QP CODE: 22102761

B.COM DEGREE (CBCS) REGULAR EXAMINATIONS, AUGUST

2022
Fourth Semester
Core Course - CO4CRT11 - CORPORATE ACCOUNTING II
Time: 3 Hours Max. Marks: 80
Part A
COVID PATTERN -Answer any SIX questions from the following. Each question
carries 3 marks
1. Partly paid investments, Claims not acknowledged as debts (other than those
under policies), Statutory liabilities/demands in dispute, not provided for,
Guarantees given by or on behalf of the company, Reinsurance obligations
[Award full marks for any one of the above]
2. Premium is the consideration received by the insurer for bearing the risk of
loss.It is the main source of income and thus credited to Revenue Account.
It is shown in Revenue Account (Schedule 1-Premium).
3. It is a complicated mathematical process by which the net liability on
outstanding or existing policies is determined by an expert called ‘Actuary’.
4. According to section 24 (2 A) of the Banking Regulation Act, every banking
companyin India, scheduled or non-scheduled, is required to maintain in
India in cash, goldor approved securities (Government Securities), an
amount which is not less than25% of the total of its demand and time
liabilities in India. This is known as “Statutory Liquidity Ratio”.
5. It is the unearned amount of discount received on those bills that will mature
after the close of the accounting year.
Discount A/c.........................Dr
To Rebate on Bills Discounted
6. Sub-division refers to conversion of shares of larger denomination in to shares
of smaller denominations. On subdivision, the number of shares increases and
there is no change in the amount of share capital.
7. It refers to the reorganisation of the existing financial structure of a company
without forming a new company. It includes;
a) Alteration of share capital
b) Reduction of share capital
c) Variation of shareholders’ rights and
d) Scheme of compromise or arrangement.
8. A business combination is a transaction or event in which an acquirer obtains
control over one or more other businesses. Amalgamations, absorptions and
acquisitions are examples.
9. AS-14 defines purchase consideration as “aggregate of shares and other
securities issued and the payment made in the form of cash and other assets
by the transferee company to the shareholders of the transferor company”.

10.
 QP CODE: 22102761

Basis Absorption External

Reconstruction
Liquidation One or more companies Only on company is
liquidated liquidated
New Company New company is not New company is formed
formed
Objective Growth, economies of Writing off accumulated
scale, diversification of losses through external
risk, etc. reorganisation
Any two points of differences are sufficient.
11. A) Winding up by Tribunal and B) Voluntary Winding Up
12. Deficiency account is prepared to explain in a nutshell how the company
lost money during its existence. It explains the reasons for arising surplus or
deficiency. This statement should be submitted by the officers and directors of
the company along with the statement of Affairs.

Part B
COVID PATTERN -Answer any FOUR questions from the following. Each
question carries 8 marks
13. Valuation Balance Sheet may be defined as a statement prepared to
ascertainthe excess of life assurance fund over net liability on existing polices
(Surplus/Profit) or excess of net liability on existing polices over life assurance
fund(Deficit or loss). It is prepared once in two years.
Format of Valuation Balance Sheet (Form I)
Liabilities Rs Assets Rs
Net Liability as per Actuarial XXX Life Assurance Fund as per XXX
Valuation (Form H) Balance sheet
Surplus (Balancing figure) XXX Deficiency (Balancing XXX
figure)

14. General insurance companies issue different types of insurance policies

different types of business. They are briefly discussed below.
a. Fire Insurance
Fire insurance contract is a contract of indemnity whereby the insurer undertakes to
compensate the insured for the actual loss suffered due to damage or destruction of
property by fire in consideration of an insurance premium. The payment of
compensation is subject to the maximum limit of the sum insured and thus the
insured cannot make profit out of an insurance contract. A fire insurance contract is a
contract of indemnity and is always subject to average clause.

