Going Concern Capital Maintenance concepts and questions | Ca Inter | CA Sandesh

[00:00:01][music] [music] Hello people welcome back after the break. So let's get our discussion ahead with preparation of financial statement.

[00:00:16]So till 13th done let's go for 14th. Now there are hardly two three more two more concepts you could say roughly based on that some small to pinto questions are there. So let's get that done. Okay.

[00:00:29]Once we are done, that's our Bible.

[00:00:32]Okay.

[00:00:34]Paka before 9:15. Don't worry. Okay. All right. Most probably looks like 8:30 only. Who knows? [snorts] Wow. Now, now look at that mug. Full smile automatically bad. Yeah. Yeah. So, that is probably our best statement that I can call out for you. Right. Uh we will try. I have like another five six questions to be done when I'm done.

[00:01:00]Okay. H 9:30 sure don't worry these are all not big big questions. These are all 10 15 minutes for question max. Okay listen question number 14. Come to question number 14.

[00:01:19]State under which head these accounts should be classified in balance sheet.

[00:01:26]You need to tell these components will come under which category. First one share application money received in excess of issued share capital.

[00:01:40]So let's say share got allotted worth only 10 lakh but shareholder paid 15 lakh. Shareholder paid how much to the company? 15 lakh but share got allotted only to the extent of 10 lakh because in case of excess allotment company does prora allotment no so what will the company do with that excess money keep it or they have to refund it that means company will have a liability to refund amo can they refund after 12 months or immediately so where it will come under current liability specifically under which one other current liability so if you have received any excess money company will have an obligation to refund it so it comes under current liability specifically under other current liability. I think this came in one of the paper for two marker or something they asked this question as a theory question share option outstanding account share option outstanding. Now remember people when employee stock options were given ESOP remember >> there we had some ESOP outstanding where will that come actually it depends okay on the type of shares given okay but here more about that you'll learn it in India's 102 CA final it can be a reserve or it can be a liability also depending on what instrument you have given to your employee if shares are given then employee stock outstanding will come under reserves and surplus Plus if something else is given we say we leave okay so yeah there's something else given that that means it is liability IC assume that it is a shares given if it is shares given to employee e employee stock option outstanding will come under shareholders funds under the heading reserves in surplus okay people this is called share based payment reserve we call it you learn about it in CF final don't worry for now just remember it this accounting will take care of to the next level. Okay sir G I think we did in one problem remember in buyback may we got employee stock out outstanding that will come under reserves and surplus okay this can change but now let's follow ICA zindabad wall answer unpaid unpaid matured debentures and interest acred sir if it is unpaid means obviously it's a liability and has it already got matured sir if the debenture due date has come means can you delay the payment or make it immediately I mean this will be a non-current liability or a current liability. This has to be shown under current liability under other current liability because debentures have got matured. So you have to pay it immediately. Now okay now if it is not matured means then you can show it under long-term borrowings provided the settlement is beyond 12 months from the balance sheet date. That rule here it's already matured. So can you delay it or you can't? So hence it comes under current liability specifically under other current liability.

[00:04:32]Uncalled liability on share and other partly paid up investments. So uncalled liability on shares means final call money not yet due if it is not even due means will we pass journal entry or that means what is this? All these are what contingent liability and commitments.

[00:04:49]These are basically like absolutely no it is from actually from not from the company perspective. It is from the shareholders perspective because they're talking about partly paid investment. We have purchased like here let's say the face value of the share is 100. We have purchased some investment equity some other company equity shares we have purchased as investment. How much money is this? 100 rupees as a face value. But company asked us to pay only uh 70. That company asked us to pay only 70 and we paid how much? 70. How much? We have not yet paid 30. Is it call scenarios or company did not ask? Company did not ask. Now this 30 is our liability. Yeah.

[00:05:28]No, it is what contingent liability at this point. When they ask we will pay that time only it will become what? Our liability. Yes. Till then it'll be shown as just a commitment or something of that contingent liability at best you could say. Uh okay. Um sir, what is the point in learning four feature proa when it comes won't want in real life people like that? uh everything we can't attach to real life. Some are meant only for exams. Okay. So we'll have to learn it in some purely exam context. I say also needs to test few things. So everything if they like practical life in practical life you never pass journal entry like this. So you do it in system. In fact practical I have to tell you if I take you to one of the companies ask you to pass a single journal entry not one of you will be able to pass even single journal entry 100%. Not even a doubt.

[00:06:23]Why? Because it is all template. Excel template. It will not even look debit to credit. Ah when Excel will be there where you update some amount and some button. It was all text you for I mean in my something some button we used to press automatically it'll go. It's all template. It'll it'll not be in debit credit format at all. It's purely in Excel format and system that Excel is integrated with Oracle or SAP and it'll push. So you'll not even want maybe one entry if you pass then you'll be like a huh got it first time you pass the entry you'll not even know what is this is this is journal entry you'll ask because it look like a statement I'm just saying practically so I say can they bring it now practical aspect and give you SAP access you know so it will not work so some are purely from exam perspective so don't worry about that okay so for now let's get this uh done with okay calls unpaid calls unpaid calls unpaid means call scenarios call scenarios is where it'll come >> under share capital as a positive or a negative number as a deduction from share capital. So that's one money received against share warrant. This is like your share application money pending allotment where you used to show you remember when we discussed balance sheet format there is something called share application money pending allotment. Same thing here only money received against share warrant. It'll come under shareholders funds only as what? Money received against share warrants because this is also eventually what? Same thing also it'll become a share capital eventually not now. So hence it will come under this category only. Just know this they're not that very important. Once in a while these sort of things come okay 14th one damaru that's all. Can I move on to the next one now everybody?

[00:08:07]Now people we have four questions.

[00:08:09]we have four questions that is based on one concept. So uh actually yeah you could say two concepts two two questions for each concept totally we'll have to do okay now people so that's all is uh this next four question so I'll make 15th question as an LDR uh first maybe once I'll call it out for you then maybe take up question number 15 easy only this also is what used to be popular in old syllabus maybe now also they can easily ask this provided in the MCQbased setup beyond Beyond that I think uh these are all I think two marks questions so beyond that little doubtful so yeah anyway asking this questions I see a headache let's cover them what is this is there is something called maintenance of capital maintenance of or maintenance of financial capital or maybe I'll write something this uh M array it's not allowing me to write only if I hold it at the very top I'll not I people stop putting cano what Huh?

[00:09:43]This is not tap. That is suspend.

[00:09:46]This is normal. There is no tapping here.

[00:09:49]Allow me to write please.

[00:09:52]Okay. Maintenance of financial capital.

[00:09:54]I'll write off quickly. Quickly, quickly. I'll write off.

[00:09:58]Maintenance of financial capital. Okay, sir.

[00:10:02]Uh, backbench guys. Yeah, those backbench guys are only disturbing.

[00:10:06]Yeah, I [snorts] thought they had become our friends. We've been meeting for many days now. Still friendship is not established. Maybe by the time costing gets over, they may become your friends.

[00:10:17]Uh yeah. By the way, how many of you are scared of all this?

[00:10:24]>> Like even the talks of this kind of uh sends you chills down the spine.

[00:10:30]Talking is okay, but horror movie is a big scare. How many of you How many of you like horror movies like into it purposely watch it? Okay. Look, one minute. 1 minute. How of you set to the moal and then watch like close the curtain or night time? So when nobody is there or I [laughter] yeah what is it now?

[00:10:58]You'll keep I'll keep candle also. Next you'll keep board also.

[00:11:03][laughter] Okay. Yeah. Thrill is there. No. Yeah.

[00:11:09]But obviously will be there at least if you keep the maybe in house you may not get that feel because of sound though in theater I think what is the recent good I don't remember recent seeing any good horror movie last mine was some conjuring or some part that was the last latest one I did not see latest one is good welcome to welcome to Delhi Odd star Hindi English. Okay, fine. All right. Maybe I I'll give it a shot. Look at our Mohammed Ibrahim. He's sending memes now.

[00:11:49]Huh?

[00:11:51]At night all my family members are asleep and watch horror series with my headphone. Ah, that must be thrilling.

[00:11:57][laughter] Great. Now they started fully horror mode.

[00:12:03]I think I spoiled you. Okay, come back.

[00:12:06]I I'll ask those guys now then. Huh?

[00:12:11]Maintenance of financial capital. Okay, write this down. So there are two ways through which you can maintain financial capital. One is historical cost method.

[00:12:24]>> Historical cost method.

[00:12:27]>> Another one is or maybe under historical cost method.

[00:12:32]You're right.

[00:12:35]Whatever profits is made, whatever profit is made, hey people come come out of the horror kaza right this whatever profits is made in the current year is withdrawn as drawings is withdrawn as drawings.

[00:13:05]Next one current cost method.

