QP CODE: F4797

M.Com DEGREE (CSS) PRIVATE EXAMINATION, NOVEMBER 2023

Second Semester
CORE COURSE – CM010201 – ADVANCED CORPORATE ACCOUNTING
General Instructions
- Marks required for pass in external examination is 60
- The Scheme of valuation is a broader guideline. Any relevant point covered in the scheme
shall be given due credit.
- Compulsorily award step marks- Importance shall be given to the correct approach rather
than the arithmetical part.
Section I

Part A (Short Answer Questions)

Answer any eight questions. Each question carries 1 weight.

1. Disadvantages of Holding company

a. Formation and ongoing compliance costs.
b. Management challenges.

2. An interim dividend is a dividend payment made before a company's annual general meeting and
before the release of final financial statements. This declared dividend usually accompanies the
company's interim financial statements and are paid out monthly or quarterly.

3. Format of Capital Account for the year ended ………………………

Expenditure Upto the During Total Receipts Upto During Total

End of The year Expenditure the The Receipts
Previous End of year
year Previous
year
Land & xxxxx xxxxx xxxxx Equity xxxxx xxxxx xxxxx
Buildings Shares
Transformer, Preference
Meter etc. xxxxx xxxxx xxxxx Shares xxxxxx xxxxx xxxxxx
Total Total
Expenditures Receipts
To Balance By Balance
of Capital of Capital
A/c A/c

4. Under the Insolvency Code, the government will set up an Insolvency and Bankruptcy Board
of India (IBBI). The IBBI will perform the role of a regulator for insolvency and bankruptcy
matters with powers to frame regulations to implement the Insolvency Code. The IBBI will
have regulatory oversight over insolvency professional agencies, insolvency professionals and
informational utilities.
The National Company Law Tribunal (NCLT) will act as adjudicating authority with quasi-
judicial powers. The insolvency resolution and liquidation processes will be monitored and
overseen by NCLT. An appeal against the orders of NCLT will lie in the National Company Law
Appellate Tribunal, from which appeals can be filed before the Supreme Court of India.
5. On the passing of the bankruptcy order under section 126, —
(a) the estate of the bankrupt shall vest in the bankruptcy trustee as provided in section 154;
(b) the estate of the bankrupt shall be divided among his creditors;
(c) subject to provisions of sub-section (2), a creditor of the bankrupt indebted in respect of any
debt claimed as a bankruptcy debt shall not—
(i) initiate any action against the property of the bankrupt in respect of such debt; or
(ii) commence any suit or other legal proceedings except with the leave of the Adjudicating
Authority and on such terms as the Adjudicating Authority may impose.
(2) Subject to the provisions of section 123, the bankruptcy order shall not affect the right of any
secured creditor to realise or otherwise deal with his security interest in the same manner as he
would have been entitled if the bankruptcy order had not been passed:
Provided that no secured creditor shall be entitled to any interest in respect of his debt after the
bankruptcy commencement date if he does not take any action to realise his security within thirty
days from the said date.
(3) Where a bankruptcy order under section 126 has been passed against a firm, the order shall
operate as if it were a bankruptcy order made against each of the individuals who, on the date of
the order, is a partner in the firm.
(4) The provisions of sub-section (1) shall not apply to such transactions as may be notified by the
Central Government in consultation with any financial sector regulator.

