CHAPTER 3 BUY-BACK OF SHARES.powerpoint.presentation.com

buy back of shares.powerpoint.presentation

1. CHAPTER 3CHAPTER 3
BUY-BACK OF EQUITY SHARESBUY-BACK OF EQUITY SHARES

2. Ans. 1. Y. Ltd.
Journal Entries
Date Date Particulars Particulars DebitDebit
``
CreditCredit
``
20072007
AprilApril
1 (a)1 (a)
Bank A/c Bank A/c Dr. Dr.
Profit and Loss A/c Profit and Loss A/c Dr. Dr.
To Fixed Assets A/c To Fixed Assets A/c
(Being sale of machine at a loss of Rs.30,000)(Being sale of machine at a loss of Rs.30,000)
1,00,0001,00,000
30,00030,000
1,30,0001,30,000
(b) (b) Equity Share Capital A/c Equity Share Capital A/c Dr. Dr.
Security Premium A/c Security Premium A/c Dr. Dr.
To Equity Shareholders A/c To Equity Shareholders A/c
(Being the amount payable on buy-back of (Being the amount payable on buy-back of
50,000 equity shares at a premium of 10%)50,000 equity shares at a premium of 10%)
5,00,0005,00,000
50,00050,000
5,50,0005,50,000
(c)(c) Equity Shareholders A/c Equity Shareholders A/c Dr. Dr.
To Bank A/c To Bank A/c
(Being the payment made to equity (Being the payment made to equity
shareholders on buy-back of their shares)shareholders on buy-back of their shares)
5,50,0005,50,000
5,50,0005,50,000
(d) (d) General Reserve A/c General Reserve A/c Dr. Dr.
Profit and Loss Appropriation A/c Profit and Loss Appropriation A/c Dr. Dr.
To Capital Redemption Reserve A/c To Capital Redemption Reserve A/c
(Being the creation of capital redemption (Being the creation of capital redemption
reserve a/c as per requirements of the reserve a/c as per requirements of the
companies act)companies act)
3,00,0003,00,000
2,00,0002,00,000
5,00,0005,00,000

3. Balance Sheet of Y Ltd.
As on 1 April 2007
(After Buy-Back of Shares)
Liabilities Liabilities ``Assets Assets ``
Share Capital Share Capital
Issued and Subscribed: Issued and Subscribed:
1,50,000 Equity Share 1,50,000 Equity Share
of Rs.10 each of Rs.10 each
Reserves and Surplus Reserves and Surplus
Securities Premium Securities Premium
Profit and Loss A/c Profit and Loss A/c
(4,00,000 – 30,000 – (4,00,000 – 30,000 –
2,00,000)2,00,000)
Capital Redemption Reserve Capital Redemption Reserve
Secured Loan Secured Loan
12% Debentures 12% Debentures
Current Liabilities Current Liabilities
Sundry Creditors Sundry Creditors
15,00,00015,00,000
1,50,0001,50,000
1,70,0001,70,000
5,00,0005,00,000
6,00,0006,00,000
5,60,0005,60,000
Fixed AssetsFixed Assets
(15,60,000 – (15,60,000 –
1,30,000)1,30,000)
Investments Investments
Current Assets -Current Assets -
Stock Stock
Sundry Debtors Sundry Debtors
Cash at Bank Cash at Bank
(4,70,000 + 1,00,000 (4,70,000 + 1,00,000
– – 5,50,000)5,50,000)
14,30,00014,30,000
6,00,0006,00,000
8,50,0008,50,000
5,80,0005,80,000
20,00020,000
34,80,00034,80,000 34,80,00034,80,000

