1. Welcome To The KNOWLEDGE SHARING MEET
CA. (Dr.) G.S. Grewal

2. Discussion On Accountancy For 2016 Examinationby
CA. (Dr.) G. S. Grewal
CA. (Dr.) G.S. Grewal

3. Topics Deleted and Included in Syllabus for 2016 Examination
CA. (Dr.) G.S. Grewal

4. Multiple Choice Questions (MCQs) Multi-Disciplinary Questions
Deleted
Multiple Choice Questions (MCQs)
Multi-Disciplinary Questions
Issue of Shares at Discount
CA. (Dr.) G.S. Grewal

5. Class XI - Included in Syllabus
Under the Heading ‘Origin of Transactions’
(a) Supporting Vouchers;
(b) Debit Note; and (c) Credit Note.
Any appropriate Software may be used.
Scope of Syllabus
In Chapter on Not – For – Profit Organisations
Adjustment is a question should not exceed 3 or 4 in number and restricted to subscriptions, consumption of consumables and sale of assets / old material.
Entrance / admission fees and general donations are to be treated as revenue receipts.
Trading Account of incidental activities is not to be prepared.
CA. (Dr.) G.S. Grewal

6. Clarifications in Syllabus for Class XI
Mark Questions will have Very Short Answer Questions
All 8 Marks Questions will have internal choice
Evaluation Skills Questions Only.
4. Learning Outcomes have been added which are indicators only and do not restrict the scope of questions to be asked.
Question Paper to be strictly based on Question Paper Design design.
CA. (Dr.) G.S. Grewal

7. Class XII – Included in Syllabus
Accounting of Private Placement of Shares
Accounting of ESOP
Definitions of terms used in Chapters on Company Accounts either Introduced or Changed
Entries for Debenture Redemption Reserve (DRR) have changed.
Clarification
Mark Questions will have Very Short Answer Questions
All 8 Marks Questions will have internal choice
Evaluation Skills Questions Only.
Learning Outcomes have been added which are indicators only and do not restrict the scope of questions to be asked.
Question Paper to be strictly based on Question Paper Design.
CA. (Dr.) G.S. Grewal

8. Important Issues in Syllabus
Partnership Accounts
1. Interest on Partner’s loan is a charge against profits.
3. Preparation of Retiring Partner Loan Account is in Syllabus.
4. Preparation of Deceased Partner Capital Account and Executor’s Account is in Syllabus.
5. Dissolution does not include Piecemeal Distribution, Sale to a Company and Insolvency.
CA. (Dr.) G.S. Grewal

9. Important Issues in Syllabus
Partnership Accounts
6. The realised value of each asset must be given at the time of dissolution.
7. In case Realisation Expenses are borne by a partner, it should be clearly indicated regarding the payment thereof.
CA. (Dr.) G.S. Grewal

10. Company Accounts Provisions of the Companies Act, 2013 will apply.
Provisions relating to DRR given in the Companies Act, 2013 changed and therefore, journal entries change.
In Debentures, Ex – Interest and Cum – Interest not in Syllabus.
In Statement of Profit and Loss, Exceptional items and Extraordinary items and Discontinued Operations not in Syllabus.  
Schedule VI of the Companies Act, 1956 is renumbered as Schedule III in the Companies Act, 2013.
CA. (Dr.) G.S. Grewal

11. Important Issues in Syllabus
Comparative and Common – size Statements
Unchanged
Accounting Ratios
Cash Flow Statement
1. Only Indirect Method in Syllabus.
2. Bank Overdraft and Cash Credit are to be treated as Short term Borrowings.
3. Unless it is specified, Current Investments are to be taken as Marketable Securities.
CA. (Dr.) G.S. Grewal

12. Circular No. Acad. 43/2013
CA. (Dr.) G.S. Grewal

13. Circular No. Acad. 43/ 2013 Items that will not to be Evaluated
Attention is drawn to the following important note in the Circular:
“As you proceed reading further, you may find that there are certain items against which in bracket the clause ‘Not to be Evaluated’ is written.
It means that for these items, accounting treatment will not be asked in the Board Examination. But students must know their place in the Financial Statements as per Schedule-VI, (Read Schedule III) as line items.”
CA. (Dr.) G.S. Grewal

14. Items that will not to be Evaluated
Money Received against Share Warrants;
2. Reserves and Surplus: (Revaluation Reserve, Share Options Outstanding and Other Reserves are not to be evaluated. However, General Reserve can be evaluated);
3. Share Application Money Pending Allotment;
4. Deferred Tax Liabilities (Net);
5. Other Long-term Liabilities;
CA. (Dr.) G.S. Grewal

15. Items that will not to be Evaluated
Intangible Assets:
(Masthead and Publishing Titles, Copyrights,
Patents and Other Intellectual Property Rights, Services and Operating Rights and Licenses and Franchises;
Capital Work-in-Progress;
Intangible Assets Under Development;
9. Deferred Tax Assets (Net);
CA. (Dr.) G.S. Grewal