[00:13:10]Current cost method under that you're right.

[00:13:17]My god so much interesting topic that was I think for you still now they're doing they're discussing probably made in Delhi story now I know your own story are discussing oh you have experienced you have actually experienced a real life scenario anyone else >> you had [laughter] huh It is in your house only and you still sleep in the same house.

[00:13:51][laughter] It was your old house, huh? And you actually felt it's coming closer to you.

[00:13:58]Okay. A deep sleep.

[00:14:02]Probably in your experience it was real.

[00:14:06]That can be something you know. I don't know. I've not experienced. Yeah.

[00:14:12]>> Huh.

[00:14:14]I'm scared for sure. I've tried. Okay.

[00:14:17]Uh, okay. If you >> I started it, huh?

[00:14:32]>> Okay. Uh, yes, there was something on my bucket list which I wanted to try. I just wanted to experience. I'm scared for sure. Uh, not normal. Movie and all is fine. Movie and all is manageable for me. I just wanted to give it out uh the real experience.

[00:14:50]So once what I again people this is just something which I'm sharing don't follow it and don't give it on me people okay as I told I've done a lot of stupid things in my life this comes in that category okay I think I should not shame [laughter] I feel little buuku will come on to me okay fine uh I had this particular thing that one hour I have to spend in Oh, Saman got graveyard.

[00:15:25]Okay. M what I night 12:00.

[00:15:30]So took my bike. Long back. Long back. Took my bike. Obvious if you have another company then there is no fun. Went to the bike. Oh. Okay. Went to the the graveyard. didn't get the courage to go in the reach the shams to stop the bike you know how back then I think I was talking about like I had bike like long back about 12 13 years back okay so back then we didn't have now at least 10 10:30 also 11:00 also you find Bangalore is buzzing almost in every area you have someone or the other keeping but 10 11 years back in fact people this side this banata side vega city mall and all is there that side no they used to call call it as forest beyond 8:00 and all 10 15 years back if you say I'm going near that side they say don't go there it was hardly developed and all full it was like forest only okay so once I taken the bike I stopped near that bike didn't really get that that much courage initially was like we'll do [clears throat] but when I got there full to ski I'm sitting in the bike off to I'm looking at the samjan go like we will try next time. Then I was like okay instead of 1 hour maybe I will try 20 minutes 15 minutes slowly I kept reducing the target not 1 hour maybe half an hour I think I stayed only for 15 minutes stops I think okay but I stayed I I was actually counting biryani no because it was like really like hardly anything out there okay so it started really like you know some you know when you're scared only you get too much of unwanted background music started talking like no [laughter] no no I think I think in my experience I think I stayed for maybe 15 20 minutes maximum I don't think so beyond that okay so but I'm a little proud I was proud of it after I came back but as he was saying when I started my bike I had a feeling somebody's following me so so 10 15 minutes it was actually quite difficult Yeah. So, yeah.

[00:17:52]So, luckily, yes, couple of days I still had those when the lights were off, I used to wake up suddenly. So, 2, three days I had that particular hangover. You could say 2 three days. Huh.

[00:18:05]I didn't see anything. But yeah, in my mind it was there. But I I still do have that like you know kind of few things like agoris and all they show, right?

[00:18:14]I'm a little fascinated by their lifestyle the extreme dedication with their show not what they follow it is just that to go to that extent to for a certain belief says a lot of dedication so I watched them now once I had also done it in forest that was actually lately I had done I walked in a particular forest with no you know proper forest no mobile at mobile car I it was actually like half an hour actually what has happened is uh from the place where I was staying I I'd been for volunteering don't ask where and all I not tell okay so from that place to the bus stand right uh so it's like it's about 10 minutes drive maximum but if you walk it's about half an hour so there are two parts one is a forest way another another way is there another way is normal way okay where there are some lights and not that many lights but still manageable but there is another way it's totally forest okay So I was like this time around we'll go in forest. Okay we'll try. I think it was around u not midnight and all. I think my bus was around at 9:00 I think. So I started around 8:15 but there's no light. It's like almost 20 25 minutes.

[00:19:27]You don't get any light. So inside the forest with my backpack it's like okay we'll try this. So that was actually nice. Scared for sure scared. I'll not deny that. Okay. I I'm pretty sure that was not my walking space. I was not walking. I was like feeling but yeah it was actually good I wanted to try that once so yeah I did that so yeah I didn't experience anything just in case you're asking in my mind it was there but then that time I was also scared for the animals usually in that area they told nothing will be there because we have some setups there but still you never know at at 8 and all when almost everything is shut right when you don't have lights you might encounter something. Luckily, I was not uh nothing. Yeah. So, yeah, that was that was a bit small experience. Howa is real, sir. I don't know if you say so.

[00:20:23]I've never tried.

[00:20:25]Mohammad Abra is saying is real. You have tried Amacha. Huh? Whom did you interact? [laughter] Okay. But again people uh just just don't try it because of stupidity. If you want to explore something, it's your call. It's your personal business. I'll not interfere. It's totally your call.

[00:20:45]But I am not responsible. Okay? Your thing, your life, your zindi, you are okay. Yeah. I will not interfere. Huh?

[00:20:56]>> You have tried. Oh, is it?

[00:21:00]Nothing happened. She's saying something happened.

[00:21:03]Uh, so all that movement and all is just like that. Huh? Any of you like he said he has a real experience. Anyone else who has that real experience like kind of felt it in your things.

[00:21:15]>> He probably has a pranking experience.

[00:21:18]Huh? Hostel may you have had it. Huh?

[00:21:21]Actually it is believed that it's haunted place. Huh?

[00:21:23]>> Seniors.

[00:21:24]>> Seniors they made him complete. [laughter] Huh?

[00:21:34]12:00 or 2:00.

[00:21:38]on the compound. Someone was sitting you actually saw that he's like someone is sitting [laughter] you never know in boys whatever happens that might be your friend only toast might be sitting out there you never know. Yeah sorry everything will be off online is saying I is real sir real response will come he has experience inj also has a you have a which one India experience or China [laughter] huh okay one minute people huh yes you have experienced and also Tell me your experience. Let's see what what have you experienced.

[00:22:31]>> Okay.

[00:22:36]>> Uh-huh.

[00:22:42]>> Okay.

[00:22:52]the the light the shadow thing.

[00:22:55]See some cracked shadow before that you saw any movie. No ca foundation got manifested in the form of that could also be the case you know.

[00:23:08]Okay. Any that uh so anything anything happened beyond that or it was just a flicker and went.

[00:23:18][laughter] >> Okay. Nice. There was a rumor that somebody died in our school bathroom and whenever we hear wind sound we used to get scared. School many many rumors are there like this. I know that is nice.

[00:23:34][laughter] Mohamad Abra is saying in Abuja board I got a response of the name they told name mother used to tell the same what name you got ma what name you got you have tried or this is someone your friends have tried and they're telling you all right okay by okay okay enough now J look right right this okay first we'll finish this then we'll discuss somewhere else and uh she's saying real humans are more than scary for sure for sure 100%. No doubt about that. Uh let's start sir let's start with the real human things. Huh?

[00:24:29]>> Oh yeah [laughter] I can believe you.

[00:24:34]Okay. Current cost method. Write down first people. Uh here may full profits are not withdrawn or must first point you right.

[00:24:46]Restate the opening equity.

[00:24:51]Restate opening equity at current cost level. at current cost 11 in bracket you can write using index using latest price or index.

[00:25:13]Okay, next one.

[00:25:17]Full amount full profit should should not be or full profit is ideally >> not withdrawn >> as drawings.

[00:25:41]Okay, write down these two points. I'll tell you more about this in problems.

[00:25:44]Let this be there for the time being in our notes. written.

[00:25:51]Oh my god, I think I switched on something.

[00:25:55]You guys are going non-stop at it. No.

[00:25:58]Uh, [laughter] so think I probably stayed take off the wrong topic, I think. Good topic, huh? Yeah, fine.

[00:26:05]Okay. And right right quickly, right, we'll finish this and then maybe we'll see.

[00:26:15]They also predict about 2025 RCB trophy and [laughter] I think RCB this time is on a roll. No, three trophies almost I think right two two women woman trophy this time women we won no so two women trophy one men trophy so honor roll three trophy continuously joy or okay right huh recording is happening he's telling recording is happening okay recording students are also telling JCSK they're telling my majority of recorded students are Tamiladu students so they're telling JCSK sure JCSK also yes finish the huh people uh next uh sh next 20 minutes we are let's try to get this thing sorted small concept but try to understand could be important for a two marker can I can we start with the problems okay question number 15 let's keep it as LDR okay complete mona Moan started a business on 1st April 2017. Underline 1st April 2017 with 12 lakh represented by 60,000 units of 20 each. So they started with how much capital?

