Contents
% ' ! 0
Chapter 1
S D R A D N A T S G N I T N U O C C A F O Y T I L I B A C I L P P !
Chapter 2
E T A T 3 L A I C N A N I & F O N O I T A T N E S E R 0 N O I T A R A P E R 0 R O F K R O W ES T MN AE R &M Chapter 3
S D R A D N A T S G N I T N U O C C A F O W E I V R E V /
Chapter 4
S E I N A P M O C F O S T N E M E T A T S L A N I &
Chapter 5
N O I T A R O P R O C N I O T R O I R P S S O L R O T I F O R 0
Chapter 6
E U S S I T H G I R E U S S I S U N O "
6.1
Chapter 7
S E R A H S E C N E R E F E R P F O N O I T P M E D E 2
Chapter 8
S E R U T N E B E D F O N O I T P M E D E 2
8.1
Chapter 9
S T N U O C C A T N E M T S E V N )
9.1
I-5
7.1
5.1
4.1
3.1
1.1
2.1 -
I-13
z
Chapter-wise Marks Distribution
I-7 z
Previous Exams Trend Analysis
I-9 z
Chapter-wise Comparison with Study Material
3 4 . % 4 . / #
I-6
% ' ! 0
S M I A L # E C N A R U S N )
Chapter 10
10.1
E S A H C R U 0 E R I (
Chapter 11
11.1
L A T N E M T R A P E $
Chapter 12
12.1
G N I T N U O C C ! H C N A R "
Chapter 13
13.1
= Y R T N % E L G N I 3 ; S D R O C E 2 E T E L P M O C N ) M O R F G N I T N U O C C !
Chapter 14
SOLVED PAPER : MAY 2022 (SUGGESTED ANSWERS)
14.1 P.1
5 CHAPTER
PROFIT OR LOSS PRIOR TO INCORPORATION
SECTION I: THEORY QUESTIONS: Q.1. What are the purposes for which Pre-incorporation Profit & Preincorporation Losses can be used for? (4 Marks) (November 2016) N O I T S E U Q E H T F O S T R A P E R A E R E H 4
Ans.:
Purposes for which pre-incorporation profits can be used are as follows: Particulars
N O I T I S I U Q C A N O L L I W D O O ' F F O G N I T I R 7
S E S N E P X % Y R A N I M I L E R 0 F F O G N I T I R 7 S T E S S A D E U L A V R E V O N W O D G N I T I R 7 S E R A H S S U N O B F O G N I U S S ) S E R A H S D I A P Y L T R A P P U G N I Y A 0
S. No.
Purposes for which pre-incorporation losses can be used are as follows: Particulars
T l O R 0 N O I T A R O P R O C N ) T S O 0 T S N I A G A F F O G N I T T E 3 N O I T I S I U Q C A N O L L I W D O O ' O T N O I T I D D ! T l O R 0 L A T I P A # F F O G N I T I R 7
S. No.
SECTION II: PROBLEMS - COMPUTATION OF RATIOS: Q.2. Megha Ltd. was incorporated on 1.8.2016 to take over the running business of M/s Happy with assets from 1.4.2016. The accounts of the company were closed on 31.3.2017. The average monthly sales during the first four months of the year (2016-17) was twice the average monthly sales during each of the remaining eight months. You are required to compute time ratio and sales ratio for pre and post incorporation periods. (MTP March 2018) 5.1
. / ) 4 ! 2 / 0 2 / # . ) / 4 2 / ) 2 0 3 3 / , 2 / 4 ) & / 2 0
5.2 Ans.:
S H T N O M
O T D O I R E P N O I T A R O P R O C N I E R 0
Computation of Time ratio:
S H T N O M
O T D O I R E P N O I T A R O P R O C N I T S O 0 S U H 4
R O
O I T A R E M I 4
R E P E L A S E G A R E V A E H T E C I W T S A W N O I T A R D OO PI RR OE CP NN I O I ET R A OR F O E P BR O EC L A N S I T YS L O H P T N E OH MT F EO GH AT R N E VO !M
Computation of Sales ratio:
X E B H T N O M N O I T A R O P R O C N I T S O P H C A E R O F E L A S E H T T E , S U H 4 R O X X
X X X X O I T A R S E L A 3
