ದ್ವಿತೀಯ ಪಿ.ಯು.ಸಿ ಲೆಕ್ಕಶಾಸ್ತ್ರ ಅಧ್ಯಾಯ – 8 ನೋಟ್ಸ್ 2nd Puc Accountancy Chapter 8 Financial Statements Of A Company Notes Question Answer pdf Karnataka Kannada 2nd Puc Accountancy Chapter 8 Notes Pdf 2023 Financial Statements Of A Company Class 12 Notes Financial Statements Of A Company Class 12 Important Questions Financial Statements Of A Company Problems And Solutions Kseeb Solution For Class 12 Chapter 8 Notes 2nd Puc Accountancy Chapter 8 Financial Statements Of A Company Part – 2 Notes
2nd Puc Accountancy Chapter 8 Notes
2nd Puc Accountancy Chapter 8 Notes
Short Questions With Answers
Q1. What are the limitations of financial statements?
A: Limitation is:
- Financial statements reflect historical data i.e reflects the original price of the items or the price at which items were acquired. It fails to highlight the current price of items as per market and also inflated prices due to rising inflation in the market. Hence data and information are historical in nature.
- Financial statements do not portray the qualitative aspects of any transaction, the aspects such as size, color, quality, and capabilities. Only quantitative data which can be expressed in monetary value are considered
- The financial statement is biased in nature as it is dependent on human interference.
- It becomes difficult to assess the performance of another company
- It will be difficult to forecast as the statement is prepared based on historical data.
Q2. List any three objectives of financial statements.
A: The objectives of preparing financial statements are:
- A financial statement provides timely and reliable information on the economic status of a company on a periodical basis. It also makes information available to external users or stakeholders who do not have direct access to the information.
- A financial statement helps in revealing the true financial position of a company. It contains information related to the liquidity, profitability, financial viability, and solvency of an organization.
- A financial statement is helpful in evaluating the earning capacity of a firm.
Q3. State the meaning of financial statements.
A: Financial statements are the end products of an accounting process, it provides a true picture of the performance of the company over a time period and such a statement is used by different users of accounting information. These statements are prepared annually
Q4. How will you disclose the following items in the Balance Sheet of a company:
(i) Loose Tools
(ii) Uncalled liability on partly paid-up shares
(iii) Debentures Redemption Reserve
(iv) Mastheads and publishing titles
(v) 10% debentures
(vi) Proposed dividends
(vii) Share forfeited account
(viii) Capital Redemption Reserve
(ix) Mining Rights
(x) Work-in-progress
A: Disclosure of various items in the Balance Sheet of a company is given below.
Q5. State the importance of financial statements to
(i) shareholders
(ii) creditors
(iii) government
(iv) investors
The following are important financial statements:
1. Shareholders: For a shareholder, a financial statement is helpful in determining the viability and profit-making capacity of a business. It provides businesses with sufficient data to analyze the financial health and performance of the business.
2. Creditors: A financial statement is essential for a creditor to understand the creditworthiness of the business along with liquidity. It helps them to decide whether further investments can be done in this business.
3. Government: A financial statement helps the government in determining GDP, national income, industrial growth, etc. which leads to the formulation of various policies and addressing problems like poverty and unemployment, etc.
4. Investors: For Investors who have invested or those planning to invest, a financial statement is necessary. The financial statement helps determine the prospects and viability of new investments.
Q6. What is Amortisation?
A: Amortisation refers to the writing of sunk cost, deferred revenue expenses and intangible assets which need not be replaced.
Q7. What are Intangible assets? Give Examples.
A: Assets that do not have physical form are known as intangible assets. It includes patents Goodwill, trademarks, etc.
Karnataka 2nd PUC Accountancy Chapter 8 Financial Statements of a Company Notes
Long Questions And Practical Problems with Solutions
Q1. Explain in detail the significance of the financial statements.
A: Importance of financial statements:
1. It provides information to various users of accounting information which can be both internal and external. Users derive information as per their needs from such statements. For example, it provides shareholders an idea about the viability of a business while the same statement can be used by tax authorities to determine the tax payable by an organization.
