21) Ind. AS 38, Intangible assets
22) Ind. AS 40, Investment property
23) Ind. AS 41, Agriculture
24) Ind. AS 101, First Time Adoption of Indian accounting Standards
25) Ind. AS 102, Share Based Payments
26) Ind. AS 103, Business Combinations
27) Ind. AS 104, Insurance Contracts
28) Ind. AS 105, Non-Current Assets Held for Sale & Discontinued
Operations
29) Ind. AS 106, Exploration for and Evaluation of Mineral Resources
30) Ind. AS 107, Financial Instruments: Disclosures
31) Ind. AS 108, Operating Segments
32) Ind. AS 112, Disclosure of interest of other entities
33) Ind. AS 113, Fair Value Measurement
34) Ind. AS 114, Regulatory Deferral Accounts
35) Ind. AS 115, Revenue from Contracts with Customers
Need for Convergence towards Global standards:
The convergence of accounting standards refers to the goal of
establishing a single set accounting standards that will be used
internationally. Following are important factors to be considered the
need for convergence: ……….
1) To make financial statements reliable, comparable & transparent.
2) To ensure a general understanding of best accounting practices.
3) To standardize financial accounting & reporting across the globe.
4) To eliminate information barriers for users of financial statements
5) To promote foreign investment and spur industrial growth.

Meaning of IFRS:
International Financial Reporting Standards (IFRS) are a set of
accounting standards developed by the International Accounting
Standards Board (IASB) that is becoming the global standard for the
preparation of public company financial statements.

Definition of IFRS:
According to IASC defines IFRS is a set of accounting standards
developed by an independent, not for profit organisation called IASB.

Meaning of Adoption:
Adoption is the process of adopting IFRS as issued by IASB, with
or without modifications. Modifications being, generally in the nature
of additional disclosures requirement or elimination of alternative
treatment.

Features of IFRS:
Following are the important features of IFRS: …….
1) Fair presentation and compliance:
An entity whose financial statements comply with IFRS shall
make an explicit and unreserved statement of such compliance in
the notes. The application of IFRSs, with additional disclosure
when necessary, is presumed to result in financial statements
that achieve a fair presentation.

2) Going concern:
When preparing financial statements, management shall
make an assessment of an entity’s ability to continue as a going
concern. An entity shall prepare financial statements on a going
concern basis unless management either intends to liquidate the
entity or to cease trading, or has no realistic alternative but to do
so.
 3) Accrual basis of accounting:
An entity shall present separately each material class of
similar items. An entity shall present separately items of a
dissimilar nature unless they are immaterial.

4) Accuracy:
An entity shall present a complete set of financial statements
(including comparative information) at least annually.

5) Comparative information:
Except when IFRSs permit or require otherwise, an entity
shall disclose comparative information in respect of the previous
period for all amounts reported in the current period’s financial
statements.

6) Consistency in presentation:
When the entity changes the presentation or classification of
items in its financial statements, the entity shall reclassify
comparative amounts unless reclassification is impracticable.

7) Faithful representation:
Financial statements should be completely and free from
bias and errors.

Objectives / Need / Purpose of IFRS:

Following are the important objectives of IFRS: ……………….
1) To develop in the public interest

2) To set single standards for high quality.

3) Understandable.

4) Enforceable and globally accepted.

5) An accounting frame work with global acceptance.

6) More cross border transactions.

7) Access to international capital and investments.

8) Enhance confidence in the minds of global stakeholders.

9) Facilitates international acquisitions and mergers.

10) Peer to peer comparison.

List of Advantages of Adopting IFRS:
1) Greater comparability:
Businesses using similar standards to prepare financial
statements can more accurately compare with each other. This is
very useful when comparing businesses that are based in different
countries, as they may otherwise have different methodologies and
rules in preparing these documents. This greater comparability has
aided investors to better identify where their investments should go.
2) High quality and transparency:
IFRS uses principle based philosophy rather than rule based
concept philosophy. Rule based philosophy may good for some
entities and bad for others or may good in one period and bad in
other period. Whereas principle based philosophy always shows
equality and transparent picture.
3) It is beneficial to new and small investors:
The IFRS can help new and small investors by making reporting
standards to have better quality and become simpler, putting these
investors in a similar position with professional investors, which was
not feasible under previous standards. This also entails a reduced
risk for these investors when they trade, as the professionals will not
be able to take advantage because the nature of financial statements
will just be simple to be understood by all.
4) It creates more flexibility:
Using a philosophy that is based on principles, instead of rules,
this set of standards will have the goal of arriving at a reasonable
valuation with various ways to accomplish tasks. This would give
businesses the freedom to adopt IFRS to their specific situations,
which will result in financial statements that are more easily read
and useful.
5) More cross border transactions and investments:
The single set of global accounting standard creates the trust
between the investors or investees, buyer and suppliers etc. The
foreign investor can easily trust on the financial statement of the
company and can make investment easily.
6) It creates confidence in the minds of global stakeholders:
The single set of accounting standards will create confidence in
minds of global stakeholders through by providing correct and
proper information about financial statements.
7) It would create a single set of accounting standards around
the world:
Instead of using multiple accounting standards based on
preference of each country where an organisation does business,
adopting IFRS would enable agencies from different segments of the
globe to apply the same standards in every transaction.

8) It would create a higher return on equity:

More than 70% of the companies examined between 2004-2006
had a higher return on equity under IFRS when compared to the
GAAP system used in United States.

9) It would make it easier for all companies to do business in

foreign countries:
The internet, transportation, technologies and communication
tools encourage us to use a system of globalization today more than
ever before in human history. Because small business owners face a
high cost of compliance since there are two sets of standards in place
today, the added cost of reporting a financial statement using IFRS
and GAAP can be cost-prohibitive.

10) It would improve the rates of foreign direct investment around

the world:
The presence of the IFRS globally would make it easier for
companies to invest in one another whenever there is a market
opportunity which presents itself. Research in the area of FDI shows
that the presence of multiple standards creates uncertainty in this
monetary transfer because of the uncertainty which exists in the
differences between the various financial standards.

List of Disadvantages of Adopting IFRS

1) It requires high costs:
Whether large or small, all businesses would feel the impact if a
country adopts IFRS. However, small companies would not have
sufficient resources to implement the changes that come with it, not
to mention that they would need to train staff or hire accountants or
consultants for assistance.

2) It would require global consistency in auditing and

enforcement: The enforcement of IFRS can create some
disadvantages as well. Although the United States has an effective
enforcement policy on its accounting rules.
3) It is prone to manipulation:
As businesses can only use the methods that they wish, this
would lead to financial statements show only desired results, which
can lead to profit manipulation. While this new set of standards
requires changes to how the rules should be applied to be justifiable,
it is often possible for businesses to come up with reasons for making
such changes.
4) It would increase the amount of work placed on accountants:
The implementation of a new system of global accounting
standards would require a complete revision of the domestic
accounting processes and strategies.
5) It is not globally accepted:
Truth is, the US has not yet adopted the IFRS, so as other
countries that choose to continue holding out as well. This means
that accounting by foreign companies operating in these countries
are facing difficulties because they have to prepare financial
statements using such a set of standards and another set of
principles that is generally accepted in these countries.

Benefits of Convergence of with IFRS:

Following are the benefits of convergence with IFRS: ……..
1) Beneficial to the economy:
If the accounting standards are converged it will promote
international business and increase the influx of capital into the
country. This will help India’s economy grow and expand.
International investing will also mean more capital for domestic
companies as well.
2) Beneficial to investors:
Convergence is a boon for investors who wish to invest in
foreign markets or economies. It makes it much easier for them to
study and compare the financial statements of foreign companies.
Since the financial statements are made using the same set of
standards it is also easier for investors to understand and analyze
them.
3) Beneficial to the Industry:
With globally accepted standards the industry can also surge
ahead. So convergence is important for the industry as well. It will
allow the industry to lower the cost of foreign capital. If companies
are not burned by adopting two different sets of standards it will
allow them easier entry into the market.
 4) More transparency:
Convergence will benefit the users of the financial
statements as well. It will make it easier for them to understand
the financial statements. And this will generate better
transparency and raise the confidence of the investors to invest
funds.

5) Cost saving:
Firstly it will exempt companies from maintaining separate
accounting books according to separate standards. This will save
a lot of work hours and money for the finance department. And
also planning and executing auditing will also become easier.

Applicability of Ind AS in India:

There are mainly four phases of applicability of Indian accounting
standards. These phases are applicable on the basis of the net worth
and the listing status of the company. These phases are divided by
Ministry of Corporate Affairs.
1) Phase I:
This phase makes Indian accounting standards compulsory
applicable to the companies. This phase was introduced on 1st
April 2016 and is applicable thereafter. These Ind AS are
applicable to companies that have a net worth of Rs. 500 crore
and more.
2) Phase II:
This phase started with the financial year 2017 and became
compulsory for all the listed companies and the companies that
are in progress to be listed or the companies which were on the
stock exchange of India that were not included in Phase I. All the
companies having a net worth value of Rs. 250 crore and more
but less than Rs. 500 crore.
3) Phase III:
Phase III makes the applicability of Ind AS to all i.e. SEBI
regulated entities, NBFCs, Insurance companies and all types of
Banks. This phase will be applicable from the financial year 2018.
4) Phase IV:
This phase only covers all the Non-banking financial
companies (NBFCs) that have a net worth of more than Rs. 250
crore but less than Rs. 500 crore. This phase would be applicable
from 1st April 2019.
 Chapter – 02
Preparation of Financial Statements (Ind AS 1)
Introduction:
The day to day transactions of the business are recorded, classified
and summarized to determine the profitability of an enterprise and also
to find out the financial position. The summarized results of the
enterprises are presented in the form of statements called as financial
statements.

