1

VIDYA SAGAR
CAREER INSTITUTE LIMITED
Answer of Aud
Answer Key Adv. Accounts Jan. 2025
SERIES - 1
Vol : 24 12.07.2024
=================================================================

SECTION - A

1 2 3 4 5
B C D B A
6 7 8 9 10
C A D C B
11 12 13 14 15
A D A C B
Answer : 15x2 = 30 Marks
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SECTION “B”
Descriptive Questions
=====================================================================================

Answer: 1 (a) 7 Marks

1. As per AS 17 ‘Segment Reporting’, a business segment or geographical segment
should be identified as a reportable segment if: STEP 1
i. Its revenue from sales to external customers and from other 1–3
transactions with other segments is 10% or more of the total revenue-
external and internal of all segments; or Its segment result 3x1 =
ii. whether profit or loss is 10% or more of: 3M
The combined result of all segments in profit; or
The combined result of all segments in loss,
whichever is greater in absolute amount; or
iii. Its segment assets are 10% or more of the total assets of all
segments.

2. If the total external revenue attributable to reportable segments constitutes less STEP 2
than 75% of total enterprise revenue, additional segments should be identified Additional
as reportable segments even if they do not meet the 10% thresholds until Condition
atleast 75% of total enterprise revenue is included in reportable segments. 1M
3. i. On the basis of turnover criteria segments M and N are reportable STEP 3
segments. Checking
ii. On the basis of the result criteria, segments M, N and R are reportable of
segments (since their results in absolute amount is 10% or more of ` 200 Criterial
lakhs). 3 Points
iii. On the basis of asset criteria, all segments except R are reportable 3x½=
segments. 1½ M

4. Since all the segments are covered in at least one of the above criteria all STEP 4
segments have to be reported upon in accordance with Accounting Standard Decision
(AS) 17. Hence, the opinion of chief accountant is wrong. 1½ M

Answer: 1 (b) 7 Marks

Calculation of Earnings Per Share (EPS) of Beta Ltd.
` `
Year ended Year ended
31.3.15 31.3.14
1. A Earning after extra ordinary items 2,00,000 70,000 ¼+¼=½M
(` 2,06,000 – ` 6,000) (` 73,000 – `
3,000)
B. No. of Equity Shares 20,000 20,000
C. Basic Earnings Per share [A/B] 10.00 3.50 ¼+¼=½M
A. Earning before extra ordinary items 1,00,000 70,000
B. No. of Equity Shares 20,000 20,000∗
C. Basic Earnings Per share [A/B] 5.00 3.50 ¼+¼=½M
2. Tax rate applicable
` 40,000 + ` 30,000 / ` 2,00,000×100 35% ¼M
` 30,000 + ` 10,000 / ` 1,00,000×100 40% ¼M
 3

3. A. Dividend on Weighted Average

Preference
Shares 6,000 3,000
B Incremental shares 15,000 7,500
C EPS on Incremental Shares [A/B] 0.40 0.40 ¼+¼=½M
(dilutive) (dilutive)
4. Convertible Debentures
A. Increase in earnings

(100,000 × x 65) 9,750 ½M

(1,00,000 × x 60 x ) 6,750 ½M

B Increase in shares 1,000 750

C Increase in EPS [A/B] 9.75 9.00 ½+½ = 1M
(Anti dilutive) (Anti dilutive)

It is anti-dilutive as it increases the EPS from continuing ordinary operations (Para 39, AS 20)

Calculation of Diluted EPS Year ended Year ended

31.3.15 31.3.14
(`) (`)
Profit from continuing ordinary activities
A. before
Preference Dividend 1,06,000 73,000
No. of ordinary equity shares 20,000 20,000
Adjustment for dilutive potential of 6%
convertible pref. shares 15,000 7,500
B. Total no. of shares 35,000 27,500
Diluted EPS from continuing ordinary operations
C. [A/B] 3.02 2.65 ¼+¼ = ½M
D. Profit including extra ordinary items 2,06,000 73,000
E. Adjusted No. of shares 35,000 27,500
F. Diluted EPS including extra ordinary items [D/E] 5.88 2.65 ½+½ = 1M