16. Items that will not to be Evaluated
10. Other Non-current Assets.
11. Cash and Cash Equivalents: (Earmarked Balance with Banks, Balances with Banks held as Margin Money or Security against borrowings, guarantees, other commitments and Bank Deposits with more than 12 months maturity are not to be evaluated); and
12. Treatment of Unamortised Expenses.
Also note: Accounting Treatment of Other Current Assets is restricted to Prepaid Expenses, Accrued Incomes and Advance Tax only.
CA. (Dr.) G.S. Grewal

17. Syllabus Requirement
The realised value of each asset must be given at the time of dissolution.
What Does it Mean?
Realisation Account will be credited by the amount realised from sale of an asset.
If the question does not specify the amount realised on sale of an asset, it is to be assumed that the asset did not realise any amount.
On the other hand, if no information is given for payment of liability, it is to be paid.
CA. (Dr.) G.S. Grewal

18. Syllabus Requirement
In case Realisation Expenses are borne by a partner, it should be clearly indicated regarding the payment thereof.
What Does it Mean?
It means, in the question not only it should be clear who is to bear Realisation Expenses but also who paid these expenses i.e., firm or the partner.
CA. (Dr.) G.S. Grewal

19. Examples Entries of Dissolution Expenses in the Books of the firm
CA. (Dr.) G.S. Grewal

20. Pass the necessary journal entries in the books of the firm? Entries:
Partner Abhi is to carry out dissolution for which the firm agrees to pay him Rs. 10,000 plus expenses. He incurs Rs. 5,000 towards dissolution expenses which are paid by the firm.
Pass the necessary journal entries in the books of the firm?
Entries:
Particulars
Debit (Rs.)
Credit (Rs.)
Realisation Exp. A/c Dr.
To Abhi’s Capital A/c
(Being the remuneration payable to Abhi)
10,000
Realisation Exp. A/c Dr.
To Cash / Bank A/c
(Being the realisation expenses paid)
5,000
CA. (Dr.) G.S. Grewal

21. Partner Alok carries out dissolution of the firm for which he is paid Rs. 10,000, including expenses. He incurs Rs. 3,000 towards dissolution expenses which are paid by the firm. Pass the necessary journal entries in the books of the firm?
Entries
Particulars
Debit (Rs.)
Credit (Rs.)
Realisation Expenses A/c Dr.
To Alok’s Capital A/c
(Being the remuneration payable credited to capital account)
10,000
Alok’s Capital A/c Dr.
To Bank A/c
(Being the realisation expenses paid by the firm debited to capital account)
3,000
CA. (Dr.) G.S. Grewal

22. Pass the necessary journal entries in the books of the firm? Entries
Partner Alka is to carry out dissolution for which the firm will pay Rs. 25,000 plus expenses. She incurs Rs. 5,000 towards dissolution expenses which are paid by her.
Pass the necessary journal entries in the books of the firm?
Entries
Particulars
Debit (Rs.)
Credit (Rs.)
Realisation Expenses A/c Dr.
To Alka’s Capital A/c
(Being the remuneration payable credited to capital account)
25,000
Realisation Expenses A/c Dr.
(Being the realisation expenses payable by the partner credited to her capital account)
5,000
CA. (Dr.) G.S. Grewal

23. Pass the necessary journal entries in the books of the firm? Entries
Partner Bhaskar is entrusted to carry out dissolution of the firm for which he is paid Rs. 20,000, including expenses. He incurs Rs. 6,000 towards dissolution expenses which are paid by him.
Pass the necessary journal entries in the books of the firm?
Entries
Particulars
Debit (Rs.)
Credit (Rs.)
Realisation Expenses A/c Dr.
To Bhaskar’s Capital A/c (Being the remuneration payable credited to capital account)
20,000
No entry for expenses since remuneration includes expenses which are borne by the partner.
CA. (Dr.) G.S. Grewal

24. Pass the necessary journal entries in the books of the firm? Entries
Partner Anita is to carry out dissolution of the firm for a remuneration of Rs. 25,000. She incurs Rs. 10,000 towards dissolution expenses which are paid by the firm.
Pass the necessary journal entries in the books of the firm?
Entries
Particulars
Debit (Rs.)
Credit (Rs.)
Realisation Expenses A/c Dr.
To Anita’s Capital A/c
(Being the remuneration payable credited to capital account)
25,000
Realisation Expenses A/c Dr.
To Bank A/c
(Being the realisation expenses paid by the firm)
10,000
CA. (Dr.) G.S. Grewal

25. Pass the necessary journal entries in the books of the firm? Entries
Partner Bhanu is entrusted to carry out dissolution of the firm for which he is paid Rs. 30,000. Dissolution expenses of Rs. 6,000 were paid by him.
Pass the necessary journal entries in the books of the firm?
Entries
Particulars
Debit (Rs.)
Credit (Rs.)
Realisation Expenses A/c Dr.
To Bhanu’s Capital A/c
(Being the remuneration payable credited to capital account)
30,000
Realisation Expenses A/c Dr.
(Being the realisation expenses paid by Bhanu on behalf of the firm credited to his Capital Account)
10,000
CA. (Dr.) G.S. Grewal

