Notes - Company Accounts
Category :
22.1 Joint Stock Company
A joint stock company is an entity incorporated through a process of law for carrying out a business activity. It is an artificial person, distinct and separate from its members, who are known as shareholders.
22.1.1 Types of Companies
A company may be a private company or a public company.
A private company is one which has a minimum paid-up share capital of ` 100000 or more and which
It is a company which is
22.2 Shares
Section 2(84) of the Companies Act, 2013 defines the term ‘share’ as, “Share means share in the share capital of a company and includes stock”.
There are two kinds of shares
A preference share is a share which fulfills the following two conditions
Equity share means share which is not a preference share. There are two kinds of equity shares
22.1.3 Share Capital
Share capital is the amount that a company can raise or has raised by issue of shares. From viewpoint of accounting share capital can be classified as
According to Section 2(8) of 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 that a company can raise in its life.
It is the maximum amount of share capital which a company is authorised by its Memorandum of Association to issue to shareholders. The company cannot raise more than the amount of capital as specified in the Memorandum of Association. It is also called nominal or registered capital.
According to Section 2(50) of the Companies Act, 2013, issued capital means such capital as the company issues from time-to-time for subscription. It is that part of the authorised capital which is actually issued to the public for subscription including the shares allotted for consideration other than cash, shares taken by directors as qualifying shares and the shares subscribed by the signatories to the company’s memorandum.
Called-up According to Section 2(15) of the Companies Act, 2013, ‘called-up capital’ means such part of the capital, which has been called for payment. Thus, it means the amount of nominal (face) value called-up by the company to be paid by the shareholders towards the share capital.
Paid-up According to Section 2(64) of the Companies Act, 2013, ‘paid-up share capital’ or ‘share capital paid-up’ means such aggregate of money credited and 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 such shares of a company but does not include any other amount received in respect of such shares, by whatever name called. It means the amount that the shareholder has paid and the company has received against the amount ‘called-up’ against the shares towards share capital.
Issued share capital cannot exceed the company’s authorised share capital.
According to Section 2(86) of the Companies Act, 2013, subscribed capital means such part of the issued capital which has been subscribed by the members of a company. It includes shares allotted for consideration other than cash, shares subscribed by the signatories to the company’s memorandum, and shares taken by directors as qualifying shares.
This capital can further be categorised as
(i) Subscribed and Fully Paid-up Shares are said to be ‘subscribed and fully paid-up’ when the entire nominal (face) value is called and also paid-up by the shareholders.
(ii) Subscribed but not Fully Paid-up Shares are said to be ‘subscribed but not fully paid-up’ Under the following two situations
(a) Company has called-up the Entire Nominal (face) Value of the Share but it has not been received. If the company has called-up the full nominal (face) value of the share but it has not received the full nominal (face) value, then it is classified or shown as ‘shares subscribed but not fully paid-up’.
(b) Company has not called-up full nominal (face) value of the share. If the company has not called-up the full nominal (face) value of the share, shares are not fully paid-up.
If a company is having ‘reserve capital’, the shares are shown as ‘subscribed but not fully paid-up’ because the company has not called the entire (face) value of the share. Being that part of uncalled capital which will be called only at the time of winding up of a company.
Capital Reserve
It is the reserve which is not free for distribution as dividend. It is mandatory to create capital reserve in case of capital profits earned by the company. Reserves which are created out of capital profits, are not readily available for distribution as dividend among the shareholders, e.g. premium on issue of shares or debentures, profits on re-issue of shares, profits prior to incorporation, premium on redemption of debentures.
22.1.4 Issue of Shares
A company can issue shares for cash or for consideration other than cash. Shares can be issued at
(a) par (b) premium (c) discount (According to Section 53 of Companies Act, 2013, a company can only issue sweat equity shares at discount). The company may ask for the payment of shares in lump sum or in instalments, namely, application, allotment, first call, second call and so on. The amount payable on application should not be less than 5% of the nominal value of security.
As per SEBI guidelines, minimum subscription of 90% of issued shares should be received by the company, only them it can proceed with allotment.
