Ncert Solutions for Class 12 Accountancy part 2 Chapter 3 Financial Statements of a Company

Class 12 accountancy part 2 Book chapter 3 exercise solutions: Accountancy Class 12 part 2 Book Chapter 3 questions and answers

Textbook	NCERT
Class	Class 12
Subject	Accountancy
Chapter	part 2 Chapter 3
Chapter Name	Financial Statements of a Company class 12 ncert solutions
Category	Ncert Solutions
Medium	English

Are you looking for Ncert Solutions solutions for class 12 accountancy chapter 3? Now you can download Class 12 accountancy chapter 3 exercise solutions pdf from here.

Short Answer Questions

Question 1: State the meaning of financial statements?

Answer 1: Financial statements are formal records of the financial activities and position of a business, organization, or individual. They provide a summary of an entity’s financial performance over a specific period, typically including key reports such as the balance sheet, income statement, and cash flow statement.

These documents are essential for assessing the financial health and stability of an entity, offering insights into its assets, liabilities, revenues, expenses, and profitability. Financial statements are used by various stakeholders, such as investors, creditors, and management, to make informed decisions, evaluate performance, and ensure accountability and transparency in financial reporting.

Question 2: What are limitations of financial statements?

Answer 2: Financial statements, while essential for understanding the financial health of an entity, have several limitations:

1. Historical Data: Financial statements primarily reflect past performance and do not provide real-time or future projections, limiting their usefulness for forecasting.
2. Qualitative Aspects Ignored: They focus on quantitative data and often overlook qualitative factors like employee morale, customer satisfaction, or market conditions.
3. Accounting Policies: The use of different accounting methods (e.g., depreciation or inventory valuation) can lead to inconsistencies and limit comparability between organizations.
4. Non-Monetary Items: Non-financial factors, such as brand value or intellectual property, are typically excluded, even though they may significantly impact the entity’s performance.
5. Inflation Effects: Financial statements may not account for the impact of inflation, leading to distorted values of assets or profits.
6. Manipulation Risks: Creative accounting practices can sometimes misrepresent the true financial position, affecting the reliability of the data.
7. Static Nature: They provide a snapshot of a specific period and may not capture dynamic changes or ongoing events impacting the business.

Question 3: List any three objectives of financial statements?

Answer 3: The financial statements are basically the accounts that are prepared for providing the true financial information to the internal as well as external users. These statements lay the base for the decision making process and policy designing by different users. The following are the various objectives for preparing financial statements. 

1. To Provide Information about Economic Resources- Financial statements provide adequate, accurate, reliable and periodical information about the employment of economic resources. It also specifies the obligation of a business to its external users who do not have the powers or authority to access the information directly.

2. To Ascertain the Financial Position- These statements help to reveal the true financial position of an enterprise. In other words, it discloses the performance and position of an organisation in terms of their profitability, solvency, liquidity, financial viability, etc.

3. To Ascertain the Earning Capacity- These statements are prepared with an objective of providing useful information to compare, predict and evaluate the earning capacity of a business firm. Thus, it helps in ascertaining the earning capacity of firms.

Question 4: State the importance of financial statements to:
(i) shareholders
(ii) creditors
(iii) government
(iv) investors

Answer 4: The following are the importance of financial statements for

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 analyse 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, 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.

Question 5: How will you disclose the following items in the Balance Sheet of a company;
(i) Current assets, inventory
(ii) Contigent liabilities in notes to accounts
(iii) Shareholders Funds, Reserve and Surplus
(iv) Fixed Assets, Intangible Assets
(v) Proposed Dividend for the current year
(vi) Non Current Liabilities
(vii) Arrears of Dividend on Commulative Preference Shares.

Answer 5: The following items will be disclosed in the balance sheet as –

Inventories – Sub-head,
Current Assets – Main Head.

Contingent Liability – Main Head in Notes to Accounts.

Shareholders Fund – Main Head,
Reserves and Surplus – Sub head.

Fixed Assets – Sub-head,
Intangible Assets – A part of Sub-head.

Proposed Dividend for the current year – Under the head Current Liabilities and Sub-head Short term Provision.

Non-Current Liabilities – Main Head.

Arrears of Dividend on Cumulative Preference Shares – Under the head Current Liabilities and Sub-head Other Current Liabilities.

Long Answer Questions

Question 1: Explain the nature of the financial statements.

Answer 1: The financial statements are the end-products of the accounting process. The financial statements not only reveal the true financial position of the company but also help various accounting users in decision making and policy designing process. The nature of the financial statements depends upon the following aspects like recorded facts, conventions, concepts, and personal judgment

1. Recorded facts– The items recorded in the financial statements reflect their original cost i.e. the cost at which they were acquired. Consequently, financial statements do not reveal the current market price of the items. Further, financial statements fail to capture the inflation effects.