2. It helps management in comparing performance which can be on both inter and intra-firm basis, it helps in determining the viability of the business and also is helpful in the framing of policies for business. It enhances the decision-making capabilities of the management.
3. Financial statements help creditors and investors determine the state of solvency of a business which influences the decision to offer loans and credit.
4. Financial statements help provide information on different policies, methods, best practices, and accounting processes. Disclosing accounting policies simplifies financial statements and makes users of accounting information.
5. The government uses accounting information to determine various parameters of national growth like GDP, National Income, Industrial growth, etc.
6. Investors need information on business solvency and profitability to offer further loans and invest in the business and such information is obtained from financial statements.
Q2. Explain the limitations of financial statements.
A: Limitations are:
1. Financial statements reflect historical data i.e. it reflects the original price of the items or the price at which items were acquired. It fails to highlight the current price of items as per market and also inflated prices due to rising inflation in the market. Hence data and information are historical in nature.
2. Financial statements do not portray the qualitative aspects of any transaction, the aspects such as size, color, quality, and capabilities. Only quantitative data which can be expressed in monetary value are considered.
3. Financial statement is biased in nature as it is dependent on personal judgment regarding the way transactions are recorded
4. It becomes difficult to assess the financial performance of one company with another due to differences in practices and methods adopted by each company.
5. It will be difficult to forecast as the statement is prepared based on historical data as it fails to capture inflation rates.
6. The company can manipulate the data to show a better liquidity position which can give a false impression to the investors leading to project cancellation
Q3. Explain the nature of the financial statements.
A: The nature of financial statements are:
1. Financial statement record facts about the items at the original price at which they were purchased and doesn’t take into account the prevailing market price, and also do not include price fluctuations due to inflation.
2.The financial statements are created based on various accounting conventions such as the Prudence convention, matching concept etc., and adhering to such conventions results in the statements being easy to understand, compare and reflect the fair and true financial situation of the organization.
3. A financial statement is based on many concepts such as the going concern concept, realization concept, and money measurement concept. A financial statement adheres to all these concepts when financial statements are prepared.
4. In preparing financial statements personal judgments play an important role. For example when determining which method to charge depreciation and recording of stock at market value or cost price. All these are based on personal judgment
Q4. Prepare the format of the balance sheet and explain the various elements of the balance sheet.
A: COMPANY’S BALANCE SHEET- As per REVISED SCHEDULE VI
Name of the Company…BALANCE SHEETas on…
| Particulars | Note No. | Figures as of the end of the Current Year | Figures as of the end of the Previous Year |
| I. EQUITY AND LIABILITIES | |||
| (1) Shareholders’ Funds | |||
| (a) Share Capital | |||
| (b) Reserves and Surplus | |||
| (c) Money received against Share Warrants | |||
| (2) Share Application Money Pending Allotment | |||
| (3) Non-Current Liabilities | |||
| (a) Long-Term Borrowings | |||
| (b) Deferred Tax Liabilities (Net) | |||
| (c) Other Long-Term Liabilities | |||
| (d) Long-Term Provisions | |||
| (4) Current Liabilities | |||
| (a) Short-Term Borrowings | |||
| (b) Trade Payables | |||
| (c) Other Current Liabilities | |||
| (d) Short-Term Provision | |||
| TOTAL | |||
| II. ASSETS | |||
| (1) Non-Current Assets | |||
| (a) Fixed Assets | |||
| (i) Tangible Assets | |||
| (ii) Intangible Assets | |||
| (iii) Capital Work-in-Progress | |||
| (iv) Intangible assets under development | |||
| (b) Non-Current Investments | |||
| (c) Deferred tax assets (net) | |||
| (d) Long-Term Loans and Advances | |||
| (e) Other Non-Current Assets | |||
| (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 | |||
| TOTAL | |||
The elements of a balance sheet consist of:
A. Shareholder Funds
1. Share Capital consists of Authorised capital, Subscribed capital and Issued capital equity, and preference share.
2. Reserves and Surplus consists of Capital Reserve, Debenture Redemption, Capital Redemption Reserve, Tax Reserve, General Reserve, and Share warrants. Share warrants provide the holder to have ownership of equity shares of a company. When money is received from selling share warrants it is called as money received against warrants.
