Buyback of Securities PDF

Buyback of Securities 1 BUYBACK OF SECURITIES INDEX S.NO. TOPIC PG.NO. No. Of...

Buyback of Securities 1 BUYBACK OF SECURITIES INDEX S.NO. TOPIC PG.NO. No. Of. Eg/Qns SECTION A - CONCEPT 1 Important Conditions for Buyback of Equity Shares 1.2 2 Some Important provisions 1.2 3 Journal Entries for Buyback of Securities 1.3 4 How to Calculate Maximum Permissible Buyback 1.4 3 SECTION B – QUESTIONS Questions of Study Material, RTPs, MTPs and Past Exams to be Practiced in the Class Series 100 – Basic Level Questions on Buyback 1.6 2 Series 200 – High Level Questions on Buyback 1.8 16 SECTION C – MCQ’s MCQ’s From ICAI Module 1.41 6 SECTION D – HOMEWORK QUESTIONS Questions of Study Material, RTPs, MTPs and Past Exams to be Practiced at Home Series 100 – Basic Level Questions on Buyback 1.43 1 Series 200 – High Level Questions on Buyback 1.45 8 1.1  Buyback of Securities SECTION A – CONCEPTS 1. IMPORTANT CONDITIONS FOR BUYBACK OF EQUITY SHARES: Buy back must be authorized by Articles of Association of the company. Special Resolution has been passed in the GM of the company authorizing the buy back. However, Board of Directors can also authorized the buyback by passing Board resolution if buyback is equal to or less than 10% of the paid up capital of the company. Buy back of equity share in any financial year shall not exceed 25% of the total paid up capital of that equity share. Aggregate buyback of equity shares shall not exceed 25% of total paid up capital and free reserves of the company, Debt Equity ratio should not exceed 2:1 after such buy back. Equity shares must be fully paid. Buy back process must be completed within 12 months from the date of passing special resolution. 2. SOME IMPORTANT PROVISIONS: (1) There are three sources of Funds for Buy Back of Equity shares: Out of Free Reserves; (GR + P&L) Out of Securities Premium; or Out of the proceeds of any Fresh issue of shares or other specified securities. (2) Free Reserves includes: General Reserve P&L account (Cr. Balance) Security Premium a/c It does not include Capital Reserve, Share application a/c and revaluation reserves. (3) Where a company purchases its own shares out of free reserves and Securities premium account, then a sum equal to the nominal value of the shares so bought back shall be transferred to the ‘Capital Redemption Reserve Account’ out of Free Reserves. (4) Premium payable on buy-back can be set off against Security Premium a/c if any; otherwise it would be set off against Revenue Reserve. (5) Capital Redemption Reserve can be utilized only for issuing Bonus shares to members. 1.2  Buyback of Securities 3. JOURNAL ENTRIES FOR BUYBACK OF SECURITIES: On Announcement of Buyback Equity Share Capital A/c Dr. (Face Value) Premium Payable on Buy-Back A/c Dr. To Equity Shares Buy-back A/c (Buyback Value) On Payment to Shareholders Equity Shares Buy-back A/c Dr. To Bank A/c Writing off Premium on Buy-back Security Premium A/c Dr. (1st Priority) Revenue Reserves Dr. (Gen. Reserve and P&L) To Premium Payable on Buyback a/c Transfer to CRR (Equal to Nominal Revenue Reserve Dr. (Gen. Reserve and P&L A/c) Value) Security Premium A/c Dr. To Capital Redemption Reserve On Fresh issue of other securities such Bank A/c Dr. as Pref. Shares To Pref. Share Capital A/c To Security Premium A/c On sale of Investment for the purpose of Bank A/c Dr. Buy-back To Investment A/c (Gain or Loss on sale transfer to P&L A/c) On Issue of Bonus Shares out of CRR and Capital Redemption Reserve Dr. (1st Priority if available) Other Free Res. Revenue Reserves Dr. (Gen. Res and P&L) To Bonus Shares A/c Bonus Shares A/c Dr. To Equity Share Capital A/c 1.3  Buyback of Securities 4. HOW TO CALCULATE MAXIMUM PERMISSIBLE BUYBACK Here we need to conduct three important Tests for calculating Maximum permissible Buyback in accordance with Companies Act, 2013. These Tests are: 1. Share Outstanding Test: Maximum no. of buyback should not excess 25% of total Outstanding Equity Shares immediately before buyback. 2. Resource Test: Maximum Amount of Buyback should not excess 25% of Total Equity Paid up capital plus Free Reserves including Securities premium. 3. Debt Equity Test: After the Buyback of Equity, Debt-Equity Ratio should not exceed 2:1. (Here equity means ESC + PSC + Free Reserves) EXAMPLE 1: - Outstanding Equity Share Capital (10/- each) 35,00,000 General Reserve 25,00,000 Profit & Loss Balance 11,50,000 Securities Premium 17,50,000 Debentures 60,00,000 Bank Loan (Non-Current Liability) 70,00,000 Current Maturity of Bank Loan 15,00,000 Sundry Creditors 25,00,000 Investment allowance Reserve 10,00,000 SOLUTION: (1) Shares outstanding Test: - Total Outstanding No. of Equity Shares x 25% 3,50,000 x 25% = 87,500 No. (2) Resources Test: - (Total Paid-up Capital + Free Reserve) x 25% = Maximum Amount of Buyback 89,00,000 x 25% = 22,25,000/- Therefore, Maximum No. of Buyback = 22,25,000/25 = 89,000 no. (3) Debt Equity Test: - Debt Equity Ratio should not exceed 2:1 after Buyback Debt (after buyback) = 1,45,00,000 Equity after Buyback Should be = 1,45,00,000 / 2 = 72,50,000 Current Equity – Buyback effect = Equity after Buyback Assume No. of shares to be bought back is X Therefore, Buyback Effect = Face Value (10X) + Premium on BB (15x) + CRR to be Created equal to FV out of FR (10X) = 35X 89,00,000 – 35x = 72,50,000 X = 47,142 No. Note: for the purpose of this chapter, equity means Share Capital + Free reserves + Securities Premium (Capital Redemption Reserve will not be a part of Equity) 1.4  Buyback of Securities Conclusion: Hence Final No. of Shares to be bought back should not be more than 47142 No. (whichever is lower in above three tests) EXAMPLE 2: - Continuing the Example 1 with additional information: There are preference share Capital also of Rs. 30,00,000 (100/- each) SOLUTION: (1) Shares outstanding Test: - Total Outstanding