b. Marine Insurance
 QP CODE: 22102761

Marine insurance policies cover perils of the sea or marine losses in considerationof an
insurance premium. Marine insurance policies cover ship insurance or hullinsurance
(risk of loss or damage to ship), cargo insurance (risk of loss or damage to cargo) and
freight insurance (risk of loss to transporters due to non-recovery of fright charges).

c. Miscellaneous Insurance Polices

i. Motor Vehicle Insurance (Protection from theft and third party insurance)
ii. Fidelity Insurance (Protection for employers from fraud, defalcations, etc)
iii. Burglary Insurance ( Protection from theft)
iv. Credit Insurance (Protection from bad debt due to insolvency)
15. It is the unearned amount of discount received on those bills that will
mature after the close of the accounting year.
Treatment in Final Accounts
a. Rebate on Bills Discounted, if given in the adjustments, should be deducted from
discount received and the net amount is shown in the Profit and Loss Account
under Schedule 13.
b. Similarly, it is shown on the liability side of the Balance sheet under the head
“Other liabilities” (Schedule 5).
c. If Rebate on bills discounted in given in the Trial Balance, then it is shown only in
the Balance sheet.
d. Rebate on bills discounted at the beginning of the year (opening balance of
Rebate on bills discounted) is added to the discount and Rebate on bills
discounted at the end is deducted to find out the net discount income, which will
be shown in the Profit and Loss Account.
16. Internal reconstruction means the reorganisation of the existing
financial structure of a company without forming a new company. It includes
alteration of share capital, reduction of share capital, variation of shareholders’
rights and scheme of compromise or arrangement.

The procedure is given below.

A. Alteration of Share Capital
i. There should be a provision in the Articles of Association for increasing
share Capital/consolidation/subdivision/conversion of shares in to stock or
even cancellation of shares.
ii. An ordinary resolution shall be passed in the General Meeting of the
company.
iii. The company is required to give a notice to the Registrar of Companies
within 30 days of its passing.
iv. Permission of SEBI is necessary if the shares are listed with a stock
exchange.
v. Confirmation of the court is not required
 QP CODE: 22102761

B. Reduction in Share Capital

A company can reduce its share capital as per the provisions of Section 66 of
theCompanies Act, 2013. The following are the main provisions:

i. There should be a provision in the Articles of Association of the company for

thereduction of share capital.
ii. The company must pass a Special Resolution for reduction of share capital.
iii. An application must be made by the company to the Tribunal/Court for an
orderconfirming reduction of capital.
iv. The order of confirmation for the reduction of share capital by the Tribunal
shallbe published by the company in such a manner as the Tribunal may
direct.
v. The order of the Tribunal confirming the reduction of share capital must
beproduced before the Registrar of Companies within 30 days of the receipt
of thecopy of the order. The minutes of capital reduction should also be
filed with theRegistrar for registration, who in turn will issue a certificate to
that effect.Reduction of share capital will not be effective until a copy of the
resolutionand sanction of the court are filed and registered with the
Registrar of Companies.
17. a) 6% Preference share capital A/c Dr 10,00,000
To 8% Preference share capital 6,00,000
To Capital Reduction (B.F) 4,00,000
b) Equity share capital A/c Dr 5,00,000
To Equity share capital 1,00,000
To Capital Reduction (B.F) 4,00,000
c) Capital Reduction A/c Dr 8,00,000
To Fixed Assets 4,00,000
To Preliminary expenses 20.000
To Accumulated losses 3,50,000
To Capital Reserve (B.F) 30,000
18. If all liabilities are not taken over by the transferee company, the deal
can be considered as amalgamation in the nature of purchase and as such
pooling of interest method cannot be used.