B. Share Application money pending allotment: It refers to an application on which allotment is pending but amount is received. It takes place when a company issues equity shares publicly in order to raise funds.
C. Non-Current Liabilities: These consists of the following items: long-term borrowings, deferred tax liabilities, long-term provisions and other long-term liabilities.
D. Current liabilities: These consist of the following items: short-term liabilities, trade payables, short-term provisions
E. Assets which include Non-current and Current Assets. Non-current assets can be long-term loans, plant, machinery, furniture, goodwill, etc. while current assets are investment is shares and debentures, finished goods, raw materials, cash and cash equivalents, bank balance, cheques not encashed, and short-term.
Q5. Prepare the format of the statement of Profit and Loss and explain its items.
A: As per the REVISED SCHEDULE VI, the statement is as follows
Statement of Profit and Loss For the year ended…
| S. No. | Particulars | Note No. | Figures for the Current Year | Figures for the Previous Year |
| I | Revenue from Operations | |||
| II | Other Income | |||
| III | Total Revenue (I + II) | |||
| IV | Expenses: | |||
| Cost of Material Consumed | ||||
| Purchase of Stock-in-Trade | ||||
| Changes in inventories of finished goods | ||||
| Work-in-progress and Stock-in-Trade | ||||
| Employee Benefit Expenses | ||||
| Finance Cost | ||||
| Depreciation and Amortisation Expenses | ||||
| Other Expenses | ||||
| Total Expenses | ||||
| V | Profit before exceptional and extraordinary items and tax (III-IV) | |||
| VI | Exceptional items | |||
| VII | Profit before extraordinary item and tax (V – VI) | |||
| VIII | Extraordinary Items | |||
| IX | Profit Before Tax (VII-VIII) | |||
| X | Tax Expenses | |||
| (1) Current Tax | ||||
| (2) Deferred Tax | ||||
| XI | Profit/(Loss) for the period from continuing operations (IX – X) | |||
| XII | Profit/ (Loss) from discontinuing operations | |||
| XIII | Tax expenses of discontinuing operations | |||
| XIV | Profit/(Loss) from discontinuing operations (after Tax (XII – XIII) | |||
| XV | Profit (Loss) for the period (XI + XIV) | |||
| XVI | Earning Per Equity Shares | |||
| (1) Basic | ||||
| (2) Diluted |
Items of Profit and Loss Statement are:
1. Revenue from Operations: Revenue is earned from the basic operating activities of an organization. The source of revenue varies for financing and non-financing companies. For financing companies, the revenue sources are Interest, dividends, and other types of financial services while for a non-financing company, it includes revenues earned from sales of products and services and other operating activities.
2. Other Incomes: Refers to incomes that are earned separately and not from any operating activity. These are the sources: Gain on the sale of investments, income from interest, and dividends as such.
3. Expenses: These include all the expenses such as the cost of materials consumed, purchasing of stock in trade, also changes in inventories, stock in trade, and work in progress.
Q6. Financial statements reflect a combination of recorded facts, accounting conventions, and personal judgments discussed.
A: Financial statements reveal the true financial position of a company and help in formulating various decisions and policy making. The nature of financial statements is dependent on these aspects:
1. Financial statement record facts about the items at the original price at which they were purchased and doesn’t take into account the prevailing market price, and also do not include price fluctuations due to inflation.
2. The financial statements are created based on various accounting conventions such as the Prudence convention, matching concept, etc., and adhering to such conventions results in the statements being easy to understand, compare and reflect the fair and true financial situation of the organization.
3. A financial statement is based on many concepts such as the going concern concept, realization concept, and money measurement concept. A financial statement adheres to all these concepts when financial statements are prepared.
4. In preparing financial statements personal judgments play an important role. For example when determining which method to charge depreciation and recording of stock at market value or cost price. All these are based on personal judgment
Q7. Explain how financial statements are useful to the various parties who are interested in the affairs of an undertaking.
