QP CODE: 21100875

B.Com DEGREE (CBCS) EXAMINATION, MARCH 2021

Fourth Semester
Core Course - CO4CRT11 - CORPORATE ACCOUNTING II
(Common for B.Com Model II Computer Applications, B.Com Model II Finance & Taxation, B.Com
Model II Marketing, B.Com Model II Travel & Tourism, B.Com Model III Office Management &
Secretarial Practice, B.Com Model III Taxation, B.Com Model III Computer Applications, B.Com
Model I Co-operation, B.Com Model I Marketing, B.Com Model I Finance & Taxation, B.Com
Model
I Travel & Tourism, B.Com Model II Logistics Management )
2017 Admission onwards

Time: 3 Hours Max. Marks : 80

Part A
Answer any ten questions.
Each question carries 2 marks.

1. What is contingent liability?

A contingent liability is a liability or a potential loss that may occur in the future depending on
the outcome of a specific event. ... In that case, the company would book that amount as
contingent liability on its balance sheet

2. What is life assurance fund?

Life Fund, also known as Life Assurance Fund is concerned with Life Insurance (Assurance)
business. It is an item that appears on the liability side of the balance sheet.

3. Define Banking.

A bank is a financial institution which performs the deposit and lending function. A bank
allows a person with excess money (Saver) to deposit his money in the bank and earns an
interest rate. Similarly, the bank lends to a person who needs money (investor/borrower) at an
interest rate

4. Write a short note on standard assets and sub- standard assets.

Standard Asset is one which does not disclose any problems, and which does not carry more
than normal risk attached to the business. Such an asset should not be an NPA. A substandard
asset would be one, which has remained NPA for a period less than or equal to 12 months.

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 A sub-standard asset is an asset classified as an NPA for less than 12 months. A doubtful asset
is an asset that has been non-performing for more than 12 months. Loss assets are loans with
losses identified by the bank, auditor, or inspector that need to be fully written off.

5. Share capital A/c ....................Dr. 10,00,000

To share final call 8,00,000

To forfeiture share 2,00,000

,
6. Equity share capital A/c.........,Dr 2,00,000
To share holders. 2,00,000

Share holders A/c...................Dr 2,00,000

To bank. 2,00,000

7. Creditors A/c.................Dr 4,000

To capital reduction. 4,000

8. What is 'Transferee Company'?

Transferee company means the company into which a transferor company is amalgamated. ...
All the assets and liabilities of the transferor company become, after amalgamation, the assets
and liabilities of the transferee company

9. What is Amalgamation in the nature of Merger?

Amalgamation in the nature of merger is an amalgamation where there is a genuine pooling

not merely of assets and liabilities of the transferor and transferee companies but also of the
shareholders’ interests and of the businesses of the companies.

10. Mention two differences between external reconstruction and amalgamation.

Internal reconstruction is a method of corporate restructuring where an arrangement is made

by the company of the organization where in changes in the assets and liabilities are made to
improve the financial position without liquidating the company or transferring the ownership
to external party, whereas external reconstruction is the one where an existing company is
liquidated and taken over by another newly formed company and the transfer of assets and
liabilities takes place, and the same is considered similar to amalgamation.

11. Who is a Liquidator?

A liquidator is the officer appointed when a company goes into winding-up or liquidation who
has responsibility for collecting in all of the assets under such circumstances of the company
and settling all claims against the company before putting the company into dissolution.
12. Assess the grounds for Compulsory winding up.

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 If a company is unable to pay its debts or the debts taken by the company is worth more than
the assets it owns and no agreements have been made with the creditors, then the company is
considered insolvent and is subjected to compulsory liquidation or compulsory winding up.
(10×2=20)
Part B
Answer any six questions.
Each question carries 5 marks.

13. Valuation balance sheet

Liabilities Amount Asset Amount

Net liability as per Actual valuation 86,00,000 Life insurance fund 1,48,60,000

Surplus

62,60,000

1,48,60,000 1,48,60,000

Distribution of surplus to policyholders

PARTICULARS AMOUNT

Surplus as per valuation

62,60,000
Add :interim bonus paid 4,50,000
Less :Dividend for 2018-2019 (8,00,000)
Amount available to policy holders 59,10,000
Less :Policy holders are entitiled 95% 5910000 56,14,500
Less : Already paid as interim bonus 4,50,000
Amount due to policy holders 51,64,500

14. Explain the features of general insurance.

Home insurance

 Coverage against damages endured by the structure of the house including the
buil ding, heating, air-conditioning, electrical apparatus etc.
 Coverage against damages endured by additional structures to the house like the
garage, back-yard, pool, driveway etc.

