GU Corporate Accounting 2024 Solved Question Paper [Gauhati University BCom 2nd Semester NEP FYUGP]

In this post, we have provided the Gauhati University BCom 2nd Semester Corporate Accounting Solved Question Paper 2024. This resource will help students understand the exam pattern, practice important questions, and prepare effectively for their exams.

By referring to this GU NEP FYUGP BCom 2nd Semester Corporate Accounting Solved Question Paper 2024, students can gain insights into the marking scheme, question format, and essential topics covered in the syllabus.

Corporate Accounting Solved Paper 2024

1 (Sem-2) BCM 01

2024

COMMERCE

Paper: BCM0200104

(Corporate Accounting)

Full Marks: 60

Time: 2½ hours

The figures in the margin indicate full marks for the questions.

Answer either in English or in Assamese.

1. Answer the following as directed: 1×8=8

(i) The Companies Act, 2013 follows Schedule III format for preparation of Final Account.

(ii) Reserve arising out of revaluation of assets is also available for issue for bonus shares.
Answer: False

(iii) The buy-back of shares does not exceed 25 percent of the total paid-up capital and free reserves of the company.

(iv) In case of partly owned subsidiary, the question of minority shareholders will not arise.
Answer: False

(v) Internal reconstruction entails reduction of accumulated loss and change in capital structure.
Answer: True

(vi) Under asset-backing method, value of one equity share = Net Assets divided by number of equity shares.

(vii) Under net assets method, purchase consideration is equal to the amount of net assets taken over by the company from the firm.

(viii) One reason for issuing right shares to the existing shareholders is to raise additional capital without diluting ownership of existing shareholders.

2. Answer in brief any six questions: 2×6=12

(a) State the meaning of Trade payable in preparing the final accounts of a company.

Answer: Trade payables refer to the amounts a company owes to its suppliers for goods or services purchased on credit. It is shown under current liabilities in the final accounts.

(b) When and how profit is capitalised?

Answer: Profit is capitalised when it is converted into capital by issuing additional shares or by reinvesting retained earnings back into the business. This usually occurs to strengthen the company's financial structure or fund expansion.

(c) Explain the meaning of Dog goodwill and Cat goodwill.

Answer:

1. Dog goodwill refers to goodwill that is non-transferable and linked directly to a specific person or skill, such as a professional's reputation.

2. Cat goodwill is transferable goodwill, which depends on the business's location, name, or customer loyalty rather than individual skill.

(d) What is Escrow Account?

Answer: An escrow account is a third-party account where funds or assets are held temporarily until specific conditions or obligations are met, such as during mergers or acquisitions.

(e) What are the two advantages of amalgamation?

Answer:

1. It helps in reducing competition by merging similar businesses.

2. It achieves economies of scale, improving efficiency and profitability.

(f) What is Consolidated Balance Sheet?

Answer: A consolidated balance sheet combines the financial statements of a holding company and its subsidiaries, presenting their financial position as a single entity.

(g) Write two needs of valuation of shares.

Answer:

1. To determine the fair value of shares during mergers or acquisitions.

2. For taxation purposes, such as inheritance tax or gift tax.

(h) Write the meaning of reduction of share capital.

Answer: Reduction of share capital involves decreasing the company's share capital, often to eliminate losses or return excess capital to shareholders, following legal procedures.

(i) Mention any four components of financial statements of a company.

Answer:

1. Balance Sheet.

2. Profit and Loss Account.

3. Cash Flow Statement.

4. Notes to Accounts.

(j) Write a note on Minority interest in a holding company.

Answer: Minority interest represents the portion of net assets or profits of a subsidiary that is attributable to shareholders other than the holding company. It appears as a separate line item in the consolidated financial statements.

3. Answer any four questions in short: 5x4=20

(a) What is Bonus share? Mention three objectives of issue of bonus shares.

Answer:- A bonus share is a free share of stock given to existing shareholders by a company from its retained earnings or reserves. These shares are issued in a specific ratio to the shareholders, such as 1:1 (one bonus share for every share held). Bonus shares increase the total number of shares held by shareholders without altering the company's total capital.

Three Objectives of Issue of Bonus Shares:

1. Reward Shareholders: To reward existing shareholders for their loyalty by giving them additional shares without requiring extra investment.