4. Ans. 2. Manish Ltd.
Journal Entries
Date Date Particulars Particulars DebitDebit
``
CreditCredit
``
20072007
(i)(i)
Equity Share Capital A/c Equity Share Capital A/c Dr. Dr.
Premium on Buy-Back of Shares A/c Premium on Buy-Back of Shares A/c Dr. Dr.
To Equity Shareholders A/c To Equity Shareholders A/c
(Being the amount payable on buy-back of (Being the amount payable on buy-back of
premium of Rs.10 per share)premium of Rs.10 per share)
6,25,0006,25,000
6,25,0006,25,000
12,50,00012,50,000
(ii) (ii) General Reserve A/c General Reserve A/c Dr. Dr.
To Capital Redemption Reserve A/c To Capital Redemption Reserve A/c
(Being creation on Capital redemption Reserve (Being creation on Capital redemption Reserve
A/c equivalent to nominal value of equity A/c equivalent to nominal value of equity
shares bought back as per Section 77 A)shares bought back as per Section 77 A)
6,25,0006,25,000
6,25,0006,25,000
(iii) (iii) Equity Shareholders A/c Equity Shareholders A/c Dr. Dr.
To Bank A/c To Bank A/c
(Being the amount paid to equity shareholders (Being the amount paid to equity shareholders
on the buy-back of their shares)on the buy-back of their shares)
12,50,00012,50,000
12,50,00012,50,000
(iv) (iv) Security Premium A/c Security Premium A/c Dr. Dr.
General Reserve A/c General Reserve A/c Dr. Dr.
To Premium on Buy-back of shares To Premium on Buy-back of shares
(Being the premium on buy-back written off)(Being the premium on buy-back written off)
5,00,0005,00,000
1,25,0001,25,000
6,25,0006,25,000

5. Balance Sheet as on after Buy-back
Liabilities Liabilities ``Assets Assets ``
Share Capital Share Capital
Authorised Authorised
Issued and Subscribed: Issued and Subscribed:
1,87,500, Equity Shares1,87,500, Equity Shares
of Rs.10 each of Rs.10 each
Reserves and SurplusReserves and Surplus
Capital Redemption Reserve Capital Redemption Reserve
General Reserve General Reserve
Profit and Loss A/c Profit and Loss A/c
Secured LoanSecured Loan
10% Debentures 10% Debentures
Current Liabilities Current Liabilities
Creditors Creditors
Bills PayableBills Payable
??
18,75,00018,75,000
6,25,0006,25,000
2,50,0002,50,000
10,00,00010,00,000
25,00,00025,00,000
15,00,00015,00,000
5,00,0005,00,000
Fixed Assets Fixed Assets
Net BlockNet Block
Investments Investments
Current Assets Current Assets
Bank Bank
(15,00,000 – (15,00,000 –
12,50,000)12,50,000)
OtherOther
Loans and AdvancesLoans and Advances
40,00,00040,00,000
15,00,00015,00,000
2,50,0002,50,000
20,00,00020,00,000
5,00,0005,00,000
82,50,00082,50,000 82,50,00082,50,000

6. StepStep ParticularsParticulars `` ``
(1)(1)Calculate Limit of 25% of Own Funds Calculate Limit of 25% of Own Funds
A. Sources A. Sources
(a) Free Reserves (a) Free Reserves
(1) General Reserve (1) General Reserve
(2) Profit and Loss A/c(2) Profit and Loss A/c
10,00,00010,00,000
10,00,00010,00,000
20,00,00020,00,000
(b) Securities Premium A/c Bal.(b) Securities Premium A/c Bal. 5,00,0005,00,000
25,00,00025,00,000
B. Paid-up capital (Equity) B. Paid-up capital (Equity) 25,00,00025,00,000
Total Overall LimitTotal Overall Limit 50,00,00050,00,000
C. Maximum amount to buy-back of all sharesC. Maximum amount to buy-back of all shares
/ securities : 25% of Own Funds / securities : 25% of Own Funds
(25% × 50,00,000)(25% × 50,00,000) 12,50,00012,50,000
VARIFICATION

