Questions and Answers of Corporate Accounting

The Balance Sheets of Hot Ltd. and Cold Ltd. as on 31st March, 2016 were as follows:Profits earned for the half-year ended on 30th September, 2015 were :Hot Ltd. ---- ₹ 2,05,000; Cold Ltd. ---- ₹
The following abridged Balance Sheet of S Co Ltd. as on 31.3.2016 is given below:The following scheme of reconstruction has been sanctioned by the court:(1) A new company S S Co Ltd. is formed with
B Ltd. is absorbed by A Ltd. on 31st March, 2016 on the basis of the following Balance Sheets:The following is the scheme of absorption:(i) Prior to absorption A Ltd. was to declare a dividend of
The Balance Sheet of Swan Ltd. as on 31.3.2016 was as follows:The following scheme of reconstruction was adopted:(a) The preference shares be reduced to an equal number of fully paid shares of ₹ 50
Following are the Balance Sheets of A Ltd. and B Ltd. as on 31.3.2016:B Ltd. is to be absorbed by A Ltd. on the following terms :(1) B Ltd. declares a dividend of 10% before absorption for the
Below is given the Balance Sheet of D. Ltd. as at 31.3.2016.Due to heavy losses the company decided upon the following scheme of reconstruction:(i) The preference shares were to be reduced to a value
The following was the Balance Sheet of Tin Toys Ltd. as on 31st March, 2016:The directors find that the machinery is overvalued by ₹ 10,000. It is now proposed to write-down this asset to its true
Following was the Balance Sheet of B Ltd. as on 31.3.2016:The company undertook following scheme of reconstruction:(a) Equity shares were to be reduced to shares of ₹ 50 each fully paid.(b)
Following is the Balance Sheet of Eknath & Co. Ltd. as on 31.3.2016:It is believed that the worst is over and that the time has arrived to effect reconstruction. A revaluation of assets reveals
The Balance Sheet of X Ltd. before reconstruction is as follows:Preference dividend is in arrear for five years. The company is now earning profits but is short of working capital. A reconstruction
The Balance Sheet of P Ltd., as on 31st March, 2016 is as stated below:Dividends on preference shares are in arrear for three years. The company passes a Special Resolution to reduce its capital in
The following is the Balance Sheet of Sick Ltd. as on 31.3.2016:The following scheme of reorganisation is sanctioned :(1) Tangible fixed assets are to be written-down by 331/3%.(2) Current assets are
Given below is the Balance Sheet of Be-Kismat Ltd. as at 31st March, 2016:The company having turned to the corner, a scheme of reconstruction was prepared and approved as under :(1) To bring in the
The Balance Sheet of Tripathi Ltd. dated 31.3.2016 is as follows:The fixed Assets are much over-valued. The Debentureholders are prepared to accept modification of their claims in consideration of a
The following is the summarised Balance Sheet of AB Ltd. as on 31st March, 2016:(a) There is a contingent liability of ₹ 30,000.(b) Preference shares are cumulative and dividends are in arrear for
Abridged Balance Sheet of Z Ltd as on 31.3.2016 is as under:Following scheme of reconstruction has been passed and approved by the Tribunal:(i) The equity shares are to be subdivided into shares of
The Directors of Hardluck Ltd. decided to recommend to the shareholders certain steps to put the affairs of the company back on the rails. On 31st March, 2016 the Balance Sheet of the company was as
The following was the Balance Sheet of R Ltd. as on March 31, 2016:No preference dividend has been paid for eight years and the company is handicapped by the antiquated nature of its plant. In the
Depression Ltd. decided to reorganise its structure following a period of adverse trading conditions. The Balance Sheet of the company as on 31st March, 2016 showed the following:Preference dividends
The Balance Sheet of A Co. Ltd. as on 31.3.2016 is as follows:The Tribunal approved a Scheme of re-organisation to take effect on 1.4.2016 whereby:(i) Preference Shares to be written-down to ₹ 75
The Balance Sheet of Alpha Ltd. as on 31.3.2016 is as follows:The Preference Shares carry the right to a prior return of capital, together with all arrears of dividends. Debentures carry a floating
The Balance Sheet of the Premier Co. Ltd. is as follows:As the company has been making losses for some time and the financial prospects seem to be unfavourable under its present financial setup, you
The Balance Sheet of Moon Ltd. as on 31.3.2016 was as follows:Sun Ltd. was formed to take over the business of Moon Ltd. on the following terms :(i) Preferential creditors to be paid ₹ 10,000 in
Prosperous Ltd. has incurred exceptional losses and a scheme of reconstruction was approved by all the concerned parties. The Balance Sheet as at 31st March, 2016 showed:The scheme of reconstruction
From the following information, find out the amount of discount credited to Profit and Loss Account: Rebate on bills discounted (1.4.2015) ₹ 32,480; Discount received ₹ 1,08,000. An analysis of
Following are the statements of interest on advances in respect of performing and non-performing assets of H K Bank Ltd Find out the income to be recognised for the year ended 31st March, 2016.