26. Partner Simran is entrusted the work of dissolving the firm and was to get 5% of the value of assets realised as remuneration, including expenses. Assets realised amounted to Rs. 10,00,000. She incurs Rs. 10,000 towards dissolution expenses which are paid by her. Pass the necessary entries in the books of the firm?
Entries
Particulars
Debit (Rs.)
Credit (Rs.)
Realisation Expenses A/c Dr.
To Simran’s Capital A/c
(Being the remuneration payable 5% of
Rs. 10,00,000 credited to capital account)
50,000
No entry for expenses since remuneration includes expenses which are borne by the partner.
CA. (Dr.) G.S. Grewal

27. Partner Tarun is entrusted the work of dissolving the firm and was to get 5% of the value of assets realised as remuneration, excluding expenses. Assets realised amounted to Rs. 10,00,000. He incurs Rs. 10,000 towards dissolution expenses which are paid by him. Pass the necessary entries in the books of the firm?
Entries
Particulars
Debit (Rs.)
Credit (Rs.)
Realisation Expenses A/c Dr.
To Tarun’s Capital A/c
(Being the remuneration payable 5% of
Rs. 10,00,000 credited to capital account)
50,000
Realisation Expenses A/c Dr.
(Being the realisation expenses payable by the firm but paid by the partner credited to his capital account)
10,000
CA. (Dr.) G.S. Grewal

28. Partap, a partner of the firm is to handle dissolution of the firm for which he is to be paid 10% of the assets realised. Assets realised amounted to Rs. 5,00,000, excluding expenses. Dissolution expenses came to Rs. 10,000 which were paid by the firm.
Pass the necessary entries in the books of the firm?
Entries
Particulars
Debit (Rs.)
Credit (Rs.)
Realisation Expenses A/c Dr.
To Partap’s Capital A/c
(Being the remuneration payable 10% of
Rs. 5,00,000 credited to capital account)
50,000
Partap’s Capital A/c Dr.
To Bank A/c
(Being the realisation expenses payable
by the firm)
10,000
CA. (Dr.) G.S. Grewal

29. Puneet, a partner of the firm is to handle dissolution of the firm for which he is to be paid 10% of the assets realised. Assets realised amounted to Rs. 5,00,000, including expenses. Dissolution expenses came to Rs. 10,000 which were paid by Amrit, another partner.
Pass the necessary entries in the books of the firm?
Entries
Particulars
Debit (Rs.)
Credit (Rs.)
Realisation Expenses A/c Dr.
To Puneet’s Capital A/c
(Being the remuneration payable 10% of
Rs. 5,00,000 credited to capital account)
50,000
Puneet’s Capital A/c Dr.
To Amrit’s Capital A/c
(Being the realisation expenses payable
by the firm and paid by partner credited
to his capital account)
10,000
CA. (Dr.) G.S. Grewal

30. Difference Between Companies Act, 2013 and the Companies Act, 1956
The Companies Act, 2013
The Companies Act, 1956
Financial Year
Companies to have their financial year ending on 31st March every year.
Companies could have their financial year as decided by them.
Format of Financial Statements
It is prescribed in Schedule III of the Companies Act, 2013.
It was prescribed in Schedule VI of the Companies Act, 1956.
Definitions of Various Terms in the Companies Act, 2013
Many terms in the Act have been defined.
Many terms in the Act were not defined.
CA. (Dr.) G.S. Grewal

31. Difference Between Companies Act, 2013 and the Companies Act, 1956
Maximum Partners in a firm
Section 464
The section empowers the Government to prescribe maximum number of partners that a firm can has. But, the number of partners that can be prescribed cannot exceed 100.
The Government has made Rule 10 of Companies (Miscellaneous) Rules, and prescribed maximum number of partners of a firm to be 50.
Thus, a firm with more than 50 partners, is not legal.
Section 11
Maximum number of partners of a firm could be 10 in banking business and 20 in any other business.
CA. (Dr.) G.S. Grewal

32. Difference Between Companies Act, 2013 and the Companies Act, 1956
Maximum Number of shareholders in Private Company
Section 2(68)
Maximum number of shareholders in a private company can be 200, excluding its past and present employees.
Shares held in joint names to be considered as one shareholder.
Section3(1)(ii)
Maximum number of shareholders in a private company was 50, excluding its past and present employees.
One Person Company
Section 2(62)
One Person Company is a company which has only one member.
One Person Company did not exist under the Companies Act, 1956.
CA. (Dr.) G.S. Grewal

