Consolidation of Accounts

(a)The Balance Sheets of H Ltd. and S Ltd. as on 31st March 2026 were as under :

The Profit & Loss Account of S Ltd. showed a credit balance of ₹ 50,000 on 01.04.2025. A dividend of l5% was paid in January 2026 for the year 2024-2025. This dividend was credited by H. Ltd. to its Profit & Loss Account. The shares were acquired on 1st October 2025. The bills payable was all issued in favour of H Ltd. included in the creditors of S Ltd. ₹ 20,000 are related to goods sold by S Ltd. included in the stock of S Ltd. are goods

of the value of ₹ 8,000 supplied by H Ltd. at a profit of 33 % on cost.

You are required to calculate consolidated profit of the companies, Net Worth of S Ltd. as on 1st October 2025 and minority interest.

The following information is of A Ltd. and its subsidiary B Ltd. as on 31st December, 2023 :

A Ltd. acquired its shares in B Ltd. On 1st January, 2023 when general reserve of B Ltd. stood at ₹ 40,000 and its profit and Loss Account (Credit) was ₹ 50,000.

Calculate the ratio of shares acquired by A Ltd. and shares held as Minority Interest.

(A)3 : 2

(B)2 : 1

(C)4 : 1

(D)None of the above

Calculate : A Ltd.’s share in capital profit and reserve on the basis of information provided in Q. No. 41.

(A)₹ 30,000

(B)₹ 54,000

(C)₹ 24,000

(D)None of the above

Calculate Cost of control on the basis of information provided in Q. No. 41.

(A)₹ 1,76,000

(B)₹ 1,70,000

(C)₹ 1,46,000

(D)None of the above

Calculate : The amount of Minority Interest on the basis of information provided in Q. No. 41.

(A)₹ 5,20,000

(B)₹ 4,00,000

(C)₹ 3,60,000

(D)₹ 4,36,000

Capital Dividend received by the holding company is ................... its cost of investment in the equity shares of subsidiary company while computing goodwill/capital reserve.

(A)added to

(B)deducted from

(C)neither added nor deducted

(D)It is totally unrelated

At the time of .................... inter-company debts and acceptances are to be cancelled out.

(A)Internal reconstruction

(B)Merger

(C)Preparing P & L account

(D)Consolidation of accounts

( b )

Balance Sheet of S Ltd. is given below

Other information :

l Holding company H Ltd. has bought 48,000 shares in its subsidiary S Ltd.

l Consideration for purchase of shares in S Ltd. ₹ 9,00,000/-

l General Reserve of S Ltd. on date of acquisition ₹ 1,20,000/-

l Profit and Loss Account on date of acquisition ₹ 24,000/-

Calculate :

(i)Minority lnterest and Goodwill.

(ii)How will goodwill be treated in consolidated books of accounts ?

(ii)What are requirements for consolidation of a subsidiary which is LLP or partnership ?

If there are profits and the dividends on cumulative preference shares are in arrears, the arrears of dividends on preference shares held by the Minority shareholders should be :

(A)Credited to the Consolidated Profit and Loss Account and debited to the Minority Interest Account

(B)Debited to the Consolidated Profit and Loss Account and credited to the Minority Interest Account

(C)Debited to the Consolidated Profit and Loss Account and credited to the Capital Reserve Account

(D)Credited to the Consolidated Profit and Loss Account and debited to the Capital Reserve Account

Pre-acquisition dividend received by Holding Company is credited to ................ .

(A)Profit & Loss A/c

(B)Capital Profit

(C)Investment A/c

(D)Revenue Profit

Holding Company holds more than .......... voting power in subsidiary company.

