Computations in Respect of Changes in NCL

Example

The following information on NCL of a company on two consecutive accounting dates is available, together with additional information as under.

Determine the sources and uses of funds arising from these changes in NCL
components.

Solution

(a) Premium paid on 1 1 % preference shares = Rs. 8,000 [A].

(b)So, Balance in share premium A/c to be = Rs. [2,00,000 - 8,0001 = Rs. 1.92.000

But, closing balance of share premium N c = Rs. 2,22,000.So, increase in share premium N c = Rs. 30,000 [B].

(c) This is to be reflected as premium received on issue of new equity shares.

(d) (Nominal) value of new equity shares issued. by difference = Rs. 7,50,000.

Together with premium. actual receipts on new equity issued = Rs. 7,80,000.

[only for information : Premium on new equity issue = 4%.]

(e) Preference shares redeemed, value = Rs. 1,00,000.Premium paid, charging to share premium N c = Rs. 8,000.

Redemption money paid for redeeming preference shares = Rs. 1.08.000.(0 Extra debentures issued, nominal value = Rs. 2,00,000.
Actually realised receipts by extra debentures issued = Rs. 1,98,500.

The summary is as under :

 

Notes : In the data givsn, the sum of equity share capital, preference share capital and debentures, in the two year endings, is, respectively, Rs. 39.80,000 and Rs. 48,30,000, showing an increase of Rs. 8,50,000. But, the net change indicated in the SUMMARY is Rs. 8,70,500. There is an excess of Rs. 20,500. This is accounted for by [B] - [A] - [C].However, whereas [B] - [A] is reflected in the change in the share premium account, [C] will be reflected [as commissions paid] in P & L Nc (Income Statement). This excess would, provisionably, be taken into "surplus" account.