Disclosure of EPS in accordance with AS 20 in the Profit and Loss Account

Earning per share (Face value ` 100) 31.3.15 (` ) 31.3.14 (` )

Basic EPS from continuing ordinary operations 5.00 3.50
1M
Diluted EPS from continuing ordinary operations 3.02 2.65
.
 4

Answer: 2 14 Marks
Balance Sheet of Vasudha Ltd. as on 31st March, 2013
(After absorption)
Particulars Note Amount
No
`
EQUITY AND LIABILITIES
1 STEP 1
Shareholders' funds Balance
(a) Share capital 1 9,43,300 Sheet
(b) Reserves and Surplus 2 2,72,990 8 Items
2 8x1 = 8 M
(a) Current liabilities
Trade payables (44,400+58,200) 1,02,600
Total 13,18,890
ASSETS
1 (a) Non-current assets

I PPE
II 3 3,85,000
Intangible assets
(a) 4 1,00,000
Current assets
2
(b) Inventories(91,500 + 75,000)
1,66,500
(c) Trade receivables(2,86,900 + 1,72,900)
4,59,800
Cash and cash equivalents(98,000 +
2,07,590
1,09,590)
13,18,890
Total

Notes to Accounts STEP 2

(`) (`)
1. Share Capital 4 x½
Equity Share Capital =
(54,000 + 40,330) Equity shares of `10 each 9,43,300 2M
2. Reserves and Surplus
Profit and Loss A/c 66,000
General Reserves 86,000
Securities Premium A/c (Refer W.N.) 1,20,990 2,72,990
3. PPE
Factory Building (2,10,000 + 1,75,000) 3,85,000
4. Intangible Assets
Goodwill (50,000 + 50,000) 1,00,000

NOTE: As the assets of Vasudha Ltd are shown in the Books after absorption at
carrying value only, no adjustment for revaluation of the same has been done in the ½M
Balance Sheet. However, assets of Vaishali Ltd have been taken at the fair value as
indicated.
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Working Note: Computation of shares issued on the basis of intrinsic Values. STEP 3

Vasudha Ltd. Vaishali Ltd.

` `
Goodwill 75,000 50,000
Factory building 1,95,000 1,75,000
Trade receivables 2,86,900 1,72,900
Inventory 91,500 (82,500/110%)= 75,000
Cash at Bank 98,000 1,09,590
7,46,400 5,82,490
Net Assets
Less: Trade payables (44,400) (58,200)
1+1= 2M
Net assets 7,02,000 5,24,290
Number of shares 54,000 40,330 Intrinsic
Intrinsic value `13 `13 ¼+¼=½ M

Hence, Vasudha Ltd. will give its 40,330 shares of `10 each @ `13 each to Vaishali
Ltd. Discharge of Purchase consideration
Share Capital Securities Premium
` `
40,330 Shares @ ` 10 each 4,03,300 ½M
40,330 shares @ ` 3 each 1,20,990 ½M
.
Answer: 3 (A) 7 Marks
Statement of Profit and Loss for the year ended 31st March, 2019 (Extract)
`
Profit before depreciation and taxes 6,40,000
Less: Depreciation for accounting purposes Profit Before
(2,80,000+30,000) (3,10,000) Tax.
Profit before taxes (A) 3,30,000 ½M
Less: Tax expense (B)
Current tax (W.N.1) (3,30,000 x 40%) 1,32,000
Deferred tax (W.N.2) NIL (1,32,000) ½M
Profit after tax (A-B) 1,98,000 1M

Working Notes:
1. Computation of taxable income
Amount (`)
Profit before depreciation and tax 6,40,000
Less: Depreciation for tax purpose (1,90,000 + 1,20,000) (3,10,000)
Taxable income 3,30,000 ½M
Tax on taxable income @ 40% 1,32,000 ½M
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2. Impact of various items in terms of deferred tax liability / deferred tax

asset
S. Transactions Analysis Nature of Effect Amount
No. difference (`) Analysis
(i) Difference in Generally, Responding Reversal (2,80,000 - 2 Points
depreciation written down timing of DTL 1,90,000) x ¼+¼=½ M
value method of difference 40%=
depreciation is (36,000)
Adopted underIT
Act which leads Nature of
to higher difference
depreciation in
2 Points
earlier years of
¼+¼=½ M
useful life of the
asset in
comparison to Effect
later years. ½+½=1 M
(ii) Depreciation Due to allowance Timing Creation (1,20,000
on new of fullamount as difference of DTL – 30,000) x Amt.
machinery expenditure under 40% 2 Item
IT Act, taxpayable = 36,000 ½+½=1 M
in theearlier years
isless. Net Impact
Net impact NIL 1M

