Practice Questions: Unit IV - Company Accounts (Financial Accounting, B.Com Hons)

Here are questions based on the provided notes for Unit IV: *Company Accounts* in Financial Accounting 1 (B.Com Hons). 

Topic : Share Capital

Easy (1–5)

1. Define authorized share capital, issued share capital, and subscribed share capital with suitable examples.
2. ABC Ltd. issues 10,000 equity shares of ₹10 each. Pass journal entries for:
   • Application money received at ₹3 per share.
   • Allotment money received at ₹4 per share.
   • Final call money received at ₹3 per share.
3. A company forfeited 100 shares of ₹10 each, issued at par, for non-payment of the first call of ₹3 per share. Show the journal entries for forfeiture.
4. XYZ Ltd. issued 5,000 preference shares of ₹100 each at a premium of 10%. The company received the full amount on application. Pass journal entries for the issue.
5. Write the accounting treatment for calls-in-arrears and calls-in-advance.

Moderate (6–10)

6. DEF Ltd. issued 10,000 equity shares of ₹20 each, payable ₹5 on application, ₹10 on allotment, and ₹5 on final call. All amounts were received except for the final call on 500 shares. Pass necessary journal entries.
7. GHI Ltd. reissued 200 forfeited shares of ₹10 each at ₹8 per share. The original issue price was ₹10, fully called-up. Pass the journal entries for forfeiture and reissue.
8. A company issued 1,00,000 shares of ₹10 each at ₹12 (₹2 premium). The full amount was payable on application. Show the necessary journal entries.
9. Calculate the total amount payable by a shareholder holding 100 shares of ₹50 each if:
   • Application money = ₹10/share
   • Allotment money = ₹20/share
   • First call = ₹15/share
   • Final call = ₹5/share
10. Explain the difference between forfeiture of shares and surrender of shares with suitable journal entries.

Challenging (11–15)

11. ABC Ltd. issued 50,000 equity shares of ₹10 each, payable ₹2 on application, ₹5 on allotment (including ₹1 premium), and ₹3 on the first call. A shareholder holding 500 shares failed to pay the first call money. Pass journal entries for the issue, non-payment, and forfeiture of shares.
12. DEF Ltd. has a subscribed capital of ₹5,00,000 divided into shares of ₹10 each. The company calls ₹8 per share. ₹7 per share is received except for 1,000 shares where only ₹6 is received. Pass journal entries for the calls-in-arrears.
13. A company forfeited 300 shares of ₹10 each for non-payment of allotment (₹5 per share). Later, these shares were reissued at ₹7 per share. Pass journal entries.
14. A company issued 1,00,000 shares of ₹10 each at a premium of ₹2, payable in full on application. However, the company refunded money for 5,000 shares due to over-subscription. Show journal entries.
15. Explain the treatment of securities premium reserve and provide examples of how it can be used under the Companies Act, 2013.

Very Hard (16–20)

16. XYZ Ltd. issued 20,000 equity shares of ₹50 each at ₹55 (₹5 premium). Application money of ₹20 per share was received. The balance was to be paid in one installment on allotment. Pass journal entries for the issue.
17. ABC Ltd. forfeited 1,000 shares of ₹10 each (issued at a premium of ₹2) for non-payment of final call (₹3). Later, the company reissued these shares at ₹9 each fully paid-up. Pass journal entries.
18. DEF Ltd. issued 50,000 shares of ₹10 each, payable ₹3 on application, ₹4 on allotment, and ₹3 on call. Calls on 2,000 shares were unpaid. Later, these shares were forfeited and reissued at ₹8 per share. Prepare journal entries and ledger accounts.
19. A company declared a bonus issue of 10,000 equity shares to its existing shareholders from the securities premium reserve. Discuss the accounting treatment and pass the journal entries.
20. A company issued debentures of ₹1,00,000 convertible into 10,000 equity shares at a premium of ₹2 per share. Pass journal entries to record the issue and conversion.

Long Questions

1. A company issued 1,00,000 shares of ₹10 each, payable ₹3 on application, ₹4 on allotment (including ₹1 premium), and ₹3 on call. A shareholder holding 2,000 shares paid only the application money, and their shares were forfeited. Later, the forfeited shares were reissued at ₹8 per share. Prepare necessary journal entries.

