Page 337 - MA-12

M.28 Management Accounting (Section B)—ISC XII

Answers

1. (i) Revaluation Account is prepared:
(a) To record the effect of Revaluation of Assets and Reassessment of Liabilities so as to
show the Assets and Liabilities at their revised (revalued) values.
(b) To ascertain the Gain (Profit)/Loss arising on account of Revaluation of Assets and
Reassessment of Liabilities.
(ii) Pro rata Allotment means allotment of shares to the applicants in the ratio of number of
shares offered to the number of shares applied.
For example:
Total No. of Shares offered to Public = 4,000
Total No. of Shares applied by Public = 4,800
No. of Shares applied by James = 96
No. of Shares to be allotted to James = 4,000/4,800 × 96 = 80 shares.
The need for a pro rata allotment arises in case of oversubscription of Shares (i.e., when
the number of shares applied for is more than the number of shares offered for subscription
by the company.
(iii) Difference between Realisation Account and Revaluation Account
Basis Realisation Account Revaluation Account
1. Meaning It records the realisation of assets and It records the effect of revaluation of
settlement of liabilities. assets and reassessment of liabilities.
2. When Prepared It is prepared at the time of dissolution of It is prepared at the time of reconstitution
the firm. of the firm.
(iv) Redemption of Debentures means discharging the liability towards debentures by making
repayment to the Debentureholders.
Methods of Redemption of Debentures:
1. By payment in lump sum at the time of their maturity.
2. By payment in instalments by draw of lots.
3. By purchase in the Open Market.
(v) When Fixed Capital Accounts Method is followed, the amount of loss is debited to
Partners’ Current Accounts. Therefore, Partner’s Capital Account is not affected by the
amount of losses and always shows credit balance.
(vi) Calls-in-Advance means the amount received from the shareholders which has not yet
been called by the company.
The amount of Calls-in-Advance is shown under the head ‘Current Liabilities’ and
sub-head ‘Other Current Liabilities’ in the Balance Sheet.
2. (a) JOURNAL

Date Particulars L.F. Dr. (`) Cr. (`)
Raghubir’s Capital A/c ...Dr. 44,000
To Balbir’s Capital A/c 20,000
To Krantibir’s Capital A/c 24,000
(Being the short interest on capital provided and profits distributed in the
wrong ratio, now rectified)