Answer: 3 (B) 7 Marks

Cash Flow Statement of Light Ltd. for the year ended 31st March, 2020
Cash flows from operating activities (` ’000) (` ’000)
Cash receipts from customers 24,894
Cash payments to suppliers (18,306) 6 Item
Cash paid to employees (621) 6x¼ =
Other cash payments (for Selling & Administrative (1,035) 1½ M
expenses)
Cash generated from operations 4,932
Income taxes paid (2,187)
Net cash from operating activities 2,745 ½M
Cash flows from investing activities
Payments for purchase of fixed asset (2,070)
4 Item
Proceeds from sale of fixed assets 1,152
4x¼ =
Purchase of investments (117) 1M
Sale of investments 153
Net cash used in investing activities (882) ½M
Cash flows from financing activities
Proceeds from issuance of share capital 2,700
4 Item
Bank loan repaid (2,250) 4x¼ =
Interest paid on bank loan (450) 1M
Dividend paid (720)
Net cash used in financing activities (720) ½M
 7

Net increase in cash and cash equivalents 1,143 ½M

Cash and cash equivalents at beginning of period 315 ½M
Cash and cash equivalents at end of period 1,458 1M
.

Answer: 4 14 Marks
Journal Entries STEP 1
(i) Equity Share Capital (`50) A/c Dr. 60,00,000 5 Item
To Equity Share Capital (`10)*A/c 8,00,000 5 x ¼=1 M
To 9% Preferecne Share Capital A/c 2,00,000
To 10% Debentrues A/c 2,80,000
To Capital Reduction A/c 47,20,000
(Being payment made in lieu of equity share capital of `50 each
by issue of equity shares of `10 each, 9% Preference share capital
and 10% Debentures as per reconstruction scheme)
-------------------------------------------------------------------------------------------------------------
(ii) 9% Preference Share Capital (`10) A/c Dr. 40,00,000 3 Item
To 9% Preference Share Capital (`8)A/c 32,00,000 3 x ¼=½ M
To Capital Reduction A/c 8,00,000
(Being 9% preference share capital of `10 each
reduced to `8 each as per reconstruction scheme)
(iii) Bank A/c Dr. 16,00,000 ½M
To Equity Share Capital (`10)A/c 16,00,000
(Being preference share holders subscribed for
2 new equity shares of 10 each against every 5 shares)
--------------------------------------------------------------------------------------------------------------
(iv)(a) Provision for Taxation A/c Dr. 75,000
To Capital Reduction A/c 9,000 May be
To Taxation Liability A/c 66,000 combined(Being liability f
(b) Taxation Liability A/c Dr. 66,000 entry
To Bank A/c 66,000 ½+½=1M
(Being Liability for taxation paid)
(v) Trade payables A/c Dr. 1,00,000
To Equity Share Capital A/c (7,000 × `10) 70,000 3 Item
To Capital Reduction A/c 30,000 3x¼ = ½M
(Being payment made to creditors in shares to the extent
of 70% as per reconstruction scheme)
(vi) Trade Payables A/c Dr. 5,00,000
4 Item
To 9% Preference share capital A/c (43,750 × 8) 3,50,000
4x¼ = 1M
To Bank A/c 1,20,000
To Capital Reduction A/c 30,000
(Being payment made to creditors in shares and cash as
per reconstruction scheme)
(vii) Capital Reduction A/c Dr. 26,000 ½M
To Bank A/c 26,000
(Being contractual commitment settled by payment
of 4% penalty)
 8