Meaning of Financial Statements:

Financial statements are formal records of the financial activities
and position of a business, person or other entity. Relevant financial
information is presented in a structured manner and in a form which
is easy to understand.

Users of Financial Statements:

Following are the users of financial statements: ………….
a) Owners
b) Investors
c) Customers
d) Government and their agencies
e) Employees
f) Creditors
g) General Public
h) Lenders

Components of Financial Statements:

Following are the important components of Financial statements:
a) A statement of financial position
b) An income statement
c) A balance sheet
d) A statement of changes in equity
e) A cash flow statement

Objectives of Financial Statements:

Following are the important objectives of Financial statements:
a) Assessment of past performance
b) Assessment of current position
c) Assessment of the operational efficiency
 Format for Statement of Financial Position as per Schedule III:
Particulars Note Amount (₹)
Liabilities
Equity and liabilities:
Share capital 1 XXX
Retained earnings 2 XXX
Total Equity XXX
Non-current liabilities:
Long-term borrowings 3 XXX
Deferred tax
Lon-term provisions
Secured and unsecured loans
Total Non-current liabilities XXX
Current liabilities: 4 XXX
Trade and other payables
Short-term borrowings
Other current liabilities 5 XXX
Short-term provisions 6 XXX
Total current liabilities XXX
Total liabilities XXX
Assets
Non-current Assets:
Tangible assets 7 XXX
Intangible assets
Non-current investment 8 XXX
Long term loans and advances
Other non-current assets
Total Non-current Assets XXX
Current Assets: 9 XXX
Trade receivable
Sundry debtors
Inventories 10 XXX
Cash and cash equivalents 11 XXX
Short term loans and advances
Other current assets
Total Current Assets XXX
Total Assets XXX
Format for Statement of profit and loss A/c as per Schedule III:
No Particulars Note Amount (₹)
I Revenue from operations (Sales) 1 XXX
II Add: Other income 2 XXX
III Total Income (I+II) XXX
IV Less: Expenses
Cost of material consumed 3 XXX
Purchase of stock in trade 4 XXX
Changes in inventory 5 XXX
Employee benefit expenses 6 XXX
Finance cost 7 XXX
Depreciation and amortization 8 XXX
Other expenses 9 XXX
Total Expense (IV) XXX
V Profit before tax (III-IV) XXX
VI Less: Tax Expenses 10 XXX
VII Profit after tax (V-VI) XXX
Problem No: 01
Under which heading and sub-headings will the following items appear
in the Balance sheet of a company as per schedule III, part-I of the
companies Act, 2013?
a) Capital reserve
b) Sundry debtors
c) Sundry creditors
d) Loose tools
e) Provision for taxation
f) Cash in hand
g) Prepaid expenses
h) Goodwill

Problem No: 02
Under which heading and sub-headings will the following items appear
in the Balance sheet of a company as per schedule III, part-I of the
companies Act, 2013?
a) Debentures
b) Sinking fund
c) Interest accrued on investment
d) Outstanding expenses
e) Bank overdraft
f) Proposed dividend
g) Stock
h) Patents
Problem No: 03
Under which heading and sub-headings will the following items appear
in the Balance sheet of a company as per schedule III, part-I of the
companies Act, 2013?
a) Bills payable
b) Bills receivable
c) Trade marks
d) Work-in-progress
e) Prepaid insurance
f) Stores and spare parts
g) Forfeiture of shares
h) Loan on mortgage

Problem No: 04
Under which heading and sub-headings will the following items appear
in the Balance sheet of a company as per schedule III, part-I of the
companies Act, 2013?
a) 6% debentures
b) Live stock
c) Share premium
d) Patterns
e) Unclaimed dividend
f) Land and building
g) Advanced income
h) Outstanding wages

Problem No: 05
Under which heading and sub-headings will the following items appear
in the Balance sheet of a company as per schedule III, part-I of the
companies Act, 2013?
a) Stock
b) Prepaid salary
c) Cash
d) Capital reserve
e) Patents
f) Debentures
g) Provision for tax
h) Sundry debtors
Problem No: 06
From the following details prepare a statement of profit or loss for
the year ended 31st March 2019 of Lakshmi Company Limited.
Particulars Amount
Revenue 7,80,000
Cost of sales 4,90,000
Other income 41,334
Distribution cost 18,000
Administrative expenses 40,000
Other expenses 4,200
Finance cost 16,000
Share of profit of association 70,200
Income tax expenses 80,834
Problem No: 07
From the following details prepare a statement of profit or loss for
the year ended 31st March 2019 of Sharath Company Limited.
Particulars Amount
Revenue 7,10,000
Cost of sales 4,60,000
Other income 22,600
Distribution cost 17,400
Administrative expenses 42,000
Other expenses 2,400
Finance cost 15,000
Share of profit of association 60,200
Income tax expenses 64,000
Problem No: 08
From the following balances of Kumar Co., Ltd. as on 31-03-2020.
Prepare a statement of P&L account.
Particulars Amount
Interest on debentures 32,400
Travelling expenses 15,000
Delivery van expenses 5,000
Bad debts 6,000
Discount 7,000
Purchase 3,15,000
Opening stock 75,000
Freight charges 8,000
Depreciation 25,000
Insurance 5,000
Commission received 7,500
Sales 6,50,000
Share transfer fees 5,000
Problem No: 09
From the following particulars of XYZ Co., Prepare a statement of
P/L for the year ended 31st March, 2020 as per Schedule III of the
companies Act, 2013.
Particulars Rs.
Revenue from operations 39,000
Cost of materials consumed 24,500
Other income 6,000
Changes in inventory 2,500
Changes in WIP 1,500
Finance cost 1,000
Employees benefit 2,000
Depreciation and amortization 3,000
Other expenses 500
Income tax expenses 1,200
Non-controlling interest 4,000

Problem No: 10
You are given the following extracts of ledger Balances taken from
Shankar Ltd., for the year ending 31-03-2020. Prepare a statement of
profit and loss A/c.
Revenue from operations 98,000
Other income 2,000
Advertising 5,250
Salaries 27,000
Depreciation 2,800
Insurance 1,000
Interest on debentures 1,000
Preliminary expenses written off 1,000
Bad debts 500
Discount 500
Printing and stationary 1,000
Cost of materials consumed 25,000
Problem No: 11
From the following prepare a statement of profit and loss for the
year ended 31-03-2020 as per companies Act, 2013.
Revenue from operation 12,00,000
Salaries and allowances 1,40,000
Stationary 30,000
Interest on term loans 50,000
Publicity 80,000
Raw materials consumed 2,20,000
Discount allowed 20,000
Depreciation 20,000
Rent received 80,000

Problem No: 12
You are given the following information from the books of Siraj
Co., as on 31st March 2018.
Siraj Co., Ltd.,
Trial balance as on 31st March, 2018
Particulars Amount Particulars Amount
Depreciation on premises 8,000 Sales 12,40,000
Material consumed 8,00,000 Equity share capital 8,00,000
Opening stock 40,000 Outstanding wages 6,000
Salaries 1,14,000
Bad debts 3,800
Bonus to employees 20,000
Interest on loan 16,000
Depn. on machinery 18,000
Conveyance 4,000
Loss on sale machinery 20,000
Insurance 16,200
Sales returns 40,000
Provision for tax 60,000
Machinery 6,00,000
P.F. Contribution 86,000
Premises 1,60,000
Computer 40,000
20,46,000 20,46,000
Additional information: Closing stock was valued at Rs. 1,20,000.
Problem No: 13
You are given the following information from the books of Glory
Co., as on 31st March 2019.
Glory Co., Ltd.
Trial balance as on 31st March, 2019
Particulars Amount Particulars Amount
Int. on debentures 32,400 Share transfer fee 15,000
Travelling expenses 10,200 12% debentures 2,70,000
Delivery van expenses 5,100 commission received 7,400
Bad debts 6,500 Sales 6,45,500
Discount 7,000 Share capital 5,00,000
Purchases 3,15,800
Opening stock 72,000
Freight outward 8,400
Free samples 5,000
Depreciation 38,900
Showroom expenses 11,400
Bank balance 1,58,600
Wages 93,000
Land & building 4,00,000
Office equipment 1,45,000
Insurance 6,000
Furniture 1,22,600
14,37,900 14,37,900
Additional information:
Closing stock was valued at Rs. 85,500

Problem No: 14
You are given the following information extract from ledger balances
taken from Vihar Co., Ltd., for the year ending 31st March 2019.
Prepare a statement of Profit and loss A/c as per revised Schedule III.
Particulars Amount
Excise duty 8,000
Provision for taxation 10,000
Depreciation on machinery 3,300
Sundry expenses 7,000
Rent 4,000
Salaries 7,500
Materials consumed 90,000
Machinery 25,000
Directors remuneration 20,000
Factory expenses 2,500
Sales 4,55,000
Return inwards 5,000
Purchases 2,35,000
Closing stock 75,000
Opening stock 82,000
Wages 30,000
Bank loan 40,000
Interest on bank loan 4,000
Interest on investment 5,000
Rent received 3,000
Motive power 12,000
Transport charges 1,000