2. A company issued 50,000 shares of ₹10 each but received applications for 80,000 shares. The company refunded money for 10,000 shares and allotted the rest on a pro-rata basis. Show the journal entries.

3. A company forfeited 500 shares of ₹10 each for non-payment of ₹3 on allotment and ₹2 on call. Later, these shares were reissued at ₹8 per share. Pass the necessary journal entries.

4. A company issued 1,00,000 shares at ₹12 each (₹2 premium). The securities premium reserve was later utilized to:

   • Write off preliminary expenses (₹50,000).
   • Provide for premium payable on redemption of preference shares (₹75,000).
     Prepare journal entries and explain the treatment under the Companies Act.

5. A company bought back 10,000 shares of ₹10 each at ₹15 per share. The buy-back was financed by free reserves. Show journal entries for the buy-back and its impact on capital structure.

6. A company announced a rights issue of 1 share for every 4 held at ₹15 per share. The existing shares are ₹10 each fully paid. Pass journal entries for the rights issue and the subscription.

7. A company issued bonus shares in the ratio of 2:5 from the general reserve and securities premium. The face value of the shares is ₹10. Discuss the accounting treatment.

8. A company issued ₹1,00,000 worth of convertible debentures, which were converted into equity shares at ₹50 per share (including a premium of ₹10). Pass journal entries.

9. A company split its existing shares of ₹10 each into 2 shares of ₹5 each. Discuss the impact on the share capital and pass necessary journal entries.

10. A company forfeited 400 shares of ₹10 each, issued at a premium of ₹2, for non-payment of ₹5 on the final call. Later, these shares were reissued at ₹8 per share fully paid-up. Pass the journal entries. 

Topic : Redemption of Preference Shares

Easy Questions:

1. A company issues ₹1,00,000 10% preference shares at ₹100 each. What is the maximum permissible redemption amount if the company has sufficient profits?
2. Explain the conditions under which preference shares can be redeemed.
3. A company redeems 1,000 preference shares of ₹100 each at a premium of ₹10. Calculate the total redemption amount.
4. What is the minimum requirement for the creation of the Capital Redemption Reserve (CRR)?
5. A company has ₹5,00,000 free reserves and wants to redeem preference shares of ₹2,00,000. Will it need to create a CRR? Why or why not?

Moderate Questions:

6. A company redeems 2,000 preference shares of ₹100 each. The company issues 1,000 equity shares of ₹100 each at par. What amount of CRR needs to be created?
7. How does the redemption of preference shares affect the company's working capital?
8. A company redeems preference shares by issuing new shares. Illustrate the journal entries required.
9. Preference shares worth ₹3,00,000 are redeemed at par using accumulated profits. Prepare the necessary journal entries.
10. A company redeems ₹2,00,000 preference shares at a premium of 5% and issues ₹1,00,000 equity shares at ₹10 each at par. Calculate the CRR to be created.

Hard Questions:

11. Explain why dividends on preference shares must be paid before redemption.
12. A company redeems 1,500 preference shares of ₹100 each at a premium of ₹10. Free reserves amount to ₹1,20,000, and securities premium is ₹30,000. Pass the journal entries.
13. A company has issued 5,000 preference shares of ₹100 each, fully paid. Due to insufficient profits, it decides to use fresh equity to fund the redemption. Discuss the accounting treatment.
14. What is the impact of redeeming preference shares on the debt-equity ratio of a company?
15. Preference shares worth ₹4,00,000 are redeemed partly through profit and partly through a fresh issue of shares. Outline the journal entries for this transaction.

Very Hard Questions:

16. Discuss the regulatory limitations under the Companies Act, 2013, on the redemption of preference shares.
17. A company redeems ₹10,00,000 preference shares, issuing ₹4,00,000 new equity shares and using ₹6,00,000 of its profits. Prepare the journal entries and discuss the financial implications.
18. Preference shares are redeemed at 10% premium using capital profits. Free reserves amount to ₹2,00,000, and profit from the sale of land is ₹1,50,000. Prepare journal entries.
19. A company has ₹7,00,000 free reserves and ₹5,00,000 preference shares due for redemption. It issues equity shares worth ₹2,00,000 at a premium of 10%. Calculate the CRR and prepare the necessary entries.
20. Explain the difference in the treatment of a premium on redemption and a premium received on a fresh issue during redemption.