A: The various parties interested in the financial statements of a company can be broadly classified as: 1. Internal and 2. External
Internal Users
1. Owners: The interest of an owner is towards knowing whether profit is earned or loss is incurred by the business. They are more interested in knowing about the viability of the capital that is invested in the business.
2. Management: Financial statements help management in devising new policies for the growth of business and also provide management with the insights required for implementing various cost-cutting measures.
3. Employees: They are interested in timely payments, bonuses, and appraisals at the decided time. Financial statements help employees to learn about the financial position of the organization so that appropriate salaries can be demanded.
External Users:
1. Banks and Financial Institutions: Such institutions provide credit so it is necessary to understand the liquidity, solvency, and creditworthiness of the organization for loan requirements in the future.
2. Creditors: Businesses own money to creditors and hence it is important for them to have information about the creditworthiness of the business.
3. Investors or potential investors: These are people who will provide funds by means of investment in the business, hence the viability and solvency of an organization will help in making investment decisions.
4. Tax Authorities: Information is required by them for determining the types of taxes that can be charged on the organization.
5. Government: Government needs information to determine National Income, GDP and industrial growth. Financial statements help the government in formulating various policies and address issues like poverty and unemployment.
6. Consumers: An organization publishing a financial statement makes consumers aware of the profits they are earning and the relative expenses that go into providing services at affordable prices, thus helping in gaining a good name among consumers.
7. Public: Public knowledge of financial statements is about how the business is spending money for social welfare.
8. Researchers: Researchers use financial statements to predict market trends and undertake research projects.
Q8. Explain the process of preparing income statements and balance sheets.
A: The process of preparing the income statement and balance sheet is as follows:
Income Statement:
1. Prepare a trial balance as per the balance of different accounts in the ledger.
2. Determine revenue received from the business operation which is achieved by subtracting sales return from sales conducted.
3. Add incomes received other than revenue (such as cash discount, profit earned from sale of assets.
4. Deduct expenses from total revenue to determine profit before tax.
5. Deduct tax paid by the company from the amount determined as profit before tax to arrive at Net Profit or Loss.
Balance Sheet:
The balance sheet consists of two parts: Equity and Liabilities and Assets.
1. The equity and liabilities contain shareholder funds, non-current liabilities, current liabilities and share application money pending allotment are recorded.
2. Assets are recorded next, it contains all non-current and current assets
3. Tally the total of both sides. It must be equal for the total to tally.
Q9. Show the following items in the balance sheet as per the provisions of the Companies Act, 2013 in Schedule III:
| Particulars | ₹ | Particulars | ₹ |
| Preliminary Expenses | 2,40,000 | Goodwill | 30,000 |
| Discount on the issue of shares | 20,000 | Loose tools | 12,000 |
| 10% Debentures | 2,00,000 | Motor Vehicles | 4,75,000 |
| Stock in Trade | 1,40,000 | Provision for tax | 16,000 |
| Cash at bank | 1,35,000 | ||
| Bills receivable | 1,20,000 |
The solution to this question is as follows:
Extract of Balance Sheet as on March 31, 2013
| Particulars | Note No. | Amount (₹) |
| I. Equity and Liabilities | ||
| 1. Shareholders’ Funds | ||
| a. Share Capital | ||
| b. Reserves and Surplus | ||
| 2. Non-Current Liabilities | ||
| Long-term Borrowings | 1 | 2,00,000 |
| 3. Current Liabilities | ||
| Other Current Liabilities | ||
| b. Short-term Provisions | 2 | 16,000 |
| II. Assets | ||
| 1. Non-Current Assets | ||
| Fixed Assets | ||
| i. Tangible Assets | 3 | 4,75,000 |
| ii. Intangible Assets | 4 | 30,000 |
| b. Non-Current Investments | ||
| 2. Current Assets | ||
| Inventories | 5 | 1,52,000 |
| b. Trade Receivables | 6 | 1,20,000 |
| c.Cash and Cash Equivalents | 7 | 1,35,000 |
| d. Other Current Assets | 8 | 2,60,000 |
Notes to Accounts
| Particulars | Amount(₹) |
| 1. Long-Term Borrowings | |
| 10% Debentures | 2,00,000 |
| 2. Short-Term Provisions | |
| Provision for Tax | 16,000 |
| 3. Tangible Assets | |
| Motor Vehicles | 4,75,000 |
| 4. Intangible Assets | |
| Goodwill | 30,000 |
| 5. Inventory | |
| Loose Tools 12,000 | |
| Stock 1,40,000 | 1,52,000 |
| 1,52,000 | |
| 6. Trade Receivables | |
| Bill Receivable | 1,20,000 |
| 7. Cash and Cash equivalents | |
| Cash at Bank | 1,35,000 |
| 8. Other Current Assets | |
| Preliminary Expenses 2,40,000 | |
| Discount on Issue of Shares 20,000 | 2,60,000 |
| 2,60,000 |
Q10. On 1st April 2017, Jumbo Ltd. issued 10,000; 12% debentures of ₹. 100 each a discount of 20%, redeemable after 5 years. The company decided to write off a discount on the issue of such debentures over the lifetime of the Debentures. Show the items in the balance sheet of the company immediately after the issue of these debentures.