7. StepStepParticularsParticulars `` ``
(2)(2) Calculate Minimum Own Funds Remaining After Calculate Minimum Own Funds Remaining After
Buy-BackBuy-Back
A. Minimum Own Funds = Debt / 2 = A. Minimum Own Funds = Debt / 2 =
Rs.25,00,000 / 2 = Rs.12,50,000Rs.25,00,000 / 2 = Rs.12,50,000
so as to satisfy the debt capital ratio of 2 : 1so as to satisfy the debt capital ratio of 2 : 1
B. Required Post-Buy back Own Funds B. Required Post-Buy back Own Funds
= Own Funds Before Buy-Back Less Minimum = Own Funds Before Buy-Back Less Minimum
Own Funds Own Funds
= 50,00,000 – 12,50,000 = 50,00,000 – 12,50,000 37,50,00037,50,000
(3)(3) Calculate Limit of 25% of Equity Capital During Calculate Limit of 25% of Equity Capital During
Year: Year:
A. Maximum NV of equity shares which could be A. Maximum NV of equity shares which could be
brought back during financial year brought back during financial year
25% of total paid-up equity share capital 25% of total paid-up equity share capital
[25% × 25,00,000] = 6,25,000[25% × 25,00,000] = 6,25,000
B. Maximum No. of Equity Shares that can beB. Maximum No. of Equity Shares that can be
bought back 6,25,000 / Rs.10 = bought back 6,25,000 / Rs.10 = 62,50062,500
(4)(4) Calculate Maximum Possible Offer Price Calculate Maximum Possible Offer Price
(A) The least of (1) & (2) amounts above is(A) The least of (1) & (2) amounts above is
Rs.12,50,000Rs.12,50,000
(B) Back vide (3) A and B above is 62,500(B) Back vide (3) A and B above is 62,500
(c) Maximum Possible Offer Price = (c) Maximum Possible Offer Price =
Lease Amount as in [A]/Max. No. of Equity Lease Amount as in [A]/Max. No. of Equity
Shares as in [B] = 12,50,000 / 62,500Shares as in [B] = 12,50,000 / 62,500 Rs.20Rs.20

8. Conclusion: Thus, keeping in view all legal conditions, Manish Ltd. can buy
back 62,500 equity shares at a price of Rs.20 each including premium of
Rs.10 per share.

9. Ans. 3. Nonita Ltd.
Journal Entries
Date Date Particulars Particulars DebitDebit
``
CreditCredit
``
(i) (i) Share Final Call A/c Share Final Call A/c Dr. Dr.
To Equity Share Capital A/c To Equity Share Capital A/c
(Being the final call made to make the equity (Being the final call made to make the equity
shares fully paid) shares fully paid)
16,00,0016,00,00
00
16,00,0016,00,00
00
(ii) (ii) Bank A/c Bank A/c Dr. Dr.
To Share Final Call A/c To Share Final Call A/c
(the receipt of final call)(the receipt of final call)
16,00,0016,00,00
00
16,00,0016,00,00
00
(iii) (iii) Equity Share Capital A/c Equity Share Capital A/c Dr. Dr.
Premium on Buy-back of Eq. Shares A/c Premium on Buy-back of Eq. Shares A/c Dr.Dr.
To Equity Shareholders A/c To Equity Shareholders A/c
(Being buying-back of equity shares) (Being buying-back of equity shares)
20,00,0020,00,00
00
20,00,0020,00,00
00
40,00,0040,00,00
00
(iv)(iv)Security Premium A/c Security Premium A/c Dr. Dr.
To Prem. on Buy-back of Eq. shares A/cTo Prem. on Buy-back of Eq. shares A/c
(Being the written off the premium on buy-back of (Being the written off the premium on buy-back of
equity shares) equity shares)
20,00,0020,00,00
00
20,00,0020,00,00
00

10. Date Date Particulars Particulars DebitDebit
``
CreditCredit
``
(v) (v) Equity Shareholders A/c Equity Shareholders A/c Dr.Dr.
To Bank A/c To Bank A/c
(Being payment on buy-back)(Being payment on buy-back)
40,00,0040,00,00
00
40,00,0040,00,00
00
(vi) (vi) Profit and Loss Appropriation A/c Profit and Loss Appropriation A/c Dr. Dr.
To Capital Red. Reserve A/cTo Capital Red. Reserve A/c
(Being creation of Capital Redemption Reserve (Being creation of Capital Redemption Reserve
A/c )A/c )
20,00,0020,00,00
00
20,00,0020,00,00
00