2. Conventions– The preparation of financial statements is based on some accounting conventions like, Prudence Convention, Materiality Convention, Matching Concept, etc. The adherence to such accounting conventions makes financial statements easy to understand, comparable and reflects the true and fair financial position of the company.

3. Accounting Assumptions − These basic accounting assumptions like Going Concern Concept, Money Measurement Concept, Realisation Concept, etc are called as postulates. While preparing financial statements, certain postulates are adhered to. The nature of these postulates is reflected in the nature of the financial statements.

4. Personal Judgments- Personal value judgments play an important role in deciding the nature of the financial statements. Different judgments are attached to different practices of recording transactions in the financial statements. For example, recording stock either at market value or at the cost requires value judgment. Similarly, provision on various assets, method of charging depreciation, period related to writing off intangible assets depends on personal judgment. Thus, personal judgments determine the nature of the financial statements to a great extent.

Question 2: Explain in detail about the significance of the financial statements.

Answer 2: Importance of financial statements

1. They provide 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, they provide shareholders with an idea about the viability of the business while the same statement can be used by tax authorities to determine the tax payable by an organisation.

2. They help 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 gives 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.

Question 3: Explain the limitations of financial statements.

Answer 3: The following are the limitations of financial statements of a company:

(i) Historical Data: The items recorded in the financial statements reflect their original cost i.e. the cost at which they were acquired. Consequently, financial statements do not reveal the current market price of the items. Further, financial statements fail to capture the inflation effects.

(ii) Ignorance of Qualitative Aspect: The qualitative aspects like colour, size and brand position in the market, employee’s qualities and capabilities are not disclosed by the financial statements.

(iii) Biased: Financial statements are based on the personal judgments regarding the use of methods of recording. For example, the choice of practice in the valuation of inventory, method of depreciation, amount of provisions, etc. are based on the personal value judgments and may differ from person to person. Thus, the financial statements reflect the personal value judgments of the concerned accountants and clerks.

(iv) Inter-firm Comparisons: Usually, it is difficult to compare the financial statements of two companies because of the difference in the methods and practices followed by their respective accountants.

(v) Window dressing: The possibility of window dressing is probable. This might be because of the motive of the company to overstate or understate the assets and liabilities to attract more investors or to reduce taxable profit. For example, Swivam showed high fixed deposits in the Assets side of its Balance Sheet for better liquidity that gave false and misleading signals to the investors.

(vi) Difficulty in Forecasting: Since the financial statements is based on historical data, so they fail to reflect the effect of inflation. This drawback makes forecasting difficult.

Question 4: Prepare the format of statement of profit and loss and explain its items upto the as certainment of profit before tax.

Answer 4: Format of Statement of Profit and Loss– As per the REVISED SCHEDULE VI

Statement of Profit and Loss

for year ended…

Statement of Profit and LossFor 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 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 the Profit and Loss Statement are

1. Revenue from Operations: Revenue is earned from the basic operating activities of an organisation. 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.

Question 5: Prepare the format of balance sheet and explain the various elements of balance sheet.

Answer 5: COMPANY’S BALANCE SHEET- As per REVISED SCHEDULE VI

Name of the Company. BALANCE SHEET as 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

Items under the head Equity and Liabilities

1. Shareholders’ Funds

1. Share Capital:
   1. Authorised Capital-  
   2. Issued Share Capital-
   3. Subscribed Share Capital-
   4. Called-up Share Capital-
   5. Paid-up Share Capital-
   6. Share Forfeiture Amount
2. Reserves and Surplus: It consists of the following items to be shown separately.
   1. Capital Reserve
   2. Capital Redemption Reserve
   3. Securities Premium
   4. Debenture Redemption Reserve
   5. Revaluation Reserve
   6. Other Reserves (such as General Reserve, Tax reserve, etc.)
   7. Proposed Additions to Reserves
   8. Sinking Fund
   9. Share Option Outstanding Amount
   10. Surplus i.e. credit balance in Statement of Profit and Loss. However, in case of debit balance in Statement of Profit and Loss, it is deducted from the total of reserves.
3. Money received against warrants: A financial instrument that allows its holder to acquire equity shares is known as Share Warrant. Any amount received by the company on such share warrants is required to be disclosed under this head.

2. Share Application Money Pending Allotment

Amount received by the company on application of shares issued and the allotment on which is to be received after the date of balance sheet is shown under this head separately.

3. Non-Current Liabilities

These are comprised of the following items.

