Page 99 - DCOM205_ACCOUNTING_FOR_COMPANIES_II

Accounting for Companies – II

notes To Profit and Loss Account 1,04,000
To Goodwill Account 50,000
To Preliminary Expenses Account 7,500
(Being writing off the fictitious assets, accumulated losses and
miscellaneous expenses under reconstruction scheme)
Provision for Taxation Account Dr. 1,500
Capital Reserve Account Dr. 75,000
To Capital Reduction Account 76,500
(Being utilization of reserve and provision for taxation for reduction of capital)
Working Note:

capital reduction account
particulars ` particulars `
To Machinery A/c 50,000 By Share Capital A/c 1,35,000
To P & L A/c 1,04,000 By Capital Reserve A/c 75,000
To Goodwill A/c 50,000 By Provision for Taxation (Balancing figures) 1,500
To Preliminary Expenses. 7,500
2,11,500 2,11,500

Balance sheet of galgotia
industries ltd. as on 31 march, 2006
st
liabilities ` assets `
Share Capital: Fixed Assets:
Issued and Paid up: Machinery
60,000 shares of ` 7 each fully paid. 4,20,000 (` 2,54,250 – ` 50,000) 2,04,250
Secured Loans: – Furniture 51,375
Unsecured Loans: – Current Assets:
Current Liabilities and Provisions: Stock 1,02,500
Creditors 77,125 Debtors 75,000
Provision for taxation 18,500 Cash & Bank balance
(` 7,500 + ` 75,000) 82,500
5,15,625 5,15,625

Illustration 9

The ledger-balances of S. K. include – Fixed Assets ` 14,00,000, Investments ` 20,000, Inventories
` 7,80,000, Trade Debtors ` 9,20,000, Preliminary Expenses ` 40,000, Equity Shares Capital
(60% paid up) ` 12,00,000, 10% First Debentures ` 4,00,000, 12% Second Debentures ` 10,00,000,
Bank Overdraft ` 1,00,000, Trade Creditors (including Mr. Ramesh for ` 17,00,000) ` 23,00,000.
Outstanding interest for one year on debentures ` 1,60,000.

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