(A)25%

(B)40%

(C)50%

(D)75%

If the financial years of both the subsidiary and holding companies do not coincide, the preceding year’s balance sheet and other statements of the subsidiary company should be attached with the consolidated financial statements. Such information attached to the balance sheet of a holding company in respect of its subsidiary companies could not be more than :

(A)One month

(B)Three months

(C)Six months

(D)Nine months

AZ Ltd. acquired 6000 equity shares of BZ Ltd. out of its 8000 equity shares of ₹ 10 each at a price of ₹ 1,50,000 on 01.04.2022. The balance sheet of BZ Ltd. on 01.01.2022 showed a reserve of ₹ 20,000 and profit & loss account credit balance of ₹ 50,000. During the year 2022, if BZ Ltd. made a profit of ₹ 40,000 then the goodwill is :

(A)₹ 30,000

(B)₹ 40,000

(C)₹ 60,000

(D)₹ 80,000

Balance Sheet as on 31st Mrach 2023 :

If shares have been acquired by H.Ltd. on 30th December, 2022 and on that date the credit balance in P & L Account of S Ltd. was ₹ 22,000 (no dividend was declared since that date), the minority interest is :

(A)₹ 26,400

(B)₹ 24,400

(C)₹ 22,000

(D)₹ 20,000

While preparing the consolidated balance sheet, some of the items are shown by adding the amount of holding company and subsidiary company and some of the items are shown in the amount belonging to the holding company without considering the amount of the subsidiary company. In this context, which of the following items is shown in the consolidated balance sheet by aggregating the amount of holding company and subsidiary company ?

(A)Share capital

(B)Proposed dividend

(C)Dividend payable

(D)Reserves and surplus

Which of the following profit & loss on revaluation of fixed assets of subsidiary company should be treated as a revenue item and adjusted with balance of the profit and loss account of the holding company while preparing the consolidated profit and loss account ?

(A)Profit related to the period after the date of acquisition of shares by holding company

(B)Profit related to the period before the date of acquisition of shares by holding company

(C)Loss related to the period after the date of acquisition of shares by holding company

(D)All the above

(b)From the following details, calculate value of Goodwill/Capital Reserve and Minority Interest that will reflect in consolidated Balance Sheet on 31 st March, 2023 :

Summarized Balance Sheets as on 31 st March, 2023

Balance Sheet of S Ltd. on 31st March, 2022 exhibited profit of ₹ 1,00,000 and general reserve of ₹ 60,000.

Discount on the issue of debentures is ...................... and can be written off against....................

(A)Capital Loss, Capital Profit

(B)Revenue Loss, Revenue Profit

(C)Capital Loss, Revenue Profit

(D)Revenue Loss, Capital Profit

The dividend received out of post-acquisition profits of the subsidiary is................

(A)Final Dividend

(B)Deemed Dividend

(C)Capital Dividend

(D)Revenue Dividend

If the net cost of investment of the holding company in the equity and preference shares of the subsidiary company is more than the share of the holding company in the net assets of the subsidiary company, the difference between the two is...................

(A)Goodwill on consolidation

(B)Capital reserve on consolidation

(C)Profit on consolidation

(D)Loss on consolidation

H Ltd. acquires 70% of the equity shares of S Ltd. on 1-1-2022. On that date, the paid up capital of S Ltd. was 5,00,000 equi ty shares of ₹ 10 each; the accumulated reserve balance was ₹ 20,00,000. Assets of S Ltd. were revalued on 1-1- 2022 and a revaluation profit of ₹ 14,00,000 was calculated. H Ltd. paid ₹ 40,00,000 to purchase the said interest. Which of the following is correct in relation to the cost of control of the group consolidated financial statement ?

(A)Capital Reserve ₹ 80,000

(B)Goodwill ₹ 80,000

(C)Capital Reserve ₹ 18,80,000

(D)Goodwill ₹ 18,80,000

Stock Reserve for unrealised profit in respect of inter-company transactions should be created by................

(A)debiting the Consolidated Profit and Loss Account and crediting Stock Reserve Account

(B)debiting the Stock Reserve Account and credited Consolidated Profit and Loss Account

(C)debiting the Consolidated Profit and Loss Account and crediting Capital Reserve Account

(D)debiting the Goodwill account and credit Consolidated Profit and Loss Account

Which statement is true in respect of the treatment of equity dividend proposed by the subsidiary company during the current year?