6. As per Section 327 of the Companies Act. 2013, preferential payments have to be made in priority,
in the order mentioned below: -
● All revenues, taxes, cesses, and rates owed to the central, state, or local governments that
had become due and payable within a year of the winding-up order.
● All wages or salary, whether working is payable for time or piece work and salary includes
which is earned wholly or in part in respect of services rendered to the company, due for up
to 4 months only within 12 months before the date of the winding-up order.
● All accrued holiday remuneration becomes payable to an employee or his legal heirs. This
has no limitation clause, which means an employee can claim any due holiday remuneration
for the services given to the company by him.
● All amounts are due in respect of contributions payable during 12 months under the
Employee State Insurance Act, 1948.
● Compensation was due under the Workmen’s Compensation Act, 1923 in respect of the
death or disablement of any company employee.
● Any amount due to any employee from the provident fund, pension fund, and gratuity fund
for the welfare of the employees maintained by the company.
● The expenses of any investigation held in pursuance of Sec. 213 and 216, in so far as they
are payable by the company.
7. Liquidation is a process in which the company is brought to an end. Also, the assets and property of
the company are redistributed to the creditors and owners. Liquidation is also referred to as
winding-up or dissolution, although dissolution technically refers to the last stage of liquidation.
8. Preferential Creditors = Rs. 1,16,000 (20,000 x 4 + 3,000 x 4 x 3)
Unsecured Creditors = Rs. 1,44,000 (14,000 x 4 x 4 – 80,000)
9. The incomplete voyage is called Voyage in Progress (VIP). Suppose one voyage has to complete by
going to Landon from Mumbai and then return from Landon to Mumbai. At the end of year, if
traveling from Landon to Mumbai is continuing, at that time, we have to calculate expenses and
incomes on incomplete voyage and treat according to accounting rule.
 (A) Receiving of Advance Income: we will deduct advance income of incomplete voyage from total
voyage income or show in the debit side of voyage account.

(B) Paying of Advance Expenses: We also will deduct advance expenses of incomplete voyage from
total voyage expenses or show in credit side of voyage account.
10. According to industry experts, revenue expenditures for hotels can range from 60-80% of total
revenue, with the largest expenses going towards labour, utilities, and maintenance. Other cost
categories include property taxes, insurance, marketing and advertising, and debt service if the
hotel is financed with debt.
Part B
Answer any six questions. Each question carries 2 weight.
11. A minority interest refers to a stake in a company that is otherwise controlled by a parent
company. This usually occurs in subsidiaries where the parent company owns more than 50% of the
voting shares.
A minority interest is less than 50 per cent ownership or interest in a company. The word can apply
to either stock ownership or a shareholding interest in a company. An investor or other entity other
than the parent company holds a minority interest in a company.
The concept of minority interest is applied only when the ownership shares in a subsidiary exceeds
50% but is less than 100%. A parent company may want to own less than 100% for a number of
reasons. First, achieving control of a subsidiary with a smaller than 100% capital investment puts
less capital at risk of loss.
Minority interest refers to the ownership stake held by investors or shareholders who own less
than 50% of the total shares or voting rights in a company. As a result, these minority shareholders
have less control over the company's decision-making processes and have limited influence.
Minority interest can be calculated by multiplying the minority percentage with the company's
book value and attributing the proportional net income to minority stakeholders.

12. Contingent liabilities are never recorded in the financial statements of a company. These
obligations have not occurred yet but there is a possibility of them occurring in the future. So a
contingent liability has no accounting treatment as such. Now such contingent liabilities have to be
reviewed on a yearly basis. It is shown as a footnote in the consolidated balance sheet.

13. Features of Double Account System

(a) Generally, a public utility undertaking needs a large amount of capital which is invested in the
acquisition of fixed assets. Therefore, fixed assets, fixed liabilities and current assets, current
liabilities are to be separately dealt with. Fixed Assets and fixed or long-term liabilities are recorded
in Receipts and Expenditure on Capital Account. Similarly, current assets and current liabilities are
recorded in the General Balance Sheet.

(b) Revenue Account and Net Revenue Account are prepared instead of Profit and Loss Account and
Profit and Loss Appropriation Account.

(c) Normally, no adjustment of asset is made in the Capital Account.

(d)Depreciation is not deducted from the asset concerned but the same is shown as a liability by
way of a fund. And, as such, fixed assets are recorded at book value.

(e) Any kind of funds and reserve — e.g., Sinking Fund, Depreciation Fund, General Reserve, Capital
Reserve, the Balance of Revenue/Net Revenue Account — are shown in the liabilities side of the
General Balance Sheet.
 (f) Discount and Premiums are permanently treated as capital items.

