INDEX

Chapter
Chapter Name Page No.
No.
1. Financial Statement of Companies 1–6
2. Cash Flow Statement 7–9
3 Buy-Back of Securities 10 – 14
4. Internal Reconstruction 15 – 19
5. Amalgamation (Including AS 14) 20 – 24
6. Branch Accounting 25 – 27
7. AS-13 Accounting for Investments 28 – 30
8. AS-21 Consolidated Financial Statements 31 – 39
9. Framework for Prep. & Pres. of Financial Statements 40
10. Accounting Standards 41 – 59
 CA NITIN GOEL PYQ May 2023 & Nov 2023

CHAPTER: FINANCIAL STATEMENT OF COMPANIES

Question 1 (Inter May 2023) (10 Marks) Pg no._____
The following balances are extracted from the books of Travese Limited as on 31st March 2023:
Particular Amount ₹
Debit Credit
7% Debentures 48,45,000
Plant & Machinery (at cost) 37,43,400
Trade Receivables 35,70,000
Land 97,37,000
Debenture Interest 3,39,150
Bank Interest 13,260
Sales 47,22,600
Transfer Fees 38,250
Discount received 66,300
Purchases 28,86,600
Inventories 1.04.2022 4,97,250
Factory Expenses 2,58,060
Rates, Taxes and Insurance 65,025
Repairs 1,49,685
Sundry Expenses 1,27,500
Selling Expenses 26,520
Directors Fees 38,250
Interest on Investment for the year 2022-2023 55,000
Provision for depreciation 5,96,700
Miscellaneous receipts 1,42,800

Additional information:
(i) Closing inventory on 31.03.2023 is ₹ 4,76,850.
(ii) Miscellaneous receipts represent cash received from the sale of the Plant on 01.04.2022.
The cost of the Plant was ₹ 1,65,750 and the accumulated depreciation thereon is ₹ 24,865.
(iii) The Land is re-valued at ₹ 1,08,63,000.
(iv) Depreciation is to be provided on Plant & Machinery at 10% p.a. on cost.
(v) Make a provision for income tax @ 25%.
(vi) The Board of Directors declared a dividend of 10% on Equity shares on 4th April, 2023.
You are required to prepare a Statement of Profit and Loss as per Schedule III of the
Companies Act, 2013 for the year ended 31.03.2023. (Ignore previous year figures)

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CA NITIN GOEL PYQ May 2023 & Nov 2023

Solution
Statement of Profit and Loss of Travese Limited.
For the year ended 31st March, 2023
Particulars Notes Amount
I. Revenue from operations 1 47,22,600
II. Other income 2 1,61,465
III. Total Income (I + II) 48,84,065
IV. Expenses:
Purchases of Inventory-in-Trade 28,86,600
Changes in inventories 3 20,400
Finance costs 4 3,52,410
Depreciation and amortization expenses 5 3,57,765
Other expenses 6 6,65,040
Total expenses 42,82,215
V. Profit (Loss) for the period (III - IV) before tax 6,01,850
VI Provision for tax (1,50,463)
VII Profit for the period 4,51,387

Notes to accounts
₹
1 Revenue from operations
Sale 47,22,600
2 Other Income
Transfer fees 38,250
Discount received 66,300
Interest on Investment 55,000
Profit on sale of plant 1,915
Total 1,61,465
3 Changes in inventories
Opening Inventory 4,97,250
Less: Closing Inventory (4,76,850) 20,400
Total 20,400
4 Finance costs
Interest on Debentures 3,39,150
Bank Interest 13,260
Total 3,52,410
5 Depreciation and Amortization expenses
Depreciation on Plant & Machinery (10% x (37,43,400 - 3,57,765
1,65,750)
6 Other expenses
Factory expense 2,58,060
Rent, Taxes and Insurance 65,025
Repairs 1,49,685
Sundry expenses 1,27,500
Selling expenses 26,520
Director’s fees 38,250
Total 6,65,040
Note: The final dividend will not be recognized as a liability at the balance sheet date (even if it is
declared after reporting date but before approval of financial statements) as per accounting
standards. Hence, it is not recognized in the financial statement for the year ending 31st March
2023. Such dividend will be disclosed in notes only.

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 CA NITIN GOEL PYQ May 2023 & Nov 2023

Question 2 (Inter Nov 2023) (20 Marks) Pg no._____

The following is the Trial Balance of Falgun Ltd., as on 31st March, 2023:
Particulars Debit Credit
Amount (₹) Amount (₹)
Equity Share Capital (Fully paid-up shares of ₹100 each) 10,00,000
10% Preference Share Capital of Face Value ₹ 100 each 4,00,000
General Reserve 2,85,000
2,000 10% Debentures of ₹ 100 each 2,00,000
Securities Premium Account 50,000
Land (at Cost) 7,00,000
Plant and Machinery 14,70,000
Furniture 4,00,000
Provision for Depreciation - Plant and Machinery 3,00,000
Provision for Depreciation – Furniture 1,90,000
Trade Receivables 3,10,000
Trade Payables 72,000
Cash-in-Hand 1,34,000
Cash-at-Bank 3,05,000
Bank Over Drafts from Nationalized bank 2,00,000
(Long Term) (Secured by Hypothecation of Stocks)
6% Secured Loan from State Finance Corporation 4,50,000
(repayable after 3 years) (Secured by Hypothecation of
Plant and Machinery)
Unclaimed Dividend 23,000
Loan from Director (Short Term) 1,00,000
Adjusted Purchases 2,25,000
Closing Stock 1,12,000
Sales 8,46,000
Carriage Inward 17,200
Miscellaneous Expenses 10,200
Selling and Distribution Expenses 46,600
Depreciation 1,80,000
Salaries 72,000
Director's Fees 40,000
Travelling Expenses 1,30,000
(include ₹ 50,000/- for foreign tour)
Profit and Loss Account 40,000
Office Expenses 28,000
Rent Received 24,000
Total 41,80,000 41,80,000

Additional Information:
(i) Authorized Capital — divided into –
a) 20,000 equity shares of ₹ 100 each.
b) 10,000 10% preference shares of ₹ 100 each
(ii) Equity shares include, 2,500 equity shares issued for consideration other than cash.
(iii) The company has had land professionally valued and decides to include it in the Balance
sheet at its valuation of ₹ 8,50,000.

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CA NITIN GOEL PYQ May 2023 & Nov 2023

(iv) It is proposed to capitalize part of the undistributed profits by making bonus issue to the
shareholders by allocating one equity share of ₹ 100 each for every 5 shares held.
(v) Trade Receivables of ₹ 46,000 are due for more than six months. There is no doubtful
amount.
(vi) Depreciation expenses include depreciation of ₹ 1,10,000 on Plant and Machinery and
that of ₹ 70,000 on Furniture.
(vii) Cash-at-Bank include ₹ 55,000 with Desire Bank Ltd., which is not scheduled Bank.
(viii) Miscellaneous expenses included ₹ 5,000 being audit fees paid to auditors.
(ix) Bills Receivables for ₹ 35,000 maturing on 31st July, 2023 has been discounted.
(x) Balance of secured loan from State Finance Corporation is inclusive of ₹ 36,000 for
interest accrued but not due.
(xi) Director's declared final dividend 8% on 6th April, 2023, transferring any amount that may
be required from General Reserve. Ignore Taxation.
(xii) Interest on debenture for the year is outstanding as on 31st March, 2023.
You are required to prepare Balance Sheet as on 31st March, 2023 and Statement of Profit and
Loss with Notes to Accounts for the year ending 31st March, 2023 as per Schedule III of the
Companies Act, 2013. Ignore previous years' figures. (Ignore taxation). (All workings should
form part of the answer)

Solution
Statement of Profit and Loss of Falgun Ltd.
for the year ended 31st March, 2023
Particulars Notes ₹
I. Revenue from operations 8,46,000
II. Other income (Rent income) 24,000
III. Total Income (I + II) 8,70,000
IV. Expenses:
Cost of materials consumed / Cost of purchases 9 2,42,200
Changes in inventories of finished goods, work-in-progress and -
Inventory-in-Trade
Employee benefits expense 10 72,000
Finance costs (Interest on debentures) 11 20,000
Depreciation and amortization expenses 12 1,80,000
Other expenses 13 2,54,800
Total expenses 7,69,000
V. Profit (Loss) for the period (III - IV) 1,01,000

Balance Sheet of Falgun Ltd. as at 31st March, 2023

Particulars Note No ₹
Equity and Liabilities
1. Shareholders' funds
a. Share capital 1 14,00,000
b. Reserves and Surplus 2 6,26,000
2. Non-current liabilities
a. Long-term borrowings 3 8,14,000
3. Current liabilities
a. Short term borrowings 4 1,00,000
b. Trade Payables 72,000
c. Other current liabilities 5 79,000
Total 30,91,000

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CA NITIN GOEL PYQ May 2023 & Nov 2023

ASSETS
1. Non-current assets
a. Property, plant and equipment 6 22,30,000
2. Current assets
a. Inventories 1,12,000
b. Trade receivables 7 3,10,000
c. Cash and bank equivalents 8 4,39,000
Total 30,91,000
Note: There is a Contingent Liability for bills discounted but not yet matured amounting ₹ 35,000.

Notes to accounts:
₹
Share Capital
1 Authorised capital:
10,000, 10% preference shares of ₹ 100 10,00,000
20,000 Equity shares of ₹ 100 each 20,00,000
30,00,000
Issued and subscribed capital:
4,000, 10% preference shares of ₹ 100 each fully paid 4,00,000
10,000 Equity shares of ₹ 100 each, fully paid 10,00,000
(of the above 2,500 shares have been issued for consideration 14,00,000
other than cash)
2 Reserves and Surplus
Securities premium 50,000
Revaluation reserve 1,50,000
General Reserve 2,85,000 4,85,000
Surplus (Profit & Loss balance)
Opening balance 40,000
Profit for the year 1,01,000 1,41,000
Total 6,26,000
3 Long-term borrowings
Debentures
2,000 10% Debentures of ₹ 100 each 2,00,000
Secured: Term Loans
6% Loan from State Finance Corporation [repayable after 4,14,000
3years (₹ 4,50,000 - ₹ 36,000 for interest accrued but not due)]
(secured by hypothecation of Plant and machinery)
Others
Bank overdraft from Nationalized bank (secured by 2,00,000
hypothecation of stocks)
Total 8,14,000
4 Short-term borrowings
Loan from Directors 1,00,000
5 Other current liabilities
Unclaimed dividend 23,000
Interest on Debentures 20,000
Interest accrued but not due on loans (SFC) 36,000 79,000
6 Property, plant and equipment
Land 7,00,000
Add: Revaluation Adjustment 1,50,000 8,50,000

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CA NITIN GOEL PYQ May 2023 & Nov 2023

Plant & Machinery 14,70,000

Less: Provision for depreciation (3,00,000) 11,70,000
Furniture 4,00,000
Less: Provision for depreciation (1,90,000) 2,10,000
Total 22,30,000
7 Trade receivables
Debts outstanding for a period exceeding six months 46,000
Other Debts 2,64,000
3,10,000
8 Cash and cash equivalents
Cash at bank with Scheduled Banks (3,05,000-55,000) 2,50,000
with others 55,000
Cash in hand 1,34,000 4,39,000
9 Cost of materials consumed/Cost of purchases
Adjusted purchases 2,25,000
Carriage inward 17,200 2,42,200
10 Employee benefit expense
Salaries 72,000
11 Finance cost
Debenture interest 20,000
12 Depreciation and amortization expenses
Plant and Machinery 1,10,000
Furniture 70,000 1,80,000
13 Other expenses
Misc. expenses (10,200-5,000) 5,200
Audit fee 5,000
Selling & Distribution expenses 46,600
Director’s fee 40,000
Travelling expenses (including foreign tour) 1,30,000
Office expenses 28,000 2,54,800

Notes:
1. The final dividend will not be recognized as a liability at the balance sheet date (even if it is
declared after reporting date but before approval of the financial statements) as per Accounting
Standards. Hence, it has not been recognized in the financial statements for the year ended 31
March, 2023. Such dividends will be disclosed in notes only.
2. Since Bonus issue is in proposal state, no adjustment has been made in the given answer.

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 CA NITIN GOEL PYQ May 2023 & Nov 2023

CHAPTER: CASH FLOW STATEMENT

Question 1 (Inter May 2023) (10 Marks) Pg no._____
The summarised Balance Sheet of Flora Limited for the year ended 31st March, 2022 and 31st
March, 2023 are as below :
Assets 31/03/2023 (₹) 31/03/2022 (₹)
Goodwill 15,000 28,000
Land 5,75,000 6,00,000
Furniture and Fixtures 48,000 44,000
Vehicles 22,000 28,000
Office Equipment 21,000 -
Long-term Investments 60,000 1,10,000
Stock-in-hand 96,000 88,000
Bills Receivables 18,150 14,500
Trade Receivables 46,000 52,000
Cash and Bank Balances 1,29,850 34,500
Total 10,31,000 9,99,000
Liabilities 31/03/2023 (₹) 31/03/2022 (₹)
Equity Share Capital 6,80,000 5,00,000
General Reserves 90,000 60,000
Profit & Loss Account 93,000 52,000
Capital Reserve 75,000 -
8% Debenture of ₹ 100 each - 3,00,000
Loan from Mr. Andrew - 15,000
Bills Payable 11,000 13,000
Trade Payables 49,000 45,000
Creditors for Equipment 10,500 -
Outstanding Expenses 4,500 3,000
Provision for Taxation 18,000 11,000
Total 10,31,000 9,99,000

Additional Information:
a. On 1st April, 2022, one of the vehicles was sold for ₹ 3,000. No new purchases were made
during the year.
b. A part of the total land was sold for ₹ 1,25,000 (Cost ₹ 1,00,000) and the balance land was
revalued. Capital reserve consists of profit on revaluation of balance land. No new
purchases were made during the year.
c. Depreciation provided during the year:
• Furniture and Fixtures ₹ 5,000
• Vehicles ₹ 2,200
d. Interim dividend of ₹ 5,000 was paid during the year.
e. Provision for taxation for the year 2022-2023 was ₹ 16,000.
f. 8% Debentures were redeemed at par after half year interest payment on 30th September,
2022.
g. Part of the long-term investments were sold at a profit of ₹ 8,000.
h. Interest income received during the year on long-term investment was ₹ 6,500.
You are required to prepare Cash Flow Statement from Operating Activities for the year ended
31st March, 2023 using indirect method. (All workings should form part of the answer)

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CA NITIN GOEL PYQ May 2023 & Nov 2023

Solution
Cash Flow Statement of Flora Limited from Operating Activities
For the year ended 31st March, 2023
₹ ₹
Net profit before taxation (W.N.1) 92,000
Adjustment: Depreciation on Furniture & Fixtures 5,000
Depreciation on Vehicles 2,200
Profit on sale of land (₹ 125000 - ₹ 100000) (25,000)
Loss on sale (Vehicle) 800
Profit on sale of long-term investments (8,000)
Interest received (6,500)
Interest on debentures 12,000
Goodwill written off 13,000 (6,500)
Operating profit before working capital changes 85,500
Increase in Stock in Hand (8,000)
Increase in Bills Receivables (3,650)
Decrease in Trade Receivables 6,000
Decrease in Bills payable (2,000)
Increase in Trade Payables 4,000
Increase in outstanding expenses 1,500 (2,150)
Cash generated from Operations 83,350
Less: Income taxes paid 9,000
Cash flow from Operating activities 74,350

