CA. (Dr.) G.S. Grewal
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CA. (Dr.) G.S. Grewal
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CA. (Dr.) G.S. Grewal
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CA. (Dr.) G.S. Grewal
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1. Under the Heading ‘Origin of Transactions’
(a) Supporting Vouchers;
(b) Debit Note; and (c) Credit Note.
2. Any appropriate Software may be used.
In Chapter on Not – For – Profit Organisations
1. Adjustment is a question should not exceed 3 or 4 in number and restricted to subscriptions, consumption of consumables and sale of assets / old material.
2. Entrance / admission fees and general donations are to be treated as revenue receipts.
3. Trading Account of incidental activities is not to be prepared.
CA. (Dr.) G.S. Grewal
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1. 1 Mark Questions will have Very Short Answer Questions
2.
All 8 Marks Questions will have internal choice
3.
Evaluation Skills Questions Only.
4.
Learning Outcomes have been added which are indicators only and do not restrict the scope of questions to be asked.
5.
Question Paper to be strictly based on Question Paper
Design design.
CA. (Dr.) G.S. Grewal
6

1. Accounting of Private Placement of Shares
2. Accounting of ESOP
3. Definitions of terms used in Chapters on Company
Accounts either Introduced or Changed
4. Entries for Debenture Redemption Reserve (DRR) have changed.
Clarification
3. 1 Mark Questions will have Very Short Answer Questions
4. All 8 Marks Questions will have internal choice
5. Evaluation Skills Questions Only.
6. Learning Outcomes have been added which are indicators only and do not restrict the scope of questions to be asked.
7. Question Paper to be strictly based on Question Paper
Design.
CA. (Dr.) G.S. Grewal
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Partnership Accounts
1. Interest on Partner’s loan is a charge against profits.
3. Preparation of Retiring Partner Loan Account is in
Syllabus.
4. Preparation of Deceased Partner Capital Account and Executor’s Account is in Syllabus.
5.
Dissolution does not include Piecemeal
Distribution, Sale to a Company and Insolvency.
CA. (Dr.) G.S. Grewal
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Partnership Accounts
6. The realised value of each asset must be given at the time of dissolution.
7. In case Realisation Expenses are borne by a partner, it should be clearly indicated regarding the payment thereof.
CA. (Dr.) G.S. Grewal
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1. Provisions of the Companies Act, 2013 will apply.
2. Provisions relating to DRR given in the
Companies Act, 2013 changed and therefore, journal entries change.
3. In Debentures, Ex – Interest and Cum – Interest not in Syllabus.
4. In Statement of Profit and Loss, Exceptional items and Extraordinary items and Discontinued
Operations not in Syllabus.
5. Schedule VI of the Companies Act, 1956 is renumbered as Schedule III in the Companies
Act, 2013.
CA. (Dr.) G.S. Grewal
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Comparative and Common – size
Statements
Unchanged
Accounting Ratios
Unchanged
Cash Flow Statement
1. Only Indirect Method in Syllabus.
2. Bank Overdraft and Cash Credit are to be treated as Short term Borrowings .
3. Unless it is specified, Current Investments are to be taken as Marketable Securities.
CA. (Dr.) G.S. Grewal
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CA. (Dr.) G.S. Grewal
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Attention is drawn to the following important note in the Circular:
“As you proceed reading further, you may find that there are certain items against which in bracket the clause ‘ Not to be Evaluated ’ is written.
It means that for these items, accounting treatment will not be asked in the Board
Examination. But students must know their place in the Financial Statements as per Schedule-VI,
(Read Schedule III) as line items.
”
CA. (Dr.) G.S. Grewal
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1.
CA. (Dr.) G.S. Grewal
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6.
CA. (Dr.) G.S. Grewal
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10.
Other Non-current Assets .
11.
Cash and Cash Equivalents: (Earmarked
Balance with Banks, Balances with Banks held as Margin Money or Security against borrowings, guarantees, other commitments and Bank Deposits with more than 12 months maturity are not to be evaluated ); and
12.
Treatment of Unamortised Expenses.
Also note: Accounting Treatment of Other
Current Assets is restricted to Prepaid Expenses,
Accrued Incomes and Advance Tax only.
CA. (Dr.) G.S. Grewal
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Syllabus Requirement
The realised value of each asset must be given at the time of dissolution.
What Does it Mean?
Realisation Account will be credited by the amount realised from sale of an asset.
If the question does not specify the amount realised on sale of an asset, it is to be assumed that the asset did not realise any amount.
On the other hand, if no information is given for payment of liability, it is to be paid.
CA. (Dr.) G.S. Grewal
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Syllabus Requirement
In case Realisation Expenses are borne by a partner, it should be clearly indicated regarding the payment thereof.
What Does it Mean?
It means, in the question not only it should be clear who is to bear Realisation Expenses but also who paid these expenses i.e., firm or the partner.
CA. (Dr.) G.S. Grewal
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CA. (Dr.) G.S. Grewal
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Partner Abhi is to carry out dissolution for which the firm agrees to pay him Rs. 10,000 plus expenses. He incurs
Rs. 5,000 towards dissolution expenses which are paid by the firm.
Pass the necessary journal entries in the books of the firm?
Entries:
Particulars
Realisation Exp. A/c
To Abhi’s Capital A/c
(Being the remuneration payable to Abhi)
Dr.
Debit (Rs.) Credit (Rs.)
10,000
10,000
Realisation Exp. A/c
To Cash / Bank A/c
(Being the realisation expenses paid)
Dr.
5,000
5,000
CA. (Dr.) G.S. Grewal 20