(g) Loan capital (debentures) Shares and Stocks are treated as capital items.

(h) Interest on Loan and Debentures (i.e., all fixed interests) are to be charged against Net Revenue
Account.

14. A. Amount of improvement to be capitalized = 12,80,000

B. Amount to be written off to revenue account = 5,20,000
C. Journal Entries
Particulars Debit (Rs.) Credit (Rs.)
New Works A/c…………………………………………. Dr. 12,80,000
Replacement A/c………………………………………. Dr. 12,20,000
To Bank 25,00,000
Bank A/c………………………………………………. Dr 5,00,000
To Replacement 5,00,000
New Works A/c……………………………………. Dr. 2,00,000
To Replacement 2,00,000
Revenue A/c…………………………………………. Dr. 5,20,000
To Replacement 5,20,000

15. Report of resolution professional on repayment plan

(1) The resolution professional shall submit the repayment plan under section 105 along with his
report on such plan to the Adjudicating Authority within a period of twenty-one days from the last
date of submission of claims under section 102.

(2) The report referred in sub-section (1) shall include that—

(a) the repayment plan is in compliance with the provisions of any law for the time being in force;

(b) the repayment plan has a reasonable prospect of being approved and implemented; and

(c) there is a necessity of summoning a meeting of the creditors, if required, to consider the
repayment plan:

Provided that where the resolution professional recommends that a meeting of the creditors is not
required to be summoned, reasons for the same shall be provided.

(3) The report referred to in sub-section (2) shall also specify the date on which, and the time and
place at which, the meeting should be held if he is of the opinion that a meeting of the creditors
should be summoned.

(4) For the purposes of sub-section (3)—

(a) the date on which the meeting is to be held shall be not less than fourteen days and not more
than twenty-eight days from the date of submission of report under sub-section (1);

(b) the resolution professional shall consider the convenience of creditors in fixing the date and
venue of the meeting of the creditors.
16. Modes of winding up
According to Section 270 of the Companies Act, 2013, a company can be wind up in two ways. They
are:

● Compulsory Winding up of Company by Tribunal

● Voluntary Winding up of Company

Compulsory Winding up of Company by Tribunal

According to Section 271 of the Companies Act, a Tribunal may issue an order to wind up a
company in the following circumstances, as detailed in Section 271(1) of the Companies Act, 2013.

● Sick Company
● Special Proposal
● Acts against the State
● Fraudulent Conduct of Business
● Failure to file financial statements with the Registrar
● It is just and equitable to wind up.
Voluntary Winding up of Company
Section 304 of the Companies Act, 2013, specifies two statutory conditions in which a company
may be voluntarily wind up. They are;

● If the company’s general meeting approves a resolution requiring the company to be wind up
voluntarily as a consequence of the expiration of the time for its duration, if any, as per its
articles, or the occurrence of any event for which the articles prescribe that the company may
be dissolve; or
● If the board of directors approves a special resolution requesting that the firm is wind up
voluntarily.
17. During the liquidation of limited company, the Statement of Affairs is presented during the
creditor's meeting. It provides an estimation of the funds which the liquidator believes will be
realizable from the sale of company assets which helps creditors determine whether they are likely
to receive a dividend from the liquidation.

How to Prepare Statement of Affairs?

List A: Assets not specifically pledged.