No. of Equity Shares x 25% 3,50,000 x 25% = 87,500 No. (2) Resources Test: - (Total Paid-up Capital + Free Reserve + Preference Share Capital) x 25% = Maximum Amount of Buyback 1,19,00,000 x 25% = 29,75,000/- Therefore, Maximum No. of Buyback = 29,75,000/25 = 1,19,000 no. (3) Debt Equity Ratio:- Debt (after buyback) = 1,45,00,000 Equity after Buyback Should be = 1,45,00,000 / 2 = 72,50,000 Current Equity – Buyback effect = Equity after Buyback 1,19,00,000 – 35x = 72,50,000 X = 1,32,857 no. Note: Current Equity here should include the Preference Share Capital also. EXAMPLE 3: - Same as Example 1 but with additional information Entity decide to issue Preference share Capital of Rs. 10,00,000 for the purpose of Buyback Remaining out of free reserve. SOLUTION: Buyback Price x No of Buyback which is assumed as Y 25 x Y = 25Y 1) Face Value Portion of BB = 10Y Out of Fresh Issue = 10,00,000 Out of CRR (10Y – 10,00,000) 2) Premium Portion of BB = 15Y Current Equity +/– Buyback Effect = Equity after Buyback 89,00,000 – [(10Y – 15Y – (10Y – 10,00,000)] + 10,00,000 = 72,50,000 89,00,000 – 25Y – 10Y + 10,00,000 + 10,00,000 = 72,50,000 89,00,000 – 35Y + 20,00,000 = 72,50,000 Y = 36,50,000/35 = 1,04,285 No. 1.5  Buyback of Securities SECTION B – QUESTIONS (Questions of Study Material, RTPs, MTPs and Past Exams to be Practiced in the Class) SERIES 100 BASIC LEVEL QUESTIONS ON BUYBACK Q.BB.RMP.101: (EXAM Jan21) The Directors of Umang Ltd. passed a resolution to buyback 5,00,000 of its fully paid equity shares of Rs. 10 each at Rs. 15 per share. This buyback is in compliance with the provisions of the Companies Act, 2013. For this purpose, the company i. Sold its investments of Rs. 30,00,000 for Rs. 25,00,000. ii. Issued 20,000, 12% preference shares of Rs. 100 each at par, the entire amount being payable with application. iii. Used Rs. 15,00,000 of its Securities Premium Account apart from its adequate balance in General Reserve to fulfill the legal requirements regarding buy-back. iv. The company has necessary cash balance for the payment to shareholders. You are required to pass necessary Journal Entries (including narration) regarding Buy-back of shares in the books of Umang Ltd. SOLUTION Journal Entries in the books of Umang Ltd. Dr. Rs. Cr. Rs. 1. Bank A/c Dr. 25,00,000 Profit and Loss A/c Dr. 5,00,000 To Investment A/c 30,00,000 (Being investment sold for the purpose of buy-back of Equity Shares) 2. Bank A/c Dr. 20,00,000 To 12% Pref. Share capital A/c 20,00,000 (Being 12% Pref. Shares issued for Rs. 20,00,000) 3. Equity share capital A/c Dr. 50,00,000 Premium payable on buy-back Dr. 25,00,000 To Equity shares buy-back A/c/ Equity shareholders A/c 75,00,000 (Being the amount due on buy-back of equity shares) 4. Equity shares buy-back A/c/ Equity shareholders A/c Dr. 75,00,000 To Bank A/c 75,00,000 (Being payment made for buy-back of equity shares) 5. Securities Premium A/c Dr. 15,00,000 General Reserve A/c Dr. 10,00,000 To Premium payable on buy-back 25,00,000 (Being premium payable on buy-back charged from Securities premium) 6. General Reserve A/c Dr. 30,00,000 To Capital Redemption Reserve A/c 30,00,000 (Being creation of capital redemption reserve to the extent of the equity shares bought back after deducting fresh pref. shares issued) 1.6  Buyback of Securities Q.BB.OM.102: Jayesh Ltd. provides you the following information: 1. Issued capital: 2,50,000 equity shares of 10/- each 2,000, 10% Preference shares of 100/- each (Issued two months back for the purpose of buy-back) 2. Reserves and Surplus: Capital Reserve – 10,00,000/- Securities Premium- 22,00,000/- Revenue Reserve – 30,00,000/- Profit & Loss A/c – 40,00,000/- 3. Resolution passed to buy back 20% of its equity capital @ 50/- per share. Required: Pass journal entries to record the above transactions. Solution 1) Equity Share Capital A/c Dr. 5,00,000 Premium on Buyback A/c Dr. 20,00,000 To Equity Share Buyback A/c 25,00,000 2) Equity Shares Buyback A/c Dr. 25,00,000 To Bank A/c 25,00,000 3) Security Premium A/c Dr. 20,00,000 To Premium on Buyback A/c 20,00,000 4) Security Premium A/c Dr. 2,00,000 Revenue Reserve A/c Dr. 1,00,000 To CRR A/c 3,00,000 (*Alternatively, Instead of 2,00,000 SP A/c we can use whole Revenue Reserve for Creating CRR of 3,00,000) 1.7  Buyback of Securities SERIES 200 HIGH LEVEL QUESTIONS ON BUYBACK Q.BB.SM.201: M Ltd. furnishes the following Balance Sheet as at 31st March, 20X1: Particulars Notes ₹ (in 000) Equity and Liabilities 1 Shareholders’ funds A Share capital 1 5,000 B Reserves and Surplus 2 6,310 2 Non-current liabilities Long term borrowings 3 400 3 Current liabilities A Trade Payables 40 Total 11,750 Assets 1 Non-current assets A Property, plant and Equipment 4 2,750 B Non-Current Investments (at cost) 5,000 2 Current assets A Inventories 1,000 B Trade receivables 2,000 C Cash and Cash equivalents 1,000 Total 11,750 Notes to accounts No. Particulars ₹ in (‘000) 1 Share Capital Authorized, Issued and Subscribed Capital: 3,00,000 Equity shares of ₹ 10 each fully paid up 3,000 20,000 9% Preference Shares of 100 each 2,000 Total 5,000 2 Reserves and Surplus Capital reserve 10 Revenue reserve 4,000 Securities premium 500 Profit and Loss account 1,800 Total 6,310 3 Long term borrowings 10% Debentures 400 4 Property, Plant and Equipment (PPE) PPE: Cost 3,000 Less: Provision for depreciation (250) Net carrying value 2,750 The company passed a resolution to buy-back 20% of its equity capital @ ₹ 15 per share. For this purpose, it sold its investments of ₹30 lakhs for ₹ 25 lakhs. 