Partner Alok carries out dissolution of the firm for which he is paid Rs. 10,000, including expenses. He incurs Rs.
3,000 towards dissolution expenses which are paid by the firm. Pass the necessary journal entries in the books of the firm?
Entries
Particulars
Realisation Expenses A/c
To Alok’s Capital A/c
Dr.
(Being the remuneration payable credited to capital account)
Debit (Rs.) Credit (Rs.)
10,000
10,000
Alok’s Capital A/c
To Bank A/c
Dr.
(Being the realisation expenses paid by the firm debited to capital account)
CA. (Dr.) G.S. Grewal
3,000
3,000
21

Partner Alka is to carry out dissolution for which the firm will pay Rs. 25,000 plus expenses. She incurs Rs. 5,000 towards dissolution expenses which are paid by her.
Pass the necessary journal entries in the books of the firm?
Entries
Particulars
Realisation Expenses A/c
To Alka’s Capital A/c
Dr.
(Being the remuneration payable credited to capital account)
Realisation Expenses A/c
To Alka’s Capital A/c
Dr.
(Being the realisation expenses payable by the partner credited to her capital account)
CA. (Dr.) G.S. Grewal
Debit (Rs.) Credit (Rs.)
25,000
25,000
5,000
5,000
22

Partner Bhaskar is entrusted to carry out dissolution of the firm for which he is paid Rs. 20,000, including expenses. He incurs Rs. 6,000 towards dissolution expenses which are paid by him.
Pass the necessary journal entries in the books of the firm?
Entries
Particulars Debit (Rs.) Credit (Rs.)
Realisation Expenses A/c Dr.
To Bhaskar’s Capital A/c
(Being the remuneration payable credited to capital account)
20,000
20,000
No entry for expenses since remuneration includes expenses which are borne by the partner.
CA. (Dr.) G.S. Grewal 23

Partner Anita is to carry out dissolution of the firm for a remuneration of Rs. 25,000. She incurs Rs. 10,000 towards dissolution expenses which are paid by the firm.
Pass the necessary journal entries in the books of the firm?
Entries
Particulars
Realisation Expenses A/c
To Anita’s Capital A/c
Dr.
(Being the remuneration payable credited to capital account)
Debit (Rs.) Credit (Rs.)
25,000
25,000
Realisation Expenses A/c
To Bank A/c
Dr.
(Being the realisation expenses paid by the firm)
CA. (Dr.) G.S. Grewal
10,000
10,000
24

Partner Bhanu is entrusted to carry out dissolution of the firm for which he is paid Rs. 30,000. Dissolution expenses of
Rs. 6,000 were paid by him.
Pass the necessary journal entries in the books of the firm?
Entries
Particulars
Realisation Expenses A/c
To Bhanu’s Capital A/c
Dr.
(Being the remuneration payable credited to capital account)
Realisation Expenses A/c
To Bhanu’s Capital A/c
Dr.
(Being the realisation expenses paid by
Bhanu on behalf of the firm credited to his Capital Account)
CA. (Dr.) G.S. Grewal
Debit (Rs.) Credit (Rs.)
30,000
10,000
30,000
10,000
25

Partner Simran is entrusted the work of dissolving the firm and was to get 5% of the value of assets realised as remuneration, including expenses. Assets realised amounted to Rs. 10,00,000.
She incurs Rs. 10,000 towards dissolution expenses which are paid by her. Pass the necessary entries in the books of the firm?
Entries
Debit (Rs.) Credit (Rs.) Particulars
Realisation Expenses A/c
To Simran’s Capital A/c
Dr.
(Being the remuneration payable 5% of
Rs. 10,00,000 credited to capital account)
50,000
50,000
No entry for expenses since remuneration includes expenses which are borne by the partner.
CA. (Dr.) G.S. Grewal 26

Partner Tarun is entrusted the work of dissolving the firm and was to get 5% of the value of assets realised as remuneration, excluding expenses. Assets realised amounted to Rs. 10,00,000. He incurs Rs. 10,000 towards dissolution expenses which are paid by him. Pass the necessary entries in the books of the firm?
Entries
Particulars Debit (Rs.) Credit (Rs.)
Realisation Expenses A/c Dr.
To Tarun’s Capital A/c
(Being the remuneration payable 5% of
Rs. 10,00,000 credited to capital account)
50,000
50,000
Realisation Expenses A/c
To Tarun’s Capital A/c
Dr.
(Being the realisation expenses payable by the firm but paid by the partner credited to
10,000
10,000
27

