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PAPER 1 – ADVANCED ACCOUNTING

All Questions are compulsory
Wherever necessary, suitable assumptions may be made and indicated in
answer by the candidates.
Working Notes should form part of the answer.
Total Marks: 100 Duration: 3 Hours

Question – 1
Following is the summarized Balance Sheet of Complicated Ltd. as on
31st March, 2023:

Particulars `
Equity shares of ` 10 each, fully paid up 12,50,000
Bonus shares of ` 10 each, fully paid up 1,00,000
Share option outstanding Account 4,00,000
Revenue Reserve 15,00,000
Securities Premium 2,50,000
Profit & Loss Account 1,25,000
Capital Reserve 2,00,000
Unpaid Dividends 1,00,000
12% Debentures (Secured) 18,75,000
Advance from related parties (Unsecured) 10,00,000
Current maturities of long term borrowings 16,50,000
 Accounting Model Exam

Particulars `
Application money received for allotment due for refund 2,00,000
Fixed Assets 46,50,000
Current Assets 40,00,000

The Company wants to buy back 25,000 equity shares of ` 10 each, on 1st
April, 2023 at ` 20 per share. Buy back of shares is duly authorized by its
Articles and necessary resolution has been passed by the Company
towards this. The buy-back of shares by the Company is also within the
provisions of the Companies Act, 2013. The payment for buy back of
shares will be made by the Company out of sufficient bank balance
available shown as part of Current Assets.

You are required to prepare the necessary journal entries towards buy
back of shares and prepare the Balance Sheet after buy back of shares.
(20 Marks)

Question – 2
(a) Mohan Ltd. furnishes the following summarised Balance Sheet on 31st
March 2023

Equity & Liabilities ` in Lakhs

Shareholder’s Funds
Share Capital
Equity Shares of ` 10 each fully paid up 780
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Equity & Liabilities ` in Lakhs

6% Redeemable Preference shares of ` 50 each fully 240
Paid up
Reserves and Surplus
Capital Reserves 58
General Reserve 625
Securities Premium 52
Profit & Loss 148
Revaluation Reserve 34
Infrastructure Development Reserve 16
Non-Current Liabilities
7% Debentures 268
Unsecured Loans 36
Current Liabilities 395
2,652
Assets ` in Lakhs
Non-Current Assets
Plant and Equipment less Depreciation 725
Investment at Cost 720
Current Assets 1207
2,652
 Accounting Model Exam

Other Information:
(i) The company redeemed preference shares at a premium of 10% on 1st
April,2023.
(ii) It also offered to buy back the maximum permissible number of equity
shares of ` 10 each at ` 30 per share on 2nd April 2023.
(iii)The payment for the above was made out of available bank balance,
which appeared as a part of the current assets.
(iv)The company had Investment in own debentures costing ` 60 lakhs
(face value ` 75 lakhs). These debentures were cancelled on 2nd April
2023.
(v) On 4th April 2023 company issued one fully paid-up equity share of `
10 each by way of bonus for every five equity shares held by the
shareholders.
You are required to:
1. Calculate maximum possible number of equity shares that can be
bought back as per the Companies Act, 2013 and
2. Record the Journal Entries for the above-mentioned information
(10 Marks)

(b) The following is the Balance Sheet of Pee Limited (A Non-listed

Company) furnishes as at 31st March, 2023:
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Particulars ` `
Equity & Liabilities
Share capital :
Authorised capital
2,50,000 Equity shares of ` 10 each fully paid 25,00,000
up
5,000, 10% Preference shares of ` 100 each 5,00,000 30,00,000
Issued and subscribed capital:
2,40,000 Equity shares of ` 10 each fully paid 24,00,000
up
3,000, 10% Preference shares of ` 100 each 3,00,000 27,00,000
(Issued two months back for the purpose of
buy back)
Reserves and surplus :
Capital reserve 10,00,000
Revenue reserve 25,00,000
Securities premium 27,00,000
Profit and loss account 35,00,000 97,00,000
Current liabilities
Trade Payables 13,00,000
Other Current Liabilities 3,00,000 16,00,000
1,40,00,000
 Accounting Model Exam