Alternative presentation:
Cash Flow Statement of Flora Limited from Operating Activities
For the year ended 31st March, 2023
₹
Net profit before taxation (W.N. 1) 92,000
Adjustment: Depreciation on Furniture & fixtures 5,000
Depreciation on Vehicles 2,200
Profit on sale of land (25,000)
Loss on sale (Vehicle) 800
Profit on sale of long- term investments (8,000)
Interest received (6,500)
Interest on debentures 12,000
Goodwill written off 13,000 (6,500)
Operating profit before working capital changes 85,500
Increase in inventory (8,000)
Decrease in Trade receivables* 2,350
Increase in Trade payables** 2,000
Increase in outstanding expenses 1,500 (2,150)
Cash generated from Operations 83,350
Less: Income taxes paid 9,000
Cash flow from Operating activities 74,350
*[(18,150 +46,000) - (14,500 + 52,000)]
**[(11,000 + 49,000) - (13,000+45,000)]

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CA NITIN GOEL PYQ May 2023 & Nov 2023

Working Notes:
1. Net Profit before Taxation
Particulars (₹)
Increases in Profit and Loss A/c (93,000-52,000) 41,000
Increases in General Reserve (90,000-60,000) 30,000
Interim dividend Paid 5,000
Transfer – provision for Taxation 16,000
Increase in retained earnings (Net Profit before Taxation) 92,000

2. Provision for Taxation Account

₹ ₹
To Bank (Balancing figure) 9,000 By Balance b/d 11,000
To Balance c/d 18,000 By Profit and loss account 16,000
27,000 27,000

3. Vehicles Account
Particulars (₹)
Opening Balance 28,000
Less: Depreciation (2,200)
Less: Closing Balance (22,000)
Book value of vehicle sold 3,800
Less: Sale Value (3,000)
Loss on sale of Vehicle 800

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 CA NITIN GOEL PYQ May 2023 & Nov 2023

CHAPTER: BUYBACK OF SECURITIES

Question 1 (Inter May 2023) (10 Marks) Pg no._____
VIJ Ltd. has the following capital structure as on 31st March, 2022:
Particulars (₹ in Lakhs)
Equity share capital (Shares of ₹ 10 each, fully paid) 990
Reserve and Surplus:
General Reserve 720
Securities Premium Account 270
Profit & Loss Account 270
Infrastructure development Reserve 540 1,800
Loan Funds 5,400
On the recommendation of the Board of Directors, the shareholders of the company have
approved on 2nd September 2022 a proposal to buyback the maximum permissible number of
equity shares, considering the sufficient funds available at the disposal of the company.
The current market value of the company's shares is ₹ 25 per share and in order to induce
the existing shareholders to offer their shares for buy-back, it was decided to offer a price of
20% over market value.
You are also informed that the Infrastructure Development Reserve is created to satisfy
income tax requirements.
You are required to compute the maximum permissible number of equity shares that can be
bought back in the light of the above information and also under a situation where the loan
funds of the company were either ₹ 3600 lakh or ₹ 4500 lakh.
The entire buy-back is completed by 09/12/2022, show the accounting entries with full
narrations in the company's books in each situation.

Solution
Statement determining the maximum number of shares to be bought back
Particulars When loan fund is
₹ 5,400 lakhs ₹ 3,600 lakhs ₹ 4,500 lakhs
Shares Outstanding Test (W.N.1) 24.75 24.75 24.75
Resources Test (W.N.2) 18.75 18.75 18.75
Debt Equity Ratio Test (W.N.3) Nil 11.25 Nil
Maximum number of shares that can Nil 11.25 Nil
be bought back [least of the above]

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CA NITIN GOEL PYQ May 2023 & Nov 2023

Journal Entries for the Buy-Back (applicable only when loan fund is ₹ 3,600 lakhs)
₹ in lakhs
Particulars Debit Credit
(a) Equity share capital account Dr. 112.50
Securities premium account Dr. 225.00
To Equity share buy- back account 337.5
(Being cancellation of shares bought back)
(b) Equity share buy-back account Dr. 337.50
To Bank account 337.50
(Being buy-back of 11.25 lakhs equity shares of ₹ 10
each @ ₹ 30 per share)
(c) General reserve account Dr. 112.50
To Capital redemption reserve account 112.50
(Being transfer of free reserves to capital redemption
reserve to the extent of nominal value of share capital
bought back out through free reserves)

Notes:
1. In place of entry (a), Alternative set of entries can be given as follows:
Equity share capital A/c Dr. 112.50
Premium payable on buy-back Dr. 225.00
To Equity shares buy-back A/c 337.50
(Being the amount due on buy-back of equity shares)
Securities Premium A/c Dr. 225.00
To Premium payable on buy-back 225.00
(Being premium payable on buy-back charged from
Securities premium)

2. In place of entry (c), Alternative set of entries can be given as follows:

Securities Premium A/c Dr. 45.00
General Reserve A/c Dr. 67.50
To Capital redemption reserve A/c 112.50
(Being transfer of free reserves to capital redemption
reserve to the extent of nominal value of share capital
bought back out through free reserves)
Working Notes:
1. Shares Outstanding Test
Particulars (Shares in lakhs)
Number of shares outstanding 99
25% of the shares outstanding 24.75

2. Resource Test
Particulars ₹
Paid up capital (₹ in lakhs) 990
Free reserves (₹ in lakhs) (720+270+270) 1260
Shareholders’ funds (₹ in lakhs) 2250
25% of Shareholders fund (₹ in lakhs) ₹ 562.5 lakhs
Buy-back price per share ₹ 30
Number of shares that can be bought back (shares in lakhs) 18.75 lakhs shares

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CA NITIN GOEL PYQ May 2023 & Nov 2023

3. Debt Equity Ratio Test

Particulars When loan fund is (all ₹ are in lakhs)
5,400 3,600 4,500
(a) Loan funds 5400 3600 4500
(b) Minimum equity to be maintained 2700 1800 2250
after buy- back in the ratio of 2:1
(c) Present equity shareholders fund 2250 2250 2250
(d) Future equity shareholder fund N.A. 2137.5(2250-112.5) N.A.
(e) Maximum permitted buy-back of Nil 337.5 (by simultaneous Nil
Equity [(d) – (b)] equation)
(f) Maximum number of shares that can Nil 11.25 (by simultaneous Nil
be bought back @ ₹ 30 per share equation)
(shares in lakhs) (See Working Note)

Under Situations 1 & 3 the company does not qualify for buy-back of shares as per the
provisions of the Companies Act, 2013.

Working Note:
Amount transferred to CRR and maximum equity to be bought back will be calculated by
simultaneous equation method.

Suppose amount equivalent to nominal value of bought back shares transferred to CRR
account is ‘x’ and maximum permitted buy-back of equity is ‘y’. Then

Equation 1: (Present equity – Nominal value of buy-back transfer to CRR) – Minimum equity
to be maintained= Maximum permissible buy-back of equity
(2250 –x)-1800 = y (1)
Since 450 – x = y

Equation 2: (Maximum Buy-back/Offer Price for Buy-back x Nominal Value)

= Nominal value of the shares bought –back to be transferred to CRR
= (y/30 x 10) = x Or
= 3x = y (2)

by solving the above two equations we get

x = ₹ 112.5 lakhs
y = ₹ 337.5 lakhs

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 CA NITIN GOEL PYQ May 2023 & Nov 2023

Question 2 (Inter May 2023) (5 Marks) Pg no._____

What are the conditions to be fulfilled by a Joint Stock Company to buy-back its equity shares
as per Companies Act, 2013? Explain.

Solution
As per the Companies Act, 2013 a joint stock company has to fulfill the following conditions to
buy-back its own equity shares:
(1)
a) the buy-back is authorised by its articles;
b) a special resolution has been passed in general meeting of company authorising the buy-back;
However, above provisions do not apply where buy-back is 10% or less of the paid-up equity
capital + free reserves & is authorized by board resolution passed at duly convened meeting of
the directors.
c) the buy-back must be equal or less than 25% of the total paid-up capital and free reserves of the
company: (Resource Test)
d) Further, the buy-back of shares in any financial year must not exceed 25% of its total paid-up
capital and free reserves: (Share Outstanding Test)
e) the ratio of the debt owed by the company (both secured & unsecured) after such buy-back is
not more than twice the total of its paid-up capital & its free reserves: (Debt-Equity Ratio Test)
f) all the shares or other specified securities for buy-back are fully paid-up;
g) the buy-back of the shares or other specified securities listed on any recognised stock exchange
is in accordance with the regulations made by the Securities and Exchange Board of India in
this behalf;
Provided that no offer of the buy-back under this sub section shall be made within a period of
one year reckoned from the date of closure of a previous offer of buy-back if any. This means
that there cannot be more than one buy-back in one year.
(2) Every buy-back shall be completed within twelve months from the date of passing the special
resolution, or the resolution passed by the board of directors.
(3) Where a company purchases its own shares out of the free reserves or securities premium
account, a sum equal to the nominal value of shares so purchased shall be transferred to the
Capital Redemption Reserve Account and details of such account shall be disclosed in the
Balance Sheet.
(4) Premium (excess of buy-back price over the par value) paid on buy-back should be adjusted
against free reserves and/or securities premium account.

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 CA NITIN GOEL PYQ May 2023 & Nov 2023

Question 3 (Inter Nov 2023) (5 Marks) Pg no._____

The following is the extract of Balance Sheet of Yellow Limited as on 31st March 2023.

Particulars Amount (₹)

4,00,000 Equity shares of ₹ 10 each 40,00,000
General Reserve 48,00,000
Profit & Loss Account 10,00,000
Securities Premium 18,00,000
Secured Loans 60,00,000
Unsecured Loans 32,00,000
Current Liabilities 28,00,000
Total 2,36,00,000
Property, Plant and Equipment 90,00,000
Investments 18,00,000
Current Assets 1,28,00,000
Total 2,36,00,000
The company intends to buy-back 80,000 equity shares of ₹ 10 each at a premium of 150%.
You are required to state whether the company can buy back equity shares.

Solution
Determination of Buy-back of maximum no. of shares as per the Companies Act, 2013
1. Shares Outstanding Test
Particulars (Shares)
Number of shares outstanding 4,00,000
25% of the shares outstanding 1,00,000

2. Resources Test: Maximum permitted limit 25% of Equity paid up capital + Free Reserves
Particulars
Paid up capital (₹) 40,00,000
Free reserves (₹) (48,00,000 + 18,00,000 + 10,00,000) 76,00,000
Shareholders’ funds (₹) 1,16,00,000
25% of Shareholders fund (₹) 29,00,000
Buy-back price per share ₹ 25
Number of shares that can be bought back (shares) 1,16,000
Actual Number of shares for buy-back 80,000

3. Debt Equity Ratio Test: Loans cannot be in excess of twice the Equity Funds post Buy-Back
Debt Equity ratio of the company should not exceed 2:1 after such buy-back.
In this case, the debt is ₹ 92,00,000 (60,00,000 + 32,00,000) and equity after such buy back will be
₹ 96,00,000 (1,16,00,000 – 20,00,000). Thus, the debt equity ratio is 0.96:1, which is less than 2:1.
Company qualifies all tests for buy-back of shares and came to the conclusion that it can buy 80,000
equity shares @ ₹ 25.
* Total debt may be considered (i.e including current liability).

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 CA NITIN GOEL PYQ May 2023 & Nov 2023

CHAPTER: INTERNAL RECONSTRUCTION

Question 1 (Inter May 2023) (5 Marks) Pg no._____
X Ltd. had ₹ 1,00,000 equity share capital divided into 1,000 shares of ₹ 100 each out of which
₹ 80 per share was called up and paid up. It has 1,500 cumulative preference shares of ₹ 100
each fully paid up. Intangible assets include Goodwill of ₹ 80,000 and patents of ₹ 27,800.
Preference dividends are in arrears of ₹ 33,000.
You are required to show the entries (Ignore dates) under each of the following conditions:
a. If X Ltd. resolves to subdivide the equity shares into 10,000 equity shares of ₹ 10 each of
which ₹ 8 per share is called up and paid up.
b. If X Ltd. resolves to convert its 1,000 equity shares of ₹ 100 each (assume fully paid) into
₹ 1,00,000 worth of stock.
c. The preference shares are to be converted into 11% unsecured debentures of ₹ 100 each
(including arrears of dividends).
d. Patents and Goodwill to be written-off.

Solution
Journal Entries in the books of X Ltd.
₹ ₹
(i) Equity Share Capital (₹ 100) A/c Dr. 80,000
To Equity Share Capital (₹ 10) A/c 80,000
(Being the sub-division of 1,000 shares of ₹ 100 each with
₹ 80 paid up into 10,000 shares ₹ 10 each with ₹ 8 paid up
by resolution in general meeting dated )
(ii) Equity Share Capital (₹ 100) A/c Dr. 1,00,000
To Equity Stock A/c 1,00,000
(Being conversion of 1,000 fully paid Equity Shares of ₹
100 into ₹ 1,00,000 Equity Stock as per resolution in
general meeting dated…)
(iii) Cumulative Preference Share Capital A/c Dr. 1,50,000
Capital Reduction (Reconstruction) A/c Dr. 33,000
To 11% Debentures (Unsecured) 1,83,000
(Being 1,500 cumulative preference shares of ₹ 100 each
fully paid up converted into 11% debentures of ₹ 100 each
(including arrears of dividends amounting ₹ 33,000)
(iv) Capital Reduction (Reconstruction) A/c Dr. 1,07,800
To Goodwill 80,000
To Patents 27,800
(Writing off patents, goodwill)

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 CA NITIN GOEL PYQ May 2023 & Nov 2023

Question 2 (Inter Nov 2023) (20 Marks) Pg no._____

Following is the Balance Sheet of Tourma Limited as at 31st March, 2023:
Particulars Notes ₹ in Lakhs
Equity and Liabilities:
1. Shareholders funds
A. Share Capital 1 24.00
B. Reserves and Surplus 2 (9.10)
2. Non-current liabilities
A. Long-term borrowings 3 3.20
3. Current liabilities
A. Trade Payables 1.15
B. Short Term Borrowings – Bank Overdraft 1.40
C. Other current liabilities 4 0.32
D. Short term provisions 5 0.42
Total 21.39
Assets:
1. Non-current assets
A. Property, Plant and Equipment 6 7.80
B. Intangible Assets 7 1.70
C. Non-Current Investments 8 1.80
2. Current Assets
A. Inventory 5.12
B. Trade Receivables 4.32
C. Cash & Cash Equivalents 0.65
Total 21.39

Notes to Accounts:
₹ in Lakhs
1 Share Capital
16,000 Equity Shares of ₹ 100 each 16.00
8,000 6% Preference Shares of ₹ 100 each 8.00
24.00
2 Reserves and Surplus
Debit balance of profit & loss account (9.10)
(9.10)
3 Long-term borrowings
3,200 10% Debentures 3.20
3.20
4 Other current liabilities
Interest payable on debentures 0.32
0.32
5 Short term provisions
Provision for taxation 0.42
0.42
6 Property, Plant and Equipment
Plant & Machinery 5.00
Furniture & Fixture 2.80
7.80

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CA NITIN GOEL PYQ May 2023 & Nov 2023

7 Intangible Assets
Patents & Copyrights 1.70
1.70
8 Non-Current Investments
Investments (Market Value ₹ 1,10,000) 1.80
1.80
As on 1st April, 2023, the following scheme of reconstruction was finalized for which necessary
resolution was passed and approvals were obtained from appropriate authorities.
Accordingly, it was decided that:
a) Each equity share is to be sub-divided into ten fully paid-up equity shares of ₹ 10 each.
After sub-division, each shareholder shall surrender to the company 40% of his holding,
for the purpose of reissue to trade payables as necessary.
b) Preference shareholders would give up 30% of their capital and 12% Debentures (face
value ₹ 100 each) shall be issued to them for balance holdings.
c) The company would issue additional 12% Debentures (face value ₹ 100 each) for ₹ 4,00,000
for meeting its working capital requirement and final settlement of Bank Overdraft at 90%
of the amount.
d) Existing debenture holders would accept Furniture & Fixture in full settlement of their
dues.
e) Trade payables claim shall be reduced to 70%, it is to be settled by the issue of equity
shares of ₹ 10 each out of shares surrendered.
f) The shares surrendered and not re-issued shall be cancelled.
g) The taxation liability is to be settled at 50,000.
h) Investments value to be reduced to market price.
i) Balance of profit and loss account is to be written off.
j) The value of inventories is to be increased by ₹ 32,000 and Provision for Doubtful Debts is
to be created at 5% of Trade Receivables.