[00:27:37]12 lakh. And they use this capital to buy how much goods? 60,000 units.

[00:27:42]Purchase price is 20. 60,000 into 20 is 12 lakh. Enough. Enough. Concentrate. It is important. Yeah. Next. Next.

[00:27:53]Complete.

[00:27:55]So, capital is 12 lakh. He used that capital to buy 60,000 units of goods at a unit price of 20 per unit. Okay.

[00:28:03]During the financial year ended 31st March 2018, he sold he's a trader moan.

[00:28:09]He sold the entire stock for 30. Entire stock means how many units?

[00:28:14]>> 60,000 units. Purchase price how much?

[00:28:17]>> 20. Selling price is 30. Okay. In order to maintain the capital intact, calculate the maximum amount that can be withdrawn by the moan. If financial capital is maintained at what level?

[00:28:29]>> Historical cost. Okay. So let's understand there's a solution. Leave that out. We will solve it. Okay.

[00:28:36]Question number 15. First people can you tell me what is the opening capital? Opening capital I call it as opening equity.

[00:28:46]How much is opening equity?

[00:28:49]12 lakhs. This is given any problem? Okay, everyone. Everyone sh second one is find something called closing equity. Find something called closing equity. Basically capital we just calling it as equity. That's all here because that's the way ICA present their solution. So I'm using the same name. You can simply also call it as opening capital and closing capital. Now check everybody on the screen.

[00:29:16]Did you sell the goods in the current year? Yeah. At what price? 30. But you purchased for how much? 20. Have they given that means you sold this goods at a loss or a profit? Profit. Have they given any other expense? Any other income or no? That's all. That's all.

[00:29:32]That means no other income. No other expense. How much profit did you make?

[00:29:36]>> You bought it at 20 rupees. You sold it for 30. That means you made how much profit?

[00:29:44]You made 10 rupees profit on one goods or one unit. Yes sir. 10 rupees profit you made on one unit. How many units did you sell? 60. So total profit is how much? Six lakh. Clear s? Yes sir.

[00:29:57]>> Due to profit your capital balance will reduce or increase. How much was your or in fact if you want to get closing equity can I write like this? Closing equity is nothing but opening equity plus profit minus if you have withdrawn any money minus if you have withdrawn any money. If you do that you'll get closing equity. Now calculate people how much was opening equity 12 lakh. Did you make any profit in the current year? Yeah. You bought it at 30 you sold it for 20. How much profit you made? You made 10 10 per unit. How many units did you sell?

[00:30:38]So total profit is how much?

[00:30:41]Six lakh. Have you withdrawn the amount or we have to calculate the drawings amount? We have to calculate the drawings amount. So so far how much is the drawings? Nothing. That means what is your closing equity?

[00:30:54]>> 18 lakh. Yes. No. G 12 lakh plus this is 6 lakh which is 18 lakh. Any problem?

[00:31:03]All good everybody? Now check for a minute. Check the screen. Sir, we are maintaining. You already copied. Okay. I wanted to give the heading. I thought I'm explaining your watching. Okay. Sir, you are maintaining financial capital under what method?

[00:31:19]>> Historical cost method. That we will write it as a heading.

[00:31:22]Capital under >> financial capital under historical cost method.

[00:31:32]financial capital using or under historical cost method. In historical cost method, what they say is if you're opening capital, listen everybody for a minute. Next one maybe if you want we can do it together. What historical cost method says is we know historical cost means what?

[00:31:54]>> Original cost. Originally how much was your capital? 12 lakh. So every year you maintain 12 lakh. That's what historical cost says. You started your business with how much capital? 12 lakh. So maintain closing equity also how much?

[00:32:08]12 lakh. But is your closing equity 12 lakh or 18 lakh? 18 lakh. That means from 18 lakh you have to bring it down to 12 lakh. So you have to reduce by how much? Six lakh. Why will equity reduce?

[00:32:21]Because of drawing. So if you draw the money capital will be same or it'll reduce. That means how much can you withdraw over here? Six lakh. That's what they asked. What is the maximum drawings?

[00:32:31]Maximum drawings will be how much? So can I say it is 2 - 1 or maybe 18 lakh minus 12 lakh. How much is that? 6 lakh rupees. So from 18 lakh if you withdraw 6 lakh rupees capital will reduce and it'll become how much? 12 lakh. And what is your opening capital? 12 lakh. That's what historical cost method says.

[00:32:53]Maintain your capital at opening capital level every year. Meaning that's what we have written the point here as if you want to maintain the capital at opening level means whatever profits you make in the current year you'll keep it or you'll withdraw you'll withdraw that's you'll not retain any profit you'll go on withdrawing so that way your opening capital itself will become your closing capital or opening equity itself will become closing equity any problem that's all is this question all about easy okay write this down no copy copied also. Okay, fine. Maybe some of them may be writing. Others can review the next question once. Question number 16.

[00:33:35]If you're done a same one more for practice, that's all you can do it. Same format may you can use and do the next question if you already copied.

[00:33:47]Everyone has copied. I don't see any hands moving.

[00:33:50]Can I move forward people online also then?

[00:33:54]Okay, let's look at question number 16 now. Then a trader, same people they will tell okay whether it is historical cost or current cost they will mention to you in the question.

[00:34:04]A trader commence the business on 1st January.

[00:34:09]1 minute sir why do we have to do this just a way of maintaining the capital ma nobody follows again only for the sake of marks that's all nothing this in fact nobody does this is foolish next method at least is reasonable this is totally foolish okay why I'll tell you when I come to the next method again purely for the sake of marks no practical application a trader commence the business on 1st January that means here maybe the year is Jan to December at with what 12,000 rupees represented by 6,000 units of a certain product at 2 rupees I think 1 zero they cut off a 10 instead of 12 lakh it became 12,000 60,000 became 6 lakh that's all as a adjustment over here okay so using this 12,000 capital you purchase how many units 6,000 units by paying what is your purchase price per unit 2 rupees during the year the trader sold all the units at 3 rupees and he had withdrawn how How much? 6,000. Now you need to comment whether historical cost method is maintained or not. Okay.

[00:35:14]But anyway, question number what?

[00:35:16]>> 16.

[00:35:18]Question number 16. First point number one. What is your opening equity?

[00:35:26]>> Opening equity is 6,000 units at 2 rupees each. In fact, they have only given this. How much is this?

[00:35:33]>> 12,000.

[00:35:35]What is your closing equity? How do you get closing equity people? Take the opening equity. Add the profit. Add the profit. Deduct the drawings. I've already written it here. So, I'll directly write it. It's fine with you.

[00:35:50]>> Okay. Opening equity 12,000. How much profit you made?

[00:35:54]>> You sold it for 6,000.

[00:35:57]>> 3 rupees. You purchased it for 2 rupees.

[00:36:00]One rupee profit you made for one unit.

[00:36:02]So on 6,000 units how much profit?

[00:36:05]6,000. This is the profit. Did you withdraw any money? The entire 6,000 they told has been withdrawn as drawing.

[00:36:11]That means what is your closing equity?

[00:36:14]This is 12,000 plus 6,000 minus 6,000.

[00:36:18]How much is it? 12,000. How does historical cost method work? Opening equity and closing equity will be same.

[00:36:25]Is it same? Yes. Therefore, what is the conclusion? Therefore, capital has been maintained under capital is maintained under historical cost.

[00:36:42]Capital has been maintained under historical cost.

[00:36:46]This is not that popular. Next method sometimes they ask it has come. I mean this also can come not that popular you could say. Uh 16th question over people you also feeling so >> can [clears throat] we get to the next question?

[00:37:03]>> Anybody still copying?

[00:37:05]>> Okay, copy.

[00:37:13]>> Done. Now as long as the opening equity and closing equity are same, we say capital has been maintained under historical cost model. Historical cost means that only maintain your closing balance of capital same as opening balance. Every year you keep doing the same thing.

[00:37:31]That's what historical cost of or financial capital maintained under historical method says. And now let's go to question number 17. And now what is this is? Now this is not historical cost. This is maintaining capital under current cost method. Now people everybody check the screen for a minute.

[00:37:51]Historical cost is quite stupid. Why is check how much money you had at year beginning? 12,000. How much profit you made? 6,000. If you withdraw of entire 6,000, how much money you'll have at the end of the year? 12,000. Correct? Now, now people use your common sense. If we have purchased and sold 6,000 units last year means you would like to do the same activity at least next year also minimum would you would like to purchase and sell how much in the next year? 6,000 ideally more but at least current year may if you have sold 6,000 units means next year also we should be in a position to purchase and sell 6,000.