33. Difference Between Companies Act, 2013 and the Companies Act, 1956
Issue of Shares at Discount
Section 53 of the Act prohibits issue of shares at a discount.
However, Section 54 of the Companies Act, 2013 is an exception. it permits issue of shares at a discount to employees as ESOPs.
Section 79 of the Companies Act, 1956 permitted issue of shares at a discount.
Receipt of Money Against Securities
Amount can be received by a company by way of cheque or other instrument.
Could be received in cash also.
CA. (Dr.) G.S. Grewal

34. Difference Between Companies Act, 2013 and the Companies Act, 1956
Articles of Association
Table F applies where Companies Limited by shares does not adopt their own Articles of Association.
Table A applied where Companies did not adopt their own Articles of Association.
Interest on Calls – in – arrears
In the absence of a clause otherwise, interest on
Calls – in – arrears is 10% p.a.
In the absence of a clause otherwise, interest on Calls – in – arrears was 5% p.a.
Interest on Calls – in – advance
Calls – in – advance is 12% p.a.
In the absence of a clause otherwise, interest payable on Calls – in – advance was 6% p.a.
CA. (Dr.) G.S. Grewal

35. Difference Between Companies Act, 2013 and the Companies Act, 1956
Minimum Subscription
Section 39:
A company shall not allot securities (shares, debentures or any securities by whatever name called) unless the amount stated in the prospectus as minimum subscription has been subscribed and the sum payable on application have been paid or received by the company by cheque or other instrument.
Section 69:
Requirement of minimum subscription was with respect to shares only and that too in respect of initial issue.
CA. (Dr.) G.S. Grewal

36. Employees Stock Option Plan (ESOP)
CA. (Dr.) G.S. Grewal

37. Employees Stock Option Plan (ESOP)
What is Employees Stock Option Plan (ESOP)?
Employees Stock Option Plan is a plan drawn to issue securities (Shares etc.) to employees (including whole time directors) at a discount i.e., at a price which is lower than its market value.
The Companies Act, 2013 (Section 53) prohibits issue of shares at a discount. But, through Section 54, it permits issue of ESOPs at a discount.
CA. (Dr.) G.S. Grewal

38. Important Terms in ESOP
Meaning
Grant Date
Date on which the Enterprise and Employees agree to the Plan.
Vesting Period
Period between the grant date and the date on which all the specified conditions of Employees Stock Option Plan (ESOP) are satisfied.
Vesting Date
Date on which an employee satisfies the specified conditions and thus, becomes entitled to the options.
Exercise
It means making an application by an employee for issue of shares against the options vested in him.
Exercise Period
Period after vesting within which an employee should exercise the right to apply under the Plan.
Exercise Price
Price payable by the employee for exercising the right for option granted.
CA. (Dr.) G.S. Grewal

39. Employees Stock Option Plan (ESOP)
How is it accounted in the books of accounts?
The difference between Market Value and Issue Price is the cost to the company, since, the Options are given to employees at a price lower than market price, it is an expense. The entry passed is:
Employees Compensation Expense A/c Dr.
To Shares Options Outstanding A/c
Employees Compensation Expense A/c is shown under ‘Employees Benefit Expenses’ in the Statement of Profit and Loss.
Shares Options Outstanding Account is shown as Reserves and Surplus under Shareholders’ Funds.
CA. (Dr.) G.S. Grewal

40. When the Vesting Period has Elapsed
When all Option is Exercised by the Employees
Bank A/c Dr.
Shares Options Outstanding A/c Dr.
To Share Capital A/c
To Securities Premium Reserve A/c
(Being the shares allotted against ESOP)
(Amount Received)
(Amount Credited to Shares Options Outstanding A/c)
(Nominal Value Per Share X No. of Shares)
CA. (Dr.) G.S. Grewal

41. When the Vesting Period has Elapsed
When All Options are not Exercised
Bank A/c Dr.
Shares Options Outstanding A/c Dr.
To Share Capital A/c
To Securities Premium Reserve A/c
To General Reserve A/c
(Being the shares allotted against ESOP)
(Amount Received)
(Amount Credited to Shares Options Outstanding A/c)
(Nominal Value Per Share X No. of Shares)
(Amount Credited to Shares Options Outstanding A/c relating to Options Exercised)
(Amount Credited to Shares Options Outstanding A/c relating to Options not Exercised)
CA. (Dr.) G.S. Grewal

42. Illustration
Bloom Ltd. grants options to subscribe 500 shares of Rs. 10 each at a price of Rs. 30 per share to each of its employees numbering 100. Vesting period being 3 years. Fair (Market) price of the share as on the grant date was Rs. 45. Employees numbering 75 exercised the option by the exercise date.
Pass the necessary journal entries.
CA. (Dr.) G.S. Grewal

43. Solution Date Particulars Debit (Rs.) Credit (Rs.) Year 1
Employees Compensation Exp. A/c Dr.
To Shares Options Outstanding A/c
(Being the 1/3rd amount of difference between Fair (Market) Value and Issue Price recognised as expense)
2,50,000
Year 2
Year 3
Employees Compensation Exp. A/c Dr.
CA. (Dr.) G.S. Grewal