11. Balance Sheet As on … 2010 after Buy-back
Liabilities Liabilities ``Assets Assets ``
Share Capital Share Capital
Authorised Authorised
Issued and Subscribed : Issued and Subscribed :
6,00,000 Equity shares of 6,00,000 Equity shares of
Rs.10Rs.10
eacheach
Reserves and Surplus Reserves and Surplus
Security Premium A/c Security Premium A/c
Capital Redemption Reserve Capital Redemption Reserve
Profit and Loss A/c Profit and Loss A/c
Secured Loans Secured Loans
10% Debentures 10% Debentures
Bank Loa Bank Loa
Current Liabilities & ProvisionsCurrent Liabilities & Provisions
(A) Current Liabilities (A) Current Liabilities
Sundry Creditors Sundry Creditors
Bills Payable Bills Payable
(B) Provisions for tax(B) Provisions for tax
??
60,00,00060,00,000
10,00,00010,00,000
20,00,00020,00,000
30,00,00030,00,000
30,00,00030,00,000
10,00,00010,00,000
20,00,00020,00,000
10,00,00010,00,000
5,00,0005,00,000
Fixed Assets Fixed Assets
Land & BuildingLand & Building
P & Machinery P & Machinery
Furniture Furniture
Investments Investments
Current Assets Loan Current Assets Loan
and Advances and Advances
(A) Current Assets :(A) Current Assets :
Debtors Debtors
Stock Stock
Bank Bank
(B) Loans and Adv.: (B) Loans and Adv.:
Bills ReceivableBills Receivable
40,00,00040,00,000
22,00,00022,00,000
20,00,00020,00,000
20,00,00020,00,000
42,00,00042,00,000
20,00,00020,00,000
21,00,00021,00,000
10,00,00010,00,000
1,95,00,001,95,00,00
00
1,95,00,001,95,00,00
00

12. Bank A/c
Particulars Particulars ``ParticularsParticulars ``
Balance b/dBalance b/d
Share Final Call A/c Share Final Call A/c
45,00,00045,00,000
16,00,00016,00,000
Equity Shareholders A/cEquity Shareholders A/c
Balance c/d Balance c/d
40,00,00040,00,000
21,00,00021,00,000
61,00,00061,00,000 61,00,00061,00,000

13. Working Notes
(i) Free Reserves Securities Premium + Profit and Loss A/c
30,00,000 + 50,00,000 = 80,00,000
(ii)25% of own funds: 25% (Share Capital + Unpaid Calls + Free
Reserves)
25%(64,00,000 + 16,00,000 + 80,00,000)
25% of 1,60,00,000 = Rs.40,00,000
(iii) Own funds 50% of Borrowed Fund
1,60,00,000 – 50% of (30,00,000 + 10,00,000)
1,60,00,000 – 20,00,000 = 1,40,00,000
(iv) Minimum Number of Shares =
Maximum number of shares that can be bought back =
40,00,000 / 20 = 2,00,000 shares
Number of shares bought back do not exceed 25% of issued capital i.e.,
8,00,000 × 25% = 2,00,000 shares.