1.8  Buyback of Securities You are required to pass necessary Journal entries & Prepare revised Balance Sheet. SOLUTION Journal Entries in the books of M Ltd. ₹ in ‘000 Particulars Dr. Cr. 1. Bank A/c Dr. 2,500 Profit and Loss A/c Dr. 500 To Investment A/c 3,000 (Being investment sold for the purpose of buy-back of Equity Shares) 2. Equity share capital A/c Dr. 600 Premium payable on buy-back Dr. 300 To Equity shares buy-back A/c 900 (Being the amount due on buy-back of equity shares) 3. Equity shares buy-back A/c Dr. 900 To Bank A/c 900 (Being payment made for buy-back of equity shares) 4. Securities Premium A/c Dr. 300 To Premium payable on buy-back 300 (Being premium payable on buy-back charged from Securities premium) 5. Revenue reserve A/c Dr. 600 To Capital Redemption Reserve A/c 600 (Being creation of capital redemption reserve to the extent of the equity shares bought back) Q.BB.RMP.202: (RTP Nov18) The following summarized Balance Sheet Pee Limited (a non-listed company) furnishes as at 31st March, 2017: Rs Rs Equity & Liabilities Share capital: Authorised capital 2,50,000 Equity shares of Rs 10 each fully paid up 25,00,000 5,000, 10% Preference shares of Rs 100 each 5,00,000 30,00,000 Issued and subscribed capital: 2,40,000 Equity shares of Rs 10 each fully paid up 24,00,000 3,000, 10% Preference shares of Rs 100 each 3,00,000 27,00,000 (Issued two months back for the purpose of buy back) Reserves and surplus: Capital reserve 10,00,000 Revenue reserve 25,00,000 Securities premium 27,00,000 Profit and loss account 35,00,000 97,00,000 Current liabilities Trade payables 13,00,000 Other current Liabilities 3,00,000 16,00,000 1,40,00,000 Assets Tangible assets 1.9  Buyback of Securities Building 25,00,000 Machinery 31,00,000 furniture 20,00,000 76,00,000 Non-current Investments 30,00,000 Current assets Inventory 12,00,000 Trade receivables 7,00,000 cash and bank balance 15,00,000 34,00,000 1,40,00,000 On 1st April, 2017, the company passed a resolution to buy back 20% of its equity capital @ Rs 60 per share. For this purpose, it sold all of its investment for Rs 25,00,000. The company achieved its target of buy-back. You are required to: (a) Give necessary journal entries and (b) Give the Balance Sheet of the company after buy back of shares. SOLUTION Journal Entries in the books of Pee Limited Particulars Dr. Cr. (i) Bank Account Dr. 25,00,000 Profit and Loss Account Dr. 5,00,000 To Investment Account 30,00,000 (Being the investments sold at loss for the purpose of buy back) (ii) Equity Share capital account Dr. 4,80,000 Premium payable on buy back A/c Dr. 24,00,000 To Equity shares buy back Account 28,80,000 (Being the amount due on buy back) (iii) Securities Premium Account Dr. 24,00,000 To Premium payable on buy back Account 24,00,000 (Being the premium payable on buy back adjusted against securities premium account) (iv) Revenue Reserve Account Dr. 1,80,000 To Capital Redemption Reserve Account 1,80,000 (Being the amount equal to nominal value of equity shares bought back out of free reserves transferred to capital redemption reserve account (4,80,000-3,00,000) (v) Equity shares buy-back Account Dr. 28,80,000 To Bank Account 28,00,000 (Being the payment made on buy back) Balance Sheet of Pee Limited as on 1st April, 2017 (After buy back of shares) Particulars Note No (Rs) I. Equity and Liabilities (1) Shareholder's Funds (a) Share Capital 1 22,20,000 (b) Reserves and Surplus 2 68,00,000 (2) Current Liabilities 16,00,000 Total 1,06,20,000 1.10  Buyback of Securities II. Assets (1) Non-current assets (a) Fixed assets 76,00,000 (2) Current assets 30,20,000 Total 1,06,20,000 Notes to Accounts 1 Share Capital Rs Authorised capital: 30,00,000 Issued and subscribed capital: 1,92,000 Equity shares of Rs 10 each fully paid up 19,20,000 3,000 10% Preference shares of Rs 100 each fully paid up 3,00,000 22,20,000 Reconciliation of share capital Opening no. of shares 2,40,000 Buy back of shares during the year During the year the company has (48,000) 1,92,000 buy back of 48,000 shares 2 Reserves and Surplus Capital reserve 10,00,000 Capital redemption reserve 1,80,000 Securities Premium 27,00,000 Less: Premium payable on buy back of shares (24,00,000) 3,00,000 Revenue reserve 25,00,000 Less: Transfer to Capital redemption reserve (1,80,000) 23,20,000 Profit and loss A/c 35,00,000 Less: Loss on investment (5,00,000) 30,00,000 68,00,000 Q.BB.RMP.203: (May19 RTP) (EXAM Nov22) Alpha Limited furnishes the following summarized Balance Sheet as at 31st March, 2017: Liabilities (Rs. in lakhs) Assets (Rs. in lakhs) Equity share capital 2,400 Machinery 3,600 (Fully paid-up shares of Rs. 10 each) Furniture 450 Securities premium 350 Investment 148 General reserve 530 Inventory 1,200 Capital redemption reserve 400 Trade receivables 500 Profit & loss A/c 340 Cash at bank 1,500 12% Debentures 1,500 Trade payables 1,400 Other current liabilities 478 7,398 7,398 st On 1 April, 2017, the company announced the buyback of 25% of its equity shares @ Rs. 15 per share. For this purpose, it sold all of its investments for Rs. 150 lakhs. On 5th April, 2017, the company achieved the target of buy back. 1.11  Buyback of Securities You are required to: (1) Pass necessary journal entries for the buy-back. (2) Prepare Balance Sheet of Alpha Limited after buy-back of the shares. SOLUTION: In the books of Alpha Limited Journal Entries (Rs. In Lakhs) Date Particulars Dr. Cr. April 1 Bank Account Dr. 150 To Investment Account 148 To Profit and Loss Account 2 (Being investment sold on profit) April 2 Equity Share capital account Dr. 600 Securities premium A/c Dr. 300 To Equity shares buy back Account 900 (Being the amount due to equity shareholders on buy back) Equity shares buy back A/c Dr. 900 To bank A/c 900 (Being the payment made on account of buyback of 60 Lakh Equity Shares) April 5 General reserve A/c Dr. 530 Profit and Loss A/c Dr. 70 To Capital redemption reserve A/c 600 (Being amount equal to nominal value of bought back shares from free reserves transferred to capital redemption reserve account as per the law) Balance Sheet (After buy back of shares) Particulars Note No (Rs) I. Equity and Liabilities (1) Shareholder's Funds (a) Share Capital 