Roll No......................................

325
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Time allowed : 3 hours Maximum marks : 100

Total number of questions : 6 Total number of printed pages : 10

NOTE : 1. Answer ALL Questions.

2. All working notes should be shown distinctly.

PART–A

1. (a) What do you mean by accounting standards ? Discuss its objectives.

(b) Explain the minimum disclosure of notes and explanatory statement that should be made
in interim financial report as per AS-25.

(c) Explain the objectives and different kinds of corporate restructuring.

(d) What do you mean by Security Premium Accounts ? How it can be utilized as per
Section 52 (2) of Companies Act, 2013 and presentation in financial statement.

(e) Explain the issue of Sweet Equtiy Shares and their limitation and restrictions.
(5 marks each)

Attempt all parts of either Q. No. 2 or Q. No. 2A

2. (a) What is Employee Stock Option plan ? Explain the importance of such plans in the modern
time.
(b) Explain the disclosure requirements as per Schedule III of the Companeis Act 2013 with
regard to ‘‘Share Capital’’.
(c) Vanities Ltd. has an issue 1,000, 12% Redeemable Preference Shares of ` 100 each,
repayable at a premium of 10%. These shares are to be redeemed out of the accumulated
reserves, which are more than the necessary sum required for redemption. Show the
necessary entries in the books of the company, assuming that the premium on
redemption of shares has to be written off against the company’s Securities Premium
Reserves.

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(d) X Ltd. made an issue of 10,000 12% debentures of ` 100 each, payable as
follows :

` 25 on Application

` 25 on Application

` 50 on First and Final Call.

Applications were received for 12,000 debentures and the directors allotted 10,000
debentures rejecting an application for 2,000 debentures. The money received on application
for 2,000 debentures rejected was duly refunded. All the calls were made and the moneys
duly received.

Show the necessary Cash Book and Journal Entries to record the above transactions.

(e) Explain the rules of revenue recognition as per AS-9.

(3 marks each)

OR (Alternative question to Q. No. 2)

2A. (i) A liquidator of a company is entitled to a remuneration at 2% on assets realised and

3% on amount distributed to Preferential Creditors and 3% on payment made to unsecured
creditors. The assets were realised for ` 25,00,000 against which payment was made
as follows :
Liquidation Expenses ` 25,000
Secured Creditors ` 10,00,000
Preferential Credidotrs ` 75,000
The amount due to unsecured creditors was ` 15,00,000. You are asked to calculate
the total remuneration payable to liquidator.
(5 marks)

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(ii) From the following figures calculate the value of a share of ` 10 on (1) dividend basis,
and (2) return on capital employed basis. The market expectation is 12% :
Year Ended Capital Profit Dividend
31st March Employed (`) (`) (%)
2014 5,00,000 80,000 12
2015 8,00,000 1,60,000 15
2016 10,00,000 2,20,000 18
2017 15,00,000 3,75,000 20
(5 marks)
(iii) What enformations are included in the note related to non-current investment as per schedule
VI of Companies Act, 2013.
(5 marks)

3. (a) The following particulars are available of ABC Ltd. :

(i) Capital :
45,000, 6% preference shares of ` 10 each, fully paid; 45,000, equtiy shares
of ` 10 each fully paid up.
(ii) External liabilities ` 75,000.
(iii) Reserves and surplus ` 35,000.
(iv) Average profit after taxation, earned every year by the company ` 85,050.
(v) The normal profit earned on the market value of equity shares, fully paid, on
the same type of company is 9%.
(vi) Company transfers every year ` 10,000 to reserves.
Calculate the fair value of share assuming that out of the total assets, assets worth
` 3,500 are fictious.
(5 marks)

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(b) W Ltd., registered with a capital of ` 10,00,000 in equity shares of ` 10 each, acquired

the business of M/s A and B, the Balance Sheet of whom at the date of acquisition

was as follows :

Liabilities Amount ` Assets Amount `

Capital Land & Building 50,000

A—70000 Plant & Machinery 40,000

B—70000 1,40,000 Furniture & Fixture 2,000

Reserves 14,000 Sundry Debtors 48,000

Sundry Creditors 30,000 Bill Receivable 13,000

Bill Payable 16,000 Stock 18,000

Cash at Bank 29,000

2,00,000 2,00,000

The assets and liabilities were subject to the following revaluation :

Plant and Machienry to be depreciated by 10%

Furniture and Fittings to be depreciated by 15%

Land and Buildings to be appreciated by 20%

A provision to be made for bad debts on debtors @ 2-1/2%

Goodwill of the firm was valued at ` 24,000.

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The consideration was to be discharged as follows :

(i) Allotment of 10,000 equtiy shares of ` 10 each at ` 12 each.

(ii) Allotment of 500, 14% Debentures of ` 100 each at a discount of 10%.

(iii) Balance in cash.

The cost of acquisition of the business amounted to ` 5,000.

You are required to show the journal entries in the books of the company W Ltd.
(5 marks)

(c) From the following particulars of R Ltd. calculate the managerial remuneration in the following
cases :

(a) There’s only one whole time director.

(b) There are two whole time directors.

(c) There are two whole time directors, one part time director and manager.