2. Improve Market Perception: To increase the liquidity of shares in the market, making the company more attractive to investors.

3. Capitalization of Reserves: To convert accumulated reserves or retained earnings into share capital, reflecting the company’s strong financial position.

(b) What is the treatment of preliminary expenses and proposed dividend while preparing the final accounts of companies ?

Answer:- Treatment of Preliminary Expenses and Proposed Dividend While Preparing the Final Accounts of Companies:

1. Preliminary Expenses:

1. Preliminary expenses are intangible assets incurred during the formation of a company.

2. These are shown under the head "Other Non-Current Assets" on the asset side of the Balance Sheet as per Schedule III of the Companies Act, 2013.

3. A portion of these expenses is written off each year and charged to the Profit and Loss Account.

2. Proposed Dividend:

1. Proposed dividends are not recognized as a liability in the Balance Sheet until they are approved by shareholders in the general meeting.

2. As per the Companies Act, 2013, dividends are disclosed in the notes to accounts under the head "Equity and Liabilities" (under "Reserves and Surplus").

3. Once approved, the dividend payable is shown under "Current Liabilities" in the Balance Sheet. The amount is also deducted from Retained Earnings or Profit and Loss Account in the statement of changes in equity.

(c) Write any five points of distinction between amalgamation in the nature of merger and amalgamation in the nature of purchase.

Answer:-The Distinction between Amalgamation in the Nature of Merger and Amalgamation in the Nature of Purchase:

Basis of Distinction	Amalgamation in the Nature of Merger	Amalgamation in the Nature of Purchase
1. Objective	To combine two or more companies into a single entity, retaining continuity.	To acquire another company's business or assets.
2. Treatment of Assets and Liabilities	Assets and liabilities of the transferor company are recorded at their book values.	Assets and liabilities are recorded at their fair market values.
3. Shareholders’ Interest	Shareholders of the transferor company maintain a substantial shareholding in the transferee company.	Shareholders of the transferor company may or may not hold shares in the transferee company.
4. Consideration	Consideration is discharged entirely in equity shares.	Consideration can be in the form of cash, shares, or other assets.
5. Legal Identity	The identity of the merging companies is blended, forming a single entity.	Only the acquiring company retains its identity, while the acquired company loses its identity.

(d) Describe the manner of preparing consolidated financial statements.

Answer:- To prepare consolidated financial statements, the parent company and its subsidiaries combine their financial results as if they are one company. Here’s how it’s done:

1. Identify Parent and Subsidiaries: The parent company controls the subsidiary, usually owning more than 50% of its shares.

2. Eliminate Intercompany Transactions: Any sales, loans, or debts between the parent and its subsidiaries are removed from the financial statements to avoid double counting.

3. Combine Financial Statements: Add together the income statements, balance sheets, and cash flow statements of the parent and all its subsidiaries.

4. Adjust for Fair Value and Goodwill:

1. When the parent acquires a subsidiary, adjust the value of assets and liabilities to reflect their fair value on the acquisition date.

2. If the parent paid more than the value of the subsidiary’s assets, the extra amount is recorded as goodwill.

5. Adjust for Non-controlling Interests: If the parent owns less than 100% of a subsidiary, show the share of the subsidiary not owned by the parent as non-controlling interest in the financial statements.

By following these steps, the consolidated financial statements show the total financial position and results of the entire group, rather than showing the financials of each company separately.

(e) Gadai Limited decided to make a right issue in the proportion of one new share of Rs. 200 each at a premium of Rs. 50. each to the shareholders for every three existing shares. The market value of the shares at the time of announcement of right issue is Rs. 500 each. Calculate the value of right.

Solution:- Download Solved PDF for Complete Solution from the GU BCom 2nd Semester Page.

(f) Prapti Company Limited had an issued capital of Rs. 5,00,000 in 50,000 shares of Rs. 10 each on which Rs. 7 per share has been called up. The company now decides to reduce the share capital to shares of Rs. 7 each fully paid by cancelling the unpaid amount of Rs. 3 per share. Show Journal entries.

Solution:- Download Solved PDF for Complete Solution from the GU BCom 2nd Semester Page.

(g) The net assets of Disha Limited were Goodwill Rs. 56,400, Building, Rs. 9,00,000, Machinery Rs. 9,00,000. It has the liabilities as Preference Share Capital Rs. 2,00,000, Debentures Rs. 10,00,000, Rs. 2,50,000. The company has 10,000 equity shares of Rs.10 each. Find out the intrinsic value of one equity share. Trade creditors. 