Partap, a partner of the firm is to handle dissolution of the firm for which he is to be paid 10% of the assets realised. Assets realised amounted to Rs. 5,00,000, excluding expenses. Dissolution expenses came to Rs. 10,000 which were paid by the firm.
Pass the necessary entries in the books of the firm?
Entries
Particulars
Realisation Expenses A/c
To Partap’s Capital A/c
Dr.
(Being the remuneration payable 10% of
Rs. 5,00,000 credited to capital account)
Debit (Rs.) Credit (Rs.)
50,000
50,000
Partap’s Capital A/c
To Bank A/c
Dr.
(Being the realisation expenses payable by the firm)
CA. (Dr.) G.S. Grewal
10,000
10,000
28

Puneet, a partner of the firm is to handle dissolution of the firm for which he is to be paid 10% of the assets realised. Assets realised amounted to Rs. 5,00,000, including expenses. Dissolution expenses came to Rs. 10,000 which were paid by Amrit, another partner.
Pass the necessary entries in the books of the firm?
Entries
Particulars Debit (Rs.) Credit (Rs.)
Realisation Expenses A/c
To Puneet’s Capital A/c
Dr.
(Being the remuneration payable 10% of
Rs. 5,00,000 credited to capital account)
50,000
50,000
Puneet’s Capital A/c
To Amrit’s Capital A/c
Dr.
(Being the realisation expenses payable by the firm and paid by partner credited
10,000
10,000
29

Difference Between Companies Act, 2013 and the Companies Act, 1956
The Companies Act, 2013 The Companies Act, 1956
Financial Year Companies to have their financial year ending on 31 st
March every year.
Companies could have their financial year as decided by them.
Format
Financial
Statements of It is prescribed in Schedule
III of the Companies Act,
2013.
It was prescribed in Schedule
VI of the Companies Act,
1956.
Definitions of
Various Terms in the
Companies Act,
2013
Many terms in the Act have been defined.
Many terms in the Act were not defined.
CA. (Dr.) G.S. Grewal
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Difference Between Companies Act, 2013 and the Companies Act, 1956
Maximum Partners Section 464 Section 11 in a firm The section empowers the
Government to prescribe
Maximum number of partners of a firm could be maximum number of partners that a firm can has. But, the number of partners that can be prescribed cannot exceed
100.
The Government has made
Rule 10 of Companies
(Miscellaneous) Rules, 2014 and prescribed maximum number of partners of a firm to be 50.
Thus, a firm with more than 50 partners, is not legal.
10 in banking business and 20 in any other business.
CA. (Dr.) G.S. Grewal
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Difference Between Companies Act, 2013 and the Companies Act, 1956
Maximum Number of shareholders in
Private Company
Section 2(68)
Maximum number of shareholders in a private company can be 200, excluding its past and present employees.
Shares held in joint names to be considered as one shareholder.
Section3(1)(ii)
Maximum number of shareholders in a private company was 50, excluding its past and present employees.
One
Company
Person Section 2(62)
One Person Company is a company which has only one member.
One Person Company did not exist under the
Companies Act, 1956.
CA. (Dr.) G.S. Grewal
32

Difference Between Companies Act, 2013 and the
Companies Act, 1956
Issue of Shares at Discount
Section 53 of the Act Section 79 of the prohibits issue of shares Companies Act, 1956 at a discount.
permitted issue of
However, Section 54 of shares at a discount.
the Companies Act, 2013 is an exception. it permits issue of shares at a discount to employees as
ESOPs.
Receipt of
Money Against
Amount can be received by a company by way of
Could be received in cash also.
Securities cheque instrument.
or other
CA. (Dr.) G.S. Grewal
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Difference Between Companies Act, 2013 and the Companies Act, 1956
Articles of
Association
Table F applies where
Companies Limited by shares does not adopt their own Articles of Association.
Table A applied where
Companies did not adopt their own Articles of
Association.
Interest on
Calls – in – arrears
In the absence of a clause otherwise, interest on
Calls – in – arrears is 10% p.a.
In the absence of a clause otherwise, interest on
Calls – in – arrears was
5% p.a.
Interest on
Calls – in – advance
In the absence of a clause otherwise, interest on
Calls – in – advance is 12% p.a.
In the absence of a clause otherwise, interest payable on Calls – in – advance was 6% p.a.
CA. (Dr.) G.S. Grewal
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Difference Between Companies Act, 2013 and the Companies Act, 1956
Minimum
Subscription
Section 39: Section 69:
A company shall not allot securities (shares, debentures or any securities by whatever name called) unless the amount stated in the prospectus as minimum subscription has been subscribed and the sum payable on application have been paid or received by the company by cheque or other instrument.
Requirement of minimum subscription was with respect to shares only and that too in respect of initial issue.
CA. (Dr.) G.S. Grewal
35