Journal Entries for Issue of Shares for Cash
|
(i) |
On Receipt of Application Money |
Bank A/c To Share Application A/c |
Dr |
(With application money received) \[[Number\text{ }of\text{ }shares\text{ }applied\times Application\text{ }money\text{ }per\text{ }share]\] |
|
(ii) |
On Allotment of Shares |
Share Application A/c To Share Capital A/c |
Dr |
(With application money on shares allotted) \[[Number\text{ }of\text{ }shares\text{ }allotted\times Application\text{ }money\text{ }per\text{ }share]\] |
|
(iii) |
On Making Allotment Due |
(a) At Par Share Allotment A/c To Share Capital A/c |
Dr |
(With allotment money due) \[[Number\text{ }of\text{ }shares\text{ }allotted\times Allotment\text{ }money\text{ }per\text{ }share]\]
(With the total) (With allotment money due (With premium money due) |
|
|
|
(b) At Premium Share Allotment A/c To Share Capital A/c To Securities Premium Reserve A/c |
Dr |
|
|
(iv) |
On Receipt of Allotment Money |
Bank A/c To Share Allotment A/c |
Dr |
(With allotment money received) |
|
(v) |
On Making the First Call Due |
Share First Call A/c To Share Capital A/c |
Dr |
(With first call money due)\[[Number\text{ }of\text{ }shares\text{ }allotted\times First\text{ }call\text{ }money\text{ }per\text{ }share]\] |
|
(vi) |
On Receipt of the First Call |
Bank A/c To Share First Call A/c |
Dr |
(With first call money received) |
Journal Entries for Issue of Shares for Consideration Other than Cash
|
(i) On Purchase of Assets |
Sundry Assets A/c Dr (Individually) To Vendor’s A/c (Being assets purchased from...... vendor) |
[With the amount of purchase price]
[With the purchase consideration] |
|
(ii) On Purchase of Business |
Sundry Assets A/c Dr *Goodwill A/c Dr To Sundry Liabilities A/c To Vendor’s A/c **To Capital Reserve A/c (Being business purchased from vendor for purchase consideration of `...) |
[With agreed value of assets]
[With agreed value of liabilities] [With purchase consideration] |
|
(iii) On Issue of Shares at Par |
Vendor’s A/c Dr To Share Capital A/c (Being...shares of... each issued to vendor) Number of shares to be issued \[=\frac{Amount\text{ }Payable}{Issue\text{ }Price\,\,\left( Face\text{ }value \right)}\] |
[With the purchase price] [With the nominal value of shares allotted] |
|
(iv) On Issue of Shares at Premium |
Vendors A/c Dr To Share Capital A/c To Securities Premium Reserve A/c (Being ... shares of `... each at a premium of `... issued to vendor) Number of shares to be issued \[=\frac{Amount\text{ }Payable\text{ }}{Issue\Pr ice\left( Pace\text{ }Value+Premium \right)}\] |
[With the purchase price] [With the nominal value of shares allotted] [With the amount of premium] . |
22.1.5 Over Subscription of Shares
When the number of shares applied for exceeds the number of shares issued, the shares are said to be oversubscribed. Over subscription of shares can be dealt in the following ways
22.1.6 Under Subscription of Shares
When the number of shares applied for is less than the number of shares offered to the public, the shares are said to be under subscribed.
Calls-in-advance
It is the amount received by the company from its allottees against the calls not yet made. Interest may be paid on calls-in-advance if the Articles of Association so provides. If the company has adopted ‘Table F’, then it is required to pay interest @ 12% per annum.
Calls-in-arrears
It is the amount not yet received by the company against the call demanded. Interest on calls-in-arrear can be collected from the shareholders if the Articles of Association so provide. If the company has adopted ‘Table F’, then it can charge interest @ 10% per annum.
Forfeiture of Shares
It means cancellation of shares and forfeiting the amount received against these shares. Forfeiture takes place when a shareholder fails to pay the calls made.
Situation 1 Forfeiture of Shares which were Issued at Par
|
Share Capital A/c Dr To Share Allotment A/c To Share Call A/c To Share Forfeiture A/c |
[With called-up amount] [With amount due but not paid on allotment] [With amount due but not paid on call] [With amount already received] |
When calls-in-arrears account is maintained by the company calls-in-arrears account would be credited in the above entry instead of share allotment account and share call(s) account.