[00:38:36]Ideally we want to grow right you want to reduce activity or increase the activity or at least activity you should maintain at what $6,000 no people last year you were able to produce purchase that product at what rupee 2 rupees every year price of the product will be same no due to inflation cost of the product will go on increase now let's say next year it became 2.5 next year by chance it became 2.5 how many units you want to buy 6,000 Now you tell me how much money you need. 15,000. Do you have 15,000 or only 12,000? 12,000. That means with the 12,000 can you buy 6,000 units? No. If you have 12,000 rupees money and if the cost per unit is 2 and a half means how many units can you buy?

[00:39:23]Definitely not six lesser than that. How much is this? Calculate this 4,00 4,800.

[00:39:31]>> 4,800 units. Now you tell me. Would you like to be in this position? Huh? No, now you tell me that means should we really withdraw all our profits or keep some? Keep some so that at least we will be able to purchase how many units in future? 6,000 units. That's what current cost method says. Don't withdraw entire money because the price of the product will not be same. Price will go on increasing. If in first year if you purchase 6,000 units means second year also you would like to buy at least how much? 6,000 that much money you need to maintain. So if you withdraw of entire money, you'll not be able to continue the same activity in the next year.

[00:40:10]That's what is a note understood.

[00:40:13]So full profit ideally is not withdrawn as drawings under which method? Current cost method. Here we'll have to do something. What to do? This point you'll understand when I do the problem beta.

[00:40:23]Can we do look at that problem? Okay.

[00:40:26]Come to question number uh which question is this part? Question number 17. Okay. Come to question number 17.

[00:40:36]In the previous question, previous question number 16. Okay, let's get that previous question data once more.

[00:40:44]What is that previous question data? You bought how many units? 6,000 units.

[00:40:49]Mentally capture them. 6,000 units you purchased at what price? 2 rupees per unit. Okay, fine. This is what you did in the previous problem. Okay, maybe if you want I'll write the replicate the data once again here. 6,000 units you have purchased at what price? 2 rupees.

[00:41:05]That's what you have done.

[00:41:08]Okay. Now people check. Suppose in the previous question that is question number 16. The average price index at the beginning and at the end of the year is 100 120. This we call it as consumer price index or whatever. Right? Which measures the price of the product. At the year beginning how much was the index? 100. Now it has become how much?

[00:41:30]120. That means it is same or it has increased.

[00:41:33]Sir due to inflation price of the product will increase. No from 100 it has become 120 means there is an increase of 20%. That means next year will the price be 2 rupees or it'll increase.

[00:41:44]So it will not be two rupees it'll increase by 20. Yes sir. Everybody good?

[00:41:49]Good good. Now entire 6,000 if you withdraw will you be able to buy same 6,000 units in the next year or you can't? You can't. So here we have to do something. Everybody got it?

[00:42:01]Yes. All right. Question number 17. I'll do it over here once again. I'll read the data. How many units did you buy in the year beginning? 6,000 units. At what price? 2 rupees per unit. At the year beginning the index was how much? 100.

[00:42:16]At the end of the year that price the consumer price index or the price of the product index has become 120. Okay.

[00:42:24]First we will start here. This is what sir financial capital under what method?

[00:42:30]Financial capital under current cost basis under current cost basis maybe one problem it's only two three line can you first observe and then write it's hardly two three lines next one you can do it on your own same format just stay for a minute and understand this easy only but yeah still observe can you tell me what is your opening equity Opening equity is given in the question only how much 12th house first what you'll have to do is you have to restate the opening equity here I'll tell you why in a bit first we will follow the steps restate or opening equity restated I'll write like that opening equity restated ated using >> using what did we use here? We are using index. No. Uh using the index we will write using the index. What is that? Is very simple. Sir 12,000 was your capital or maybe I'll write here index or same people. Today we purposely we invited them. So it's okay. It's not their mistake. It's our mistake only. Okay.

[00:43:56]Index. Sir capital sir people at the beginning of the year how much was index 100 at the beginning of the year index was 100 and how much was our capital 12,000 at the end of the year is the index 100 120 that means how much is your capital you need to restate your capital considering the index so how will you get this so basically 12,000 represents 100 because 12,000 was a number when the index was 100 now is the index 100 or 120 how much is this 14,000 >> 14,400 in multiple ways to calculate from 100 if index has become 120 means 20% increase you can add 12,000 20% you'll get the same number that way also is okay I believe in proportionate method of doing it easy now people first you do the restatement of your opening capital using the index or price whatever that they have given Now closing equity. Closing equity. Sir, how do you get closing equity?

[00:45:06]Opening actual opening equity which is 12,000 plus profit. How much is the profit? Should have to calculate again or already done. You already did here we calculated. Now how much is that profit?

[00:45:17]The profit here is 6,000 and that's it.

[00:45:19]Or you withdrawn also? It's same as last question. Last question. May you withdrawn how much? 6,000. You made a profit of 6,000 and you withdraw how much? 6,000. What is closing equity?

[00:45:30]12,400.

[00:45:32]Okay sir, everybody good? Now you check retained earnings. Retained retained equity or retained earnings we can say that is nothing but your uh 3 - 2 3 - 2 how much are you getting? 12,000US 14,400 is a 2,400 negative. First I'll write off then let me explain it to you.

[00:45:55]Retain earnings is 2,400 negative. So therefore you'll write the conclusion as conclusion.

[00:46:04]Point number one, since retained equity or retained earnings, you could say, since retained equity is negative, comma, since retained equity is negative, comma, trader has not maintained trader has not maintained capital using cap is not maintained capital at current cost.

[00:46:38]At current cost.

[00:46:41]Sometimes they'll also ask you maximum drawings.

[00:46:45]Maximum permissible drawing is equal to Maximum permissible drawings is equal to 6,000 - 2,400. How much is this?

[00:46:57]>> 3,600.

[00:46:58]>> 3,600. Okay. Write this. I'll explain it to you what we did here. First update. I know some of you would have not got this. No issues. Update. I'll explain.

[00:47:12]Or do you want me to explain then you'll write? What is it? How how do you want explain? Huh? Okay. They're saying explain. It'll become easy. So very simple. Oh. Now in the current year trader made how much profit? 6,000. And did the trader retain any money or full withdrawal? Whatever profit may trader with do. So hence closing balance of equity is 12,000. Agreed. That means check visualize simple opening at the year beginning how much cash trader had 12,000. He made how much profit? 6,000.

[00:47:44]That means cash balance became 18,000.

[00:47:46]Again he withdrew 6,000. So cash balance is how much? 12,000. That means at the end of the year trader has how much money with them? 12,000. So far good.

[00:47:57]Now people last year if you have purchased 6,000 units or this year may if you purchase 6,000 units means next year also you should be able to purchase 6,000 units. Yes sir. This year may you are able to purchase the goods at what price? 2 rupees. But is index same or going on increasing? This year if you purchase at 2 rupees means this year if you purchased at 2 rupees means this is for current year. Next year will the price be 2 rupees? Huh? No. price will increase by 20%. How 20%. This is your goodsky index. At the year beginning the goods sky index was how much? 100. At the end of the year it has become 120.

[00:48:37]Calculate the percentage.

[00:48:40]>> 100 has become 120 means increase in percentage is 20%. Or you can also calculate like this. 2 rupees is the price of the goods when the index is 100. When the index has become 120, how much would be the price? 2.4.

[00:48:54]Now one one unit now will cost you in the next year how much? 2.4. Yes sir.

[00:49:00]That means to buy to buy two 6,000 units how much money is required?

[00:49:06]How much amount is required to buy this 6,000 units for one unit? 2.4 rupees.

[00:49:11]For 6,000 units how much?

[00:49:15]14,400.

[00:49:16]That much money we need to have. Do we have 14400 or only 12,000 with the 12,000? Can you buy 14,400 worth of goods? Huh? No. That means trader has maintained capital adequately or not maintained.

[00:49:30]That's a conclusion. Yes. S everybody good? Because he withdrew more. That means how much he should they should withdraw?

[00:49:38]>> How much they should withdraw?

[00:49:39]Basically, how much money you need to have? 14,400. That means full amount of 6,000 can you withdraw now? No. How much can you withdraw? Basically 3,600 only you can withdraw. How? Okay. Check. How much profit you made? 6,000 rupees profit you made. Correct? Now, so in that how much price has increased from 12,000 it has become 14,400. That means 2,400 you'll have to keep. 2,400 you'll have to keep because price of the goods has increased. Last year you bought it for 12,000. This time this year you will buy it for 14,400.

[00:50:15]How much has the price increased? 2004.

[00:50:18]That much you need to retain in 6,000 may 2,400 you have to retain means how much can you withdraw only 3,600 you can withdraw that's all they presented okay common sense that's all okay n that that's fancy terms we represented >> once again explaining okay fine last or current year may how many units did you buy 6,000 units at what price per unit 2 rupees this happened at year beginning.