Long Questions (10 Questions)

Easy to Moderate Questions:

1. A company redeems ₹5,00,000 preference shares of ₹100 each at par. The company decides to issue 4,000 equity shares of ₹100 each at ₹110 and use the securities premium for redemption. Prepare the journal entries.
2. A company redeems 3,000 preference shares of ₹100 each at 5% premium, using accumulated profits. Show the journal entries and explain the accounting treatment of the premium.
3. Draft a detailed note on the importance of Capital Redemption Reserve (CRR) in the context of redemption of preference shares.
4. A company has ₹10,00,000 preference shares due for redemption. Explain how the redemption can be executed using a combination of profits and new issue of shares.
5. Prepare journal entries for the redemption of 1,000 preference shares of ₹100 each at a premium of ₹10, utilizing the profits and securities premium.

Hard Questions:

6. A company has the following balances:

   • Preference Share Capital: ₹15,00,000
   • Free Reserves: ₹6,00,000
   • Securities Premium: ₹2,00,000
   • New Equity Issue: ₹5,00,000 (Issued at ₹10 per share at ₹12).

   Show the journal entries for redemption of preference shares at par.

7. Prepare a full ledger and balance sheet presentation after redeeming ₹10,00,000 preference shares (₹100 each) at a 10% premium. The company uses ₹4,00,000 profits and issues ₹6,00,000 equity shares at par.

8. Discuss how the redemption of preference shares affects the company's liquidity, solvency, and profitability.

9. A company redeems 10,000 preference shares of ₹100 each at a 20% premium. Half the amount is paid from accumulated profits, and the rest is financed by issuing new shares. Prepare the journal entries and evaluate the effect on shareholders' equity.

10. Explain the legal framework under the Companies Act, 2013, for the redemption of preference shares. Discuss with examples how a company can structure its funds for redemption.

Topic : Debentures

1. Issuance of Debentures at Par
   A company issues ₹1,00,000 8% debentures at par. The debentures are issued for cash.
   Task: Pass the journal entry for the issue of debentures.

2. Issuance of Debentures at a Premium
   XYZ Ltd. issues 10,000 6% debentures of ₹100 each at a 10% premium.
   Task: Record the journal entry for the issue of these debentures.

3. Interest on Debentures
   A company issued ₹5,00,000 10% debentures on 1st April 2023. Interest is payable on 30th September and 31st March each year.
   Task: Pass the journal entry for the interest payment on 30th September 2023.

4. Debenture Redemption (Sinking Fund Method)
   A company issues ₹2,00,000 12% debentures, and the redemption is to be made using a sinking fund.
   Task: Pass the journal entry for the creation of a sinking fund.

5. Debenture Redemption (Installment Method)
   A company issues ₹4,00,000 8% debentures, redeemable in 4 equal annual installments.
   Task: Record the journal entry for the first installment of redemption.

6. Issue of Debentures for Assets
   XYZ Ltd. issues 10,000 7% debentures of ₹100 each as part payment for machinery valued at ₹8,00,000.
   Task: Pass the journal entries for the issue of debentures for assets.

7. Conversion of Debentures into Shares
   A company issued 10,000 10% debentures of ₹100 each. The debentures are convertible into shares at a ratio of 2 debentures for 1 share at a price of ₹120 per share.
   Task: Pass the journal entry for the conversion of debentures into shares.

8. Debentures in Lieu of Dividend
   A company issued ₹5,00,000 8% debentures in lieu of a dividend of ₹40,000.
   Task: Pass the journal entry for the issue of debentures in lieu of dividend.

9. Debenture Interest Accrual
   XYZ Ltd. has ₹10,00,000 12% debentures outstanding as of 31st December.
   Task: Pass the journal entry to record accrued interest for the debentures on 31st December.

10. Redemption of Debentures by Buying Back
    A company bought back ₹1,00,000 worth of its 10% debentures at 5% below the par value.
    Task: Record the journal entry for the buyback of debentures.

11. Debenture Interest on an Unequal Basis
    A company issued ₹50,00,000 9% debentures for a term of 5 years, payable annually. The company pays interest at an unequal rate in the first and second years, increasing every year.
    Task: Prepare the journal entries for interest payments for the first two years.