1 1,800 (b) Reserves and Surplus 2 1,322 (2) Non-Current Liabilities (a) Long-term borrowings - 12% Debentures 1,500 (2) Current Liabilities (a) Trade payables 1,400 (b) Other current liabilities 478 Total 6,500 II. Assets (1) Non-current assets (a) Property, Plant & Equipment (i) Tangible assets 3 4,050 (2) Current assets (a) Current investments (b) Inventory 1,200 1.12  Buyback of Securities (c) Trade receivables 500 (d) Cash and cash equivalents (W.N.) 750 Total 6,500 Notes to Accounts 1 Share Capital Rs in lakhs Equity share capital (Fully paid-up shares of Rs.10 each) 1800 2 Reserves and Surplus General Reserve 530 Less: Transfer to CRR (530) - Capital redemption reserve 400 Add: Transfer due to buy-back of shares from P/L 70 Transfer due to buy-back of shares from Gen. res. 530 1,000 Securities Premium 350 Less: Premium payable on buy back of shares (300) 50 Profit and loss A/c 340 Less: Transfer to CRR (70) 272 1,322 3 Tangible assets Machinery 3,600 Furniture 450 4,050 Working Note: Cash at bank after buy-back Rs. in lakhs Cash balance as on 1st April, 2017 1,500 Add: Sale of investments 150 1,650 150 Less: Payment for buy back of shares (900) 750 Q.BB.RMP.204: (RTP May20) The following was the Balance Sheet of C Ltd. as on 31st March ,2019: Equity & Liabilities Rs Lakhs Assets Rs Lakhs Share Capital: Fixed Assets 14,000 Equity shares of Rs 10 each Fully Paid Up 8,000 Investments 2,350 10% Redeemable Pref. Shares of 2,500 Cash at Bank 2,300 Rs 10 each Fully Paid Up Reserves & Surplus Other Current Assets 8,250 Capital Redemption Reserve 1,000 Securities Premium 800 General Reserve 6,000 Profit & Loss Account 300 Secured Loans: 9% Debentures 5,000 Current Liabilities: Trade payables 2,300 1.13  Buyback of Securities Sundry Provisions 1,000 26,900 26,900 On 1st April, 2019 the Company redeemed all its Preference Shares at a Premium of 10% and bought back 10% of its Equity Shares at Rs 20 per Share. In order to make cash available, the Company sold all the Investments for Rs 2,500 lakhs. You are required to pass journal entries for the above and prepare the Company’s Balance sheet immediately after buyback of equity shares and redemption of preference shares. SOLUTION: Journal Entries in the books of C Ltd. (Rs in lakhs) Particulars 1 Bank A/c Dr. 2,500 To Investments A/c 2,350 To Profit and Loss A/c 150 (Being investment sold on profit for the purpose of buy- back) 2 10% Redeemable Preference Share Capital A/c Dr. 2,500 Premium on Redemption of Preference Shares A/c Dr. 250 To Preference Shareholders A/c 2,750 (Being redemption of preference share capital at premium of 10%) 3 Securities Premium A/c Dr. 250 To Premium on Redemption of Preference Shares A/c 250 (Being premium on redemption of preference shares adjusted through securities premium) 4 Equity Share Capital A/c Dr. 800 Premium on buyback Dr. 800 To Equity buy-back A/c 1,600 (Being Equity Share bought back, Share Capital cancelled, and Premium on Buyback accounted for) 5 Securities Premium A/c (800-250) Dr. 550 General Reserve A/c Dr. 250 To Premium on Buyback A/c 800 (Being premium on buyback provided first out of securities premium and the balance out of general reserves.) 6 Preference Shareholders A/c Dr. 2,750 Equity buy-back A/c Dr. 1,600 To Bank A/c 4,350 (Being payment made to preference shareholders and equity shareholders) 7 General Reserve Account Dr. 3,300 To Capital Redemption Reserve Account 3,300 (Being amount transferred to capital redemption reserve account towards face value of preference shares redeemed and equity shares bought back) Balance Sheet of C Ltd. (after Redemption and Buyback) (Rs Lakhs) Particulars Note No Amount (Rs.) (I) EQUITY AND LIABILITIES (1) Shareholders’ Funds: (a) Share Capital 1 7,200 1.14  Buyback of Securities (b) Reserves and Surplus 2 7,200 (2) Non-Current Liabilities: (a) Long Term Borrowings 3 5,000 (3) Current Liabilities: (a) Trade payables 2,300 (b) Short Term Provisions 1,000 Total 22,700 (II) ASSETS (1) Non-Current Assets PPE 14,000 (2) Current Assets: (a) Cash and Cash equivalents (W N) 450 (b) Other Current Assets 8,250 22,700 Notes to Accounts Rs in Lakhs 1. Share Capital 720 lakh Equity Shares of Rs 10 each Fully Paid up (80 lakh Equity Shares bought back) 7,200 2. Reserves and Surplus General Reserve 6,000 Less: Adjustment for premium paid on buy back (250) Less: Transfer to CRR (3,300) 2,450 Capital Redemption Reserve 1,000 Add: Transfer due to buy-back of shares from Gen. res. 3,300 4,300 Securities premium 800 Less: Adjustment for premium paid on redemption of preference shares (250) Less: Adjustment for premium paid on buy back (550) Profit & Loss A/c 300 Add: Profit on sale of investment 150 450 7,200 3. Long-term borrowings Secured 9 % Debentures 5,000 Working Note: Bank Account Receipts Amount Payments Amount (Rs Lakhs) (Rs Lakhs) To balance b/d 2,300 By Preference Shareholders A/c 2,750 To Investment A/c (sale 2,500 By Equity Shareholders A/c 1,600 Proceeds) By Balance c/d (Balancing figure) 450 4,800 4,800 1.15  Buyback of Securities Q.BB.RMP.205: (EXAM Nov22) PG Limited furnishes the following Balance Sheet as at 31st March,2022: Particulars Notes ₹ (in Lakhs) 1. Equity and Liabilities Shareholders’ funds (a) Share Capital 1 12,000 (b) Reserves and Surplus 2 8,100 2 Current liabilities (a) Trade Payables 7,450 (b) Other Current Liabilities 1,950 Total 29,500 Assets 1 Non-current asset (a) Property, Plant and Equipment 12,760 (b) Non-current Investments 740 2 Current asset (a) Inventories 6,000 (b) Trade receivable 2,600 (c) Cash and cash equivalents 7,400 Total 29,500 Notes to accounts: Particulars ₹ (in Lakhs) 1 Share Capital 12,000 Authorized, issued and subscribed capital Equity share capital (fully paid up shares of ₹ 10 each) 2 Reserves and Surplus Securities premium General 1,750 General reserve 2,650 Capital redemption reserve 2,000 Profit and Loss