TLCC

The Liquid Chemical Company (TLCC) was started on 1 April 2009. Its primary business was selling
specialty chemicals used in the manufacturing of paint. The balance sheet of TLCC as of 31 March 2013
is given in Exhibit 1.

The following transactions took place during the year 2013-2014:

1. On 15 April 2013, the company issued 70 shares with a face value of ` 10 for a premium of ` 8. As
per the company policy all these shares are eligible for all future dividend payments.

2. Total purchases of the company amounted to ` 1,800, out of which ` 600 were paid for in cash and
the remaining was on credit. Out of the credit purchases, goods costing ` 70 were defective. They
were returned and immediately replaced with goods of similar value. At the end of the year the
balance in the inventory account was ` 180.

3. TLCC received a cash discount of ` 30 from their credit suppliers for timely payment. The balance of
the accounts payable at the end of the year is 280.

4. Total sales for the year were ` 9,000, out of which credit sales were worth ` 1200.

5. The ending balance of accounts receivables was ` 500. Cash collected from debtors amounted to `
920. The bad debts written off during the year were ` 20 and ` 10 worth of previously written off bad
debts were recovered this year. The provision for doubtful debts is maintained at 2.5% of closing
balance of accounts receivables.

6. On 1 April 2013, the company paid `80 non-refundable deposits to ensure uninterrupted electricity
supply to its premises for the next 10 years. This payment is to be considered as an operating activity
while preparing cash flow statement.

7. Salaries for any month were paid on 5th of subsequent month. Salary per month was supposed to be
60 starting from April 1st 2013. The salary of March, 2014 was paid on 5 April 2014.

8. TLCC sold one piece of equipment which was purchased for ` 30 on 1 April 2012 for ` 16 on 30 June
2013. It purchased new equipment worth ` 100 on 31 December 2013. The depreciation rate for
equipment was 10% per annum.

9. The company purchased building worth ` 180 on 30 June 2013. Building was depreciated at the rate
of 10% and vehicles at the rate of 20% per annum.

10. The bank loan was taken on 31 March 2013 and is to be repaid in 6 semi-annual installments along
with interest. The interest and installments are due on 30th June and 31st December. As per the terms
of the loan, the first installment was due on 30th June 2013.

11. On 1 January 2014, the company purchased land worth ` 400 and issued shares at face value of `10
each for half the balance and a loan for the remaining half the balance. The loan carried an interest
rate of 12%. The loan was repayable in 10 equal annual instalments along with interest. The first
instalment was due on 31st December 2014.

12. On 1 July 2013, the company decided to rent a warehouse to store its products. The monthly rent for
the warehouse was `10. As per the rental agreement, TLCC paid the rent of the entire two years rent,
` 240, in advance on 1 July 2013.
13. Assessment for 2010-11 and 2011-12 was completed during the year and the assessed tax was ` 110
and ` 120 respectively. The company had paid the balance due and/or received refund accordingly.
The tax rate of the firm was 25%. Advance tax paid during the year in cash was ` 120.

14. During the year the company invested ` 200 in a fixed deposit. The company received interest
amounting to ` 60 on the fixed deposit. Dividend for 2012-2013 was paid in July 2013. On 31 March
2014, the company declared total dividend of ` 1 per share.

Prepare Income Statement, Cash Flow Statement, and Balance Sheet for the year ending 31 March 2014
in the attached format.
 TLCC
Balance Sheet as on 31 March, 2013
Particulars Detail Amount
EQUITY AND LIABILITIES
Shareholders funds
Share capital (50 shares of 10 each) 500
Reserves and surplus
Share Premium 300
Reserves and Surplus 900 1200
1700
Non-current liabilities
Long term Loans from banks (10%) 300

Current liabilities
Accounts payables 200
Dividend payable (2012-13) 50
Salary Payable 20
Provision for tax (2010-11) 110
Provision for tax (2011-12) 100
Provision for tax (2012-13) 90 300 570
Total 2570
ASSETS

Fixed Assets
Equipment 400
Accumulated Depreciation - Equipment 40 360
Vehicle 150
Accumulated Depreciation - Vehicle 30 120
Building 300
Accumulated Depreciation -Building 30 270
750

Current assets
Inventories 200
Accounts receivables 400
- Provision for doubtful debts 10 390
Cash 900
Advance income tax (2010-11) 110
Advance income tax (2011-12) 110
Advance income tax (2012-13) 110 330
1820

Total 2570