The solution to this question is as follows:
Balance Sheet as on April 01, 2017
| Particulars | Note No. | Amount (₹) |
| I. Equity and Liabilities | ||
| 1. Shareholders’ Funds | ||
| a. Share Capital | ||
| b. Reserves and Surplus | ||
| 2. Non-Current Liabilities | ||
| a. Long-term Borrowings | 1 | 10,00,000 |
| 3. Current Liabilities | ||
| a. Other Current Liabilities | ||
| b. Short-term Provisions | ||
| Total | 10,00,000 | |
| II. Assets | ||
| 1. Non-Current Assets | ||
| a. Other Non-Current Assets | 2 | 1,60,000 |
| 2. Current Assets | ||
| a. Other Current Assets | 3 | 40,000 |
| b. Cash and Cash Equivalents | 4 | 8,00,000 |
| Total | 10,00,000 |
Notes to Accounts
| Particulars | Amount(₹) |
| 1. Long-Term Borrowings | |
| 12% Debentures | 10,00,000 |
| 2. Other Non-current assets | |
| Unamortized discount on issue of Debentures | 1,60,000 |
| 3. Other Current Assets | |
| Unamortized discount on issue of Debentures | 40,000 |
| 4. Cash and Cash Equivalents | |
| Bank | 8,00,000 |
3. From the following information prepare the balance sheet of Gitanjali Ltd., as per the (Revised) Schedule VI:
Q11. Inventories ₹. 14,00,000; Equity Share Capital ₹. 20,00,000; Plant and Machinery ₹. 10,00,000; Preference Share Capital ₹. 12,00,000; Debenture Redemption Reserve ₹. 6,00,000; Outstanding Expenses ₹. 3,00,000; Proposed Dividend ₹. 5,00,000; Land and Building ₹. 20,00,000; Current Investments ₹. 8,00,000; Cash Equivalent ₹. 10,00,000; Short-term loan from Zaveri Ltd. (A Subsidiary Company of Twilight Ltd.) ₹. 4, 00,000; Public Deposits ₹. 12, 00,000.