44. Solution Date Particulars Debit (Rs.) Credit (Rs.) Year 4
Bank A/c (75 X 500 X Rs. 30) Dr.
Shares Options Outstanding A/c Dr.
To Share Capital A/c
(75 X 500 x Rs. 10)
To Securities Premium Res. A/c
(75 x 500 x Rs x Rs. 15)
To General Reserve A/c
(25 x 500 x Rs. 15)
(Being 500 shares each allotted to 75 employees exercising options, related amount transferred from Shares Options Outstanding Account to Securities Premium Account . Balance amount i.e., amount relating to 25 employees who did not exercise option transferred to General Reserve)
11,25,000
7,50,000
3,75,000
13,12,500
1,87,500
CA. (Dr.) G.S. Grewal

45. Debenture Redemption Reserve
CA. (Dr.) G.S. Grewal

46. Debenture Redemption Reserve (DRR)
Section 71 of the Companies Act, 2013; together with
Rule 18(7) of the Companies (Share Capital and Debentures) Rules, 2014
deals with Debenture Redemption Reserve.
Section 71 of the Companies Act, 2013 requires companies to transfer amount at least equal to 25% of the nominal value of debentures to DRR before the redemption of debentures begins.
DRR is required to be created only for non – convertible part of the Debentures.
CA. (Dr.) G.S. Grewal

47. Debenture Redemption Reserve (DRR)
Requirements of DRR
Section 71 of the Companies Act, 2013 requires companies to transfer amount at least equal to 25% of the nominal value of total redeemable debentures.
Rule 18(7) of the Companies (Share Capital and Debentures) Rules, 2014 requires companies to invest amount at least equal to15% of the value of debentures to be redeemed by 31st March of the next year in specified securities.
Investment in specified securities to be made by 30th April of the year.
Investment can be utilised only for redemption of debentures.
CA. (Dr.) G.S. Grewal

48. Debenture Redemption Reserve (DRR)
Companies not required to create DRR
All India Financial Institutions (AIFIs) regulated by Reserve Bank of India.
Banking Companies.
Other Financial Institutions (LIC, IDFCI etc.)
All other Companies are required to create DRR.
CA. (Dr.) G.S. Grewal

49. Journal Entries for DRR
1. On Transfer of Amount to DRR
Amount
Surplus i.e., Balance in Statement
of Profit and Loss A/c Dr.
To Debenture Redemption Reserve A/c
(Being the amount transferred to DRR)
At least 25% of the total Redeemable Debentures
2. On Investment Made in terms of Rule 18(7)
Debenture Redemption Investment A/c Dr.
To Bank A/c
(Being the amount invested in Specified Securities)
Note: This amount must be invested by 30th April of the current year for the Debentures to be redeemed by 31st March of next year.
At least equal to 15% of the Debentures to be redeemed by 31st March of next year.
CA. (Dr.) G.S. Grewal

50. Journal Entries for DRR
3. When Debentures are redeemed
Bank A/c Dr.
To Debenture Redemption Investment A/c
(Being the investment realised at the time of redemption of debentures)
(Amt. Received)
(Amount of Inv.)
4. If Investment earns Income and Tax is Deducted at Source (TDS)
TDS Receivable A/c Dr.
To Interest A/c
(Being the investment realised)
(Amount of TDS)
(Interest Earned)
5. When all the Debentures have been redeemed
Debenture Redemption Reserve A/c Dr.
To General Reserve A/c
(Being the balance in DRR transferred to General Reserve on redemption of all debentures)
CA. (Dr.) G.S. Grewal

51. Question on DRR
Appollo Ltd. issued 21,000, 8% Debentures of Rs. 100 each on 31st March, 2008 redeemable at a premium of 8% on 30th June, The company transferred the required amount to Debenture Redemption Reserve in three equal instalments staring 31st March, 2013.The required investment was made in specified securities on 30th April, 2015.
Pass the necessary journal entries regarding transfer of amounts to Debenture Redemption Reserve, investment made and redemption of debentures.
CA. (Dr.) G.S. Grewal

52. Solution Date Particulars Debit (Rs.) Credit (Rs.) 2013 Mar. 31
Surplus i.e., Balance in Statement
of Profit and Loss A/c Dr.
To DRR A/c
(Being the one – third of 25% of total redeemable debentures transferred to DRR)
1,75,000
2014
CA. (Dr.) G.S. Grewal

53. Solution Date Particulars Debit (Rs.) Credit (Rs.) 2015 Mar. 31
Surplus i.e., Balance in Statement
of Profit and Loss A/c Dr.
To DRR A/c
(Being the one – third of 25% of total redeemable debentures transferred to DRR)
1,75,000
Apr. 30
Deb. Redemption Investment A/c Dr.
To Bank A/c
(Being the amount equal to 15% of the redeemable debentures invested in Government Securities)
3,15,000
CA. (Dr.) G.S. Grewal