account 1,700 Total 8,100 On 1stApril, 2022, the company announced the buy-back of 25% of its Equity Shares @ ₹ 15 per share. For this purpose, it sold all of is investments for ₹ 750 lakhs. On 5thApril, 2022, the company achieved the target of buy-back You are required to pass necessary journal entries for the above transactions. SOLUTION In the books of PG Limited Journal Entries Date Particulars Dr. Cr. 2022 (₹ in lakhs) April 1 Bank A/c Dr. 750 To Investment A/c 740 To P& L A/c (Profit on sale of investment) 10 1.16  Buyback of Securities (Being investment sold on profit) April 5 Equity share capital A/c Dr. 3,000 Premium payable on buy-back A/c Dr. 1,500 To Equity shares buy-back A/c 4,500 (Being the amount due to equity shareholders on buy- back) Securities Premium A/c Dr. 1,500 To Premium payable on buy-back A/c 1,500 (Being the amount of premium charged from securities premium account) Equity shares buy-back A/c Dr. 4,500 To Bank A/c 4,500 (Being the payment made on account of buy-back of 30 Lakh Equity Shares) April 5 Profit and Loss A/c Dr. 1,700 General reserve A/c Dr. 1,300 To Capital redemption reserve A/c 3,000 (Being amount equal to nominal value of buy-back shares from free reserves transferred to capital redemption reserve account as per the law) Note: 1. In the last entry given in the solution, it is possible to adjust transfer to Capital Redemption Reserve Account from different combinations of amounts from Securities Premium, General Reserve and Profit and Loss Account to the extent available. 2. Calculation of amount of Buy Back of Share: ₹12,000/10 X 25% X ₹ 15 = ₹ 4,500 Lakhs Q.BB.RMP.206: (MTP Oct20) The following was the summarized balance sheet of Bhoomi Ltd. as on 31st March, 2020: Equity & liability Rs. (In lakhs) Assets Rs. (In lakhs) Authorised Capital: Property, plant and equipment 1,12,000 Equity shares of Rs. 10 each 80,000 Investments 24,000 Issued Capital Cash at Bank 13,200 Equity Shares of Rs.10 each Fully Paid up 64,000 Trade Receivables 66,000 10% Redeemable Preference Shares of 10 each, Fully Paid Up 20,000 Reserves & Surplus: Capital Redemption Reserve 8,000 Securities Premium 6,400 General Reserve 48,000 Profit & Loss Account 2,400 9% Debentures 40,000 Trade Payables 26,400 2,15,200 2,15,200 On 1st April,2020 the Company redeemed all its Preference Shares at a Premium of 10% and bought back 25% of its Equity Shares at Rs.20 per Share. In order to make Cash available, the Company sold all the Investments for Rs.25,000 Lakhs and raised a Bank Loan amounting to Rs.16,000 lakh on the Security of the Company's 1.17  Buyback of Securities Plant. Give the necessary Journal Entries considering that the buyback is authorized by the articles of company and necessary resolution is passed by the company for this. The amount of Securities premium may be utilized to the maximum extent allowed by law. SOLUTION: Journal entries In the books of Bhoomi Ltd. Dr. Cr. Rs. in lakhs 1 Bank A/c Dr. 25,000 To Investments A/c 24,000 To Profit and Loss A/c 1,000 (Being Investments sold and, profit being credited to Profit and Loss Account) 2 10% Redeemable Preference Share Capital A/c Dr. 20,000 Premium payable on Redemption of Preference Shares A/c Dr. 2,000 To Preference Shareholders A/c 22,000 (Being amount payable on redemption of Preference shares, at a Premium of 10%) 3 Securities Premium A/c Dr. 2,000 To Premium payable on Redemption of Preference Shares A/c 2,000 (Being Securities Premium utilised to provide Premium on Redemption of Preference Shares) 4 Equity Share Capital A/c Dr. 16,000 Premium payable on Buyback A/c Dr. 16,000 To Equity Share buy back A/c 32,000 (Being the amount due on buy-back) 5 Securities Premium A/c (6,400 – 2,000) Dr. 4,400 General Reserve A/c (balancing figure) Dr. 11,600 To Premium payable on Buyback A/c 16,000 (Being premium on buyback provided first out of Securities Premium and the balance out of General Reserves.) 6 Bank A/c Dr. 16,000 To Bank Loan A/c 16,000 (Being Loan taken from Bank to finance Buyback) 7 Preference Shareholders A/c Dr. 22,000 Equity Shares buy back A/c Dr. 32,000 To Bank A/c 54,000 (Being payment made to Preference Shareholders and Equity Shareholders) 8 General Reserve Account Dr. 36,000 To Capital Redemption Reserve Account 36,000 (Being amount transferred to Capital Redemption Reserve Account to the extent of face value of preference shares redeemed and equity Shares bought back) (20,000 + 16,000) 1.18  Buyback of Securities Q.BB.RMP.207: (May21 RTP) M/s. Vriddhi Infra Ltd. (a non-listed company) provide the following information as on 31.3.2020: (Rs.) Land and Building 21,50,000 Plant & Machinery 15,00,000 Non- current Investment 2,00,000 Trade Receivables 5,50,000 Inventories 1,80,000 Cash and Cash Equivalents 40,000 Share capital:1,00,000 Equity Shares of Rs. 10 each fully paid up 10,00,000 Securities Premium 3,00,000 General Reserve 2,50,000 Profit & Loss Account (Surplus) 1,50,000 10% Debentures (Secured by floating charge on all assets) 20,00,000 Unsecured Loans 8,00,000 Tarde Payables 1,20,000 On 21st April, 2020 the Company announced the buyback of 15,000 of its equity shares @ Rs. 15 per share. For this purpose, it sold all its investment for Rs. 2.50 lakhs. On 25th April, 2020, the company achieved the target of buy back. On 1st May, 2020 the company issued one fully paid-up share of Rs. 10 each by way of bonus for every eight equity shares held by the equity shareholders. You are required to pass necessary Journal Entries for the above transactions. SOLUTION: In the books of Vriddhi Infra Ltd. Journal Entries Date Particulars Dr. Cr. April 21 Bank Account Dr. 2,50,000 To Investment Account 2,00,000 To Profit and Loss Account 50,000 (Being investment sold on profit) April 25 Equity Share capital account Dr. 1,50,000 Securities premium A/c Dr. 75,000 To Equity shares buy back Account 2,25,000 (Being the