The entry will be
|
Share Capital A/c Dr To Calls-in-arrears A/c To Share Forfeiture A/c |
[Called-up value] [Total amount not received] [Amount received] |
Situation 2 Forfeiture of Shares which were Originally Issued at a Premium
When shares issued at premium are forfeited, two possibilities exist which are
(i) When securities premium amount has been received
|
Share Capital A/c Dr To Share Allotment A/c To Share Call A/c To Share Forfeiture A/c |
[Amount called-up less premium] [Amount not received on allotment] [Amount not received on calls] [Amount received so far excluding securities premium reserve] |
(ii) When securities premium amount has not been received
|
Share Capital A/c Dr Securities Premium Reserve A/c Dr To Share Allotment A/c To Share Call A/c To Share Forfeiture A/c |
[Amount called-up less premium] [Premium amount called-up but not received] [Amount not received on allotment] [Amount not received on calls] [Amount received so far] |
Re-Issue of Forfeited Shares
The directors can either cancel or re-issue the forfeited shares. Shares forfeited can be re-issued at par, at premium or at a discount. In case, they are re-issued at par, accounting entry will be
|
Bank A/c Dr To Share Capital A/c |
In case, shares are re-issued at a discount, the amount of discount allowed on the re-issue of forfeited shares must not exceed the amount forfeited on re-issued shares. The discount allowed on re-issue of forfeited shares should be debited the ‘share forfeiture account’. The journal entry will be
|
Bank A/c Dr |
[With the amount received on re-issue] |
|
*Share Forfeiture A/c Dr |
[With the discount allowed on re-issue] |
|
To Share Capital A/c |
[With the amount credited as paid-up] |
*It is calculated as
If the forfeited shares are re-issued at a price higher than that paid-up i.e. at a discount, the excess is credited to securities premium reserve account. The journal entry will be
|
Bank A/c Dr To Share Capital A/c To Securities Premium Reserve A/c |
After the shares have been re-issued, the balance (if any) in the share forfeited account is transferred to capital reserve accounts.
|
Important Points to be kept in Mind Regarding Forfeiture of Shares
· If securities premium reserve account has been credited and also received, then it is not debited at the time of forfeiture. · Loss on re-issue cannot exceed the forfeited amount. · If the loss on re-issue is less than the amount forfeited, the surplus is transferred to capital reserve. · The forfeited amount on shares not yet re-issued is shown in the balance sheet as an addition to share capital under subscribed capital. · When shares are re-issued at a loss, such loss is debited to forfeited shares account. · If shares are re-issued at a price which is more than the face value of shares, then excess amount is credited to securities premium reserve account. |
22.1.7 Some Important Terms Related to Shares
It refers to the right of the existing shareholders to subscribe in proportion of their existing holdings to the shares issued by a company.
It refers to issue and allotment of shares to a selected group of persons privately and not to general public. In order to issue shares through this route, a company should pass a special resolution.
These are equity shares issued by a company to its employees and directors at a discount or for consideration other than cash for providing know how or making available rights in the nature of intellectual property.
It is scheme under which the company grants an option to an employee to apply for shares of the company at a determined price.
It is a scheme under which a company offers shares to its employees as part of a public issue or otherwise.
It means purchasing of own shares by the company for immediate cancellation.
Important provisions relating to buy-back are (Section 68)
A company may purchase its own shares out of (a) Free reserves, (b) Securities premium reserve account, (c) The proceeds of an earlier issue of shares. However, no buy-back can be done out of proceeds of an earlier issue of same kind of shares.
For buy-back, the following conditions must be fulfilled
(a) Buy-back should be authorised by the Articles of Association of company.
(b) A company may buy-back up to 10% of the aggregate of paid-up equity capital and free reserves.
22.2 Accounting for Debentures
It is a document which either creates a debt or acknowledges it. It is a document containing details of an interest-bearing loan made to a company. The main advantage of raising finance by issuing debentures is that interest paid on debentures is deductible in determining the taxable income of the company.
22.2.1 Issue of Debentures
Dentures can be issued for cash or for consideration other than cash. Debentures can be issued at (i) par; (ii) premium; or (iii) discount.
