Calumet 11. Loss of stock policy It is a policy for damage or destruction of merchandise that a business has on its hand. It covers the stock of raw materials. work in progress and finished goods of an enterprise. Its subject matter is an existing tangible asset. 12. Loss of profit policy. ‘A loss of profit policy goes along with loss of stock policy. This policy covers the diminished profits and continuing fixed expenditures if the company stops or slows down its operations due to damages caused by fire or additional coverages. In other words, it covers loss of profit which would have earned during the discontinuance or interruption period. Its subject matter is a non-existing intangible thing. Section B: Answer any 6 questions. Each question carries 5 marks. 13. Share premium reserve - uses. When a company issue shares at a price higher than its face value, it is said to have been issued at a premium. The premium on issue of share is a capital profit and must be credited to the ‘Securities Page |3Statement of P & L Dr 125000 To CRR 125000 Preference Share Holders A/c Dr 275000 To Bank 275000 16. Solution. Statement showing the net liability of Underwriters (in units) Particulars (6) | (3) | Zi) | Total Gross liability of the underwriters 30000} 15000] 5000} 50000 (Less) Credit for unmarked application (in the gross lability ratio) 9000} 4500} 1500} 15000 21000) 10500} 3500} 35000 ‘Less: Marked applications (Including firm underwriting shares) 16000} 10000} 4000} 30000 Balance 5000 500 5000 (Less) Surplus of underwriter Z (in the gro liability ratio) -3a3 | -167 0 Balance 4667 333 0] so00 (Add) Firm underwriting applications s000{ 2000} 1000] 8000 Net liability of underwriters 9667} 2333] 1000] 13000 17. Notes to Accounts. Note 1 - Employee Benefit Expenses Rs in ‘000 Particulars Salaries 250 Wages + Outstanding wages 200 Contribution to PF 200 Contribution to Gratuity 72 Staff Welfare Expenses 150 Expenses on ESPP 28 Total 900 Note 2 - Finance Costs Particulars Rs in 000 Interest expenses gs. Brokerage 5 Interest on debentures 6 3620. S.NO_| CONDITIONS MAXIMUM REMUNERATION IN A YEAR 1 Overall limit on managerial remuneration 11% of the net profits of company 2 Company with one managing directorhvhole 5% of the net profits of company | time directorimanager |3 | Company with more than one managing —_—_—-10% of the net profits of company | | directornwnole time director/manager 4 | Remuneration payable to directors who are 1% of the net profits of company if there { neither managing director nor whole time —_is a managing director or whole time | director director i | 15 Remuneration payable to directors who are 9% of the net profits of company if here | neltner managing director nor whole time 1S no managing director er whole time director director However, @ public compan managerial remuneration in excess of 11% by passing a special resolution approved by the shareholders and subject to the compliance of Schedule V conditions. In case company has defaulted in payment of dues to any Bank or Public Financial Institution or Non- convertible debenture holders or any other secured creditor prior approval of the same shall be obtained by the company before obtaining the approval in the general meeting. The percentages given above shall be exclusive of any fees payable under section 197(5). (2) Remuneration by a Company having no profits / inadequate profits If in any financial year, a company has no profits or inadequate profits, no amount shall be payable by way of remuneration, to its Directors, Managing director, Whole time director, Manager, non - Executive director, independent director except in accordance with provisions of schedule V. However, there ‘is no restriction on amount payable to directors under 197 (5). Journal Entries in the Books of Sachin 1.12.17 | 6% Debentures A/c Dr 21840 Interest A/c Dr 500 To Raja Lid A/e 22340 ii 31.12.17 | Bank A/c Dr 600 To Interest A/c 600 Page |7Qi, Notes: Ex-interest price = Add: Brokerage ‘Total purchase price 200 x Rs.104 = Interest accrued = 20000 x 6% x 5/ Interest received = 20000 x 6% x 6/ Under-Insurance. If an asset is insured for less thi claims are paid. Rs.20800 Rs. 1040 Rs.21840 12= Rs.500 12= Rs.600 an its actual value, in insurance parlance it is said to be under insured. i.e., If the insured value or policy value is less than the insurable value or average value of stock in the Godown, it is called under insurance. Typically, it means that the insured is considered to be the self-insurer to the extent of under insurance and therefore, becomes liable to bear a proportion of the loss. Under Insurance is to purchase an insurance policy for the value less than the actual or market value. For example, if a property of the actual and market value for Rs. 100000/- is insured for Rs. 50000/- only it is a case of under insurance. The Average Clause is there to encourage insurance customers to declare honest values when insuring their valuables. It is also there to ensure a fair premium is always contributed into the pool of premiums from which everyone's Section C: Answer any 2 questions. Bach question carrles 15 marks, 22. Solution Journal Entries in the books of Jaya Ltd Bank A/e Dr 60000 To Equity Share Application 60000 Equity Share application A/c Dr 60000 To Equity share Capital a/c 40000 