CA. (Dr.) G.S. Grewal
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What is Employees Stock Option Plan (ESOP)?
Employees Stock Option Plan is a plan drawn to issue securities (Shares etc.) to employees (including whole time directors) at a discount i.e., at a price which is lower than its market value.
The Companies Act, 2013 (Section 53) prohibits issue of shares at a discount. But, through Section 54, it permits issue of ESOPs at a discount.
CA. (Dr.) G.S. Grewal
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Term Meaning
Grant Date Date on which the Enterprise and Employees agree to the Plan.
Vesting
Period
Period between the grant date and the date on which all the specified conditions of Employees
Stock Option Plan (ESOP) are satisfied.
Vesting
Date
Date on which an employee satisfies the specified conditions and thus, becomes entitled to the options.
Exercise It means making an application by an employee for issue of shares against the options vested in him.
Exercise
Period
Period after vesting within which an employee should exercise the right to apply under the Plan.
Exercise
Price
Price payable by the employee for exercising the right for option granted.
CA. (Dr.) G.S. Grewal
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How is it accounted in the books of accounts?
The difference between Market Value and Issue Price is the cost to the company, since, the Options are given to employees at a price lower than market price, it is an expense. The entry passed is:
Employees Compensation Expense A/c
To Shares Options Outstanding A/c
Dr.
Employees Compensation Expense A/c is shown under
‘Employees Benefit Expenses’ in the Statement of Profit and Loss.
Shares Options Outstanding Account is shown as
Reserves and Surplus under Shareholders’ Funds.
CA. (Dr.) G.S. Grewal
39

When all Option is Exercised by the Employees
Bank A/c Dr.
Shares Options Outstanding A/c Dr.
To Share Capital A/c
To Securities Premium Reserve A/c
(Amount Received)
(Amount Credited to
Shares Options
Outstanding A/c)
(Nominal Value Per
Share X No. of Shares)
(Amount Credited to
Shares Options
Outstanding A/c)
(Being the shares allotted against ESOP)
CA. (Dr.) G.S. Grewal
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When All Options are not Exercised
Bank A/c Dr.
Shares Options Outstanding A/c Dr.
(Amount Received)
(Amount Credited to Shares
Options Outstanding A/c)
To Share Capital A/c
To Securities Premium Reserve A/c
To General Reserve A/c
(Nominal Value Per Share X
No. of Shares)
(Amount Credited to Shares
Options Outstanding A/c relating to Options Exercised)
(Amount Credited to Shares
Options Outstanding A/c relating to Options not
Exercised)
(Being the shares allotted against
ESOP)
CA. (Dr.) G.S. Grewal
41

Bloom Ltd. grants options to subscribe 500 shares of Rs.
10 each at a price of Rs. 30 per share to each of its employees numbering 100. Vesting period being 3 years. Fair (Market) price of the share as on the grant date was Rs. 45. Employees numbering 75 exercised the option by the exercise date.
Pass the necessary journal entries.
CA. (Dr.) G.S. Grewal
42

Date Particulars Debit
(Rs.)
2,50,000 Year
1
Year
2
Employees Compensation Exp. A/c Dr.
To Shares Options Outstanding A/c
(Being the 1/3 rd amount of difference between Fair (Market) Value and Issue
Price recognised as expense)
Employees Compensation Exp. A/c Dr.
To Shares Options Outstanding A/c
(Being the 1/3 rd amount of difference between Fair (Market) Value and Issue
Price recognised as expense)
Year
3
Employees Compensation Exp. A/c Dr.
To Shares Options Outstanding A/c
(Being the 1/3 rd amount of difference between Fair (Market) Value and Issue
Price recognised as expense)
CA. (Dr.) G.S. Grewal
2,50,000
2,50,000
Credit
(Rs.)
2,50,000
2,50,000
2,50,000
43

Date Particulars
Year 4 Bank A/c (75 X 500 X Rs. 30) Dr.
Shares Options Outstanding A/c Dr.
To Share Capital A/c
(75 X 500 x Rs. 10)
To Securities Premium Res. A/c
(75 x 500 x Rs. 20 + 500 x Rs. 15)
To General Reserve A/c
(25 x 500 x Rs. 15)
(Being 500 shares each allotted to 75 employees exercising options, related amount transferred from Shares
Options Outstanding Account to
Securities Premium Account . Balance amount i.e., amount relating to 25 employees who did not exercise option
Debit
(Rs.)
11,25,000
7,50,000
Credit
(Rs.)
3,75,000
13,12,500
1,87,500
44