Problem No: 15
You are given the following information extract from ledger balances
taken from Chanakya Co., Ltd., for the year ending 31st March 2018.
Prepare a statement of Profit and loss A/c as per revised Schedule III.
Particulars Amount
Opening stock of finished goods 1,90,500
Cost of material consumed 2,92,000
Salaries to office staff 68,000
Closing stock of finished goods 2,03,000
Interest on debentures paid 16,250
General expenses 8,250
Discount earned 4,900
Cash sales 2,66,000
Credit sales 3,87,500
Income tax refund 11,500
Provision for taxation 30,000
Goodwill written off 18,000
Sales returns 17,000
Provision for bad debts 8,200
Delivery expenses 7,200
Printing and stationary 22,600
Factory expenses 82,000
Bonus to employees 32,000
Depreciation on machinery 50,000
Problem No: 16
From the following particulars of M/s Ravinandan Ltd., prepare a
statement of profit and loss for the year ended 31 march, 2017 as per
Schedule III of companies Act, 2013;
Particulars ₹
Revenue from operations 1,00,000
Printing and stationary 2,000
Advertisement 4,000
Salaries and allowances 6,000
Interest on long term loans 4,500
Goodwill written off 1,500
Material consumed 35,000
Discount allowed 1,000
Interest on investment received 1,500
Depreciation on fixed assets 2,000

Problem No: 17
Prepare statement of Profit and loss under companies Act, 2013,
from the following details of XYZ Ltd., for the year ended 31-03-2022.
Sales ₹ 8,00,000
Purchase of raw materials ₹ 3,50,000
Commission received ₹ 1,50,000
Carriage outwards ₹ 20,000
Opening stock of raw materials ₹ 90,000
Closing stock of raw materials ₹ 50,000
Rent received ₹ 20,000
Salaries to employees ₹ 1,00,000
PF contribution to employees ₹ 25,000
Interest on bank loan ₹15,000
Interest on debentures ₹ 15,000
Sundry expenses ₹ 5,000
Depreciation ₹ 20,000
Income tax paid ₹ 37,500
Excise duty ₹ 25,000
Consumable stores ₹ 40,000
Factory expenses ₹ 30,000
Problem No: 18
Prepare a statement of profit or loss under Companies Act, 2013 from
the following details of Kavya Ltd., for the year ended 31-03-2019.
Particulars ₹
Sales 16,00,000
Purchase of raw materials 7,00,000
Commission received 3,00,000
Carriage inwards 1,00,000
Return outwards 40,000
Opening stock of raw materials 1,80,000
Closing stock of raw materials 1,00,000
Rent received 40,000
Salaries to employees 2,00,000
PF contribution to employees 50,000
Interest on bank loan 30,000
Interest of debentures 30,000
Sundry expenses 10,000
Depreciation 40,000
Income tax paid 75,000
Excise duty 50,000
Consumables 80,000
Factory expenses 60,000
Problem No: 19
The following are given for Sachidananda Limited for the year ending
31 March 2023.
st

Particulars ₹
Purchases 6,00,000
Stock of goods (01-04-2022) 80,000
Stock of goods (31-03-2023) 90,000
Sales 10,00,000
Depreciation on fixed assets 10,000
Preliminary expenses written off 8,000
Salaries to employees 19,000
Rent of showroom 12,000
Interest on loan 10,000
Discount received from suppliers 5,000
Office expenses 2,000
Printing and stationary 1,800
Carriage outwards 1,200
Advertisement 800
Income tax at 40%
Problem No: 20
From the following particulars of M/s Ravinandan Ltd., prepare a
statement of profit and loss for the year ended 31 march, 2017 as per
Schedule III of companies Act, 2013;
Particulars ₹
Revenue from operations 2,00,000
Printing and stationary 6,000
Advertisement 8,000
Salaries and allowances 4,000
Interest on long term loans 6,500
Goodwill written off 3,500
Material consumed 45,000
Discount allowed 2,000
Interest on investment received 2,500
Depreciation on fixed assets 4,000

Problem No: 21
From the following details prepare a statement of financial
position on 31st March 2016 Shravani Company Limited.
Particulars Amount
Property, plant and equipment 7,01,400
Goodwill 1,61,600
Inventories 2,70,460
Debtors 1,83,200
Cash and cash equivalents 6,24,800
Other intangible assets 4,54,940
Other current assets 51,300
Investment in associates 2,00,300
Investment in equity instruments 2,85,000
Share capital 13,00,000
Retained earnings 4,87,000
Non-controlling interest 1,40,100
Long term borrowings 2,40,000
Deferred tax 57,600
Long term provisions 57,700
Sundry creditors 2,30,200
Short term borrowings 3,00,000
Current portion of long term borrowings 20,000
Current tax payable 70,000
Short term provisions 10,000
Other components of equity 20,400
Problem No: 22
From the following Trail balance of Johnson Ltd., as at 31-03-
2023. Prepare statement of financial position as per Ind. AS-1
(Schedule III of Companies Act of 2013)
Liabilities Amount Assets Amount
Equity share capital 1,25,000 Cash at bank 75,000
Reserve and surplus 25,000 Non-current assets 50,000
Non-current liabilities 2,00,000 Non-current investments 25,000
Current liabilities 50,000 Land and buildings 2,00,000
Staff provident fund 50,000 Furniture 50,000
Deposit from public 50,000 Office equipment 25,000
1,25,000 Goodwill 50,000
Debentures
Stock 1,00,000
Debtors 50,000

6,25,000 6,25,000

Problem No: 23
From the following is the trail balance of Vishal Ltd., prepare the Balance
sheet of the company as on 31st March 2016 as per Schedule III of Co., Act.
Trial balance as on 31st March 2016
Debit Rs. Credit Rs.
Advances to employees 3,00,000 Equity S.C 52,00,000
Cash at Bank 3,14,320 Capital reserve 60,000
Furniture and fixture 7,50,000 Loan from SBI 8,00,000
Premises 41,09,940 Provision for employees
Welfare fund 6,00,000
Patents 10,00,000 Proposed dividends 1,64,000
Discount on issue of shares
(Written off) 25,000 Short term loan 4,90,200
Trade receivables 3,66,240 Unpaid dividend 64,800
Advance tax 50,000 Profit and loss A/c 42,980
8% Govt., bonds 3,36,000 Bills payable 85,100
Stock in trade 3,55,600 Sundry creditors 1,00,020
76,07,100 76,07,100
Problem No: 24
From the following Trail balance of MN Co., as on 31-03-2020.
Prepare statement of Financial position as per Ind. AS -1 (Schedule III
of Companies Act of 2013)
Trail Balance
Debit Amount Credit Amount
Plant property Equ. 8,00,000 Equity share capital 5,00,000

Intangible assets 3,00,000 Capital redemption 50,000

reserve
Current investment 1,00,000
Non-current 8,00,000
Other Non-current 2,00,000 liabilities
assets
P and L A/c 40,000
Inventories 90,000
Current liabilities 6,00,000
Cash and cash 4,00,000
equivalents
Trade receivables 1,00,000
19,90,000 19,90,000

Problem No: 25
From the following Trail balance of Reddy Co., as on 31-03-2020.
Prepare statement of Financial position as per Ind. AS -1 (Schedule III
of Companies Act of 2013)
Debit Amount Credit Amount
Tangible assets 12,00,000 Equity share capital 10,00,000

Intangible assets 4,00,000 General reserve 6,00,000

Current investments 4,00,000 Non-current 10,00,000

liabilities
Other non-current 4,00,000
investment P and L A/c 6,00,000

Trade receivables 5,00,000 Current liabilities 7,00,000

Stock 8,00,000
Cash 2,00,000
39,00,000 39,00,000
Problem No: 26
From the following Trail balance of AP Co., as on 31-03-2020.
Prepare statement of Financial position as per Ind. AS -1 (Schedule III
of Companies Act of 2013)
Debit Amount Credit Amount
Cash at bank 1,50,000 Equity share capital 2,50,000
Non-current assets 1,00,000 Reserves & surplus 50,000
Non-current invest. 50,000 Non-current
Land and building 4,00,000 liabilities 4,00,000
Furniture 1,00,000 Current liabilities 1,00,000
Office equipment 50,000 Staff provident fund 1,00,000
Goodwill 1,00,000 Deposits from public 1,00,000
Stock 2,00,000 Preference capital 2,50,000
Trade receivables 1,00,000
12,50,000 12,50,000

Problem No: 27
The trail balance of Mysore Ltd. on 31-03-2022 was as follows:
Particulars Dr. (₹) Cr.( ₹)
Share capital: Shares of ₹100 each - 4,00,000
8% mortgage debentures - 1,00,000
Plant and machinery 4,50,000 -
Furniture 50,000 -
Land and building 1,00,000 -
Accounts payable - 1,20,000
Long term loans - 2,00,000
Provision for depreciation - 50,000
Inventories 1,80,000 -
Accounts receivables 20,000 -
Investment in flats 1,60,000 -
Technical knowhow 40,000 -
Cash and cash equivalents 20,000 -
P/L A/c - 1,30,000
Revenue received in advance - 20,000
Total 10,20,000 10,20,000
Prepare a statement of financial position of Mysore ltd., as on 31-03-
2022 as per Schedule III of Companies Act, 2013.
Problem No: 28
From the given trail balance, prepare the Balance sheet of
Moonlight Ltd., as on 31st March, 2023 as per Ind AS 01.
Trail Balance as on 31st March, 2023
Particulars Dr. (₹) Cr. (₹)
Share capital (40,000 ES of ₹10 each) - 4,00,000
Bills receivable 90,000 -
10% mortgage loan - 1,70,000
Stores and spares 1,15,000 -
Debtors 1,66,000 -
Plant and machinery 2,90,000 -
Goodwill 40,000 -
Provision for tax - 26,000
General reserve - 1,30,000
Cash in hand 18,000 -
Calls-in-arrears (at ₹ 2 per share) 2,000 -
Marketable securities 5,000 -