(A)It will be simply ignored for the consolidation. It will not be mentioned even in the notes to accounts to the balance sheet of the subsidiary

(B)Such proposed dividend is simply shown in the notes to accounts to the Balance Sheet related to the year of the proposal

(C)The entry will be passed if the same has not already been passed

(D)Add the proposed dividend amount with the existing dividend

What is the treatment requirement for revenue dividend received by the minority?

(A)To be credited to Profit & Loss A/C

(B)To be debited to Profit & Loss A/C

(C)To be added in Revenue reserves in the Balance Sheet

(D)No treatment

A holding company can hold shares of subsidiary, but a subsidiary cannot hold shares of its holding company. This restriction does not apply to :

(A)Foreign subsidiary company

(B)Investment company

(C)Subsidiary company holding shares as trustee

(D)Government company

Unrealized profit included in stock of goods sold by holding company to subsidiary or subsidiary company to holding company should be ..................... while preparing consolidated financial statements.

(A)Deducted from stock in consolidated balance sheet only.

(B)Deducted from P&L Account balance in consolidated balance sheet only.

(C)Deducted from stock as well as P&L Account balance in consolidated balance sheet.

(D)Shown separately on assets side of the consolidated balance sheet.

The share capital of H Ltd. and S Ltd., constituted in shares of ₹ 10 each, was respectively ₹ 5,00,000 and ₹ 1,00,000 as on 31st March, 2022. S Ltd., had a credit balance of ₹ 30,000 in reserves on that date when H Ltd. acquired 8,000 shares of S Ltd. for ₹ 1,40,000. S Ltd. decided to make a bonus issue out of post-acquisition profits, of two shares of ₹ 10 each, fully paid, for every five shares held. In this case, the value of minority interest would be :

(A)₹ 20,000

(B)₹ 26,000

(C)₹ 28,000

(D)₹ 34,000

A company in which only the majority of shares (more than 50%) are owned by the holding company, it is said to be a/an ................... .

(A)Associate company

(B)Joint venture company

(C)Partly owned subsidiary company

(D)Limitedly owned subsidiary company

The main purpose of the preparation of consolidated statements is :

(A)the compliance of AS-21

(B)to satisfy the legal provisions of the Companies Act, 2013

(C)to reflect a true and fair view of the position and the profit or loss of the holding company ‘group’

(D)to reflect a true and fair view of the position and the profit or loss of the holding company

If the holding company’s year-end stock includes ₹ 2,70,000 goods invoiced to it by its 60% owned subsidiary at cost plus 25%, what is the amount of unrealized profit ?

(A)₹ 54,000

(B)₹ 67,500

(C)₹ 32,400

(D)₹ 40,500

When the holding company purchases the shares at a price above the nominal value, the excess price paid represents :

(A)Cost of control or Goodwill

(B)Capital Reserve

(C)Reserve and Surplus

(D)Business Assets

CARO, 2016 applies to a private limited company being a subsidiary or holding company of a public company, having a paid up capital and reserves and surplus not more than .................. as on the balance sheet date.

(A)₹ 5 Crore

(B)₹ 1 Crore

(C)₹ 2 Crore

(D)₹ 10 Crore

What is the amount of the unrealized profit to be eliminated, if the parent’s yearend inventory includes at ₹ 5,40,000 goods invoiced to it by its 60% owned subsidiary at cost plus 25% ?

(A)₹ 35,000

(B)₹ 1,08,000

(C)₹ 64,800

(D)₹ 81,000

Pre-acquisition profit in subsidiary company is considered as :

(A)Revenue Profit

(B)Capital Profit

(C)Goodwill

(D)Cost of control

If cost of acquisition of shares in the subsidiary company is more than intrinsic value of the shares of subsidiary company on the date of acquisition, then resultant figure will be :

(A)Minority Interest

(B)Capital Reserve

(C)Goodwill

(D)Significant cost

Unrealized profit on goods sold and included in stock is deducted from :