Solution:- Download Solved PDF for Complete Solution from the GU BCom 2nd Semester Page.

(h) What are the situations that call for internal reconstruction of a company?

Answer:- Internal reconstruction of a company is done to fix its financial problems and make it healthier, without closing down or getting help from outside. 

Some situations that need internal reconstruction include:

1. Losing Money: If a company keeps losing money and its debts are higher than its assets, it may need to restructure to recover and avoid shutting down.

2. Having Useless Assets: If a company owns things that aren’t helping it make money, it may need to sell or remove these assets to improve its finances.

3. Too Much Debt: When a company owes too much money and can’t pay it, internal reconstruction can help by negotiating with creditors to reduce or reschedule the debt.

4. Not Enough Working Capital: If a company doesn’t have enough cash to run its daily operations, it might need to reorganize its finances, like changing share capital or altering reserves.

5. Weak Financial Structure: If the company relies too much on debt or doesn’t have enough equity, internal reconstruction can help balance its financial situation by converting debt into shares or adjusting capital.

6. Legal Requirements: If the company is not meeting certain legal or financial rules, internal reconstruction can help it comply with these regulations.

7. Changing Market Conditions: If the market or business environment changes, the company may need to reorganize to adapt to new challenges and opportunities.

8. Preparing for Merger or Restructuring: Internal reconstruction can be part of a plan to restructure the company before merging with another company or making other big changes.

In short, internal reconstruction helps a company fix its financial problems so it can continue to operate and avoid shutting down.

4. Answer any two questions: 10×2=20

(a) From the following balances of Dham Limited as on 31-3-2024, prepare a Balance Sheet as per the Companies Act, 2013:

Particulars	Rs.
Term Loan	5,00,000
Trade creditors	5,72,500
Cash Balance	1,37,500
Loose Tools	25,000
Investments	2,62,500
Provision for Taxation	85,000
Securities Premium	2,37,500
Loan from Debtors	1,00,000
General Reserve	10,25,000
Equity Share Capital	6,86,500
Debtors	6,02,400
Stores	2,00,000
Fixed Assets	20,75,000
Finished Goods	3,75,000
Capital Work-in-progress	1,29,000
Preference share capital	1,50,000
Debentures	4,50,000

Solution: 

Balance Sheet of Dham Limited as on 31st March, 2024

(As per Schedule III of the Companies Act, 2013)

Particulars	Note No.	Amount (Rs.)
I. EQUITY AND LIABILITIES
1. Shareholders' Funds:
(a) Equity Share Capital	1	6,86,500
(b) Preference Share Capital	1	1,50,000
(c) Securities Premium	2	2,37,500
(d) General Reserve	2	10,25,000
Total Shareholders' Funds		20,99,000
2. Non-Current Liabilities:
(a) Long-Term Borrowings (Term Loan)	3	5,00,000
(b) Debentures	3	4,50,000
Total Non-Current Liabilities		9,50,000
3. Current Liabilities:
(a) Trade Creditors	4	5,72,500
(b) Provision for Taxation	4	85,000
(c) Loan from Debtors	4	1,00,000
Total Current Liabilities		7,57,500
TOTAL EQUITY AND LIABILITIES		38,06,500

II. ASSETS
1. Non-Current Assets:
(a) Fixed Assets	5	20,75,000
(b) Capital Work-in-Progress	5	1,29,000
(c) Investments	6	2,62,500
Total Non-Current Assets		24,66,500
2. Current Assets:
(a) Inventories (Stores + Finished Goods)	7	5,75,000
(b) Trade Receivables (Debtors)	8	6,02,400
(c) Cash and Cash Equivalents	9	1,37,500
(d) Loose Tools	9	25,000
Total Current Assets		13,39,900
TOTAL ASSETS		38,06,500

(b) Polku Limited has Rs. 5,00,000 in equity of Rs. 10 each. It has Rs. 95,000 in General Reserve, Rs. 32,000 in Security Premium Account. The Company has passed necessary resolutions to buy- back 10,200 equity shares at par. In order to execute the resolution, Rs. 40,000, 8% debentures are issued at 5% discount repayable after 4 years at par.

