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ACCOUNTING FOR ENTREPRENEURS

SELF ASSESSMENT PAPER


BY :
DR. T.K. JAIN

AFTERSCHO☺OL
– DEVELOPING CHANGE MAKERS
CENTRE FOR SOCIAL ENTREPRENEURSHIP
PGPSE PROGRAMME –
World’ Most Comprehensive programme in social entrepreneurship &
spiritual entrepreneurship - OPEN FOR ALL FREE FOR ALL
M: 9414430763
tkjainbkn@yahoo.co.in

FILL IN THE BLANKS :

1. The holding company and the subsidiary company may have a


number of inter-company transactions which may be       while
preparing the consolidated balance sheet.

2. If the price paid by the holding company for the shares acquired in
the subsidiary company is more than the intrinsic value of the shares
acquired, the difference is treated as      .

3.      is equal to the paid-up value of shares held by minority


shareholders plus proportionate share of the company’s profits and
reserves plus proportionate shares of profits on revaluation of assets of
the company minus proportionate share of company’s losses minus
proportionate share of loss on revaluation of assets of the company.

4. If fixed assets of the subsidiary company are      at the time of


acquisition of shares by the holding company without any alteration in
book-values, the excess or short depreciation should be adjusted by
debiting or crediting the Consolidated Profit and Loss Account and
crediting or debiting the respective Asset Account.

5. Companies declaring distributing or paying dividends are liable to


pay tax on the same at prescribed rate which is known tax on      .

6. Profit and Loss Appropriation Account shows the      of the net
profit as disclosed by the Profit and Loss Account proper.
7. Balance sheet of a company shall be prepared in the form set out in
Part      and profit and loss account of a company shall comply with
the requirements of Part       of Schedule       of the Companies Act,
1956.

8. Which of these are advantages of declaring bonus shares to the


shareholders:
As the bonus is not paid in cash, the liquid resources of the company
are not disturbed.

a. more realistic picture of the company’s capital structure is


displayed in the Balance Sheet.
b. With the issue of bonus shares, the overall market capitalization
will increase
c. This is the cheapest method of increasing capital which is
necessary in case of expansion of business. (However, in effect it
does not increase the total resources at the disposal of the
company).
d. Bonus issue will increase the market value of the company
e. Bonus issue help in utilization of provisions.

f. Abnormally high rate of dividend can be reduced by increasing


capital.

g. As the profit is permanently ploughed back into the company, its


credit worthiness increases.

h. From the view point of the shareholders

i. If the shareholder requires cash, they can easily convert the


bonus shares into cash.

j. These bonus shares become a permanent source of income to


the shareholders, if the rate of dividend is maintained or not
reduced proportionately.

k. Although the rate of dividend falls, the total amount of dividend


may increase as the shareholders get dividend on a larger
number of shares.
9. Which of these about bonus issue is incorrect :
a. The bonus issue shall be made out of free reserves built out of
the genuine profits or share premium collected in cash only.

b. Reserves created by revaluation of fixed assets can be used for


issue of bonus shares.
c. The declaration of bonus issue, in lieu of dividend, is allowed

d. The bonus issue is not made unless the party-paid shares, if any
existing, are made fully paid-up.

e. the company has to ensure that it has not defaulted in payment


of interest or principal in respect of fixed deposits and interest on
existing debentures or principal on redemption thereof; and

f. The company has to ensure that it has sufficient reason to


believe that it has not defaulted in respect of the payment of
statutory dues of the employees such as contribution to
provident fund, gratuity, bonus etc.

10. Articles of the company normally provide that dividends, may be


paid in      to the amount paid-up on each share.

11. The rule regarding issue of dividend out of previous year profit is :
the total amount to be drawn from the accumulated profits earned in
previous year(s) transferred to the reserves shall not exceed an
amount equal to      of the sum of its paid-up capital and free
reserves and the amount so drawn shall first be utilised to set-off the
losses incurred in the financial year before any dividend in respect of
preference or equity shares is declared; and the balance of reserves
after such draw shall not fall below      of its paid-up share capital.

12. In marginal costing      are taken into account for computing the
value of stocks of work-in-progress and finished products.

13. In marginal costing the unit cost of a product means the average
     cost of manufacturing the product.

14. In absorption costing the effects of sales and production are


combined, in marginal costing on the other hand, the emphasis is
placed on     .

15. When output is less than sales i.e. closing stock is less than
opening stock, the profit under marginal costing is      than the profit
under absorption costing;

16. Marginal costing is also known as      costing.

17. In case the company goes into liquidation, the amount paid as
calls-in-advance shall not be refundable except after the payment in
full to the      
18. If forfeited shares are re-issued at a discount, the amount of
discount can, in no case, exceed the amount credited to     .

19. On re-issue of forfeited shares which were originally issued at a


discount, Discount on Issue of Share Account should be reinstated with
the proportionate amount to the shares re-issued so that the discount
on issue of shares may be      to the shares issued.

20. Those share holders who don’t pay on calls, have to be given at
least       day notice to the defaulting shareholder calling upon him to
pay the amount due from him together with interest before a specified
date

Answers :
1.eliminated / removed 2.Goodwill 3. Minority Interest 4. revalued.
5.Distributed profits. 6. disposal 7. I, II, VI 8. B,D,E are incorrect, rest
are all correct. 9. B and C are incorrect.
10. proportion 11. one-tenth, 15% 12. Only variable costs 13. variable
14. sales 15. greater 16. variable 17. ordinary creditors. 18. Shares
Forfeited Account 19. proportionate 20. 14 days.

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