You are required to:

1. Pass necessary journal entries in the books of account of Tourma Limited.
2. Prepare Reconstruction Account, and
3. Prepare Balance Sheet of the company after internal reconstruction.

Solution
Journal Entries in the books of Tourma Ltd.
Dr. ₹ In lakhs Cr. ₹ In lakhs
Equity Share Capital (₹ 100) A/c Dr. 16.00
To Share Surrender A/c 6.40
To Equity Share Capital (₹ 10) A/c 9.60
(Subdivision of 16,000 equity shares of ₹ 100 each into 1,60,000
equity shares of ₹ 10 each and surrender of 64,000 of such
subdivided shares as per capital reduction scheme)
Preference Share Capital (₹ 100) A/c Dr. 8.00
To 12% Debentures A/c 5.60
To Reconstruction (₹ 100) A/c 2.40
(12% Debenture issued to Preference Shareholders and 30% of
the capital foregone by them)
Bank A/c Dr. 4.00
To 12% Debentures (₹ 100) A/c 4.00
(Being 12% debentures issued)

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CA NITIN GOEL PYQ May 2023 & Nov 2023

Bank Overdraft A/c Dr. 1.40

To Bank A/c 1.26
To Reconstruction A/c 0.14
(Being bank overdraft amount paid)
10% Debentures A/c Dr. 3.20
Interest payable A/c Dr. 0.32
To Debenture holders A/c 3.52
(Being Interest payable on the 10% debentures credited to
debenture holders A/c)
Debentureholders A/c Dr. 3.52
To Furniture & fixtures A/c 2.80
To Reconstruction A/c 0.72
Trade payables A/c Dr. 1.15
To Reconstruction A/c 1.15
(Transferred claims of the trade payables to reconstruction
account, 70% of which is being clear reduction and equity shares
are being issued in consideration of the balance)
Share Surrender A/c Dr. 6.40
To Equity Share Capital A/c 0.805
To Reconstruction A/c 5.595
(Issued equity shares to discharge the claims of the trade payables
respectively as per scheme and the balance in share surrender
account is being transferred to reconstruction account)
Provision for Taxation A/c Dr. 0.42
Reconstruction A/c Dr. 0.08
To Liability for taxation A/c 0.50
(Being conversion of the provision for taxation into liability for
taxation.)
Liability for taxation A/c Dr. 0.50
To Cash/Bank A/c 0.50
(Being taxation liability settled)
Reconstruction A/c Dr. 0.70
To Investment A/c 0.70
(Being investments’ value reduce to market price)
Inventory A/c Dr. 0.32
To Reconstruction A/c 0.104
To Provision for doubtful debts (4,32,000 x 5%) 0.216
(Being inventory revalued and provision for doubtful debts
created)
Reconstruction A/c Dr. 9.329
To Profit and Loss A/c 9.10
To Capital Reserve A/c 0.229
(Adjusted debit balance of profit and loss account against the
reconstruction account and the balance in the latter is being
transferred to capital reserve)

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CA NITIN GOEL PYQ May 2023 & Nov 2023

Balance Sheet of Tourma Limited (and reduced) as at...

Particulars Note No. ₹ In lakhs
I. Equity and Liabilities
(1) Shareholder's Funds
(a) Share Capital 1 10.405
(b) Reserves and Surplus 2 0.229
(2) Non-Current Liabilities
(a) Long-term borrowings 3 9.60
(3) Current Liabilities
Total 20.234
II. Assets
(1) Non-current assets
(a) Property, plant and equipment 4 5.00
(b) Intangible assets 5 1.70
(c) Non-current investments 6 1.10
(2) Current assets
(a) Inventories 7 5.44
(b) Trade receivables 8 4.104
(c) Cash and cash equivalents (W.N) 2.89
Total 20.234

Notes to Accounts
₹ In lakhs
1. Share Capital
Equity Share Capital
Issued Capital: 10.405 Equity Shares of ₹ 10 each (9.6 + 0.805) 10.405
(Of the above shares all are allotted as fully paid up pursuant to
capital reduction scheme by conversion of equity shares without
payment being received in cash)
2. Reserve and Surplus
Capital Reserve 0.229
3. Long-term borrowings
Unsecured Loans:
12% Debentures (5.60 + 4) 9.60
4. Property, Plant and Equipment
Plant & Machinery 5.00
5. Intangible assets
Patents & copyrights 1.70
6. Non-Current Investments
Investments 1.10
7. Inventory 5.12
Add: Appreciation under scheme of Reconstruction 0.32 5.44
8. Trade Receivables 4.32
Less: Provision for doubtful debts (0.216) 4.104

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 CA NITIN GOEL PYQ May 2023 & Nov 2023

CHAPTER: AMALGAMATION
Question 1 (Inter May 2023) (20 Marks) Pg no._____
X Ltd. and Y Ltd. had been carrying on business independently. They agreed to amalgamate
and form a new company XY Ltd. with an authorized share capital of ₹ 40,00,000 divided into
8,00,000 equity dares of ₹ 5 each. On 31st March, 2023 the respective information of X Ltd. and
Y Ltd. were as follows:
X Ltd. (₹) Y Ltd. (₹)
Share Capital 34,25,000 36,10,000
Trade Payable 59,70,000 18,02,500
Property, Plant and Equipment 58,25,000 37,40,000
Current Assets 31,45,000 15,99,500

Additional Information:
The following revalued figures of non-current and current assets are:
X Ltd. (₹) Y Ltd. (₹)
Property, Plant and Equipment 71,00,000 39,00,000
Current Assets 29,95,000 15,77,500

The debtors and creditors include ₹ 1,37,250 owed by X Ltd. to Y Ltd.

The purchase consideration is satisfied by issue of the following shares and debentures.
6,20,000 equity shares of XY Ltd. to X Ltd. and Y Ltd. in the proportion to the profitability of
their respective business based on the average net profit during the last four years which
were as follows:

X Ltd. (₹) Y Ltd. (₹)

2020 Profit 42,50,000 26,50,000
2021 Profit 44,45,760 27,60,000
2022 (Loss)/Profit (75,000) 34,00,000
2023 Profit 37,79,240 35,90,000

7.5% debenture in XY Ltd. at par to provide an income equivalent to 4% return business as on

capital employed in their respective business as on 31st Mar, 2023 after revaluation of assets.

You are required to:

(1) Compute the amount of debenture and shares to be issued to 'X' Ltd. and 'Y' Ltd.
(2) A Balance Sheet of XY Ltd. showing the position immediately after amalgamation.

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CA NITIN GOEL PYQ May 2023 & Nov 2023

Solution
1. Computation of amount of Debentures and Shares to be issued:
(i) Average Net Profit X Ltd. Y Ltd.
₹ (42,50,000+44,45,760-75,000+37,79,240)/4 31,00,000
₹ (26,50,000+27,60,000+34,00,000+35,90,000)/4 31,00,000
(ii) Equity Shares Issued
a) Ratio of distribution
X Ltd. : Y Ltd.
1 1
b) Number of shares
X Ltd. : 3,10,000
Y Ltd. : 3,10,000
6,20,000
c) Amount of shares
3,10,000 shares of ₹ 5 each = ₹ 15,50,000
3,10,000 shares of ₹ 5 each = ₹ 15,50,000
d)
Capital Employed (after revaluation of assets) X Ltd. (₹) Y Ltd. (₹)
Property, plant and equipment 71,00,000 39,00,000
Current Assets 29,95,000 15,77,500
1,00,95,000 54,77,500
Less: Current Liabilities (59,70,000) (18,02,500)
41,25,000 36,75,000

(iii) Debentures Issued

X Ltd. (₹) Y Ltd. (₹)
4% Return on capital employed 1,65,000 1,47,000
7.5% Debentures to be issued to provide (1,65,000 × 100/7.5) (1,47,000 × 100/7.5)
equivalent income: =22,00,000 =19,60,000

Balance Sheet of XY Ltd.

As at 31st March 2023 (after amalgamation)
Particulars Note No ₹
I. Equity and Liabilities
(1) Shareholders’ Funds
(a) Share Capital 1 31,00,000
(b) Reserves and Surplus 2 5,40,000
(2) Non-Current Liabilities
(a) Long-term borrowings 3 41,60,000
(3) Current Liabilities
(a) Trade Payables 4 76,35,250
Total 1,54,35,250
II. Assets
(1) Non-current assets
(a) PPE 5 1,10,00,000
(2) Current assets
(a) Other current assets 6 44,35,250
Total 1,54,35,250

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CA NITIN GOEL PYQ May 2023 & Nov 2023

Notes to Accounts
₹
1 Share Capital
Authorized
8,00,000 Equity Shares of ₹ 5 each 40,00,000
Issued and Subscribed
6,20,000 Equity Shares of ₹ 5 each 31,00,000
(all the above shares are allotted as fully paid-up
pursuant to a contract without payment being received in
cash)
2 Reserve and Surplus
Capital Reserve 5,40,000
3 Long-term borrowings
Secured Loans
7.5% Debentures
X Ltd. 22,00,000
Y Ltd. 19,60,000 41,60,000
Current Liabilities:
4 Trade Payables
X Ltd. 59,70,000
Y Ltd. 18,02,500
77,72,500
Less: Mutual Owings (1,37,250) 76,35,250
5 Property, Plant and Equipment:
X Ltd. 71,00,000
Y Ltd. 39,00,000 1,10,00,000
6 Other Current Assets:
X Ltd. 29,95,000
Y Ltd. 15,77,500
45,72,500
Less: Mutual Owings (1,37,250) 44,35,250

Working Notes:
X Ltd. ₹ Y Ltd. ₹ Total ₹
(1) Purchase Consideration
Equity Shares Issued 15,50,000 15,50,000 31,00,000
7.5% Debentures Issued 22,00,000 19,60,000 41,60,000
37,50,000 35,10,000 72,60,000
(2) Capital Reserve
(a) Net Assets taken over
Property, plant & equipment 71,00,000 39,00,000 1,10,00,000
Current Assets 29,95,000 14,40,250* 44,35,250
1,00,95,000 53,40,250 1,54,35,250
Less: Current Liabilities (58,32,750**) (18,02,500) (76,35,250)
42,62,250 35,37,750 78,00,000
(b) Purchase Consideration 37,50,000 35,10,000 72,60,000
(c) Capital Reserve [(a) - (b)] 5,12,250 27,750 5,40,000
* 15,77,500–1,37,250 = 14,40,250
** 59,70,000–1,37,250 = 58,32,750

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CA NITIN GOEL PYQ May 2023 & Nov 2023

Note: In Working note 2 given above, the mutual owings amounting ₹ 1,37,250 included in
debtors and creditors of X Ltd. and Y Ltd. have been adjusted. Alternatively, the capital reserve
can be computed without adjustment of mutual owings. In that case, this working note will be
presented in the following manner:
X Ltd. ₹ Y Ltd. ₹ Total ₹
Capital Reserve
(a) Net Assets taken over
Property, plant & equipment 71,00,000 39,00,000 1,10,00,000
Current Assets 29,95,000 15,77,500 45,72,500
1,00,95,000 54,77,500 1,55,72,500
Less: Current Liabilities (59,70,000) (18,02,500) (77,72,500)
41,25,000 36,75,000 78,00,000
(b) Purchase Consideration 37,50,000 35,10,000 72,60,000
(c) Capital Reserve [(a) - (b)] 3,75,000 1,65,000 5,40,000

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 CA NITIN GOEL PYQ May 2023 & Nov 2023

Question 2 (Inter Nov 2023) (5 Marks) Pg no._____

Raman Limited and Naman Limited decided to amalgamate and form a new company Rana
Limited as on 31st March, 2023 and provided you the following information :
As on 31st March, 2023 Revalued Figures for
Particulars Amalgamation
Raman Naman Raman Naman
Limited (₹) Limited (₹) Limited (₹) Limited (₹)
Equity shares of ₹ 10 each 6,72,000 2,52,000 - -
10% Preference Shares of ₹ 100 Each 3,36,000 1,68,000 - -
Reserves and Surplus 5,44,240 2,65,480 - -
Trade Payables 84,000 1,76,000 80,640 1,68,960
Property, Plant and Equipment 7,69,000 4,36,400 10,58,100 5,20,100
Goodwill 1,62,000 - 1,62,000 -
Inventories 1,89,000 1,17,600 2,78,620 2,06,780
Trade Receivables 2,81,000 1,47,000 2,47,140 1,38,180
Cash & Cash Equivalents 2,35,240 1,60,480 - -
The purchase consideration is to he satisfied as follows:
a) By issue of 4 Preference Shares of ₹ 100 each in Rana Limited @ ₹ 85 paid up and at a
premium of ₹ 30 per share for every 3 preference shares held in both the companies.
b) By issue of 5 Equity shares of ₹ 10 each in Rana Limited @ ₹ 7 paid up and at a premium
of ₹ 5 per share for every 3 equity shares held in both the companies.
c) In addition, necessary cash should be paid to equity shareholders of both the companies
as required to adjust the rights of shareholders of both the companies in accordance with
the intrinsic value of the shares of both the companies.
You are required to compute the purchase consideration for both the companies.

