Page 354 - DCOM201_ACCOUNTING_FOR_COMPANIES_I

Unit 14: Preparation of Final Accounts

Solution: Notes
Profit & Loss Appropriation Account
(For the year ended on 31st March 2007)
Particulars Particulars
To Income Tax 8,00,000 By Balance b/f 4,25,000
To Dividend Equalization Fund 1,00,000 By net profit as per
To Dividend on Preference shares 2,50,000 Profit & loss a/c 15,75,000
To Dividend on Equity Shares 5,00,000
To Development Rebate Reserve 1,00,000
To Transfer to General reserve 50,000
To Balance c/d 2,00,000
20,00,000 20,00,000

Notes
(a) Dividend on preference shares 10% on 25,00,000 = 2,50,000

(b) Dividend on equity shares 12.5% on 40,00,000 = 5,00,000
Illustration 7:
st
The Balance sheet of P. Ltd. as on 31 March 07 is given below:
Liabilities (in lacs) Assets (in lacs)
Issued and Paid up Capital 20 lacs 200 Freehold Property 200
equity shares of 10 each
Profit and Loss a/c 180 Stock in Trade 120
12% Debentures 120 Sundry Debtors 100
Sundry Creditors 100 Cash and Bank 180
600 600

It was resolved in the Annual General Meeting:
1. to pay a dividend of 10% and corporate dividend tax @ 10%.

2. to issue one bonus share for every four shares held.
3. to give existing shareholders the option to buy one 10 shares @ 14 for every four shares
held prior to the bonus distribution.
4. to repay the debentures at a premium of 4%
All the shareholders who took up the option in (iii) above pass Journal entries and draw up the
Balance sheet after the above transactions have been given effect to (Ignore tax on income), also
prepare Profit and Loss Appropriation Account.

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