12. Debenture Interest in Advance
    ABC Ltd. issues ₹2,00,000 6% debentures and receives ₹12,000 as advance interest.
    Task: Pass the journal entry for the receipt of interest in advance.

13. Debentures Redeemed with Preference Shares
    A company redeems ₹3,00,000 worth of 8% debentures by issuing preference shares of ₹100 each at a premium of ₹10.
    Task: Pass the journal entries for redemption of debentures.

14. Issuance of Debentures with a Callable Option
    ABC Ltd. issues ₹1,00,000 10% callable debentures that can be redeemed before maturity. The callable option is exercised after 3 years.
    Task: Record the journal entries for redemption under the callable option.

15. Conversion of Debentures to Preference Shares
    XYZ Ltd. has issued ₹5,00,000 8% debentures. The company decides to convert ₹2,00,000 worth of debentures into 20,000 preference shares of ₹100 each.
    Task: Pass the journal entries for the conversion of debentures into preference shares.

16. Issue of Debentures with a Debenture Redemption Reserve
    A company issues ₹6,00,000 8% debentures, and the company creates a Debenture Redemption Reserve (DRR) of ₹60,000.
    Task: Prepare the journal entries for the creation of DRR.

17. Debenture Redemption with a Trust Deed
    ABC Ltd. issues ₹5,00,000 worth of debentures and forms a trust deed for its redemption. The redemption is planned in 5 years.
    Task: Pass the journal entries related to the trust deed.

18. Debenture Redemption by a New Issue of Debentures
    XYZ Ltd. redeems ₹1,00,000 of its 10% debentures by issuing new 10% debentures at par.
    Task: Record the journal entries for the redemption of debentures through the issue of new debentures.

19. Accounting for Debenture Redemption Fund
    A company issues ₹8,00,000 worth of 10% debentures, redeemable after 5 years, and sets up a debenture redemption fund.
    Task: Pass the journal entry for the creation of a debenture redemption fund and its usage.

20. Debenture Redemption in Cash
    A company redeemed ₹2,00,000 worth of debentures at ₹110 per debenture when the debentures were issued at ₹100.
    Task: Record the journal entries for the redemption in cash.

Long Questions on Debentures (10 Questions)

1. Debenture Issue and Redemption
   XYZ Ltd. issued 20,000 9% debentures of ₹100 each at a premium of ₹10. The debentures are redeemable after 5 years. Prepare the necessary journal entries for:

   • Issuance of debentures.
   • Payment of interest for the first year.
   • Redemption of debentures after 5 years at a premium of 5%.

2. Debenture Redemption with Sinking Fund
   ABC Ltd. issued ₹10,00,000 12% debentures and created a sinking fund for redemption. The sinking fund accumulates 10% of the face value every year. Prepare journal entries for the first three years and the redemption of debentures using the sinking fund.

3. Accounting for Debenture Interest in the Case of Underwriting
   A company issues ₹4,00,000 worth of debentures, and the issue is underwritten by a broker. The debenture interest is payable semi-annually. Prepare the journal entries for:

   • Issuance of debentures.
   • Underwriting commission.
   • Interest payments for the first two installments.

4. Debenture Conversion into Equity Shares
   XYZ Ltd. issued ₹1,00,000 worth of debentures, which were convertible into equity shares at a 10% premium. The conversion took place in the second year. Prepare the journal entries for the conversion of debentures into equity shares and the recognition of conversion premium.

5. Issue of Debentures in Lieu of Dividend
   ABC Ltd. issues ₹2,00,000 worth of debentures to its shareholders in lieu of dividend. Prepare the journal entries for the issuance of debentures in place of dividend and the payment of interest.

6. Accounting for Debenture Redemption Reserve
   A company with ₹5,00,000 worth of debentures creates a debenture redemption reserve of 25% of the face value annually. Prepare the journal entries for the creation and utilization of the debenture redemption reserve over 5 years.

7. Accounting for Debenture Redemption with Buyback
   A company issued ₹2,00,000 worth of debentures at 8% interest. It decides to buy back ₹1,00,000 worth of debentures at ₹95 each, which were issued at ₹100. Prepare the journal entries for the buyback and redemption of debentures.