Solution
Purchase consideration:
Raman Ltd. ₹ Naman Ltd. ₹
Payable to preference shareholders: 5,15,200 2,57,600
Preference shares at ₹ 115 per share (3,360 x 4)/3 (1,680 x 4)/3
Equity Shares at ₹ 12 per share 13,44,000 5,04,000
(67,200 x 5/3) (25,200 x 5/3)
Cash [See W.N.] 41,260 94,980
19,00,460 8,56,580

Working note:
Raman Ltd. ₹ Naman Ltd. ₹
Goodwill 1,62,000 -
PPE 10,58,100 5,20,100
Trade receivables 2,47,140 1,38,180
Inventory 2,78,620 2,06,780
Cash & Cash Equivalent 2,35,240 1,60,480
19,81,100 10,25,540
Less: Trade payables (80,640) (1,68,960)
19,00,460 8,56,580
Payable in shares 18,59,200 7,61,600
Payable in cash 41,260 94,980

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 CA NITIN GOEL PYQ May 2023 & Nov 2023

CHAPTER: BRANCH ACCOUNTING

Question 1 (Inter May 2023) (5 Marks) Pg no._____
Artis Limited has a branch at Seattle USA. Its Trial Balance as on 31 st December, 2022 is as
follows.:
Dr. in US $ Cr. In US $
Stock as on 01.01.2022 22,000 -
Purchases 1,00,000 -
Sales - 1,30,500
Goods from H.O. 30,000 -
Salaries 4,000 -
Head Office A/c. - 27,000
Sundry Debtors 2,200 -
Sundry Creditors - 1,500
Cash at Bank & Hand 800 -
Total 1,59,000 1,59,000
The following information is given
a. Salaries outstanding are $ 500.
b. The Head Office sent goods to Branch for ₹ 24,00,000.
c. The Head Office shows an amount of ₹ 21,90,000 due from Branch.
The exchange rates were as below :
- On 1ST January 2022 - ₹ 79 to 1 $.
- On 31st December 2022 - ₹ 83 to 1 $.
- Average rate during the year was ₹ 79.50 to 1 $.
You are required to prepare the Seattle Branch Trial Balance incorporating adjustments given
above, converting dollars into rupees.

Solution
Seattle Branch Trial balance (in ₹)
Particulars Rate as per ₹ Debit ₹ Credit ₹
Stock (01-01-2022) 79.00 17,38,000
Purchases 79.50 79,50,000
Sales 79.50 1ss,03,74,750
Goods from HO Given 24,00,000
Salaries ($ 4,000 + $ 500 = $ 4,500 x ₹ 79.50 3,57,750
79.50)
Head Office A/c Given 21,90,000
Sundry Debtors 83.00 1,82,600
Sundry Creditors 83.00 1,24,500
Cash at Bank & Hand 83.00 66,400
Salaries Outstanding ($ 500 x ₹ 83) 83.00 41,500
Exchange gain 36,000
Total 1,27,30,750 1,27,30,750

Alternative: The amount of outstanding salary amounting $ 500 (included in the salaries)
may be converted at ₹ 83 and the salary paid during the year at ₹ 79.50. In that case the
amount of salaries including outstanding salary debited in the trial balance will be for ₹
3,59,500 [(4,000 X 79.5 =3,18,000) + (500 x 83= 41,500). In this case, the amount of exchange
gain will be computed as ₹ 34,250.

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 CA NITIN GOEL PYQ May 2023 & Nov 2023

Question 2 (Inter Nov 2023) (10 Marks) Pg no._____

Jolly Industries of Delhi is a trader in spices. It has a branch at Jalandhar to which Head office
invoice goods at 20% on sales. The Jalandhar branch sells spices both on cash and credit.
Branch remit all the cash received to Head Office Bank account, thus all expenses of branch
are also directly paid from head office.
From the following information given, Prepare Branch Accounts in the Head office ledger
using Stock and Debtors Method. Branch does not maintain any books of account, but send
fortnightly returns to Head office.
Particulars ₹
Stock at Jalandhar as on 1 April, 2022 (Cost Price)
st
1,00,000
Sundry Debtors at Jalandhar as on 1 April, 2022
st
1,10,000
Cash received from Debtors 3,45,000
Bad debts during the year 9,500
Discount allowed to Debtors 5,500
Goods received from Head Office at Invoice Price 6,00,000
Returns to Head office at Invoice Price 60,000
Normal loss of goods during transport (Out of Goods sent by H.O. to Branch) 12,000
Sales returns at Jalandhar Branch 11,000
Salaries and staff welfare expenses at Branch 54,000
Rent and taxes at Branch 9,000
Other Office Expenses 2,500
Sundry Debtors at Branch as at 31 March 2023
st
1,55,000
Stock at Jalandhar as on 31 March, 2023 (Cost Price)
st
1,20,000
Credit sales at Branch are four times of the cash Sales at Branch.

Solution
Books of Jolly Industries, Delhi Jalandhar
Branch Stock Account
Particulars ₹ Particulars ₹
To Balance b/d – Op Stock 1,25,000 By Bank A/c – Cash Sales 1,04,000
To Branch Debtors A/c – 11,000 By Branch Debtors A/c - Credit Sales 4,16,000
Sales Return
To Goods sent to Branch A/c 6,12,000 By Goods sent to Branch (Returns to 60,000
(6,00,000 +12,000) H.O.)
By Branch Stock Adjustment A/c 12,000
(Normal Loss)
By Branch Stock Adjustment A/c 6,000
(Abnormal Loss) (bal. fig.)
By Balance c/d - Closing stock 1,50,000
7,48,000 7,48,000

Jalandhar Branch Stock Adjustment Account

Particulars ₹ Particulars ₹
To Goods sent to Branch A/c 12,000 By Balance b/d 25,000
(1/5 of ₹60,000) (on returns) (20% of 1,25,000)
To Branch Stock A/c 1,200 By Goods sent to Branch A/c 1,22,400
(Abnormal Loss) (6,000x1/5) (1/5 of ₹ 6,12,000)
To Branch Stock A/c (Normal Loss) 12,000
To Balance c/d (1/5 of 1,50,000) 30,000

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CA NITIN GOEL PYQ May 2023 & Nov 2023

To Branch P&L A/c

(Profit on sale) – B.F. 92,200
1,47,400 1,47,400

Goods Sent to Branch Account

Particulars ₹ Particulars ₹
To Jalandhar Branch Stock 1,22,400 By Jalandhar Branch Stock A/c 6,12,000
Adjustment A/c
To Jalandhar Branch Stock A/c 60,000 By Jalandhar Branch Stock 12,000
(Returns) Adjustment A/c
To Purchases A/c 4,41,600
6,24,000 6,24,000

Branch Debtors Account

Particulars ₹ Particulars ₹
To Balance b/d 1,10,000 By Bank 3,45,000
To Branch Stock A/c 4,16,000 By Branch P&L A/c - Discount 5,500
By Branch P&L A/c - Bad Debts 9,500
By Branch Stock - Sales Returns 11,000
By Balance c/d 1,55,000
5,26,000 5,26,000

Branch Expenses Account

Particulars ₹ Particulars ₹
To Bank A/c (Rent & Taxes) 9,000 By Branch Profit & Loss A/c 65,500
(Transfer)
To Bank A/c (Salaries & 54,000
Staff Welfare expenses)
To Bank A/c (office expenses) 2,500
65,500 65,500

Branch Profit & Loss Account

for the year ending 31st March 2023
Particulars ₹ Particulars ₹
To Branch Expenses A/c 65,500 By Branch Stock Adj. A/c 92,200
To Branch Debtors A/c 5,500
To Branch Debtors A/c 9,500
To Abnormal Loss (cost) 4,800
To Net Profit transferred to Profit 6,900
& Loss A/c
92,200 92,200

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 CA NITIN GOEL PYQ May 2023 & Nov 2023

CHAPTER: AS 13: ACCOUNTING FOR INVESTMENTS

Question 1 (Inter May 2023) (10 Marks) Pg no._____
The following information is given for Mr. Atwood for the year ended 31.03.2023:
01.04.2022 Mr. Atwood has 3,000 equity shares in Sun Limited at a book value of ₹
3,30,000 (nominal value ₹ 100 each).
01.07.2022 Purchased 1,500 equity shares in Sun Limited for ₹ 1,38,600.
01.08.2022 Purchased 5,000, 9% Bonds at ₹ 97 cum-interest (face value ₹ 100). The due
dates of interest are 1st September and 1st March.
02.10.2022 Dividend declared on equity shares and paid by Sun Limited for the year 2021-
2022 @ 10%
15.10.2022 Sun Limited made a bonus issue of two equity shares for every five shares
held.
01.01.2023 1,000 equity shares in Sun Limited sold @ ₹ 115 per share
31.03.2023 Sold 4,000, 9% Bonds @ ₹ 99 ex-interest
1. The market price of Equity Shares of Sun Limited is ₹ 125 each and Bonds ₹ 98 each on
31st March 2023.
2. Interest on bonds was received on due dates.
You are required to prepare Investment Account in the books of Mr. Atwood for the year ended
31st March 2023, assuming that the investments are valued at the average cost or market
value, whichever is lower. (Round off to nearest Rupee)

Solution
In the books of Atwood
Investment in Equity Shares of Sun Ltd. Account
Date Particular No. Dividend (₹ ) Date Particular No. Dividend (₹)
1.04 To Bal. 3,000 3,30,000 2.10 By Bank 30,000 15,000
b/d A/c
(W.N. 5)
1.07 To Bank 1,500 1,38,600 1.1 By Bank 1,000 1,15,000
A/c A/c
15.10 To Bonus 1,800 31.3 By Bal 5,300 3,81,600
Issue c/d
(W.N.7)
1.01 To Profit 43,000
& Loss
A/c
(W.N. 6)
31.3 To Profit 30,000
& Loss
A/c
6,300 30,000 5,11,600 6,300 30,000 5,11,600

9% Bonds Account [Interest Payable: 1st September & 1st March]

Date Particular Nominal Interest Cost Date Particular Nominal Interest Cost
1.8 To Bank 5,00,000 18,750 4,66,250 1.9 By Bank - 22,500 -
A/c A/c
(W.N.1) (5,00,000
x9%x6/12)

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CA NITIN GOEL PYQ May 2023 & Nov 2023

31.3 To Profit 23,000 1.3 By Bank - 22,500 -

& Loss A/c
A/c (W.N
3)
31.3 By Bank 4,00,000 3,000 3,96,000
A/c (W.N
2)
31.3 To Profit 30,000 31.3 By 1,00,000 750 93,250
& Loss Balance
A/c c/d
(W.N.4)
5,00,000 48,750 4,89,250 5,00,000 48,750 4,89,250

Working Notes:
1. Cost of Bond purchased on 1st August, 2022
5,000, 9% bonds were purchased @ ₹ 97 cum-interest. Total amount paid 5,000 bonds x
₹ 97 = 4,85,000 which includes accrued interest for 5 months, i.e., 1st March, 2022 to 31st
July, 2022. Accrued interest will be ₹ 5,00,000 x 9/100x 5/12 = ₹ 18,750. Therefore, cost of
Bond purchased = ₹ 4,85,000 – 18,750 = ₹ 4,66,250.
2. Sale of bonds on 31st March, 2023
4,000 bonds were sold@ ₹ 99 ex-interest, i.e., Total amount received = 4,000 x 99 +
accrued interest for 1 month = ₹ 3,96,000 + ₹ 3,000 (4,00,000 x 9/100 x 1/12)
3. Profit on sale of bonds ₹
Sale value = 3,96,000
Cost of 4,00,000 9% bonds = 4,66,250/5,000x 4,000 = 3,73,000
Profit = 23,000
4. Value of bonds on 31.3.2023
Lower of:
Cost of bonds on 31.3.2023 will be ₹ 4,66,250/ 5,000 x 1,000 = ₹ 93,250.
Market Value on 31.3.2023 will be ₹ 1,000 X 98 = 98,000
Value of bonds on 31.3.2023 = ₹ 93,250
Interest accrued on bonds on 31.3.2023 = 1,00,000 x 9% x 1/12 = ₹ 750
5. Dividend on equity shares for 2021-22
Post acquisition dividend = 3,00,000 x 10% = ₹ 30,000 transferred to Profit & Loss account
Pre-acquisition dividend = 1,50,000 X 10% = ₹ 15,000 credited to investment A/c
6. Profit on sale of equity shares ₹
Sale value = 1,15,000
Cost of shares = 4,53,600 / 6,300 x 1,000 = 72,000
Profit = 43,000
(Average cost method being followed)
7. Value of equity shares at end of year
Lower of:
Cost of shares on 31.3.2023 will be ₹ 4,53,600 / 6,300 x 5,300 = ₹ 3,81,600
Market Value on 31.3.2023 will be ₹ 5,300 x 125 = 6,62,500
Value of shares = ₹ 3,81,600

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 CA NITIN GOEL PYQ May 2023 & Nov 2023

Question 2 (Inter Nov 2023) (10 Marks) Pg no._____

Following information is given by Mr. Happy (stock broker) relating to his holding in 10%
Government Bonds:
a) Opening Balance as 1st April, 2022 was 5,000 units (Nominal value ₹ 100 each), Cost ₹
4,85,000
b) On 1st June, 2022, Purchased 600 units, cum-interest @ ₹ 99
c) On 1st August, 2022, Purchased 2400 units, ex-interest @ ₹ 97.50
d) On 1st October, 2022, Sold 2,500 units @ ₹ 98.50, ex-interest
e) On 1st January, 2023, Sold 3,000 units @ ₹ 99 cum interest
Interest is received on 30th June and 31st December each year. Mr. Happy closes his books on
31st March each year.
Prepare Investment Account in the books of Mr. Happy assuming that FIFO method of
valuation is followed by Mr. Happy.

Solution
Investment A/c of Mr. Happy for the year ending on 31-3-2023 (10% Govt. Bonds)
Date Particular Nominal Interest Amount Date Particular Nominal Interest Amount
Value Value
01.04 To 5,00,000 12,500 4,85,000 30.06 By Bank - 28,000 -
Balance (5,60,000*
b/d 10%*6/12)
01.06 To Bank 60,000 2,500 56,900 01.10 By Bank 2,50,000 6,250 2,46,250
A/c A/c
01.08 To Bank 2,40,000 2,000 2,34,000 31.12 By Bank - 27,500 -
A/c (5,50,000
*10%*6/12)
01.10 To P & L - - 3,750 01.01 By Bank 3,00,000 - 2,97,000
A/c A/c
01.01 To P & L - - 7,083 31.03 By Bal. 2,50,000 6,250 2,43,483
A/c c/d
31.03 To P&L - 51,000 -
A/c-Tfr.
8,00,000 68,000 7,86,733 8,00,000 68,000 7,86,733
Working Note:
1. Purchase cost of 600 Units on 1.6.2022
600 Units @₹ 99 cum interest 59,400
Less: Interest for 5 months (2,500)
Purchase cost of 600 Units 56,900

2. Profit on sale of Units as on 1.10.2022

Sales price of Units (2,500 x ₹ 98.50) 2,46,250
Less: Cost price of Units (4,85,000*2,500/5,000) (2,42,500)
Profit on sale 3,750

3. Profit on sale of Units as on 01.01.2023

Sales price of Units (3,000 x ₹ 99) 2,97,000
Less: Cost price of Units (2,89,917)
First 2,500 out of Opening: (4,85,000*2,500/5,000) = 2,42,500
Next 500 out of 01.06.2022 (56,900*500/600) = 47,417
Profit on sale 7,083

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 CA NITIN GOEL PYQ May 2023 & Nov 2023

CHAPTER: AS 21: CONSOLIDATED FINANCIAL STATEMENTS

Question 1 (Inter May 2023) (15 Marks) Pg no._____
G Ltd. & its subsidiary K Ltd. give the following information for the year ended 31st March, 2023:
(in crores)
Particulars G Ltd. ₹ K Ltd. ₹
Sales and other Income 3,000 750
Increase in Inventory 750 100
Raw material consumed 600 100
Wages and Salaries 600 75
Production expenses 100 50
Administrative expenses 75 50
Selling and Distribution expenses 100 25
Interest 75 30
Depreciation 75 30

The following information is also given:

a. G Ltd. sold goods of ₹ 200 crores to K Ltd. at cost plus 25%. (1/5th of such goods were still
in inventory of K Ltd. at the end of the year)
b. G Ltd. holds 75% of the Equity share capital of K Ltd. and the Equity share capital of K Ltd.
is ₹ 800 crores on 01.04.2022 (date of acquisition of shares)
c. Administrative expenses of K Ltd. include ₹ 5 crore paid to G Ltd. as consultancy fees.
Also, selling and distribution expenses of G Ltd. include ₹ 20 crores paid to K. Ltd. as
commission.
Prepare a consolidated statement of Profit and Loss of G Ltd, with its subsidiary K Ltd. for the
year ended 31st March, 2023.