Give Journal entries for buy-back of shares.

Solution:- Download Solved PDF for Complete Solution from the GU BCom 2nd Semester Page.

(c) Niribili Limited having a paid-up capital of Rs. 6,00,000 divided into 60,000 shares of Rs.10 each has reserve of Rs.4,00,000. The Company has decided to declare bonus out of the reserve and to distribute the same in the form of bonus shares of Rs. 10 each as fully paid- up to the existing shareholders in the ratio of one bonus share for every five shares held in the company. Calculate the amount of bonus to be declared and show the Journal entries in the books of the company and represent the items in the Balance Sheet.

Solution:- Download Solved PDF for Complete Solution from the GU BCom 2nd Semester Page.

(d) Explain the provisions of AS-14 relating of to accounting treatment amalgamation in the books of the transferee company.

Answer:-  AS-14: Accounting for Amalgamations – Accounting Treatment in the Books of the Transferee Company.

Accounting Standard (AS) 14 deals with the accounting treatment of amalgamations, including both mergers and acquisitions. The standard provides specific guidance on how the transferee company (the company receiving the assets and liabilities of the transferor company) should account for an amalgamation.

There are two types of amalgamations recognized by AS-14:

1. Amalgamation in the Nature of Merger

2. Amalgamation in the Nature of Acquisition

1. Amalgamation in the Nature of Merger: In this type of amalgamation, the transferee company is required to account for the amalgamation as follows:

1. Assets and Liabilities of the Transferor Company: All assets and liabilities of the transferor company are recorded in the books of the transferee company at their book value.

2. No Goodwill or Capital Reserve: The difference between the book value of the assets acquired and the liabilities assumed is not recognized as goodwill. If the liabilities exceed the assets, a capital reserve is created.

3. Shareholders of the Transferor Company: The shareholders of the transferor company receive equity shares in the transferee company on a one-to-one basis or any other agreed ratio, without any adjustment for the fair value of assets or liabilities.

4. No Profit or Loss on Amalgamation: There is no profit or loss recognized in the books of the transferee company because the assets and liabilities are recorded at their book values.

2. Amalgamation in the Nature of Acquisition: In this case, the transferee company accounts for the amalgamation as follows:

1. Assets and Liabilities of the Transferor Company: The assets and liabilities are recorded at their fair values at the date of amalgamation.

2. Goodwill or Capital Reserve: If the purchase consideration paid by the transferee company exceeds the fair value of the assets acquired, the difference is recognized as goodwill. If the fair value of assets exceeds the purchase consideration, the difference is recorded as a capital reserve.

3. Recognition of Profit or Loss: The transferee company recognizes a profit or loss on the acquisition, based on the difference between the purchase price and the fair value of the assets and liabilities acquired.

3. Disclosure Requirements: AS-14 also requires the following disclosures in the financial statements:

1. Name and nature of the amalgamation (merger or acquisition).

2. Date of amalgamation and the method used for accounting.

3. The details of the purchase consideration, such as cash or shares issued, and any goodwill or capital reserve created.

4. A statement showing the assets and liabilities of the transferor company as on the date of amalgamation and the corresponding fair values.

Conclusion: AS-14 provides clear guidelines for the accounting treatment of amalgamations in the books of the transferee company. The key distinction is whether the amalgamation is in the nature of a merger (no goodwill, book value accounting) or an acquisition (goodwill, fair value accounting). Proper adherence to these provisions ensures that the financial statements of the transferee company reflect a true and fair view of the combined entity.

(e) Vishal Limited acquired 200 (4/5th) equity shares of Prajapati Limited of Rs.100 each on 31-03-2024. The summarised Balance Sheet of Vishal Ltd. and Prajapati Ltd on 31-03-2024 were as under:

Particulars	Vishal Ltd (Rs.)	Prajapati Ltd (Rs.)
I. EQUITY AND LIABILITIES
1. Shareholders’ Funds
(a) Share Capital (Equity shares of Rs. 10 each fully paid)	80,000	25,000
(b) Reserves and Surplus
General Reserve	30,000	8,000
Surplus (Balance of Statement in P&L)	15,000	12,000
2. Current Liabilities
Trade Payables (Sundry Creditors)	20,000	15,000
TOTAL	1,45,000	60,000
II. ASSETS
1. Non-Current Assets
(a) Property and Equipment	70,000	25,000
(b) Non-Current Investments (200 shares in Prajapati Ltd.)	30,000	—
2. Current Assets	45,000	35,000
TOTAL	1,45,000	60,000

Prajapati Ltd. had credit balance of Rs. 8,000 in the General Reserve and Rs. 4,000 in Statement of Profit and Loss when Vishal Ltd. acquired the shares in Prajapati Ltd. Prepare a consolidated Balance Sheet. Show necessary workings.