14. Ans. 4. Naina Ltd.
Journal Entries
Date Date Particulars Particulars DebitDebit
``
CreditCredit
``
(i) (i) Equity Share Capital A/c Equity Share Capital A/c Dr. Dr.
To Equity Share holders A/c To Equity Share holders A/c
To Capital Reserve A/c To Capital Reserve A/c
(Being the amount payable on buy-back of (Being the amount payable on buy-back of
1,25,000 equity shares at Rs.90 each)1,25,000 equity shares at Rs.90 each)
1,25,00,001,25,00,00
00
1,12,50,001,12,50,00
00
12,50,00012,50,000
(ii) (ii) Profit and Loss Appropriation A/c Profit and Loss Appropriation A/c Dr. Dr.
To Capital Redemption Reserve A/c To Capital Redemption Reserve A/c
(Being creation of capital redemption reserve (Being creation of capital redemption reserve
a/c to the extent divisible profits are utilised to a/c to the extent divisible profits are utilised to
buy-back equity shares) buy-back equity shares)
55,00,00055,00,000
55,00,00055,00,000
(iii) (iii) Equity Shareholders A/c Equity Shareholders A/c Dr. Dr.
To Bank A/c To Bank A/c
(Being payment on buy-back of equity shares) (Being payment on buy-back of equity shares)
1,12,50,001,12,50,00
00
1,12,50,001,12,50,00
00
Legal Note
Since the company had already issued Rs.70,00,000. 10% Preference Shares
for buy-back purpose, the balance (1,25,00,000 – 70,00,000) has been taken
from divisible profits.

15. Ans. 5. Oberoi International Ltd.
Journal Entries
Date Date Particulars Particulars DebitDebit
``
CreditCredit
``
(i) (i) Bank A/cBank A/c Dr. Dr.
To Preference Share Application A/cTo Preference Share Application A/c
(Being application money received on 20,000, 11% (Being application money received on 20,000, 11%
preference shares @ Rs.8 each) preference shares @ Rs.8 each)
1,60,0001,60,000
1,60,0001,60,000
(ii) (ii) Preference Share Application A/c Preference Share Application A/c Dr. Dr.
To 11% Preference Share Capital A/c To 11% Preference Share Capital A/c
To Security Premium A/c To Security Premium A/c
(Being preference share application money (Being preference share application money
transferred to 11% preference share capital and transferred to 11% preference share capital and
security premium a/c (20,000 × 2)security premium a/c (20,000 × 2)
1,60,0001,60,000
1,20,0001,20,000
40,00040,000
(iii) (iii) Preference Share Allotment A/c Preference Share Allotment A/c Dr. Dr.
To 11% Preference Share Capital A/cTo 11% Preference Share Capital A/c
(Being receipt of allotment money)(Being receipt of allotment money)
80,00080,000
80,00080,000
(iv) (iv) Bank A/c Bank A/c Dr. Dr.
To Preference Share Allotment A/c To Preference Share Allotment A/c
(Being receipt of allotment money) (Being receipt of allotment money)
80,00080,000
80,00080,000

16. Date Date Particulars Particulars DebitDebit
``
CreditCredit
``
(v) (v) Equity Share Capital A/c Equity Share Capital A/c Dr. Dr.
Premium on Buy-back of Shares A/c Premium on Buy-back of Shares A/c Dr. Dr.
To Equity Shareholders A/c To Equity Shareholders A/c
(Being amount payable on buy-back of equity (Being amount payable on buy-back of equity
shares to equity shareholders)shares to equity shareholders)
7,00,0007,00,000
70,00070,000
7,70,0007,70,000
(vi) (vi) Profit and Loss Appropriation A/c Profit and Loss Appropriation A/c Dr. Dr.
To Capital Redemption Reserve A/c To Capital Redemption Reserve A/c
(Being creation of capital redemption a/c (Being creation of capital redemption a/c
equivalent to the nominal value of the shares equivalent to the nominal value of the shares
redeemed)redeemed)
5,00,0005,00,000
5,00,0005,00,000
(vii) (vii) Equity Shareholders A/c Equity Shareholders A/c Dr. Dr.
To Bank A/c To Bank A/c
(Being the payment to equity shareholders a/c)(Being the payment to equity shareholders a/c)
7,70,0007,70,000
7,70,0007,70,000
(viii) (viii) Security Premium A/c Security Premium A/c Dr. Dr.
To Premium on Buy-back of Shares To Premium on Buy-back of Shares
(Being premium on buy-back charged to security (Being premium on buy-back charged to security
premium a/c)premium a/c)
70,00070,000
70,00070,000

