LOYOLA COLLEGE (AUTONOMOUS), CHENNAI – 600 034

B.Com. DEGREE EXAMINATION – COMMERCE

THIRD SEMESTER – APRIL 2023
16/17/18UCO3MC01 – COMPANY ACCOUNTS

Date: 02-05-2023 Dept. No. Max. : 100 Marks

Time: 01:00 PM - 04:00 PM

SECTION – A

Answer all the questions 10x2=20 marks

1. What is underwriting?
2. Explain “pro-rata” allotment of shares.
3. What are calls-in-arrears?
4. Why Vendor’s suspense account is prepared?
5. What is the meaning of the term convertible debentures?
6. Explain the meaning of “profit prior to Incorporation”.
7. Write any four expenses which will come under the head “other expenses” in financial statements of
a company.
8. What is super profit?
9. Arvind Ltd., was incorporated on 1st May 2006 to purchase the running business of Vikram and Co.
with effect from 1st January 2006. The company obtained certificate of commencement of business
on 24th August 2006. Calculate the time ratio, if the accounts were finalized on 31st December 2006.
10. A Ltd. issued ₹ 5,00,000, 10% debentures of ₹ 100 each at par which are repayable after 10 years at a
premium of 10%. Pass journal entry for the issue.

SECTION – B
Answer any four questions 4x10=40 marks
11. Explain the provisions of the companies act regarding the issue of shares at premium.
12. What is goodwill? Explain the methods for evaluating Goodwill.
13. What is the procedure to be followed for reducing share capital?
14. Samuel Ltd. invited applications from public for ₹ 1,00,000 equity shares of ₹ 10 each. The entire
issue was underwritten by the underwriters A, B and C to the extent of 40%, 40% and 20%
respectively.
The company received application for 80,000 shares from public out of which applications for
20,000, 10,000 and 20,000 shares were marked in favour of A,B and C respectively. The remaining
applications did not bear any stamp. Calculate the net liability of each one of the underwriters.

15. The balance sheet of Rahuman & Co. Ltd. on 31.3.2018 stood as follows:
Liabilities ₹ Assets ₹
Equity shares of ₹ 100 each 5,00,000 Fixed Assets 8,00,000
9% Redeemable preference 3,00,000 Investments 1,00,000
shares of ₹ 100 each
Securities Premium 50,000 Bank balance 2,00,000
Capital Reserve 1,00,000 Other current assets 5,00,000
P & L A/c 2,00,000
10% Debentures 3,00,000
Creditors 1,50,000
16,00,000 16,00,000
The redeemable preference shares were due for redemption at 5% on 1.4.2018. The
company arranged for the following:
(i) It issued 2,000 equity shares of ₹ 100 at a premium of 10%.

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 (ii) It sold the investments for ₹ 90,000.
(iii) It planned to arrange a bank overdraft to the extent if necessary.
The redemption was carried out. Give journal entries for redemption of preference
shares.

16. The following is the balance sheet of weak co .ltd as on 31st March 1995
Liabilities ₹ Assets ₹
1,00,000 equity 10,00,000 Land 1,00,000
Shrares of ₹ 10 each
Sundry creditors 1,73,000 Plant & machinery 2,30,000
Furniture & Fittings 68,000
Stock 1,50,000
Debtors 70,000
Cash at Bank 5,000
Profit and loss a/c 5,50,000
11,73,000 11,73,000
The approval of the court was obtained for the following scheme of reduction of capital:
a) The equity shares to be reduced to ₹ 4 per share
b) Plant and machinery to be written down to ₹ 1,50,000
c) Stock to be revalued at ₹ 1,40,000
d) The provision on debtors for doubtful debts to be created ₹ 2,000
e) Land to be revalued at ₹ 1,42,000. Pass Journal entries.

17. Don Ltd., was formed to take over the assets and liabilities of Shri laxman and to acquire the
adjacent premises. The balance sheet of Shri laxman on 31st December, 1998 was as follows:
Liabilities Amount (₹) Assets Amount (₹)
Trade creditors 8,000 Cash in hand 2,000
Capital 1,60,000 Cash at bank 12,000
Book debts 18,000
Stock 78,000
Furniture 10,000
Land and building 48,000
1,68,000 1,68,000
The purchase consideration was agreed at ₹ 2, 00,000 and was to be paid as under:
i. 5, 600 equity shares of ₹ 20 each, fully paid
ii. ₹ 68,000 in 6% preference shares of ₹ 100 each issued at par.
iii. ₹ 20,000 in cash
All the assets and liabilities were valued as per above balance sheet except the book debts which
were subject to a bad debts provision of 5%. The company raised further capital by issue of 15,000
equity shares of ₹ 20 each. The adjoining premises were purchased for ₹ 1,00,000 and additional
stock of ₹ 1,40,000 was obtained from the open market. Record the above transactions in the books
of Don Ltd., through journal entries.