amount due to equity shareholders on buy back) Equity shares buy back A/c Dr. 2,25,000 To bank A/c 2,25,000 (Being the payment made on account of buyback of 15,000 Equity Shares) General reserve A/c Dr. 1,50,000 To Capital redemption reserve A/c 1,50,000 (Being amount equal to nominal value of bought back shares from free reserves transferred to capital redemption reserve account as per the law) May 1 Capital redemption reserve A/c Dr. 1,06,250 To Bonus shares A/c (W.N.1) 1,06,250 (Being the utilization of capital redemption reserve to issue bonus shares) Bonus shares A/c Dr. 1,06,250 To Equity share capital A/c 1,06,250 (Being issue of one bonus equity share for every ten equity shares held) 1.19  Buyback of Securities Working Note: Amount of bonus shares = {(1,00,000 – 15,000) X 1/8} X 10 = Rs. 1,06,250 Q.BB.RMP.208: (MTP May22) Alpha Ltd. furnishes the following information as at 31st March, 2021: Rs. In lakhs Rs. In lakhs Shareholders' Funds Equity share capital (fully paid up shares of Rs. 10 each) 2,400 Reserves and Surplus Securities Premium 350 General Reserve 530 Capital Redemption Reserve 400 Profit & Loss Account 340 1,620 Non-current Liabilities 12% Debentures 1,500 Current Liabilities Trade Payables 1,490 Other Current Liabilities 390 1,880 Non-current Assets Property, plant and equipment 4,052 Current Assets Current Investments 148 Inventories 1,200 Trade Receivables 520 Cash and Bank 1,480 3,348 (i) On 1st April, 2021, the company announced buy-back of 25% of its equity shares @ Rs. 15 per share. For this purpose, it sold all its investment for Rs. 150 lakhs. (ii) On 10th April, 2021 the company achieved the target of buy-back. (iii) On 30th April, 2021, the company issued one fully paid-up equity share of Rs. 10 each by way of bonus for every four equity shares held by the Capital Redemption Reserve. Premium (excess of buy-back price over the par value) paid on buy-back should be adjusted against securities premium account. You are required to pass necessary journal entries and prepare the Balance Sheet of Alpha Ltd. after bonus issue. SOLUTION In the books of Alpha Limited Journal Entries Date Particulars Dr. Cr. 2021 (Rs. in lakhs) April 1 Bank A/C Dr. 150 To Investment A/c 148 To Profit on sale of investment 2 (Being investment sold on profit) April 10 Equity share capital A/C Dr. 600 1.20  Buyback of Securities Securities premium A/C Dr. 300 To Equity shares buy back A/c 900 (Being the amount due to equity shareholders on buy back) Equity shares buy back A/C Dr. 900 To Bank A/c 900 (Being the payment made on account of buy back of Rs. 60 Lakh Equity Shares) April 10 General reserve A/C Dr. 530 Profit and Loss A/C Dr. 70 To Capital redemption reserve (CRR) A/c 600 (Being amount equal to nominal value of buy back shares from free reserves transferred to capital redemption reserve account as per the law) April 30 Capital redemption reserve A/C Dr. 450 To Bonus shares A/c (W.N.1) 450 (Being the utilization of capital redemption reserve to issue bonus shares) Bonus shares A/C Dr. 450 To Equity share capital A/c 450 (Being issue of one bonus equity share for every four equity shares held) Profit on sale of Investment Dr. 2 To Profit and Loss A/c 2 (Profit on sale transfer to Profit and Loss A/c) Note: For transferring amount equal to nominal value of buy back shares from free reserves to capital redemption reserve account, the amount of Rs. 340 lakhs from P & L A/c and the balance from general reserve may also be utilized. The combination of different set of amounts (from General Reserve and Profit and Loss Account) aggregating Rs. 600 lakhs may also be considered for the purpose of transfer to CRR. Balance Sheet (After buy back and issue of bonus shares) Particulars Note No Amount (Rs. in Lakhs) I. Equity and Liabilities (1) Shareholder's Funds (a) Share Capital 1 2,250 (b) Reserves and Surplus 2 872 (2) Non-Current Liabilities (a) Long-term borrowings - 12% Debentures 1,500 (3) Current Liabilities (a) Trade payables 1,490 (b) Other current liabilities 390 Total 6,502 II. Assets (1) Non-current assets 1.21  Buyback of Securities (a) Property, plant and equipment 4,052 (2) Current assets (a) Current investments (b) Inventory 1,200 (c) Trade receivables 520 (d) Cash and cash equivalents (W.N. 2) 730 Total 6,502 Notes to Accounts: Rs. In lakhs 1. Share Capital Equity share capital (225 lakh fully paid-up shares of Rs. 10 each) 2,250 2. Reserves and Surplus General Reserve 530 Less: Transfer to CRR (530) - Capital Redemption Reserve 400 Add: Transfer due to buy-back of shares from P/L 70 Add: Transfer due to buy-back of shares from Gen. res. 530 Less: Utilisation for issue of bonus shares (450) 550 Securities premium 350 Less: Adjustment for premium paid on buy back (300) 50 Profit & Loss A/c 340 Add: Profit on sale of investment 2 Less: Transfer to CRR (70) 272 872 Working Notes: 1. Amount of equity share capital = 2,400 - 600 (buyback) + 450 (Bonus shares) = 2,250 2. Cash at bank after issue of bonus shares Rs. in lakhs Cash balance as on 1st April, 2021 1480 Add: Sale of investments 150 1630 Less: Payment for buy back of shares (900) 730 Q.BB.SM.209: (MTP May23) (RTP Nov20) Pratham Ltd. (a non-listed company) has the following Capital structure as on 31st March, 20X1: Particulars ₹ ₹ Equity Share Capital (shares of ₹ 10 each fully paid 30,00,000 Reserves & Surplus General Reserve 32,50,000 Security Premium Account 6,00,000 Profit & Loss Account 4,30,000 Revaluation Reserve 6,20,000 49,00,000 Loan Funds 42,00,000 1.22  Buyback of Securities You are required to compute by Debt Equity Ratio Test, the maximum number of shares that can be bought back in the light of above information, when the offer price for buy-back is ₹ 30 per share. SOLUTION Debt Equity Ratio Test Particulars ₹ (a) Loan funds 42,00,000 (b) Minimum equity to be maintained after buy-back in the ratio of 2:1 (₹ in crores) 21,00,000 (c) Present equity shareholders fund (₹ in crores) 72,80,000 (d) Future equity shareholder fund (₹ in crores) (See 59,85,000 Note 2) (72,80,000-12,95,000) (e) Maximum permitted buy-back of Equity (₹ in 38,85,000 (by simultaneous crores) [(d) – (b)] (See Note 2) equation) (f) Maximum number of shares that can be bought back 1,29,500 (by simultaneous @ ₹ 30 per share (shares in crores) (See Note 2) equation) Working Note: 1. Shareholders’ funds Particulars ₹ Paid up capital 30,00,000 Free reserves (32,50,000 +6,00,000+4,30,000) 42,80,000 72,80,000 2. As per section 68 of the Companies Act, 2013, amount transferred to CRR and maximum equity to be bought back will be calculated by simultaneous equation method. Suppose amount equivalent to nominal value of bought back shares transferred to CRR account is ‘x’ and maximum permitted buy-back of equity is ‘y’. Equation 1: (Present equity – Nominal value of buy-back transfer to CRR) – Minimum equity to be maintained = Maximum permissible buy-back of equity (72,80,000 –x)-21,00,000 = y (1) Since 51,80,000 – x = y Equation 2: (Maximum Buyback/offer price of Buyback) x Nominal Value = Nominal Value of the shares Bought-Back to be transferred to CRR = Y/30 x 10 = X 3X = Y (2) x = ₹ 12,95,000 crores and y = ₹ 38,85,000 crores Q.BB.SM.210: (Also in MTP – March18, August18, March19 & April19) SMM Ltd. has the following capital structure as on 31st March, 20X1: ₹ in crore Particulars Situation I Situation II (i) Equity share capital (shares of ₹ 10 each) 1,200 1,200 (ii) Reserves: General Reserves 1,080 1,080 Securities Premium 400 400 Profit & Loss 200 200 Infrastructure Development Reserve Statutory Reserve) 320 320 (iii) Loan Funds 3,200 6,000 1.23  Buyback of Securities The company has offered buy-back price of ₹ 30 per equity share. You are required to calculate maximum permissible number of equity shares that can be bought back in both situations and also required to pass necessary Journal Entries. SOLUTION Statement determining the maximum number of shares to be bought back Number of shares (in crores) Particulars When loan fund is ₹ 3,200 crores ₹ 6,000 crores Shares Outstanding Test (W.N.1) 30 30 Resources Test (W.N.2) 24 24 Debt Equity Ratio Test (W.N.3) 32 Nil Maximum number of shares that can be bought 24 Nil back [least of the above] Journal Entries for the Buy-Back (applicable only when loan fund is ₹3,200 crores) ₹ in crores Particulars Debit Credit (a) Equity shares buy-back account Dr. 720 To Bank account 720 (Being payment for buy-back of 24 crores equity shares of ₹ 10 each @ ₹ 30 per share) (b) Equity share capital account Dr. 240 Premium Payable on buy-back account Dr. 480 To Equity share buy-back account 720 (Being cancellation of shares bought back) Securities Premium account General Dr. 400 Reserve / Profit & Loss A/c Dr. 80 To Premium Payable on buy-back account 480 (Being Premium Payable on buy-back account charged to securities premium and general reserve/Profit & Loss A/c) (c) General Reserve / Profit & Loss A/c Dr. 240 To Capital redemption reserve account 240 (Being transfer of free reserves to capital redemption reserve to the extent of nominal value of share capital bought back out of redeemed through free reserves) Working Notes: 1. Shares Outstanding Test Particulars (Shares in crores) Number of shares outstanding 120 25% of the shares outstanding 30 2. Resources Test Particulars Paid up capital (₹ in crores) 1,200 Free reserves (₹ in crores) (1,080 + 400 +200) 1,680 Shareholders’ funds (₹ in crores) 2,880 25% of Shareholders fund (₹ in crores) ₹ 720 crores Buy-back price per share ₹ 30 1.24  Buyback of Securities Number of shares that can be bought back 24 crores shares 3. Debt Equity Ratio Test: Loans cannot be in excess of twice the Equity Funds post Buy-Back Particulars When loan fund is ₹ 3,200 crores ₹ 6,000 crores (a) Loan funds (₹) 3,200 6,000 (b) Minimum equity to be maintained after buy-back in 1,600 3,000 the ratio of 2:1 (₹) (a/2) (c) Present equity shareholders fund (₹) 2,880 2,880 (d) Future equity shareholders fund (₹) (see W.N.4) 2,560 (2,880-320) N.A. (e) Maximum permitted buy- back of Equity (₹) [(d) 960 Nil – (b)] (f) Maximum number of shares that can be bought 32 crore shares Nil back @ ₹ 30 per share As per the provisions of the Companies Act, 2013, company Qualifies Does not Qualify 4. Amount transferred to CRR and maximum equity to be bought back will be calculated by simultaneous equation method Suppose amount transferred to CRR account is ‘x’ and maximum permitted buy-back of equity is ‘y’ Then Equation 1: (Present Equity- Transfer to CRR)- Minimum Equity to be maintained = Maximum Permitted Buy-Back = (2,880 – x) – 1,600 = y = 1280 – x =y (1) Equation 2: Maximum Permitted Buy-Back X Nominal Value Per Share/Offer Price Per Share y/30 x 10 = x or 3x = y (2) by solving the above two equations we get x= ₹ 320 y = ₹ 960 Q.BB.RMP.211: (EXAM May23) VIJ Ltd. has the following Capital Structure as on 31st March, 2022: particulars (₹ in Lakhs) Equity Share Capital (Shares of ₹ 10 each, fully Paid) 990 Reserves & Surplus: General Reserve 720 Securities Premium Account 270 Profit & Loss Account 270 Infrastructure development Reserve 540 1,800 Loan Funds 5,400 On the recommendation of the Board of Directors, the shareholders of the company have approved on 2 nd September, 2022 a proposal to buy-back the maximum permissible number of equity shares, considering the sufficient funds available at the disposal of the company. The current market value of the company’s shares is ₹ 25 per share and in order to induce the existing shareholders to offer their shares for buy-back, it was decided to offer a price of 20% over market rate. 1.25  Buyback of Securities You are also informed that the Infrastructure Development Reserve is created to satisfy income tax requirements. You are required to compute