Q.3. From the following information, calculate the ratio of Sales in each case separately. (a) (i) Date of acquisition - 1st April, 2013; date of incorporation - 1st July, 2013 and date of closing the books of account - 31st March, every year. (ii) The sales for the year ending on 31st March, 2014 were ` 24,00,000 of which ` 4,80,000 goods were sold during the first six months of the accounting period. (b) (i) The accounts were made up to 31st December, 2013. The company was incorporated on 1st May, 2013 to take over a business from the preceding 1st January. (ii) Total sales for the year were ` 12,00,000. It is ascertained that the sales for November and December are one and half times the average of those for the year, whilst those for February and April are only half the average. (c) (i) Hello Ltd. was incorporated on 1st July, 2013 to take the existing business of X Ltd. from 1st April, 2013. Date of closing the books of account - 31st March, 2014. (ii) Monthly sales in April 2013, February 2014 and March 2014 are double the average monthly sales for remaining months of the year. (RTP May 2014)/(RTP November 2017)
S H T N O M T S R l F O S E L A 3
`
E R O F E R E H 4
Ans.: a
E N U * D N A Y A L I R P ! E I S H T N O M F O T S I S N O C D O I R E P N O I T A R O P R O C N I E R 0
`
H T N O M R E P
S H T N O M T S R l F O E L A 3
`
`
S H T N O M E S O H T F O S E L A 3
`
. / ) 4 ! 2 / 0 2 / # . ) / 4 2 / ) 2 0 3 3 / , 2 / 4 ) & / 2 0
`
R O
O I T A 2 S E L A 3
`
8 S E L A S Y L H T N O M F O E G A R E V A E H T T E ,
`
`
E R O F E R E H 4
S U H 4
b
S H T N O M G N I N I A M E R F O S E L A 3
`
5.3
S W O L L O F S A N W O H S E B N A C S H T N O M T N E R E F F I D F O S E L A 3 May June July Aug Sept Oct
Dec
X E I R E B M E C E $ O T Y A X M E O B R F S S E I L A D S O I Y R L E H RT P ON N XO O M I T E A X R G O A P R R E OV O E I CR T A NO A E I F R E H ST R TE E S T L OHA E 043,
S U H 4
c
Nov
X
Mar. April
X
Feb
X
Jan
X X E I XI L R P ! X O T Y XR A U N XA * M O XR F S I D O XI R E P X N O I T A R XO P R O C N I E R 0
S E L A 3
Month
S W O L L O F S A N W O H S E B N A C S H T N O M T N E R E F F I D F O S E L A 3 Sept
Oct Nov Dec Jan Feb March X
Aug.
X
July
X
April May June
X X X E I H XE C I R E A XN U * O O T XT Y L L I U R P * X! M O M R O F R S XF I S D I D O I R XO R E I R O P E X P N O XN T I O A X I R T A O XR P O R P O O E I R C R T O N O A C I F R E S R T E E S L O H A 0 0 4 3
SN E I L A E 3R
Month
Q.4. S. Ltd. was incorporated on 30th November 2020 to take over the running Business of proprietorship firm of Mr. S. The various expenses debited to the profit and loss Account for the year 2020-21 included:
(i) Directors fees (ii) Preliminary expenses written off (iii) Salaries and general expenses (iv) Statutory Audit fees (v) Tax Audit fees u/s 44AB of the Income Tax Act, 1961 (vi) Commission to travelling agents (vii) Sale promotion expenses (viii) Advertisement expenses (ix) Rent expenses (x) Bad debts You are required to determine the basis of apportionment of above expenses between pre incorporation and post incorporation periods. (5 Marks) (July 2021)
. / ) 4 ! 2 / 0 2 / # . ) / 4 2 / ) 2 0 3 3 / , 2 / 4 ) & / 2 0
5.4 Ans.:
D O I R E P N O I T A R O P R O C N I T S O 0 O T E G R A H # D O I R E P N O I T A R O P R O C N I T S O 0 O T E G R A H # O I T A R E M I 4 D O I R E P N O I T A R O P R O C N I T S O 0 O T E G R A H #
v
N I O I T A R R E V O N R U T S S D E L O A I R S E FP O E SV I I S T A C BE P ES E HR T E NH /T E H T F O " ! S U T SC E E! &X A T4 I D UE !M O XC AN 4)
iv
S E E & T I D U ! Y R O T U T A T 3
iii
S E S N E P X E L A R E N E G D N A S E I R A L A 3
ii
Basis of apportionment
F F O N E T T I R W S E S N E P X % Y R A N I M I L E R 0
i
Particulars S E E & S R O T C E R I $
Sl. No.
S T N E G A L E V A R T O T N O I S S I M M O #
N I O I T A R R E V O N R U T S S D E L O A I R S E FP O E SV I I S T A C BE P ES E HR T E NH /T
S E S N E P X E N O I T O M O R 0 S E L A 3
N I O I T A R R E V O N R U T S S D E L O A I R S E FP O E SV I I S T A C BE P ES E HR T E NH /T
S E S N E P X % T N E M E S I T R E V D !