8. Issue of Debentures with Callable Option and Redemption
   A company issues ₹10,00,000 worth of callable debentures at ₹105 each. After three years, the company decides to redeem the debentures at the call price. Prepare the journal entries for the issuance and redemption of callable debentures.

9. Debenture Redemption by New Issue of Debentures
   XYZ Ltd. redeems ₹4,00,000 worth of 10% debentures by issuing new debentures at a 12% interest rate. Prepare the journal entries for the redemption and the issuance of new debentures.

10. Debenture Redemption through a Trust Deed
    ABC Ltd. issues ₹10,00,000 worth of 12% debentures, and a trust deed is executed for the purpose of redeeming these debentures after 5 years. Prepare the journal entries for the creation of a trust deed and redemption of debentures.

Topic : Final Accounts of a Company

Easy Questions

1. Trial Balance Preparation:
   A company provides the following information:

   • Opening Stock: ₹50,000
   • Purchases: ₹200,000
   • Sales: ₹300,000
   • Salaries: ₹20,000
   • Rent: ₹10,000
     Prepare a trial balance from the given data.

2. Profit and Loss Account Preparation:
   From the following details, prepare a Profit and Loss Account:

   • Gross Profit: ₹100,000
   • Salaries: ₹20,000
   • Rent: ₹10,000
   • Interest Expense: ₹5,000

3. Depreciation Accounting:
   A company buys machinery for ₹5,00,000. The expected life is 5 years, and the residual value is ₹50,000. Calculate the annual depreciation using the straight-line method.

4. Basic Adjustments in Final Accounts:
   Pass journal entries for the following adjustments:

   • Outstanding rent: ₹5,000
   • Prepaid insurance: ₹2,000

Moderate Questions

5. Preparation of a Balance Sheet (Vertical Format):
   Using the following details, prepare a balance sheet:

   • Share Capital: ₹10,00,000
   • Fixed Assets: ₹5,00,000
   • Current Liabilities: ₹2,00,000
   • Current Assets: ₹7,00,000

6. Calculation of Reserves and Surplus:
   A company’s net profit is ₹3,00,000. It transfers 10% to the general reserve and declares a dividend of 5% on ₹10,00,000 of share capital. Calculate the remaining profit in the Profit and Loss Account.

7. Adjustment for Accrued Income:

   • Interest income earned but not received: ₹10,000.
     Show the treatment in final accounts.

8. Preparation of a Cash Flow Statement (Indirect Method):
   Given:

   • Net Profit: ₹50,000
   • Depreciation: ₹10,000
   • Increase in Current Liabilities: ₹5,000
   • Decrease in Inventory: ₹7,000
     Prepare the operating activities section.

9. Calculation of Managerial Remuneration:
   A company’s net profit before tax is ₹10,00,000. Calculate the maximum remuneration payable to a managing director under the Companies Act if:

   • There is no other director.

10. Issue of Shares and its Impact on Accounts:
    A company issues 1,000 shares of ₹100 each at a premium of ₹10. Prepare the journal entries for:

    • Issue of shares.
    • Receipt of application money and allotment.

Hard Questions

11. Preparation of Profit and Loss Appropriation Account:
    A company earns a profit of ₹2,50,000. It transfers ₹50,000 to reserves, pays a 10% dividend on ₹5,00,000 share capital, and carries the remaining profit forward. Prepare the Profit and Loss Appropriation Account.

12. Valuation of Inventory:
    Calculate the value of closing stock using the FIFO method for the following data:

    • Opening stock: 100 units @ ₹50 each.
    • Purchases: 200 units @ ₹60 each.
    • Sold: 150 units.

13. Redemption of Debentures:
    A company redeems 1,000 debentures of ₹100 each at a premium of 10%. Pass journal entries for the redemption.

14. Treatment of Preliminary Expenses:
    Explain how preliminary expenses of ₹1,00,000 are treated in the final accounts of a company.

15. Provision for Taxation:
    A company estimates its income tax liability for the year as ₹75,000. How will this be recorded and shown in the financial statements?

16. Adjustment for Contingent Liabilities:
    A contingent liability for ₹1,00,000 is disclosed in the notes to accounts. Explain its treatment and impact on the final accounts.