Journal Entries for issue of Debentures for Cash
|
|
Transaction |
Entry |
Amount |
|
(i) |
On Receipt of Application Money |
Bank A/c Dr To Debenture Application A/c (Being application money received) |
[With the application money received] |
|
(ii) |
On Acceptance of Applications |
Debenture Application A/c Dr To X% Debentures A/c (Being application money transferred to debenture account) |
[With the amount of application money on the allotted debentures] |
|
(iii)
|
When Allotment Money is Due
|
(a) At par Debenture Allotment A/c Dr To X% Debentures A/c (Being allotment money due) |
|
|
(b) At premium Debenture Allotment A/c Dr To X% Debentures A/c To Securities Premium Reserve A/c (Being allotment due on debentures with premium) |
[With the money due on allotment] [With the nominal value of debenture due at the time of allotment] [With the premium money received] |
||
|
(c) At discount Debenture Allotment A/c Dr Discount on Issue of Debentures A/c Dr To X% Debentures A/c (Being allotment due on X% debentures) |
[With the amount due on allotment] [With the amount of discount] [With the face value] |
||
|
(iv) |
On Adjustment of Excess Debenture Application Money |
Debenture Application A/c Dr To Debenture Allotment A/c (Being adjustment of excess debenture application money) |
[With the surplus application money on partially accepted applications] |
|
(v) |
On Refund of Excess Debenture Application Money |
Debenture Application A/c Dr To Bank A/c (Being refund of excess debenture application money) |
[With the application money refunded on rejected applications] |
|
(vi) |
On Receipt of Allotment Money |
Bank A/c Dr To Debenture Allotment A/c (Being allotment money received) |
[With the allotment money received] |
|
(vii) |
On Making Calls |
Debenture First and Final Call A/c Dr To X% Debentures A/c (Being first and final call money due) |
[With the amount due on first and call] |
|
(viii) |
On Receipt of Call Money |
Bank A/c Dr To Debenture First and Final Call A/c (Being first and final call money received) |
[With the first and final call money received] |
Journal Entries for issue of debentures for consideration other than cash
|
(i) |
When Debentures are Issued at Par |
Vendor’s A/c Dr To X% Debentures A/c (Being ... debentures at `... per debenture issued to vendors) Number of Debentures to be Issued =\[\frac{Purchase\text{ }Consideration\,}{Issue\text{ }Price\,\,\left( Par\text{ }value\text{ }per\text{ }debenture \right)}\] |
[With the nominal value of debentures] |
|
(ii) |
When Debentures are issued at Premium |
Vendor’s A/c Dr To X% Debentures A/c To Securities Premium Reserve A/c (Being ... debentures at `... each issued at a premium of `... per debenture to vendors) Number of Debentures to be Issued =\[\frac{Purchase\text{ }Consideration}{Issue\,\Pr ice\,\left( Face\text{ }value+Premium\text{ }per\text{ }debenture \right)}\] |
[With purchase consideration] [With the nominal value of debentures] [With premium] |
|
(iii) |
When Assets are Purchased |
Sundry Assets A/c Dr To Vendor’s A/c (Being assets purchased from the vendor) |
[With the agreed value of assets taken over] |
|
(iv) |
When Business is Purchased |
Sundry Assets A/c Dr *Goodwill A/c Dr *To Sundry Liabilities A/c To Vendor’s A/c To Capital Reserve A/c (Being business of vendor purchased) |
[With the value of assets]
[With the value of liabilities] [With the purchase consideration] |
|
(v) |
When Debentures are Issued at Discount
|
Vendor’s A/c Dr Discount on Issue of Debentures A/c Dr To X% Debentures A/c (Being ... debentures at `... each issued to vendors at a discount of `... per debenture) Number of Debentures to be Issued \[=\frac{Purchase\text{ }Consideration}{Issue\,\Pr ice\,\left( Face\text{ }value-Discount\text{ }per\text{ }debenture \right)}\] |
[With purchase consideration] [With discount] [With nominal value of debentures]
|
22.2.2 Issue of Debentures as Collateral Security
It means issue of debentures as a subsidiary or secondary security, in addition to the primary security. Debentures issued as collateral security may or may not be recorded in the books of accounts.
Interest on Debentures
It is a charge against the profit of the company and is payable whether profits are earned or not.
Redemption of Debentures
It is a process of repayment of loan raised by issue of debentures.
Sources of Redemption of Debentures
Debentures can be redeemed from the- following sources
As per the guidelines issued by SEBI, an amount equal to 25% of the debentures issued must be transferred to debenture redemption reserve, before redemption starts, if such redemption is out of profits. Further, every company required to create/maintain DRR shall before on or before 30th April in each year, deposit or invest, as the case may be, a sum atleast equal to 15% of the amount of its debentures maturing for payment during the year ending on the 31st March, of next year in following specified securities.