17. Bank A/c
Particulars Particulars ``ParticularsParticulars ``
Balance b/d Balance b/d
Pref. Share App. A/cPref. Share App. A/c
Pref. Share Allot A/cPref. Share Allot A/c
10,00,00010,00,000
1,60,0001,60,000
80,00080,000
Equity Shareholders A/cEquity Shareholders A/c
Balance c/d Balance c/d
7,70,0007,70,000
4,70,0004,70,000
12,40,00012,40,000 12,40,00012,40,000

18. Balance Sheet As on …
(After Buy-back)
Liabilities Liabilities ``Assets Assets ``
Share Capital Share Capital
Authorised Authorised
Issued and Subscribed: Issued and Subscribed:
50,000, 10% Pref. 50,000, 10% Pref.
Shares of Rs.10 eachShares of Rs.10 each
20,000, 11% Pref. 20,000, 11% Pref.
Share of Rs.10 eachShare of Rs.10 each
6,30,000 Equity Shares 6,30,000 Equity Shares
of Rs.10 each of Rs.10 each
Reserves and SurplusReserves and Surplus
Securities Prem. A/cSecurities Prem. A/c
Profit & Loss A/c Profit & Loss A/c
Cap. Redem. Res. A/cCap. Redem. Res. A/c
Secured Loans Secured Loans
12% Debentures 12% Debentures
Current Liabilities Current Liabilities
Creditors Creditors
??
5,00,0005,00,000
2,00,0002,00,000
63,00,00063,00,000
1,70,0001,70,000
1,00,0001,00,000
5,00,0005,00,000
8,00,0008,00,000
4,00,0004,00,000
Fixed Assets Fixed Assets
Current Assets Current Assets
Cash at Bank Cash at Bank
Other Other
66,00,00066,00,000
4,70,0004,70,000
19,00,00019,00,000
89,70,00089,70,000 89,70,00089,70,000

19. Capital Redemption Reserve A/c is calculated as:
Nominal value of equity shares bought back 7,00,000
Less: Proceeds from the issue of 11% Preference shares 2,00,000
Utilisation of profit and loss A/c 5,00,000

20. Ans. 6. Kuber limited
Journal Entries
Date Date Particulars Particulars DebitDebit
``
CreditCredit
``
(i) (i) Revenue Reserve A/c Revenue Reserve A/c Dr. Dr.
To Capital Redemption Reserve A/cTo Capital Redemption Reserve A/c
(Being redemption of preference shares out of (Being redemption of preference shares out of
revenue reserves or divisible profits)revenue reserves or divisible profits)
7575
7575
(ii) (ii) 12% Pref. Share Capital A/c 12% Pref. Share Capital A/c Dr. Dr.
To Pref. Shareholders A/c To Pref. Shareholders A/c
(Being payment made on redemption)(Being payment made on redemption)
7575
7575
(iii) (iii) Pref. Shareholders A/c Pref. Shareholders A/c Dr. Dr.
To Bank A/c To Bank A/c
(Being payment made on redemption) (Being payment made on redemption)
7575
7575
(iv) (iv) Equity Share Capital A/c Equity Share Capital A/c Dr. Dr.
Prem. On Buy-back of Shares A/c Prem. On Buy-back of Shares A/c Dr. Dr.
To Equity Shareholders A/cTo Equity Shareholders A/c
(Being the amount payable on buy-back of equity (Being the amount payable on buy-back of equity
shares)shares)
55
2020
2525

21. Date Date Particulars Particulars DebitDebit
``
CreditCredit
``
(v) (v) Revenue Reserves A/c Revenue Reserves A/c Dr. Dr.
To Capital Redemption A/c To Capital Redemption A/c
(Being creation of capital redemption reserve (Being creation of capital redemption reserve
account equivalent of nominal value of equity account equivalent of nominal value of equity
shares bought back) shares bought back)
55
55
(vi) (vi) Equity Shareholders A/c Equity Shareholders A/c Dr. Dr.
To Bank A/c To Bank A/c
2525
2525
(vii)(vii)Revenue Reserve A/c Revenue Reserve A/c Dr. Dr.
To Premium on Buy-back of shares)To Premium on Buy-back of shares)
2020
2020