List B: Assets Specifically Pledged.
List C: Preferential Creditors
List D: Debenture holders Secured by a floating charge.
List E: Unsecured Creditors
List F: Preference Shares.
List G: Equity Shares.
List H: Surplus or Deficiency.
18. Types of Underwriting
1. Complete/Full Underwriting. In case, the entire issue of shares or debentures of a
company is undertaken, it is said to be full or complete underwriting. Such an
underwriting may be done by one underwriter or by a number of underwriters.
2. Partial underwriting means the underwriter provides the issuer with a commitment to
guarantee a sale of a certain portion of the total issue and in the case of under-
subscription, by purchasing the balance of the securities.
 3. Syndicate underwriting: An underwriter syndicate is a group of investment banks and
broker-dealers formed temporarily to sell new issues of a company's equity or debt to
investors. The reason for an underwriter syndicate is to pool the resources of multiple
firms when an issue is too large for one firm to take on.
4. Open/Normal underwriting: where the underwriter agrees to take up
shares/debentures only when the issue is not subscribed by the public in full.
5. Firm underwriting: where an underwriter agrees to buy a certain number of
shares/debentures in addition to the shares he has to take under the underwriting
agreement.
6. Sub underwriting: Institutions which agree with the underwriter of a share issue to take
up a proportion of any shares which the underwriter has underwritten. Sub-
underwriting is a mechanism by which an underwriter can reduce its risk.
Part C
Answer any two questions. Each question carries 5 weight.
19. Consolidated Balance Sheet as on 31.03.2011
Liabilities Amount Assets Amount
Share Capital (Rs.10) 25,00,000 Land 10,00,000
Reserve 2,00,000 Building 13,00,000
Profit and Loss Account Machinery 10,50,000
(3,00,000-80,000) 2,20,000 Investment 12,000
Add R/P of H Ltd 4,60,000 6,80,000 Current Assets 4,38,000
Current Liabilities 2,50,000 Goodwill 90,000
Minority Interest 2,60,000
38,90,000 38,90,000

WN 1: Ratio 40,000:10,000 or 4:1

WN 2: Adjusted P&L A/c
Particulars Amount Particulars Amount
To balance b/d 4,00,000
To Interim dividend 1,00,000 By Profit earned
To Balance c/d 4,00,000 during the year 9,00,000

9,00,000 9,00,000

WN 3: Capital Profit
Profit and Loss A/c Debit Balance on 01.04.2010 (4,00,000)
Profit from 01.04.2010 to 01.07.2010 9,00,000x3/12 2,25,000
Profit on revaluation of land 4,00,000
Capital Profit 2,25,000
H Ltd = 2,25,000 x 4/5 = 1,80,000
MI = 2,25,000 x 1/5 = 45,000
WN 4: Revenue Profit
Profit from 01.07.2010 to 31.03.2011 9,00,000 x 9/12 = 6,75,000
Less interim dividend 5,00,000 x 20% = 1,00,000
Revenue Profit 5,75,000
H Ltd = 5,75,000 x 4/5 = 4,60,000
MI = 5,75,000 x 1/5 = 1,15,000
 WN 5: Cost of Control/Capital Reserve
Paid up share capital 40,000 shares of Rs. 10 each 4,00,000
Capital Profit 1,80,000
Cost of Investment (6,70,000)
Cost of Control (90,000)

WN 6: Minority Interest

Paid Up Share Capital 5,00,000 x 1/5 1,00,000

Capital Profit 45,000
Revenue Profit 1,15,000
Minority Interest 2,60,000

20. Calculation of Capital Base

Fixed Assets 4,20,00,000
Less Customers’ Contribution to Main Lines 3,20,000 4,16,80,000
Intangible Assets (Preliminary Expenses) 1,40,000
Contingency Reserve Investment 76,00,000
Current Assets 23,70,000
5,17,90,000
Less: Depreciation 98,00,000
Loan from Electricity Board 1,20,00,000
Debentures 75,00,000
Development Reserve 4,40,000
Consumers Deposit 4,84,000
Tariffs & Dividend Control Reserve 8,40,000
Capital Base 2,07,26,000

Calculation of Reasonable Return

10% (i.e. Bank Rate 8% + 2%) on Rs. 2,07,26,000 capital base 20,72,600
6% on Reserve Fund Investment (6% on 90,00,000) 5,40,000
1/2 % on loan from Electricity Board (1/2% on 1,20,00,000) 60,000
1/2 % on Debentures (1/2% on 75,00,000) 37,500
½% on Development Reserve (1/2% on 4,40,000) 2,200
Reasonable Return 27,12,300