CA. (Dr.) G.S. Grewal
45

Section 71 of the Companies Act, 2013; together with
Rule 18(7) of the Companies (Share Capital and
Debentures) Rules, 2014 deals with Debenture Redemption Reserve.
Section 71 of the Companies Act, 2013 requires companies to transfer amount at least equal to 25% of the nominal value of debentures to DRR before the redemption of debentures begins.
DRR is required to be created only for non – convertible part of the Debentures.
CA. (Dr.) G.S. Grewal
46

Requirements of DRR
• Section 71 of the Companies Act, 2013 requires companies to transfer amount at least equal to 25% of the nominal value of total redeemable debentures.
• Rule 18(7) of the Companies (Share Capital and
Debentures) Rules, 2014 requires companies to invest amount at least equal to15% of the value of debentures to be redeemed by 31 st March of the next year in specified securities.
• Investment in specified securities to be made by 30 th
April of the year.
• Investment can be utilised only for redemption of debentures.
CA. (Dr.) G.S. Grewal
47

Companies not required to create DRR
1. All India Financial Institutions (AIFIs) regulated by
Reserve Bank of India.
2. Banking Companies.
3. Other Financial Institutions (LIC, IDFCI etc.)
All other Companies are required to create DRR.
CA. (Dr.) G.S. Grewal
48

1. On Transfer of Amount to DRR Amount
Surplus i.e., Balance in Statement of Profit and Loss A/c Dr.
To Debenture Redemption Reserve A/c
(Being the amount transferred to DRR)
At least 25% of the total
Redeemable
Debentures
2. On Investment Made in terms of Rule 18(7)
Debenture Redemption Investment A/c Dr.
To Bank A/c
(Being the amount invested in Specified Securities)
Note: This amount must be invested by 30 th
April of the current year for the
Debentures to be redeemed by 31 st
March of next year.
At least equal to 15% of the
Debentures to be redeemed by
31 st March of next year.
CA. (Dr.) G.S. Grewal
49

3. When Debentures are redeemed
Bank A/c Dr.
To Debenture Redemption Investment A/c
(Being the investment realised at the time of redemption of debentures)
(Amt. Received)
(Amount of Inv.)
4. If Investment earns Income and Tax is Deducted at Source (TDS)
Bank A/c Dr.
TDS Receivable A/c Dr.
(Amt. Received)
(Amount of TDS)
To Interest A/c
(Being the investment realised)
(Interest Earned)
5. When all the Debentures have been redeemed
Debenture Redemption Reserve A/c Dr.
To General Reserve A/c
(Being the balance in DRR transferred to General Reserve on
50

Appollo Ltd. issued 21,000, 8% Debentures of Rs. 100 each on 31 st March, 2008 redeemable at a premium of
8% on 30 th June, 2015. The company transferred the required amount to Debenture Redemption Reserve in three equal instalments staring 31 st March, 2013.The
required investment was made in specified securities on
30 th April, 2015.
Pass the necessary journal entries regarding transfer of amounts to Debenture Redemption Reserve, investment made and redemption of debentures.
CA. (Dr.) G.S. Grewal
51

Date Particulars
2013
Mar. 31 Surplus i.e., Balance in Statement of Profit and Loss A/c Dr.
To DRR A/c
(Being the one – third of 25% of total redeemable debentures transferred to
DRR)
2014
Mar. 31 Surplus i.e., Balance in Statement of Profit and Loss A/c Dr.
To DRR A/c
(Being the one – third of 25% of total redeemable debentures transferred to
DRR)
Debit
(Rs.)
1,75,000
1,75,000
Credit
(Rs.)
1,75,000
1,75,000
CA. (Dr.) G.S. Grewal
52

Date Particulars
2015
Mar. 31 Surplus i.e., Balance in Statement of Profit and Loss A/c Dr.
To DRR A/c
(Being the one – third of 25% of total redeemable debentures transferred to
DRR)
2015
Apr. 30 Deb. Redemption Investment A/c Dr.
To Bank A/c
(Being the amount equal to 15% of the redeemable debentures invested in
Government Securities)
Debit
(Rs.)
1,75,000
3,15,000
Credit
(Rs.)
1,75,000
3,15,000
CA. (Dr.) G.S. Grewal
53

Date Particulars Debit
(Rs.)
2015
June 30 Bank A/c Dr.
To Deb. Redemption Investment A/c
(Being the investment encashed)
3,15,000
Credit
(Rs.)
3,15,000
2015
June 30 8% Debentures A/c Dr.
Premium on Redemption of
Debentures A/c Dr.
To Debenture Holders A/c
(Being the amount payable on redemption)
21,00,000
1,68,000
22,68,000
CA. (Dr.) G.S. Grewal
54

Date Particulars Debit
(Rs.)
2015
June 30 Debenture Holders’ A/c Dr.
To Bank A/c
(Being the amount paid to debenture holders)
22,68,000
Credit
(Rs.)
22,68,000
2015
June 30 DRR A/c Dr.
To General Reserve A/c
(Being the amount of DRR transferred to General Reserve after redemption of debentures)
5,25,000
5,25,000
CA. (Dr.) G.S. Grewal
55