Problem No: 29
The following balances have been extracted from the books of
Rabin Ltd., as on 31st March, 2023.
Particulars Amount (₹)
Share capital (equity shares of ₹10 each fully paid) 10,00,000
Securities premium 1,00,000
12% debentures 4,00,000
Trade payables 2,00,000
Proposed dividend 50,000
Debt in statement of profit & loss 30,000
Investment in Govt. bonds 4,00,000
Work-in-progress 1,00,000
Patents 40,000
Unclaimed dividend 10,000
Trade receivables 20,000
Public deposits 50,000
Plant and equipment 6,00,000
Furniture and fixtures 1,00,000
Office equipment 2,00,000
Stock-in-trade 2,60,000
Stores and spares 40,000
Expenses on issue of debentures 20,000
Prepare a Statement of Financial Position of the company as per
Ind AS 01.
Problem No: 30
Following are the ledger balances extracted from the books of
Mukunda Ltd., for the year ending 31st March, 2022.
Particulars Amount (₹)
Share capital 5,00,000
Capital reserve 1,00,000
General reserve 50,000
Profit and loss A/c (Credit Balance) 1,50,000
10% debentures 2,50,000
Bank loan (long term) 1,50,000
Bank loan (short term) 25,000
Investments (non-current) 1,00,000
Trade receivables (current) 25,000
Goodwill 50,000
Computer software 2,50,000
Investment in property 4,00,000
Provisions (current) 25,000
Land and building 3,00,000
Plant and machinery 1,25,000
Prepare a Statement of Financial Position (SOFP) as on 31-03-2022
as per schedule – III of Companies Act, 2013.
 CHAPTER – 03
Provision under Accounting Standard for Items
Appear in Financial Statements
Property, Plant and Equipment: (Ind AS 16)
Introduction:
Ind AS 16 Property, plant and equipment outlines the accounting
treatment for most types of property, plant and equipment. It is initially
measured at its cost, subsequently measured either using a cost or
revaluation model.

Meaning of Property, Plant and Equipment:

It is a company asset that is vital to business operations but,
cannot be easily liquidated and depending on the nature of company’s
business the total value of PP&E can range from very low to extremely
high compared to total assets.

Objective:
This Standard deals with the accounting treatment of Property,
Plant & Equipment including the guidance for the main issues related
to the recognition & measurement, determination of carrying value,
depreciation charges, any impairment loss and de-recognition aspects
for the property, plant & equipment in the financial statements of an
entity.

Scope:
The requirements of this standard are applicable for the
accounting treatment of property, plant and equipment.

This Standard is not applicable:

a) To the property, plant and equipment which are classified as held
for sale as per Ind AS 105.
b) Biological assets which are related to agricultural activities except
bearer plants.
c) The measurement and recognition of exploration and evaluation
assets.
d) Mineral rights and reserves like oil and gas and other non-
regenerative resources.
Definition
1. Property, Plant & Equipment:
The item which meets the following criteria will be treated as
property plant and equipment as the standard prescribes:
a) These are tangible items;
b) That are held for use in the production, supply of goods or
services, rental to others, or use in administration and
c) Their economic benefits are for more than one accounting
period.

2. Cost:
It is the amount of cash or cash equivalents paid or the fair value
of the consideration transferred to acquire, purchase or construct an
asset.

3. Carrying Value:
It is the value at which asset will be presented in the statement of
financial position and it is determined as Cost less Accumulated
Depreciation and Accumulated Impairment Loss.

4. Depreciable Amount:
It is the amount of asset which will be depreciated over its useful
life and is determined as the cost of an asset less its residual value.

5. Residual Value:
It is the estimated net disposal proceeds that an entity would
currently obtain from disposal of the asset, if the asset were already
in the condition and situation which is expected to be at the end of
its useful life.

6. Useful Life:
It is the period of time or number of production units for which
asset will be used by the management.

7. Depreciation:
It is the systematic allocation of the depreciable amount of an
asset over its related useful life.

8. Fair value:
It is amount that is expected to be received to sell an asset or
required to be paid to transfer a liability, in an orderly transaction
between market participants at the date of measurement.
9. Impairment Loss:
If the carrying value of asset exceeds its recoverable value, the
excess is known as impairment loss.

Initial Recognition
An asset will be recognized as property, plant and equipment if it
meets:
(a) It is apparent that the future economic benefits related to such
asset would follow to the business.
(b) Cost of such asset could be reliably measured.

Disclosure Requirement:
For each class of property, plant and equipment, the entity is required
to disclose the following:
(a) The measurement model
(b) Method of depreciation
(c) Depreciation rate or useful life of the asset
(d) Any expense on the asset during the year which was capitalized as
part of the carrying amount of the asset.
(e) Any compensation received from the third parties in respect of any
impairment related to the asset.
(f) Any depreciation charges which are recognized as part of cost of
other assets.
(g) Any change in useful life, residual value or depreciation method
related to the property, plant and equipment.
(h) Carrying values of the assets which are idle.

Problems under Property, Plant and Equipment:

Problem No: 01
Veena traders purchased a plant from Sujay limited on 30-092015
with a quoted price of Rs. 200 lakhs. Sujay limited offer 3 months’ credit
with a condition that discount of 1.5% will be allowed if, the payments
were made within one month. GST is 18% on the quoted price.
Company incurred 2% on transportation cost and 3% on erection cost
of the quoted price pre-operative cost amounted to Rs. 2,00,000.
Estimated life of the plant is 8 years.
Residual value of the plant is Rs. 20,00,000.
a) Calculate the original cost of the plant.
b) Carrying amount of the plant on 31-03-2016.
Problem No: 02
Krishna traders purchased a plant from Sanjay limited on 01-01-
2018 with a quoted price of Rs. 100 lakhs. Sanjay limited offer 3
months’ credit with a condition that discount of 5% will be allowed if,
the payments were made within one month. GST is 18% on the quoted
price. Company incurred 4% on transportation cost and 3% on erection
and establishment charges on quoted price. The post-operative cost
amounted to Rs. 4,00,000. The Krishna limited will pay the amount on
31-03-2018.
Estimated life of the plant is 10 years.
Residual value of the plant is Rs. 10,00,000.
a) Calculate the original cost of the plant.
b) Carrying amount of the plant on 31-03-2019.

Problem No:03
Ravi Ltd., purchased an equipment for its company the price paid
for the equipment is 2,50,000 inclusive of value added to tax of Rs.
60,000. The entity gets a credit of VAT while calculating the payable on
the finished goods sold.
Additional cost incurred are
Freight Rs. 10,000 customs duty Rs. 8,000.
Installation expenses of Rs. 5,000.
The estimate of dismantling and removing the item would be Rs. 5,000
After equipment was put to use Rs. 5,000 was spent on cleaning the
spare parts. Calculate the cost of asset according to Ind AS-16.

Problem No:04
Ganesh Ltd., ordered a laptop in flip kart. The price of laptop is
Rs. 40,000, allowed 10% discount at the time of purchase and charged
18% GST which is not refundable. Shipping charges Rs. 500, software
installation charges Rs. 3,000 and annual service charges Rs. 3,000.
Calculate the initial cost of laptop and give reasons as per Ind. AS-16.

Problem No:05
Rajesh Ltd., ordered a Smart phone in Amazon. The price of smart
phone is Rs. 80,000, allowed 10% discount at the time of purchase and
charged 18% GST which is not refundable. Shipping charges Rs. 1000,
software installation charges Rs. 2,000. Calculate the initial cost of
laptop and give reasons as per Ind. AS-16.
Problem No: 06
Saraswathi limited is installing a plant, the company incurred
various costs. The information in relation to the same is furnished
below:
Particulars Rs
Cost of the plant 30,00,000
Initial handling cost 2,00,000
Costs incurred in site preparation 2,00,000
Consultation fees 6,50,000
Interest paid to the suppliers 1,00,000
Dismantling cost after 6 years 3,33,333
Operating losses before production 3,33,333 Identify
the cost that could be capitalized.

Problem No: 07
ABC Ltd., has purchased an equipment for the purpose of
production. The company paid for an equipment of ₹ 2,64,000 exclusive
of GST ₹ 24,600. The company cannot gets a credit of GST while
calculating tax payable on finished goods sold.
The additional costs incurred are:
Freight ₹ 10,000
Customs duty ₹ 5,000
Installation charges ₹ 8,000
Pre-operative expenses ₹ 11,000
Estimated cost of dismantling expenses ₹ 12,000
Before an equipment put to use ₹ 2,000 was spent for cleaning of an
equipment. Calculate the cost of PPE as per Indian AS – 16.

Problem No: 08
X Ltd., has purchased a machinery for its manufacturing unit, the price
paid for the machinery is ₹ 5,00,000, inclusive of GST of ₹ 80,000. The
company gets a credit of GST while calculating tax payable on finished
goods sold.
The additional costs incurred are:
Freight ₹ 10,000
Customs duty ₹ 8,000
Installation charges ₹ 6,000
Estimated cost of dismantling and removing the item would be ₹ 4,000
After the machinery put into use ₹ 24,000 was spent for cleaning the
spare parts. Calculate the cost of PPE as per Indian AS – 16.
Problem No: 09
T limited has purchased an equipment for its manufacturing unit.
The price paid for the equipment is ₹ 2,20,000, inclusive of GST of ₹
39,600. The company gets a credit of GST while calculating tax payable
on finished goods sold.
The additional costs incurred are:
Freight ₹ 4,500
Customs duty ₹ 4,000
Installation charges ₹ 3,000
Estimated cost of dismantling and removing the item would be ₹ 1,500.
After the equipment put into use ₹ 11,000 was spent for cleaning the
spare parts.
Calculate the cost of PPE as per Ind AS – 16.