[00:50:48]Okay. At the end of the year, at the end of the year, is the goods index same or it changed?

[00:50:55]>> When you purchase the goods, when you purchase the goods by paying 2 rupees, index was 100. But at the end of the year, index is not 100. It has become 120. That means at the end of the year, the price of the goods will not be 2 rupees. It would have changed. How much is this? How do you find X? 2 into 120 divided by 100. How much is that? 2.4.

[00:51:20]That means at the end of the current year, one unit of the goods will cost you how much? 2.4 per unit. How many units did you trade, buy and sell in the current year? 6,000.

[00:51:31]>> At least 6,000 you want to buy in the next year also. Uh to buy 6,000 units next year, amount required in next year is how much? For one unit, we need 2.4 rupees. For 6,000 units, how much money you need? 14,400 that means money you need to keep correct no so earlier in the current year how much did you buy it for this goods for 12,000 now to buy the same goods you need to have 14,400 so as the price of the goods increased how much >> 2,400 that means that much profit you have to keep that much profit you need to keep how much profit you made in the current year 6,000 how much has the goods price increased by 2,400 so in 6,000 000 rupees profit 2,400 rupees profit you retain balance you can with so balance will be 3,600 that is what we trying to get >> correct because you need this 2,400 extra to buy same 6,000 units in the next year that's all okay now that presentation we are doing in this fashion that's all ICI presents in this format so I'm trying to maintain the same okay now check this presentation if you want what you'll have to do is first store opening capital how much 12,000 this this is the opening capital when the index was 100 now at the end of the year is index 100 or 120 so restate this opening equity using the latest index what is the latest index 120 so 12,000 is a number when the index was 100 when it has become 120 how much will be the capital 14,000 yes sa this much money You need to buy the goods in the next year. Comfortable this much money you need to buy the goods in the next year.

[00:53:21]See that's what we got it here. Correct.

[00:53:23]That is what we mean by opening equity restated using the index. This number makes sense. Now find out the actual closing equity. How do you find actual closing balance of capital? Opening balance plus profit minus drawings. That's what I've done.

[00:53:40]Open actual opening balance of capital was 6,000. How much profit you made?

[00:53:45]6,000. How much you actually withdraw?

[00:53:48]6,000. They only told last question.

[00:53:49]Last question data we have to use. They told trader has withdrawn 6,000. What is the closing balance of capital? 12,000.

[00:53:57]Sir, we need to maintain how much?

[00:54:00]14,400. But trader maintained only 12.

[00:54:03]That means did the trader retain any money? No. Ideally, he had to retain how much? 2,400. Did he retain? No. So because this retained earnings is negative, has trader maintained the capital or not maintained?

[00:54:17]>> Not maintain. Okay. Now in some problem they'll also ask how much maximum you can withdraw. How much maximum you can withdraw? Can you withdraw 6,000? No.

[00:54:27]2,400 we need to retain. So hence from 6,000 reduce 2,400 you'll get how much drawings you can make. But if if possible try to present in the same format. You can present any other way also but ICA suggested answer will be like this. So I suggest keep the same thing. Okay sir. [snorts] We have one more question. Write it say don't get deviated. Try to remember the format and let's try to solve the next one in the same manner. Yeah that's what we'll try now. I hope everyone's understanding is better. Copy.

[00:55:39]This is more logical. Do you agree with me? Because at least you need to do the same level of activity. For that we need to have money. Historical cost is stupid. This I think makes more sense.

[00:55:50]Zoom or scroll down? Scroll down. Okay.

[00:55:57]Can I keep it here or else? Is it okay?

[00:56:02]>> Little up. This is okay.

[00:56:06]uh others if you think you have done you can read the next question and try to solve using the same format.

[00:56:17]How many more problems sir?

[00:56:20]And he's saying last one sir you you said only five six problems are over sir. Yes sir.

[00:56:26]>> Yes sir. Yes sir. You're right sir.

[00:56:28]Correct sir. Thank you sir. Uh I don't mind taking multiple thanks today.

[00:56:33][laughter] >> We will do it. I'll tell you. I I'll tell you. I'll tell you. Don't worry.

[00:56:45]>> I don't know. Today you leave it to me.

[00:56:51]Today and Sunday you leave it to me or after Sunday you leave everything to me.

[00:56:55]I'll decides. Okay.

[00:57:15]Done. People copying part. Can we get to the next question or anyone still writing this?

[00:57:23]Balcony that side this side. Okay. All good. Done.

[00:57:31]>> Okay.

[00:57:44]Next is question number >> 18. Huh?

[00:58:04]>> All right people. This we can do it together. Question number 18. Same in the previous example data. So first we will write in the previous example that is in question number 16 what we did 6,000 units we purchased by pay 2 rupees. So total is 12,000. This happened at year beginning. All is a data. And how much has the trader withdrawn?

[00:58:29]>> 6,000.

[00:58:30]>> The trader has withdrawn 6,000. That is your question number 16 card data. Okay, keep this in mind and let's see what has happened in question number 18. Now they've used the same data and they're telling now suppose in our previous example that is question 16. The price of the product has become 2.5. Now they've not given index they have directly given price of the product. Okay. Now previously we used the index and worked it out. Here directly they've given the price. You bought at the year beginning at what price? 2 rupees. We were able to buy each unit at 2 rupees. But at the end of the year it has become 2.5. I mean the increase is 25%.

[00:59:13]If you do 2 + 25%, you'll get 2.5.

[00:59:18]Okay. Or other words they're saying the index has become 125. This time around we will not use the index. We'll work out using the for I mean the price because if the index is given what to do? No, no. At year beginning the index is 100. At the end of the year, it has become 125. That's what they're saying.

[00:59:36]So, let's ignore this and try to solve using the price. Okay. First, what is the opening equity that they've given in the problem?

[00:59:45]12,000 in current cost basis. May first thing we'll have to do is you have to restate your opening cost, opening cap, opening equity using your index or the price.

[00:59:57]Here we using index or price.

[00:59:59]Opening equity index restated using price very simple it's like this check price opening equity when the price of the product was 2 rupees how much was opening equity opening equity was 12,000 now has the price of the goods has become 2 or 2.5 if the price has become 2.5 means what is your restate Opening equity pro proportionate. Yes sir. So how do you do that? 12,000 represents the opening equity when the price of the product was 2 rupees. When it is 2.5 how much?

[01:00:42]>> This is the cross multiplication. How much is this?

[01:00:45]>> 15,000. Any problem.

[01:00:52]Now find out the actual closing equity.

[01:00:54]How do you find out actual closing equity? Take the act. It's your closing capital. How do you find out actual closing balance of capital? Take the opening capital which is actual how much?

[01:01:05]>> 12,000 plus actual profit. How much profit have you made in the current year? 6,000 minus drawings. Did we make any drawings? Yeah. Trader withdrew how much? 6 12,000. That means the closing equity is how much? 12,000. Correct.

[01:01:20]Sir, next year to buy the same 6,000 units, you need how much money? 15,000.

[01:01:26]Have you maintained 15,000 or 12,000?

[01:01:29]That means did you retain the money here or no retention? These two come minuses how much? 3,000. Positive or negative?

[01:01:36]Negative. In fact, yeah. Everybody good?

[01:01:38]Good. Good. Good.

[01:01:42]Closing equity should at least be how much? 15,000. Is it 15,000? No. Because it is not we saying retained equity has become negative. So trader has maintained the capital at current cost or not maintained. First conclusion is the same. Since retained earnings is or retained equity is negative, trader has not maintained capital at current cost.

[01:02:05]Can you tell me how much is the maximum permissible drawings? 6,000 has withdrawn. 6,000 is permitted. Huh? No.

[01:02:12]How much he has to retain?

[01:02:14]>> 3,000 he should have retained. In six month three he should retain means how much can he withdraw? 3,000. So three in 6,000 profit 3,000 should be retained.

[01:02:24]another 3,000 can be distributed that way closing capital will become 15 correct no and you'll be able to do this activity once again in the next year that's all is this drama all about okay write this I'll I'll leave the screen here I hope this step wise much better now [clears throat] Hey people finished one. Okay.

[01:03:25]Sir as I told this this particular topic is two topics in our study material framework for preparation of financial statement and preparation of financial statement all this you'll see in your framework topic but we have merged and made it as one topic okay don't say this question is not there in ICM material you'll find it in the framework topic not in preparation Still or done?

[01:03:54]>> Done. Okay.

[01:04:04]Question number 19, I'll keep it as an LDR. Question number 19, I'll keep it as a LDR.

[01:04:12]Some concept. I think I've given you this but maybe once more I will give a few pointers you can write when entity is not a going concern when entity is not a going concern when entity is not a going concern what and all you need to do yeah I think I did mention this in there. Whenever entity going concern means what?