Particulars ` `
Assets
Tangible assets
Building 25,00,000
Machinery 31,00,000
Furniture 20,00,000 76,00,000
Non-Current Investments 30,00,000
Current Assets
Inventory 12,00,000
Trade Receivables 7,00,000
Cash and bank balances 15,00,000 34,00,000
1,40,00,000

On 01st April, 2023, the company passed a resolution to buy back 20% of
its equity capital @ ` 60 per share. For this purpose, it sold all of its
investment for ` 25,00,000.
The company achieved its target for buy-back. You are required to:
(a) Give necessary journal entries, and
(b) Give the Balance Sheet of the Company after buy back of shares.
(10 Marks)
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Question – 3
(a) Super Ltd. gives the following information as on 31st March, 2023:
Particulars `
Equity Share Capital of ` 10 each fully paid up 17,00,000
Revenue Reserve 23,50,000
Securities Premium 2,50,000
Profit & Loss Account 2,00,000
Infrastructure Development Reserve 1,50,000
9% Debentures 38,00,000
Unsecured loan 8,50,000
Property, Plant & Equipment 58,50,000
Current Assets 34,50,000

Super Limited wants to buy back 35,000 equity shares of ` 10 each

fully paid up on 1st April, 2023 at ` 30 per share. Buy Back of shares is
fully authorised by its articles and necessary resolutions have been
passed by the company towards this. The payment for buy back of
shares will be made by the company out of sufficient bank balance
available as part of the Current Assets. Comment with calculations,
whether the Buy Back of shares by the company is within the
provisions of the Companies Act, 2013
(10 Marks)
(b) Umesh Ltd. resolves to buy back 4 lakhs of its fully paid equity shares
of ` 10 each at ` 22 per share. This buyback is in compliance with the
provisions of the Companies Act and does not exceed 25% of
Company’s paid up capital in the financial year. For the purpose, it
 Accounting Model Exam

issues 1 lakh 11 % preference shares of ` 10 each at par, the entire

amount being payable with applications. The company uses ` 16 lakhs
of its balance in Securities Premium Account apart from its adequate
balance in General Reserve to fulfill the legal requirements regarding
buy-back. Give necessary journal entries to record the above
transactions
(5 Marks)
(c) The Directors of Umang Ltd. passed a resolution to buyback 5,00,000
of its fully paid equity shares of ` 10 each at ` 15 per share. This
buyback is in compliance with the provisions of the Companies Act,
2013. For this purpose, the company
(i) Sold its investments of ` 30,00,000 for ` 25,00,000.
(ii) Issued 20,000, 12% preference shares of ` 100 each at par, the
entire amount being payable with application
(iii)Used ` 15,00,000 of its Securities Premium Account apart from its
adequate balance in General Reserve to fulfill the legal
requirements regarding buy-back.
(iv) The company has necessary cash balance for the payment to
shareholders.
You are required to pass necessary Journal Entries (including narration)
regarding buy back of shares in the books of Umang Ltd
(5 Marks)
Question – 4
(a) Rohan Ltd furnishes the following information as at 31-03-2023
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Particulars ` `
Share Capital:
Equity Share Capital of ` 20 each fully paid 50,00,000
up
10,000 10% Preference Shares of ` 100 each 10,00,000 60,00,000
fully paid up
Reserves & Surplus:
Capital Reserve 1,00,000
Securities Premium 12,00,000
Revenue Reserve 5,00,000
Profit and Loss 20,00,000
Dividend Equalisation Fund 5,50,000 43,50,000
12% Debentures 12,50,000
Current liabilities and Provisions 5,50,000
Property, Plant and Equipment 1,00,75,000
Current Assets:
Investment 3,00,000
Inventory 2,00,000
Cash and Bank 15,75,000 20,75,000
The shareholders adopted the following resolution on 31st March,
2023:
 Accounting Model Exam

