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Commerce & Accountancy 2023 Paper I 50 marks Solve

Paper I — Q2

(a) The Balance Sheet of AB Limited as on 31st March, 2022 is as follows: ₹ I. Equity and Liabilities 1. Shareholders'…

(a) The Balance Sheet of AB Limited as on 31st March, 2022 is as follows: ₹ I. Equity and Liabilities 1. Shareholders' Funds: (a) Share Capital: 16,000 Equity Shares @ ₹ 100 each fully paid 16,00,000 (b) Reserves and Surplus (-) 21,40,000 2. Non-current Liabilities: 8% Debentures 28,00,000 Accrued Interest 1,40,000

हिंदी में प्रश्न पढ़ें

(a) AB लिमिटेड का 31 मार्च, 2022 को तुलन-पत्र निम्नलिखित है : ₹ I. इक्विटी एवं दायित्व 1. शेयरधारक निधि : (a) अंश पूँजी : 16000 समता अंश @ ₹ 100 प्रत्येक पूर्ण प्रदत्त 16,00,000 (b) आरक्षितियाँ एवं अधिशेष (-) 21,40,000 2. अप्रचलित दायित्व : 8% ऋणपत्र 28,00,000 अर्जित ब्याज 1,40,000

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Directive word: Solve

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How this answer will be evaluated

Approach

This is a numerical problem requiring you to solve for financial restructuring. Begin by identifying that the company is technically insolvent (negative net worth) and requires reconstruction. For part (a), compute the deficiency and prepare the Reconstruction Account; for part (b), draft the revised Balance Sheet post-reconstruction. Allocate approximately 60% of time to calculations in part (a) and 40% to presenting the final Balance Sheet in part (b), ensuring all journal entries and working notes are clearly shown.

Key points expected

  • Part (a): Calculation of total deficiency/loss to be written off (₹21,40,000 negative reserves + potential reconstruction adjustments) and preparation of Reconstruction Account showing reduction of share capital, debenture interest waiver, and settlement terms
  • Part (a): Proper accounting entries for sacrifice by equity shareholders (reduction in face value/paid-up value), sacrifice by debenture holders (interest waiver and possible principal reduction), and treatment of accumulated losses
  • Part (b): Preparation of reconstructed Balance Sheet as per Schedule III of Companies Act, 2013 with proper classification of equity, liabilities and assets post-reconstruction
  • Part (b): Correct presentation of revised share capital structure, elimination of negative reserves, and revised debenture liability after reconstruction scheme
  • Working notes showing step-by-step computation of reconstruction adjustments, including any reduction in debenture principal, interest waiver, and new equity structure

Evaluation rubric

DimensionWeightMax marksExcellentAveragePoor
Demand-directive understanding20%2Correctly interprets 'solve' as requiring complete numerical solution with reconstruction accounting; distinguishes between part (a) reconstruction workings and part (b) final presentation; recognizes this as internal reconstruction under Companies ActAttempts numerical solution but confuses external vs internal reconstruction or mixes up part (a) and part (b) requirements; incomplete understanding of reconstruction mechanicsMisinterprets as theory question on balance sheet formats; fails to attempt calculations or provides irrelevant theoretical discussion without numerical work
Content depth & accuracy20%2Accurately computes deficiency of ₹50,80,000 (₹21,40,000 + ₹28,00,000 + ₹1,40,000); correctly applies reconstruction scheme with proper reduction ratios; all ledger accounts and balance sheet figures mathematically correctCorrect method but arithmetic errors in deficiency calculation or reconstruction adjustments; minor errors in journal entries or balance sheet balancing; understands concept but execution flawedFundamental errors in computing net deficiency; incorrect treatment of debentures/reserves; balance sheet does not tally; ignores accrued interest or double counts adjustments
Structure & flow20%2Clear sequential presentation: working notes → Reconstruction Account → Journal entries → Balance Sheet; proper headings and sub-headings per Schedule III; logical flow from problem identification to solutionPresent in correct order but missing some headings; working notes not clearly separated; balance sheet format partially correct but classification errors existRandom presentation without logical sequence; no working notes; balance sheet format completely wrong; illegible or disorganized structure making evaluation difficult
Examples / case-law / data20%2Cites relevant provisions of Companies Act 2013 (Section 230-240 on compromise/arrangement); references SEBI guidelines on reconstruction if applicable; uses standard reconstruction formats from ICAI/Company LawMentions Companies Act generally without specific sections; uses standard accounting formats but no authoritative references; acceptable professional presentationNo reference to legal framework; uses non-standard formats; fails to cite any accounting standards or company law provisions relevant to reconstruction
Conclusion & analytical edge20%2Brief concluding observation on viability post-reconstruction (EPS improvement, debt-equity ratio); notes that reconstruction preserves company as going concern vs liquidation alternative; mentions need for subsequent capital infusionSimple statement that reconstruction is complete; no analytical insight on financial position improvement; mechanical ending without evaluationNo conclusion; abrupt ending with only balance sheet total; or irrelevant conclusion on unrelated topics

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