The solution to this question is as follows:
Balance Sheet as on …
| Particulars | Note No. | Amount (₹) |
| I. Equity and Liabilities | ||
| 1. Shareholders’ Funds | ||
| a. Share Capital | 1 | 32,00,000 |
| b. Reserves and Surplus | 2 | 6,00,000 |
| 2. Non-Current Liabilities | ||
| a. Long-term Borrowings | 3 | 12,00,000 |
| 3. Current Liabilities | ||
| a. Other Current Liabilities | 4 | 3,00,000 |
| b. Short-term Borrowings | 5 | 4,00,000 |
| c. Short-term Provisions | 6 | 5,00,000 |
| Total | 62,00,000 | |
| II. Assets | ||
| 1. Non-Current Assets | ||
| a. Fixed Assets | ||
| i. Tangible Assets | 7 | 30,00,000 |
| ii. Intangible Assets | ||
| b. Non-Current Investments | ||
| 2. Current Assets | ||
| a. Inventories | 14,00,000 | |
| b. Current Investments | 8,00,000 | |
| c. Cash and Cash Equivalents | 10,00,000 | |
| Total | 62,00,000 | |
Notes to Accounts
| Particulars | Amount(₹) |
| 1. Share Capital | |
| Equity Share Capital | 20,00,000 |
| Preference Share Capital | 12,00,000 |
| 32,00,000 | |
| 2. Reserve and Surplus | |
| Debenture Redemption Reserve | 6,00,000 |
| 3. Long-term Borrowings | |
| Public Deposits | 12,00,000 |
| 4. Other Current Liabilities | |
| Outstanding Expenses | 3,00,000 |
| 5. Short-term Borrowings | |
| Loan from Zaveri Ltd. | 4,00,000 |
| 6. Short-Term Provisions | |
| Proposed Dividend | 5,00,000 |
| 7. Tangible Assets | |
| Land and Building | 20,00,000 |
| Plant and Machinery | 10,00,000 |
| 30,00,000 |
Q12. From the following information prepare the balance sheet of Jam Ltd. as per the (revised) Schedule VI:
Inventories ₹. 7, 00,000; Equity Share Capital ₹. 16, 00,000; Plant and Machinery ₹. 8, 00,000; Preference Share Capital ₹. 6, 00,000; General Reserve’s ₹. 6, 00,000; Bills payable ₹. 1, 50,000; Provision for taxation ₹. 2, 50,000; Land and Building ₹. 16, 00,000; Noncurrent Investments ₹. 10, 00,000; Cash at Bank ₹. 5, 00,000; Creditors ₹. 2, 00,000; 12% Debentures ₹. 12,00,000.
The solution to this question is as follows:
Balance Sheet as on March 31, 2013
| Particulars | Note No. | Amount (₹) |
| I. Equity and Liabilities | ||
| 1. Shareholders’ Funds | ||
| a. Share Capital | 1 | 22,00,000 |
| b. Reserves and Surplus | 2 | 6,00,000 |
| 2. Non-Current Liabilities | ||
| a. Long-term Borrowings | 3 | 12,00,000 |
| 3. Current Liabilities | ||
| a. Short-term Borrowings | ||
| b. Trade Payables | 4 | 3,50,000 |
| c. Short-term Provisions | 5 | 2,50,000 |
| Total | 46,00,000 | |
| II. Assets | ||
| 1. Non-Current Assets | ||
| a. Fixed Assets | ||
| i. Tangible Assets | 6 | 24,00,000 |
| b. Non-Current Investments | 10,00,000 | |
| 2. Current Assets | ||
| a. Inventories | 7,00,000 | |
| b. Cash and Cash Equivalents | 7 | 5,00,000 |
| Total | 46,00,000 |
Notes to Accounts
| Particulars | Amount(₹) |
| 1. Share Capital | |
| Equity Share Capital | 16,00,000 |
| Preference Share Capital | 6,00,000 |
| 22,00,000 | |
| 2. Reserve and Surplus | |
| General Reserve | 6,00,000 |
| 3. Long-Term Borrowings | |
| 12% Debentures | 12,00,000 |
| 4. Trade Payables | |
| Creditors | 2,00,000 |
| Bills Payable | 1,50,000 |
| 3,50,000 | |
| 5. Short-Term Provisions | |
| Provision for Taxation | 2,50,000 |
| 6. Tangible Assets | |
| Land and Building | 16,00,000 |
| Plant and Machinery | 8,00,000 |
| 24,00,000 | |
| 7. Cash and Cash Equivalents | |
| Bank | 5,00,000 |
Q13. From the following information prepare the balance sheet of Jam Ltd. as per the (revised) Schedule VI:
Inventories ₹. 7, 00,000; Equity Share Capital ₹. 16, 00,000; Plant and Machinery ₹. 8, 00,000; Preference Share Capital ₹. 6, 00,000; General Reserve’s ₹. 6, 00,000; Bills payable ₹. 1, 50,000; Provision for taxation ₹. 2, 50,000; Land and Building ₹. 16, 00,000; Noncurrent Investments ₹. 10, 00,000; Cash at Bank ₹. 5, 00,000; Creditors ₹. 2, 00,000; 12% Debentures ₹. 12,00,000.