Problem No: 10
Calculate the carrying cost of machinery and write notes.
On 1st July, 2020 Nagaraj Manufacturers spent ₹ 48,000 to replace
their machinery. The machinery had been acquired 5 years back and
had a carrying value at July 2018 amounting to ₹ 1,15,500 of their
amount ₹ 10,500 related to original machinery.

Intangible Assets (Ind AS 38)

Introduction:
Ind AS 38 intangible assets outlines the accounting requirements
for intangible assets, which are non-monetary assets which are without
physical substance and identifiable.
Meaning of Intangible Assets:
An identifiable non-monetary asset without physical substance
controlled by the entity, from which future economic benefits are
expected to flow towards the entity.
OR
An intangible asset is an asset that does not have any physical
existence. Like tangible assets, you cannot seen and touch but we can
realize its presence in an enterprise.
Objective:
The objective of Ind AS 38 is to prescribe the accounting treatment
for intangible assets that are not dealt with specifically in another
standard. It requires an entity to recognize an intangible assets if, and
only if, specified criteria are met. The standard also specifies how to
measure the carrying amount of intangible assets and requires
specified disclosures about intangible assets.
Scope:
Ind AS 38 applies to all intangible assets other than:
a) Financial assets
b) Exploration and evaluation assets
c) Expenditure on the development and extraction of minerals, oil,
natural gas and similar resources
d) Intangible assets arising from insurance contracts issued by
insurance companies.

Examples of Intangible Assets:

a) Goodwill
b) Trade mark
c) Patent rights
d) Computer software
e) Trade secrets
f) Import quotas
g) Franchise agreements
h) Licensing and royalty
i) Technical knowhow
j) Mortgage service rights.
Recognition Criteria:
Ind AS 38 requires an entity to recognize an intangible asset,
whether purchased or self-created if: …
1) It is probable that the future economic benefits that attributable
to the asset will flow to the entity.
2) The cost of the asset can be measured reliably.
Disclosures under Ind AS 38:
For each class of intangible assets, disclose: ….
a) Useful life
b) Amortization method
c) Gross carrying amount
d) Accumulated amortization and impairment losses
e) Basis for determining that an intangible has an indefinite life.
f) A reconciliation of the carrying amount at the beginning and end
of the period.
 Impairment of Assets Ind AS 36
Introduction:
Ind AS 36 impairment of assets seeks to ensure that an entity’s
assets are not carried at more than their recoverable amount. With the
exception of goodwill and certain intangible assets for which an annual
impairment test is required.
Objective of Ind AS 36
The objective of this standard is to prescribe that an entity applies
to ensure that assets are not carried at more than their recoverable
amount.

Scope:
The standard applies to all assets (including current assets) other than:
a) Inventories
b) Assets arising from construction contracts
c) Deferred tax assets (Ind AS 12-income taxes)
d) Assets arising from employee benefits
Definitions:
a) Impairment loss:
The amount by which the carrying amount of an asset or
cash generating unit exceeds its recoverable amount.
b) Carrying amount:
The amount at which an asset is recognized in the balance
sheet after deducting accumulated depreciation and accumulated
impairment loss.

c) Recoverable amount:
The higher of an asset’s fair value less costs of disposal
(sometimes called net selling price) and its value in use.

d) Fair value:
The price that would be received to sell an asset or paid to
transfer a liability in an orderly transaction between market
participants at the measurement date.

e) Value in use:
The present value of the future cash flows expected to be
derived from an asset or cash generating unit.
Recognition and measurement:
If Recoverable amount < carrying amount of an asset
Impairment Loss = Carrying amount – Recoverable amount

Disclosure requirement:
For each class of assets, the financial statements should disclose:
a) Amount of impairment loss
b) Line items of the income statement in which those impairment
loss are included
c) Amount of reversals of impairment losses
d) Amount of impairment losses recognized directly against
revaluation surplus
e) Line items of the income statement in which those impairment
losses are reversed
f) Amount of reversals of impairment losses recognised directly
against revaluation surplus.

Problems under Impairment of Assets

Problem No: 01
The cost of machine is Rs. 3,00,000 which has 5 years of useful
life. Depreciation is on straight line method at 10% p.a. machine is
expected to generate Rs. 30,000 p.a. net cash flow for 5 years. The net
residual value of the machine on current date is Rs. 1,40,000, a
required rate of return is 10% p.a.
Calculate: a) Carrying amount of the machine
b) Impairment loss
c) Revised carrying value
[The present value of an annuity at 10% p.a. for 5 years is 3.79]

Problem No: 02
The cost of machine is Rs. 4,00,000 which has 5 years of useful
life. Depreciation is on straight line method at 10% p.a. machine is
expected to generate Rs. 40,000 p.a. net cash flow for 5 years. The net
residual value of the machine on current date is Rs. 1,80,000, a
required rate of return is 20% p.a.
[The present value of an annuity at 10% p.a. for 5 years is 3.79]
Calculate: a) Carrying amount of the machine
b) Impairment loss
c) Revised carrying value
Problem No: 03
Akash limited purchase a machine costing Rs. 2,00,000 which has
5 years of useful life. Depreciation is on straight line method at 15%
p.a. after 5 years of the usage of the machine the net realizable value is
Rs. 40,000. The required rate of return is 20% p.a.
Calculate: a) Carrying amount of the machine
b) Impairment loss
c) Revised carrying value

Problem No: 04
Manu limited purchased an asset 4 years back at a cost of Rs. 10
lakhs and depreciation is charged on straight line method at 10% p.a.
and at the end of the year, it has realised the asset market value of Rs.
4,50,000 and has written off the loss on Re-valuation to the profit and
loss A/c. It is assumed that disposal cost amounted to Rs. 30,000.
What will be the impairment loss if value in use is estimated Rs.
4,00,000?

Problem No: 05
Ananth limited purchased an asset 3 years back at a cost of Rs.
10 lakhs and depreciation is charged on diminishing balance method
at 10% p.a. and at the end of the year, it has realised the asset market
value of Rs. 6,00,000 and has written off the loss on Re-valuation to
the profit and loss A/c. It is assumed that disposal cost amounted to
Rs. 50,000. What will be the impairment loss if value in use is estimated
Rs. 5,00,000?

Problem No: 06
T Ltd. has a plant whose original cost is ₹ 9,60,000 and
accumulated depreciation amounted to ₹ 96,000. Another company
sold a similar plant for ₹ 3,80,000 and the selling expenditure amounted
to ₹ 35,000. The management has determined the value in use of the
plant of ₹ 4,10,000. Calculate the Impairment loss.

Problem No: 07
Pruthvi Ltd. has a plant whose original cost is ₹ 4,80,000 and
accumulated depreciation amounted to ₹ 48,000. Another company
sold a similar plant for ₹ 1,90,000 and the selling expenditure amounted
to ₹ 17,500. The management has determined the value in use of the
plant of ₹ 2,05,000. Calculate the Impairment loss.
Problem No: 08
ABC Ltd. has a carrying value of ₹ 2,00,000. An impairment review
shows that the recoverable amount is ₹ 1,10,000 and that the intangible
assets have a net realizable value of ₹ 20,000. The assets making up of
ABC Ltd. is as follows:
Goodwill ₹ 30,000
Intangible assets ₹ 50,000
Tangible asset ₹ 1,20,000
2,00,000
Calculate impairment loss and show how this would be allocated.

Problem No: 09
XYZ Ltd. has a carrying value of ₹ 4,00,000. An impairment review
shows that the recoverable amount is ₹ 2,20,000 and that the intangible
assets have a net realizable value of ₹ 40,000. The assets making up of
ABC Ltd. is as follows:
Goodwill ₹ 60,000
Intangible assets ₹ 1,00,000
Tangible asset ₹ 2,40,000
4,00,000
Calculate impairment loss and show how this would be allocated.

Problem No: 10
Tarun Co. has a machine that originally cost ₹35,00,000 with
accumulated depreciation of ₹ 5,00,000. The market value of the
machine is ₹ 30,00,000 the cost of dismantling is ₹ 1,00,000, and the
direct selling costs are ₹ 2,00,000. The value in use as determined by
management is ₹ 27,50,000. The remaining estimated life of the
machine is 5 years and estimated residual value at the end of this life
is ₹ 2,50,000.
a) Calculate impairment loss for the machine.
b) Calculate the depreciation charge on the machine after the
impairment loss has been recognised.
 Borrowing Cost Ind AS – 23
Meaning of Borrowing Cost:
As per ICAI defines as, “Borrowing costs are interest and other
costs incurred by an enterprise in connection with borrowing of funds”.
These costs are directly attributable to the acquisition, construction or
production of a qualifying asset from part of the cost of that asset.
Objective:
The objective of Ind AS 23 is to prescribe the accounting treatment
for borrowing costs. Borrowing costs include interest on bank
overdrafts and borrowings, finance charges on finance lease and
exchange differences on foreign currency borrowings.
Scope:
Qualifying assets measured at fair value.
This standard shall not be applied: ….
a) In the calculation of cost of equity share capital or preference
share capital.
b) On the production of those goods which are manufactured in a
bulk quantity on repetitive basis.
Recognition of Borrowing cost:
Borrowing costs that are directly attributable to the acquisition,
construction or production of a qualifying asset from the cost of that
asset.
a) The borrowing cost which relates to a qualifying asset is called
‘Eligible Borrowing Cost’.
b) The borrowing cost related to qualifying asset, which becomes
eligible to be capitalized.
c) The cost of qualifying asset including the capitalized borrowing
cost should not exceed the recoverable value of the asset.
Measurement:
Where funds are borrowed specifically, costs eligible for
capitalization are the actual costs incurred less any income earned on
the temporary investment of such borrowings.
Disclosure:
a) Amount of borrowing cost capitalized during the period.
b) The Capitalization rate used to determine the amount of
borrowing costs eligible for capitalization.
 Problems under Borrowing Cost:

Problem No: 01
Calculate the borrowing cost in the case of Indraprastha Co., Ltd.,
a) 30 crores arranged by 12% p.a. debentures payable after 10
years, 10 crores by 12 years’ loan from SBI and 10 crores from
Indian Bank. The SBI interest rate is 14% p.a. and Indian Bank
interest rate is 16% p.a.
b) Debentures payable at 10% premium.
c) The cost of issue of debentures is Rs. 22 lakhs.
d) The service charges for SBI loan is 8%.