Bidisha Bank Ltd had extended the following credit lines to a small-scale industry which had not paid any interest since March, 1995: Balance outstanding on 31.3.2001 DICGC/ECGC
From the following information find out the amount of provisions to be shown in the Profit and Loss Account of a Commercial Bank. Assets Standard Sub-standard Doubtful one year Doubtful three
Prepare a Profit and Loss Account for the year ended 31.3.2016 and a Balance Sheet of Mini Bank Ltd as on that date from following Trial Balance on 31st March, 2016 (all figures in ₹): Dr. Unissued
Progressive Bank Ltd has authorised capital of ₹ 50 lakhs comprising of 50,000 shares of ₹ 100 each, all of which are subscribed. But 70% of the face value of the shares is called up. Bills
Distinguish between fixed income bearing securities and variable income bearing securities.
Where investments are reclassified from current to long-term, transfers are made atA. CostB. The lower of cost and fair valueC. None of these
Mr. X furnishes the following details relating to his holding in 6% Government Bonds :Opening Balance face value ₹ 60,000 -- Cost ₹ 59,000.1.3.2016 ---- 100 units purchased ex-interest at ₹
Explain the different purposes of maintaining investment ledger.
A provision for diminution in the value of a long-term investment should be made when the decline is believed to beA. TemporaryB. PermanentC. None of these
On 1.1.2016 Debentures in X Ltd. were held as investment by Y Ltd. to the tune of ₹ 15,000 at the cost of ₹ 16,000. Interest is payable half yearly on 30th June and 31st December. On 1.5.2016 ₹
(a) What is cum-interest or dividend ?(b) How is it adjusted in the books of account ?
A long-term investment is an investment other thanA. Investment propertiesB. A current investmentC. None of these
Mr. A held on 1st January, 2016 ₹ 1,00,000 of 31/2% Government loan at ₹ 95,000. Three months interest had accrued. On 31st May he purchased a further ₹ 40,000 of the loan @ ₹ 96 (Net)
(a) In what ways is ex-interest or dividend different from cum-interest or dividend?(b) How is ex-interest or dividend treated in the books of account?
Investments other than current investments are classified as long-term investments, even though theyA. May be readily marketableB. May not be readily marketableC. None of these
Nicco-Uco Finance Co. Ltd. had on 1st January 2016, 6% Government of West Bengal Bonds of the face value of ₹ 80,000 valued at ₹ 79,600 on which interest accrued for three months on that date. On
How is dividend from pre-acquisition profit treated in the Investment Account?
Any reduction in the carrying amount and any reversals of such reductions should beA. Charged to the profit and loss accountB. Credited to the profit and loss accountC. None of these
Nicco-Uco Finance Co. Ltd. had on 1st January 2016, 6% Government of West Bengal Bonds of the face value of ₹ 80,000 valued at ₹ 79,600 on which interest accrued for three months on that date. On
How is bonus shares treated in the Investment Account?
