Yesterday, we had explained basic steps of making consolidated income statement. Today, we will clear these basic steps through an example.
The trial balance of H Ltd and S Ltd are given below as on 31-3-2010| H Ltd. | S Ltd. | |||
| Dr. | Cr. | Dr. | Cr. | |
| Equity share capital (Rs. 10) | 10,00,000 | 4,00,000 | ||
| 6% Pref. share capital (Rs. 10) | - | 1,00,000 | ||
| Fixed Assets less depreciation up to 31-3-2009 | 5,50,000 | 3,50,000 | ||
| Sales including 200000 sales by H Ltd to S ltd | 12,00,000 | 10,00,000 | ||
| Cost of goods sold | 960,000 | 8,00,000 | ||
| stock 31-3-2010 | 120,000 | 90,000 | ||
| debtors and creditors | 2,00,000 | 1,30,000 | 1,60,000 | 60,000 |
| general expenses 32000 shares in S ltd. | 4,00,000 | |||
| interim dividend paid | ||||
| preference | 3000 | |||
| equity | 20,000 | |||
| Dividend received | 16000 | |||
| profit and loss account ( 31-3-2009 | 76,000 | 48,000 | ||
| Bank | 62,000 | 65,000 | ||
| 24,22,000 | 24,22,000 | 16,08,000 | 16,08,000 | |
1) Shares were purchased on 1-4-2008
2) S Ltd has paid and provided Rs. 20,000 dividend for 2007-2008 and
46000 for 2008-2009. The net profit for 2008-2009 was 74,000
3)H ltd. proposed 80,000 fir 2009-2010 and S ltd provided for final dividend
of 3000 as preference dividend and 20,000 equity dividend
4) Goods sold by H ltd to S ltd were at 20% profit on sales price. Closing
stock of S Ltd includes 20,000 such stocks.
5) Depreciation is charged @ 10% p.a. on reducing balance method. There is no
addition in 2009. Fixed assets of S Ltd were valued at 10,000 in excess, but not adjustment has
been made in books. Provision for additional depreciation is to be made only to the extent to
holdings of H ltd.
Prepare consolidated trading and profit and loss account and p/l appropriation account for the year
ended 31st march 2010.
Working notes :
1. Calculation of extra depreciation on fixed assets
Amount written up on 1-4-2008 ================ 10,000
Less depreciation 10% depreciation ( 10,000 X 10/100) = 1000
-------------------------------------------------------------------
Book value on 1-4-2009 ==================== 9000
10% Depreciation 2009-2010 ================= 900
Holding company's share of depreciation 900 X 4/5 = 720
2. Calculation of capital reserve
Profit and loss account balance of S ltd on 31-3-2009 = 48000
Less : Profit of S ltd for 2008-2009 = 74000
Less : Dividend for 2008-2009 = 46000
--------------------------------------------
====================== 28000 ======== - 28000
----------------------------------------------------------------
Profit and loss balance on 1-4-2008 =========== 20000
============================================
Share of holding company 20,000 X 4/5 ========= 16000
3. Calculation of Share of Minority interest in Net Profit of S ltd
Sales --------------------10,00,000
Less cost of goods sold 8,00,000
------------------------------------------
Gross profit -------------- 2,00,000
Less general exp. ------- 1,20,000
Less depreciation ------ 35,000
=============================
current Net profit ------------- 45,000
Old profit ---------- ---------- 48,000
=============================
Total profit ------------------ 93,000
Less interim dividend ------- 23000 ( Pref. + equity)
Less proposed dividend ----23000 ( Pref. + equity)
========================================
Balance of net profit ------ 47000
==========================================
Share of Minority interest in Net Profit of S ltd 47000 X 1/5
= 9400
Consolidated Trading and profit and loss account and P/L Appropriation account
| Total | total | ||||
| To cost of goods sold HLtd 960000 + S Ltd 8,00,000 -------------------- ============1760,000 Less internal transfer 2,00,000 ---------------------------- ============1560,000 | 15,60,000 | By Sales HLtd 12,00,000 + S Ltd 10,00,000 -------------------------------- ================22,00,000 Less internal transfer 2,00,000 ------------------------------------ ================20,00,000 | 20,00,000 | ||
| To Gross profit c/d | 4,40,000 | ||||
| 20,00,000 | 20,00,000 | ||||
| To General Expenses | By Gross Profit b/d | 4,40,000 | |||
| H Ltd | 130,000 | By Dividend Received | |||
| S Ltd | 1,20,000 | H Ltd | 16,00,000 | ||
| 250,000 | 2,50,000 | Less received from S ltd | - 16,00,000 | Nil | |
| By Dividend Proposed | |||||
| H Ltd | 16,000 | ||||
| Less proposed from S ltd | - 16,000 | Nil | |||
| To Depreciation | |||||
| H Ltd | 55000 | ||||
| S ltd | 35000 | ||||
| 90000 | 90,000 | ||||
| To Net Profit C/d | 1,00,000 | ||||
| 4,40,000 | 4,40,000 | ||||
| To interim dividend | By Balance B/d | 1,24,000 | |||
| Pref. | By Net Profit B/d | 1,00,000 | |||
| H Ltd | Nil | ||||
| S ltd | 3000 | 3,000 | |||
| Equity | |||||
| H Ltd | Nil | ||||
| S Ltd | 20,000 | ||||
| total | 20,000 | ||||
| Less internal transfer | -16,000 | ||||
| Net | 4,000 | 4,000 | |||
| To Proposed Divided | |||||
| Pref. | |||||
| H ltd | Nil | ||||
| S ltd | 3,000 | 3,000 | |||
| Equity | |||||
| H ltd | 80,000 | ||||
| S ltd | 20,000 | ||||
| total | 1,00,000 | ||||
| Less internal transfer | -16,000 | ||||
| Net | 84000 | 84,000 | |||
| To balance C/d | 1,30,000 | ||||
| 2,40,000 | 2,40,000 | ||||
| To Share of Minority interest in Net Profit of Sltd | 9400 | By Balance B/d | 1,30,000 | ||
| To stock reserve 20,000 X 20/100 X 4/5 | 3200 | ||||
| To capital reserve | 16,000 | ||||
| To extra depreciation on value written off 9000 X 10/100 X 4/5 | 720 | ||||
| To Balance C/d | 1,00680 | ||||
| 1,30,000 | 1,30,000 | ||||
Comments