 Illustration 26: [ Name:Nilesh Dhatavkar , Roll No:122, Div:A]

The Summarized Balance Sheet Of Nilesh Ltd As On 31st March,2013

PARTICULARS NOTE AMOUNT(₹) AMOUNT(₹)

1. EQUITY AND LIABILITIES
A] Shareholder`s funds
a] Share capital 1 15,00,000
b] Reserves and Surplus 2 [20,00,000] [5,00,000]
B] Non-Current Liabilities
Long Term Borrowings 3 10,00,000
C ]Current liabilities
a] Short Term Borrowing 4 10,00,000
b] Trade Payables 5,00,000 15,00,000
TOTAL 20,00,000
2. ASSETS
A] Non-current Assets
Fixed Assets
-Tangible Assets 5 11,00,000
-Intangible Assets 6 3,00,000 14,00,000
B] Current assets
a] Inventories 3,00,000
b] Trade Receivables 2,50,000
c] Deferred Revenue expenditures 50,000 6,00,000
TOTAL 20,00,000
NOTES TO ACCOUNTS AMOUNT(₹)
1. Share Capital
Authorised, issued, and fully paid
a] 10,000 Equity Shares of ₹200 each 10,00,000
b] 5,000 16% Preference shares of ₹200 each 5,00,000
TOTAL 15,00,000
2. Reserves and Surplus
Profit and Loss A/c [10,00,000]
3. Long Term Borrowings
8% Debentures 10,00,000
4. Short Term Borrowings
a] Loan from Directors 6,00,000
b] Bank Overdraft 4,00,000
TOTAL 10,00,000
5. Fixed Assets
Tangible Assets
-Freehold property 8,00,000
-Plant 3,00,000
TOTAL 11,00,000
6. Intangible Assets
a] Goodwill 2,00,000
b] Trademark 1,00,000
TOTAL 3,00,000

The Following scheme of Internal Reconstruction was framed, approved by the Court , all the
concerned parties and implemented.

1. The Preference shares to be written down to ₹50 each and the Equity shares to ₹40 each.
Each class of shares then to be converted into shares of ₹200 each.
2. The Debentureholders to take over freehold property [Book value ₹4,00,000] at a valuation of
₹5,00,000 in part repayment of their holdings. Remaining Freehold property to be Revalued
at ₹12,00,000.
3. Loan from Directors to be waived off in full.
4. Stock of ₹1,00,000 to be written off ₹25,000 to be provided for bad debts.
5. Profits and Loss A/c balance, Trademark, Goodwill and Deferred revenue expenditure to be
written off.

Pass Journal Entries for all the above mentioned transactions. Also prepare Capital Reduction A/c
and Company`s Balance Balance Sheet immediately after reconstruction.

SOLUTION:

JOURNAL ENTRIES IN THE BOOKS “NILESH LTD”.

NO PARTICULARS DEBIT[₹] CREDIT[₹]

1 16% Preference Share Capital A/c Dr 5,00,000
To 16% Preference Share Capital A/c 1,25,000
To Capital Reduction A/c 3,75,000
[Being the preference shares of ₹200 each
reduced to ₹50 each as per the approved
scheme]
2 Equity Share Capital A/c Dr 10,00,000
To Equity Share Capital A/c 2,00,000
To Capital Reduction A/c 8,00,000
[Being the Equity Shares of ₹ 200 each
reduced to ₹40 each]
3 Preference Share Capital A/c Dr 1,25,000
To Preference Share Capital A/c 1,25,000
[Being conversion of 5,000 shares of ₹ 50
each to 1250 shares of ₹ 200 each]
4 Equity Share Capital A/c Dr 2,00,000
To Equity Share Capital A/c 2,00,000
[Being conversion of 10,000 shares of ₹40
each to 2000 shares of ₹ 200 each]
5 Freehold Premises A/c Dr 1,00,000
To Capital Reduction A/c 1,00,000
[Being value of freehold property
appreciated]
6 16% Debentures A/c Dr 5,00,000
To Freehold Premises A/c 5,00,000
[Being claim of debentureholders settled in
part by transfer of Freehold property]
7 Freehold Property A/c Dr 8,00,000
To Capital Reduction A/c 8,00,000
[Being appreciation in the value of Freehold
Property]
8 Directors Loan A/c Dr 6,00,000
To Capital Reduction A/c 6,00,000
[Being Directors loan waived in full ]
9 Capital Reduction A/c Dr 26,75,000
To Deferred Revenue ExpenditureA/c 50,000
To Profit and loss A/c 20,00,000
To Provision of Doubtful Debts A/c 25,000
To Inventories A/c 1,00,000
To Goodwill A/c 2,00,000
To Trademark A/c 1,00,000
To Capital Reserve A/c 2,00,000
[Being certain value of various assets
[tangible and intangible], profit and loss A/c
debit balance written off and balance
transferred to capital reserve A/c as per the
scheme]
Dr CAPITAL REDUCTION A/c Cr

PARTICULARS JV AMOUNT[₹] PARTICULARS JV AMOUNT[₹]

To Provision for Doubtful 9 25,000 By Preference Share 1 3,85,000
Debts A/c Capital A/c
To Inventories A/c 9 1,00,000 By Equity Share Capital 2 8,00,000
A/c
To Profit and Loss A/c 9 20,00,000 By Freehold Property A/c 5 1,00,000
To Trademark A/c 9 1,00,000 By Freehold Property A/c 7 8,00,000
To Goodwill A/c 9 2,00,000 By Directors Loan A/c 8 6,00,000
To Deferred Revenue 9 50,000
Expenditure A/c
To Capital Reserve A/c 9 2,00,000
26,85,000 26,85,000

BALANCE SHEET OF “NILESH LTD “.[&REDUCED ] AS ON 31ST MARCH, 2013

PARTICUARS NOTE AMOUNT[₹]

NO.
1. EQUITY AND LIABILITIES
A] Shareholders Funds
a] Share capital 1 3,25,000
b] Reserves And Surplus (Capital Reserve ) 2,00,000
B]Non-Current Liabilities
Long Term Borrowing (16% Debentures ) 5,00,000
C]Current Liabilities
a] Short Term Borrowing (Bank Overdraft) 4,00,000
b] Trade Payables 5,00,000
TOTAL 19,25,000
2. ASSETS
A] Non-current Assets
Fixed Assets 2 15,00,000
-Tangible assets
B] Current Assets
a] Inventories 2,00,000
b] Trade Receivables (2,50,000-25,000) 2,25,000
TOTAL 19,25,000