Methods of Redemption
There three methods of redemption of debentures
On Maturity in Lumpsum
When all the debentures are redeemed by paying in lumpsum at a time, it is called redemption in lumpsum. In this method debentures are redeemed at the end of the specified time.
|
|
Transaction |
Entry |
Amount |
|
(i) |
On Creation of Debenture Redemption Reserve |
Surplus, i.e. Balance in Statement of Profit and Dr Loss. To Debenture Redemption Reserve A/c |
|
|
(ii) |
On Investment or Deposit being made in Specified Securities |
Debenture Redemption Investment A/c Dr To Bank A/c |
|
|
(iii) |
On the Amount being Due to Debenture holders on Redemption |
· If the debentures are to be redeemed at par X% Debenture A/c Dr To Debenture holders’ A/c |
[With nominal value] |
|
· If the debentures are to be redeemed at a premium X% Debentures A/c Dr Premium on Redemption of Debentures A/c Dr To Debenture holders’ A/c |
[With nominal value] [With premium payable] [With total] |
||
|
(iv) |
On Encashing Investment Debenture holders |
Bank A/c Dr To Debenture Redemption Investment A/c |
[With the amount paid] |
|
(v) |
On Payment to Debenture holders |
Debenture holders’ A/c Dr To Bank A/c |
[With the amount paid] |
|
(vi) |
When all Debentures are Redeemed |
Debenture Redemption Reserve A/c Dr To General Reserve A/c |
[With the amount of DRR] |
When all the debentures are redeemed, the amount of debenture redemption reserve account is transferred to general reserve account.
In Instalment by Draw of Lots
In this method, the company may redeem its debentures in instalments beginning from a particular year i.e. by payment in each year of a certain portion, the actual debentures to be redeemed are selected usually by draw of lots. The holders are repaid the amount at par or at a premium as per the terms of issue. The journal entries required to be passed are the same as discussed in the previous method.
By Purchase in Open Market
When a company purchases its own debentures in the open market for the purpose of immediate cancellation, the purchase and cancellation of such debentures are termed as redemption by purchase in the open market. The advantage of such an option is that a company can redeem the debentures at its convenience whenever it has surplus funds. Second, the company can purchase them when they are available in market at a discount.
Journal Entry
|
Transaction |
Entry |
Amount |
|
(i) On Purchase of Debentures |
Own Debentures A/c Dr To Bank A/c |
[With purchase cost] |
|
(ii) On Cancellation of Debentures When Purchased at a Nominal at Price |
X% Debentures A/c Dr To Own Debentures A/c |
|
|
When Purchased at a Price below Nominal Value of Debentures |
X% Debentures A/c Dr To Own Debentures A/c To Gain or Profit on Cancellation of Own Debentures A/c |
[With nominal value] [With purchase price] [Excess of face value over cost of own debentures cancelled] |
|
When Purchase at a Price Higher than the Nominal Value of Debentures. |
X% Debentures A/c Dr Loss on Cancellation of own Debentures Dr A/c To Own Debentures A/c |
[With nominal value] [with excess of cost over
nominal value] [with purchase price] |
|
(iii) On Transfer of Gain On Cancellation |
Gain or Profit on Cancellation of Own Dr Debentures A/c To Capital Reserve A/c |
|
By Conversion
Companies redeem their debentures in cash but sometimes, they may redeem their debentures by converting them into new class of shares or debentures. A convertible debenture gives holder the option to convert their debentures into shares at a later date and also at a fixed price. These new shares or debentures can be issued at par, premium or discount.