On 1st April, 2016, XY & Co. Ltd. held 9% Debentures in B Ltd. of the face value of ₹ 10,000 at a cost of ₹ 8,000. Market value on that date was ₹ 9,000. Interest is payable on 31st
Bonanza Limited held on 1st April, 2016 ₹ 2,00,000 of 9% Government Loan (2018) at ₹ 1,90,000 (face value of Loan ₹ 100 each). Three month’s interest had accrued on the above date. On 31st
Mr. Shape dealt on the stock exchange and had purchased and sold leading scripts but did not maintain his accounts in a proper manner. He furnished the following data:Everlite Ltd. issued bonus
On 1.1.2016, X Ltd. had 10,000 equity shares of ₹ 10 each in Alpha Ltd. purchased for ₹ 1,25,000. The company unlike investment companies does not make any apportionments of dividends (received
The date of transaction isA. The date on which it is recorded in the books of accountB. The date when the transaction is contracted or recognisedC. The date of receiving (or paying) cash
Exchange differences arising on the settlement of monetary items should be recognisedA. In the Balance Sheet as capital reserveB. In the Profit and Loss Account as income or expensesC. Neither of the
Net investment in a non-integral foreign operation isA. The amount invested by the reporting enterprise at costB. The reporting enterprises’ share in the net assets of that operationC. Neither of
If the US$ falls in value against the Indian ₹ (INR), and you have net $ liabilityA. An exchange loss will resultB. An exchange gain will resultC. Neither gain or loss will result
AS ---- 12 deals withA. Government participation in the ownership of the enterpriseB. Special problems arising in accounting for government grant in hyper inflationary economiesC. Disclosure of
Government grant includesA. Free technical assistanceB. Indirect help, such as improving local roadC. Duty drawbacks
Government grants may be related to1. Specific Fixed Assets2. Revenues3. ExpensesWhich of the following alternative is correct ?A. 1 and 3B. 1, 2 and 3C. 1 only
On the notification that an enterprise will receive a government grantA. Enterprise will do nothing until the cash is receivedB. Enterprise will record it on an accrual basisC. Enterprise will open
Where the government grants are of the nature of promoters’ contribution and no repayment is ordinarily expected thereof, the grant is treated asA. Capital reserve which can be distributed as
When the government grant is in the form of land at no cost, then it shouldA. Not be recorded at allB. Be recorded at a fair valueC. Be recorded at a nominal value
When a government grant is awarded for the purpose of giving immediate financial support to an enterpriseA. It should be transferred to capital reserveB. It should be credited to Profit and Loss
The amount refundable in respect of a grant related to revenue should be appliedA. First against capital profitB. First against current profitC. First against unamortised deferred credit
The amount refundable in respect of a grant related to a specific fixed asset should be recordedA. By reducing general reserveB. By increasing the book value of the assetC. By reducing the book value
Government grant in the nature of promoters’ contribution that become refundableA. Should be reduced from the general reserveB. Nshould be reduced from the capital reserveC. Should be charged to
AS----13: Accounting for Investments deals withA. Operating leases onlyB. Financial lease onlyC. Neither operating lease nor finance lease
A long-term investment is an investment other thanA. Investment propertiesB. A current investmentC. None of the above
Pre-acquisition interest on investment isA. Credited to profit and loss accountB. Credited to capital reserveC. Deducted from the total cost of acquisition
A provision for diminition in the value of a long-term investment should be made when the decline isbelieved to beA. TemporaryB. PermanentC. Neither of the above
When rights shares offered are subscribed for, the cost of rights shares areA. Accounted for separatelyB. Added to the carrying amount of the original holdingC. Deducted from the carrying amount of
An enterprise holding investment properties should account for them asA. Current investmentsB. Separate assetC. Long-term investments
Investment properties (e.g., buildings) are carried in the financial statementsA. At costB. At fair market valueC. At cost less accumulated depreciation and accumulated impairment loss
Any reduction in carrying amount and any reversals of such reductions should be adjusted inA. The revaluation reserveB. The general reserveC. The profit and loss account
Profits on disposal of investment isA. Credited to revaluation reserveB. Credited to profit and loss accountC. Credited to investment fluctuation fund