vii
viii
O I T A 2 E M I 4 N I O I T A R R E V O N R U T S S D E L O A I R S E FP O E SV I I S T A C BE P ES E HR T E NH /T
S T B E $ D A "
x
S E S N E P X % T N E 2
ix
N I O I T A R R E V O N R U T S S D E L O A I R S E FP O E SV I I S T A C BE P ES E HR T E NH /T
vi
SECTION III: SIMPLE PROBLEMS: Q.5. Sneha Ltd. was incorporated on 1st July, 2013 to acquire a running business of Atul Sons with effect from 1st April, 2013. During the year 201314, the total sales were ` 24,00,000 of which ` 4,80,000 were for the first six months. The Gross profit of the company ` 3,90,800. The expenses debited to the Profit & Loss Account included: (i) Director’s fees ` 30,000 (ii) Bad debts ` 7,200 (iii) Advertising ` 24,000 (under a contract amounting to ` 2,000 per month) (iv) Salaries and General Expenses ` 1,28,000 (v) Preliminary Expenses written off ` 10,000 (vi) Donation to a political party given by the company ` 10,000. Prepare a statement showing pre-incorporation and post-incorporation profit for the year ended on 31st March, 2014. (8 Marks) (May 2014)/(RTP May 2015)/ (RTP November 2019) (Figures Doubled)
. / ) 4 ! 2 / 0 2 / # . ) / 4 2 / ) 2 0 3 3 / , 2 / 4 ) & / 2 0
5.5
Ans.: Working Notes - For computation of Sales and Time ratio: Working Note I: Computation of Sales ratio: Particulars
O T P U D O I R E P R O F S E L A 3
`
O T M O R F D O I R E P R O F S E L A 3 E R O F E R E H 4 O I T A 2 S E L A 3 Working Note II: H C R A T S O T Y L U * T S E N U * O T L I R P ! T S
Computation of Time ratio:
S H T N O M S H T N O M E R O F E R E H 4 S I O I T A 2 E M I 4 Statement showing Computation of Profits for pre-incorporation and postincorporation periods for the year ended on 31st March, 2014 Particulars
Total Amount
Basis of Apportionment (Ratio)
Pre-incorpoPostration incorporation
T S O 0
T S E E S T E S M M O L O A I 4 I 0 0 3 4
S E L A 3
G N I S I T R E V D !
S T B E D D A "
E E F S R O T C E R I $ S S E ,
T l O R 0 S S O R '
S E S N E P X E L A R E N E G S E I R A L A 3
Y T R A 0 L A C I T I L O 0 O T N O I T A N O $
S E S N E P X E Y R A N I M I L E R 0
T l O R 0 T E .
, 0 O T D E R R E F S N A R 4
L A T I P A # O T D E R R E E V F R S E NS AE R 42
Q.6. R Limited was incorporated on August 1,20X1. It had acquired a running business of R & Co. with effect from April 1,20X1. During the year 20X1-X2, the total sales were ` 36,00,000. The sales per month in the first half year were half of what they were in the later half year.
. / ) 4 ! 2 / 0 2 / # . ) / 4 2 / ) 2 0 3 3 / , 2 / 4 ) & / 2 0
5.6
The net profit of the company ` 2,00,000 was worked out after charging the following expenses: (i) Depreciation ` 1,23,000, (ii) Directors’ fees ` 50,000, (iii) Preliminary expenses ` 12,000, (iv) Office expenses ` 78,000, (v) Selling expenses ` 72,000 and (vi) Interest to vendors upto August 31, 20X1 ` 5,000. You are required to ascertain pre-incorporation and post-incorporation profit for the year ended on 31st March, 20X2. (6 Marks) (November 2019 Examination (Adapted)) Ans.: Working Notes - For computation of Sales and Time ratio: Working Note I: E H T N I E R E W Y E H T T A H W F O F L A H E R E W R A E Y F L A H T S R l E H T N I H T N O M R RA E E PY SL F E A L A H S R EE T HA 4L
Computation of Sales ratio:
X S I H T N O M R E P R A E Y F L A H R E T A L E H T N I S E L A S E H T T A H T E M U S S ! R A E Y F L A H T S R l E H T N I H T N O M R E P E B D L U O H S T I N E H 4 E R O F E R E H 4 L L I W 8 Y L U * T S O T 8 L I R P ! 6 M O R F E I S H T N O M R U O F T S R l E H T R O F SX E L A E 3B 8 H C R A T S O T 8 T S U G U ! T S M O R F E I S H T N O M T H G I E T S A L E HX T R O F E SB E L L L I A 3W S U H 4 O I T A R S E L A 3 Working Note II: Computation of Time ratio: 8 H C R A T S O T 8 T S U G U ! T S 8 Y L U * T S O T 8 L I R P ! T S
Working Notes:
S H T N O M S H T N O M S U H 4 S I O I T A R E M I 4 Statement showing pre and post incorporation profit for the year ended on 31st March, 20X2 Particulars
Total amount `
N O I T A I C E R P E $ S S E ,
N O I T A T U P M O # E E 3 T l O R 0 SW S O A L R E 'B
Basis of PrePostApportionment Incorporation Incorporation (Ratio) ` `
. / ) 4 ! 2 / 0 2 / # . ) / 4 2 / ) 2 0 3 3 / , 2 / 4 ) & / 2 0
Particulars
Total amount `
5.7
T S O 0
S E E & S R O T C E R I $
Basis of PrePostApportionment Incorporation Incorporation (Ratio) ` `
L A U T C !
T S O 0
S E S N E P X % E C l F /
S E S N E P X % Y R A N I M I L E R 0 S E S N E P X % G N I L L E 3 S R O D N E V O T T S E R E T N )
T l O R 0 T E .