Problem No: 02
PQR co., constructing power generation plant. This project
requires totally 12 crores, which are raised as follows: …
a) ₹ 4 crores from IFCI for 10 years @ 11% interest rate.
b) ₹ 2 crores of loan from HDFC bank for 6 years @ 10% interest rate.
c) ₹ 2 crores of loan from SBI bank for 4 years @ 12 % interest rate.
d) ₹ 3 crores from 10% debentures for 5 years @ 5% discount.
e) ₹ 1 crore as overdraft from corporation bank @ 4% interest rate.
f) Out of total borrowed funds Rs. 5 crores are kept in HUDCO bank
as short term deposit for 6 months @ 5% rate.
g) IFCI bank loan is borrowed through consultation and the
consultancy charges are 2% of total loan amount.

Problem No: 03
Calculate the borrowing cost in the case of Akash Co., Ltd.,
a) 20 crores arranged by 12% p.a. debentures payable after 10
years, 8 crores by 12 years’ loan from SBI and 10 crores from
Indian Bank. The SBI interest rate is 12% p.a. and Indian Bank
interest rate is 14% p.a.
b) Debentures payable at 10% premium.
c) The cost of issue of debentures is Rs. 20 lakhs.
d) The service charges for SBI loan is 8%.
Problem No: 04
Ashok limited took a loan of Euros 5000 on 1st April 2015 for the
purpose of setting up a new subsidy. The company took a loan at an
interest rate of 5% p.a. payable annually. On 1st April 2015 the
exchange rate was determined at Rs. 60 per Euro. The exchange rate
on 31/03/2016 stood at Rs. 65 per Euro. The amount corresponding
could have also been borrowed at 12% p.a. in the local currency on
01/04/2016. Calculate:
a) Borrowing cost.
b) Increase in the liability towards the principal amount.
c) Exchange rate difference accounted.

Problem No: 05
Indian limited began construction of a new plant on 1st April 2022 and
obtained a special loan of Rs. 4,00,000 to finance the construction of
the plant. The rate of interest on loan was 10% p.a. the expenditure
that were made on the project were:
On 1st April 2022 Rs. 5,00,000
On 1 August 2022
st Rs. 12,00,000
On 1 January 2023
st Rs. 2,00,000
The company’s other outstanding non-specific loan was Rs. 23,00,000
at an interest rate of 12% p.a. The construction of the plant completed
on 31st March, 2023. You are required to calculate amount of interest
to be capitalized i.e. borrowing cost as per Ind AS 23.

Problem No: 06
X Limited obtained a loan of Rs. 60,00,000 on 1st April 2022 from Bank
of Baroda to be capitalized as under:
Construction of factory building Rs. 20,00,000
Purchase of plant and machinery Rs. 15,00,000
Working capital required Rs. 10,00,000
Purchase of vehicle Rs. 15,00,000
On 31 March 2023, construction of company building was completed
st

and plant and machinery was ready for its intended use. Total interest
charges by Bank of Baroda for the financial year ending 31st March
2023 was 7,20,000. How do you treat the total interest charged on
loan?
 Investment Properties Ind AS – 40
Meaning of Investment Properties:
Investment property is the property (land or a building or part of
a building or both) held by the owner or by the lessee under a finance
lease to earn rentals or for capital appreciation or both.
For example: Land held for long term appreciation, building leased
out under an operating lease.
Objective:
Investment properties applies to the accounting for property (land
or buildings) held to earn rentals or for capital appreciation or both.
Scope:
This standard shall be applied in the recognition, measurement and
disclosure of investment property.
The following are not Investment property and therefore, are
outside the Scope of Ind AS – 40.
a) Property held for use in the production or supply of goods or
services or for administrative purposes.
b) Property held for sale in the ordinary course of business.
c) Property being constructed or developed on behalf of third party.
d) Owner occupied property.
e) Property leased to another entity under a finance lease.
Recognition:
Investment property shall be recognised as an asset when,
a) It is probable that the future economic benefits that are associated
with the investment property will flow to the entity.
b) The cost of investment property can be measured reliably.
Measurement at recognition:
Investment properties are initially measured at cost and with
some exceptions may be subsequently measured using a cost model or
fair value model.
Disclosure requirement:
An entity shall disclose: …..
a) Its accounting policy for measurement of investment property.
b) When classification is difficult, the criteria it uses to distinguish
investment property from owner-occupied property.
c) The extent to which the fair value of investment property is based
on a valuation by an independent valuer.
d) Contractual obligations to purchase, construct or develop
investment property.
 CHAPTER – 04
Provisions under Accounting Standards for Items
that do not appear in Financial Statements

Segment Reporting (Ind AS 108)

Meaning of Segment Reporting:
Segment reporting is a reporting system which breaks down the
operations of a company into manageable pieces or segments. Public
companies must then record detailed financial statements for each
operating segment. The goal is to increase transparency for creditors
and investors on the company’s most important operating units.
Objective:
The objective of this standard is to establish principles for
reporting financial information, about the different types of products
and services an enterprise produces and the different geographical
areas in which it operates.
Scope of operating segments:
a) Whose debt or equity instruments are traded in a public market
b) It applies to the consolidated financial statements with a
securities commission or other regulatory organisation.
Exceptions of operating segments:
Following are the important exceptions of operating segments:
a) Any entity’s post-employment benefits plans are not operating
segments.
b) Corporate headquarters or other departments that may not earn
revenues.
Measurement criteria under operating segments:
An entity shall provide an explanation of the measurement of
segment of profit or loss, segment assets and segments liabilities for
each reportable segments.

Concepts explicitly defined under Ind AS 108:

a) Chief Operating Decision Maker (CODM):
CODM identifies a function that function is to allocate
resources to and assess the performance of the operating
segments of the entity. For Ex: CEO, COO.
 b) Aggregation Criteria:
Two or more segments may be aggregated into a single
operating segment if it is consistent with the core principle i.e.
the segments have similar economic characteristics and the
segment are similar in each of the following respects: ….
a) The nature of products and services
b) The nature of production process
c) The type of customer for their products and services
d) The method used to distribute their products.

Reportable Segment:
An entity shall report separately information about each operating
segment that: ….
a) Has been identified as an operating segment
b) Exceeds the quantitative thresholds.

Disclosure requirement:
An entity shall disclosure of the following: ….
a) General information
b) Segment revenue, segment expenses, segment assets and
segment liabilities and basis of its measurements.
c) Reconciliation of totals of segment revenue, reported segment
profit or loss, segment assets and segment liabilities.

Reconciliation of operating segments:

An entity shall provide reconciliations of all of the following: ….
a) The total of the reportable segments revenues to the entity’s
revenue.
b) The total of the reportable segments measures of profit or loss to
the entity’s profit.
c) The total of the reportable segments assets and segment liabilities
to the entity’s assets and liabilities.
d) The total of the reportable segments’ amounts for every other
material item of information disclosed.

Entity wise disclosures:

Entity wise disclosures shall be provided only if the information
required under Ind AS 108:
a) Products or services
b) Geographical areas
c) Major customers
 Related Party Disclosures (Ind AS 24)
Meaning of Related Party:
A related party is a person or entity that is related to the entity that
is preparing the financial statements.
A person or a close member of that person’s family is related to a
reporting entity if that person:
a) Has control or joint control over reporting entity.
b) Has significant influence over the reporting entity or
c) Is a member of the key management personnel of the reporting
entity or of a parent of the reporting entity.
Meaning of Related Party transactions:
Related party transactions refer to transfer of resources, services
or obligations between related parties regardless of whether a price is
charged.
Following are the examples of related party transactions:
a) Purchase or sale of good, property and other assets
b) Rendering or receiving of services
c) Leasing arrangements
d) Transfers of research and development
Close members of the family of a person:
Close members of a family of a person are those who may be
expected to influence or be influenced by that person in their dealings
with the entity and includes:
a) That person’s children and spouse or domestic partner
b) Children of person’s spouse or domestic partner and
c) Dependents of that person or that person or that person’s spouse
or domestic partner.
Compensation:
It includes all employee benefits (as per Ind AS-19), includes
employee benefits to which Ind AS-102, share based payments applies.