54. Solution Date Particulars Debit (Rs.) Credit (Rs.) 2015 June 30
Bank A/c Dr.
To Deb. Redemption Investment A/c
(Being the investment encashed)
3,15,000
8% Debentures A/c Dr.
Premium on Redemption of
Debentures A/c Dr.
To Debenture Holders A/c
(Being the amount payable on redemption)
21,00,000
1,68,000
22,68,000
CA. (Dr.) G.S. Grewal

55. Solution Date Particulars Debit (Rs.) Credit (Rs.) 2015 June 30
Debenture Holders’ A/c Dr.
To Bank A/c
(Being the amount paid to debenture holders)
22,68,000
DRR A/c Dr.
To General Reserve A/c
(Being the amount of DRR transferred to General Reserve after redemption of debentures)
5,25,000
CA. (Dr.) G.S. Grewal

56. Definition of a Company
Section 2(20) of the Companies Act, 2013.
“Company” means a company incorporated under this Act or any previous Company Law.”
Section 3(1)(i) of the Companies Act, 1956
“Company” means a company formed and registered under this Act or an existing company as defined in Clause (ii)”
Clause (ii)
“Existing Company” means a company formed and registered under any of the previous companies laws specified below:
(a) ………. to (g) …………..
CA. (Dr.) G.S. Grewal

57. Definition of Company Limited by Guarantee / Shares
Section 2(21) Company Limited by Guarantee
“Company Limited by Guarantee” means a company having the liability of its members limited by the Memorandum to such amount as the members may respectively undertake to contribute to the assets of the company in the event of it being wound up.
It was not defined in the Companies Act, 1956.
Section 2(22) Company Limited by Shares
“Company Limited by Shares” means a company having the liability of its members limited by the Memorandum to the amount, if any, unpaid on the shares respectively held by them.
CA. (Dr.) G.S. Grewal

58. Definition of Authorised or Nominal Capital
Section 2(8) of the Companies Act, 2013
“Authorised Capital” or “Nominal Capital” means such capital as is authorised by the memorandum of a company to be the maximum amount of share capital of the company.
It was not defined in the Companies Act, 1956.
CA. (Dr.) G.S. Grewal

59. Definitions of Issued Share Capital and Subscribed Share Capital
Section 2(50) Issued Share Capital
“Issued Share Capital” means such capital as the company issues from time to time for subscription.
It was not defined in the Companies Act, 1956.
Section 2(86) Subscribed Share Capital
“Subscribed Share Capital” means such part of the capital which is for the time being subscribed by the members of a company.
CA. (Dr.) G.S. Grewal

60. Definition of “Paid up Share Capital or Share Capital Paid up”
Section 2(64) of the Companies Act, 2013
“Paid-up Share Capital” or “Share Capital Paid-up” means such aggregate of money credited as paid-up as is equivalent to the amount received as paid-up in respect of shares issued and also includes any amount credited as paid-up in respect of shares of the company, but does not include any other amount received in respect of such shares, by whatever name called.
Section 2(32) of the Companies Act, 1956
“It includes capital credited as paid-up.”
CA. (Dr.) G.S. Grewal

61. Definition of “Called up Capital”
Section 2(15) of the Companies Act, 2013
“Called-up Capital” means such part of the capital, which has been called for payment.
It was not defined in the Companies Act, 1956
CA. (Dr.) G.S. Grewal

62. Definition of “Share” Section 2(84) of the Companies Act, 2013
“Share” means a share in the share capital of a company and includes stock.
It was not defined in the Companies Act, 1956
CA. (Dr.) G.S. Grewal

63. Definition of Preference Share
Section 43, Explanation(ii) of the Companies Act, 2013
“Preference Share Capital” with reference to any company limited by shares, means that part of the issued share capital of the company which carries or would carry a preferential right with respect to:
payment of dividend, either as a fixed amount or an amount calculated at a fixed rate, which may either be free of or subject to income tax; and
repayment, in the case of a winding up or repayment of capital, of the amount of share capital paid-up or deemed to have been paid-up, whether or not, there is a preferential right to the payment of any fixed premium or premium on any fixed scale, specified in the memorandum or articles of the company.
CA. (Dr.) G.S. Grewal

64. Definition of Equity Share
Section 43, Explanation(i) of the Companies Act, 2013
“Equity share capital” with reference to any company limited by shares, means all share capital which is not preference share capital.
Section 85(2) of the Companies Act, 1956
“Equity Shares” are those shares which are not preference shares.
CA. (Dr.) G.S. Grewal

65. Definition of “Securities Premium Reserve”
Section 52(2) of the Companies Act, 2013
It prescribes the purposes for which Securities Premium Reserve can be utilised.
Sections 77A and 78 of the Companies Act, 1956
It prescribed the purposes for which Securities Premium Reserve could be utilised.
The purposes for which Securities Premium Reserve can be utilised are same.
CA. (Dr.) G.S. Grewal