Solution
Consolidated statement of profit and loss of G Ltd. and its subsidiary K Ltd.
for the year ended on 31st March, 2023
Particulars Note No. ₹ in Crores
I. Revenue from operations 1 3,525
II. Total Income 3,525
III. Expenses
Cost of material purchased/consumed 2 650
Changes of inventories of finished goods 3 (842)
Employee benefit expense 4 675
Finance cost 5 105
Depreciation and amortization expense 6 105
Other expenses 7 225
Total expenses 918
IV. Profit before tax (II-III) 2,607

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CA NITIN GOEL PYQ May 2023 & Nov 2023

Notes to Accounts
₹ in ₹ in
Crores Crores
1. Revenue from operations
Sales and other income
G Ltd. 3,000
K Ltd. 750
3,750
Less: Inter-company sales (200)
Consultancy fees received by G Ltd. from K Ltd. (5)
Commission received by K Ltd. from G Ltd. (20) 3,525
2. Cost of material purchased/consumed
G Ltd. 600
K Ltd. 100
700
Less: Purchases by K Ltd. from G Ltd. (200) 500
Direct expenses (Production)
G Ltd. 100
K Ltd. 50 150
650
3. Changes of inventories of finished goods
G Ltd. 750
K Ltd. 100
850
Less: Unrealized profits ₹ 40 crores × 25/125 (8) 842
4. Employee benefits and expenses
Wages and salaries:
G Ltd. 600
K Ltd. 75 675
5. Finance cost
Interest:
G Ltd. 75
K Ltd. 30 105
6. Depreciation
G Ltd. 75
K Ltd. 30 105
7. Other expenses
Administrative expenses
G Ltd. 75
K Ltd. 50
125
Less: Consultancy fees received by G Ltd. from K Ltd. (5) 120

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CA NITIN GOEL PYQ May 2023 & Nov 2023

Selling and distribution Expenses:

G Ltd. 100
K Ltd. 25
125
Less: Commission received by K Ltd. from G Ltd. (20) 105
225

Note: The information (i) given in the question states that G Ltd. sold goods of ₹ 200 crores to
K Ltd. at cost plus 25%. In the above solution it has been considered that the amount of ₹ 200
crores is sale value. Alternatively, ₹ 200 crores may be assumed as the cost of the goods
sold. In that case, the solution will differ and will be as follows:

Alternative solution:
Consolidated statement of profit and loss of G Ltd. and its subsidiary K Ltd.
for the year ended on 31st March, 2023
Particulars Note No. ₹ in Crores
II. Revenue from operations 1 3,475
II. Total Income 3,475
III. Expenses
Cost of material purchased/consumed 2 600
Changes of inventories of finished goods 3 (840)
Employee benefit expense 4 675
Finance cost 5 105
Depreciation and amortization expense 6 105
Other expenses 7 225
Total expenses 870
IV. Profit before tax (II-III) 2,605

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CA NITIN GOEL PYQ May 2023 & Nov 2023

Notes to Accounts
₹ in ₹ in
Crores Crores
1. Revenue from operations
Sales and other income
G Ltd. 3,000
K Ltd. 750
3,750
Less: Inter-company sales (250)
Consultancy fees received by G Ltd. from K Ltd. (5)
Commission received by K Ltd. from G Ltd. (20) 3,475
2. Cost of material purchased/consumed
G Ltd. 600
K Ltd. 100
700
Less: Purchases by K Ltd. from G Ltd. (250) 450
Direct expenses (Production)
G Ltd. 100
K Ltd. 50 150
600
3. Changes of inventories of finished goods
G Ltd. 750
K Ltd. 100
850
Less: Unrealized profits ₹ 40 crores × 25/100 (10) 840
4. Employee benefits and expenses
Wages and salaries:
G Ltd. 600
K Ltd. 75 675
5. Finance cost
Interest:
G Ltd. 75
K Ltd. 30 105
6. Depreciation
G Ltd. 75
K Ltd. 30 105
7. Other expenses
Administrative expenses
G Ltd. 75
K Ltd. 50
125
Less: Consultancy fees received by G Ltd. from K Ltd. (5) 120
Selling and distribution Expenses:

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 CA NITIN GOEL PYQ May 2023 & Nov 2023

G Ltd. 100
K Ltd. 25
125
Less: Commission received by K Ltd. from G Ltd. (20) 105
225

Question 2 (Inter May 2023) (15 Marks) Pg no._____

H Ltd. acquired 15000 shares in S Ltd. for ₹ 1,55,000 on July 1, 2022. The Balance sheet of the
two companies as on 31st March, 2023 were as follows:
H Ltd. ₹ S Ltd. ₹
Equity and Liabilities:
Equity Share Capital 9,00,000 2,50,000
(Fully paid shares of ₹ 10 each)
General Reserve 1,60,000 40,000
Surplus i.e., Balance in Statement of Profit and Loss 80,000 25,000
Bills Payable 40,000 20,000
Trade Creditors 50,000 30,000
Total 12,30,000 3,65,000
Assets:
Machinery 7,00,000 1,50,000
Furniture 1,00,000 70,000
Investment in Equity Shares of S Ltd. 1,55,000 -
Stock-in-Trade 1,00,000 50,000
Trade Debtors 60,000 35,000
Bills Receivable 25,000 20,000
Cash at Bank 90,000 40,000
Total 12,30,000 3,65,000

The following additional information is provided to you:

a. General reserve appearing in the Balance Sheet of S Ltd, remained unchanged since
31st March, 2022.
b. Profit earned by S Ltd. for the year ended 31st March, 2023 amounted to ₹ 20,000.
c. H Ltd. sold goods to S Ltd. costing ₹ 8,000 for ₹ 10,000, 25% of these goods remained
unsold with S Ltd. on 31st March, 2023.
d. Creditors of S Ltd. include ₹ 4000 due to H Ltd. on account of these goods.
e. Out of Bills payable issued by S Ltd. ₹ 15,000 are those which have been accepted in
favour of H Ltd. Out of these, H Ltd. had endorsed by 31st March, 2023, ₹ 8000 worth of
bills receivable in favour of its creditors.
You are required to draw a consolidated Balance Sheet as on 31st March, 2023.

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CA NITIN GOEL PYQ May 2023 & Nov 2023

Solution
Consolidated Balance Sheet of H Ltd. and its Subsidiary S Ltd.
as at 31st March, 2023
Particulars Note No. (₹)
I. Equity and Liabilities
(1) Shareholder's Funds
(a) Share Capital 1 9,00,000
(b) Reserves and Surplus 2 2,73,500
(2) Minority Interest 3 1,26,000
(3) Current Liabilities
(a) Trade Payables 4 1,29,000
Total 14,28,500
II. Assets
(1) Non-current assets
(a) Property, Plant and Equipment 5 10,20,000
(2) Current assets
(a) Inventory 6 1,49,500
(b) Trade Receivables 7 1,29,000
(c) Cash & cash equivalent 8 1,30,000
Total 14,28,500
Notes to Accounts
₹
1. Share capital
Authorised, issued, subscribed and paid up
capital
90,000 equity shares of ₹ 10 each, fully paid up 9,00,000
2. Reserves and Surplus
General Reserves 1,60,000
Profit and Loss Account (W.N.5) 88,500
Capital Reserve (W.N. 4) 25,000 2,73,500
3. Minority interest in S Ltd. (WN 3) 1,26,000
4. Trade payables
Bills Payable
H Ltd. 40,000
S Ltd. 20,000
Less: Mutual payables (7,000) 53,000
Trade Creditors
H Ltd. 50,000
S Ltd. 30,000
Less: Mutual owing (4,000) 76,000 1,29,000
5. Property, plant and equipment
Machinery: H Ltd. 7,00,000
S Ltd. 1,50,000 8,50,000
Furniture: H Ltd. 1,00,000
S Ltd. 70,000 1,70,000 10,20,000
6. Inventory
H Ltd. 1,00,000
S Ltd. 50,000
Less: Unrealized profit (2,000x 25%) (500) 1,49,500

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CA NITIN GOEL PYQ May 2023 & Nov 2023

7. Trade receivables 1,29,000

Bills receivable:
H Ltd. 25,000
S Ltd. 20,000
Less: Mutual payables (7,000) 38,000
Debtors:
H Ltd. 60,000
S Ltd. 35,000
Less: Mutual owing (4,000) 91,000 1,29,000
8. Cash & cash equivalent
Cash at Bank H Ltd. 90,000
S Ltd. 40,000 1,30,000

Working Notes:
1. Percentage of holding No. of Shares Percentage
Holding Co. : 15,000 (60%)
Minority shareholders : 10,000 (40%)
Total Shares : 25,000

2. Analysis of Profits
Pre-acquisition profits Post-acquisition
and reserves of S Ltd. profits of S Ltd. (₹)
(₹)
General Reserve 40,000 ---
Opening balance of Profit and Loss 5,000 ---
Current Year’s profit (in 1:3) 5,000 15,000
50,000 15,000
H Ltd.’s share (60%) 30,000 9,000
Minority Interest (40%) 20,000 6,000

3. Minority Interest
Paid up value of 10,000 shares @ ₹ 10 each ₹ 1,00,000
Add: Share in pre-acquisition profits and reserve (40%) ₹ 20,000
Add: Share in post-acquisition profits (40%) ₹ 6,000
₹ 1,26,000

4. Capital Reserve for H Ltd.

(A) Cost of acquiring 15,000 shares of S Ltd. ₹ 1,55,000
(B) Paid up value of 15,000 shares of S Ltd. @ ₹ 10 each ₹ 1,50,000
Add: Share in pre-acquisition profit and reserves of S Ltd. ₹ 30,000
₹ 1,80,000
Capital Reserve (B-A) ₹ 25,000

5. Consolidated Balance of Profits of H Ltd.

Balance as per Statement of Profit and Loss ₹ 80,000
Add: Share in post-acquisition profits of S Ltd. ₹ 9,000
Less: Unrealised Profit in unsold stock of S Ltd. ₹ (500)
₹ 88,500

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 CA NITIN GOEL PYQ May 2023 & Nov 2023

Question 3 (Inter Nov 2023) (15 Marks) Pg no._____

GB Limited acquired 80% of equity shares of TB Limited on 1st April, 2016 at a cost of ₹
58,00,000 when TB Limited had an Equity share capital of ₹ 50,00,000 and Reserves and
Surplus of ₹ 4,64,000. The following information is provided:
Year Profit/(Loss) of TB Limited (₹)
2016-17 (14,50,000)
2017-18 (23,20,000)
2018-19 (29,00,000)
2019-20 (6,96,000)
2020-21 1,90,000
2021-22 6,80,000
2022-23 12,70,000
You are required to calculate the minority interests and cost of control at the end of each year
for the purpose of consolidation.

Solution
Year Profit / (Loss) Minority Additional Minority's Share of Cost of
Interest Consolidated losses borne by GB Control
(20%) P & L (Dr.) Cr. Ltd.
₹ Balance
At the -
time of 10,92,800
acquisition (W.N.)
in 2016
2016-17 (14,50,000) (2,90,000) (11,60,000) 14,28,800
(W.N.)
Balance 8,02,800
2017-18 (23,20,000) (4,64,000) (18,56,000) 14,28,800
Balance 3,38,800
2018-19 (29,00,000) (5,80,000) (23,20,000) 14,28,800
(2,41,200)
Loss of minority 2,41,200 (2,41,200) 2,41,200 2,41,200
borne by Holding Co.
Balance Nil (25,61,200)
2019-20 (6,96,000) (1,39,200) (5,56,800) 14,28,800
Loss of minority 1,39,200 (1,39,200) 1,39,200 3,80,400
borne by Holding Co.
Balance Nil (6,96,000)
2020-21 1,90,000 38,000 1,52,000 14,28,800
Profit share adjusted (38,000) 38,000 (38,000) 3,42,400
against losses of
minority absorbed by
Holding Co.
Balance Nil 1,90,000
2021-22 6,80,000 1,36,000 5,44,000
Profit share adjusted
against losses of (1,36,000) 1,36,000 (1,36,000) 2,06,400 14,28,800
minority absorbed by
Holding Co.
Balance Nil 6,80,000

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CA NITIN GOEL PYQ May 2023 & Nov 2023

2022-23 12,70,000 2,54,000 10,16,000 (2,06,400) Nil 14,28,800

(2,06,400) 2,06,400
Balance 47,600 12,22,400

Working Note:
Calculation of Minority interest and Cost of control on 1.4.2016
Share of Holding Co. Minority Interest
100% (₹) 80% (₹) 20% (₹)
Share Capital 50,00,000 40,00,000 10,00,000
Reserve 4,64,000 3,71,200 92,800
43,71,200 10,92,800
Less: Cost of investment (58,00,000)
Goodwill 14,28,800

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 CA NITIN GOEL PYQ May 2023 & Nov 2023

CHAPTER: FRAMEWORK FOR PREPARATION AND PRESENTATION OF

FINANCIAL STATEMENTS
Question 1 (Inter May 2023) (5 Marks) Pg no._____
Mille started a business on 01.04.2022 with a capital of ₹ 15,00,000. She purchased 1,500 units
of stock at ₹ 1,000 each. She sold the entire stock for ₹ 1,500 each unit till 31.03.2023.
You are required to calculate the maximum amount which can be withdrawn by Mille in order
to keep her capital intact, if Financial Capital is maintained at:
a. Historical Cost
b. Current Purchasing Power (opening index at 100 and closing index at 125)
c. Physical Capital Maintenance (Price per unit at the end of year is ₹ 1,350)

Solution
Financial Capital Maintenance at historical Costs
Sr. No. Particulars Computation ₹
(i) Opening Equity 1,500 x 1,000 15,00,000
(ii) Closing Equity 1,500 x 1,500 22,50,000
(iii) Maximum Drawing (ii)-(i) 7,50,000

Financial Capital Maintenance at current purchasing power

Sr. No. Particulars Computation ₹
(i) Opening Equity 1,500 x 1,000 x 125/100 18,75,000
(ii) Closing Equity 1,500 x 1,500 22,50,000
(iii) Maximum Drawing (ii)-(i) 3,75,000

Financial Capital Maintenance at Physical Capital Maintenance

Sr. No. Particulars Computation ₹
(i) Opening Equity 1,500 x1,350 20,25,000
(ii) Closing Equity 1,500 x 1,500 22,50,000
(iii) Maximum Drawing (ii)-(i) 2,25,000

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 CA NITIN GOEL PYQ May 2023 & Nov 2023

CHAPTER: ACCOUNTING STANDARDS

Applicability of AS
Question 1 (Inter Nov 2023) (5 Marks) Pg no._____
List down the applicable criteria under the companies (Accounting Standards) Rule, 2021, to
classify a company as Small and Medium Sized Company (SMC).