(i) Buy back 25% of the paid-up capital and it was decided to offer a
price of 20% over market price. The prevailing market value of the
company's share is ` 30 per share.
(ii) To finance the buy-back of shares, company:
Issues 3,000, 14% debentures of ` 100 each at a premium of 20%.
Issues 2,500, 10% preference shares of ` 100 each.
(iii)Sell investment worth ` 1,00,000 for ` 1,50,000.
(iv)Maintain a balance of ` 2,00,000 in Revenue Reserve.
(v) Later, the company issue three fully paid up equity shares of ` 20
each by way of bonus for every 15 equity shares held by the equity
shareholders.
You are required to pass the necessary journal entries to record the
above transactions.
(10 Marks)

(b) Anu Ltd furnishes you with the following balance sheet as at 31st
March, 2023.
Particulars ` in ` in
Crores Crores
Sources of Funds
Share Capital:
Authorised 100
Issued:
12% redeemable preference shares of ` 100 75
each fully paid
Equity shares of ` 10 each fully paid 25 100
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Particulars ` in ` in
Crores Crores
Reserves and Surplus
Capital reserve 15
Securities Premium 25
Revenue Reserves 260 300
400
Application of Funds
Fixed assets at cost 100
Less: Provision for depreciation (100) Nil
Investment at cost (Market Value is ` 400 Cr.) 100
Current Assets 340
Less: Current liabilities (40) 300
400

The company redeemed preference shares on 01st April, 2023. It also

bought back 50 lakh equity shares of ` 10 each at ` 50 per share. The
payments for the above were made out of the huge bank balances,
which appeared as a part of current assets. You are asked to:
a. Pass journal entries to record the above
b. Prepare balance sheet as at 01.04.2023
c. Calculate the value of equity share on a net asset basis.
(10 Marks)
 Accounting Model Exam

Question – 5
(a) Extra Ltd., (a non-listed company) furnishes you with the following
summarized Balance Sheet as on 31st March, 2023:

Particulars Notes ` in
Lakhs
Equity and Liabilities
1. Shareholder’s Funds
A. Share Capital 1 120
B. Reserves and Surplus 2 118
2. Non-Current Liabilities
Long Term Borrowings 3 4
3. Current Liabilities
Trade Payables 70
312
Assets
1. Non-Current Assets
Property, Plant and Equipment 50
Non-Current Investments 120
2. Current Assets
Cash and Cash Equivalents 142
312
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Notes to Accounts

No. Particulars ` in
Lakhs
1. Share Capital
Authorized, issued and subscribed capital:
Equity share capital of ` 10 each fully paid up 100
9% Redeemable preference shares of ` 100 each 20
fully paid
Total 120
2. Reserves and Surplus
Capital Reserve 8
Revenue Reserve 50
Securities Premium 60
Total 118
3. Long Term Borrowings
10% Debentures 4

(i) The company redeemed the preference shares at a premium of

10% on April 1st 2023.

(ii) It also bought back 3 Lakh equity shares of ` 10 each at ` 30 per

share. The payment for the above was made out of huge bank
balances, which appeared as a part of the current assets.
 Accounting Model Exam

(iii) Included in its investments were “Investments in Own

Debentures” costing ` 2 Lakhs (Face Value ` 2.20 Lakhs). These
debentures were cancelled on 01st April, 2023.
(iv) The company had 1,00,000 equity options outstanding on the
above mentioned date, to the employees at ` 20 when the market
price was ` 30 (This was included under current liabilities). On
01-04-2023 employees exercised their options for 50,000 shares.
You are required to pass the journal entries to record the above and
prepare balance sheet as at 01-04-2023.
(16 Marks)

(b) Pratham Ltd. (a non-listed company) has the following Capital

structure as on 31st March, 2023 :

Particulars ` `
Equity Share Capital (Shares of ` 10 each fully 30,00,000
paid up)
Reserves and Surplus
General Reserve 32,50,000
Securities Premium Account 6,00,000
Profit & Loss Account 4,30,000
Infrastructure Development Reserve 6,20,000 49,00,000
Loan Funds 42,00,000
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You are required to compute by Debt Equity Ratio Test, the

maximum number of shares that can be bought back in the light of
above information, when the offer price for buyback is ` 30 per share.
(4 Marks)