(viii) 7% Debentures A/c Dr. 23,00,000 3 Item

To Plant & Machinery A/c 22,00,000 3x¼ = ½M
To Capital Reduction A/c 1,00,000
(Being 7% debentures holders settled through charge
of plant & machinery as per reconstruction scheme)
(ix) 8% Debentures A/c Dr. 17,00,000 3 Item
To 10% Debentures A/c (17,000 × `80) 13,60,000 3x¼ = ½M
To Capital Reduction A/c 3,40,000
(Being conversion of 8% debentures to 10% debentures
at one for every two debentures held by them as per
reconstruction scheme)
(x) Capital Reduction A/c Dr. 12,30,000
To Land & Building A/c 3,75,000
To Profit & Loss A/c 2,15,000 5 Item
To Trade Receivables A/c 4,50,000 5x¼ = 1M
To Inventories 1,90,000
(Being amount of Capital Reduction utilized in writing May be
off Profit & loss Dr. bal., Land & building, Current combined
Assets, Inventories through capital reduction account) entry
(xi) Capital Reduction A/c Dr. 47,73,000
To Capital Reserve A/c 47,73,000 ½M
(Being Balance in capital reduction account
transferred to capital reserve account)

(ii) Balance Sheet of M/s. Clean Ltd. (as reduced) as on 31.3.2015 STEP 2
Particulars Notes (`)
1 Equity and Liabilities Balance
Shareholders' funds Sheet
a Share Capital 1 62,20,000 8 Item
b Reserve and Surplus 2 47,73,000 8x¼= 2 M
2. Non-current liabilities
a Long-term Borrowings 3 16,40,000
Total 1,26,33,000
Assets
1 Non-current Assets

a PPE 4 71,25,000
b Investments 16,50,000
2 Current Assets
a Inventories 5 7,60,000
b Trade Receivables 6 13,50,000
c Cash and Cash equivalents 17,48,000
Total 1,26,33,000
Notes to accounts STEP 3
(`) Notes
Share Capital 1 to 6
Equity Share Capital 6x¼=
Issued subscribed and paid up 1½M
2,47,000 equity shares of `10 each 24,70,000
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(out of which 7,000 equity shares have been issued for

consideration for other that cash)
Preference Share Capital
Issued, subscribed and paid up
4,68,750 Preference Shares of `8 each 37,50,000
(out of which 43,750 equity shares have been issued for
consideration for other that cash) 62,20,000
2. Reserves and Surplus
Capital Reserve 47,73,000
3. Long-term borrowings
Secured
20,500 10% Debentrues of `80 each 16,40,000
4. PPE
Land & Building 75,00,000
Adjustment under scheme of reconstruction (3,75,000) 71,25,000
5. Inventores 9,50,000
Adjustment under scheme of reconstruction (1,90,000) 7,60,000
6. Trade Receivables 18,00,000
Adjustment under scheme of reconstruction 4,50,000 13,50,000

Working Notes: STEP 4

1. Cash at Bank Account
Particulars (`) Particulars 6 (`)
Items
To Balance b/d 3,60,000 By Taxation liability 66,000 6x¼=
To Equity Share capital A/c 16,00,000 By Trade Payables A/c 1,20,000 1M
By Penalty A/c 26,000
. By Balance c/d (bal. Fig.) 17,48,000 19,66,00
2. Capital Reduction Account
Particulars (`) particulars (`) 12 Items
To Land & Building 3,75,000 By Equity Share Capital A/c 47,20,000 12x¼=
To Machinery A/c 2,15,000 By 9% Preference 2M
Share Capital 8,00,000
To Trade receivables A/c 4,50,000 By 7% Debentures 1,00,000
To Inventories A/c 1,90,000 By Provision for tax 9,000
To Bank 26,000 By Trade Payables 60,000
To Capital Reserve (bal. Fig.) 47,73,000 (30,000 +30,000)
. By 8% Debentures 3,40,000
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Answer: 5 14 Marks
Consolidated Balance Sheet of White Ltd. and its Subsidiary Black Ltd. STEP 1
as at 31st March, 2021
Balance
Particulars Note No. (`) Sheet
7 Items
I. Equity and Liabilities
7x½ =
(1) Shareholder's Funds
3½M
(a) Share Capital 1 6,50,000
(b) Reserves and Surplus 2 2,55,000
(2) Minority Interest 3 1,05,000
(3) Current Liabilities
(a) Trade Payables 4 1,90,000
Total 12,00,000
.
.