Solution
Criteria for classification of Companies under the Companies (Accounting Standards) Rules,
2021 to classify a company as Small and Medium-Sized Company (SMC):
“Small and Medium Sized Company” (SMC) means, a company-
a. whose equity or debt securities are not listed or are not in the process of listing on any
stock exchange, whether in India or outside India;
b. which is not a bank, financial institution or an insurance company;
c. whose turnover (excluding other income) does not exceed rupees two-fifty crores in the
immediately preceding accounting year;
d. which does not have borrowings (including public deposits) in excess of rupees fifty
crores at any time during the immediately preceding accounting year; and
e. which is not a holding or subsidiary company of a company which is not a small and
medium-sized company

AS 1: Disclosure of Accounting Policies

Question 1 (Inter May 2023) (5 Marks)
You are required to comment on the following cases as per the provisions of Accounting
Standard-1 ‘Disclosure of Accounting Policies’
a) Bee Limited has not complied with AS-2 "Valuation of inventories" and the same is
disclosed in the Notes on Accounts. Management is of the view that the financial
statements give a true and fair view as non-compliance with AS-2 is disclosed.
b) Cee Limited sold its Office Building for ₹ 10,00,000 on 1st March, 2023. The buyer has paid
the full amount and taken possession of the building. The book value of the Office Building
is ₹ 4,00,000. On 31st March 2023, documentation and legal formalities are pending. The
company has not recorded the disposal and the amount received is shown as an advance.
c) Dee Limited has prepared its accounts on cash basis and the same is not disclosed.
d) Jee Limited disclosed significant accounting policies adopted in the preparation of
financial statements, in the Directors' Report.

Solution
a) As per AS-I disclosure of accounting policies is not a remedy for wrong or inappropriate
treatment in accounting. In the given case the financial statement does not give a true and
fair view as they are not in compliance with AS-2.
b) Considering the substance over form as per AS-I, documentation and legal formalities
represent the form of the transaction, although the legal title has not been transferred,
the economic reality and substance are that the rights and beneficial interest in the Office
Building have been transferred. Therefore, recording of acquisition/ disposal (by the
transferee and transferor respectively) would in substance represent the transaction
entered into.

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 CA NITIN GOEL PYQ May 2023 & Nov 2023

c) Accrual is a fundamental accounting assumption. If it is not followed by the company, the

facts should be disclosed under AS-I. Hence the company should disclose the fact that the
cash basis of accounting has been followed in the notes on accounts.
d) The practice followed by the company is not correct. It should be disclosed as part of
financial statements (The director’s report is not part of financial statements).

Question 2 (Inter Nov 2023) (5 Marks)

Discuss Disclosure requirements in following cases as per AS 1.
(i) Accountant of A Ltd. charges a probable loss of losing a suit in books of accounts and
also disclosed the same fact in financial statements. The probability of losing the suit is
25%.
(ii) Accountant of A Ltd. capitalized all the revenue expenses of repair and maintenance
during the year to Plant & Machinery and is also disclosing the same as company policy
in financial statements.
(iii) A Ltd. has followed accrual basis of accounting since incorporation. The chief accountant
also disclosed this fact in financial statements.
(iv) A Ltd. was providing for after sales expenses @ 2% of sales for covering expenses during
the warranty period. Now A Ltd. observes that actual after sales expenses were much
less as compared to provision because of better technology used in manufacturing of the
products. Now, the Board of A Ltd. decides to account for these expenses as and when
they occur. Sales during the period are ₹ 50 crores.

Solution
i. In this case, accountant of company created a provision for damages of probability of
losing a suit by a charge against profits. Unless the probability of losing the suit is more
than probability of not losing it, there should not be any creation of provision for such
probable losses. So, there is no need to charge such loss against profit and disclosing
the same in financial statements.
ii. Repairs and maintenance are revenue expenditure and should not be added to the value
of assets, as these expenses do not increase the capacity of asset. Hence such expenses
should be charged to profit & loss statement.
Further the chief accountant also disclosed its policy of adding repairs to value of assets
by way of notes to accounts. As per AS 1 disclosure is not a method to correct the wrong
treatments. So, the contention of chief accountant is wrong.
iii. Accrual is one of the Fundamental accounting assumptions. If fundamental accounting
assumptions are followed properly then no specific disclosure is required.
Disclosure is required only when there is deviation and the company is not following
fundamental accounting assumptions. So the company need not disclose this in financial
statements.
iv. As per AS 1, any change in the accounting policies which has a material effect in the
current period or which is reasonably expected to have a material effect in later periods
should be disclosed. Accordingly, the notes on accounts should properly disclose the
change and its effect.
Note: So far, the company has been providing 2% of sales for meeting after sales
expenses during the warranty period. Now the company has improved the quality of its
products with better technology and has been observing that actual expenses are very
less than the provision, Hence, the company has decided not to make provision for such
expenses but to account for the same as and when expenses are incurred. Due to this
change, the profit for the year is increased by ₹1 crore than would have been the case if
the old policy were to continue.

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 CA NITIN GOEL PYQ May 2023 & Nov 2023

AS 2: Valuation of Inventories
Question 1 (Inter Nov 2023) (5 Marks) Pg no._____
In the following cases, find the value of closing stock as per AS 2:
(i) Sonu is a retailer dealing in toys. During the year, he purchased items worth for ₹ 1,47,000
and made a total sale ₹ 1,54,000. The average percentage of gross margin is 10% on cost.
Opening stock of toys at cost was ₹ 20,000.

(ii) On 21st March, 2023, Mohan purchased 250 chairs at ₹ 300 each. The selling price of the
chair is ₹ 400 each. Owing to a manufacturing defect, net realisable value of the whole lot
of chair was determined at 70% of their normal selling price. No chairs were sold during
the year.

Solution:
i. Cost of closing inventory is shown below:
₹
Sale value of opening stock and purchases (₹ 20,000 + ₹1,47,000) x 1.10 1,83,700
Sales (1,54,000)
Sale value of unsold stock 29,700
Less: Gross Margin (₹ 29,700 / 1.10) x 0.10 (2,700)
Cost of closing inventory 27,000

ii.
Closing stock at cost (250X ₹ 300) (i) 75,000
Net Realizable value of closing stock (₹ 280* × 250) (ii) 70,000
Value of closing stock [lower of (i) and (ii)] 70,000
*400*70% = 280

AS 5: Net P/L for period, Prior Period Items & Changes in A/cing Policies
Question 1 (Inter Nov 2023) (5 Marks)
The accountant of Beryl Limited has asked you to identify the following items as - Change in
Accounting Policies / Change in Accounting Estimates / Extraordinary Items / Prior period
items / Ordinary Activity.
(i) Non-provision for salary already due in earlier year.
(ii) Attachment of the property of the enterprise.
(iii) Introduction of new pension scheme for employees.
(iv) Change in Reserve for obsolete inventory.
(v) Settlement of litigation case.
(vi) Actual Bad debts exceed the provision.
(vii) Legislative changes having long term retrospective application.
(viii) Capitalisation of working capital loan interest.
(ix) Change from Cost Model to Revaluation Model for measurement of carrying amount of
PPE.
(x) Government sanctioned grant in current year for expenses incurred in previous
accounting year.

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 CA NITIN GOEL PYQ May 2023 & Nov 2023

Solution:
(i) Prior Period item
(ii) Attachment of property of enterprise is an extraordinary item.
(iii) Introduction of new pension scheme for employes is not a change in accounting policy.
It is an ordinary activity.
(iv) Change in provision for obsolete inventory is a change in accounting estimate.
(v) Litigation settlement is an ordinary activity but requires separate disclosure
(vi) Change in estimate
(vii) Ordinary activity requiring separate disclosure
(viii) Error*
(ix) Change in Accounting policy.
(x) Ordinary activity requiring separate disclosure or extra-ordinary item.
If it relates to the previous year then it can be considered as a prior period item.

AS 7: Construction Contracts
Question 1 (Inter May 2023) (5 Marks) Pg no._____
Fisher Construction Co. obtained a contract for construction of a commercial complex. The
following details are available in records of a company for the year ended 31st March, 2023:
Particulars Amount in Lakhs
Total contract price 24,000
Work certified 12,500
Work not certified 2,500
Estimated further cost to completion of work 17,500
Progress payment received 11,000
Progress payment to be received 3,000
Applying the provisions of AS 7, you are required to compute:
a. Profit / Loss for the year ended 31st March, 2023.
b. Contract work in progress at the end of financial year 2022-2023.
c. Revenue to be recognized out of the total contract value.
d. Amount due from/ to customers as at the year end.

Solution
(₹ In lakhs)
(i) Profit or Loss for the year ended 31.03.2023
Total cost of construction (12,500 + 2,500 + 17,500) 32,500
Less: Total contract price (24,000)
Total foreseeable loss to be recognized as expense 8,500
According AS 7, when it is probable that total contract costs will exceed total contract
revenue; the expected loss should be recognized as an expense immediately.

(₹ in lakhs)
(ii) Contract work-in-progress i.e. cost incurred to date are 15,000 lakhs
Work certified 12,500
Work not certified 2,500
Contract work in progress at the end of 2022-23 15,000

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 CA NITIN GOEL PYQ May 2023 & Nov 2023

(iii) Proportion of total contract value recognized as revenue:

For this, cost incurred till 31.03.2023 is 46.154% (15,000/32,500 x 100) to total costs of
construction.
Therefore, Proportion of total contract value recognized as revenue is
46.154% of ₹ 24,000 lakhs = ₹ 11,076.96 lakhs Or
46.15% (Approx.) of ₹ 24,000 lakhs = ₹ 11,076 lakhs

(iv) Amount due from/ to customers =

(Contract costs + Recognised profits – Recognised Losses)
– (Progress payments received + Progress payments to be received)
= (15,000 + Nil – 8,500) – (11,000 + 3,000) ₹ in lakhs
= [6,500 – 14,000] ₹ in lakhs
Amount due to customers = ₹ 7,500 lakhs

AS 9: Revenue Recognition
Question 1 (Inter May 2023) (5 Marks) Pg no._____
Toy Ltd. is engaged in manufacturing toys. They provide you the following information as on
31st March, 2023:
a. On 15th January, 2023, Toys worth ₹ 5,00,000 were sent to A Ltd. on consignment basis of
which 25% Toys unsold were lying with A Ltd. as on 31st March, 2023.
b. Toys worth ₹ 2,25,000 were sold to S Ltd. on 25th March, 2023 but at the request of S Ltd.,
these were delivered on 15th April, 2023.
c. On 1st November, 2022, toys worth ₹ 3,50,000 were sold on approval basis. The period of
approval was 4 months after which they were considered sold. Buyer sent approval for
75% goods upto 31st December, 2022 and no approval or disapproval received for the
remaining goods till 31st March, 2023.
You are required to advise the accountant of Toy Ltd., the amount to be recognised as revenue
in above cases in the context of AS-9.

Solution
As per AS 9 “Revenue Recognition”, in a transaction involving the sale of goods, performance
should be regarded as being achieved when the following conditions are fulfilled:
(i) the seller of goods has transferred to the buyer the property in the goods for a price or
all significant risks and rewards of ownership have been transferred to the buyer and the
seller retains no effective control of the goods transferred to a degree usually associated
with ownership; and
(ii) no significant uncertainty exists regarding the amount of the consideration that will be
derived from the sale of the goods.
Case (i) 25% toys lying unsold with consignee should be treated as closing inventory and sales
should not be recognized for ₹ 1,25,000 (25% of ₹ 5,00,000). In case of consignment sale
revenue should not be recognized until the goods are sold to a third party.
Sales for ₹ 3,75,000 (75% of ₹ 5,00,000) should be recognized for year ended 31st March, 2023.
Case (ii) The sale is complete but delivery has been postponed at buyer’s request. The entity
should recognize the entire sale of ₹ 2,25,000 for the year ended 31st March, 2023.
Case (iii) In case of goods sold on approval basis, revenue should not be recognized until the
goods have been formally accepted by the buyer or the buyer has done an act adopting the
transaction or the time period for rejection has elapsed or where no time has been fixed, a
reasonable time has elapsed. Therefore, revenue should be recognized for the total sales
amounting ₹ 3,50,000 as the time period for rejecting the goods had expired.

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 CA NITIN GOEL PYQ May 2023 & Nov 2023

AS 10: Property, Plant & Equipment

Question 1 (Inter May 2023) (5 Marks) Pg no._____
In the books of Topmaker Limited, carrying amount of Plant and Machinery as on 1st April, 2022
is ₹ 56,30,000.
On scrutiny, it was found that a purchase of Machinery worth ₹ 21,12,000 was included in the
purchase of goods on 1st June, 2022. On 30th June, 2022 the company disposed a Machine
having book value of ₹ 9,60,000 (as on 1st April, 2022) for ₹ 8,25,000 in part exchange of a new
machine costing ₹ 15,65,000.
The company charges depreciation @ 10% p.a. on written down value method on Plant and
Machinery.
You are required to compute:
(a) Depreciation to be charged to Profit & Loss Account.
(b) Book value of Plant & Machinery as on 31st March, 2023; and
(c) Profit/Loss on exchange of Plant & Machinery.

Solution
(i) Depreciation to be charged in the Profit & Loss Account
Particulars Amount in ₹
Depreciation on old Machinery 1,40,750
[10% on ₹ 56,30,000 for 3 months (01.04.2022 to 30.06.2022)]
Add: Depreciation on Machinery acquired on 01.06.2022 1,76,000
(₹21,12,000 X 10% X10/12)
Add: Depreciation on Machinery after adjustment of Exchange 4,67,625
[10% of ₹ 56,30,000 – 9,60,000 + 15,65,000) for 9 months]
Total Depreciation to be charged in Profit & Loss A/c 7,84,375

(ii) Book value of Plant & Machinery as on 31.3.2023

Particulars Amount in ₹
Balance as per books on 01.04.2022 56,30,000
Add: Included in purchases on 01.06.2022 21,12,000
Add: Purchases on 30.06.2022 15,65,00036,77,000
93,07,000
Less: Book value of Machine sold on 30.06.2022 (9,60,000)
83,47,000
Less: Depreciation on Machinery in use ₹ (7,84,375 -24,000) (7,60,375)
Book Value as on 31.03.2023 75,86,625
Note: The computation of depreciation and book value of Plant & Machinery can be presented
in the following alternative manner:

Particulars Book Value Period Depreciation Book Value as

or Cost or on 31.03.2023
Acquisition
Opening Value 46,70,000 01.04.2022 to 4,67,000 42,03,000
(56,30,000 – 31.03.2023 (46,70,000 x 10%)
9,60,000)
Sold 9,60,000 01.04.2022 to 24,000 -
30.06.2022 (9,60,000 x 10% x 3/12)
Purchases 21,12,000 01.06.2022 1,76,000 19,36,000
to 31.03.2023 (21,12,000 x 10% x 10/12)

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 CA NITIN GOEL PYQ May 2023 & Nov 2023

New Machinery 15,65,000 01.07.2022 1,17,375 14,47,625

to 31.03.2023 (15,65,000 x 10% x 9/12)
Total 7,84,375 75,86,625

(iii) Profit/Loss on Exchange of Machinery

Particulars Amount in ₹
Balance as per books on 01.04.2022 9,60,000
Less: Depreciation for 3 months (₹ 9,60,000 x 10 /100 x 3 / 12) (24,000)
W.D.V. as on 30.06.2022 9,36,000
Less: Exchange value (8,25,000)
Loss on Exchange of Machinery 1,11,000

AS 11: The Effects of changes in Foreign Exchange Rates

Question 1 (Inter May 2023) (5 Marks) Pg no._____
Trower Limited is an Indian importer. It imports goods from True View Limited situated at
London. Trower Limited has a payable of £ 50,000 to True View Limited as on 31st March,
2023. True View Limited has given Trower Limited the following two options:
(a) Pay immediately with a cash discount of 1% on the payable.
(b) Pay after 6 months with interest @ 5% p.a. on the payable.
The borrowing rate for Trower Limited in rupees is 15% p.a.
The following are the exchange rates :
Date ₹/£
31st March, 2023 97
30 September, 2023
th
99
You are required to give your opinion to Trower Limited on which of the above two options to
be chosen.