66. Definition of “Debenture”
Section 2(30) of the Companies Act, 2013
“Debenture” includes debenture stock, bonds or any other instrument of a company evidencing a debt, whether constituting a charge on assets of the company or not.
Section 2 (12) of the Companies Act, 1956
“Debenture” includes debenture stock, bonds or any other instrument of a company, whether constituting a charge on assets of the company or not.
CA. (Dr.) G.S. Grewal

67. Operating Cycle Operating Cycle is the time gap between
the acquisition of an asset for processing, and
its realisation in cash and cash equivalents.
If operating cycle cannot be identified, it is assumed to be a period of 12 months.
CA. (Dr.) G.S. Grewal

68. Operating Cycle Operating Cycle is the time gap between
the acquisition of an asset for processing, and
its realisation in cash and cash equivalents.
If operating cycle cannot be identified, it is assumed to be a period of 12 months.
CA. (Dr.) G.S. Grewal

69. Operating Cycle Operating Cycle is the time gap between
the acquisition of an asset for processing, and
its realisation in cash and cash equivalents.
If operating cycle cannot be identified, it is assumed to be a period of 12 months.
CA. (Dr.) G.S. Grewal

70. Operating Cycle Chart
Cash/Bank
Trade Receivables
Realised
Purchase of Raw
Material (Say held for
2 Months)
Finished Good Sold and
Converted to Trade Receivables
(Say on Credit Period of 4 Months)
Processing of Raw Material to manufacture Finished Goods (Say 5 Months)
Finished Goods Held in Inventory (Say 90 Days, i.e., 3 Months)
Operating Cycle is 14 Months (2 Months + 5 Months + 3 Months + 4 Months)
CA. (Dr.) G.S. Grewal

71. Operating Cycle Chart
Cash/Bank
Trade Receivables
Realised
Purchase of Raw
Material (Say held for
1 Month)
Finished Good Sold and
Converted to Trade Receivables
(Say on Credit Period of 1 Month)
Processing of Raw Material to manufacture Finished Goods (Say 4 Months)
Finished Goods Held in Inventory (Say 60 Days, i.e., 2 Months)
Operating Cycle is 8 Months (1 Month + 4 Months + 2 Months + 1 Month)
CA. (Dr.) G.S. Grewal

72. Q. How is Long – term Borrowings becoming due for payment within 12 months of the reporting date or the period of Operating Cycle, shown in the Balance Sheet?
A. It is not shown as Short – term Borrowings but Other Current Liabilities and sub - head ‘Current Maturities of Long – term Debts’.
CA. (Dr.) G.S. Grewal

73. BALANCE SHEET as at………….
PARTICULARS
NOTE NO.
Rs.
EQUITY AND LIABILITIES
Share Capital 1
7,93,000
Share Capital
Amount (Rs.)
Note 1: Share Capital
Authorised Share Capital
1,00,000 Equity Shares of Rs. 10 each
10,00,000
Issued Capital
10,000 Equity Shares of Rs. 10 each
8,00,000
Subscribed Capital
Subscribed and fully paid up
78,000 Equity Shares of Rs. 10 each
(Out of the above, 10,000 fully paid Equity Shares have been issued for consideration other than cash)
Subscribed but not fully paid up
1,000, Equity Shares of Rs. 10 each
Less: Calls – in – arrears
Add: Forfeited Shares Account*
10,000
2,000
7,80,000
8,000
788,000
5,000
7,93,000
CA. (Dr.) G.S. Grewal

74. Q. What are ‘Share Warrants’?
A. The term ‘Share Warrants’ is defined in Companies (Accounting Standards) Rules, as follows:
“Share Warrants are financial instruments which gives the holder the right to acquire equity shares”.
CA. (Dr.) G.S. Grewal

75. Capital Reserve Reserves and Surplus Capital Redemption Reserve
Securities Premium Reserve
Debenture Redemption Reserve
Revaluation Reserve
Share Options Outstanding Account
Other Reserves
Surplus i.e., Balance in Statement of Profit and Loss
CA. (Dr.) G.S. Grewal

76. Q. Can a Company have reserves other than
Q. Can a Company have reserves other than those specified in Schedule VI?
A. Yes, a company can have reserves other than those specified in Schedule VI. Schedule VI of the Companies Act is made flexible by including an entry Any Other Reserves (to specify the nature and purpose of each reserve).
Examples: Investment Fluctuation Reserve, Workmen Compensation Reserve, Subsidy Reserve, Tax Reserve, Development Reserve, Research and Development Reserve, Asset Replacement Reserve etc.
CA. (Dr.) G.S. Grewal

77. Q. Is there a difference between Statement
Q. Is there a difference between Statement of Profit and Loss and Surplus i.e., Balance in Statement of Profit and Loss?
A. Yes.
Statement of Profit and Loss is a statement from which profit earned or loss incurred during the year is known.
Surplus i.e., Balance in Statement of Profit and Loss is a reserve representing balance in the reserve. It includes opening Balance and current year’s profit or loss.
CA. (Dr.) G.S. Grewal

