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 Chander’s claim is not valid as in the absence of partnership deed interest on partners loan is provided @ 6% p.a

 A’s claim is not valid as in the absence of partnership deed, no salary is allowed to partners.

No, he is not entitled to the salary because it is not so, Provided in the Partnership deed and according to the Partnership act, 1932 if the Partnership deed does not provided for payment of salary to Partners, he will not be entitled to it.

Difference between first and second method of disposal of realisation account is as under:

In the absence of Partnership deed, mutual relations are governed by the Partnership Act, 1932.

Under the second method of realisation account, payment of bills payable is credited to cash/ bank account and difference amount will be transferred to Realisation Account.

Correct option is (D) Bank account

Correct option is (A) Disposal account

The total capital of a company is divided into equal units of small denomination termed as shares. The ownership of these shares is easily transferable, from one person to other, subject to certain conditions. The person who is contributing in the capital in the form of shares is known as shareholder. 

Types of Shares As per the Section 86 of the Company Act of 1956, there are two types of shares:

1. Preference Shares: Section 85 of the Company Act, 1956 defines Preference Shares to be featured by the following rights: – 

(a) Preference Shares entitle its holder the right to receive dividend at a fixed rate or fixed amount. 

(b) Preference Shares entitle its holder the preferential right to receive repayment of capital invested by them before their equity counterparts at the time of winding up of the company.

2. Equity Shares: Equity Shareholders have a voting right and control the affairs of a company. As per Section 85 (2) of Companies Act 1956; equity share is a share that is not a preference share. It does not possess any preferential right of payment of dividend or repayment of capital. The rate of dividend is not fixed on equity shares and varies from year to year, depending upon the amount of profit available for distribution after paying dividend to the preference shareholders.

The capital of a company is divided into a number of equal parts. Each part is called a share. May a company divide its capital into shares of ? 10,? 50,^100 or any suitable amount, but it is always preferable to have shares of a small denomination in order to bring them within the reach of the small investor. According to Lord Lindley, “The portion of capital to which each member is entitled to his share”. In this way, the share is a proportionate part of the share capital and forms ownership in a company.

According to the Companies Act, 1956 there are two types of shares 

(i) Preference Share Preference Share is one which carries the following two rights 

(a) They have a right to receive dividend at a fixed rate before any dividend is paid on the equity shares 

(b) On the winding up of the company, they have right to return of capital before the capital returned on equity shares. However, notwithstanding the above two conditions, a holder of the preference share may have a right to share fully or to a limited extent in the surplus of the company as specified in the Memorandum or Articles* of the company. 

(ii) Equity Share Under Indian Companies Act 1956, ‘an equity share is share which is not preference share’. Thus, this share does not carry any preferential right or in other words, equity share is one which is entitled to dividend and repayment of capital after the claim of preference shares is satisfied. Usually, the equity shareholders control the affairs of the company and hence right to all the profits after the preference dividend has been paid.

New Profit Sharing Ratio : 

Siva's sharre = 1/5 x 1/2 = 1/10

Selvam's share = 2/5 - 1/10 = (4 - 1)/10 = 3/10

Senthil's share = 3/5 - 1/10 = (6 - 1)/10 = 5/10

Siva's share = 1/10 + 1/10 = 2/10

New Profit sharing Ratio = 3 : 5 : 2

Sacrificing Ratio = 1 : 1

His claim is not valid because no partner is entitled to get salary unless there is a provision for the same in partnership agreement.

• This method is used when it is not possible to pay all the liabilities at one time.
• After closing Assets and Liabilities they are not transferred to Realisation account but they are kept open.
• After realising the money from assets and after the payment of liabilities, the closing balance (profit or loss) is transferred to Realisation account.
• The dissolution expense is debited to realisation account.
• The closing balance of Realisation account (profit or loss) is transferred to partners capital or current account in their profit and loss ratio.

(i) for non-payment of call money 

In following situations company can issue shares for consideration other than cash.