Solution:
Option (i) Pay immediately with Cash discount of 1% on the payable
₹
Total amount payable as on 31.3.2023 (50,000 x ₹ 97) 48,50,000
Less: Cash discount (48,500)
48,01,500
Add: Borrowing cost @ 15% p.a. for 6 months 3,60,112.50
If payment made immediate 51,61,612.50

Option (ii) Pay after 6 months with interest @ 5% p.a. on the payable
₹
Total amount payable as on 31.3.2023 (50,000 x ₹ 99) 49,50,000
Interest for 6 months @ 5% 1,23,750
If payment made after 6 months 50,73,750
Thus, Option (ii) is beneficial to Trower Limited as the Rupee outflow will be lower by ₹
(51,61,612 – 50,73,750) = ₹ 87,862 in option (ii).

Note: The above answer be presented in the alternative manner given as below:
Option (i) Pay immediately with Cash discount of 1% on the payable
₹
Total amount payable on 31.3.2023 50,000

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 CA NITIN GOEL PYQ May 2023 & Nov 2023

Less: Cash discount (50,000 x 1 / 100) (500)

49,500
49,500 x ₹ 97 48,01,500
Add: Borrowing cost @ 15% p.a. for 6 months 3,60,112.50
If payment made immediate 51,61,612.50

Option (ii) Pay after 6 months with interest @ 5% p.a. on the payable
₹
Total amount payable on 31.3.2023 50,000
Interest for 6 months @ 5% (50,000 x 5 / 100 x 6 / 12) 1,250
51,250
If payment made after 6 months (51,250 x 99) 50,73,750
Thus, Option (ii) is beneficial to Trower Limited as the Rupee outflow will be lower by ₹
(51,61,612 – 50,73,750) = ₹ 87,862 in option (ii).

Question 2 (Inter Nov 2023) (5 Marks) Pg no._____

Karna Ltd., an Indian Company, has the following foreign currency transactions during the
financial year 2022-23:
(i) On 1st July, 2022, imported goods from Try Ltd., a German based company, amounting to ₹
30,96,000.
(ii) On 1st October, 2022, imported plant & machinery from Lucy Ltd., a German based company,
for € 18,500. The amount was paid on the date of import itself. (Ignore depreciation).
(iii) On 1st December, 2022, exported good on credit to Cream Ltd., a German based company,
amounting to ₹ 50,40,000.
All the above transactions were recorded in the books of account at the prevailing exchange
rate on the date of the transactions. Ignore taxes and duty on the above transactions. Payment
due from Cream Ltd. and payment due to Try Ltd. is outstanding as on 31st March, 2023.
Rate of exchange between reporting currency (₹) and foreign currency (€) on different dates
are as under:
On 1st July, 2022 1 € = ₹ 86 On 1st October, 2022 1 € = ₹ 88
On 1 December, 2022
st
1 € = ₹ 84 On 31st March, 2023 1 € = ₹ 90
You are required, as per AS-11:
a) To show value at which above items will appear in Balance sheet as on 31st March, 2023.
b) To calculate the amount of gain/loss on each of above transactions on account of exchange
differences, if any.

Solution:
As per AS 11 “The Effects of Changes in Foreign Exchange Rates”, Foreign currency monetary
items should be reported using the closing rate. Non-monetary items which are carried in
terms of historical cost denominated in a foreign currency should be reported using the
exchange rate at the date of the transaction. Exchange differences arising on the settlement
of monetary items or on reporting an enterprise’s monetary items at rates different from
those at which they were initially recorded during the period, or reported in previous financial
statements, should be recognised as income or as expenses in the period in which they arise.

i. Items given in the question will appear in the Balance Sheet at the following values:
Trade Payables (30,96,000/86= 36,000 German Currency) x ₹ 90 = ₹ 32,40,000
Plant and Machinery 18,500 German Currency X ₹ 88 = ₹16,28,000
Trade Receivables (50,40,000/84= 60,000 German Currency) x ₹ 90 = ₹ 54,00,000

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 CA NITIN GOEL PYQ May 2023 & Nov 2023

ii. Amount of gain / loss on each transaction on account of exchange difference:

Exchange loss on Transaction of import of goods from Try Ltd. = ₹ (1,44,000)
[36,000 German Currency X ₹ 4 (i.e. 90-86)]
Exchange gain on Transaction of export of goods to Cream Ltd = ₹ 3,60,000
[60,000 German Currency X ₹ 6 (i.e. 90-84)]

AS 12: Accounting for Government Grants

Question 1 (Inter May 2023) (5 Marks) Pg no._____
On 1st April 2021, Eleanor Limited purchased a manufacturing Plant for ₹ 60 lakhs, which has
an estimated useful life of 10 years with a salvage value of ₹ 10 lakhs. On purchase of the
Plant, a grant of ₹ 20 lakhs was received from the government.
You are required to calculate the amount of depreciation as per AS-12 for the financial year
2022-23 in the following cases:
(i) If the grant amount is deducted from the value of plant.
(ii) If the grant is treated as deferred income.
(iii) If the grant amount is deducted from the value of Plant, but at the end of year 2022-2023
grant is refunded to the extent of ₹ 4 lakhs, due to non-compliance of certain conditions.
(iv) If the grant is treated as the promoter's contribution.
(Assume depreciation on the basis of Straight-Line Method.)

Solution
Calculation of depreciation as per AS 12 for the financial year 2022-23:
(i) If the grant amount is deducted from the value of Plant, then the amount of deprecation
will be ₹ 3,00,000 p.a. (₹ 60,00,000 - ₹ 10,00,000 - ₹ 20,00,000) / 10 years.
(ii) If the grant is treated as deferred income, then amount of depreciation will be ₹ 5,00,000
p.a. (₹ 60,00,000 - ₹ 10,00,000) / 10 years.
(iii) If the grant amount is deducted from the value of plant, but at the end of the year 2022-
23 grant is refunded to the extent of ₹ 4 lakh then the amount of depreciation will be ₹
3,00,000 p.a. (₹ 60,00,000 - ₹ 10,00,000 - ₹ 20,00,000) /10 year for year 2021-22 and for
the year 2022-23 Depreciation will be ₹ 3,00,000 calculated as follows, (₹60,00,000 - ₹
10,00,000 - ₹ 20,00,000– ₹ 3,00,000) / 10 years.
Note: It is assumed that the depreciation for the year has been charged on the book value
on the plant before making adjustment for grant. Alternatively, if it is considered
otherwise then the depreciation will be charged after making adjustment for grant. In that
case depreciation for the year 2022-23 will be as ₹ 3,44,444 calculated as follows, (₹
60,00,000 - ₹10,00,000 - ₹ 20,00,000 + 4,00,000– ₹ 3,00,000 / 9 years
(iv) If the grant is treated as promoter’s contribution, then the amount of depreciation will be
₹ 5,00,000 p.a. (₹ 60,00,000 -10,00,000) /10 years.

Note: The answer can be presented in the following alternative manner:

(i) (ii) (iii) (iv)
Date Particulars Grant Value Grant treated Grant Grant treated
deducted as Deferred Refunded as Promoter’s
from Plant Income Contribution
01.04.2021 Cost of Plant 60,00,000 60,00,000 60,00,000 60,00,000
Less: Salvage 10,00,000 10,00,000 10,00,000 10,00,000
50,00,000 50,00,000 50,00,000 50,00,000
01.04.2021 Less: Grant 20,00,000 - 20,00,000 -
30,00,000 50,00,000 30,00,000 50,00,000

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 CA NITIN GOEL PYQ May 2023 & Nov 2023

Useful Life 10 10 10 10
(years)
31.03.2022 Depreciation FY 3,00,000 5,00,000 3,00,000 5,00,000
2021-22
1.4.2022 Cost of Plant 60,00,000
Less: Salvage 10,00,000
50,00,000
Less: Grant 20,00,000
30,00,000
Less: 3,00,000
Depreciation FY
2022-23
Book value at the 27,00,000
time of refund
of grant i.e. at the
end of period
Add: Grant
Refundable at
end of 22-23 4,00,000
Book value 31,00,000
available for
remaining 8
years.

Note: It is assumed that the depreciation for the year has been charged on the book value on
the plant before making adjustment for grant. Alternatively, if it is considered otherwise then
the depreciation will be charged after making adjustment for grant. In that case depreciation
for the year 2022-23 will be as:
Particular ₹
Cost of Plant 60,00,000
Less: Salvage 10,00,000
50,00,000
Less: Grant 20,00,000
30,00,000
Add: Grant Refundable 4,00,000
34,00,000
Less: Depreciation for 2021-22 3,00,000
31,00,000
Useful Life (years) 9
Depreciation for 2022-23 3,44,444

Question 2 (Inter Nov 2023) (5 Marks) Pg no._____

A Ltd. purchased a Machinery for ₹ 75 Lakhs. Government Grant received towards this
Machinery is ₹ 10 Lakhs. Residual Value of Machinery at the end of useful life of 6 Years is ₹
5 Lakhs. Asset is shown in Balance Sheet at net of grant.
At the beginning of the 3rd year, an amount becomes refundable to the extent of ₹ 8 Lakhs due
to non-compliance of certain conditions of grant.
You are required to give necessary Journal entries for the 1st year and the 3rd year in the books
of A Ltd.

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CA NITIN GOEL PYQ May 2023 & Nov 2023

Solution
Journal Entries in the Books of A Ltd.
Year Particulars ₹ in lakhs ₹ in lakhs
(Dr.) (Cr.)
1 Machinery Account Dr. 75
To Bank Account 75
(Being machinery purchased)
2 Bank Account Dr. 10
To Machinery Account 10
(Being grant received from the government reduced from the
cost of machinery)
3 Depreciation Account (W.N.1) Dr. 10
To Machinery Account 10
(Being depreciation charged on Straight Line method (SLM))
4 Profit & Loss Account Dr. 10
To Depreciation Account 10
(Being depreciation transferred to Profit and Loss Account at
the end of year 1)
5 Machinery Account Dr. 8
To Bank Account 8
(Being government grant on machinery partly refunded which
increased the cost of fixed asset)
6 Depreciation Account (W.N.2) Dr. 12
To Machinery Account 12
(Being depreciation charged on SLM on revised value of fixed
asset prospectively)
7 Profit & Loss Account Dr. 12
To Depreciation Account 12
(Being depreciation transferred to Profit and Loss Account at
the end of year 3)

Working Notes:
1. Depreciation for Year 1
₹ in lakhs
Cost of the Machinery 75
Less: Government grant received (10)
65
Depreciation [(65 – 5)/6] 10

2. Depreciation for Year 3

₹ in lakhs
Cost of the Machinery 75
Less: Government grant received (10)
65
Less: Depreciation for the first two years 20
45
Add: Government grant refundable 8
53
Depreciation for the third year [(53 – 5)/4] 12

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 CA NITIN GOEL PYQ May 2023 & Nov 2023

AS 16: Borrowing Costs

Question 1 (Inter May 2023) (5 Marks) Pg no._____
On 1st April, 2022 Workhouse Limited took a loan from a Financial Institution for ₹ 25,00,000
for the construction of Building. The rate of interest is 12%.
In addition to above loan, the company has taken multiple borrowings as follows:
(a) 8% Debentures ₹ 15,00,000
(b) 15% Term Loan ₹ 30,00,000
(c) 10% Other Loans ₹ 18,00,000

The company has utilised the above funds in construction/purchase of the following assets:
(a) Building ₹ 70,00,000
(b) Furniture ₹ 22,00,000
(c) Plant & Machinery ₹ 90,00,000
(d) Factory Shed ₹ 43,00,000

The construction of Building, Plant & Machinery and Factory Shed was completed on 31st March
2023. Readymade Furniture was purchased directly from the market. The factory was ready
for production on 1 April 2023.
You are required to calculate the borrowing cost for both qualifying and non-qualifying assets.

Solution:
Interest to be Capitalized (on qualifying asset)
Particulars Computation ₹
i. On specific Borrowings 25,00,000x12% 3,00,000
ii. On non-specific borrowings (W.N.1) 6,67,500
iii. Amount of interest to be Capitalised (i+ii) 9,67,500

Interest transferred to P&L (on non-qualifying asset)

Particulars Computation ₹
i. On non-specific Borrowings (W.N.1) 82,500

Working note:
1. Treatment of interest under AS 16 on non-specific borrowings
Particulars Qualifying # Computation Interest- Interest- charged
asset Capitalized to P&L A/c
i. Building Yes 45,00,000/2,00,00,000 1,68,750 -
x 63,00,000 x 11.9048%
ii. Furniture No 22,00,000/2,00,00,000 - 82,500
x 63,00,000 x 11.9048%
iii. Plant & Yes 90,00,000/2,00,00,000 3,37,500 -
Machinery x 63,00,000 x 11.9048%
iv. Factory shed Yes 43,00,000/2,00,00,000 1,61,250 -
x 63,00,000 x 11.9048%
Total 6,67,500 82,500
Note: Alternative manner of presentation for Treatment of interest under AS 16 on non-
specific borrowings:

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 CA NITIN GOEL PYQ May 2023 & Nov 2023

Particulars Qualifying Expenses Share in Interest- Interest-

asset Incurred borrowings Capitalized charged to
₹ ₹ ₹ P&L A/c ₹
i. Building Yes 45,00,000 7,50,000 x 45/200 1,68,750 -
ii. Furniture No 22,00,000 7,50,000 x 22/200 - 82,500
iii. Plant & Yes 90,00,000 7,50,000 x 90/200 3,37,500 -
Machinery
iv. Factory Yes 43,00,000 7,50,000 x 43/200 1,61,250 -
shed
Total 2,00,00,000 6,67,500 82,500

2. Weighted Average interest rate for non-specific borrowings

Particulars Amount of loan Rate of interest Amount of interest
(a) (b) (c) = (a) x (b)
Debentures 15,00,000 8% 1,20,000
Term loan 30,00,000 15% 4,50,000
Other loans 18,00,000 10% 1,80,000
63,00,000 7,50,000
# Weighted Average Rate of Interest = 7,50,000 / 63,00,000 x 100 = 11.9048%

Question 2 (Inter Nov 2023) (5 Marks) Pg no._____

Glen Ltd. began construction of a new building on 1 January, 2022.
st

On 1st April, 2022, following two loans were obtained to fund the construction cost:
(i) Loan of ₹ 60,00,000 from Data Bank Ltd. was taken at interest rate of 8% per annum. This
loan was fully utilized for construction of the new building.
(ii) Loan of ₹ 20,00,000 from Satya Bank Ltd. Out of this, loan amount of ₹ 6,00,000 was utilized
for working capital purpose. Total interest of ₹ 1,92,000 were paid to Satya Bank Ltd. for
the financial year 2022-23.
Construction of the new building was completed on 31st January, 2023 and was ready for its
intended use on the same date. None of the loan was repaid during the year. The building is a
qualifying asset for the purpose of AS-16. Out of loan from Data Bank Ltd., surplus funds were
temporarily invested for the short period of time. This temporary investment earned interest
of ₹ 30,000.
You are required to calculate the amount of interest (a) to be capitalized, (b) to be charged to
profit & loss account from the total interest incurred as borrowing cost during the year 2022-
23. (as per AS-16).