1. Long-Term Borrowings- It is further consists of the given below items.

• Debentures
• Bonds
• Term Loans from bank as well as from other parties
• Deposits
• Other Loans and Advances

2. Deferred Tax Liabilities (Net)
3. Other Long-Term Liabilities
4. Long-Term Provisions

4. Current Liabilities

Under this head the following items are disclosed.

1. Short-term Liabilities- It is further comprised of the given below items.

• Loan repayable on demands from bank as well as from other parties
• Deposits
• Other Loans and Advances

2. Trade Payables
3. Other Current Liabilities- It includes all those liabilities that are not covered in any of the mentioned above heads. Some examples are-

• Income received in advance
• Interest accrued but not due on borrowings
• Interest accrued and due on borrowings
• Unpaid Dividends
• Calls-in-Advance and interest thereon
• Other Payables etc.

4. Short-term Provisions- These are categorised as follows.

• Provision for Doubtful Debts
• Proposed Dividend
• Provision for Tax
• Provision for Employees Benefits
• Others

Items under the head Assets

Non-Current Assets and Current Assets are two titles that come under the heading of Assets.

1. Non-Current Assets

1. Fixed Assets- These are further classified s follows.

• Tangible Assets (such as, Building, Machinery, Furniture, etc.)
• Intangible Assets (such as Goodwill, Trademark, Copyrights, Mining Rights, etc.)
• Capital Work-in-Progress
• Intangible Assets under development

2. Non-current Investments- These are the investments that are not held for the purpose of resale.
3. Deferred Tax Assets
4. Long-term Loans and Advances
5. Other Non-Current Assets

2. Current Assets

Under this head the following items are shown.

1. Current Investments- Investments that are held for conversion into cash within a period of 12 months. These are further classified as follows.

• Investment in Equity Shares
• Investment in Preference Shares
• Investment in Government or Trust Securities
• Investment in Debentures or Bonds
• Investment in Mutual Funds
• Investment in Partnership Firms
• Other Investments

2. Inventories- It comprised of the given items.

• Raw Materials
• Work-in-Progress
• Finished Goods
• Stock-in-Trade (goods acquired for trading)
• Stores and Spares
• Loose Tools

3. Trade Receivables
4. Cash and Cash Equivalents- These are classified as follows.

• Cash on Hand
• Balances with Banks
• Cheques, Drafts on Hand
• Others

5. Short-term Loans and Advances
6. Other Current Assets (such as prepaid expenses, advance taxes, etc.)

Question 6: Explain how financial statements are useful to the various parties who are interested in the affairs of an undertaking?

Answer 6: 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 organisation 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 organisation for loan requirements in future.

2. Creditors: Businesses owe 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 organisation will help in making investment decisions.

4. Tax Authorities: Information is required by them for determining the types of taxes that can be charged to the organisation.

5. Government: Government needs information to determine National Income, GDP and industrial growth. Financial statements help the government formulate various policies and address issues like poverty and unemployment.

6. Consumers: An organisation 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 to gain 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.

Question 7: ‘Financial statements reflect a combination of recorded facts, accounting conventions and personal judgements’. Discuss.

Answer 7: The financial statements not only help in presenting the true and real financial position of the company but they also help in taking managerial decisions. The nature of the financial statements depends upon the following aspects like recorded facts, conventions, concepts and personal judgement.

(i) Recorded Facts: The items recorded in the financial statements reflect their original cost i.e., the cost at which they were acquired. Consequently, financial statements do not reveal the current market price of the items. Further, financial statements fail to capture the inflation effects.

(ii) Accounting Conventions: The preparation of financial statements is based on some accounting conventions like, Prudence Convention, Materiality Convention, Matching Concept, etc. The adherence to such accounting conventions makes financial statements easy to understand, comparable and reflects the true and fair financial position of the company. Besides the above while preparing financial statements, certain concepts are adhered to. The nature of these concepts is reflected in the nature of the financial statements.

(iii) Personal Judgements: The nature of financial statement largely depends upon the personal value judgements. Personal judgements are attached to different practices of recording transactions in the financial statements, e.g., recording stock either at market value or at the cost requires value judgement depending upon the personal judgement. Thus, personal judgements help in determining the nature of the financial statements.

Question 8: Explain the process of preparing income statement and balance sheet.

Answer 8: The process of preparing Income Statement (now Statement of Profit and Loss) as per Revised Schedule VI is explained below in a chronological order.

• 1. Prepare a Trial Balance on the basis of the balances of various accounts in the ledger.
• 2. Record Revenue from Operations i.e. Sales less Sales Return. 
• 3. Add Other Incomes to Revenue from Operations (such as profit on sale of assets, cash discount received etc.) to ascertain Total Revenue.
• 4. Deduct all the expenses incurred by the company from Total Revenue (such as cost of material consumed, finance cost, depreciation and amortisation etc.) to ascertain Profit before Tax.
• 5. Deduct Tax paid by the company from Profit before Tax to ascertain the Profit or loss for the period.