When investments are re-classified from current to long-term, the transfers are made atA. CostB. The lower of cost and fair value on the date of transferC. Fair value on the date of transfer
Which of the following statement is true?A. Borrowing costs may include interest on bank borrowings and other short-term and long-term borrowings.B. Borrowing costs may include interest and
A qualifying asset is an asset that necessarily takes :A. A short period of time to get ready for its intended use or saleB. A substantial period of time to get ready for its intended use or saleC. A
Borrowing costs are capitalised as part of the cost of a qualifying asset when it is probable that :A. They will result in future economic benefits to the enterprise and the cost may not be measured
Temporary investment income generated from loans taken in order to finance qualifying asset should be:A. Added to the borrowing costsB. Deducted from the borrowing costsC. Shown as income in the
Borrowing costs areA. Always capitalisedB. Never capitalisedC. Sometimes capitalised
Borrowing costs should be recognised as an expense and charged to the profit and loss account of the period in which they are incurred :A. If the borrowing costs relate to qualifying assetB. If the
Mohan Meakin Ltd. is manufacturing high quality wine which will take 6 years to mature. The inventory of wine:A. Is not a qualifying assetB. Is a qualifying assetC. Is a fixed asset
Capitalisation of borrowing costs should commence when1. Expenditure for acquisition, construction or production of a qualifying asset is being incurred;2. Borrowing costs are being incurred;3.
Capitalisation of borrowing costs should be suspended during extended periods:A. If the active development is interrupted temporarilyB. If the active development is interrupted permanentlyC. Neither
Capitalisation of borrowing costs should cease :A. When substantially all the activities necessary to prepare the qualifying asset for its intended use or sale are completeB. When all the activities
Minimum lease payments are:(i) Payments over the lease term, the lessee is to make(ii) Contingent rent(iii) Any residual value guaranteed by the lessee.Which of the following is correct ?A. (i), (ii)
Gross investment in the lease is the aggregate of theA. Minimum lease payments under finance lease from the stand point of the lessorB. Minimum lease payments under finance lease from the stand point
Leased assets appear in the Balance Sheet of the lessee in the case ofA. All leasesB. Operating leasesC. Finance leases
Lease liabilities areA. Long-term liabilityB. Current liabilityC. Split between A and B
At the beginning of the leaseA. Major portion of the payment is principal, with a small element of interestB. Major portion of the payment is interest, with a small element of principalC. The
Contingent rent must beA. Added to the lease liabilityB. Charged as expenseC. Treated as deferred revenue expenditure
Lessors shall record assets, given under a finance leaseA. As a leased assetB. As held-for-sale assetsC. As a receivable
Initial direct costs of the lessee, such as in negotiating and securing leasing arguments areA. Charged immediately by the lesseeB. Added to the amount recorded as an assetC. Added with contingent
A finance lease gives rise to a depreciation expense for the depreciable assets. The depreciation policy for leased asset shouldA. Match the period of the leaseB. Be consistent with that for
An asset given under operating lease should be presented in the Balance Sheet of theA. Lessee as a fixed assetB. Lessor as a fixed assetC. Lessor as a current asset
In preparing the financial statements of R Ltd for the year ended 31.3.2017, you come across the following information. State with reasons, how would you deal with them in the financial statements:An
On April 1, 2016 Singh had 20,000 equity shares in X Ltd. The face value of the shares were ₹ 10 each but their book value was ~ 16 per share.On June 1, 2016, Singh purchased 5,000 more equity
Raghav Rathore carried out the following transactions in connection with his investments during the year ended 31 March, 2016:You are required to record the above transactions in the Ledger of
A cash flow statement provides information that enables users to evaluateA. The profitability of the companyB. The solvency of the companyC. The liquidity, flexibility and ability of the company to
Disclosure of fundamental accounting assumptions are:A. Necessary if they are followed at the time of preparation of financial statementsB. Necessary if they are not followed at the time of
Revenue from sales, expenses paid for purchases, employee salary and overheads compriseA. Operating activitiesB. Financing activitiesC. Investing activities

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