, 0 O T D E R R E F S N A R 4
E V R E S E 2 L A T I P A # O T D E R R E F S N A R 4
`
`
`
`
`
S E S N E P X E L L !
T l O R P T E . T l O R P S S O R '
Computation of Gross profit:
Q.7. A firm M/s. Alag, which was carrying on business from 1st July, 2010 gets itself incorporated as a company on 1st November, 2010. The first accounts are drawn upto 31st March 2011. The gross profit for the period is ` 56,000. The general expenses are ` 14,220; Director’s fee ` 12,000 p.a.; Incorporation expenses ` 1,500. Rent upto 31st December was ` 1,200 p.a. after which it is increased to ` 3,000 p.a. Salary of the manager, who upon incorporation of the company was made a director, is ` 6,000 p.a. His remuneration thereafter is included in the above figure of fee to the director. The net sales are ` 8,20,000, the monthly average of which for the first four months is one-half of that of the remaining period. The company earned a uniform profit. Interest and tax may be ignored. Give profit and loss account showing pre and post incorporation profit. (6 Marks) (November 2011) Ans.:
E V l T X E N D N A S H T N O M R U O F T S R l F O S E L A S Y L H T N O M E G A8 R E V A S EH HT T N TO E ,M
Working Notes - For computation of Sales and Time ratio: Working Note I: Computation of Sales ratio: 8
S H T N O M R U O F T S R l F O S E L A S L A T O 4
8
8 S H T N O M E V l T X E N F O S E L A S L A T O 4
x x
S U H 4 O I T A R S E L A 3 8 8
. / ) 4 ! 2 / 0 2 / # . ) / 4 2 / ) 2 0 3 3 / , 2 / 4 ) & / 2 0
5.8 Working Note II:
Computation of Time Ratio: H C R A T S O T R E B M E V O . T S R E B O T C / T S O T Y L U * T S
Working Notes:
S H T N O M S H T N O M S U H 4 S I O I T A R E M I 4 Profit & Loss Account for 9 months ended on 31st March, 2011 Particulars
Basis of Apportionment (Ratio)
`
W O L E B E T O . E E 3
`
L A U T C !
T N E 2 O 4
`
L A U T C !
S E S N E P X E N O I T A M R O & O 4
Total
O I T A R E M I 4
E E F S R O T C E R I $ O 4
PostIncorporation period
O I T A R S E L A 3
S E S N E P X E L A R E N E ' O 4
L A U T C !
Y R L A A S S R E G A N A O 4
T l O R 0 S S O R '
Pre Incorporation period
T l O R 0 T E . O 4
L A T I P A # O T D E R R E E V F R S E NS AE R 42
C ! , 0 O T D E R R E F S N A R 4
M P `
`
`
S H T N O M
`
S H T N O M T N E R N O I T A R O P R O C N I T S O 0
`
`
S H T N O M
T N E R N O I T A R O P R O C N I E R 0 E R O F E R E H 4
`
E I A P
S A W T N E R R E B M E C E $ T S L L I 4
Note - Rent ratio:
Q.8. The promoters of G Ltd. took over on behalf of the company a running business with effect from 1st April, 20X1. The company got incorporated on 1st August, 20X1. The annual accounts were made up to 31st March, 20X2 which revealed that the sales for the whole year totalled ` 1,600 lakhs out of which sales till 31st July, 20X1 were for ` 400 lakhs. Gross profit ratio was 25%. The expenses from 1st April 20X1, till 31st March, 20X2 were as follows: Particulars Salaries Rent, Rates and Insurance Sundry Office Expenses
(` in lakhs) 69 24 66
. / ) 4 ! 2 / 0 2 / # . ) / 4 2 / ) 2 0 3 3 / , 2 / 4 ) & / 2 0
5.9
Particulars
(` in lakhs) 76 72 4 25 9 12 11
Travellers’ Commission Discount Allowed Bad Debts Directors’ Fee Tax Audit Fee Depreciation on Tangible Assets Debenture Interest
Prepare a statement showing the calculation of Profits for the pre-incorporation and post-incorporation periods. (8 Marks) (May 2013) Ans.: Working Notes - For computation of Sales and Time ratio: Working Note I: Computation of Sales ratio:
8 Y L U * T S O T P U S E L A 3 8 H C R A T S O T 8 T S U G U ! T S M O R F D O I R E P E H T R O F S E L A S S U H 4
(` in lakhs)
R A E Y E L O H W E H T R O F S E L A 3
Particulars
S U H 4 O I T A R S E L A 3 Working Note II: 8 H C R A T S O T 8 T S U G U ! T S 8 Y L U * T S O T 8 L I R P ! T S
Computation of Time ratio:
S H T N O M S H T N O M S U H 4 S I O I T A R E M I 4 Statement showing computation of Profits for the pre-incorporation and post-incorporation periods: Particulars
Basis of Apportionment (Ratio)
PreIncorporation (` in lakhs)
PostIncorporation (` in lakhs)
E M I 4 E M I 4
S E S N E P X E E C l F O Y R D N U 3
S E L A 3
N O I S S I M M O C S R E L L E V A R 4
E M I 4
E C N A R U S N ) D N A S E T A R T N E 2
S E L A 3
S E I R A L A 3 S S E ,
F O T l O R 0 S S O R ' `
Total Amount (` in lakhs)
. / ) 4 ! 2 / 0 2 / # . ) / 4 2 / ) 2 0 3 3 / , 2 / 4 ) & / 2 0
5.10 Particulars
PreIncorporation (` in lakhs)
PostIncorporation (` in lakhs)
T S O 0 E M I 4
S A E L B I G N A T N O N O I T A I C E R PT S EE $S
S E L A 3
S E E & T I D U ! X A 4
S E L A 3
E E F S R O T C E R I $ -
Basis of Apportionment (Ratio) S E L A 3
S T B E D D A "
D E W O L L A T N U O C S I $
Total Amount (` in lakhs)
T S O 0
T l O R P T E .