17. Revaluation of Fixed Assets:
    A company revalues its land and building from ₹10,00,000 to ₹12,00,000. Show the journal entry and its impact on the balance sheet.

18. Profit Distribution to Shareholders:
    A company declares an interim dividend of 20% on ₹10,00,000 share capital. Show the treatment in financial statements.

19. Bonus Issue of Shares:
    A company issues 10,000 bonus shares of ₹10 each. Explain its accounting treatment and disclosure in financial statements.

20. Accounting for Preference Shares:
    A company issues 1,000 preference shares of ₹100 each redeemable after 5 years. Show the accounting treatment for the issue and redemption.

Long Questions (Detailed)

1. Preparation of Final Accounts:
   From the following trial balance, prepare the final accounts of a company for the year ended 31st March 2024:

   • Gross Profit: ₹2,00,000
   • Administrative Expenses: ₹50,000
   • Selling Expenses: ₹30,000
   • Interest on Debentures: ₹10,000
   • Share Capital: ₹5,00,000
   • Fixed Assets: ₹3,00,000

2. Cash Flow Statement Preparation:
   Prepare a cash flow statement (as per Ind AS 7) using the following information:

   • Net Profit: ₹2,00,000
   • Depreciation: ₹30,000
   • Increase in Debtors: ₹20,000
   • Increase in Creditors: ₹10,000
   • Purchase of Fixed Assets: ₹50,000

3. Consolidated Financial Statements:
   A holding company owns 75% of a subsidiary. The holding company earns ₹10,00,000 profit, and the subsidiary earns ₹2,00,000. Prepare a consolidated balance sheet and profit statement.

4. Issue of Shares and Debentures:
   A company issues 5,000 equity shares of ₹100 each at a premium of ₹20 and 1,000 debentures of ₹500 each. Pass the journal entries and show their impact on the balance sheet.

5. Calculation of Depreciation (Comparative Methods):
   Compare the depreciation expense for machinery costing ₹5,00,000 under the straight-line method and diminishing balance method (15%) for the first 3 years.

6. Accounting for Amalgamation:
   Company A and Company B merge to form Company C. Prepare the journal entries and final accounts for amalgamation under the purchase method.

7. Provision for Bad Debts:
   A company estimates 5% of its debtors as bad debts. Debtors amount to ₹1,00,000 at year-end. Show the journal entries and treatment in financial statements.

8. Buyback of Shares:
   A company buys back 1,000 shares of ₹100 each at ₹120 per share. Show the accounting treatment.

9. Revaluation of Assets and Liabilities:
   A company revalues its machinery from ₹8,00,000 to ₹6,00,000 and adjusts its liabilities upward by ₹1,00,000. Show the impact on the balance sheet.

10. Corporate Social Responsibility (CSR) Accounting:
    A company spends ₹2,00,000 on CSR activities during the year. Show the accounting and disclosure in the final accounts.

Topic : Comprehensive Questions

Easy Level

1. Define the term share capital. Write the journal entry for the issue of 10,000 equity shares at ₹10 each.
2. A company issued 5,000 shares of ₹100 each at a premium of ₹10. Write the journal entries for the issue of these shares.
3. A company forfeits 2,000 shares for non-payment of the final call of ₹5 per share (face value: ₹10). Pass the necessary journal entry.
4. Write the journal entries for issuing debentures worth ₹1,00,000 at a discount of 10%.
5. A company declares and pays a final dividend of ₹50,000. Write the journal entries.

Moderate Level

6. ABC Ltd. reissued 1,000 forfeited shares at ₹8 each, originally issued at ₹10 each. Calculate and write the journal entries for reissue.
7. Distinguish between equity shares and preference shares with examples.
8. Prepare a proforma of a Statement of Profit and Loss for a company as per Schedule III of the Companies Act, 2013.
9. A company issued 10% debentures worth ₹2,00,000. Interest is payable semi-annually. Calculate and record the entries for the interest paid.
10. A company purchased machinery worth ₹5,00,000 by issuing 10,000 shares of ₹50 each. Pass the journal entries.