22. Balance Sheet as on …
(After Buy-back and Redemption)
Liabilities Liabilities ``Assets Assets ``
Share Capital Share Capital
Authorised Authorised
Issued and Subscribed: Issued and Subscribed:
200 lacs of equity shares 200 lacs of equity shares
of Rs.10 fully paid up of Rs.10 fully paid up
Reserves and SurplusReserves and Surplus
Capital Reserve Capital Reserve
Capital Redemption Capital Redemption
ReserveReserve
Securities Premium Securities Premium
Rev. Res b/d Rev. Res b/d 260 260
Cap. Redem. Res. Cap. Redem. Res. 80 80
180180
Less: Prem. on Less: Prem. on
Buy-backBuy-back 20 20
Current Liabilities Current Liabilities
100100
2020
1515
8080
2525
160160
4040
Fixed Assets Fixed Assets 100 100
Less: Pro. For Dep. Less: Pro. For Dep. 100100
Investments Investments
(Market Value Rs.400)(Market Value Rs.400)
Current Assets Current Assets
(340 – 100)(340 – 100)
100100
240240
340340 340340

23. Value of an Equity Share Rs. (in Crores)
Investment at market value 400
Current Assets 240
640
Less: Current Liabilities 40
600
No. of Equity Shares : 2 Crores
Value per equity shares 6.00 crore / 2 crores = Rs.300
Alternately, Balance Sheet can be prepaid in a vertical form.

24. Kubel Ltd.
Balance Sheet (After Buy-Back and Redemption)
ParticularsParticulars Sch.Sch. `` ``
I. SOURCES OF FUNDSI. SOURCES OF FUNDS
1. SHAREHOLDERS’ FUNDS1. SHAREHOLDERS’ FUNDS
a. Capitala. Capital
b. Reserves and Surplusb. Reserves and Surplus
2. LOAN FUNDS2. LOAN FUNDS
Total Total
II. APPLICATION OF FUNDSII. APPLICATION OF FUNDS
1. Fixed Assets 1. Fixed Assets
a. Gross Block a. Gross Block
b. Less: Depreciationb. Less: Depreciation
c. Net Blockc. Net Block
2. Investments (Market value Rs.400 crores)2. Investments (Market value Rs.400 crores)
3. Current Assets, Loans Advances 3. Current Assets, Loans Advances
Less: Current Liabilities & Provisions Less: Current Liabilities & Provisions
Net Current Assets Net Current Assets
4. MISC EXPEN. (Not Written Off/Adjusted)4. MISC EXPEN. (Not Written Off/Adjusted)
………………11
………………22
……………………
……………………
……………………
……………………
……………………
……………………
……………………
……………………
……………………
……………………
2020
280280
100100
100100
240240
4040
300300
__________
300300
100100
200200
TotalTotal 300300

25. Schedules to Balance Sheet
(Rs. in crores)
ParticularsParticulars `` ``
Schedule 1 : Capital Schedule 1 : Capital
Authorised: Authorised:
Issued, Subscribed and Paid-up: Issued, Subscribed and Paid-up:
200 lakhs Equity Shares of Rs.10 each fully paid200 lakhs Equity Shares of Rs.10 each fully paid
(50 lakhs equity shares or Rs.10 each have been bought back (50 lakhs equity shares or Rs.10 each have been bought back
out reserve at Rs.50 per share) out reserve at Rs.50 per share)
(12% 75 lakhs Redeemable Preference Shares of Rs.100 each (12% 75 lakhs Redeemable Preference Shares of Rs.100 each
fully paid up, have been redeemed on 1 April, 2004)fully paid up, have been redeemed on 1 April, 2004)
Total Total
100100
2020
__________
2020