78. Q. What is Revaluation Reserve?
A. Upward revision of Book Value of an asset is credited to ‘Revaluation Reserve’.
Revaluation Reserve cannot be distributed unless gain is realised. Also fictitious assets such as preliminary expenses, loss on issue of debentures etc. cannot be written off against it.
If the company revises the value of the asset downward, Revaluation Reserve is debited by the amount of downward revision.
CA. (Dr.) G.S. Grewal

79. Q. What is Shares Options Outstanding Account?
A. Shares are issued at a price that is lower than its market value to the employees. Companies issuing these shares have to create a reserve for the amount of difference crediting it to Shares Options Outstanding Account.
The amount is credited in instalment over the vesting period.
if the employee exercises the option or the vesting period is over, the amount is transferred to General Reserve.
CA. (Dr.) G.S. Grewal

80. Q. What amount is shown under ‘Share
Q. What amount is shown under ‘Share Application Money Pending Allotment’?
A. Out of the total Share Application Money received only that much amount is shown against ‘Share Application Money Pending Allotment’ against which shares will be allotted by the company.
Money received by the company as share Application Money and which is to be refunded is shown under the head Current Liabilities and sub – head Other Current Liabilities.
CA. (Dr.) G.S. Grewal

81. Comparative Statements And Common – size Statements
CA. (Dr.) G.S. Grewal

82. Format of Comparative Balance Sheet
Particulars
Note No.
Rs.
Absolute Change (Increase /Decrease) Rs.
Percentage Change (Increase/Decrease) % A B
(B-A)=C
C/A X 100=D
I. EQUITY AND LIABILITIES
1. Shareholders’ Funds
Share Capital
Reserves and Surplus
2. Non-Current Liabilities
Long-term Borrowings
Long-term Provisions
3. Current Liabilities
Short-term Borrowings
Trade Payables
Other Current Liabilities
Short-term Provisions
Total
II. ASSETS
1. Non-Current Assets
(a) Fixed Assets:
Tangible Assets
Intangible Assets
Non-current Investments
Long-terms Loans and Advances
2. Current Assets
Current Inventories
Inventories
Trade Receivables
Cash and Cash Equivalents
Short-term Loans and Advances
Other Current Assets ……
..….
CA. (Dr.) G.S. Grewal

83. FORMAT OF COMPARATIVE STATEMENT OF PROFIT & LOSS
COMPARATIVE STATEMENT OF PROFIT AND LOSS
for the years ended 31st March, 2013 and 2014 
Particulars
Note No.
Rs.
Absolute Change
(Increase or Decrease)%
Percentage Change (Increase or Decrease)% A B
(B-A)=C
𝐶 𝐴 X 100=D
I. Revenue from Operations ……
100
II. Other Income
III. Total Revenue(I+II)
IV. Expenses:
Cost of Materials Consumed
Purchases of Stock-in-Trade
Changes in Inventories of Finished Goods,
Work-in-Progress and Stock-in-Trade
Employees Benefit Expenses
Finance Costs
Depreciation and Amortisation
Other Expenses
Total Expenses
Profit before Tax(III-IV)
CA. (Dr.) G.S. Grewal

84. COMMON SIZE STATEMENT OF PROFIT AND LOSS
Particulars
Note No.
Absolute Change
Percentage of Revenue from Operations
I. Revenue from Operations ……
100
II. Other Income
III. Total Revenue(I+II)
IV. Expenses:
Cost of Materials Consumed
Purchases of Stock-in-Trade
Changes in Inventories of Finished Goods,
Work-in-Progress and Stock-in-Trade
Employees Benefit Expenses
Finance Costs
Depreciation and Amortisation Expenses
Other Expenses
Total Expenses
Profit before Tax(III-IV)
for the years ended 31st March, 2013 and 2014
CA. (Dr.) G.S. Grewal

85. FORMAT OF COMMON-SIZE BALANCE SHEET
Particulars
Note No.
Rs.
Rs.
Absolute Change (Increase /Decrease) Rs.
Percentage Change (Increase/Decrease) % A B
(B-A)=C
C/A X 100=D
I. EQUITY AND LIABILITIES
1. Shareholders’ Funds
Share Capital
Reserves and Surplus
2. Non-Current Liabilities
Long-term Borrowings
Long-term Provisions
3. Current Liabilities
Short-term Borrowings
Trade Payables
Other Current Liabilities
Short-term Provisions
Total
II. ASSETS
1. Non-Current Assets
(a) Fixed Assets:
Tangible Assets
Intangible Assets
Non-current Investments
Long-terms Loans and Advances
2. Current Assets
Current Inventories
Inventories
Trade Receivables
Cash and Cash Equivalents
Short-term Loans and Advances
Other Current Assets ……
..….
100
CA. (Dr.) G.S. Grewal

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CA. (Dr.) G.S. Grewal

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