Vehicle insurance
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  Coverage and hospitalisation in case you or your vehicle is involved in an
accident.
 Ability to get vehicle repaired at any network garage mentioned in the insurance
policy by enchasing the cashless settlement facility.

Health insurance

Your policy covers you for all aspects of your treatment including pre and post
hospitalisation, hospital room charges, surgeon’s fees, expenses related to medical
reports and other similar things.

Travel Insurance

Travel insurance is also considered a general type of insurance. If you are travelling
abroad, you need to invest in a good travel insurance policy that covers you for several
things.

15.

schedule -9 Loans
Purticulars Amount
Bills purchased and discount 80
Cash credit and overdraft 100
180

Schedule - 5 Other liabilities and provision

Purticulars Amount
Bills
payable 100
Unclaimed dividend 50
Depreciation 100
250

Schedule - 12 Contingent liability

Purticulars Amount
Liability on foreign exchange
contract 50
Bullion 20
70
16. What is internal reconstruction? Explain the procedure for internal
reconstruction.

A settlement made with members, creditors and debenture holders may result into
reconstruction of a company and such reconstruction will be called as “Internal
Reconstruction”, if there is no liquidation of an existing company.
Internal reconstruction of a company is done through the reorganization of its share capital. It
is a scheme of reorganization in which all interested parties in the capital structure volunteer to
sacrifice. They are the company’s shareholders, debenture holders, creditors, etc. Generally,
share capital is reduced to write off the past accumulated losses of the company. Under
internal reconstruction, the accumulated trading losses and fictitious assets are written off

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 against the sacrifice made by these interest holders in the form of a reduction of the paid-up
value of their interest.
17.
Journal entries
L De Cre
Date Purticulars .F bit dit

1 (o/d)Equity share capital a/c dr 200000

To (new)Equity share 200000
(subdivision of share in to rs.10 each)

2 Equity sharecapital a/c dr 100000

To surrendered share 100000
(200000*50/100)
(surrender of share)

3 Surrendered share a/c dr 600000

To equity share 600000
(100000*60/100)
(share issued to debenture holders)

4 Debenture a/c dr 800000

To capital reduction 800000
(Debenture reduced)

5 Surrendered share a/c dr 400000

To capital reduction 400000
(cancellation of unissued share)

6 Capital reduction a/c dr 1200000

To Capital reserve 1200000
(Balance transferred to capital reserve)

18.
Calculation of purchase consideration
Purticulars LY ltd LB ltd
Agreed value of assets taken over:
800
goodwill 100000 00
190
land and building 200000 000
220
plant and machinery 170000 500
patent 50000 -
150
stock 50000 00
480
debtors 90000 00
125
bills receivable 10000 00

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 100
bank 50000 00
711
720000 000
Less: agreed value of liabilities taken
over:
bank overdraft 50000 500
00
creditors 50000 120
000
bills payable 50000 300
00
150000 200000
51
purchase consideration 570000 1000
19.
Realisation A/c
Purticulars Amount Purticulars Amount
To Land and building 130000 By bills payable 1500
To Plant and machinery 65200 By creditors 10500
To
Stock 5000 By PQ ltd 200000
To Cash 1800
To Equityshareholders(b.f) 10000

212000 212000
20.
Calculation of purchase consideration

Purticulars X Y
Premisses 100000 0
Machinery 29500 35400
Stock 30000 22500
Bank 15000 9500
174500 67400
Less: Creditors 30000 12000
P.C 144500 55400
No of shares
(144500/15) 9633 3693

Journal entries in the books of AB

ltd
L
Date Purticulars .F Debit Credit

1 Business purchase a/c dr 199900

To liquidators of Z ltd a/c 144500

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 To liquidators of Y ltd a/c 55400
(purchase consideration due)

2 Premisses a/c dr 100000

Machinery a/c dr 29500
Stock a/c dr 30000
Bank a/c dr 15000
To creditors a/c 30000
To business purchase a/c 144500
(assets and liability takenover)

3 Premisses a/c dr 0
Machinery a/c dr 35400
Stock a/c dr 22500
Bank a/c dr 9500
To Creditors a/c 12000
To Business purchase a/c 55400
(assets and liabilities taken over)
Liquidators of Xltd a/c dr
4 Liquidators of Yltd a/c dr 144500
To Equityshare of AB ltd a/c 55400
199900

21. Explain the Preferential creditors of a company.

 A preferred creditor is an individual or organization that has priority in being paid
the money it is owed if the debtor declares bankruptcy.
 The types of creditors that are preferred are defined by law and vary depending on
the jurisdiction.
 Unpaid wages and taxes, as well as environmental and tort damages, are often the
first expenses covered.
 Preferred bondholders and, on occasion, economic development institutions also
have a greater chance of recovering any money owed.