T S E R E T N I E R U T N E B E $
L A T I P A #
O T
D E R R E E V FR S E NS AE R 42
, 0 O T D E R R E F S N A R 4
Q.9. Moon Ltd. was incorporated on 1st August, 2019 to take over the running business of a partnership firm w.e.f. on 1st April, 2019. The summarized Profit & Loss Account for the year ended on 31st March, 2020 is as under:
Amount (` )
S R E A R S SE E U E L T Y XA N E AS E H 4N BSTT EE NR S O $ N E EEF O TI SNO F l M O R N E I I T T S OA T OR El SA RL A S S I T I O I 0A O 2 C S T R T M R EE S3 C 0 E R T R S S EV M N E P OS T R T EOEN RE DE I ',2#$) $!.
Particulars
Moon Ltd. initiated an advertising campaign which resulted in increase of monthly sales by 25% post incorporation. You are required to prepare a statement showing the profit for the year between pre-incorporation and post-incorporation. Also, explain how these profits are to be treated in the accounts? (5 Marks) (November 2020) Ans.: Working Note - I: O T M O R F E I S H T N O M T S R l R O F S E L A S Y L H T N O M E HX T TE E ,B
Computation of Sales ratio:
. / ) 4 ! 2 / 0 2 / # . ) / 4 2 / ) 2 0 3 3 / , 2 / 4 ) & / 2 0
5.11
T S S H T N O M T X E N R O F S E L A S Y L H T N O H C SR HA T N OT MS RO OT F S E L A S T S NU EG HU 4! X X S H T N O M T X X E N R O F X S E L A S N X E H 4 R X A E Y E H T X R O F F O S E L A S L A T O 4 x
E I X O I T A 2 S E L A 3 E C N E ( Working Note - II: H C R A T S O T T S U G U ! T S Y L U * T S O T L I R P ! T S
Computation of Time ratio:
S H T N O M S H T N O M S I O I T A R E M I T S U H 4 Statement showing the calculation of Profits for the pre-incorporation and post- incorporation periods Particulars
Total Amount
Preincorporation `
T S O 0 T S O 0
T S O 0
E M I 4
S E L A S
E M I 4
E M I 4
72,400
E V R E S E 2 L A T I P A # O T D E R R E F S N A R T E B L L I W T l O R P N O I T A R O P R O C N I E R 0
Net profit
Postincorporation `
S E L A S
T N E M E S I T R E V D !
E E F S R O T C E R I $
S E R U T N E B E D N O T S E R E T N )
N O I T A I C E R P E $
S E L A S N O N O I S S I M M O #
S E I R A L A 3
S E X A T D N A S E T A R T N E 2
T l O R 0 S S O R ' Less
`
Basis of Allocation
1,21,000
T N U O C C ! S S O , T l O R 0 O T D E R R E F S N A R T E B L L I W T l O R P N O I T A R O P R O C N I T S O 0 Q.10. Tarun Ltd. was incorporated on 1st July, 2018 to acquire a running business of Vinay Sons with effect from 1st April, 2018. During the year 2018-19, the total sales were ` 12,00,000 of which ` 2,40,000 were for the first six months. The Gross Profit for the year is ` 4,15,000. The expenses debited to the Profit and Loss account included: (i) Director’s fees ` 25,000 (ii) Bad Debts ` 6,500 (iii) Adverting ` 18,000 (under a contract amounting to ` 1,500 per month) (iv) Company Audit Fees ` 15,000
. / ) 4 ! 2 / 0 2 / # . ) / 4 2 / ) 2 0 3 3 / , 2 / 4 ) & / 2 0
5.12
(v) Tax Audit Fees ` 10,000 (1) Prepare a statement showing pre-incorporation and post-incorporation profit for the year ended on 31st March, 2019. (2) Explain how profit are to be treated. (5 Marks)(May 2019) Ans.:
Statement showing the computation of Profits for the pre-incorporation and post- incorporation periods For the year ended on 31st March, 2019 Particulars
Post- incorporation
S E L A 3
T S O 0
E M I 4
T l O R 0 T E .