Disclosure requirement:
Management Compensation:
Disclose key management personnel compensation in total and
each of the following categories:
a) Short term employee benefits
b) Post-employment benefits
c) Other long term benefits
d) Termination benefits
e) Share based payment benefits
Related party transactions:
It must disclose the nature of the related party relationship as well as
information about the transactions and outstanding balances
necessary for an understanding of the potential effort of the
relationship on the financial statements.
a) Name of the related party.
b) The amount of the transactions.
c) Relationship with such related party.
d) The amount of outstanding balances, including terms and
conditions and guarantees.
e) Provisions for doubtful debts to the amount of outstanding
balances.
f) Expenses recognised during the period in respect of bad or
doubtful debts due from related parties.
There is important note given for this standard that when there is
conflict with duties of reporting authority about confidentiality of
business, disclosure is not to be made but in all other case all
transaction should be disclosed even if there is huge volume of such
related parties’ transactions taken place.

Events Occurring After Balance sheet Date (Ind AS – 10):

Meaning:
Events occurring after reporting period are defined as ‘events
which occur between the end of the reporting date and the date when
the financial statements are approved for issue’.
Scope:
This standard shall be applied in the accounting for and
disclosure of events after the reporting period.
Objective:
The objective of this standard is to ensure that the:
 Circumstances when an entity should adjust its financial
statements for events after the reporting period;
 Disclosures which an entity has to give about the date when the
financial statements were approved for issue and about events
after the reporting period
These events may be classified into 2 types:
Adjusting Events:
Adjusting events – Those that provide evidence of conditions that
existed at the end of the reporting period.
Non-Adjusting Events:
Non-Adjusting events – Those that are indicative of conditions that
arise after the reporting period.

Disclosure:
a) Date of authorization for issue – An entity shall disclose the date
when the financial statements were authorized for issue and who
gave that authorization. If the entity’s owners or others have the
power to amend the financial statements after issue, the entity
shall disclose that fact.

b) Updating disclosure about conditions at the end of the reporting

period: If an entity receives information after the reporting period
about conditions that existed at the end of the reporting period, it
shall update disclosures that relate to those conditions, in the
light of the new information.

Interim Financial Reporting (Ind AS 34):

Meaning of Interim Financial Reporting:
According to Ind AS 34 Interim financial report means a financial
report contains either a complete or condensed set of financial
statements for an interim period. Interim period refers to a financial
reporting period shorter than a full financial year (a quarter or Half
year).
Components of Interim financial report:
Following are the important components of interim financial report:
a) A Condensed statement of financial position (SOFP)
b) A Condensed income statement
c) A Condensed statement of changes in equity
d) A Condensed statement of cash flows.
e) Selected explanatory notes.

Ind AS 34 Prescribes:
a) The minimum content of an interim financial report.
b) The principles for recognition and measurement in complete.
c) Condensed financial statement for an interim period.

Scope of interim financial report.

IAS 34 applies if an entity is required to publish an interim
financial report in accordance with IFRS.
Ind AS 34 does not specify:
a) Which entities should be required to publish interim financial
report?
b) The frequency of publication.
c) How soon after the end of an interim period the report should be
published?

Entities may be required to publish interim financial information:

a) Governments c) Stock Exchange
b) Securities regulations d) Accounting bodies

Disclosure requirements:
Following are the disclosure requirements of interim financial report:
a) The write down of inventories to net realizable value and the
reversal of such a write down.
b) The reversal of any provisions for the costs of restructuring.
c) Acquisitions and disposals of items of PPE.
d) Commitments of purchase of PPE.
e) Litigation settlement.
f) Corrections of prior period errors.
g) Related party disclosures.
h) Any loan default or breach of a loan agreement.
 Indian Accounting Standards – 1
2 Marks Questions for Main Examination
1) Expand IFRS, MCA, IASB, IFRIC, IASC and GAAP?
IFRS: International Financial Reporting Standards
MCA: Ministry of Corporate Affairs
IASB: International Accounting Standards Board
IFRIC: International Financial Reporting Interpretations committee
IASC: International Accounting Standards Committee
GAAP: Generally Accepted Accounting Principles
2) What is meant by GAAP?
Generally Accepted Accounting Principles (GAAP) refers to the
rules or guidelines adopted for recording and reporting of business
transactions, in order to bring uniformity in the preparation and
presentation of financial statements.
3) Give the meaning of Accounting Standards?
Accounting standards are the guidelines for financial accounting,
such as how a firm prepares and presents its business income,
expenses, assets and liabilities, and may be in accordance to
standards set by the IASB.
4) State any two differences between IFRS & GAPP?
IFRS GAAP
1. These are accepted globally. 1. These are accepted in US.
2. It allows Last in first out 2. It allows First in first out
inventory method. inventory method.

5) State any four objectives of Accounting Standards?

Following are the objectives of Accounting Standards: …………….
a) To bring uniformity in accounting methods
b) To improve the reliability of the financial statements
c) To Simplify the accounting information
d) To Prevents the frauds and manipulations

6) State any two advantages of Accounting Standards.

Following are the Advantages of Accounting Standards: ……
a) Attains uniformity in accounting
b) Improves reliability of financial statements
c) Prevents frauds and accounting manipulations
d) Assists auditors
7) State any two disadvantages of Accounting Standards.
Following are the Advantages of Accounting Standards: …………….
a) Rigid and flexible
b) Selecting an alternative is difficult
c) Time consuming is high
d) Limited scope
8) Give the meaning of IFRS?
International Financial Reporting Standards (IFRS) are a set
of accounting standards developed by the International
Accounting Standards Board (IASB) that is becoming the global
standard for the preparation of public company financial
statements.
9) Define IFRS?
According to IASC defines IFRS is a set of accounting
standards developed by an independent, not for profit
organisation called IASB. These are becoming the global standard
for the preparation of public company financial statements.
10) State any four objectives of IFRS?
Following are the important objectives of IFRS: ….
1) To develop in the public interest
2) To set single standards for high quality.
3) Understandable.
4) Enforceable and globally accepted.

11) What is meant by IFRS Convergence?

The convergence of accounting standards refers to the goal
of establishing a single set of accounting standards that will be
used internationally.
12) What is meant by IFRS Adoption?
Adoption is the process of adopting IFRS as issued by IASB,
with or without modifications. Modifications being, generally in
the nature of additional disclosures requirement or elimination of
alternative treatment.
13) State any four advantages of IFRS?
Following are advantages of IFRS: ……
a) It allows greater comparability.
b) It is beneficial to new and small investors
c) It creates more flexibility
d) It creates confidence in the minds of global stakeholders
14) State any two disadvantages of IFRS?
Following are disadvantages of IFRS: ….
a) It requires high costs
b) It is prone to manipulation
c) Lack of proper training and guidance program
d) It is not globally accepted.

15) State any four accounting standards issued by ASB / MCA?

List of Ind AS issued by Ministry of Corporate Affairs
(Ind AS 101): First Time Adoption of Indian Accounting Standards
(Ind AS 102): Share Based Payments
(Ind AS 103): Business Combinations
(Ind AS 104): Insurance Contracts

16) What is meant by Financial Statements?

Financial statements are formal records of the financial
activities and position of a business, person or other entity.
Relevant financial information is presented in a structured
manner and in a form which is easy to understand.

17) State any four users of Financial Statements.

Following are the users of financial statements: ………….
a) Owners
b) Investors
c) Employees
d) Creditors

18) State any four components of Financial Statements.

Following are the important components of Financial statements:
a) A statement of financial position
b) An income statement
c) A balance sheet
d) A statement of changes in equity
e) A cash flow statement

19) State any two objectives of Financial Statements.

Following are the important objectives of Financial statements:
a) Assessment of past performance
b) Assessment of current position
c) Assessment of the operational efficiency
20) What are notes to accounts?
Notes to accounts are the additional information and
explanation that accompany the financial statements. They
provide details and clarity about the items, amounts and
transactions reported in the balance sheet, income statement,
statement of changes in equity and cash flow statement.

21) What is Income Statement?

An income statement or Profit and loss account is one of the
financial statements of a company and shows the company’s
revenues and expenses during a particular period.

22) List any four items of other incomes.

List of other incomes as follows: ……
a) Interest on investment received
b) Rent received
c) Dividend received
d) Commission received

23) What is investment property as per Ind AS - 40?

Investment property is the property (land or a building or
part of a building or both) held by the owner or by the lessee under
a finance lease to earn rentals or for capital appreciation or both.
For example: Land held for long term appreciation, building
leased out under an operating lease.

24) What are Government grants?

The assistance was given by the government in cash or kind
with certain specific conditions. These do not include such grants
from the government which cannot be measured reasonably.

25) What do you mean by the term inventories?

Inventory is the raw material, work in progress, finished products
that are considered to be the portion of a business’s assets that
are ready or will be ready for sale.

26) What is event after the Balance sheet date as Ind. AS-10?
Event after the balance sheet date is an event which could be
favorable or unfavorable, that occurs between the end of the
reporting period and the date that the financial statements are
authorized for issue.
27) Give the meaning of accounting policies?
Accounting policies are specific principles, rules and
procedures implemented by a company’s management team and
are used to prepare its financial statements. These include any
methods, measurement systems and procedures for presenting
disclosures.
28) What do you mean by Property, Plant and Equipment as per
Ind AS 16?
It is a company asset that is vital to business operations but,
cannot be easily liquidated and depending on the nature of
company’s business the total value of PPE and it can be range
from very low to extremely high compared to total assets.
29) What are financial Assets?
Financial assets are the non-physical assets whose value is
derived from a contractual claim such as bank deposit, bonds and
stocks.
30) What is meant by an Asset?
An asset is a resource with economic value that an individual,
corporation or country owns or controls with the expectation that
it will provide future benefit.