The process of preparing Balance Sheet as per the Revised Schedule VI is explained below in a chronological order.
As per the this schedule, the Balance Sheet is prepared in vertical format and divided into two parts i.e. (i) Equity and Liabilities and (ii) Assets

• 1. Under the head Equity and Liabilities: Shareholders’ Funds, Share Application Money Pending Allotment, Non-Current Liabilities and Current Liabilities are recorded.
• 2. After recording Equity and Liabilities, Assets are recorded. Under this head all the Non-Current Assets (such as Tangible and Intangible Assets, Capital Work-in-Progress etc.) and Current Assets (such as Inventories, Trade Receivables, Current Investment etc.) are recorded.
• 3. At the end, total of two heads is ascertained, which must be equal.

Numerical Questions

Question 1: Show the following items in the balance sheet as per the provisions of the Companies Act, 2013 in Schedule III:

Particulars	Rs.	Particulars	Rs.
Preliminary Expenses	2,40,000	Good will	30,000
Discount on 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

Answer 1:

Extract of Balance Sheet as of 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

Question 2: On April 1 , 2017, Jumbo Ltd., issued 10,000; 12% debentures of Rs. 100 each a discount of 20%, redeemable after 5 years. The company decided to write-off discount on issue of such debentures on March 31, 2018. Show the items in the balance sheet of the company immediately after the issue of these debentures.

Answer 2:

Balance Sheet as of 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

Question 3: From the following information prepare the balance sheet of Gitanjali Ltd.
Inventories Rs. 14,00,000; Equity Share Capital Rs. 20,00,000; Plant and Machinery Rs. 10,00,000; Preference Share Capital Rs. 12,00,000; Debenture Redemption Reserve Rs. 6,00,000; Outstanding Expenses Rs. 3,00,000; Proposed Dividend Rs. 5,00,000; Land and Building Rs. 20,00,000; Current Investments Rs. 8,00,000; Cash Equivalent Rs. 10,00,000; Short term loan from Zaveri Ltd. (A Subsidiary Company of Twilight Ltd.) Rs. 4,00,000; Public Deposits Rs. 12,00,000.

Answer 3:

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
			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
			30,00,000

Question 4: From the following information prepare the balance sheet of Jam Ltd.
Inventories Rs. 7,00,000; Equity Share Capital Rs. 16,00,000; Plant and Machinery Rs. 8,00,000; 8% Preference Share Capital Rs. 6,00,000; General Reserves Rs. 6,00,000; Bills payable Rs. 1,50,000; Provision for taxation Rs. 2,50,000; Land and Building Rs. 16,00,000; Non-current Investments Rs. 10,00,000; Cash at Bank Rs. 5,00,000; Creditors Rs. 2,00,000; 12% Debentures Rs. 12,00,000.

Answer 4:

Balance Sheet as of 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
				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
				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
				24,00,000
7. Cash and Cash Equivalents
Bank				5,00,000

Question 5: Prepare the balance sheet of Jyoti Ltd., as at March 31, 2017 from the following information.
Building Rs. 10,00,000; Investments in the shares of Metro Tyers Ltd. Rs. 3,00,000; Stores & Spares Rs. 1,00,000; Statement of Profit and Loss (Dr.) Rs. 90,000; 5,00,000 Equity Shares of Rs. 20 each fully paid-up; Capital Redemption Reserve Rs. 1,00,000; 10% Debentures Rs. 3,00,000; Unpaid dividends Rs. 90,000; Share options outstanding account Rs. 10,000.

Answer 5:

Balance Sheet as of 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
			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
			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

Note: There is a misprint in the book. The number of equity shares issued must be 50,000 so that both the sides of the Balance Sheet stand equal.

Question 6: Brinda Ltd., has furnished the following information:
(a) 25,000, 10% debentures of Rs.100 each;
(b) Bank Loan of Rs.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 at March 31, 2017.

Answer 6:

Extract of Balance Sheet as of 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
		35,00,000
2. Other Current Liabilities
Interest on Debentures		2,50,000

Question 7: Prepare a balance sheet of Black Swan Ltd., as at 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

Answer 7:

Extract of Balance Sheet as of 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
			4,200
3. Long-Term Borrowings
10% Debentures			3,000
4. Tangible Assets
Fixed Assets	9,000
Less: Depreciation	700		8,300
			8,300
5. Cash and Cash Equivalents
Cash			6,100
6. Other Current Assets
Preliminary Expenses			300