(A)Capital Profit

(B)Revenue Profit

(C)Fixed Assets

(D)Minority interest

On 30th June, 2018, two-third of the shares of S Ltd. (with total capital of ₹ 48,00,000) was acquired by H Ltd. The balance sheet of S Ltd. showed a debit balance ₹ 24,00,000 on 1st January, 2018 and a credit balance of ₹ 14,40,000 on 31st December, 2018. The investment by H Ltd. in shares of S Ltd. is ₹ 36,00,000. Calculate the ‘‘cost of control’’ in this acquisition :

(A)₹ 7,20,000

(B)₹ 6,20,000

(C)₹ 3,60,000

(D)₹ 1,80,000

The total capital of subsidiary company is ₹ 3,00,000 and out of this, ₹ 2,40,000 is owned by holding company. What is the amount of minority interest, if % of outside shareholder is 20% ?

(A)₹ 2,40,000

(B)₹ 60,000

(C)₹ 48,000

(D)None of the above

Profit on revaluation of assets to be shown as ............ in the consolidated Balance Sheet.

(A)General Reserve

(B)Capital Reserve

(C)Goodwill

(D)None of the above

Equity holder of a company who does not have the voting control of the company, by virtue of his or her below fifty percent ownership of the company’s equity capital, termed as :

(A)Small shareholder

(B)Minority shareholder

(C)(A) or (B) Both

(D)None of these options

On 1st April, 2019, H Ltd. purchased 16,00,000 equity shares out of 20,00,000 equity shares of S Ltd. Following information is provided as on 31st March, 2019, by S Ltd. : ₹

On 1st April, 2019, a machine of S Ltd. revalued by H Ltd. 25% above its book value of ₹ 12,50,000. The amount of minority interest will be :

(A)₹ 40 Lakh

(B)₹ 55 Lakh

(C)₹ 54.775 Lakh

(D)₹ 56.025 Lakh

The main purpose of the preparation of consolidate statements is :

(A)the compliance of AS-21

(B)to satisfy the legal provision of the Companies Act, 2013

(C)to reflect a true and fair view of the position and the profit or loss of the holding company ‘group’

(D)All the above

(iii)Beta Ltd. is a subsidiary of Alpha Ltd. The following is the Balance Sheet of Beta Limited as at 31st March, 2019 :

Particulars Amount ( ₹ in lakh)

EQUITY AND LIABILITIES

1.Shareholders' Funds

Assets

1.Non-current Assets :

Tangible Assets :

On 1st April, 2018, Alpha Ltd. acquired 24 lakh equity shares of Beta Ltd. at a cost of ₹ 460 lakh. On that date, Statement of Profit and Loss of Beta Ltd. showed a credit balance of ₹ 180 lakh and Land & Building was revalued by Alpha Ltd., at 20% above book value of ₹ 300 lakh (but no such adjustments are shown in the books of Beta Ltd.). You are required to calculate :

(1)Cost of Control, and

(2)Minority Interest.

(a)From the following Balance Sheets of Viva Ltd. and Jiyu Ltd., prepare the Consolidated Balance Sheet in the books of Viva Ltd. Viva Ltd. acquired the shares of Jiyu Ltd. as on 1st October, 2018. Balance Sheet as at 31st March, 2019 : Amount ( ₹ )

The profit and loss account of Jiyu Ltd. had a credit balance of ₹ 90,000 on 1st April, 2018.

(b)Minority interest and its calculating procedure.

(a)From the balance sheets given below, prepare a consolidated balance sheet :

1.Shareholders’ fund

(a)Share Capital ₹ 1 each share 1,50,000 30,000

(b)Reserves and Surplus :

2.Current Liabilities

II. ASSETS :

1.Non-current Assets

2.Current Assets

Additional information :

(1)All the profits of D Ltd. have been earned since the shares were acquired by M Ltd. but there was already the general reserve of ₹ 9,000 at the date.

(2)There are mutual bills payable of ₹ 6,000 and ₹ 5,000 included in the bills payable of M Ltd. and D Ltd. respectively, out of which, the drawer companies discounted 60% of the mutual bills.

(3)Fixed assets of D Ltd. are undervalued by ₹ 3,000, and those of M Ltd. overvalued by ₹ 10,000.