Section 2(20) of the Companies Act, 2013 .
“Company” means a company incorporated under this Act or any previous Company Law.
”
Section 3(1)(i) of the Companies Act, 1956
“Company” means a company formed and registered under this Act or an existing company as defined in Clause (ii)”
Clause (ii)
“Existing Company” means a company formed and registered under any of the previous companies laws specified below:
(a) ………. to (g) …………..
CA. (Dr.) G.S. Grewal
56

Definition of Company Limited by
Guarantee / Shares
Section 2(21) Company Limited by Guarantee
“Company Limited by Guarantee” means a company having the liability of its members limited by the
Memorandum to such amount as the members may respectively undertake to contribute to the assets of the company in the event of it being wound up.
It was not defined in the Companies Act, 1956.
Section 2(22) Company Limited by Shares
“Company Limited by Shares” means a company having the liability of its members limited by the
Memorandum to the amount, if any, unpaid on the shares respectively held by them.
It was not defined in the Companies Act, 1956.
CA. (Dr.) G.S. Grewal
57

Definition of Authorised or Nominal Capital
Section 2(8) of the Companies Act, 2013
“Authorised Capital” or “Nominal Capital” means such capital as is authorised by the memorandum of a company to be the maximum amount of share capital of the company.
It was not defined in the Companies Act, 1956.
CA. (Dr.) G.S. Grewal
58

Definitions of Issued Share Capital and
Subscribed Share Capital
Section 2(50) Issued Share Capital
“Issued Share Capital” means such capital as the company issues from time to time for subscription.
It was not defined in the Companies Act, 1956.
Section 2(86) Subscribed Share Capital
“Subscribed Share Capital” means such part of the capital which is for the time being subscribed by the members of a company.
It was not defined in the Companies Act, 1956.
CA. (Dr.) G.S. Grewal
59

Definition of “Paid up Share Capital or
Share Capital Paid up”
Section 2(64) of the Companies Act, 2013
“Paid-up Share Capital” or “Share Capital Paid-up” means such aggregate of money credited as paid-up as is equivalent to the amount received as paid-up in respect of shares issued and also includes any amount credited as paid-up in respect of shares of the company, but does not include any other amount received in respect of such shares, by whatever name called.
Section 2(32) of the Companies Act, 1956
“It includes capital credited as paid-up.”
CA. (Dr.) G.S. Grewal
60

Definition of “Called up Capital”
Section 2(15) of the Companies Act, 2013
“Called-up Capital” means such part of the capital, which has been called for payment.
It was not defined in the Companies Act, 1956
CA. (Dr.) G.S. Grewal
61

Definition of “Share”
Section 2(84) of the Companies Act, 2013
“Share” means a share in the share capital of a company and includes stock.
It was not defined in the Companies Act, 1956
CA. (Dr.) G.S. Grewal
62

Definition of Preference Share
Section 43, Explanation(ii) of the Companies Act, 2013
“Preference Share Capital” with reference to any company limited by shares, means that part of the issued share capital of the company which carries or would carry a preferential right with respect to:
(a) payment of dividend, either as a fixed amount or an amount calculated at a fixed rate, which may either be free of or subject to income tax; and
(b) repayment, in the case of a winding up or repayment of capital, of the amount of share capital paid-up or deemed to have been paid-up, whether or not, there is a preferential right to the payment of any fixed premium or premium on any fixed scale, specified in the memorandum or articles of the company.
CA. (Dr.) G.S. Grewal
63

Definition of Equity Share
Section 43, Explanation(i) of the Companies Act, 2013
“Equity share capital” with reference to any company limited by shares, means all share capital which is not preference share capital.
Section 85(2) of the Companies Act, 1956
“Equity Shares” are those shares which are not preference shares.
CA. (Dr.) G.S. Grewal
64

Definition of “Securities Premium Reserve”
Section 52(2) of the Companies Act, 2013
It prescribes the purposes for which Securities
Premium Reserve can be utilised.
Sections 77A and 78 of the Companies Act, 1956
It prescribed the purposes for which Securities
Premium Reserve could be utilised.
The purposes for which Securities Premium Reserve can be utilised are same.
CA. (Dr.) G.S. Grewal
65

Definition of “Debenture”
Section 2(30) of the Companies Act, 2013
“Debenture” includes debenture stock, bonds or any other instrument of a company evidencing a
debt, whether constituting a charge on assets of the company or not.
Section 2 (12) of the Companies Act, 1956
“Debenture” includes debenture stock, bonds or any other instrument of a company, whether constituting a charge on assets of the company or not.
CA. (Dr.) G.S. Grewal
66

Operating Cycle is the time gap between
• the acquisition of an asset for processing, and
• its realisation in cash and cash equivalents.
If operating cycle cannot be identified, it is assumed to be a period of 12 months.
CA. (Dr.) G.S. Grewal
67