(6×5=30)
Part C
Answer any two questions.
Each question carries 15 marks.

22.
Form A-RA
Revenue account for the year ended 31-3-2019
Particulars Note Amount
1) Premium earned (Net) (1200+20) 1 1,220
Less : Reinsurance ceded -250
Reinsurance premium accepted 175
2) Income from investment
Interest Dividend Rent (23+2) 25
3) Other income

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 profit on sale of investment 5
Consideration for annuites granted 40
Registration fee 2
Total
A 1217

1) Commission 2 47
2) Operating expenses relating to insurance 3 23
Total B 70

1) Benefits paid (Net) 4 824

Total C 824

Surplus (D) A-B-C 323

Appropriations:
Transfer to fund for future appropriation 323
Total D 323

Schedule -2 Commission
Particulars Amount
Commission on Direct business 50
Add : Commission for annuities granted 15
Less : Commission on reinsurance ceded -20
Add : Commission on direct business owing 2
47

Schedule -3 Operating Expenses

Particulars Amount
Salaries and allowances 15
Surrenders 3
General Expenses 2
Depriciation on Fixed Assets 3
23

Schedule -4 Benefits paid

Particulars Amount
Claims paid 675
Surrenders 125
Annuities paid 32
Add : Claims Outstanding 4
Less : Reinsurance Claims -12
824

23.

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 Profit for the year ended 31-3-2018
Particulars Schedule no Amount
I) Income
Interest earned 13 692
Other income 14 30
Total A 722
II) Expenditure
Interest expended 15 362
Operating expenses 16 255
Provisions and contigencies 69.25
Total B 686.25
III) Profit/Loss 35.75
Total C 35.75
Appropriations :
Transfer to statutory reserve (35.75*25/100) 8.9
Balance carried over to balance sheet 26.8
35.75

Schedule-13 Interest earned

Particulars Amount
Interest on loan 300
Interest on cash credit 240
Interest on overdraft 30
Discount on bills 152
Less : Closing rebate on bills discounted -30
692

Schedule-14 Other income

Particulars Amount
Commission 10
Exchange and brokerage 20
30

Schedule-15 Interest Expended

Particulars Amount
Interest on PD 275
Interest on savings bank deposits 87
362

Schedule-15 Operating Expenses

Particulars Amount
Salaries and allowance 150
Postage and Telegram 10
Printing and Stationery 20
Sundry Expenses 10
Rent and taxes 25

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 Audit fees 10
Salary to MD 30
255

Provisions and contigencies

Particulars Amount
Bad debt 40
Provision for tax (65*45/100) 29.25
69.25

24.
Calculation of purchase consideration
Cash (5,00,000/10=50,000)*75 3,750,000
Equity Shares 15,000,000
18,750,000

Ledger Accounts in the Books of A Ltd

Realisation A/C
Particulars Amount Particulars Amount
Land and buildind 265,000 Sundry creditors 50,000
Plant and Machinery 185,000 Workmen savings Bank 45,000
Furniture 65,000 Debentures 150,000
Patent and Trademark 45,000 Z Ltd 18,750,000
Inventories 250,000
Debtors 55,000
Cash 15,000
Equity shareholders 18,115,000
18,995,000 18,995,000

Equity shareholders A/C

Particulars Amount Particulars Amount
Cash 3,750,000 Equity share capital 500,000
Equity shareholders in Z Ltd 15,000,000 Reserves and surplus 65,000
Insurance fund 55,000
Surplus a/c 15,000
Realisation a/c 18,115,000
18,750,000 18,750,000

Z Ltd a/c
Particulars Amount Particulars Amount
Realisation a/c 18,750,000 Equity shares 15,000,000
3,750,000
18,750,000 18,750,000

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 25.
Liquidators final statement of a/c
Reciept Amount Payment Amount
Assets realised 26000 Liquidators expense 2521
Surplus from securities Liquidators remuneration on
held by secured
creditors assets realised.
(30000-25000) 5000 (26000+5000)
(31000*2/100) 620
on unsecured creditors
(22859*1/101 ) 226 846
Preferential creditors 5000
Unsecured creditors 22633
31000 31000

(2×15=30)

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