[01:04:48]>> Entity will continue for a foreseeable future. Meaning at least it'll continue for the next 12 months. If it is not a going concern means it will shut down.

[01:04:56]It will not continue for more than 12 months. If this if they tell you in the problem means then all assets all assets should be shown all assets should be shown at realizable value. Every asset doesn't matter whether it is current or non-current whatever doesn't matter all assets will be shown at realizable value.

[01:05:24]All liabilities All liabilities should be shown should be shown at settlement value.

[01:05:45]Point number three, deferment of deferment of income and expense is not allowed.

[01:06:04]This you will do only when the entity is not a going concern. Next problem is on this when the entity is not a going concern, how you need to prepare your P&L and balance sheet. That's your next wa drum.

[01:06:18]Okay. Update it till you're Can we review the next question?

[01:06:24]Can we do the next question?

[01:06:28]Huh? How many more?

[01:06:32]Two more.

[01:06:35]I already counted four already over at least. At least let me let me complete the next problem at least.

[01:06:42]Uh one moreh please sir till 910 you do whatever you want sir that 9:30 you take ah sure okay yes yes copied copied copied >> question number 19 I think next one is okay this we will apply the next question that is question number 19 come to question number 19 it's an LDR are we have multiple questions in study material like this one is good enough one if you do it more or less we know the concept that is sufficient so check this the balance sheet of a trader on 31st March 20 x1 is as follows it's a trader so is should we have to prepare balance sheet P&L in schedule 3 format or our old format trading P&L format is there no account format we'll prepare in that format because it's not a company it's a >> trading concern okay capital is how much 60,000 P&L 25 usually for a trader P&L you will not show separately you'll add it to the capital but it's okay 10% loan 35 lakh trade payable is 10,000 since it's a trader they have given the balance sheet in this format in solution also we'll present balance sheet in same format asset information they have given one thing catching our eye here is deferred cost Okay, you used to have no preliminary expenditure, deferred revenue expenditure you used to get in your 11th grade and all. Same here. How much cost have you deferred? 10,000.

[01:08:18]We'll see what to do. Now check at the check the additional information.

[01:08:23]Remaining life of property. Do we have any property plant and equipment? Yes.

[01:08:28]Remaining useful life of this PP is how much? 5 years. Underline that. The pattern of usage of the asset is even.

[01:08:35]Even means same. If the pattern of usage is same means you'll go for which method? Obviously you'll go for SLM method of depreciation. Clear sir even if they don't tell pattern of economic benefits we'll assume that >> SLM only assuming pattern of economic benefits is same any which way the [snorts] net realizable value of the property on 31st March 20 x2. Hang on.

[01:09:02]This is the data given on 31st March 20 x1. Now they are saying on 31st March 20 x2 the real if you sell this property you'll get how much 60,000 realizable value okay trader purchase and sale in x1 x2 is this or maybe quickly read the requirement you'll understand the data better maybe you are required to prepare P&L and balance sheet for the trader in both cases what case when entity is a going concern when entity is not a going this question will give you clarity under both. Okay. When it is a going concern and when it is not a going concern. When it is not a going concern, you tell me sir what you'll do.

[01:09:45]All the assets will get shown at realizable.

[01:09:49]All liability at settlement value.

[01:09:51]Deferment of income expense not allow.

[01:09:55]Okay. Keep that point.

[01:09:57]Okay.

[01:09:59]In x1 x2 that means we are talking about current year which is our current year here in x1 x2 means current year will begin on 1st April 20 x1 and it'll end on 31st March 20 x2 for this particular year we need to prepare trading account and P&L account under going concern and not a going concern while case what is the purchase in the current year four lakh sales is 4.5 lakh okay cost and NRV of the stock as on 31st March 20x2 end of the year cost of the inventory is 32 NRV is or realizable value is 40 expense once I'll read then we'll again go back and capture the relevant components expense [snorts] including interest on 10% loan is how much 3,500 for the year how much is the total expense 14900 this 14,900 includes the interest of how much 3,500 so that that's fine total expense is 14,900 deferred cost that is this 10,000 is amortized equally over 4 years that means every year how much you are amortizing 10,000 you are amortizing over 4 years means every year 25 that's what you've been doing I mean that that's what you want to do trade receivable as on end of current year that is 31st March 20 x2 is 25,000 of which 2,000 is doubtful provision for doubtful debts collection of Another 4,000 depends on successful reinstallation of a certain product supplied to the customer. Customer is saying I will pay you this 4,000 only if you do some reinstallation activity.

[01:11:38]Maybe old installation was not proper.

[01:11:40]Hence customer is saying reinstall it then only I will pay 4,000 otherwise I will not pay. Okay. Closing trade payable is 12,000 which is likely to be settled at 5% discount. Okay. Cash balance at the end of the year is 3,7100. There is an early repayment penalty of the loan. How much? If you repay the loan early, then bank will say you should not pay me 35,000. You should pay a penalty also of 2,500. So total payment will become 35 + 2,500 that is 3,7500. That will come only if you >> pay early. That's all is the data. Okay sir. Okay. So we can do it parallelly over here.

[01:12:22]Question number 19. We need to prepare trading and P&L account. That's the requirement right trading P&L or P&L and balance sheet. So I'll write it as PNL account of a trader for the year ended. What is the current year ended?

[01:12:41]31st March 20 X2 for the current year ended or year ended 31st March 20 X2. If you want first you can prepare going concern P&L separately not a going concern separately or I think we can merge and do in column format that'll be faster. Can we try that?

[01:13:01]>> Okay. Normally what is trader P&L format sir particulars amount particulars amount but here I'll do under s two cases particular. So first case what they told assuming going concern. So first is a going concern. If the entity is a going concern, how will you prepare? And when the entity is not a going concern, what will happen?

[01:13:27]Replicate the same column on the credit side.

[01:13:32]Particular going concern not a going concern.

[01:13:45]Okay. Debit to credit to make this column and keep uh ideally it's always better to have also a balance sheet format so that as and when we see we can push the data also into the balance sheet. Can we try that way? Okay. So leave around maybe like uh 10 to 12 lines.

[01:14:12]Okay. Then have balance sheet format.

[01:14:15]Have you have all of you made P&L format?

[01:14:19]Balance sheet format also same in two cases. When it is a going concern when it is not a going concern maybe I'll write it here.

[01:14:30]>> Balance sheet of a trader as on what date?

[01:14:37]>> 31st March 20 x2. You can leave 8 to 10 lines and then make this uh for a trader we can use T- shape format. Yeah, for a trader for partnership firm this is acceptable for only for a company follow schedule 3 format for sole proprietor partnership firm you can follow this okay uh you what do you used to write for balance balance sheet format liabilities amount assets amount to don't write liabilities amount write liabilities and the next will be going concern and then next it will be not a going concern.

[01:15:18]>> Similarly on the other side you'll write assets.

[01:15:23]Then going concern not a going concern.

[01:15:40]Ah, my format is ready. What about yours?

[01:15:45]John, this one we don't have to worry about the spacing anyway. It's a second table.

[01:15:50]No, you can figure that out.

[01:15:56]Can we do it people?

[01:15:59]Okay. Now let's go line by line item and push it. Now visualize or maybe you know trading P&L format order first. First first what will come? Opening stock. Sir you are preparing balance sheet as on 31st March 20 X2. Yes. In the question they have given balance sheet as on 31st March 20 X1. I mean this is for last year. last year closing balance will become current year open closing stock of last year becomes opening stock of current year. So go back to your P&L account. This is your trading P&L together you're doing. So you'll write here what to opening stock. How much is opening stock? 30,000. Whether it is a going concern or whether it is not a going concern. This will be same. No >> because this came from the last year.

[01:16:48]Okay. Then what you'll show purchases how much are the purchases they told current year trader purchases four lakh sales is 4 and a half lakh whether it is a going concern or not a going concern your purchase boots for four lakh only no so same and sales will it change or same sales undergoing concern and not undergoing concern is same only very three simple rules people if it is not a going concern all assets at realizable value all liabilities at at the end of the year okay end of the year all the assets this rule is applicable at the end of the year all the assets at year end will be shown at realizable value all liabilities at the end of the year will be shown at settlement value at the end of the year expense and income you should not defer okay this is all as a simple fun okay next what what they have captured or is it okay that I go line by line and do it would you be comfortable with that so that way adjustment is also sorted okay check the screen everybody for a minute then sir how much is PP value 65,000 last year closing balance will become current year opening balance okay how much is the life of the PP remaining 5 years that means calculate if entity is the going concern if entity is the going concern should we have to worry about anything or normal way normal will be 65,000 is asset value and asset has a life of how many years?

[01:18:23]>> 5 years. That means will you depreciate the asset? Will you depreciate the asset? Yes. How much >> is depreciation as an expense? Yeah. Now I will not write trading P and split. I will just do it together. Okay. So I will capture next expense. What?

