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Ch 11 Unit 1 Preparation of Financial Statements - 2 | CA Inter Advanced Accounting | CA Parag Gupta

CA Parag Gupta 2.0・2 minutes read

Delta Limited's trial balance as of March 31, 2002 includes detailed debit and credit items categorizing assets, expenses, liabilities, and incomes. The company's financial statement reveals a comprehensive breakdown of equity, liabilities, long-term borrowings, current liabilities, and various reserves, providing a thorough overview of its financial standing and operations.

Insights

  • Debit items in Delta Limited's trial balance represent assets or expenses, while credit items represent liabilities or incomes, providing a clear distinction between the two sides of the balance sheet.
  • Detailed information on equity and liabilities in the balance sheet includes specifics on share capital, reserves, long-term borrowings, and current liabilities, offering a comprehensive breakdown of the company's financial structure and obligations.

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Recent questions

  • What do debit items represent in accounting?

    Assets or expenses.

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Summary

00:00

Delta Limited Trial Balance Analysis 2002

  • Trial balance of Delta Limited as on 31 March 2002 provided with debit and credit items.
  • Debit items represent assets or expenses, while credit items represent liabilities or incomes.
  • Assets include cash in hand, plant and machinery cost, trade receipt bill, closing inventory, cash at bank, and purchases.
  • Expenses consist of factory expense, administrative expense, selling expenses, and interest on debentures.
  • Liabilities on the credit side include debenture liability, share capital liability, reserve liability, profit and loss liability, security premium, sales, trade payables liability, provision for depreciation, and suspense.
  • Additional information includes authorized share capital of 80,000 shares of Rs 10 each and revaluation of land at Rs 960,000.
  • Disclosure of equity share capital issued for consideration other than cash and suspense account of Rs 10,000 related to the sale of machinery.
  • Calculation of book value and gain from the sale of machinery based on cost and accumulated depreciation.
  • Provision for depreciation on plant and machinery at 10% of cost, impacting the profit and loss statement and provision for depreciation.
  • Information on bank balance allocation between a scheduled bank and a non-scheduled bank, with Rs 5,000 in the latter.
  • Provision for income tax at 30% of profit before tax, affecting the profit and loss statement and current liabilities.
  • Details on trade receipt bills overdue for more than six months, impacting the balance sheet presentation and notes to accounts.

17:54

Equity, Liabilities, and Share Capital Analysis

  • The main head is Equity and Liabilities, with the first sub-head being Share Capital.
  • Share Capital includes 8,800 shares of Rs 10 each, totaling Rs 8,00,000.
  • The issued and subscribed share capital is 50,000 shares of Rs 10 each, amounting to Rs 5,00,000.
  • Colson arrears of 5,000 shares at Rs 10 each are given, resulting in Rs 4,95,000.
  • A disclosure is needed for the 5,000 shares issued for consideration other than cash.
  • The second sub-head under Equity and Liabilities is Reserve and Surplus.
  • The third main head is Non-Current Liabilities, with the first sub-head being Long Term Borrowing.
  • Debentures are included under Long Term Borrowing, necessitating note number three.
  • Tax liability and other long-term liabilities are not present in the question.
  • The next main head is Current Liabilities, with Trade Payables and Other Current Liabilities being the sub-heads.

41:05

Financial Analysis of Company XYZ

  • General Reserve of ₹1, PNL of ₹775, Security Premium of ₹3, and Revaluation Reserve of ₹160 were given in the question.
  • The profit for the year will be determined later after considering this year's profit.
  • In the Reserve and Surplus section, four items were listed: Securities Premium of 0, Revaluation Reserve of 160, General Reserve of 150, and the current year's profit.
  • Long-term Borrowings included debentures worth ₹10,000.
  • The Plant and Machinery section detailed land costing ₹800, revalued at ₹160, and Plant and Machinery with an opening balance of ₹824, reduced by ₹24 due to a sale.
  • Provision for Depreciation was initially ₹150, reduced by ₹20 due to a sale, and increased by ₹80 for the year, totaling ₹210.
  • Total Property, Plant, and Equipment amounted to ₹1,550, comprising land and Plant and Machinery.
  • Trade Receivables included debts outstanding for more than six months, totaling ₹120.
  • Cash and Cash Equivalents included ₹2,000 in hand and ₹23,000 in a scheduled bank.
  • Other Income consisted of a gain of ₹6,000 from the sale of Plant and Machinery, contributing to the total revenue of ₹12,060.

01:01:36

Examining Expenses: Schedule Three, Question 14

  • The expenses incurred by everyone are accounted for as an adjusted purchase, with a particular focus on a specific expense at one place. This expense, part one of schedule three, corresponds to question number 14, with the possibility of additional schedules. Part two and notes, typically valued at 14 marks, could potentially be 15 marks. The figures, totaling 1796, are deemed accurate and require further examination.
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