Solution:- 

Consolidated Balance Sheet of Vishal Ltd. and Prajapati Ltd. 

As on 31-03-2024

Particulars	Note No.	Amount (₹)
I. EQUITY AND LIABILITIES
1. Shareholders' Funds:
(a) Share Capital	1	80,000
(b) Reserves and Surplus	2	49,000
(c) Capital Reserve	3	6,000
2. Minority Interest	4	9,000
3. Current Liabilities:
(a) Trade Payables	5	35,000
Total Equity and Liabilities		1,79,000
II. ASSETS
1. Non-Current Assets:
(a) Property and Equipment	6	95,000
(b) Investments	7	—
2. Current Assets:
(a) Current Assets	8	84,000
Total Assets		1,79,000

WORKING NOTES FOR CONSOLIDATED BALANCE SHEET: 

1. Calculation of Cost of Control (Goodwill or Capital Reserve)

• Cost of Investment by Vishal Ltd. in Prajapati Ltd.

• Vishal Ltd. purchased 200 shares of ₹100 each in Prajapati Ltd.

• Total Cost of Investment = ₹30,000

• Proportionate Net Assets of Prajapati Ltd. acquired by Vishal Ltd.

• Share Capital (200 shares of ₹100, out of 250 shares) = 200 × ₹100 × 4/5 = ₹20,000

• General Reserve = ₹8,000 × 4/5 = ₹6,400

• Surplus (P&L) = ₹12,000 × 4/5 = ₹9,600

Total Proportionate Net Assets = ₹20,000 (Share Capital) + ₹6,400 (General Reserve) + ₹9,600 (Surplus) = ₹36,000

• Capital Reserve Calculation
  Since the cost of investment (₹30,000) is less than the total proportionate net assets (₹36,000), the difference of ₹6,000 is treated as a Capital Reserve.

• Capital Reserve = ₹36,000 - ₹30,000 = ₹6,000

2. Minority Interest Calculation

• Minority Interest in Prajapati Ltd. (1/5th not acquired by Vishal Ltd.)

• Share Capital (1/5) = ₹25,000 × 1/5 = ₹5,000

• General Reserve (1/5) = ₹8,000 × 1/5 = ₹1,600

• Surplus (P&L) (1/5) = ₹12,000 × 1/5 = ₹2,400

Total Minority Interest = ₹5,000 (Share Capital) + ₹1,600 (General Reserve) + ₹2,400 (Surplus) = ₹9,000

3. Consolidated Reserves and Surplus

• General Reserve:

• Vishal Ltd. General Reserve = ₹30,000

• Share of Prajapati Ltd. in General Reserve = ₹6,400

Total General Reserve = ₹30,000 (Vishal Ltd.) + ₹6,400 (Share of Prajapati Ltd.) = ₹31,600

• Surplus (P&L):

• Vishal Ltd. Surplus = ₹15,000

• Share of Prajapati Ltd. in Surplus = ₹2,400

Total Surplus = ₹15,000 (Vishal Ltd.) + ₹2,400 (Share of Prajapati Ltd.) = ₹17,400

4. Preparation of Consolidated Balance Sheet

• Shareholders’ Funds:

• Share Capital: ₹80,000 (Vishal Ltd.)

• Reserves and Surplus: ₹31,600 (General Reserve) + ₹17,400 (Surplus) = ₹49,000

• Capital Reserve: ₹6,000

• Minority Interest: ₹9,000

• Current Liabilities:

• Trade Payables: ₹35,000 (Combined, including both companies)

• Non-Current Assets:

• Property and Equipment: ₹70,000 (Vishal Ltd.) + ₹25,000 (Prajapati Ltd.) = ₹95,000

• Current Assets:

• Current Assets: ₹45,000 (Vishal Ltd.) + ₹35,000 (Prajapati Ltd.) = ₹84,000

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