Operating Cycle is the time gap between
• the acquisition of an asset for processing, and
• its realisation in cash and cash equivalents.
If operating cycle cannot be identified, it is assumed to be a period of 12 months.
CA. (Dr.) G.S. Grewal
68

Operating Cycle is the time gap between
• the acquisition of an asset for processing, and
• its realisation in cash and cash equivalents.
If operating cycle cannot be identified, it is assumed to be a period of 12 months.
CA. (Dr.) G.S. Grewal
69

Cash/Bank
Trade Receivables
Realised
Purchase of Raw
Material (Say held for
2 Months)
Finished Good Sold and
Converted to Trade Receivables
(Say on Credit Period of 4 Months)
Processing of Raw Material to manufacture Finished Goods
(Say 5 Months)
Finished Goods Held in
Inventory (Say 90 Days, i.e.
, 3 Months)
Operating Cycle is 14 Months (2 Months + 5 Months + 3 Months + 4 Months)
CA. (Dr.) G.S. Grewal
70

Cash/Bank
Trade Receivables
Realised
Purchase of Raw
Material (Say held for
1 Month)
Finished Good Sold and
Converted to Trade Receivables
(Say on Credit Period of 1 Month)
Processing of Raw Material to manufacture Finished Goods
(Say 4 Months)
Finished Goods Held in
Inventory (Say 60 Days, i.e.
, 2 Months)
Operating Cycle is 8 Months (1 Month + 4 Months + 2 Months + 1 Month)
CA. (Dr.) G.S. Grewal
71

Q.
How is Long – term Borrowings becoming due for payment within 12 months of the reporting date or the period of Operating Cycle, shown in the
Balance Sheet?
A.
It is not shown as Short – term Borrowings but
Other Current Liabilities and sub - head
‘Current Maturities of Long – term Debts’.
CA. (Dr.) G.S. Grewal
72

BALANCE SHEET as at………….
PARTICULARS
I.
EQUITY AND LIABILITIES
Share Capital
Share Capital
Note 1: Share Capital
Authorised Share Capital
1,00,000 Equity Shares of Rs. 10 each
Issued Capital
10,000 Equity Shares of Rs. 10 each
Subscribed Capital
Subscribed and fully paid up
78,000 Equity Shares of Rs. 10 each
(Out of the above, 10,000 fully paid Equity Shares have been issued for consideration other than cash)
Subscribed but not fully paid up
1,000, Equity Shares of Rs. 10 each
Less: Calls – in – arrears
Add: Forfeited Shares Account*
NOTE NO.
1
Amount (Rs.)
10,000
2,000
CA. (Dr.) G.S. Grewal
Rs.
7,93,000
Amount (Rs.)
10,00,000
8,00,000
7,80,000
8,000
788,000
5,000
7,93,000
Slide 73

A.
The term ‘ Share Warrants’ is defined in
Companies (Accounting Standards) Rules,
2006 as follows:
“Share Warrants are financial instruments which gives the holder the right to acquire equity shares”.
CA. (Dr.) G.S. Grewal
74

I.
Capital Reserve
II.
Capital Redemption Reserve
III.
Securities Premium Reserve
IV.
Debenture Redemption Reserve
V.
Revaluation Reserve
VI.
Share Options Outstanding Account
VII.
Other Reserves
VIII.
Surplus i.e., Balance in Statement of Profit and Loss
CA. (Dr.) G.S. Grewal
75

Q. Can a Company have reserves other than those specified in Schedule VI?
A.
Yes, a company can have reserves other than those specified in Schedule VI. Schedule VI of the Companies Act is made flexible by including an entry Any Other Reserves (to specify the nature and purpose of each reserve) .
Examples: Investment Fluctuation Reserve,
Workmen Compensation Reserve, Subsidy
Reserve, Tax Reserve, Development
Reserve, Research and Development
Reserve, Asset Replacement Reserve etc.
CA. (Dr.) G.S. Grewal
76

Q.
Is there a difference between Statement of Profit and Loss and Surplus i.e.,
Balance in Statement of Profit and Loss?
A.
Yes.
Statement of Profit and Loss is a statement from which profit earned or loss incurred during the year is known.
Surplus i.e., Balance in Statement of Profit and Loss is a reserve representing balance in the reserve. It includes opening Balance and current year’s profit or loss.
CA. (Dr.) G.S. Grewal
77

Q. What is Revaluation Reserve?
A.
Upward revision of Book Value of a n asset is credited to ‘ Revaluation Reserve ’.
Revaluation Reserve cannot be distributed unless gain is realised. Also fictitious assets such as preliminary expenses, loss on issue of debentures etc. cannot be written off against it.
If the company revises the value of the asset downward, Revaluation Reserve is debited by the amount of downward revision.
CA. (Dr.) G.S. Grewal
78