S E L A 3
E E & T I D U ! X A 4
T S O 0
S E E & T I D U ! Y N A P M O #
G N I S I T R E V D !
E E F S R O T C E R I $
S T B E D D A "
Less
Pre- incorporation
Basis of Allocation
S E L A 3
T l O R 0 S S O R '
Total Amount
R O C N I T S O P D N A E V R E S E R C L A T I! P S AS CO O, T D ET R l R O E R F P S NO AT R D T E ER BR E OF T S SN T A l R OT RE PB NO OT I T T A l R OO PR RP ON CI O NT I A R EO R 0P -
Working Note I:
(i)
Computation of Sales ratio: `
O T P U D O I R E P R O F S E L A 3
Particulars
O T M O R F D O I R E P R O F S E L A 3
O I T A 2 S E L A 3 S U H 4 Working Note II:
Computation of Time ratio:
H C R A T S O T Y L U * T S E N U * O T L I R P ! T S
(ii)
S H T N O M S H T N O M S I O I T A 2 E M I 4 S U H 4
Q.11. The promoters of Shiva Ltd. took over on behalf of the company a running business with effect from 1st April 2017. The company got incorporated on 1st August 2017. The annual accounts were made up to 31st March, 2018 which revealed that the sales for the whole year totalled ` 2400 lakhs out of which sales till 31st July, 2017 were for ` 600 lakhs. Gross profit ratio was 20%.
. / ) 4 ! 2 / 0 2 / # . ) / 4 2 / ) 2 0 3 3 / , 2 / 4 ) & / 2 0
5.13
The expenses from 1st April 2017, till 31st March, 2018 were as follows: Particulars Salaries Rent, Rates and Insurance Sundry Office Expenses Traveller’s Commission Discount allowed Bad Debts Directors’ Fee Tax Audit Fee Depreciation on Tangible Assets Debenture Interest
` in lakhs 75 30 72 20 16 8 30 16 15 14
Prepare a statement showing the calculation of profits for the pre-Incorporation and Post incorporation periods. (10 Marks)(May 2018) Ans.: Working Note I: Computation of Sales ratio:
T S O T T S U G U ! T S M O R F D O I R E P E H T R O F S E L A S E R O F H E C R R E HA 4-
(` in lakh)
Y L U * T S O T P U S E L A 3 R A E Y E L O H W E H T R O F S E L A 3
Particulars
S U H 4 O I T A R E L A 3 Working Note II: H C R A T S O T T S U G U ! T S Y L U * T S O T L I R P ! T S
Computation of Time ratio:
S H T N O M S H T N O M S U H 4 S I O I T A R E M I 4 Statement showing computation of Profits for the pre-incorporation and post-incorporation periods: Particulars
Basis of Apportionment (Ratio)
Preincorporation (` in lakhs)
Postincorporation (` in lakhs)
S E L A 3
F O T l O R 0 S S O R ' `
Total Amount (` in lakhs)
. / ) 4 ! 2 / 0 2 / # . ) / 4 2 / ) 2 0 3 3 / , 2 / 4 ) & / 2 0
5.14 Particulars
Basis of Apportionment (Ratio)
Preincorporation (` in lakhs)
Postincorporation (` in lakhs)
E M I 4 S E L A 3
N O I S S I M M O C S R E L L E V A R 4
S E L A 3
D E W O L L A T N U O C S I $
S E L A 3
S T B E D D A "
T S O 0
E E F S R O T C E R I $
E M I 4
S E L A 3
S E E & T I D U ! X A 4
E M I 4
S E S N E P X E E C l F O Y R D N U 3
E M I 4
E C N A R U S N ) D N A S E T A R T N E 2
T S O 0
E L B I G N T A S T E R N E O T N N I O E I T R A U I T C N ET S E R T PE B l ES S E O $A $ R P T E .
S E I R A L A 3 S S E ,
Total Amount (` in lakhs)
E V R E S E 2 L A T I P A # O T D E R R E F S N A R 4
, 0 O T D E R R E F S N A R 4
Q.12. The Business carried on by Kamal under the name “K” was taken over as a running business with effect from 1st April, 2013 by Sanjana Ltd., which was incorporated on 1st July, 2013. The same set of books was continued since there was no change in the type of business and the following particulars of profits for the year ended on 31st March, 2014 were available. Particulars Sales: Company period Prior period Selling Expenses Preliminary Expenses written off Salaries Directors’ Fees Interest on Capital (Upto 30.6.2013) Depreciation Rent Purchases Carriage Inwards Net Profit
` 40,000 10,000 3,500 1,200 3,600 1,200 700 2,800 4,800 25,000 1,019
` 50,000
43,819 6,181
The purchase price (including carriage inwards) for the post-incorporation period had increased by 10 percent as compared to pre-incorporation period. No stocks were carried either at the beginning or at the end.