To Bank A/c 12000 To Equity share allotment a/c ‘8000 Equity share allotment a/c Dr 100000 ‘To Equity share capital a/c 60000 To Securities premium reserve 40000 Bank A/c Dr 89700 ‘To Equity Share allotment 89700 Equity share first call a/c Dr 60000 To Equity share capital a/c 60000 Page | 8Particulars EQUITY AND LIABILITIES Shareholders funds a. Share Capital b. Reserves and Surplus c. Money received against share warrants Share Application money pending allotment 3 | Non-Current Liabilities a, Long term borrowings b, Deferred tax liabilities (Net) c. Otner Long term liabilities d. Long-term provisions 4 | Current Liabilities a. Short-term borrowings b. Trade payables c. Other current liabilities d. Short-term provisions TOTAL 0 ASSETS 1 | Non-Current Assets a. Fixed Assets i. Tangible Intangible iii, Capital work-in-progress iv. Intangible assets under development b. Non-Current investments ¢. Deferred tax assets (Net) d. Long-term Loans and Advances . Other Non-current assets i 240300 2 | Current Assets a. Current investments b, Inventories c. Trade receivables d. Cash and cash equivalents e. Short term loans and advances f, Other current assets 240300 TOTAL 240300 Note 1; Share Capital Rauity share Capital Total 198000 198000 Note 2: Reserve & SurplusCapital Reserve Securities Premium ae Forfeited shares 1000 coe 42300 Note 3: Cash & Cash Equivalents Cash at bank 240300 Total 240300 23. Solution Essar Ltd ‘Statement of Profit and Loss {Part Il of Schedule II, Section 129) for the year ended 31/03/20XX [Pardculars Note | Amount (Rs) No. 1 | Revenue from operations 440000 nr Other Income é i Total Revenue (I+II) 440000 1V_ | Expenses: of materials consumed oO chases of stock in trade 136000 hanges in inventories 1 (53000) Employee benefit expenses Ea 22000 Finance Costs 3 34000 Depreciation and amortization expenses 30000 Other expenses 4 41000 Total expenses 210000 v Profit before exceptional and extraordinary items and tax 230000 au-iy) VI | Exceptional Items 0 VIL | Profit before extraordinary items and tax (V-V1) 230000 Vill | Extraordinary items e IX | Profit before tax (VII-VIIN) : 230000 x | Tax Page | 12Current tax ey Deferred tax X1_| Profit (Loss) for the period from continuing operations 180000 (x) xit_| Profit (Loss) for the period from discontinuing operations | 0 XIII | Tax expenses of discontinuing operations o XIV | After tax Profit (Loss) for the period from discontinuing ° operations (XI-XII) XV_ | Profit (Loss) for the period (XI + XIV) 180000 Note 1: Change in inventories Particulars Rs Opening stock 30000 ) Closing stock -83000 Change in inventories Note 2: Employee benefit expenses Particulars Rs ‘a. Salaries and wages 22000 b. Contribution to PF and other funds c. Expenses on ESOP and ESPS , Staff welfare expenses Employee benefit expenses 22000 Note 3: Finance Costs Particulars Rs a. Interest expenses 10000 , Other borrowing costs c. Loss/Discount on issue of debentures written off d. Applicable net (gain) loss on foreign currency transaction e. Debenture interest 24000 Finance Costs 34000 Note 4: Other expenses Particulars Rs Office Expense 28000 Audit Fees 13000 41000 Other expensesBalance Sheet of Essar Ltd (Schedule Ill, Section 129) as on_31/03/20XX Particulars Note No. Amount (RS) EQUITY AND LIABILITIES 1 | Shareholders’ funds: a, Share Capital b. Reserves and Surplus c, Money received against share warrants 800000 393714 2.| Share Application money pending allotment 3 | Non-Current Liabilities a. Long term borrowings b. Deferred tax liabilities (Net) c. Other Long-term liabilities 4. Long-term provisions 400000 4 | Current Liabilities a. Short-term borrowings b. Trade payables c. Other current liabilities ¢. Short-term provisions 50000 146286 TOTAL 1790000 0 ASSETS 1 | Non-Current Assets a. Fixed Assets Tangible Intangible iii, Capital work-in-progress jv. Intangible assets under development b. Non-Current investments c. Deferred tax assets (Net) d. Long-term Loans and Advances ©. Other Non-current assets 900000 500000 2| Current Assets a. Current investments b, Inventories c. Trade receivables d. Cash and cash equivalents ¢, Short term loans and advances f. Other current assets ye 83000 243000 64000 TOTAL 1790000 Note 1: Reserve & Surplus General Reserve Surplus Aje (After transfer to resesve, dividend, CDT) 240000 153714 Page | 13‘By Bank (Sale) By Bank (WN 5) By Bank (Sale) By Balance cid (wN7) Profit on 15.05.20217 = 7600-(30000 x 4000/2000) ~ Rs. 1600 a 2, Number of bonus shares = 16000/4 = 4000 shares 3. Number of right share eligible = 1600/5 = 3200 shares 4, Sales proceeds of 10000 shares Rs,14000 {-) cost of shares sold (27000 x 10000/22000) = Rs.42250 Profit on sale Rs.1727 5, Closing value of 12000 shares held on 31.03.2018. (27000 x 12000/22000) Rs:14727 25. Solution. White Ltd Computation of claim for loss of profit 1. Determination of the indemnity period 01-03 to 31-08 6 months 2. Calculation of Gross profit ratio Net Profit + Insured Standing Charges) / Sales *100 30% (360000+240000)/2000000"100 3, Coinputation of short sales (Difference between standard sales and actual sales of indemnity period) Sales during previous corresponding period 960000 (+) Increase expected (10%) 96000 -320000 () Actual Sales during indemnity period Short Sales 736000 4, Calculation of Gross profit on short sales Page | 15