Page 101 - DCOM205_ACCOUNTING_FOR_COMPANIES_II

Accounting for Companies – II

notes (Being issue of 8,000, 14% Debentures in lieu of
12% debentures and outstanding Interest on
debentures and balance transferred to
Reconstruction Account)
Trade Creditors Account (Mr. Ramesh) Dr. 17,00,000
To Bank Account 6,00,000
To Reconstruction Account 11,00,000
(Being the final settlement of Mr. Ramesh and balance
transferred to Reconstruction Account)
Trade Creditors Account Dr. 6,00,000
To Equity Share Capital A/c 6,00,000
(Being the issue of equity shares of ` 20 each to the
creditors)
Reconstruction Account Dr. 30,60,000
To Fictitious Assets A/c 20,00,000
To Preliminary Expenses A/c 40,000
To Fixed Assets A/c 10,20,000
(Being the utilization of Reconstruction A/c in writing off the fictitious
assets, preliminary expenses and overvaluation of assets)
Working Note:
Fictitious assets are calculated by preparing the following Balance Sheet:

liabilities ` assets `
Equity Share Capital 12,00,000 Fixed Assets 14,00,000
First Debenture 4,00,000 Investment 20,000
Second Debentures 10,00,000 Inventories 7,80,000
Bank Overdraft 1,00,000 Debtors 9,20,000
Creditors 23,00,000 Preliminary Expenses 40,000
O/s Interest on Debentures 1,60,000 Fictitious Assets (Balance) 20,00,000
51,60,000 51,60,000

Balance sheet of
s. k. industries ltd. as on 30 June, 2006
th
liabilities ` assets `
Share Capital: Fixed Assets:
50,000 Equity Shares (` 14,00,000 – ` 10,20,000) 3,80,000
of ` 20 each (out of which
30,000 shares have been issued Investments 20,000
to creditors) 10,00,000
Current Assets:
Secured Loans: Inventories 7,80,000
Debentures 4,00,000 Debtors 9,20,000
14% Debentures 8,00,000 Cash (` 8,00,000 –
` 6,00,000 – ` 1,00,000) 1,00,000
22,00,000 22,00,000

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