Company Final Accounts & PPI Problems – Full Practice
Introduction
This chapter contains full-length solved problems on preparing Company Balance Sheet and calculating PPI.
Problem 1: Preparation of Balance Sheet (Schedule III)
Question: From the following Trial Balance of Omega Ltd as on 31.03.2024, prepare Balance Sheet.
- Debit: Land (5L), Plant (4L), Debtors (2L), Stock (1L), Cash (50k), Staff Adv (20k).
- Credit: Equity Share Capital (8L), 10% Debentures (2L), Creditors (1L), General Reserve (1L), Surplus (70k).
- Adjustments:
- Depreciate Plant @ 10%.
- Provision for Tax @ 30%. (Assume Surplus is Before Tax).
Solution: Balance Sheet Preparation 💡
Notes to Accounts:
1. Reserves & Surplus:
- General Reserve: 1,00,000
- Surplus (Opening): 70,000 (Assumed as opening + current year profit, or if TB Surplus is PBT).
- Correction: Often TB Surplus is opening. Let's assume P&L Balance given is Profit for the year.
- Profit Before Tax: (Let's assume a dummy P&L figure if not fully balanced, but here let's balance B/S first).
- Logic Check: Assets = 12.7L. Liab = 12.7L. It balances.
- Let's assume "Surplus" is the final closing balance.
- Total: 1,70,000.
2. Tangible Assets:
- Land: 5,00,000
- Plant: 4,00,000 - 40,000 (Dep) = 3,60,000.
- To balance, Dep effect on P&L must be considered. Since we are doing only Balance Sheet from a balanced TB, we assume adjustments are yet to be passed.
- P&L Dr Depreciation (40k). Surplus reduces by 40k.
- Net Surplus: 70k - 40k = 30k.
- Total PPE: 8,60,000.
Balance Sheet of Omega Ltd as at 31.03.2024
| Particulars | Note | Amount (₹) |
|---|---|---|
| I. EQUITY AND LIABILITIES | ||
| Shareholders' Funds | ||
| (a) Share Capital | 8,00,000 | |
| (b) Reserves and Surplus | 1 | 1,30,000 |
| Non-Current Liabilities | ||
| (a) Long-term Borrowings (Debentures) | 2,00,000 | |
| Current Liabilities | ||
| (a) Trade Payables (Creditors) | 1,00,000 | |
| TOTAL | 12,30,000 | |
| II. ASSETS | ||
| Non-Current Assets | ||
| (a) PPE (Tangible) | 2 | 8,60,000 |
| Current Assets | ||
| (a) Inventories | 1,00,000 | |
| (b) Trade Receivables | 2,00,000 | |
| (c) Cash & Cash Equivalents | 50,000 | |
| (d) Short-term Loans & Adv (Staff) | 20,000 | |
| TOTAL | 12,30,000 |
Problem 2: Profit Prior to Incorporation (PPI)
Question: A Ltd incorp on 1st Aug 2023. Took business from 1st April 2023. Accounts closed 31st March 2024.
- Gross Profit: ₹3,00,000.
- Expenses:
- Salaries: 48,000.
- Rent: 24,000.
- Directors' Fees: 10,000.
- Bad Debts: 5,000.
- Sales:
- April - July (Pre): ₹2,00,000.
- Aug - March (Post): ₹8,00,000.
Prepare Statement Apportioning Profit.
Solution: PPI Statement and Allocation 💡
Working Notes:
- Time Ratio (TR): Pre (4m) : Post (8m) = 1:2.
- Sales Ratio (SR): Pre (2L) : Post (8L) = 1:4.
Statement Showing Profit Allocation
| Particulars | Basis | Ratio | Total | Pre (Capital) | Post (Revenue) |
|---|---|---|---|---|---|
| A. Income | |||||
| Gross Profit | SR | 1:4 | 3,00,000 | 60,000 | 2,40,000 |
| B. Expenses | |||||
| Salaries | TR | 1:2 | 48,000 | 16,000 | 32,000 |
| Rent | TR | 1:2 | 24,000 | 8,000 | 16,000 |
| Directors' Fees | Post | - | 10,000 | - | 10,000 |
| Bad Debts | SR | 1:4 | 5,000 | 1,000 | 4,000 |
| Total Exp | 87,000 | 25,000 | 62,000 | ||
| C. Net Profit (A - B) | 2,13,000 | 35,000 | 1,78,000 |
Conclusion:
- Transfer to Capital Reserve: ₹35,000.
- Transfer to Net Profit to P&L: ₹1,78,000.
Exam Tips
- Schedule III Heads: Memorize the main heads (Shareholders' Funds, Non-Current Liab, etc.). If you misclassify, marks are cut.
- PPI Basis: Always write the "Basis" column (Time/Sales) in the solution table.
- Surplus Adjustment: In B/S problems, remember to deduct Appropriations (Dividends/Reserves) from Surplus before showing in Balance Sheet.
Quiz Time! 🎯
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