• For purchasing of any assets or business, company does not pay cash and issue shares.
• When company issues shares in lieu of remuneration payable to promoters.
• When company issues bonus shares to existing shareholders.
• When company issues shares towards under-writing commission to underwriters.

Correct option is (B) SEBI

As per the Section 79 of the Company Act of 1956, following are the conditions under which a company can issue shares at a discount.

• A company can issue shares at discount provided it has previously issued such type of shares. 

• The issue of shares at a discount is authorised by a resolution passed by the company in the General Meeting and sanction obtained from the Company Law Tribunal. 

• The resolution specifies that the maximum rate of discount is 10% of the face value of the shares, unless higher percentage of discount allowed by the Company Law Tribunal. 

• A company can issue shares at discount at least after one year from the date of commencing business. 

• If a company wants to issue shares at discount, then it must issue them within two months of obtaining sanction from the Company Law Tribunal. 

• Every prospectus related to the issue of the shares should explicitly and clearly contain particulars of the discount allowed on the issue of shares.

Correct option is (C) ₹ 1

Calculate New Profit Sharing Ratio = 1 – 1/5 = 4/5

Mala = 3/5 x 4/5 = 12/25

 Anitha = 2/5 x 4/5 =  8/25

Mercy = 1/5 x 5 = 5/25

New Profit Sharing Ratio = 12 : 8 : 5

Sacrificing Ratio = Old share – New share Mala 

Mala = 3/5 - 12/25 = (15 - 12)/25 = 3/5

Anitha = 2/5 - 8/25 = 2/25

Scrificing Ratio = 3 : 2

P would have given the argument that unrecorded asset belonged to the old firm when the profit sharing ratio was 2:1.hence it shoud be credited to revaluation account so that the profit on account of this asset could be shared  in 2:1.

Through initial public offer when capital amount is collected, it is known as share capital.

Types of share capital is as follows :

• Authorized share capital: The maximum amount which a company can accumulate by share capital during its lifetime is called authorized share capital.
• Issued share capital: The share capital issued by issue of shares out of authorized capital based on the need of the company in full or part is known as issued capital.
• Subscribed capital: The value of shares for which applications are received out of issued share capital is known as subscribed capital.
• Called up capital: Amount called up by company per share is known as called up capital.
• Uncalled capital: A capital which is not yet called from the shareholders by the board of directors of the company is called uncalled capital.
• Paid-up capital: The amount received by the company from shareholders out of called up capital is known as paid-up capital.
• Reserve capital: Amount of difference between subscribed capital and uncalled capital which directors feels that will not be required in future, is transferred as reserve by passing special resolution known as reserve capital.

Capital which can be divided into transferable small denominations and all these divisible units are known as share. Through initial public offer when capital amount is collected, it is known as share capital.

(iii) capital reserve 

1. On receipt of application money :

Bank A/c Dr.
To Share application and allotment A/c
(No. of share applied x Application money per share)

2. On transfer of application money to share capital and allotment money due :

Share application and allotment A/c Dr.
To Share capital A/c
(No. of Share alloted x Application money per share + Allotment money per share)

3. On refund of money to applicants on rejected applications :

Share applications and allotment A/c Dr.
To Bank A/c
(No. of Rejected shares x Application money per share)

4. On receipt of allotment money :

Bank A/c Dr.
To Share application and allotment A/c
(Actual amount received from share holders on allotment)

The company can issue its own share in three ways.