[01:18:39]Depreciation.

[01:18:42]If entity is a going concern, you'll calculate the depreciation in the normal way. What is asset value? 65. How much life remaining? Five. Five years. So have they given residual value? No. So how much is this? 65,000 is a carrying amount of the asset minus residual value not given zero. Sir don't take 60,000 as a residual value. Pro residual value means the asset value at the end of useful life. Here life of the asset will come how will the asset ending now only or after 5 years. Uh this is the realizable value. Now if you sell the asset today you will get how much? 60. We don't want today's realizable value. We want residual value at the end of the useful life. Meaning after 5 years is that given not given.

[01:19:32]>> So assume to be what? Zero. Carrying amount 65 residial value 0 divided by remaining life five. How much is this?

[01:19:40]13,000 will be the depreciation any problem everybody good now for a minute check everybody is it okay parallelly I can complete or you want me to do going concern first >> parallelly is okay not confusion >> okay now check if entity is not a going concern if entity is not a going concern all the assets at the end of the year should be reflected at realizable value currently what is PP value last year closing balance will become current year opening. So current year PP is shown in our books at 65. If entity is not a going concern, can you show it at 65 or realizable value? At the end of the year, what is realizable value?

[01:20:25]>> That means from 65 you'll have to bring the asset down to 60. From 65 you need to make it to 60. So asset value increasing or reducing that means how much dep you will charge. Okay. Now how from 65 you need to bring it to 65 you need to bring it to 60 means how much is the reduction 5,000 that only will be accounted as depreciation in the second case when the entity is not a going concern understood that This is what I meant by when entity is a going concern normal accounting what you've been doing normal but if entity is not a going concern every asset at the end of the year will be get shown at realizable value currently PP value is 65 from 65 bring it down to realizable value 60 so reduction in the value of the asset is five that you'll account it as depreciation done okay next point number two purchase and sale did we already account? Yeah. Now cost and NRV of the stock as on 31st March 20 X2 this at the end of the year end of the year we have an asset called closing stock what is the cost of the closing stock 32 NRV is what sir if entity is going concern if the entity is going concern you will do normal accounting how should the normally inventory be valued at cost or NRV whichever is cost is 32 NRV is 40 you'll record it at 32 2 so closing stock comes where in trading accounting >> by closing stock yes s at what value will it be recorded cost or NRV whichever is lower 32 or 40 which is lower 32,000 this is the case when entity is a going concern if entity is not a going concern if entity is not a going concern at the end of the year every asset will be reflected at realizable value. So this is year end stock only no if entity is not a going concern will you will value it at cost or NRV whichever is lower or directly NRV directly realizable value how much is that 40,000 that means in this case my closing stock will get valued at 40,000 why we do this is if entity is not a going concern will you keep the asset or sell it sell it hence all the asset at realizable value and all the liability you'll have to settle so hence show it at settlement value Since entity is not expected to continue, don't defer your income and expenditure. It's a basic common sense rule actually everybody. Okay.

[01:23:17]All right. Online also I'm thinking you guys are good so far.

[01:23:22]Okay. Then next point expenses. So including the loan amount it's fine. How much is the expense? 14,900. So expense is normal. Expense comes on which side of trading account? Debit side. How much is that expense? 14,900. Whether it is your going concern or not a going concern expense will be recognized. No.

[01:23:44]If it is not a going concern, you cannot defer. That's all. Here are we differing or this is an normal expense. No normal expense. Both the cases may you'll record 14,900.

[01:23:54]Easy sir G.

[01:24:01]Okay. Next one. Now what is the next point? Deferred cost is amortized equally over four years. So last year how much deferred cost we have 10,000 in the normal case may you are transferring this 10,000 to one year PN or four year.

[01:24:16]So how much every year? 10,000 divided by 4. How much is that? 2,5 this way call it as deferred cost. Yes. No. Two deferred cost. In normal case may you'll amortize 10,000 over four years. How much will be the amount?

[01:24:34]>> 2,500. Meaning when the entity is a going concern every year in P&L you will book 2,500 expense. This will continue for four more years. SRG.

[01:24:45]If entity is not a going concern 10,000 you will defer out immediately entire 10,000 you'll have to book it in that year because there is no next year if there is no next year everything has to be accounted in the current year the deferment of expense will not be allowed and not a going concern case clear okay next point what is the X.2 trade receivable uh as on 31st March 20 x2 is how much?

[01:25:23]25,000. Okay, let's read it. Of which 2,000 is doubtful? 2,000 is doubtful.

[01:25:30]Collection of another 4,000 depends on successful installation of a product.

[01:25:34]Yes, SRG.

[01:25:36]Okay. If if the going concern assumption is valid means I'll come back to the asset. So, and write data. So, what will be the balance of data? You will show in balance sheet. Will you show 25,000 or 2,000 provision is there? 2,000 provision is there? 25,000 minus how much?

[01:25:54]25,000 minus 2,000. How much will be that?

[01:25:58]23,000.

[01:26:00]Clear?

[01:26:02]Yes, people. Now if entity is not a going concern if entity is not a going concern now you would tell me if you have no intention to continue the company only will you do this reinstallation activity because one of the customer is saying I will pay you 4,000 only if you do the reinstall company only we are not interested to continue will be interested in this reinstallation process doubtful so in that case may do you think you'll collect this money from datas or going that means what will be the trade receivable balance if it is not a going concern 25,000 must minus 2,000 doubtful and this 4,000 also looks doubtful because we may not do this reinstallation activity yes no in that case this will become 9 10,000 any problem if you want balance sheet you can take they also prepared in the same fashion I think even PNL also they're doing in same fashion only how okay everybody yeah but I feel I still feel like you know it's okay one problem if it's better Maybe if you write it so far good, good, good, good, good. Okay, that means you tell everybody if it is a going concern how much is provision for doubtful debts? 20,000.

[01:27:14]Provision for doubtful debts also as an expense. Will it come in P&L? No space, huh? Okay, I will write here to to provision for >> doubtful debts.

[01:27:31]If entity is a going concern, if entity is a going concern, how much do you think will be provisioned for doubtful debts? Only 2,000 this number.

[01:27:42]Yes. Because if entity is expected to continue then maybe we will do this reinstallation. So that means we'll be able to collect this amount. If entity is not a going concern, then doubtful amount is 2,000 or 4,000 also. That means if entity is not a going concern means it will become 6,000 that is 2,000 plus 4,000. So in that case may expense will become 6,000. Clear sir G right.

[01:28:18]Okay. Next. What else is there? Next to closing balance of trade payable is 12,000. That's okay. Which is likely to be settled at 5% discount. Okay. Now, if entity is not a going concern, can you push the credit hour amount or settle immediately? If you pay immediately, credit is ready to take 12,000 or he'll give you discount. He'll give you 12,000 5% discount. That means will settlement value be 12,000 or 5% lesser? Credit R where it'll come in P& balance sheet.

[01:28:49]Balance sheet. Balance sheet. May I leave two three lines and then write credit hours. If entity is a going concern then we will pay on the normal date. Then we'll pay on the normal date.

[01:29:00]If you pay normal date will you get discount? No. That means how much you need to pay? 12,000.

[01:29:08]But if entity is not a going concern then we'll settle the credit immediately. In that case may we will pay 12,000 or we'll get 5% discount. We will not pay full amount. 5% discount you will get. How much will be that?

[01:29:20]11,04. Yes sir.

[01:29:24]Sir, discount received from credit R is also an income. Will income come in PNL?

[01:29:29]So go back to your P and write what by >> discount from or discount received from citors. Will you receive discount under going concern case? No. In going concern case, you will pay the amount to ctor on the normal date where you will not get any discount. discount you'll get only if you immediately settle. So discount income will only come in not a going concern case 600 how is it 600 >> 12,000 5% discount so hence 600 rupees will be our income only under not a going concern case no confusion all right so balance sheet also we have updated next what is there cash balance cash will come in P&L or balance sheet only directly go your balance sheet and write cash balance. How much is that?

[01:30:26]>> This is a cash available. No, whether it is a going concern or not a going concern. This much cash you do have right. So 37,7700 same under both the cases.

[01:30:38]Anything more given or that's all. Uh in fact one more is there. There is an early repayment penalty for loan how much? 2500. If you repay the loan early then you'll have to pay how much penalty? 2,500. Okay. So that mean this is a expense.

[01:30:54]So will it come in your P&L? Sir, when will you repay the loan early? When entity is a when entity is a going concern, all the settlement you do do it on the proper date. If entity is not a going concern, then every liability have to settle immediately. So this penalty will come only if you settle the loan early. Early settlement when it will happen in going concern case or not a going concern? Not a going concern. How much penalty you have to pay? 2,500.