The solution to this question is as follows:
Balance Sheet as on March 31, 2013
| Particulars | Note No. | Amount (₹) |
| I. Equity and Liabilities | ||
| 1. Shareholders’ Funds | ||
| a. Share Capital | 1 | 22,00,000 |
| b. Reserves and Surplus | 2 | 6,00,000 |
| 2. Non-Current Liabilities | ||
| a. Long-term Borrowings | 3 | 12,00,000 |
| 3. Current Liabilities | ||
| a. Short-term Borrowings | ||
| b. Trade Payables | 4 | 3,50,000 |
| c. Short-term Provisions | 5 | 2,50,000 |
| Total | 46,00,000 | |
| II. Assets | ||
| 1. Non-Current Assets | ||
| a. Fixed Assets | ||
| i. Tangible Assets | 6 | 24,00,000 |
| b. Non-Current Investments | 10,00,000 | |
| 2. Current Assets | ||
| a. Inventories | 7,00,000 | |
| b. Cash and Cash Equivalents | 7 | 5,00,000 |
| Total | 46,00,000 | |
Notes to Accounts
| Particulars | Amount(₹) |
| 1. Share Capital | |
| Equity Share Capital | 16,00,000 |
| Preference Share Capital | 6,00,000 |
| 22,00,000 | |
| 2. Reserve and Surplus | |
| General Reserve | 6,00,000 |
| 3. Long-Term Borrowings | |
| 12% Debentures | 12,00,000 |
| 4. Trade Payables | |
| Creditors | 2,00,000 |
| Bills Payable | 1,50,000 |
| 3,50,000 | |
| 5. Short-Term Provisions | |
| Provision for Taxation | 2,50,000 |
| 6. Tangible Assets | |
| Land and Building | 16,00,000 |
| Plant and Machinery | 8,00,000 |
| 24,00,000 | |
| 7. Cash and Cash Equivalents | |
| Bank | 5,00,000 |
Q14. Prepare the balance sheet of Jyoti Ltd. as on March 31, 2017, from the following information:
Building ₹. 10,00,000; Investments in the shares of Metro Tyers ₹. 3,00,000; Stores & Spares ₹. 1,00,000; Discount on issue of 10% debentures ₹. 10,000; Statement of Profit and Loss (Dr.) ₹. 90,000; 5,00,000 Equity Shares of ₹. 20 each fully paid-up; Capital Redemption Reserve ₹. 1,00,000; 10% Debentures ₹. 3,00,000; Unpaid dividends ₹. 90,000; Share options outstanding account ₹. 10,000.
The solution to this question is as follows:
Balance Sheet as on March 31, 2017
| Particulars | Note No. | Amount (₹) |
| I. Equity and Liabilities | ||
| 1. Shareholders’ Funds | ||
| a. Share Capital | 1 | 10,00,000 |
| b. Reserves and Surplus | 2 | 10,000 |
| 2. Non-Current Liabilities | ||
| Long-term Borrowings | 3 | 3,00,000 |
| 3. Current Liabilities | ||
| Other Current Liabilities | 4 | 1,00,000 |
| Total | 14,10,000 | |
| II Assets | ||
| 1. Non-Current Assets | ||
| a. Fixed Assets | ||
| i. Tangible Assets | 5 | 10,00,000 |
| b. Non-Current Investments | 6 | 3,00,000 |
| 2. Current Assets | ||
| a. Inventories | 7 | 1,00,000 |
| b. Other Current Assets | 8 | 10,000 |
| Total | 14,10,000 | |
Notes to Accounts
| Particulars | Amount(₹) |
| 1. Share Capital | |
| Equity Share Capital (50,000* shares of ₹ 20 each) | 10,00,000 |
| 2. Reserve and surplus | |
| Capital Redemption Reserve | 1,00,000 |
| Less: Statement of Profit or Loss (Debit) | 90,000 |
| 10,000 | |
| 3. Long-term Borrowings | |
| 10% Debentures | 3,00,000 |
| 4. Other Current Liabilities | |
| Unpaid Dividend | 90,000 |
| Share Option Outstanding | 10,000 |
| 1,00,000 | |
| 5. Tangible Assets | |
| Building | 10,00,000 |
| 6. Non-Current Investments | |
| Shares of Metro Tyres | 3,00,000 |
| 7. Inventory | |
| Stores and Spares | 1,00,000 |
| 8. Other Current Assets | |
| Discount on Issue of 10% Debentures | 10,000 |
Q15. Brinda Ltd. has furnished the following information:
(a) 25,000, 10% debentures of ₹. 100 each;
(b) Bank Loan of ₹. 10, 00,000 repayable after 5 years;
(c) Interest on debentures is yet to be paid.