1. Issue of shares at Face value or At par.
2. Issue of shares at Premium and
3. Issue of shares at Discount.

New Profit Sharing Ratio = Old Ratio – Sacrificing Ratio Vimala 

Vimla = 4/7 - 1/14 = (8 - 1)/14 = 7/14

Kamala = 3/7 - 1/14 = (6 - 1)/14 = 5/14

Vinita = 1/14 + 1/14 = 2/14

New Profit Sharing Ratio = 7 : 5 : 2

Sacrificing Ratio = 1 : 1

Ramya share = 25% = 100% – 25% = 75% = 3/4 

Ambika’s share = 5/10 x 3/4 = 15/10 

Dharani’s share = 3/10 x 4/3 = 9/40 

Padma’s share = 2/10 x 3/4 = 6/40 

Mercy’s share 

New Profit Sharing Ratio 

Sacrificing Ratio = Old share – New share

Ambika’s share = 5/10 – 15/40 = (20 - 15)/40 = 5/40 

Dharani’s share = 3/10 - 9/10 = (12 - 9)/10 = 3/40

Padma’s share = 2/10 – 6/40 = (8 - 6)/40 = 2/40

Sacrificing Ratio = 5 : 3 : 2

New Profit Sharing Ratio:

Govind = 5/9 x 2/9 = 10/81 ; 5/9 - 10/81 = (45 - 10)/81 = 35/81

Gopal = 4/9 x 1/9 = 4/81 ; 3/8 - 3/64 = (24 - 3)/64 = 21/64

Rahim = 2/9 + 1/9 = 3/9 ; 10/81 + 4/81 = 14/81

New Profit Sharing Ratio = 35 : 32 : 14

Scrificing Ratio = 10/81 : 4/81 = 5 : 2

A would have given the argument that the reserve was created out of profits when their profit sharing ratio was 2:1.hence it shoud be credited in old profit sharing ratio.

(iii) Share capital account

Accounting entry is done in the company’s book for the transaction related to share capital are as under :

1. If you get an application for a lesser share of the shares issued by company then keep in mind the number of share application received and accordingly record the transactions.

2. If applications are received for more mumber of shares than issued for public subscription then excess application money are refunded to share applicants and regarding received amount it should be debited to Share application A/c and credited to Bank A/c. Then after all the accounting treatments are given keeping in mind the allotted shares.

3. If company has issued both equity shares as well as a preference share, then while calculation put the equity and preference word before the word share in the accounting notes.

4. When the shareholder do not pay the share allotment or share call money in time :

• Transfer the amount not received from sharefolder to Calls in arrears A/c and credited to Share allotment A/c or Respective call A/c.
• In future if these amount is reveived then debit to Bank A/c and credit to Call in arrears A/c.
• If these amount is not received and these share are forfeited then at the time of forfeiture, credit to Calls in arrears A/c and account has been closed.
• Sometimes amount not received from shareholder has been transferred to Share allotment or Share calls A/c instead of Calls in arrears A/c with actual received amont. In future if this amount received then it debited to Bank A/c and credited to Share allotment A/c or Respective call A/c. If this amount is not received then these shares has been forfeited.

5. If any share holders pay advance amount towards allotment or call then in that circumstances :

• Amount received in advance for share allotment will be credited to Share allotment A/c and amount received in advance for call will be credited to Calls in advance A/c.
• When actual amount of call is received then it will be debited to Calls in advance A/ c and credited to Respective call A/c.

6. When shares are issued at premium has been forfeited;

• If amount of premium is received on forfeited shares then no entry will be given.
• If amount of premium is not received on forfeited shares then at the time of forfeiture, this ‘ not received amount is debited to Securities premium A/c.

7. If forfeited shares are reissued with premium then amount of premium will be credited to securities premium A/c. If forfeited share are reissued at discount then amount of discount will be debited to Share forfeiture A/c.

8. The maximum discount can be given on reissue of forfeited shares is equal to the amount forfeited on capital account which was received on these shares.

9. If some of the forfeited shares are re-issued then the proportion of the forfeited share is found out by the following formula :

• Proportional Balance of Forfeited Shares = Total amount of Forfeited Shares  \(\times \frac{Reissue\, of\, Shares }{ Total \,Forfeited\, Shares }\)
• If these shares are issued by discount then total amount of discount will be debited to Share forfeited account and remaining share forfeiture amount will be transferred to capital reserve account.