26. Schedule 2 : Reserves & Surplus Schedule 2 : Reserves & Surplus
(1) Capital Reserve (1) Capital Reserve …………
(2) Capital Redemption Reserve (2) Capital Redemption Reserve
Asper last A/c Asper last A/c …………
Add: Transfer from Revenue Reserves Add: Transfer from Revenue Reserves …………
(3) Securities Premium (3) Securities Premium …………
(4) Revenue Reserve (4) Revenue Reserve
As per last A/c As per last A/c …………
Less : Transfer to Capital Redemption Reserve Less : Transfer to Capital Redemption Reserve …………
Less: Premium paid on buy-backLess: Premium paid on buy-back …………
Total Total …………
8080
260260
8080
180180
2020
1515
8080
2525
160160
280280

27. Ans. 7. Danny Ltd.
Journal Entries
Date Date Particulars Particulars DebitDebit
``
CreditCredit
``
(i) (i) Equity Share Capital A/c Equity Share Capital A/c Dr. Dr.
Premium on Buy-back of shares A/c Premium on Buy-back of shares A/c Dr. Dr.
To Equity Shareholders A/c To Equity Shareholders A/c
(Being amount payable on buy-back of shares) (Being amount payable on buy-back of shares)
4,50,0004,50,000
45,00045,000
4,95,0004,95,000
(ii) (ii) Bank A/c Bank A/c Dr. Dr.
To Preference Shares Capital A/c To Preference Shares Capital A/c
(Being issue of 12% preference shares for buying-(Being issue of 12% preference shares for buying-
back of equity shares) back of equity shares)
390390
390390
(iii) (iii) Equity Shareholders A/c Equity Shareholders A/c Dr. Dr.
To Bank A/c To Bank A/c
(Being payment of equity shareholders after buy-(Being payment of equity shareholders after buy-
back of their shares) back of their shares)
495495
495495
(iv) (iv) General Reserve A/c General Reserve A/c Dr. Dr.
To Capital Redemption Reserve A/c To Capital Redemption Reserve A/c
(Being the creation of Capital Redemption Reserve (Being the creation of Capital Redemption Reserve
A/c from General Reserves after adjusting the A/c from General Reserves after adjusting the
issue of preference shares (450 – 390 = 60))issue of preference shares (450 – 390 = 60))
6060
6060

28. Date Date Particulars Particulars DebitDebit
``
CreditCredit
``
(v) (v) Securities Premium A/c Securities Premium A/c Dr. Dr.
General Reserve A/c General Reserve A/c Dr. Dr.
To Premium on Buy-back of shares A/cTo Premium on Buy-back of shares A/c
(Being the utilisation of free reserves to write off (Being the utilisation of free reserves to write off
premium on redemption) premium on redemption)
55
4040
4545
LEGAL NOTES
The nominal value of the equity shares bought back is Rs.4,50,000. The
balance available in general reserve being only Rs.60,000 after transferring
Rs.40,000 to premium on buy-back of equity shares. Hence Rs.3,90,000, 12%
preference shares of Rs.10 each (i.e. 39,000 shares) be issued in order to
comply with the provisions of Section 77 AA of the Companies Act.

29. Balance Sheet of Danny Ltd.
As on …..
(After Buy-back)
Liabilities Liabilities ``Assets Assets ``
Share Capital Share Capital
Authorised Authorised
Issued and Subscribed: Issued and Subscribed:
2,55,000 equity sahres of 2,55,000 equity sahres of
Rs.10 each fully paid upRs.10 each fully paid up
39,000, 12% preference 39,000, 12% preference
shares of Rs.10 eachshares of Rs.10 each
Reserves and SurplusReserves and Surplus
Capital Redemption Res.Capital Redemption Res.
Secured Loans Secured Loans
10% Debentures 10% Debentures
Current Liabilities Current Liabilities
Sundry Creditors Sundry Creditors
2,5502,550
390390
6060
1,4001,400
1,5601,560
Fixed Assets Fixed Assets
Land and Building Land and Building
Plant & Machinery Plant & Machinery
Furniture and Fittings Furniture and Fittings
Investments Investments
Current Assets Current Assets
Stock Stock
Sundry DebtorsSundry Debtors
Cash and Bank Balance Cash and Bank Balance
630630
2,3502,350
350350
370370
1,2001,200
590590
470470
5,9605,960 5,9605,960