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CA Foundation · Accounting · Company Accounts

Iyer Ltd. has equity share capital of ₹5,00,000 and 10% debentures of ₹3,00,000 repayable in 4 years. Interest on debentures for the year is ₹30,000, and ₹10,000 of it is accrued but unpaid. Statement of P&L shows PBT ₹2,00,000 before tax; tax rate 30%. Dividend of ₹50,000 is proposed after the balance sheet date. Opening surplus was ₹1,00,000, and ₹20,000 is transferred to general reserve. Closing balance of surplus in the Balance Sheet is:

Closing surplus is ₹2,20,000. Profit after 30% tax is ₹1,40,000; adding it to opening surplus of ₹1,00,000 and deducting the ₹20,000 transfer to general reserve gives this. Proposed dividend is not deducted, and interest is already charged before PBT.

  1. A₹2,20,000Correct
  2. B₹2,70,000
  3. C₹2,40,000
  4. D₹2,00,000

Explanation

PBT ₹2,00,000 is already after interest. Tax = 30% of 2,00,000 = 60,000, so PAT = 1,40,000. Closing surplus = opening 1,00,000 + PAT 1,40,000 - transfer to reserve 20,000 = ₹2,20,000. Proposed dividend is not deducted as it is not declared before the balance sheet date. Deducting it gives ₹1,70,000.

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