II. Assets
(1) Non-current assets
(a) Property, Plant and Equipment 5 9,31,000
(2) Current assets
(i) Inventory 6 1,70,000
(ii) Cash & cash equivalent 7 99,000
Total 12,00,000

STEP 2
Notes to Accounts
Notes to
` Acc
1. Share capital 1–7
6,500 equity shares of ` 100 each, fully paid up 6,50,000 Except 2
Total 6,50,000 6x½ =
2. Reserves and Surplus 3M
General Reserves 60,000
Profit and Loss Account 1,50,000
Add: 75% share of Black Ltd.’s post-acquisition profits 1M
(W.N.1) 37,500 1,87,500
Capital reserve (W.N. 5) 7,500
Total 2,55,000
3. Minority interest in Black Ltd. (WN 4) 1,05,000
4. Trade payables
White Ltd. 1,15,000
Black Ltd. 75,000 1,90,000
5. Property, plant and equipment
White Ltd. 5,80,000
Black Ltd. 3,51,000 9,31,000
6 Inventory
White Ltd. 50,000
 11

Black Ltd. 1,20,000 1,70,000

7 Cash & cash equivalent
White Ltd. 39,000
Black Ltd. 54,000
Cash in transit 6,000 99,000

Working Notes: STEP 3

1. Post-acquisition profits of Black Ltd. `

profits earned during the year = ` 90,000 + `10,000 1,00,000
Pre-acquisition profits (1.4.20 to 30.9.20) 50,000
1M
Post-acquisition profits (1.10.20 to 31.3.21) 50,000
White Ltd.’s share 75% of 50,000 37,500
Minority Interest 25% of 50,000 12,500
2. Pre-acquisition profits and reserves of Black Ltd.
Reserves as on 1.4.2020 30,000
Profit and Loss Account 40,000
[10,000 (loss as on 1.4.20) +50,000 (6 month Adjusted pre- 1½ M
acquisitionprofits)]
70,000
White Ltd.’s = (75%) × 70,000 52,500
Minority Interest= (25%) × 70,000 17,500
3. Post-acquisition reserves of Black Ltd.
Post-acquisition reserves (Total reserves Less pre-acquisition reserves nil ½M
= ` 30,000 – 30,000)
4. Minority Interest
Paid-up value of (3,000 – 2,250) = 750 shares
held by outsiders i.e. 750 × ` 100 75,000
1½M
Add: 25% share of pre-acquisition reserves & Profit 17,500
25% share of post-acquisition profit 12,500
1,05,000
5. Capital Reserve
Price paid by White Ltd. for 2,250 shares (A) 2,70,000
Intrinsic value of the shares- 2M
Paid-up value of 2,250 shares held by White Ltd. 2,25,000
i.e. 2,250 × ` 100
Add 75% share of pre-acquisition reserves & profit
(70,000 x 75%) 52,500 (B) 2,77,500
Capital reserve (A – B) 7,500
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Answer 6 (a) 4 Marks

According to AS 10 (Revised), the following costs can be capitalized:

Cost of the plant Rs. 25,00,000
Initial delivery and handling costs Rs. 2,00,000 5 Items
Cost of site preparation Rs. 6,00,000 5x½
Consultants’ fees Rs. 7,00,000 = 2½M
Estimated dismantling costs to be incurred after 7 years Rs. 3,00,000
Rs. 43,00,000 ½M
Note: Interest charges paid on “Deferred credit terms” to the supplier of the plant (not a
qualifying asset) of Rs. 2,00,000 and operating losses before commercial production 1M
amounting to Rs. 4,00,000 are not regarded as directly attributable costs and thus cannot be
capitalized. They should be written off to the Statement of Profit and Loss in the period they
are incurred.

