Scheme of Corporate Accounting

Scheme of corporate accounting (4th sem) 1st internal test 2021 capital ratio =
Solution :
Section A
1. Holding Company : A company which acquires directly or indirectly all the shares or
more than 50% of shares, or acquires higher degree of controlling power or voting power
in other company is known as holding company.
2. . Cost of control / goodwill : Excess value paid over the nominal value of share and
capital reserve is called cost of control or goodwill.
Cost of control/ goodwill = Investment – Nominal Value of Shares – Capital Reserve.
3. Minority Interest : The amount of shares held by outside shareholders other than holding
company are called as minority group of shareholders. The aggregate of share capital,
proportionate share in the pre/post acquisition reserves, profits, and any profit on
appreciation in the value of fixed assets is considered as minority interest. The amount of
minority interest is shown on liability side of balance sheet.
Section B
I.
1 Share capital = 1,00,000
i. Anand (H) Ltd acquired 80% of shares = 80/100 X 1,00,000 =80,000/-
ii. Ashoka Ltd share capital= 1,00,000 - 80,000 = 20,000/-
Therefore share capital ratio = 80,000 : 20,000 = 4 : 1
2. Reserve fund :
Reserve fund on 31-12-2020 = 17,000
Reserve fund on 1-1- 2020 = 5,000
Reserve created during the year = 17,000 – 5,000 =12,000
I. Pre acquisition reserve
Reserve on 1-1-2020 = 5,000
Add : Proportion of reserve prior to the acquisition
( from 1-1-2020 to 1-5-2020= 4 months )
4/12 X 12,000 = 4,000
Total pre acquisition reserve = 9,000
This should be shared by both the companies in their share capital ratio i.e. 4:1
i. Anand Ltd = 4/5 X 9,000 = 7,200
ii. Ashoka Ltd = 1/5 X 9,000 = 1,800

II. Post acquisition reserve ;
= Reserve during the year – pre acquisition reserve
= 17,000 – 9,000 = 8,000
This should be share by both the companies in their share capital ratio.
Anand Ltd = 4/5 x 8,000 = 6,400
Ashoka Ltd = 1/5 X 8,000 = 1,600
3. Profit and loss A/c:
P& L A/c balance on 31-12-2020 = 30,000
P & L A/c Balance on 1-1-2020 = 6,000
Profit earned during the year = 24,000
i. Pre acquisition profit op bal = 6,000
Proportionate profit prior to acquisition
( 4/12 x 24,000) =8,000
Total pre acquisition profit =14,000
This should be share by both the companies in their share capital ratio i.e. 4 : 1
Anand Ltd = 4/5 X 14,000 =11,200
Ashoka Ltd = 1/5 X 14,000 = 2,800
ii. Post acquisition profit :
= profit on 31-12-2020 – pre acquisition profit
=30,000 – 14,000 = 16,000
This should be shared by both the companies in their share capital ratio i.e. 4 : 1
Anand Ltd = 4/5 X 16,000 = 12,800
Ashoka Ltd = 1/5 X 16,000 = 3,200

Chart showing holding co and subsidiary co interest.
Particulars Total Anand Ltd Ashoka ltd
1. Share capital (3:1) 1,00,000 80,000 20,000
2. Reserve fund
Pre acquisition reserve 9,000 7,200 1,800
Psot acquisition reserve 8,000 6,400 1,600
3. Profit and loss a/c
Pre acquisition profit 14,000 11,200 2,800
Post acquisition profit 16,000 12,800 3,200
Total 1,47,000 1,17,600
Section c
1.working notes :
1. share capital = sarvesh Ltd : Mahesh Ltd
=60,000 : 40,000
= 3:2
1. General reserve
i. Pre acquisition reserve =40,000
Sarevesh Ltd = 3/5 X 40,000 =24,000
Mahesh Ltd = 2/5 X 40,000 = 16,000
ii. Post acquisition reserve = nil
3 . P & L A/c
i. Pre acquisition = opening balance = 20,000

+ (3/12 X 50,000) =12,500
= 32,500
Sarrvesh Ltd = 3/5 X 32,500 = 19,500
Mahesh Ltd = 2/5 32,500 = 13,000
ii. Post acquisition = profit during the year =50,000

Less portion of pre acquisition =12,500
Post acquisition profit = 37,500
Sarvesh Ltd = 3/5 X 37,500 =22,500
Mahesh Ltd = 2/5 X 37,500 = 15,000
Calculation of minority interest ;
Particulars Total Sarvesh Ltd Mahesh Ltd
1. Share capital 1,00,000 60,000 40,000
2. General reserve
Pre acquisition 40,000 16,000
Post acquisition - - -
3. P&L A/c 32,500 19,500 13,000
Pre acquisition 37,500 22,500 15,000
Total 2,10,000 1,26,000 84,000
Notes to accounts :
Note, Particulars, Amount
1 Share capital
Shares @ 10 each 400,000
2 Reserves & Surplus
i. Capital Reserves -
ii. General reserve
Sarvesh Ltd = 60,000
+ share of S Ltd post Acquisition = 60,000
iii. P&L A/c