10. When company purchases any business and shares are issued for consideration then if value of issued shares is higher than the net assets of business, the amount of difference is transferred to Goodwill Account, but if the value of issued shares is less than the net assets of business, the difference is transferred to Capital Reserve Account.

New Profit Sharing Ratio = Old Ratio - Sacrificing Ratio

Raja = 3/5 - 1/20 = (12 - 1)/20 = 11/20

Ravi = 2/5 - 4/20 = (8 - 4)/20 = 4/20

Ram = 1/20 + 4/20 = 5/20

New Profit sharing Ratio = 11 : 4 : 5

Scrificing Ratio = 1/20 : 4/20  

Sacrificing Ratio = Old Ratio – New Ratio

Praveena = 7/10 - 5/10 

= 2/10

Dhanya = 3/10 - 2/10 

= 1/10

Sacrifcing Ratio = 2 : 1

In this case Sacrifice ratio is : 3:2 ( i.e the old ratio)

Explanation: Since nothing is mentioned, the how C has received ratio from the old   partners, therefore, it is assumed that the old partners have made sacrifice in old ratio.

Correct option is (C) Reserve capital

New Profit Sharing Ratio: 

Ananth = 3/5 – 1/5 = 2/5

Suman = 2/5 

= Ananth = 1/5 

= New Profit sharing Ratio = 2 : 2 : 1 

Sacrificing Ratio = 1 : 0

Ajay’s sacrifies = (1/4 X 2/3) = 2/12 

Naveen’s sacrifies =(1/4 X 1/3) = 1/12 

Ajay’s new share = (5/8 – 2/12) = 11/24 

Naveen’s New share = (3/8 – 1/12) = 7/24 

Surender’s share = (1/4 or 6/24 )

New ratio = 11:7:6

Debenture redemption premium a/c is a personal account and shows credit balance. It is a liability of the comapny. It appears under the head Non-current liabilities under the sub-head “Other long term liabilities” on the equity and liability side of the balance sheet each year, until the debentures are repaid.

Debenture Redemption Reserve A/c will be shown on the equity and liabilities side of the balance sheet under the heading of Reserve and Surplus.

As per rule 18(7) (C) of the companies Rule 2014, company required to deposit or invest, a sum which shall not be less than 15% of the total face value of the debentures to be redeemed at the end (before 30th April) of the year. The amount so deposited or invested can be utilized only for the purpose of repayment at debentures maturing during the year.

The correct answer is : (c) 5:3

The following are the main points of SEBl’s guidelines for creation of Debenture Redemption Reserve (DRR). 

• Every company that issues debentures with a maturity of more than 18 months shall create DRR. 

• An amount equal to 50% of debenture issued shall be transferred to DRR before starting redemption of debentures. 

• Creation of DRR is applicable only for Non-Convertible Debentures and for non-convertible part of Partly Convertible Debentures. ’ 

• Any withdrawal from DRR is allowed only after 10% of debentures are redeemed. 

Thus, as per the SEBI’s guidelines, 50% of the debentures issued should be redeemed out of the profits that are transferred to DRR and the remaining 50% of the debentures issued can be redeemed either out of profits or out of capital. Hence, no company can redeem all the debentures issued purely out of the capital.

As per the SEBI’s guidelines, the following companies are exempted from the creation of 

• Infrastructure companies (i.e. those companies that are engaged in the business of developing, maintaining and operating infrastructure facilities) 

• A Company that issues debentures with a maturity up to 18 months

 Rahul’s sacrificing share = (4/7 X 1/4) = 1/7 

 Sahil’s sacrificing share =( 3/7 X 1/3) = 1/7 

Rahul’s new share = (4/7 – 1/7) = 3/7 

Sahil’s New share = (3/7 – 1/7) = 2/7 

Kamal’s share = (1/7+1/7) = 2/7 

New profit sharing ratio = 3:2:2

When company redeem all the money of debentures then after the balance of debenture redemption reserve account will be transferred to General Reserve A/c.