Journal Entries
|
Transaction |
Entry |
Amount |
|
For Amount Due to Debenture holders |
(a) Redemption at Par ....% Debentures A/c Dr To Debentureholders’s A/c |
[With nominal value] |
|
(b) Redemption at Premium ...% Debentures A/c Dr Premium or Redemption of Debentures A/c Dr To Debentureholders’ A/c |
[With nominal value] [With premium payable] |
|
|
For Discharging Obligation By Issuing Shares or Debentures • . ' |
(a) If New Shares/Debentures are Issued at par
Debentureholders’ A/c Dr To Share Capital/New Debentures A/c |
[With amount due] [With nominal value] |
|
(b) If New shares/Debentures are Issued at Premium Debentureholder’ A/c Dr To Share Capital/New Debentures A/c To Securities Premium Reserve A/c |
[With amount due] [With nominal value] [With premium of issue] |
|
Important Points to be remembered · If is mentioned in the question that redemption is out of capital, then DRR should be created with 25% of the nominal value of debentures. · If it is mentioned that redemption is out of profits, then DRR should be created with the 100% of the nominal value of debentures. · If nothing is mentioned about the source of redemption, then as per SEBI guidelines, 25% of the nominal value of debentures, is to be transferred to DRR account. · If in any particular question, DRR already exists with more than 25% of the nominal value of debentures, then in that) case total 100% of the nominal value of debentures is to be transferred to DRR account. |
22.3 Final Accounts of a Company
These the final products of an accounting process, financial statements are prepared by following the accounting concepts and principles. Financial statements are historical in nature. According to Section 2(40) of the Companies Act, 2013 final accounts of a company will include .
(i) Balance sheet (ii) Statement of profit and loss (iii) cash flow statement (iv) A statement of changes in equity (v) any explanatory notes annexed to, or forming part of, any document referred to in points (i) to (iv) above.
22.3.1 Balance Sheet
It may be defined as a statement of assets and liabilities of the company at a particular date. Form for preparing statement of profit and loss is prescribed under Schedule III, Part I of the Companies Act, 2013.
Format of Balance Sheet
The form prescribed under Schedule III, Part I of the Companies Act, 2013 is as follow
Name of the Company Balance
Sheet as at...
|
Particulars |
Note No. |
Figures as at the End of the Current Reporting Period (`) |
Figures as at the End of the Previous Reporting Period (`) |
|
I. EQUITY AND LIABILITIES |
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|
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1. Shareholders’Funds |
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(a) Share Capital |
|
… |
… |
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(b) Reserves and Surplus |
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… |
… |
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(c) Money Received against Share Warrants |
|
… |
… |
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2. Share Application Money Pending Allotment |
|
… |
… |
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3. Non-current Liabilities |
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(a) Long-term Borrowings |
|
… |
… |
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(b) Deferred Tax Liabilities (Net) |
|
… |
… |
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(c) Other Long-term Liabilities |
|
… |
… |
|
(d) Long-term Provisions |
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… |
… |
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4. Current Liabilities |
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(a) Short-term Borrowings |
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… |
… |
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(b) Trade Payables |
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… |
… |
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(c) Other Current Liabilities |
|
… |
… |
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(d) Short-term Provisions’ |
|
… |
… |
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Total |
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… |
… |
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II. assets |
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1. Non-current Assets |
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(a) Fixed Assets |
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(i) Tangible Assets |
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… |
… |
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(ii) Intangible Assets |
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… |
… |
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(iii) Capital Work-in-progress |
|
… |
… |
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(iv) Intangible Assets under Development |
|
… |
... |
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(b) Non-current Investments |
|
…. |
… |
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(c) Deferred Tax Assets (Net) |
|
… |
… |
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(d) Long-term Loans and Advances |
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… |
… |
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(e) Other Non-current Assets |
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… |
… |
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2. Current Assets |
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(a) Current Investments |
|
… |
… |
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(b) Inventories |
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… |
… |
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(c) Trade Receivables |
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… |
… |
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(d) Cash and Cash Equivalents |
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… |
… |
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(e) Short-term Loans and Advances |
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... |
… |
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(f) Other Current Assets |
|
… |
… |
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Total |
|
… |
… |
22.3.2 Statement of Profit and Loss
Statement of profit and loss shows the net result of business operations i.e. financial performance during an accounting period. Form for preparing statement of profit and loss is prescribed under Schedule III, Part II of the Companies Act, 2013.