SECTION – C
Answer any two questions 2x20=40 marks
18. X Ltd. issued for public subscription 2,00,000 shares of ₹ 10 each at a premium of ₹ 5 per share
payable as under:
₹ 2.50 per share on application;
₹ 7.50 per share on allotment (including premium);
₹ 4 per share on first call;
₹ 1 per share on final call.
Applications for 3,00,000 shares were received. Allotment was made pro-rata to the applicants for
2,40,000 shares, the remaining applications being rejected. Money overpaid was used towards
allotment.

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 Y to whom 4,000 shares were allotted failed to pay the allotment money and on his failure to pay the
first call his shares was forfeited and Z to whom 6,000 shares were allotted failed to pay the last two
calls. These shares were subsequently forfeited after the final call was made. All these forfeited
shares were reissued to W as fully paid at ₹ 8 per share. Give journal entries to record the above
transactions.
19. Razaak Ltd. was registered with an authorised capital of ₹ 6,00,000 in equity shares of ₹ 10 each.
The following is its Trial Balance on 31st March 1998.
Particulars Debit(₹ ) Credit (₹ )
Goodwill 25,000
Cash 750
Bank 39,900
Purchases 1,85,000
Preliminary expenses 5,000
Share capital 4,00,000
12% Debentures 3,00,000
P & L A/c (cr) 26,250
Calls-in- arrears 7,500
Premises 3,00,000
Plant & Machinery 3,30,000
Interim Dividend 39,250
Sales 4,15,000
Stock (1.4.97) 75,000
Furniture & Fixtures 7,200
Sundry Debtors 87,000
Wages 84,865
General expenses 6,835
Freight and carriage 13,115
Salaries 14,500
Directors’ fees 5,725
Bad debts 2,110
Debenture interest paid 18,000
Bills payable 37,000
Sundry Creditors 40,000
General Reserve 25,000
Provision for bad debts 3,500
12,46,750 12,46,750
Prepare Statement of Profit & Loss and Balance Sheet in proper form after making the following
adjustments:
(1) Depreciate Plant & Machinery by 15%
(2) Write off preliminary expenses
(3) Provide for 6 months interest on debentures
(4) Provide bad and doubtful debts provision at 5% on sundry debtors
(5) Provide for income tax at 50%
(6) Stock on 31.3.1998 was ₹ 95,000
(7) Provide for corporate dividend tax @ 17%.

20. The balance sheet of Saraswathi Ltd disclosed the following position as on 31.12.2008
Liabilities ₹ Assets ₹
6,000 equity shares of ₹ 100 each 6,00,000 Good will 1,65,000
Profit and loss a/c 75,000 Investments 5,25,000
General reserve 2,25,000 Stock 6,60,000
6% Debentures 4,50,000 Sundry debtors 3,90,000
Sundry creditors 1,50,000 Cash at bank 60,000
Workmen’s savings bank a/c 3,00,000
18,00,000 18,00,000
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 (i) The profits for past five years are : 2004 = ₹ 30,000; 2005 = ₹ 70,000; 2006 =
₹ 50,000; 2007 = ₹ 55,000 and 2008 = ₹ 95,000.
(ii) The market value of investments was ₹ 3,30,000
(iii) Good will is to be valued at three years purchase of the average annual profits for the last five
years.
Find the intrinsic value of each share.

21. The promoters of proposed Ramu Ltd purchased a running business on 1st April 2004 from Mr.
Armstrong. The company was incorporated on 1st August 2004. The combined profit and loss
account of the company prior to and after the date of incorporation is as under:

Profit and loss A/c for the year ended 31st March 2005
Particulars ₹ Particulars ₹
To rent, rates, insurance, electricity & 15,000 By gross profit 1,75,000
salaries
To Directors’ fees 4,000 By Discount received from 8,000
creditors
To preliminary expenses 5,000
To carriage outwards & selling expenses 6,000
To interest paid to vendors 20,000
To Net profit 1,33,000
1,83,000 1,83,000
i. Sales upto 31st July 2004 were ₹ 5,000 out of the total sales of ₹ 25,00,000 for the year
ii. Purchases upto 31st July 2004 were ₹ 3,00,000 out of total purchases of ₹ 12,00,000 for the
year.
iii. Interest paid to vendors on 1st February 2005 @12% p.a. on ₹ 2,00,000 being purchase
consideration.
From the above information, you are required to prepare a statement showing the profits earned prior
to and after incorporation.

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