Net profit before provision for income tax

and managerial remuneration but after

depreciation and provision for repair 85,00,000

Depreciation provided in the books 30,00,000

Provision for repair of machinery during the year 2,50,000

Depreciation allowable under Schedule II

of Companies Act, 2013 24,00,000

Actual Expenditure incurred on repair during

the year 1,50,000

(5 marks)

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4. (a) The following are the Profit & Loss Account of H Ltd. and S Ltd. for the year ended
31st March, 2017 :
H Ltd. S Ltd. H Ltd. S Ltd.
` ` ` `
To Opening Stock 1,00,000 — By Sales 8,00,000 6,50,000
By closing stock
(` 1,50,000 +
To Purchases 5,00,000 4,00,000 ` 1,00,000) 1,50,000 1,00,000
To Productive Wages 1,50,000 1,00,000
To Gross Profit c/d 2,00,000 2,50,000
9,50,000 7,50,000 9,50,000 7,50,000
To Sundry Expenses 75,000 1,00,000 By Gross Profit b/d 2,00,000 2,50,000
To Debenture Interest — 6,000 By Debenture Interest 3,000 —
To Provision for Taxation 60,000 70,000
To Profit c/d 68,000 74,000
2,03,000 2,50,000 2,03,000 2,50,000
To Preference Dividend — 3,000 To Profit b/d 68,000 74,000
To Proposed Dividend 20,000 20,000
To Tax on distributed
Profit @ 15% 3,000 3,450
To Balance c/d 45,000 47,550
68,000 74,000 68,000 74,000
You are also given the following additional information :
(1) H Ltd. holds 1500 equity shares of ` 100 each in S Ltd. whose capital consists
of 2,000 equity shares of ` 100 each and 6% 500 cumulative preferences shares
of ` 100 each. S Ltd. has also issued 6% Debentures of ` 1,00,000 out of
which H Ltd. holds ` 50,000.

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(2) The shares in S Ltd. were acquired by H Ltd. on 1st July 2016 but the debentures
were acquired on 1st April 2016. S Ltd. was incorporated on 1st April, 2016.
(3) During the year S Ltd. sold to H Ltd. goods costing ` 50,000 at the selling
price of ` 75,000. One fourth of the goods manufactured remained unsold on
31st March, 2017. The goods were valued at cost to the holding company for
closing stock purposes.
Prepare a consolidated profit and Loss Account, showing separately the working
notes.
(7 marks)

(b) U Ltd. suffered continuous losses. Its balance sheet as on 31-3-2016 was as
follows :

Particulars Amounts

(`)

I. Equity and Liabilities :

(1) Shareholder Fund

(a) Share Captial

Authorised, issued and subcribed capital :

30,000 equity shares of ` 10 each fully paid up 3,00,000

2000, 8% cumulative preference shars of ` 100

each fully paid 2,00,000

(b) Reserve and Surplus :

(i) P & L Account (2,00,000)

(ii) Securities Premium 90,000

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(2) Non-current liabilities :

(a) Long-term borrowings unsecured loan
(from director) 50,000
(3) Current Liabilities :
(a) Trade Payables
Sundry Creditors 3,00,000
Outstanding Exps. (including directors remuneration
of ` 20,000) 70,000
Total 8,10,000
II. Assets :
(1) Non-current assets :
(a) Fixed Assets
(i) Tangible
Plant 3,00,000
Loose Tools 10,000
(ii) Intangible Assets Goodwill 50,000
(b) Other non-current assets preliminary expenses 5,000
(2) Current Assets :
(a) Inventories 1,50,000
(b) Trade Receivable : Debtors 2,50,000
(c) Cash and cash equivalents :
Cash 10,000
Bank 35,000
Total 8,10,000

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Note :—Dividends on preference shares are in arrears for three years.

The following scheme of reconstruction has been agreed upon and duly approved
by the court on April 1, 2016.

(A) Equity shares to be converted into 1,50,000 shares of ` 2 each.

(B) Equity shareholders to surrender 90% of their holding to the company.

(C) Preference shareholders forego arrears of dividend and in lieu thereof the rate
of 8% to be increased to 9% in future.

(D) Sundry creditors agree to reduce their claims by one-fifth in consideration of their
getting shares of ` 35,000 of the surrendered equity shares.

(E) Directors forego their loan and remuneration.

(F) Assets are worth : Plant ` 2,60,000, loose tools ` 2,000, debtors ` 2,35,000
and stock ` 1,30,000.

(G) Expenses of reconstruction amounted ` 10,000.

(H) Any surplus remaining after meeting the losses and expenses should be utilised
in further reducing the value of plant.

(I) To provide working capital, all existing members to subscribe 50,000 equity
shares.

Give journal entries to implement the above scheme.

(8 marks)
PART–B

5. (a) What is the importance of having the accounts audited by an independent auditor.

(b) What is the propriety audit ? What are the objectives and scope of propriety
audit.

(c) What services are prohibited to be rendered by an auditor appointed under Companies
Act, 2013.
(5 marks each)

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Attempt all parts of either Q. No. 6 or Q. No. 6A

6. (a) Write a short note on compliance audit.

(b) What are the importance matters which an auditor should ensure to ascertain and establish
true and fair view.

(c) Explain the term ‘‘Secretarial Audit’’. In what circumstances secretarial audit is
done ?
(5 marks each)
OR (Alternative question to Q. No. 6)

6A. (i) What are the points to be considered while carrying out the internal control review of
recruitment function.
(5 marks)

(ii) Write short notes on responsibilities of Joint Auditor.

(5 marks)

(iii) Managing Director of Alpha Ltd. himself wants to appoint Mr. R a practicing chartered
accountant, as first auditor of the company. Comment on the proposed action of the
managing director.
(5 marks)
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