[01:31:22]Will it come in going concern case? No, it'll only come in your not a going concern case. Paka everybody getting the surgery.

[01:31:40]Okay. Loan is a liability, right? It'll come in your balance sheet.

[01:31:45]So, how much is the loan amount you have taken? Look at the balance sheet. How much is the loan? It's a 10% loan.

[01:31:52]How much is the loan? 35,000. In the normal going concern case, may you will pay 35,000 on time. Loan balance will be 35 or have they given any different balance? No. If entity is not a going concern, will you have to pay 35,000 or you have to pay extra?

[01:32:08]Because you if entity is not a going concern, you have to settle this loan early. If you settle this loan early, there is a penalty. How much? Sir why will bank charge penalty for early settlement sir sir bank will decide the interest rate based on the term if you are taking let's say five year loan then bank may give you at 10%. If you say you want loan only for one year it will not be 10 it may be 15%. So bank decided the interest rate based on the term. Now are you following the term or settling early? Settling early. So some banks if you settle the loan early they will charge prepayment penalty. recall some penalty here penalty is there how much 2,500 that means will you pay the loan at 35 or you have to pay extra you can't pay it at 35 you have to pay 2,000 500 huh okay that means how much you have to pay if entity is not a going concern if entity is not a going concern you'll settle early because you're settling early you have to pay 2,500 penalty more and it'll become 37500 clear okay This is done. Anything else?

[01:33:17]That's it. Now close your P&L first and tell me what is the total profit or loss of which case you're telling me which if it is going concern debit or credit side total which side is more credit is more h how much?

[01:33:35]>> 4 lakh 4 lak 82,000. This side also should be 482. Is it 482? You're getting balancing figure that is your net profit to >> to net profit arrived as balancing figure 19,600.

[01:33:53]Okay. If entity is not a going concern what is the total,600 >> 4 lak 90,600.

[01:34:03]Okay.

[01:34:05]Check the solution and tell if the totals are right later. Don't tell numbers wrong >> 22 >> 200 that will be the net profit arrived as balancing figure in not a going concern case so far okay all right now balance sheet balance sheet may first liability side you also capital how much is the capital that they have given people 60,000 Will it change? No. This is capital already introduced. No. So it'll be 60 60 in both cases. What about P and L?

[01:34:47]P and L may if you want you can give a break up. You can tell how much is the opening balance and how much is the current year profit? Both you can show it.

[01:34:59]P and how much is opening balance or I don't know how the IC is doing it.

[01:35:08]Okay. How much is the opening balance of P&L that they have given? 25,000.

[01:35:12]25,000. Will this change or same?

[01:35:14]>> Same. Then you will get add what?

[01:35:17]Current year profit.

[01:35:20]Current year profit. You'll get it from your trading P and how much is it?

[01:35:25]19,600 here and 22,200 there. H. Any more liabilities to be captured or that's it? That's it. I think asset one or two we have not captured anything. Closing stock and PP are not yet captured.

[01:35:43]Update it till your now check always again refer back to the question. Capital captured yes. PNL yes loan and trade payable yes. Asset side PP have you shown? Not yet. So let's show that. Property plant and equipment under normal case may PP will be shown at what value? 65,000 minus minus depreciation if an entity is a going concern how much depre 13,000 is your depreciation and PP balance will be >> 52,000 correct G take the normal balance reduce depreciation done if entity is not a going concern all assets at what value realizable value what is the realizable value of PP at the end of the year 60,000 it is given. So in th that case may it will come at 60 or you can also take 65 minus how much depri 5,000 depre you'll automatically get 60,000 clearer then what are the other assets stock closing stock I think we have not yet shown closing stock is there in your trading account copy from that closing stock if it is a going concern closing stock will be valid at normal basis cost or NRB whichever is lower which is 32. If it is not a going concern directly at net realizable value which is 40,000 okay PP is shown come back to the question PP captured stock captured trade receivable captured what about deferred cost what about deferred cost here we'll deferred cost how much was deferred cost opening balance >> last year closing balance will become current year opening balance in a normal case may are you transferring this deferred cost entirely to P&L or differing over two years every year you are only transferring 2500 that means in 10,500 how much went to current year PNL 200 so how much will be your deferred cost balance 7,500 this is when the entity is a going concern when the entity is not a going concern what did you do you transfer 2500 to P&L or full amount it was 10 and full to P and L. So what is will be the deferred cost balance zero because deferment is not allowed in case of when entity is not a going concern anything else is there or that's it bank balance that was given only so I think balance sheet should match give the total this going concern how much 1 lakh 51600 both the side when entity is not a going concern.

[01:38:38]Anyone has a balance?

[01:38:41]>> One lakh 5600 >> one lakh 56100 both the sides.

[01:38:50]Problem over. I hope this gives you a little better idea as to how we need to prepare when entity is a going concern and when it is not a going concern.

[01:39:01]But usually in exam what they ask is they will not ask both. They'll ask when the entity is not a going concern prepared trading and P&L. So they'll only ask this column. That's the more popular option. Both coming is rare. But we have done both. So we have that comparative analysis. So yeah. All right. Anyone still copying or done?

[01:39:22]Done. Okay. One last one we will do and we leave. Question number 23. Theory.

[01:39:27]Theory. 2 minutes. Question number 23.

[01:39:30]Come to 23.

[01:39:34]This is not actually it is there. It is there in AS7. When you read construction contract, I told one question relates to preparation of financial statement.

[01:39:41]There you can if you flip your books to construction contract AS7, you'll see this question. It's actually this chapter question by mistake got uploaded there. I don't know which question is there in AS7. Which one? 14th. All of you open AS7 topic construction contract refer question number 14. You'll find this.

[01:40:02]I've copied in AS7 topic also here also.

[01:40:05]Now you'll find at both the places I found it.

[01:40:10]Okay. Now people you remember or maybe let me get your memory back there.

[01:40:14]Current liability. There are four features. Anybody remembers? When can you call a component as a current liability?

[01:40:21]>> Held for trading purpose.

[01:40:24]>> It is expected to be settled within operating cycle. expected to be settled within 12 months from the balance sheet date. Company should not have unconditional right to defer the payment beyond 12 months from the balance sheet date. Yes. No. They should not have a right to push the payment beyond 12 months. If that right to push is there means non-current liability. If that right to push is not there means current liability. Application is that is this question. Okay. SRG question number 23.

[01:40:59]Saga Limited one company they've issued convertible bonds for how much value? 65 cr which are due to mature on 30th September 2018 while preparing financial statements on 31st March 2018. I'll not even bother reading anything further.

[01:41:18]Sir current year is ending on what day?

[01:41:22]>> 31st March 2018. This debenture itself is getting matured on what day?

[01:41:29]>> 30th September 2018.

[01:41:33]Sir, what is the current liability?

[01:41:36]Something which is expected to be settled within 12 months from the balance sheet date. If you count 12 months from the balance sheet date, it is 31st March 2019.

[01:41:46]Are these debentures getting redeemed before that?

[01:41:48]>> Yes.

[01:41:49]>> You can redeem or you can convert.

[01:41:51]Doesn't matter. You can repay the debenture holders their money or you can convert it into equity shares. Is is the redemption or conversion happening within 31st March 2019? Yes. That means what? Obviously this is what current liability. Now they will give blade this person has conversion or that person has conversion fal conversion will happen within 12 months. No. So what is the answer? Current liability. But still for the sake of it we will read. company expects these are convertible bonds. No conversion option company could have or investors can have whoever can have that conversion option. Okay. The company expects bond holders will not exercise their option of converting bonds to equity shares. Maybe company does not have this conversion option. Company has told the bond holders you take a choice whether you want money in a equity shares. We are telling the debenture holders on 38th September 2018 I will give you 65 crores in cash or I will give you 65 cr worth equity shares. You decide what you want. What is the company expecting that will happen that the bond holders will go for what?

[01:42:59]Conversion option. Huh? Now they're saying they will not exercise conversion option. That means we will settle by cash.

[01:43:06]How should the company classify this bond? Okay. How should be the classification? Doesn't matter whether you are converting or whether you are paying cash redemption is happening within what 12 months from the balance sheet date. So it has to be what?

[01:43:20]Parental liability. So first case may the answer is it has to be classified as current liability. Also state whether convertible bonds will change if company expect that the bonds will converted into equity shares. Doesn't matter whether they convert or whether they don't convert. Redemption to is happening within 12 months. So in every case may it is what current liability only. So still the answer or classification is what current liability they have given first current liability of features then finally they have told in this situation also you should classify it as what current liability basically in every case it is what current liability doesn't matter who has the option doesn't matter we are settling by cash or doesn't matter whether you are settling by shares since settlement is happening within 12 months it is a current liability. Thank you.