31) What is meant by Current Asset? Give two examples.

Current assets are a company’s short term assets. That can
liquidated quickly and used for a company’s immediate needs. For
example: Cash, Stock, Bills receivable, Prepaid expenses etc.,
32) What do you mean by Tangible assets? Give two examples.
Tangible assets are physical assets that a company uses in
its operations and that are listed on its balance sheet. For
example: Buildings, Plant and machinery, Equipment, Vehicles
etc.,
33) What are intangible assets as per Ind AS 38?
An identifiable non-monetary asset without physical substance
controlled by the entity, from which future economic benefits are
expected to flow towards the entity.
34) What is meant by Borrowing Cost as per Ind AS 23?
Borrowing costs are the costs that are directly attributable
to the acquisition, construction or production of a qualifying asset
from part of the cost of that asset.
35) What are Qualifying assets or Non-current assets?
Qualifying assets or Non-current assets are those assets that
a business owns that are not easily converted to cash within a
year. For example: Plant and equipment, intangible assets etc.,
36) What is meant by Segment Reporting:
Segment reporting is a reporting system which breaks down
the operations of a company into manageable pieces or segments.
Public companies must then record detailed financial statements
for each operating segment. The goal is to increase transparency
for creditors and investors on the company’s most important
operating units.

37) What is meant Related party:

A related party is a person or entity that is related to the
entity that is preparing the financial statements.

38) What is related party transactions?

Related party transactions refer to transfer of resources,
services or obligations between related parties regardless of
whether a price is charged.

39) State any two examples of disclosure of related party

transactions?
Following are the examples of related party transactions:
a) Purchase or sale of good, property and other assets
b) Rendering or receiving of services
c) Leasing arrangements
d) Transfers of research and development

40) What is Interim Financial Report?

According to IAS 34 Interim financial report means a financial
report containing either a complete set of financial statements for
an interim period.

41) State any two components of interim financial report?

Components of interim financial report: …………
a) A Condensed statement of financial position.
b) A Condensed income statement
c) A Condensed statement of cash flows
d) A Condensed statement of changes in equity
42) State any four disclosure standards under IFRS?
a) Earnings per share Ind AS 33
b) Statement of cash flow Ind AS 7
c) Operating segment Ind AS 108
d) Interim financial reporting Ind AS 34.

43) What are the criteria for investment properties?

Following are the two points to be considered for criteria of
investment: …
a) The future economic benefits that are associated with the
investment property will flow to the entity.
b) The cost of the investment property can be measured
reliably.

44) What is cost of sales?

Cost of sales is the cost of the inventory items sold during
the period.
Cost of sales = opening stock + purchases – closing stock.
45) List the items included in shareholder’s fund.
List of items included in shareholder’s fund: ….
a) Common stock (Equity share capital)
b) Preferred stock (Preference share capital)
c) Retained earnings
d) Foreign currency translation reserve.

46) Define Equity?

The amount of money that would be returned to a company’s
shareholders if all of the assets were liquidated and all of the
company’s debt was paid off in the case of liquidation.
47) What are current liabilities? Give two examples.
The short term obligations that are expected to be paid within
one year. For example: Sundry creditors, Bills payable etc.,
48) What meant by impairment loss?
The amount by which the carrying amount of an asset or
cash generating unit exceeds its recoverable amount.
49) What is meant by carrying amount?
The amount at which an asset is recognized in the balance
sheet after deducting accumulated depreciation and
accumulated impairment loss.
50) What are Non-adjusting events?
Non-adjusting events refers to an enterprise should not
adjust its financial statements for events after the reporting period
that are indicative of conditions that arise after the reporting date.
51) Who is Chief Operating Decision Maker?
Chief operating decision maker is person who identifies a
function, which function is to allocate resources to and assess the
performance of the operating segments of the entity. For Example:
Chief Executive Officer, Chief Operating Officer.
52) What is meant by Cash generating Unit?
A Cash generating unit is a group of assets that generates
cash inflows that are mostly independent of other assets. For
example: Oil refinery industry, gas industry etc.,
53) What is meant by Government related entity?
Government related entity is an entity that is controlled,
jointly controlled or significantly influenced by a government.
Government means govt., government agencies, and similar
bodies whether local, national or international.
54) What is the meaning of Key Management Personnel?
Key management personnel are those people having
authority and responsibility for planning, directing and
controlling the activities of an entity either directly or indirectly.
For ex: BOD, CEO etc.,
 V Semester B. Com Examination, February/March 2024
(NEP Scheme) (Freshers)
COMMERCE
Paper – 5.4: Indian Accounting Standards – 1
Time: 2 ½ Hours Max. Marks: 60
SECTION - A
1. Answer any five sub-questions. Each sub-question carries 2 Marks
(5x2=10)
a) What are current assets? Give two examples.
b) Give the meaning of Borrowing cost as per Ind AS-23?
c) What is segment reporting?
d) Mention any four examples of intangible assets.
e) Expand GAAP and IFRS.
f) List any two items of other income.
g) What are notes to accounts?

SECTION – B
Answer any Three of the following. Each carries Four Marks (3x4=12)
2. What is Interim Financial Report? Mention the minimum components
of Interim Financial Report.

3. List the objectives of Ind AS.

4. From the following prepare a statement of profit and loss for the year
ended 31-03-2023 as per Schedule III of companies Act, 2013.
Particulars Amount
Revenue from operation 3,00,000
Salaries and allowances 35,000
Stationary 7,500
Interest on long-term loans 12,500
Publicity expenses 20,000
Raw-materials consumed 55,000
Discount allowed 5,000
Depreciation 5,000
Rent received 20,000

5. Jeevitha Ltd., ordered a Printer in e-bay. The price of a printer is ₹

20,000, allowed 10% discount at the time of purchase and charged
18% GST which is not refundable. Shipping charges ₹ 250,
installation charges ₹ 1,500 and annual service charges ₹ 1,500.
Calculate the initial cost of printer as per Ind. AS-16.
 6. P Ltd. has a plant whose original cost is ₹ 2,40,000 and accumulated
depreciation amounted to ₹ 24,000. Another company sold a similar
plant for ₹ 95,000 and the selling expenditure amounted to ₹ 8,750.
The management has determined the value in use of the plant of ₹
1,02,500. Calculate the Impairment loss.

SECTION – C
Answer any Three of the following. Each one carries 10 Marks (3x10=30)
7. List any ten Ind AS.
8. Explain the disclosure requirements of related party disclosure under
Ind AS-24.
9. Kumar Company constructing power generation plant. This project
requires totally 28 crores, which are raised as follows: …
a) ₹ 4 crores from HDFC for 10 years @ 11% interest rate.
b) ₹ 4 crores of loan from IFCI bank for 4 years @ 12% interest rate.
c) ₹ 4 crores of loan from SFC for 6 years @ 10 % interest rate.
d) ₹ 4 crores from SBI bank for 4 years @ 10% interest rate.
e) ₹ 2 crore from canara bank for 3 years @ 11% interest rate.
f) ₹ 4 crores from 10% debentures for 5 years @ 5% discount.
g) ₹ 3 crores as overdraft from corporation bank @ 4% interest rate.
h) ₹ 3 crores as loan from central bank @ 5% interest rate.
i) Out of the borrowed fund ₹10 crores are kept in HUDCO bank as
short-term deposit for 6 months @ 5% interest rate.
j) IFCI bank loan is borrowed through consultation and the
consultancy charges are 2% of total loan amount.
Calculate total borrowing cost in accordance with Ind AS-23.

10. Prepare statement of Profit and loss under companies Act, 2013,
from the following details of Sharada Ltd., Co. for the year ended
31-03-2023.
Particulars ₹
Sales ₹ 8,00,000
Purchase of raw materials ₹ 3,50,000
Commission received ₹ 1,50,000
Carriage outwards ₹ 20,000
Opening stock of raw materials ₹ 90,000
 Closing stock of raw materials ₹ 50,000
Rent received ₹ 20,000
Salaries to employees ₹ 1,00,000
PF contribution to employees ₹ 25,000
Interest on bank loan ₹15,000
Interest on debentures ₹ 15,000
Sundry expenses ₹ 5,000
Depreciation ₹ 20,000
Income tax paid ₹ 37,500
Excise duty ₹ 25,000
Consumable stores ₹ 40,000
Factory expenses ₹ 30,000

11. Following are the ledger balances extracted from the books of
Mukunda Ltd., for the year ending 31st March, 2022.
Particulars Amount (₹)
Share capital 5,00,000
Capital reserve 1,00,000
General reserve 50,000
Profit and loss A/c (Credit Balance) 1,50,000
10% debentures 2,50,000
Bank loan (long term) 1,50,000
Bank loan (short term) 25,000
Investments (non-current) 1,00,000
Trade receivables (current) 25,000
Goodwill 50,000
Computer software 2,50,000
Investment in property 4,00,000
Provisions (current) 25,000
Land and building 3,00,000
Plant and machinery 1,25,000
Prepare a Statement of Financial Position (SOFP) as on 31-03-2022
as per schedule – III of Companies Act, 2013.
 SECTION – D
Answer any One of the following questions. Each carries 8 Marks (1x8=8)
12. a) Under which main heading and sub-heading will the following
items appear in Balance Sheet of a company as per Schedule-III,
Part-I of the Companies Act, 2013?
i Stock
ii Prepaid salary
iii Cash
iv Capital reserve
v Patents
vi Debentures
vii Provision for tax
viii Sundry debtors
OR
b) Briefly explain the procedure for issue of Accounting Standards
by Accounting Standards Board of India.