the maximum permissible number of equity shares that can be brought back in the light of the above information and also under a situation where the loan funds of the company were either ₹ 3,600 lakh or ₹ 4,500 lakh. The entire buy-back is completed by 09/12/2022, show the accounting entries with full narration in the company’s books in each situation. SOLUTION: 1.26  Buyback of Securities Q.BB.RMP.212: (EXAM May22) Quick Ltd. has the following capital structure as on 31st March,2021: Rs. in Crores (1) Share Capital: 462 (Equity Shares of Rs. 10 each, fully paid) (2) Reserves and Surplus: General Reserve 336 Securities Premium Account 126 Profit and Loss Account 126 Statutory Reserve 180 Capital Redemption Reserve 87 Plant Revaluation Reserve 33 888 (3) Loan Funds: Secured 2,200 Unsecured 320 2,520 On the recommendations of the Board of Directors, on 16th September, 2021, the shareholders of the company have approved a proposal to buy-back of equity shares. The prevailing market value of the company's share is Rs. 20 per share and in order to induce the existing shareholders to offer their shares for buy-back, it was decided to offer a price of 50% over market value. The company had sufficient balance in its bank account for the buy- back of shares You are required to compute the maximum number of shares that can be bought back in the light of the above information and also under a situation where the loan funds of the company were either Rs. 1,680 Crores or Rs. 2,100 Crores. Assuming that the entire buy-back is completed by 31st December,2021, Pass the necessary accounting entries (narrations not required) in the books of the company in each situation. SOLUTION Statement determining the maximum number of shares to be bought back Number of shares Particulars When loan fund is Rs. 2,520 Rs. 1,680 Rs. 2,100 crores crores crores Shares Outstanding Test (W.N.1) 11.55 11.55 11.55 Resources Test (W.N.2) 8.75 8.75 8.75 Debt Equity Ratio Test (W.N.3) Nil 5.25 Nil Maximum number of shares that can be bought back [least of the Nil 5.25 Nil above] Journal Entries for the Buy-Back (applicable only when loan fund is Rs. 1,680 crores) Rs. in crores Particulars Debit Credit (a) Equity share buy-back account Dr. 157.5 To Bank account 157.5 (b) Equity share capital account (5.25 x Rs. 10) Dr. 52.5 1.27  Buyback of Securities Securities premium account (5.25 x Rs. 20) Dr. 105 To Equity share buy-back account 157.5 (c) General reserve account Dr. 52.5 To Capital redemption reserve account 52.5 Working Notes: 1. Shares Outstanding Test Particulars (Shares in crores) Number of shares outstanding 46.2 25% of the shares outstanding 11.55 2. Resources Test Particulars Paid up capital (Rs. in crores) 462 Free reserves (Rs. in crores) (336+126+126) 588 Shareholders’ funds (Rs. in crores) 1,050 25% of Shareholders fund (Rs. in crores) Rs. 262.5 crores Buy-back price per share Rs. 30 Number of shares that can be bought back (shares in crores) 8.75 crores shares 3. Debt Equity Ratio Test Particulars When loan fund is Rs. 2,520 crores Rs. 1,680 crores Rs. 2,100 crores (a) Loan funds (Rs. in crores) 2,520 1,680 2,100 (b) Minimum equity to be maintained after buy- back in the ratio of 2:1 (Rs. in crores) 1,260 840 1,050 (c) Present equity Shareholders fund (Rs. in crores) 1,050 1,050 1,050 (d) Future equity shareholder fund (Rs. in crores) (See N.A. 997.5 N.A. Note 2) (1,050-52.5) (e) Maximum permitted buy-back of Equity (Rs. in crores) Nil 157.5 Nil [(d) – (b)] (See Note 2) (By simultaneous equation) (f) Maximum number of shares that can be bought back Nil 5.25 Nil @ Rs. 30 per share (shares in crores) (See Note 2) (By simultaneous equation) Note: 1. Under Situations 1 & 3 the company does not qualify for buy-back of shares as per the provisions of the Companies Act, 2013. 2. As per section 68 of the Companies Act, 2013, the ratio of debt owed by the company should not be more than twice the capital and its free reserve after such buy-back. Amount transferred to CRR and maximum equity to be bought back will be calculated by simultaneous equation method. Suppose amount equivalent to nominal value of bought back shares transferred to CRR account is ‘x’ and maximum permitted buy-back of equity is ‘y’. Then Equation 1: (Present equity – Nominal value of buy-back transfer to CRR) – Minimum equity to be maintained= Maximum permissible buy-back of equity (1,050 –x)-840 = y Since 210 – x = y 1.28  Buyback of Securities Equation 2: (Maximum buy-back/Offer price for buy-back) X Nominal Value = Nominal value of the shares bought –back to be transferred to CRR = (y/x X 10) = x Or 3x = y (2) by solving the above two equations we get x = Rs. 52.5 crores y = Rs. 157.5 crores 3. Statutory reserves, capital redemption reserve and plant revaluation reserves are not free reserves. 4. For calculation of debt -equity ratio both secured and unsecured loans have been considered Q.BB.SM.213: Following is the Balance Sheet of Competent Limited as at 31st March, 20X1: Particulars Notes ₹ Equity and Liabilities 1 Shareholders’ funds A Share capital 1 12,50,000 B Reserves and Surplus 2 18,75,000 2 Non-current liabilities Long term borrowings 3 28,75,000 3 Current liabilities 16,50,000 A Other Current Liabilities Total 76,50,000 Assets 1 Non-current assets A Property, plant and Equipment 4 46,50,000 2 Current assets A Other Current Assets 30,00,000 Total 76,50,000 Notes to accounts No. Particulars ₹ 1 Share Capital Authorized, issued and subscribed capital: Equity share capital (fully paid up shares of ₹ 10 each) 12,50,000 2 Reserves and Surplus Securities premium 2,50,000 Profit and loss account 1,25.000 Revenue reserve 15,00,000 Total 18,75,000 3 Long term borrowings 14% Debentures 18,75,000 Unsecured Loans 10,00,000 Total 28,75,000 4 Property, plant and equipment Land and Building 19,30,000 1.29  Buyback of Securities Plant and machinery 18,00