. / ) 4 ! 2 / 0 2 / # . ) / 4 2 / ) 2 0 3 3 / , 2 / 4 ) & / 2 0
O I T A 2 S E L A 3
O I T A 2 E M I 4
Particulars
S E E & R O T C E R I $
N O I T A I C E R P E $
T N E 2
S E I R A L A 3
" ! T l O R 0 T E . S S O , L A T I P A #
S E S N E P X % Y R A N I M I L E R 0
" S E S N E P X % F O L A T O 4
S E S N E P X % G N I L L E 3 S S E ,
L A T I P A C N O T S E R E T N )
! T l O R 0 S S O R '
E T O W .O L E B
S D R A W N ) E G A I R R A #
E T O W .O L E B
S E S A H C R U 0 S S E ,
S I O I T A 2
D O I R E P Y N A P M O C E H T N I R E H G I H S A W E C I R P E S A H C R U P T U "
S I O I T A 2
?
Post Period Pre Period Basis of Apportionment (Ratio) N E V I ' S E L A 3
Note: Purchase Ratio: ?
Computation of Time ratio: Working Note II:
5.15 You are required to draw up a statement showing the amount of pre and post incorporation period profits stating the basis of allocation of expenses.
(RTP November 2014)/(RTP May 2018) Ans.:
Working Note I:
Computation of Sales ratio:
Statement showing computation of profits/losses for pre-incorporation and Post-incorporation period:
. / ) 4 ! 2 / 0 2 / # . ) / 4 2 / ) 2 0 3 3 / , 2 / 4 ) & / 2 0
5.16
Q.13. A Ltd. was incorporated on 1st May, 2012 to take over the running business of M/s Om from 1st January, 2012. The accounts of A Ltd. were made up to 31st December, 2012 and Draft Trading and Profit and Loss Account were as follows: Particulars To Opening Stock To Purchases To Gross Profit c/d To Rent, Rates and Insurance To Interest To Director’s Fees To Salaries To Office Expenses To Travelers’ Commission To Discounts To Advertisement To Bad Debts To Depreciation To Debenture Interest To Net Profit
` 1,40,000 9,10,000 3,00,000 13,50,000 18,000
Particulars By Sales By Closing Stock
` 12,00,000 1,50,000
By Gross Profit b/d
13,50,000 3,00,000
6,000 20,000 51,000 42,000 12,000 5,000 10,000 3,000 15,000 4,500 1,13,500 3,00,000
3,00,000
It is ascertained that the sales of November and December are one and half times the average of those for the year while sales for February and April are only half the average. You are required to show the apportionment of year’s profit between the pre- and post-incorporation periods. (RTP November 2013) Ans.: Working Note I: Computation of Sales ratio: Weight
Y R A U R B E &
Y L U *
H C R A -
T S U G U !
L I R P !
R E B M E T P E 3 R E B O T C / R E B M E V O . R E B M E C E $
Post-incorporation period Y E A N U - *
Weight
Y R A U N A *
Pre-incorporation period
. / ) 4 ! 2 / 0 2 / # . ) / 4 2 / ) 2 0 3 3 / , 2 / 4 ) & / 2 0
S U H 4
R O O I T A R S E L A 3
O T O T S U H 4
S H T N O M S H T N O M O I T A R E M I 4
S E L A 3
N O I T A I C E R P E $
E M I 4
T S E R E T N ) E R U T N E B E $
T S O 0
S E L A 3
T N U O C S I $
N O I S S I M M O # S R E L L E V A R 4
S E S N E P X % E C l F /
S E I R A L A 3
S S E T E E S E E S M M L L L A O I A A I 3 0 4 4 3 3
S T B E $ D A "
T N E M E S I T R E V D !
E M I 4
S E E & S R O T C E R I $
E M I 4
T S E R E T N )
! T l O R 0 S S O R '
" S E S N E P X % S S E ,
D N A S E E T C A N 2A R TU N S EN 2)
PrePostincorporation incorporation Period Period Total Basis of Apportionment (Ratio) Particulars
5.17
Working Note II:
Computation of Time ratio:
Statement showing Apportionment of Profit between Pre and Postincorporation Periods:
" ! T l O R 0 T E .
L A T I P A # O T D E R R E E V F R S E NS AE R 42
, 0 O T D E R R E F S N A R 4
Q.14. Peek Ltd. was incorporated on 01.07.2020 to take over the existing business of Rich & Co. with effect from 01.04.2020. Date of closing books of account is 31.03.2021.