For the liabilities not taken over by the transferee company, the following
accounting entries have to be passed.

a) If excess amount is paid,

Liability A/c Dr

Realisation A/c Dr

To Bank

b) If lesser amount is paid,

Liability A/c Dr
 QP CODE: 22102761

To Bank A/c
To Realisation A/c

[Value Liberally]
19. a) Business Purchase A/c Dr 2,00,000
To Liquidator of Lala Ltd 2,00,000
b) Tangible Assets 75,000
Machinery A/c 5,500
Stock A/c 19,000
Debtors 17,000
Goodwill [B.F) 1,26,500
To Creditors 25,000
To Bank O D 18,000
To Business Purchase 2,00,000

20. Calculation of purchase consideration

Preference shareholders = 10,000 X 8/5 X 10 = 1,60,000
Equity shareholders = 7,500 X 10/15 X 10 = 50,000
Total = Rs. 2,10,000
Realisation A/c
Particulars Rs Particulars Rs
Goodwill 60,000 By Tiya Ltd 2,10,000
Building 75,000 Creditors 30,000
Plant 15,000 Debentures 50,000
Stock 40,000 By Equity 10,000
Debtors 50,000 shareholders
Preference 60,000 (B.F)
shareholders

3,00,000 3,00,000

Journal Entries in the Books of Tiya Ltd

a) Business Purchase A/c Dr 2,10,000
To Liquidator of Nima Ltd 2,10,000
b) Building A/c Dr 75,000
Plant A/c Dr 15,000
Stock A/c Dr 40,000
Debtors A/c Dr 50,000
Goodwill A/c (B.F) Dr 1, 10,000
To Creditors 30,000
To Debentures A/c 50,000
 QP CODE: 22102761

To Business Purchase 2,10,000

c) Liquidator of Nima Ltd 2,10,000
To Equity share capital 50,000
To Preference share capital 1.60,000
21. The following are the main points of difference between Insolvency and
Liquidation:
(i) The term ‘insolvency’ is applicable to Individuals, Partnership firms and
Hindu Undivided families, whereas the term ‘liquidation’ is applicable to Joint
Stock Companies.

(ii) A person is said to be an insolvent when his liabilities exceed his assets or
has committed an act of insolvency, and against whom an order of adjudication
is passed by a competent court. But a company can be liquidated even though
it may be solvent. That means solvent as well as insolvent companies can be
liquidated.
(iii) Insolvency of a person is governed by the Insolvency Act, whereas
liquidation of a company is governed by the Companies Act.
(iv) An Official Receiver or Official Assignee is appointed in case of insolvency,
whereas Liquidator is appointed in case of liquidation.
(v) In case of insolvency, an order of discharge entitles the insolvent person to
start a new business. But in case of companies, there is no question of starting
the business by the same company.

Part C
Answer any THREE question from the following. Maximum marks 30
22. Balance Sheet of Maharaja General Insurance Company as on
31.03.2019
Particulars Schedule Rs (‘000)
Source of Funds
Shareholders’ Funds
Share Capital 5 2,000
Reserves and Surplus 6 1,900
Fair Value Change Account 200
Borrowings 7 3,300
Total 7,400
Application of Funds
Investments 8 3,500
Loans 9 2,000
Fixed Assets 10 1,500
Current Assets:
Cash and Bank Balances 11 3,600
Advances and Other Assets 12 450
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Sub- Total A 4050

Current Liabilities
Current Liabilities 13 1,350
Provisions 14 3,000
Sub-Total B 4,350
Net Current Assets (A-B) (300)
Miscellaneous expenditure 15 Nil
Total 6,700
[Value Liberally – Error in the question - The sum of debit balances and
sum of credit balances in the question are not equal]
Schedule 5 – Share Capital
Paid up capital 2,000

Schedule 6- Reserves and Surplus

Contingency reserve 400
General reserve 1200
Profit and loss account 300
1,900

Schedule 7-Borrowings
Public deposits 1300
Bank loan 2,000
3,300

Schedule 8-Investments
Govt. Securities 2,400
Shares and debentures in joint stock 1,500
companies
3,900
Less Fair Value 400
3,500

Fair value change account

Govt. Securities 2,400
Shares and debentures in joint stock companies 1,500

3,900
Less Market value of investments 3,500

Less Investment Reserve 200

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Fair value change account 200

