Page 357 - MA-12

M.48 Management Accounting (Section B)—ISC XII

Answers

1. (i) Debentures Redemption Reserve (DRR) is a reserve created out of profits available for
distribution as dividend for the purpose of redemption of debentures.
The amount to be transferred to DRR is specified in Rule 18(7)(b) of the Companies (Share
Capital and Debentures) Rules, 2014. The rule prescribes that a company shall transfer at
least 25 per cent of the nominal (face) value of the outstanding debentures to DRR.
(ii) The ratio in which the remaining or continuing partners acquire the outgoing (retired or
deceased) partner’s share is called gaining ratio. This ratio is calculated by taking out the
difference between the New Profit Share and Old Profit Share of each partner.
Gain of a Partner = New Share – Old Share.
Gaining Ratio may be applied:
(a) When there is change in profit-sharing ratio.
(b) When a partner retires/dies.
(iii) JOURNAL
Date Particulars L.F. Dr. (`) Cr. (`)

2019 Raja’s Capital A/c (` 75,000 × 3/10) ...Dr. 22,500
June 30 Samrat’s Capital A/c (` 75,000 × 7/10) ...Dr. 52,500
To Badshah’s Capital A/c (` 2,25,000 × 2/6) 75,000
(Being the Badshah’s share of profit till the date of death adjusted in the
Capital Accounts of Raja and Samrat in their gaining ratio, i.e., 3 : 1)

Note: When the new profit-sharing ratio of continuing partners differs from their old profit-sharing ratio, outgoing
partners’ share of profit or loss is adjusted through the Capital Accounts of gaining partners in their gaining ratio. It
is calculated as under:
3 3 3 2 1 7
Raja’s Gain = - = ; Samrat’s Gain = - = ◊
5 6 30 5 6 30
Thus, Gaining Ratio of Raja and Samrat = 3 : 7.
(iv) JOURNAL
Date Particulars L.F. Dr. (`) Cr. (`)
Investment Fluctuation Reserve A/c ...Dr. 40,000
To Sunil’s Capital A/c 15,000
To Dalip’s Capital A/c 15,000
To Investments A/c 10,000
(Being the value of Investments brought down to maket value and surplus
Investment Fluctuation Reserve transferred to old Partners’ Capital Accounts
in the ratio of 1 : 1)
(v)
Basis Undersubscription Oversubscription
1. Shares Applied Number of shares applied is less than the Number of shares applied is more than the
number of shares offered for subscription. number of shares offered for subscription.
2. Acceptance All the applications for shares are accepted, i.e., All applications are not accepted. Some
full allotment is made. are rejected. Alternatively, shares are
allotted on pro rata basis.
3. Refund As all applications are accepted, there is no Excess application money is refunded or
excess money to be refunded. adjusted towards allotment.