Format of Statement of Profit and Loss
Format of statement of profit and loss as specified in Schedule III is as follow
|
|
Particulars |
Note No. |
Figures for the Current Reporting Period (`) |
Figures for the Previous Reporting Period (`) |
|
(i) |
Revenue from Operations |
|
… |
… |
|
(ii) |
Other Income |
|
… |
… |
|
(iii) |
Total Revenue (I + II) |
|
… |
… |
|
(iv) |
Expenses |
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|
|
|
|
Cost of Materials Consumed |
|
… |
… |
|
|
Purchases of Stock-in-trade |
|
… |
…. |
|
|
Changes in Inventories of Finished Goods |
|
… |
… |
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|
Work-in-progress and Stock-in-trade |
|
… |
… |
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Employees Benefits Expenses |
|
… |
.. |
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Finance Costs |
|
… |
… |
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Depreciation and Amortisation Expenses |
|
… |
… |
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Other Expenses |
|
… |
… |
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Total Expenses |
|
… |
… |
|
(v) |
Profit before Exceptional and Extraordinary Items, and Tax (III-IV) |
|
… |
… |
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(vi) |
Exceptional Items |
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|
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(vii) |
Profit before Extraordinary Items and Tax (V-VI) |
|
… |
… |
|
(viii) |
Extraordinary Items |
|
… |
… |
|
(ix) |
Profit before Tax (VII - VIII) |
|
… |
… |
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(x) |
Tax Expenses |
|
|
|
|
|
1. Current tax |
|
… |
… |
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|
2. Deferred tax |
|
… |
… |
|
(xi) |
Profit (Loss) for the Period from Continuing Operations (VII-VIII) |
|
… |
... |
|
(xii) |
Profit (Loss) from Discontinuing Operations |
|
… |
… |
|
(xiii) |
Tax Expenses of Discontinuing Operations |
|
… |
... |
|
(xiv) |
Profit (Loss) from Discontinuing Operations (after tax) (XII-XIII) |
|
… |
… |
|
(xv) |
Profit (Loss) for the Period (XI-XIV) |
|
… |
… |
|
(xvi) |
Earnings per Equity Shares |
|
… |
… |
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|
1. Basic |
|
... |
… |
|
|
2. Diluted |
|
… |
… |
22.4 Accounting for Liquidation
Liquidation or winding-up is a legal term and refers to the procedure through which the affairs of the company are wound up by law.
22.4.1 Modes of Liquidation
Compulsory winding-up by the court
Voluntary winding-up the members
Winding-up under the supervision of court
22.4.2 Consequences of Winding-Up
An officer called a liquidator is appointed and he takes over the administration of the company. He may be appointed by High court, members or by the creditors as the case may be. The powers of board of directors are ceased and all the powers vest in the liquidator.
On liquidation the liquidator prepares the following given accounts.
Liquidation Final Statement of Account
|
Receipts |
Amount ` |
Payments |
Amount ` |
|
Cash in hand Cash at Bank Amount realized from the Sale of Assest: Land and Building Plant and Machinery ………. Furniture ………. Inventories ………. Trade Receivables ............ Surplus amount received from Secured Creditors Calls from shareholders @...............`........on shares
|
|
Legal charges Liquidator’s Remuneration: (i) Fixed Amount (if any) ………. (ii) % on amount realised From Assets ……….
(iii) % on amount paid to trade payables ………. (iv) % on amount paid to Shareholders ………. Liquidation Expenses or cost or winding-up Debenture holders or other Creditors having a floating charge on the assets of the company Preferential Creditors Unsecured Creditors Preferential Shareholders(Refund of Capital) Equity Shareholders (Refund of Capital)
|
|
|
|
|
Liquidator’s Realisation and Distribution Statement
Receiver can prepare realisation and distribution statement instead of receipts and payments account. This statement show
(i) What amounts have been received from various properties, and (ii) how payments have been made for various liabilities and shareholders. Its specimen is given below
Realisation and Distribution Statement
|
A. Receipts From Assets Realised: |
` |
` |
|
(i) |
............. |
|
|
(ii) |
............. |
............. |
|
B. Payments made: |
............. |
|
|
(i) Fully Secured Creditors |
|
|
|
(ii) Liquidator’s Creditors: |
|
|
|
(a) Liquidator’s Remuneration |
............. |
|
|
(b) Cost of Liquidation |
............. |
|
|
(iii) Debentures |
............. |
|
|
(iv) Creditors: |
|
|
|
Preferential |
............. |
|
|
Unsecured |
............. |
............. |
|
Surplus: Payments made to Contributories: |
............. |
............. |
|
(a) |
............. |
............. |
|
(b) |
............. |
............. |
Statement of Affairs and Lists to be Annexed
Statement as to the affairs of......... Ltd., on the .......... day of ...........20............, being the date of the winding-up order (or order appointing provisional liquidator or the date directed by the official liquidator as the case may be) showing assets at estimated realisable values and liabilities expected to rank:
|
|
................................................ Assets |
|
Estimatec Realizable Values ` |
|||||
|
|
Balance at bank Cash and cash Equivalents Marketable Securities Trade Receivables: Debtors Bills Receivable Loans and Advances Unpaid Calls Inventories ……….. ……….. Freehold property, Land and Buildings Leasehold Property Plant and Machinery Furniture fittings Utensils etc Investment other than marketable securities Livestock Other property viz ……….. ……….. |
Assets not specifically pledged (as per list ‘ A') |
…. …. …. …. ….