Schedule 9-Loans
Mortgage loans 1,300
Loan on companies policies 7,00
2,000

Schedule 10-Fixed assets

Premises 1,500
1,500

Schedule 11-Cash and Cash Equivalents

Cash in hand 3,600
3,600

Schedule 12-Advances and Other Assets

Agents balance 110
Deposits with electricity board 100
Outstanding premium 240
450

Schedule 13-Current Liabilities

Creditors 750
O/S expenses 250
Claims outstanding 350
1,350

Schedule 14-Provision
Provision for unexpired risk
Fire 1,600
Marin 1,400
3,000
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23.
Balance Sheet................... (Here enter the name of the banking
company)
as on................
Schedule As on As on 31.3....
No 31.3....(Current (Previous Year)
Year)
CAPITAL AND
LIABILITIES: 1
Capital 2
Reserves & Surplus 3
Deposits
Borrowings
Other Liabilities and 4
provisions 5
TOTAL
ASSETS
Cash and Balance with 6
Reserve Bank of India
Balance with banks and
Money at call and Short 7
notice
Investments 8
Advances 9
Fixed Assets 10
11
Other Assets
TOTAL:
Contingent liabilities
12
Bills for collection
(Award 12 marks for the model format and full marks for model format
with imaginary figures – Schedules should be part of the answer)
24.
Particulars Dr Cr
Equity share capital A/c (100) Dr 20,00,000
To Equity Share Capital (5) 20,00,000
Equity share capital A/c Dr 18,00,000
To Surrendered shares A/c 18,00,000
16% Debentures A/c Dr 5,10,000
Outstanding Interest A/c Dr 1,20,000
To Capital Reduction 6,30,000
Creditors A/c Dr 3,00,000
To Capital reduction 3,00,000
Surrendered shares A/c Dr 3,50,000
 QP CODE: 22102761

To Equity share capital 3,50,000

Surrendered shares A/c Dr 14,50,000
To Capital Reduction 14,50,000
Capital Reduction A/c Dr 23,80,000
To Profit and Loss A/c 9,70,000
To Fixed Assets A/c 10,40,000
To Stock A/c 50,000
To Debtors A/c 1,20,000
To Capital Reserve A/c 2,00,000

Balance Sheet as at 31.03.2018

Particulars Note No Rs
I. Equity and Liabilities
1) Shareholders Fund
Share capital 5,50,000
Reserves and Surplus (Capital 2,00,000
Reserve)
2) Non-Current Liabilities 4,90,000
Long Term Borrowings (16%
Debentures)
3) Current Liabilities
Trade payables (Creditors) 2,00,000
14,40,000
II. Assets
1) Non-Current Assets 9,60,000
Tangible Assets
2) Current Assets
Stock 2,00,000
Trade Receivables 2,30,000
Cash and cash Equivalents 50,000
14,40,000
[Award 10 marks for journal entries and 5 marks for revised balance
sheet]
25.
Receipts Rs Payments Rs
1. Cash at Bank 1. Liquidation Expenses
2. Assets Realised (Legal charges)
Sundry Debtors 2. 2. Liquidator’s
Stock in Trade Remuneration
Investments 3. 3. Debentures having
Freehold property a floating charge
Plant & Machinery 4. Preferential
Furniture & Fittings 3. creditors
Surplus from securities 4. 5. Unsecured creditors
given
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to secured creditors 5. 6. Preference

4. Calls in arrear collected shareholders
(Unpaid calls) 6. 7. Equity shareholders
(Award 12 marks for the model format and full marks for model format
with imaginary figures)

22102761-Corporate Accounting II
MCQ- ANSWERS
1.B

2.D

3.A

4.D

5.B

6.C

7.D

8.A

9.C

10.C

11.D

12.D

13.C

14.B

15.A

16.A

17.D

18.A

19.A

20.A