Q. What is Shares Options Outstanding
Account?
A.
Shares are issued at a price that is lower than its market value to the employees. Companies issuing these shares have to create a reserve for the amount of difference crediting it to
Shares Options Outstanding Account .
The amount is credited in instalment over the vesting period.
if the employee exercises the option or the vesting period is over, the amount is transferred to General Reserve.
CA. (Dr.) G.S. Grewal
79

Q.
What amount is shown under ‘Share
Application Money Pending Allotment’?
A.
Out of the total Share Application Money received only that much amount is shown against ‘Share Application Money Pending
Allotment’ against which shares will be allotted by the company.
Money received by the company as share
Application Money and which is to be refunded is shown under the head Current Liabilities and sub – head Other Current Liabilities .
CA. (Dr.) G.S. Grewal
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CA. (Dr.) G.S. Grewal
81

Format of Comparative Balance Sheet
Particulars Note
No.
2012-13
Rs.
2013-14
Rs.
Absolute Change
(Increase /Decrease)
Rs.
(B-A)=C
Percentage Change
(Increase/Decrease) %
C/A X 100=D A B
I. EQUITY AND LIABILITIES
1. Shareholders’ Funds
(a) Share Capital
(b) Reserves and Surplus
2. Non-Current Liabilities
(a) Long-term Borrowings
(b) Long-term Provisions
3. Current Liabilities
(a) Short-term Borrowings
(b) Trade Payables
(c) Other Current Liabilities
(d) Short-term Provisions
Total
II. ASSETS
1. Non-Current Assets
(a) Fixed Assets:
Tangible Assets
Intangible Assets
(b) Non-current Investments
(c) Long-terms Loans and Advances
2. Current Assets
(a) Current Inventories
(b) Inventories
(c) Trade Receivables
(d) Cash and Cash Equivalents
(e) Short-term Loans and Advances
(f) Other Current Assets
Total
CA. (Dr.) G.S. Grewal
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82

FORMAT OF COMPARATIVE STATEMENT OF PROFIT & LOSS
COMPARATIVE STATEMENT OF PROFIT AND LOSS for the years ended 31st March, 2013 and 2014
Particulars
I. Revenue from Operations
II. Other Income
III. Total Revenue(I+II)
IV. Expenses:
Cost of Materials Consumed
Purchases of Stock-in-Trade
Changes in Inventories of Finished Goods,
Work-in-Progress and Stock-in-Trade
Employees Benefit Expenses
Finance Costs
Depreciation and Amortisation
Other Expenses
Total Expenses
Profit before Tax(III-IV)
CA. (Dr.) G.S. Grewal
Note
No.
2012-13
Rs.
2013-14
Rs.
A
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B
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Absolute
Change
(Increase or
Decrease)%
(B-A)=C
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Percentage Change
(Increase or Decrease)%
𝐶
𝐴
X 100=D
100
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83

COMMON SIZE STATEMENT OF PROFIT AND LOSS
Particulars Note
No.
Absolute Change Percentage of Revenue from Operations
I. Revenue from Operations
II. Other Income
III. Total Revenue(I+II)
IV. Expenses:
Cost of Materials Consumed
Purchases of Stock-in-Trade
Changes in Inventories of Finished Goods,
Work-in-Progress and Stock-in-Trade
Employees Benefit Expenses
Finance Costs
Depreciation and Amortisation Expenses
Other Expenses
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Total Expenses
Profit before Tax(III-IV)
CA. (Dr.) G.S. Grewal
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84

FORMAT OF COMMON-SIZE BALANCE SHEET
Particulars Note
No.
2012-13
Rs.
2013-14
Rs.
Absolute Change
(Increase /Decrease)
Rs.
(B-A)=C
Percentage Change
(Increase/Decrease) %
A B C/A X 100=D
I. EQUITY AND LIABILITIES
1. Shareholders’ Funds
(a) Share Capital
(b) Reserves and Surplus
2. Non-Current Liabilities
(a) Long-term Borrowings
(b) Long-term Provisions
3. Current Liabilities
(a) Short-term Borrowings
(b) Trade Payables
(c) Other Current Liabilities
(d) Short-term Provisions
Total
II. ASSETS
1. Non-Current Assets
(a) Fixed Assets:
Tangible Assets
Intangible Assets
(b) Non-current Investments
(c) Long-terms Loans and Advances
2. Current Assets
(a) Current Inventories
(b) Inventories
(c) Trade Receivables
(d) Cash and Cash Equivalents
(e) Short-term Loans and Advances
(f) Other Current Assets
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CA. (Dr.) G.S. Grewal
Please be free to write to us on:
Dr. (CA.) G. S. Grewal: cagsgrewal@gmail.com
,
Phone: 09811242856
Shri R. K. Khosla: Phone 08527162655
86

For latest in Education
AND
for updation in accountancy
CA. (Dr.) G.S. Grewal 87