Solution:
According to AS 16 “Borrowing Costs”, borrowing costs that are directly attributable to the
acquisition, construction or production of a qualifying asset should be capitalized as part of
the cost of that asset. The amount of borrowing costs eligible for capitalization should be
determined in accordance with this Standard. Other borrowing costs should be recognised
as an expense in the period in which they are incurred.

The standard also states that to the extent that funds are borrowed specifically for the
purpose of obtaining a qualifying asset, the amount of borrowing costs eligible for
capitalization on that asset should be determined as the actual borrowing costs incurred on
that borrowing during the period less any income on the temporary investment of those
borrowings.

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Thus, eligible borrowing cost on Loan of data bank to be capitalized:

= ₹(60,00,000 x 8%)x 10/12 - ₹30,000
= ₹4,00,000 - ₹ 30,000
= ₹3,70,000

Loan Particulars Nature of (a) Interest to be (b) Interest to be

assets Capitalized (₹) charged to Profit &
Loss Account (₹)
Data Construction of Qualifying Asset 3,70,000 (4,80,000 - 4,00,000)
bank factory building 80,000
Satya Construction of Qualifying Asset (1,92,000x14/20) x (1,92,000 x 14/20) x 2/12
Bank factory building 10/12 = 1,12,000 = 22,400
Satya Working Capital Not a NIL (1,92,000x6/20)
Bank Qualifying Asset = ₹57,600
Total ₹4,82,000 ₹1,60,000
Note: Loan from Satya bank is considered to be specific borrowings.

AS 17: Segment Reporting

Question 1 (Inter May 2023) (5 Marks) Pg no._____
The Accountant of X. Ltd. provides the following data regarding its five segments:
Particulars A B C D E Total (₹ in crore)
Segment Assets 50 20 15 10 5 100
Segment Results (85) 10 10 (15) 5 (75)
Segment Revenue 250 50 40 60 30 430
The accountant is of the opinion that segment 'A alone should be reported.
Is he justified in his view? Examine his opinion in the light of provisions of AS -17 Segment
Reporting.
Solution
As per AS 17 ‘Segment Reporting’, a business segment or geographical segment should be
identified as a reportable segment if:
• Its revenue from sales to external customers and from other transactions with other
segments is 10% or more of the total revenue- external and internal of all segments; or
• Its segment result whether profit or loss is 10% or more of:
➢ The combined result of all segments in profit; or
➢ The combined result of all segments in loss,
whichever is greater in absolute amount; or
• Its segment assets are 10% or more of the total assets of all segments.

If the total external revenue attributable to reportable segments constitutes less than 75% of
total enterprise revenue, additional segments should be identified as reportable segments
even if they do not meet the 10% thresholds until 75% of total enterprise revenue is included
in reportable segments.

On the basis of revenue criteria, segments A, B and D are reportable segments.

On the basis of the result criteria, segments A, B, C and D are reportable segments (since
their results in absolute amount are 10% or more of ₹ 100 crore).
On the basis of asset criteria, all segments except E are reportable segments.

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Since all the segments except E are covered in at least one of the above criteria. Hence, all
segments except E have to be reported upon in accordance with Accounting Standard (AS) 17.
Hence, the opinion of chief accountant that only segment A alone should be reported, is wrong
as all segments are reportable except E.

Question 2 (Inter Nov 2023) (5 Marks) Pg no._____

Garnet Limited has 4 operating segments. The total revenue (internal and external) and
assets are set out as below:
(₹ in Lakhs)
Segment Inter Segment Sales External Sales Total Assets
Fan 3,200 10,900 23,700
Light 200 1,400 13,200
Lamp 0 1,500 4,200
Printer 1,100 200 3,400
TOTAL 4,500 14,000 44,500
How many reportable segments does Garnet Limited have as per the Revenue and Assets
criteria given in AS 17? State Reasons for your answer.
Solution
As per AS 17 ‘Segment Reporting’, a business segment or geographical segment should be
identified as a reportable segment if:
Its revenue from sales to external customers and from other transactions with other
segments is 10% or more of the total revenue- external and internal of all segments; or
If it relates to the previous year then it can be considered as a prior period item.
Its segment assets are 10% or more of the total assets of all segments.
If the total external revenue attributable to reportable segments constitutes less than 75% of
total enterprise revenue, additional segments should be identified as reportable segments
even if they do not meet the 10% thresholds until at least 75% of total enterprise revenue is
included in reportable segments. This is not applicable in the given case. In the given case
75% of External Revenue is ₹ 10,500 Lakhs (₹ 14,000 × 75%) and the total External Revenue
from Reportable segments is ₹ 12,300 Lakhs. So, no need to add Reportable segments.
On the basis of turnover criteria segment Fan is reportable segment as its sales are more
than 1,850 lakhs (10% of ₹ 18,500 lakhs). Moreover, total external revenue attributable to
reportable segment is also more than 75% of the total enterprise revenue.
On the basis of asset criteria, Fan and Light are reportable segments as their assets are more
than 4,450 lakhs (10% of ₹ 44,500 lakhs).

AS 18: Related Party Disclosures

Question 1 (Inter May 2023) (5 Marks) Pg no._____
Answer the following with respect to AS-18:
a. ABC Ltd. sold goods of ₹ 2,00,000 to its associate company for the 1st quarter ending
30.06.2022. After that the related party relationship ceased to exist. However, goods were
supplied to any other ordinary customer. Decide whether transactions of the entire year
have to be disclosed as related party transactions.
b. If the majority of directors of Arjun Ltd. constitute the majority of the Board of another
Company Bheem Ltd. in their individual capacity as professionals (and not by virtue of
their being Directors in Arjun Ltd.). Are both the companies related?

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c. Asha Ltd. sells all the manufactured furniture of ₹1,00,00,000 to Sasha Ltd. as per
agreement. Sasha Ltd. is the only customer to Asha Ltd. In the financial statements, Asha
Ltd. wants to present Sasha company as a related party. Comment on the disclosure
requirement.

Solution
a) As per AS 18, parties are considered to be related if any time during the reporting period
one party has the ability to control the other party or exercise significant influence over
the other party. Transactions of ABC Ltd. with its associate company for the first quarter
ending 30.06.2022 only are required to be disclosed as related party transactions as the
company has the ability to exercise significant influence only till 30.6.2022.
The transactions for the period in which related party relationship did not exist need not
be reported.
b) In the given case, Arjun Ltd. cannot be said to control the composition of board of directors
of Bheem Ltd. as the directors have been appointed in their individual capacity as
professionals and not by virtue of their being directors in Arjun Ltd.
Hence, it cannot be concluded that the companies are related merely because the majority
of the directors of one company became the majority of the directors of the second in
their individual capacity as professionals.
c) In the context of AS 18, a single customer, supplier, franchiser, distributor, or general
agent with whom an enterprise transacts a significant volume of business cannot be
construed as Related Party Relationship merely by virtue of the resulting economic
dependence. There is an economic dependence between the companies but no one
controls or exercise significant influence on the other.
In the given case, Asha Ltd. need not report Sasha Company as its related party in its
financial statements.

AS 20: Earnings per Share

Question 1 (Inter Nov 2023) (5 Marks) Pg no._____
Sapphire Limited earned Net profit of ₹ 39,00,000 and ₹ 59,40,000 for the years 2021-22 &
2022-23 respectively. The following information were given for 2022-2023:
(i) The company declared Rights issue of two new shares for each five outstanding shares.
(ii) 4,00,000 shares were outstanding prior to Rights issue.
(iii) Rights issue price was ₹ 27.50 and the last date to exercise rights was 1st July, 2022.
(iv) Fair value of one equity share immediately prior to exercise of rights on 1st July, 2022 was
₹ 143.
You are required to Compute Basic Earnings Per Share as per AS-20:
1. for the year 2021-22, and
2. for the year 2022-23

Solution
Computation of Basic Earnings Per Share
Year Year
2021-22 (₹) 2022-23 (₹)
EPS for the year 2021-22 as originally reported
Net profit of the year attributable to equity shareholders
Weighted average number of equity shares o/s during year
= (₹ 39,00,000 / 4,00,000 shares 9.75

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EPS for the year 2021-22 restated for rights issue =

[₹ 39,00,000 / (4,00,000 shares * 1.3*)] 7.5
EPS for the year 2022-23 including effects of rights issue
= {59,40,000 / [(4,00,000 × 1.3 × 3/12) + (5,60,000 × 9/12)]} 10.8
= 59,40,000/5,50,000 (approx..)
*Refer working note 2.

Working Notes:
1. Computation of theoretical ex-rights fair value per share
= (Fair value of all outstanding shares immediately prior to exercise of rights + Total amount
received from exercise) / Number of shares outstanding prior to exercise + Number of shares
issued in the exercise
= [(₹ 143 × 4,00,000 shares) + (₹ 27.5 ×1,60,000 shares)]/ 4,00,000 shares + 1,60,000 shares
= 6,16,00,000/ 5,60,000 shares = ₹110

2. Computation of adjustment factor

= Fair value per share prior to exercise of rights / Theoretical ex-rights value per share
= ₹ 143/₹110 (Refer Working Note 1)
= ₹1.3 (approx.)

Alternative
Computation of theoretical ex-rights fair value per share
= Fair value of o/s shares prior to right exercise + Total Amt. received from exercise of rights
Number of shares outstanding prior to exercise + number of shares issued in the exercise
= [(₹ 143 × 4,00,000 shares) + (₹ 27.5 ×1,60,000 shares)]/ 4,00,000 shares + 1,60,000 shares
= 6,16,00,000/ 5,60,000 shares
= ₹110

Paid Part in Right Issue = 1,60,000 * 27.50/110 = 40,000 shares

Bonus Part in Right Issue = 1,60,000 – 40,000 = 1,20,000 shares
Computation of earnings per share
2021-22 2022-23
EPS for the year 2021-22 as originally reported:
₹ 9.75
(₹ 39,00,000/4,00,000 shares)
EPS for the year 2021-22 restated for rights issue:
₹ 7.50
[₹ 39,00,000/ (4,00,000 shares + 1,20,000 shares)]
EPS for the year 2022-23 including effects of rights issue
59,40,000 . ₹ 10.80
{(4,00,000 + 1,20,000)*12/12}+ (40,000 x 9/12)

AS 22: Accounting for Tssssaxes on Income

Question 1 (Inter Nov 2023) (5 Marks) Pg no._____
The following particulars are stated in the Balance Sheet of Siddhi Limited as on 31st March,
2022:
Particulars (₹ In lakhs)
Deferred Tax Liabilities (Cr.) 2.50
Deferred Tax Assets (Dr.) 1.35
The following transactions were reported during the year 2022-23:

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(₹ in Lakhs)
(i) Depreciation as per accounting records 15.00
(ii) Depreciation as per income tax records 20.00
(iii) Interest paid to NBFC accounted in books on accrual basis but paid on 6.00
30-06-2023
(iv) Items disallowed for tax purposes in 2021-22 but allowed in 2022-23 1.05
(v) Donation to Private Trust 40.00
(vi) Tax rate 15%
(vii) There were no additions to fixed assets during the year
You are required to calculate the Deferred Tax Asset and Deferred Tax Liability as on 31 st
March 2023 as per AS-22.

Solution
Balances of Deferred tax assets and Deferred tax liability as on 31st March, 2023
₹ (in lakhs)
Deferred tax liability (Cr.) (2.5 +.75) 3.25
Deferred tax asset (Dr.) (1.35 - .158*) 1.192

Working Note:
Impact of various items in terms of deferred tax liability / deferred tax asset
S. No. Transactions Nature of Effect Amount (₹)
difference
(i), (ii) Difference in Responding Creation of (20 - 15) x 15% = .75
depreciation timing DTL
difference
(iii) Interest to financial No timing Not applicable Not applicable
institutions difference
(iv) Disallowances, as per IT Timing Reversalof ₹ 1.05 lakh x 15%
Act, of earlier years difference DTA = ₹ .158* lakh
(v) Donation to private Permanent Not applicable Not applicable
trusts difference
*Alternatively, may be rounded off as ₹ 0.157 lakh or 0.1575.

AS 24: Discontinuing Operations

Question 1 (Inter Nov 2018)/(Inter Nov 2023) (5 Marks)/ (RTP May 2020)/(Nov 2020)/(May 2022)
Anaylse the disclosure and presentation requirements of AS 24 for discontinuing operations?
(Any Five)
Solution
An enterprise should include the following information relating to a discontinuing operation
in its financial statements beginning with the financial statements for the period in which the
initial disclosure event (as defined in paragraph 15) occurs:
a) a description of the discontinuing operation(s);
b) the business or geographical segment(s) in which it is reported as per AS 17, Segment
Reporting;
c) the date and nature of the initial disclosure event;
d) the date or period in which the discontinuance is expected to be completed if known or
determinable;
e) the carrying amounts, as of the balance sheet date, of the total assets to be disposed of
and the total liabilities to be settled;

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f) the amounts of revenue and expenses in respect of the ordinary activities attributable to
the discontinuing operation during the current financial reporting period;
g) the amount of pre-tax profit or loss from ordinary activities attributable to the
discontinuing operation during the current financial reporting period, and the income tax
expense related thereto; and
h) the amounts of net cash flows attributable to the operating, investing, and financing
activities of the discontinuing operation during the current financial reporting period.

AS 26: Intangible Assets

Question 1 (Inter Nov 2023) (5 Marks) Pg no._____
Panna Limited purchased software from Agate Limited for a period of 5 years and capitalized
the cost. It provided you the following information:
- Cost of software ₹ 57,60,000.
- Expected Life cycle of the software 5 years
The software was amortized at ₹ 6,40,000 per annum in first three years based on economic
benefits derived from the software. After three years, it was found that the software may be
used for another 5 years from then. So, Panna Limited got it renewed after expiry of five years
for 3 more years.
The net cash flows from the software during these 5 years were expected to be as follows:
Particular Amount (₹)
Year 1 ₹ 23,04,000
Year 2 ₹ 29,44,000
Year 3 ₹ 28,16,000
Year 4 ₹ 25,60,000
Year 5 ₹ 21,76,000
You are required to calculate the amortization cost of the software for each of the years.

Solution
Panna Limited amortised ₹ 6,40,000 per annum for the first three years i.e. ₹ 19,20,000. The
remaining carrying cost can be amortised during next 5 years on the basis of net cash flows
arising from the sale of the product. The amortisation may be found as follows:
Year Net cash flows ₹ Amortisation Ratio Amortisation Amount ₹
I - 0.1111 6,40,000
II - 0.1111 6,40,000
III - 0.1111 6,40,000
IV 23,04,000 0.180 6,91,200
V 29,44,000 0.230 8,83,200
VI 28,16,000 0.220 8,44,800
VII 25,60,000 0.200 7,68,000
IX 21,76,000 0.170 6,52,800
Total 1,28,00,000 1.000 57,60,000

It may be seen from above that from fourth year onwards, the balance of carrying amount
i.e., ₹ 38,40,000 has been amortised in the ratio of net cash flows arising from the product
of Panna Ltd.

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