Hard Level

11. X Ltd. issued ₹1,00,000 worth of 12% debentures at par, redeemable at a premium of 5%. Record the issue and redemption entries.
12. A company had a profit of ₹5,00,000 and declared a dividend of ₹2,00,000. Prepare the journal entries for:
    • Provision for Dividend
    • Payment of Dividend
13. A company issued 20,000 shares at ₹10 each. ₹2 is payable on application, ₹3 on allotment, and the balance on the first call. Record the journal entries for full subscription.
14. Pass the journal entries for underwriting commission, assuming ABC Ltd. pays 3% of the issue amount as commission.
15. A company forfeited 500 shares for non-payment of allotment money and reissued them at ₹6 per share. Pass the necessary entries.

Very Hard Level

16. Draft the necessary journal entries for issuing rights shares of ₹10 each at a premium of ₹5 to the existing shareholders.
17. A company acquired assets worth ₹20,00,000 and liabilities worth ₹5,00,000. Pass the journal entries when:
    • Payment is made in cash.
    • Payment is made through shares.
18. A company redeems its 5% preference shares worth ₹10,00,000 by issuing fresh equity shares. Record the entries as per Companies Act.
19. Prepare a Balance Sheet in proper format as per Schedule III of the Companies Act, 2013, using the following details:
    • Share Capital: ₹10,00,000
    • Reserves: ₹5,00,000
    • Secured Loans: ₹20,00,000
    • Current Liabilities: ₹10,00,000
    • Fixed Assets: ₹25,00,000
    • Investments: ₹10,00,000
    • Current Assets: ₹10,00,000
20. Draft journal entries for a bonus issue where the company uses its free reserves to issue fully paid shares to existing shareholders.

Long-Answer Questions

1. Accounting for Forfeiture and Reissue of Shares:
   Discuss the rules and pass the journal entries for forfeiting shares and their reissue under various conditions.

2. Preparation of Balance Sheet and Profit & Loss Account:
   Prepare a Balance Sheet and Statement of Profit and Loss for XYZ Ltd. with the following information:

   • Share Capital: ₹20,00,000
   • Reserves and Surplus: ₹5,00,000
   • Revenue: ₹15,00,000
   • Expenses: ₹7,00,000
   • Debentures: ₹10,00,000
   • Current Assets: ₹18,00,000

3. Amalgamation of Companies:
   Explain the accounting treatment in the books of the transferor and transferee company during amalgamation as per Accounting Standard-14. Give journal entries.

4. Issue of Debentures:
   XYZ Ltd. issued ₹50,00,000 debentures at 5% interest, redeemable after 5 years. Show how the company will account for the issue and interest payment.

5. Redemption of Preference Shares:
   Describe the process and accounting treatment for the redemption of preference shares using free reserves.

6. Right Issue of Shares:
   A company offers a rights issue to its shareholders in a 1:5 ratio at ₹50 per share (market price: ₹100). Discuss the treatment and pass journal entries.

7. Valuation of Goodwill and Shares:
   Write a detailed explanation of the methods used for valuation of goodwill and shares, supported by examples.

8. Bonus Shares:
   Discuss the procedure for issuing bonus shares and its accounting treatment. Include journal entries and impact on financial statements.

9. Accounting for Buyback of Shares:
   Explain the rules and accounting treatment for buyback of shares under the Companies Act, 2013.

10. Preparation of Cash Flow Statement:
    Prepare a Cash Flow Statement for a company using the indirect method with the following data:

• Net Profit: ₹5,00,000
• Depreciation: ₹1,00,000
• Increase in Inventory: ₹50,000
• Decrease in Trade Payables: ₹40,000
• Purchase of Fixed Assets: ₹2,00,000

Theoretical Question

Here are 100 theoretical questions on Company Accounts based on the topics in your syllabus:

Share Capital

1. Define share capital.
2. What are the different types of share capital?
3. Explain the concept of authorized share capital.
4. What is issued share capital?
5. Define subscribed share capital.
6. What is called-up capital?
7. Explain paid-up capital.
8. What is reserve capital?
9. Differentiate between equity shares and preference shares.
10. What are the features of equity shares?
11. List the types of preference shares.
12. What is meant by the term “right shares”?
13. Explain the concept of bonus shares.
14. What are sweat equity shares?
15. What is over-subscription of shares?
16. Explain under-subscription of shares.
17. What is the minimum subscription?
18. Why is the issue price of shares important?
19. What is a share premium?
20. Explain the accounting treatment of share premium.
21. Define forfeiture of shares.
22. What is reissue of forfeited shares?
23. Explain the difference between shares forfeited and shares reissued.
24. What are the conditions for the reissue of forfeited shares?
25. Discuss the advantages of issuing shares.