Disposal of Surplus
Clear Profit 27,50,100
Less Reasonable Return 27,12,300
Surplus 37,800
Allocation of Surplus
1/3 of surplus limited to 5% of Reasonable Return 12,600
Tariffs and Dividend Control Reserve 12,600
Consumers Benefit Reserve 12,600
21. Liquidator’s Final Statement of Account as on 31.03.2018
Particulars Amount Particulars Amount
To Assets Realised 30,50,000 By Liquidation expenses 54,000
To Equity By Liquidator’s remuneration 91,500
Shareholders By Debenture holders 4,60,000
(5,000 x 4) 20,000 By Preferential Creditors 1,49,500
By Unsecured Creditors 10,45,000
By Preference shareholders 12,40,000
By Equity shareholders
(5,000 x 6) 30,000
30,70,000 30,70,000

WN 1
Amount payable to Equity shareholders 5,50,000
Less Surplus available 10,000
Loss 5,40,000
Loss per share 5,40,000/10,000 = 54
22. Expenses
1. Bunker Cost:
This is the expenditure incurred on fuel oil, diesel, coal and fresh water used during the voyage.
Now-a-days oil and diesel are used in place of coal. The bin or storing place of coal is referred to as
bunker. Hence the name bunker costs.

2. Port Charges:
Port is used by the shipping companies for loading and unloading of goods and parking of ships,
hence the charges paid for these purposes are known as port charges.

3. Depreciation:
Depreciation of the ship for the period of voyage is calculated and charged to the Voyage Account.

4. Insurance:
Insurance premium of cargo must be entirely debited to the concerned Voyage Account whereas
the insurance charges of the ship are charged proportionately to each voyage on the basis of time
of voyage.

5. Address Commission and Brokerage:

This is payable to the brokers and agents who help the shipping company in procurement of cargo,
i.e., freight or business. This is calculated at a certain per cent of the freight earned including the
primage or surcharge and debited to Voyage Account. Address commission is payable to the
Charterer whereas brokerage is payable to the agent of the charterer.

6. Stevedoring Charges:
The expenses which are incurred in loading of goods on the ships and unloading of goods from the
ships are known as stevedoring charges.

7. Port Charges:
These are the charges paid to port authorities for allowing the ship to use the port either for
loading or unloading the cargo.

8. Salaries and wages of the crew, captain and other staff.

 9. Harbour charges

10. Manager’s commission, if any.

Incomes
1. Freight:
The amount which is charged by the shipping companies for taking goods or cargo from one place
to another is called freight. It is an income.

2. Primage:
It is additional freight just like surcharge on freight originally collected for the captain of the ship,
now-a-days it is treated as income of the shipping company.

3. Passage Money:
Fare collected from the passengers travelled in addition to the fare collected for merchandise.

4. Closing Stocks of Stores, Provisions, Coal, Fuel etc.

Generally, voyage profit represents the excess of voyage incomes earned over the expenses
incurred for this purpose. But if, however, the voyage is in progress, the incomes and expenses
relating to the unfinished voyage are carried forward to the next year.

Excess of credit side of Voyage Account over its debit side is profit on the voyage. Excess of debit
side of Voyage Account over its credit side is loss on the voyage. This profit or loss is transferred to
General Profit and Loss Account of the shipping company.

Answers of MCQ
1. (a) Revenue Account
2. (a) Revenue
3. (c) Clear Profit
4. (c) Under both the cases
5. (c) Nominal
6. (b) A particular voyage
7. (b) Credited
8. (b) Eliminated
9. (a) Effect
10. (b) Eliminated
11. (a) Capital account
12. (a) Straight line method
13. (a) Section 199
14. (a) Not be entitled
15. (a) Section 116
16. (b) Credited
17. (a) Solvent company
18. (a) Firm underwriting
19. (c) Joint stock companies
20. (c) Section 183