OR
Answer 6 (a) 4 Marks
(I) As per para 9 of AS 11 “Changes in Foreign Exchange Rates”, a foreign currency Rule
transaction should be recorded, on initial recognition in the reporting
currency, by applying to the foreign currency amount the exchange rate ½M
between the reporting currency and the foreign currency at the date of the
transaction. Accordingly, on 31.12.2012, borrowings will be recorded at
` 88,00,000 (i.e $ 2,00,000 ×` 44.00) X
(II) As per para 11(a) of the standard, at each balance sheet date, foreign currency
monetary items should be reported using the closing rate. Accordingly, on ½M
31.03.2013, borrowings (monetary items) will be recorded at ` 89,00,000 (i.e. $
2,00,000 × ` 44.50).
(III) In the books of Aman Ltd. Journal Entries
Date Particulars ` `
1. 31-12-2012 Bank A/c Dr. 88,00,000
To Borrowings 88,00,000 ½M
2. 31.03.2013 P/L A/c Dr. 1,00,000
(Difference in exchange)
(W.N.1) ½M
To Borrowings 1,00,000
3. 30.06.2013 Borrowings A/c Dr. 89,00,000
To P/L A/c 3,00,000 1M
(Difference In exchange)
(W.N.2)
To Bank A/c 86,00,000

Working Notes: W.No.

1. The exchange difference of ` 1,00,000is arising because the transaction has
been reported at different rate (` 44.50 =1 US $) from the rate initially ½M
recorded (i.e. ` 44 =1 US $).
 13

2. The exchange difference of ` 3,00,000 is arising because the transaction has ½M

been settled at an exchange rate (` 43.00 =1 US $) different from the rate at
which reported in the last financial statement (` 44.50= 1 US $).

Answer 6 (b) 4 Marks

Calculation of cost of software (intangible asset) acquired for internal use
Purchase cost of the software £ 1,50,000
Less: Trade discount @ 2.5% £ ( 3,750) ½M
£1,46,250 ½M
Cost in ` (UK £1,46,250 x ` 100) 146,25,000 ½M
Add: Import duty on cost @ 10% (`) 14,62,500
160,87,500 ½M
Add: Additional import duty @ 5% (`) 8,04,375
168,91,875 ½M
Add: Installation expenses (`) 1,50,000
Add: Professional fee for clearance from customs (`) 50,000
Cost of the software to be capitalized (`) 170,91,875 1M

Note: Since entry tax has been mentioned as a recoverable / refundable tax, it is not ½M
included as part of the cost of the asset.

Answer 6 (c) 6 Marks

Trading and Profit and Loss A/c Trading

For the year ended 31St March, 2014 Acc
10 Items
Particulars H.O. ` Branch ` Particulars H.O. ` Branch `
P/L Acc
To Opening Stock 1,25,000 – By Sales 23,79,600 7,30,000
11 Items
To Purchases 21,50,000 – By Goods sent to 7,38,000 –
branch 10x¼=
To Goods received – 7,38,000 By Closing Stock 5,43,000 81,000 2M
from H.O. (W.N. 1 & 2)

To Gross Profit c/d 13,85,600 73,000 11x¼=

2.5 M
36,60,600 8,11,000 36,60,600 8,11,000

To Office Expenses 50,000 4,500 By Gross Profit 13,85,600 73,000

b/d

To Selling Expenses 32,000 3,300

To Staff salaries 45,000 8,000

To Branch Stock 36,000 –

Reserve (W.N. 3)

To Net Profit 12,22,600 57,200

13,85,600 73,000 13,85,600 73,000

 14

Working Notes:
(1) Calculation of Closing stock of head office: `
Opening stock of head office 1,25,000
Goods purchased by head office 21,50,000
22,75,000
Less: Cost of goods sold [(31,17,600 (23,79,600 + 7,38,000) × 100/180] (17,32,000)
5,43,000 ½M
(2) Calculation of closing stock of branch: `
Goods received from head office [At invoice value] 7,38,000
Less: Invoice value of goods sold [7,30,000 × 180/200] 6,57,000
81,000 ½M
(3) Calculation of unrealized profit in branch stock:
Branch stock ` 81,000
Profit included 80% of cost
Hence, unrealized profit would be = ` 81,000 × 80/180 = ` 36,000 ½M