Show the above items in the balance sheet of the company as on March 31, 2017.
The solution to this question is as follows:
Extract of Balance Sheet as on March 31, 2017
| Particulars | Note No. | Amount (₹) |
| I. Equity and Liabilities | ||
| 1. Shareholders’ Funds | ||
| a Share Capital | ||
| b. Reserves and Surplus | ||
| 2. Non-Current Liabilities | ||
| Long-term Borrowings | 1 | 35,00,000 |
| 3. Current Liabilities | ||
| Other Current Liabilities | 2 | 2,50,000 |
Notes to Accounts
| Particulars | Amount(₹) |
| 1. Long-Term Borrowings | |
| 12% Debentures | 25,00,000 |
| Bank Loan | 10,00,000 |
| 35,00,000 | |
| 2. Other Current Liabilities | |
| Interest on Debentures | 2,50,000 |
Q16. Prepare a balance sheet of Black Swan Ltd., as on March 31, 2017, from the following information:
| General Reserve | : | 3,000 |
| 10% Debentures | : | 3,000 |
| Statement of Profit & Loss | : | 1,200 |
| Depreciation on fixed assets | : | 700 |
| Gross Block | : | 9,000 |
| Current Liabilities | : | 2,500 |
| Preliminary Expenses | : | 300 |
| 6% Preference Share Capital | : | 5,000 |
| Cash & Cash Equivalents | : | 6,100 |
The solution to this question is as follows:
Extract of Balance Sheet as on March 31, 2017
| Particulars | Note No. | Amount (₹) |
| I. Equity and Liabilities | ||
| 1. Shareholders’ Funds | ||
| a. Share Capital | 1 | 5,000 |
| b. Reserves and Surplus | 2 | 4,200 |
| 2. Non-Current Liabilities | ||
| a. Long-term Borrowings | 3 | 3,000 |
| 3. Current Liabilities | 2,500 | |
| Total | 14,700 | |
| II. Assets | ||
| 1. Non-Current Assets | ||
| a. Fixed Assets | ||
| i. Tangible Assets | 4 | 8,300 |
| 2. Current Assets | ||
| a. Cash and Cash Equivalents | 5 | 6,100 |
| b. Other Current Assets | 6 | 300 |
| Total | 14,700 |
Notes to Accounts
| Particulars | Amount(₹) |
| 1. Share Capital | |
| 6% Preference Share Capital | 5,000 |
| 2. Reserve and Surplus | |
| General Reserve | 3,000 |
| Statement of Profit or Loss | 1,200 |
| 4,200 | |
| 3. Long-Term Borrowings | |
| 10% Debentures | 3,000 |
| 4. Tangible Assets | |
| Fixed Assets | 9,000 |
| Less: Depreciation | 700 |
| 8,300 | |
| 5. Cash and Cash Equivalents | |
| Cash | 6,100 |
| 6. Other Current Assets | |
| Preliminary Expenses | 300 |
Concepts covered in this chapter –
- Meaning of financial statements
- Nature of financial statements
- Objectives of financial statements
- Types of financial statements
- Limitations of financial statements
FAQ:
Financial statements are the end products of an accounting process, it provides a true picture of the performance of the company over a time period and such a statement is used by different users of accounting information. These statements are prepared annually
Amortisation refers to the writing of sunk cost, deferred revenue expenses and intangible assets which need not be replaced.
Assets that do not have physical forms are known as intangible assets. It includes patents Goodwill, trademarks, etc.
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