Total sales were ` 75,00,000, Rate of Gross profit is 10% on sales. The expenses charged to profit and loss statement include:
. / ) 4 ! 2 / 0 2 / # . ) / 4 2 / ) 2 0 3 3 / , 2 / 4 ) & / 2 0
5.18
Salesmen’s Commission
` 30,000
Discount Allowed
` 15,000
Carriage outward
` 45,000
Free Sample
` 60,000
After sales service charge
` 90,000
Directors’ fees
` 1,50,000
Audit fees (Statutory audit of company)
` 70,000
Tax audit fees to Chartered Accountant
` 15,000
Salary to general staff
` 16,000
Formation Expenses
` 30,000
Rent (Office Building)
` 27,000
General Expenses
` 48,000
Donation to political party
` 51,000
General travelling Expenses
` 60,000
The sales per month in the first half year were half of what they were in the later half year. Rent of office building was paid @ ` 2,000 p.m. upto 30th September, 2020 and thereafter it was increase by ` 500 p.m. Prepare a statement showing pre incorporation & post incorporation profit for the year ended 31.03.2021 and also compute the amount to be transferred to capital reserve account. (12 Marks) (December 2021) Ans.:
S H T N O M S I D O I R E P N O I T A R O P R O C N I T S O 0
i.e.
S H T N O M
E N U * H T O T L I R P ! T S D O I R E P N O I T A R O P R O C N I E R 0
Computation of Time Ratio:
S I O I T A R E M I 4 S U H 4 X E B X O T T O M O R F M O SR HF T N O M S H T TN S R O lM R O F T SX E E L N A S R O YF L H S T E N L A OS MY L EH HT T N TO E ,-
Computation of Sales ratio: i.e.
X D O I R E P N O I T A R O P R O C N I E R P E H T N I S E L A 3
i.e.
O I T A 2 S E L A 3 X X X D O I R E P N O I T A R O P R O C N I T S O P R O F S E L A S L A T O 4
. / ) 4 ! 2 / 0 2 / # . ) / 4 2 / ) 2 0 3 3 / , 2 / 4 ) & / 2 0
E M I 4
T T S E S E S M O L O A I 0 0 3 4
S E S N E P X E L A R E N E '
) E T O . 7
S E I R A L A 3
G N I D L I U B E C l F O T N E 2 E E F T I D U A X A 4
S E S N E P X % N O I T A M R O & E E F T I D U ! Y N A P M O #
T S O 0 E B O T D E M U S S A Y T R A P L A CY I T N I L A O PP OM T O NC OY I T B A D NI OA $P
E T O . S E L A 3
S E S N E P X E G N I L L E V A R 4 L A R E N E '
G I & L A " S S O L T l O R P T E .
T l O R P L A T I P A C S A D E T A E R T S I T l O R P N O I S T I A E R V OR PE RS OE CR NL I A EI T R P 0A C O T R E F S N A R T T N U O M A E C N E H
E R P
D O I R E P N O I T A R O P R O C N I E R P R O F T N E 2
D O I R E P N O I T A R O P R O C N I T S O P R O F T N E 2
`
T S O 0
N O I T A R O P R O C N I T S O P E E F S R O T C E R I $
`
Particulars
S E L A 3
S E G R A H C E C I V R E S E L A S R E T F !
S E L A 3
S E L P M A S E E R &
S E L A 3
S D R A W T U O E G A I R R A #
S E L A 3
` S E L A 3
` S E L A 3
N O I S S I M M O C N E M S E L A 3
D E W O L L A T N U O C S I $
R E B M E T P E 3 T S U G U ! Y L U *
T S O P
H C R A -
O T R E B O T C /
O I T A R R E V O N R U T F O S I S A B E H T N O D ES I DS I A V I B D NE EM EI BT EN VO AD HE D SI E V S I ND E PE XB EY GA NM I L T L I E VY AE L R V 4I T LA A R N E R NT E EL '!
Note 1:
`
Post-incorporation period T l O R P S S O R '
Less:
`
Pre-incorporation period Basis of allocation Particulars
5.19 Statement showing calculation of profits for pre and post incorporation periods for the year ended 31.3.2021
Transfer to capital reserve
`
Working Note I:
Computation of Rent allocation:
Accounting (Accounts) | CRACKER AUTHOR PUBLISHER DATE OF PUBLICATION EDITION ISBN NO NO. OF PAGES BINDING TYPE
: : : : : : :
Parveen Sharma, Kapileshwar Bhalla TAXMANN June 2022 4th Edition 9789356222557 822 PAPERBACK
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Description This book is prepared exclusively for the Intermediate Level of Chartered Accountancy Examination requirement. It covers the questions & detailed answers strictly as per the new syllabus of ICAI. The Present Publication is the 4th Edition & updated till 30th April 2022 for CA-Inter | New Syllabus | Nov. 2022/May 2023 exams. This book authored by CA Parveen Sharma & CA Kapileshwar Bhalla, with the following noteworthy features:
· Strictly as per Revised Syllabus of ICAI · Coverage of this book includes: Past Exam Questions
CA Intermediate November 2020 – Accounting
CA Intermediate January 2021 – Accounting
CA Intermediate July 2021 – Accounting
CA Intermediate May 2022 – Accounting
Questions from RTPs and MTPs of ICAI
· [Arrangement of Question] Questions in each chapter are arranged 'sub-topic' wise
· [Marks Distribution] Chapter-wise marks distribution · [Trend Analysis] for the Previous Exams from (Nov 2020 Onwards | New Syllabus)
· [Comparison with Study Material] Chapter-wise comparison with ICAI Study Material
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