DCM2203 CORPORATE ACCOUNTING JULY-AUG 2025

Description

SESSION	JULY -AUG 2025
PROGRAM	BACHELOR OF COMMERCE (B COM)
SEMESTER	IV
COURSE CODE & NAME	DCM2203 CORPORATE ACCOUNTING

 

 

Set – 1

 

 

Q1. Explain the purpose of preparing final accounts, and prepare the format of Statement of Profit and Loss according to Schedule III as per the Companies Act, 2013. 2+8  

Ans 1.

Purpose of Preparing Final Accounts

Final accounts are prepared at the end of an accounting period to present the financial performance and financial position of a business. The primary purpose is to determine the profit or loss earned during the year and to show how efficiently the company has operated. Final accounts also help determine the company’s financial health, including assets, liabilities, and equity.

They serve as a reliable source of information for shareholders, management, lenders, investors, and regulatory bodies, enabling them to make informed decisions. Final accounts

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Q2. Y Ltd. was incorporated with an authorised capital of ₹25,00,000 divided into shares of ₹10 each. The company issued 20,000 shares at a 20% premium, payable as follows:

On Application ₹4 (including ₹1 premium)

On Allotment ₹5 (including ₹1 premium)

On First Call ₹2 (including ₹0.50 premium)

On Final Call ₹1.50 (including ₹0.50 premium)

Applications were received for all shares and all amounts were duly received.

 Pass the necessary journal entries. 10       

Ans 2.

Journal Entries for Issue of Shares

Given:

Authorised capital = ₹25,00,000 (info only, no entry)

Issued shares = 20,000 shares of ₹10 each

Issue terms (per share):

Application ₹4 (incl. ₹1 premium = ₹3 capital + ₹1 premium)

Allotment ₹5 (incl. ₹1 premium = ₹4 capital + ₹1 premium)

 

 

Q3. Sigma Ltd. issued 8,000, 12% debentures of ₹100 each.

Pass journal entries for the issue of debentures under the following cases:

(a) Issued at par and redeemable at par

(b) Issued at a discount of 5% and redeemable at par

(c) Issued at a premium of 10% and redeemable at par

(d) Issued at par and redeemable at a premium of 5%

(e) Issued at a discount of 10% and redeemable at a premium of 10%   2+2+2+2+2    

Ans 3.

Issue of 12% Debentures

Given:

No. of debentures = 8,000

Face value per debenture = ₹100

Formula (common):

 

 

 

Set – 2

 

 

Q4. The profits of XYZ Ltd. for the past three years were as follows:

2020 – ₹1,80,000; 2021 – ₹1,60,000; 2022 – ₹1,95,000.

Adjustments required:

• 2020 profits include a gain of ₹10,000 from sale of old furniture.
• 2021 profits were reduced by ₹8,000 due to a one-time litigation loss.
• 2022 profits include ₹5,000 interest income on government securities.
• Manager’s salary of ₹24,000 per annum was omitted from all years.
• From now, insurance premium on stock of ₹2,000 per annum will be paid.

Calculate goodwill on the basis of

(a) Three years’ purchase of average profit, and

(b) Weighted average profit method with weights 1, 2, and 3 respectively.         10       

Ans 4.

Given profits:

2020 – ₹1,80,000

2021 – ₹1,60,000

2022 – ₹1,95,000

Adjustments logic:

• Non-trading / non-recurring income (furniture gain, interest on govt. securities) = less
• Abnormal loss (litigation loss) = add back
• Manager’s salary (₹24,000 p.a.) omitted = deduct (future expense)

 

 

 

Q5. Ms. Aditi Sharma plans to invest ₹1,20,000 in a new venture for 5 years. The firm’s cost of capital (WACC) is 8%. Expected cash inflows are as follows:

Year 1 – ₹25,000

Year 2 – ₹28,000

Year 3 – ₹32,000

Year 4 – ₹40,000

Year 5 – ₹48,000

Calculate:

(a) Present value of cash inflows for each year,

(b) Total discounted cash inflows, and

(c) Net Present Value (NPV). Also, give your investment decision based on NPV.         10       

Ans 5.

Net Present Value (NPV) Calculation

Given:

Initial Investment = ₹1,20,000

Cost of Capital (Discount Rate) = 8%

Project Life = 5 years

Cash Inflows:

Year 1 – ₹25,000

Year 2 – ₹28,000

Year 3 – ₹32,000

Year 4 – ₹40,000

Year 5 – ₹48,000

Step 1: Formula for Present Value

PV = Cash Inflow / (1 + r)^n

 

 

Q6. Define External Reconstruction and differentiate it from Internal Reconstruction. Also discuss the accounting treatment of reduction in share capital under the Companies Act, 2013. 2+3+5    

Ans 6.

External Reconstruction, Internal Reconstruction, and Accounting Treatment of Reduction of Share Capital

External Reconstruction

External reconstruction refers to a process in which an existing company is wound up and a new company is formed to take over its business, assets, and liabilities. The old company legally ceases to exist, and shareholders of the old company are allotted shares in the new company, usually in exchange for their existing holdings. This form of restructuring is generally used when the company is facing persistent financial losses or requires a complete reorganisation of its structure. External reconstruction helps restore financial stability, improve operational efficiency, and build a fresh capital base without carrying forward the