… …. ….
…. …. …. …. …. …. …. …. …. …. …. …. …. …. …. …. …. …. …. …. …. …. …. …. …. …. ….
…. …. …. …. …. …. …. …. …. …. …. …. …. …. |
…….. |
||||
|
(e) Gross Liabilities ` |
Assets specifically pledged (as per List ‘B’)
……….. ……….. ………..
|
|
(a) Estimated Realisable value |
(b) Creditors |
(c) Deficiency Ranking as Unsecured
|
(d) Surplus To Last Column |
||
|
` |
` |
` |
` |
|||||
|
Estimated surplus from assets specifically pledged …… …… Estimated total assets available for preferential creditors, debentureholders secured by a floating charge, and unsecured creditors * (carried forward) …… …… Summary of Gross Assets (d) Gross realisable value of assets specifically pledged `…… other Assets `…… Gross Assets `…… |
||||||||
|
|
||||||||
|
* Note: All assets specifically mortgaged, pledged or otherwise given as security should be included under this head. In the case of goods given as security, those n possession of the company and those not in possession should be separately set out |
||||||||
|
Estimated total assets available for preferential creditors, debenture holders secured by a floating charge, and unsecured creditors (brought forward) Liabilities (to be deducted from surplus or added to deficiency as the case may be) Secured creditors (as per list 'B') to the extent to which claims are esti- mated to be covered by assets specifically pledged [item (a) or (b) in preceding page, whichever is the less] (insert in ‘Gross Liabilities ‘column only) …… Preferential creditors (as per list 'C') Estimated balance of assets available for Debentureholders secured by a floating charge and unsecured creditors* Debentureholders secured by a floating charge (as per list 'D') …… Estimated surplus Deficiency as regard Debentureholders* Unsecured Creditors (as per list 'E'): Estimated unsecured balance of claims of creditors Estimated unsecured balance of claims of creditors partly secured on specific assets, brought form preceding page (c) Trade Payables: Trade Accounts Bills Payable Outstanding Expenses ……….. Contingent liabilities (state nature) ……….. Estimated Surplus / Deficiency as regard Creditors* [being difference between Gross Asset brought from preceding page (d) and Gross Liabilities as per column (c)] Issued and Called-up Capital: ………… Preference shares of …. …. ….each `……….. called-up (as per list ‘F') ……….. Equity shares of... `……….. called-up (as per list 'G') …. …. ….each Estimated Surplus/Deficiency as regareds Members* (as per list 'H') ` |
||||||||
|
…….
….……
………
…….
……
……….
|
||||||||
List ‘H’ Deficiency or Surplus Account
|
Items contributing to deficiency (or Reducing Surplus) |
` |
|
|
1. |
Excess (if any) of capital and liabilities over assets on the…..20…..as shown by balance sheet: Copy annexed) |
….. |
|
2. |
Net dividends and bonus declared during the period ......20......to the date of statement |
….. |
|
3. |
Net trading losses (after charging items shown in note below) for the same period |
….. |
|
4. |
Losses other than trading losses written-off or for which provision has been made in the books during the same period (give particulars or annex schedule) |
….. |
|
5. |
Estimated loss now written-off or for which provision has been made for the purpose of preparing the statement (give particulars or annex schedule) |
….. |
|
6. |
Other items contributing to deficiency or reducing surplus. Items reducing deficiency (or contributing to Surplus): |
|
|
7. |
Excess (if any) of assets over capital and liabilities `.....on the 20.......as shown in the balance sheet .......... (copy annexed) |
|
|
8. |
Net trading profits (after charging items shown in note below) for the period from .......... The..... 20 ....... to the date of statement |
|
|
9. |
Profits and income other than trading profits during the same period (give particulars of .......... annex schedule) |
|
|
10. . |
Other items reducing deficiency or contributing to surplus .......... |
|
|
|
deficiency (Surplus as shown by Statement) |
….. |
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