Redemption of Preference Shares

26. What is redemption of preference shares?
27. Explain the provisions under the Companies Act, 2013 for redemption of preference shares.
28. What is the purpose of creating a Capital Redemption Reserve (CRR)?
29. What are the sources available for redeeming preference shares?
30. Explain the journal entries for redemption of preference shares at a premium.
31. Differentiate between redemption of preference shares and buyback of shares.
32. What are the conditions for redeeming irredeemable preference shares?
33. Explain fully paid and partly paid preference shares with examples.

Debentures

34. What is a debenture?
35. Differentiate between shares and debentures.
36. What are the types of debentures?
37. Define secured and unsecured debentures.
38. What is a redeemable debenture?
39. Explain irredeemable debentures.
40. What are convertible debentures?
41. Differentiate between convertible and non-convertible debentures.
42. What is the purpose of issuing debentures?
43. Explain the term “debenture trustee.”
44. What is a debenture trust deed?
45. What are the methods of redeeming debentures?
46. What is the sinking fund method for redemption of debentures?
47. Explain the terms "discount on issue of debentures" and its accounting treatment.
48. What are debentures issued as collateral security?
49. Define the term “premium on redemption of debentures.”
50. What is the journal entry for redemption of debentures at par?
51. Discuss the importance of maintaining a Debenture Redemption Reserve (DRR).
52. What is meant by the term "interest on debentures"?
53. How is debenture interest different from dividend?
54. Why do companies prefer to issue debentures over equity shares?

Company Final Accounts

55. Define company final accounts.
56. What are the components of company final accounts?
57. What is the purpose of preparing final accounts for a company?
58. Explain the format of a company’s Statement of Profit and Loss.
59. What is the format of a company’s Balance Sheet?
60. What are the key adjustments made while preparing final accounts?
61. Explain the treatment of depreciation in final accounts.
62. How is provision for taxation shown in final accounts?
63. What is the difference between provisions and reserves?
64. How are dividends treated in the final accounts of a company?
65. What is the significance of a profit and loss appropriation account?
66. Explain the concept of contingent liabilities and their disclosure in final accounts.
67. What is the accounting treatment of preliminary expenses in company accounts?
68. Define the term “notes to accounts” in final accounts.
69. What is the difference between interim and final dividend?
70. What is the significance of a company's working capital in final accounts?
71. Discuss the treatment of goodwill in final accounts.
72. How are accrued expenses and prepaid expenses adjusted in final accounts?

Forfeiture and Reissue of Shares

73. Explain the reasons for the forfeiture of shares.
74. What is the accounting treatment for forfeiture of shares?
75. How is the forfeiture amount utilized when shares are reissued?
76. What are the legal requirements for forfeiting shares?
77. Explain the term "gain on reissue of shares."
78. What is the maximum discount allowed on reissue of forfeited shares?

Journal Entries for Company Accounts

79. What are the journal entries for the issue of shares at a premium?
80. What is the journal entry for allotment of shares?
81. Explain the journal entries for forfeiture of shares.
82. What are the journal entries for reissue of forfeited shares?
83. What are the journal entries for redemption of preference shares?
84. What is the journal entry for the issue of debentures at a discount?
85. What are the journal entries for the redemption of debentures?

Miscellaneous Questions

86. Define the term "book building" in the context of share issuance.
87. What is the difference between public issue and private placement of shares?
88. What is a prospectus, and why is it important in issuing shares?
89. Define the term "sweat equity shares" and its significance.
90. Discuss the difference between bonus shares and rights shares.
91. What are the advantages of debentures for investors?
92. What is the accounting treatment of calls in arrears?
93. Explain the difference between equity capital and debt capital.
94. What is a stock split, and how is it accounted for?
95. How does a company's share capital impact its financial structure?
96. What is meant by the term "capital gearing"?
97. Explain the significance of maintaining proper reserves in a company.
98. What is the difference between fixed and fluctuating reserves?
99. Why is the preparation of final accounts critical for a company's stakeholders?
100. Discuss the importance of adhering to accounting standards in preparing company accounts.