The Balance Sheet of Star Limited (unlisted company other than AIFI, Banking company, NBFC and HFC) as at 31st March, 2026 is as under: Particulars…

CA Foundation · Accounting · PYQS · May 2026
The Balance Sheet of Star Limited (unlisted company other than AIFI, Banking company, NBFC and HFC) as at 31st March, 2026 is as under: Particulars Note No. ₹ I. Equity and liabilities (1) Shareholder’s Funds (a) Share Capital 1 3,00,000 (b) Reserves and Surplus 2 1,00,000 (2) Non-current liabilities (a) Long term borrowings 3 70,000 (3) Current Liabilities (a) Trade payables 50,000 Total 5,20,000 II. Assets (1) Non-Current assets (a) Property, Plant and Equipment 4 2,50,000 (b) Non-current Investment: DRR Investment 10,500 (2) Current assets (a) Inventories 1,50,000 (b) Trade receivables 75,000 (c) Cash and cash equivalents 5 34,500 Total 5,20,000 Notes to Accounts Particulars ₹ 1 Share Capital Authorized share capital 60,000 Equity shares of 10 each fully paid 6,00,000 Issued and subscribed share capital 30,000 Equity shares of 10 each fully paid 3,00,000 Particulars ₹ 2 Reserve and Surplus Statement of Profit & Loss 93,000 Debenture Redemption Reserve 7,000 1,00,000 Particulars ₹ 3 Long term borrowings 10% Debentures 70,000 Particulars ₹ 4 Property, Plant and Equipment Freehold property 2,50,000 Particulars ₹ 5 Cash and cash equivalents Cash at bank 24,000 Cash in hand 10,500 34,500 At the Annual General Meeting on 1st April, 2026, it was resolved: 1. To give existing shareholders the option to purchase two 10 shares @15 per share for every five shares (held prior to the bonus distribution). This option was exercised by all the shareholders. 2. To issue one bonus share for every six shares held. 3. To repay the debentures at a premium of 10%. The DRR Investments realized at par as per existing book value. Give the necessary journal entries to record the above transactions in the books of Star Limited.

Suggested Answer and Working Notes:

In the Books of Star Ltd. Journal Entries Particulars Dr. ₹ Cr. ₹ Bank A/c Dr. 1,80,000 To Equity Shareholders A/c / Share Application A/c 1,80,000 (Being application money received on 12,000 shares @15 per share to be issued as rights shares in the ratio of2:5) (WN - 1) Equity Shareholders A/c / Share Application A/c Dr. 1,80,000 To Equity Share Capital A/c 1,20,000 To Securities Premium A/c 60,000 (Being share application money on 12,000 shares @10 per share transferred to Share Capital Account, and 5per share to Securities Premium Account vide Board’s Resolution dated….) Securities Premium A/c # Dr. 60,000 Statement of Profit & Loss A/c Dr. 10,000 To Bonus to Shareholders A/c 70,000 (Being amount transferred for issue of bonus shares to existing shareholders in the ratio of1:6 i.e.7,000 shares vide Board’s Resolution dated…. (WN - 2)) Bonus to Shareholders A/c Dr. 70,000 To Equity Share Capital A/c 70,000 (Being issue of bonus shares in the ratio of1for6vide Board’s Resolution dated…. ) 10% Debentures A/c Dr. 70,000 Premium on Redemption of debentures A/c Dr. 7,000 To Debenture holders A/c 77,000 (Being amount payable to debentures holders) Statement of Profit and loss A/c Dr. 7,000 To Premium on Redemption of Debentures A/c 7,000 (Being Premium on redemption of debentures charged to Profit & Loss A/c) Debenture Redemption Reserve A/c Dr. 7,000 To General Reserve 7,000 (Being DRR transferred to general reserve) Bank A/c Dr. 10,500 To Debenture Redemption Reserve Investment A/c 10,500 (Being DRR Investment realised) Debenture holders A/c Dr. 77,000 To Bank A/c 77,000 (Being amount paid to debenture holders on redemption) Working Note: 1. Calculation of number of shares in Right Issue = 30,000 x 2/5 = 12,000 Shares 2. Calculation of number of shares in Bonus Issue Total number of equity shares issued = 30,000+12,000= 42,000 shares Bonus shares issued = 42,000 x 1/6 = 7,000 shares.

Topics: Accounting for Bonus Issue and Right Issue

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