Sarvesh Ltd = (80,000+1,00,000) =1,80,000
Share in post acquisition = 22,500 =2,02,500 2,62,500
3 Minority Interest as per chart 84,000
4. Trade payable Sarvesh Ltd – 90,000
Mahesh Ltd -20,000 1,10,000
5 Tangible Fixed Assets , Sarvesh Ltd – 5,20,000
Mahesh Ltd – 1,00,000 6,20,000
6. Inventories:
Stock - Sarvesh Ltd – 20,000
Mahesh Ltd - 80,000 1,00,000
7 .Trade receivables: Drs : Sarvesh Ltd – 20,000
Mahesh Ltd – 20,000 40,000
8. cash and cash equivalents : Sarvesh Ltd – 20,000
Mahesh Ltd – 30,000 50,000

Particulars Note Amount
Equity and liabilities
1.shareholders funds
Share capital 1 4,00,000
Reserve and surplus 2 2,62,500 6,62,500
2. 2 .Minority interest 3 84,000
3.Current liabilities
Trade payables 4 1,10,000
Total equity and liabilities 8,56,500
Assets
1. Non current assets
Tangible fixed assets 5 6,20,000
Intangible fixed assets 46,500
2. Current assets
Inventories 6 1,00,000
Trade receivables 7 40,000
Cash and cash equivalents 8 50,000 1,90,000
Total assets 8,56,500
Consolidated Balance sheet of Anand Ltd with its subsidiary Ashoka Ltd as

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Scheme of corporate accounting (4th sem) 1st internal test 2021 capital ratio =

i. Anand (H) Ltd acquired 80% of shares = 80/100 X 1,00,000 =80,000/-

ii. Ashoka Ltd share capital= 1,00,000 - 80,000 = 20,000/-

Therefore share capital ratio = 80,000 : 20,000 = 4 : 1

Reserve fund on 31-12-2020 = 17,000

Reserve fund on 1-1- 2020 = 5,000

Reserve created during the year = 17,000 – 5,000 =12,000

I. Pre acquisition reserve

Reserve on 1-1-2020 = 5,000

Add : Proportion of reserve prior to the acquisition

( from 1-1-2020 to 1-5-2020= 4 months )

4/12 X 12,000 = 4,000

Total pre acquisition reserve = 9,000

i. Anand Ltd = 4/5 X 9,000 = 7,200

ii. Ashoka Ltd = 1/5 X 9,000 = 1,800

= Reserve during the year – pre acquisition reserve

= 17,000 – 9,000 = 8,000

Anand Ltd = 4/5 x 8,000 = 6,400

Ashoka Ltd = 1/5 X 8,000 = 1,600

3. Profit and loss A/c:

P& L A/c balance on 31-12-2020 = 30,000

P & L A/c Balance on 1-1-2020 = 6,000

Profit earned during the year = 24,000

i. Pre acquisition profit op bal = 6,000

Proportionate profit prior to acquisition

( 4/12 x 24,000) =8,000

Total pre acquisition profit =14,000

Anand Ltd = 4/5 X 14,000 =11,200

Ashoka Ltd = 1/5 X 14,000 = 2,800

ii. Post acquisition profit :

= profit on 31-12-2020 – pre acquisition profit

=30,000 – 14,000 = 16,000

Anand Ltd = 4/5 X 16,000 = 12,800

Ashoka Ltd = 1/5 X 16,000 = 3,200

Particulars Total Anand Ltd Ashoka ltd

1. Share capital (3:1) 1,00,000 80,000 20,000

Pre acquisition reserve 9,000 7,200 1,800

Psot acquisition reserve 8,000 6,400 1,600

3. Profit and loss a/c

Pre acquisition profit 14,000 11,200 2,800

Post acquisition profit 16,000 12,800 3,200

Total 1,47,000 1,17,600

1. share capital = sarvesh Ltd : Mahesh Ltd

i. Pre acquisition = opening balance = 20,000

Sarrvesh Ltd = 3/5 X 32,500 = 19,500

Mahesh Ltd = 2/5 32,500 = 13,000

ii. Post acquisition = profit during the year =50,000

Note, Particulars, Amount

+ share of S Ltd post Acquisition = 60,000

iii. P&L A/c

Share in post acquisition = 22,500 =2,02,500 2,62,500

3 Minority Interest as per chart 84,000

4. Trade payable Sarvesh Ltd – 90,000

Mahesh Ltd -20,000 1,10,000

5 Tangible Fixed Assets , Sarvesh Ltd – 5,20,000

Mahesh Ltd – 1,00,000 6,20,000

Stock - Sarvesh Ltd – 20,000

Mahesh Ltd - 80,000 1,00,000

7 .Trade receivables: Drs : Sarvesh Ltd – 20,000