Saturday, November 30, 2024

RFA (INCOME TAX)

1. Definition of Rent-Free Accommodation (RFA):

RFA is a perquisite provided by an employer to an employee, where the employee is allowed to reside in a house without paying rent or at a nominal rent.

2. For Government Employees:

  • The value of RFA is determined as per government rules (also referred to as the license fee).
  • If the house is furnished:
    • Add 10% of the cost of furniture to the license fee, or
    • Use the actual higher charges, whichever is more.

3. For Non-Government Employees:

The valuation depends on whether the employer owns or hires the accommodation:

A. If the Employer Owns the House:

  • The percentage of the salary is determined based on:
    • The population of the city (as per the 2001 or 2011 census).
    • The date: Before or after 1st September 2023.
City Population Perquisite Value (Before 1st Sep 2023) Perquisite Value (After 1st Sep 2023)
Below 10,00,000 7.5% of salary 5% of salary
10,00,000 to 14,99,999 10% of salary 5% of salary
15,00,000 to 24,99,999 10% of salary 7.5% of salary
25,00,000 to 40,00,000 15% of salary 7.5% of salary
Above 40,00,000 15% of salary 10% of salary

B. If the Employer Hires the House:

  • 15% of salary is considered before 1st September 2023.
  • 10% of salary is used for calculations after 1st September 2023.

C. If the House is Furnished:

  • Add 10% of the cost of furniture to the calculated value.

4. Key Points to Remember:

  • Salary includes basic pay, dearness allowance (if applicable for retirement benefits), and any other taxable allowances.
  • The cost of furniture includes furniture, appliances, and fittings provided in the accommodation.


Example 1: For a Government Employee

  1. Details:

    • Basic Salary: ₹50,000 per month
    • DA (Dearness Allowance): ₹10,000 per month
    • Total Salary: ₹60,000 per month
    • License Fee as per government rules: ₹2,000 per month
    • Cost of furniture provided: ₹1,00,000

  2. Calculation:

    • License Fee = ₹2,000/month
    • 10% of the cost of furniture = 10% of ₹1,00,000 = ₹10,000/year or ₹833/month
    • Total RFA Value = License Fee + Furniture Charges
      = ₹2,000 + ₹833 = ₹2,833 per month

Example 2: For a Non-Government Employee (Owned Accommodation)

  1. Details:

    • Basic Salary: ₹1,00,000 per month
    • DA (Retirement benefit eligible): ₹20,000 per month
    • Total Salary: ₹1,20,000 per month
    • City Population: 30 lakh (2011 Census, falls in 25,00,000 to 40,00,000 category)
    • Furnished House: Furniture cost = ₹2,50,000

  2. Calculation:

    • Perquisite Value (After 1st September 2023):
      7.5% of salary = 7.5% of ₹1,20,000 = ₹9,000 per month.
    • Add 10% of the cost of furniture:
      10% of ₹2,50,000 = ₹25,000/year or ₹2,083/month.
    • Total RFA Value = ₹9,000 + ₹2,083 = ₹11,083 per month

Example 3: For a Non-Government Employee (Hired Accommodation)

  1. Details:

    • Basic Salary: ₹80,000 per month
    • DA: ₹20,000 per month
    • Total Salary: ₹1,00,000 per month
    • House Rent paid by employer: ₹15,000 per month
    • Furnished House: Furniture cost = ₹50,000

  2. Calculation:

    • Perquisite Value (After 1st September 2023):
      10% of salary = 10% of ₹1,00,000 = ₹10,000 per month.
    • Add 10% of the cost of furniture:
      10% of ₹50,000 = ₹5,000/year or ₹417/month.
    • Total RFA Value = ₹10,000 + ₹417 = ₹10,417 per month

Key Notes:

  • For non-government employees, the calculation changes depending on whether the accommodation is owned or hired by the employer.
  • For furnished accommodations, always add 10% of the furniture cost to the calculated RFA value.
  • Always use the census population and date-based rules for accurate calculations.


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Accounting for Share

 Accounting for Share Capital

Important Questions by AARISH SIR
  1. Describe the salient features of a company?
  2. What is the difference between private and public company?
  3. Describe the following:-
    1. Issued share capital
    2. Paid up share capital
    3. Reserve share capital
  4. ABC Company Ltd was registered with a capital of 10,00,000 divided into equity shares of Rs. 100 each, issued 6000 shares to the public. The entire 6000 shares were subscribed for by the public and were duly allotted. The shareholders were called upon to pay Rs. 90 per share. The first call of Rs. 20 per share was not received on 100 shares. Show the presentation of various shares capital in the absence of the company.
  5. Explain the difference types of shares?
  6. X Ltd was registered with a capital of 2300000 in shares of Rs. 10 each. It issued a prospectus inviting applications for 23000 shares at 40% premium payable at follows:-
    On Application Rs. 5 (including Rs. 1 premium)
    On Allotment Rs. 4 (including Rs. 1 premium)
    On First call Rs. 3 (including Rs. 1 premium)
    On Second call Rs. 2 (including Rs. 1 premium)
    Applications were received for 23000 shares, All money was duly received. Pass the necessary journal entries.
  7. The Adarsh Control Device ltd. Issued to the public for subscription of 1000 shares of Rs. 10 each at discount of 10% payable Rs. 4 on application, Rs. 3 on allotment and Rs. 2 on first and final call. The issues were fully subscribed and all the money was duly received.
    Write the journal entries for the above in the books of accounts.
  8. A Company issued to the public subscription 16, 8000 shares of Rs. 10 each at discount of 10% payable as Rs. 2 on Application, Allotment and first call and Rs.3 on the Final call. Applications were received for 2, 52000 shares and allotment was made prorate to 80% of applicants. R to whom 6720 shares were allotted to paid only the application money and S who had applied for 10080 shares paid the entire call money due along with the allotment. Pass the necessary journal entries to record the above transactions assuming that calls-in-arrears account is maintained.
  9. D Ltd. makes an issue of 10000 equity shares of Rs. 10 each payable as:-
    • On Application Rs. 3
    • On Allotment Rs. 3
    • On first and final call Rs. 4
    All the shares were subscribed for. One shareholder who as allotted 500 shares however paid the entire amount due on his shares however paid the entire amount due on his shares along with his allotment money
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Friday, November 29, 2024

Retirement and Death of Partner

Retirement/Death of partner

Important Questions by AARISH SIR
  1. X, Y and Z are partners sharing profit in the ratio of 3 : 2 : 1. Y retires and on the date of Y’s retirement. Goodwill already appears in the books at a value of 48,000. New ratio of X and Y is 3 : 2. Pass the necessary journal entries.
  2. X, Y and Z are partners sharing profits in the ratio 3 : 2 : 1. X retires from the partnership. In order to settle his claim the following revaluation of assets and liabilities was agreed upon:
    1. The value of machinery is increased by 50,000.
    2. The value of investment is increased by 4,000.
    3. A provision for outstanding bill standing in the books at 2,000 is now not required.
    4. The value of land & building is decreased by 24,000.
    Give journal entries if
    1. Partners decide to show the revalued amount in the balance sheet.
    2. Partners decide to show the original value of assets & liabilities in the balance sheet and Y and Z agree to share profits in the ratio of 2 : 1.
    Revaluation Account
    DateParticularsAmountDateParticularsAmount
    To land & building
    To partner’s capital A/C
    X16,000
    X16,000
    X16,000
    		24,000



    32,000    		By machinery A/C
    By investment A/C
    By provision for outstanding bill A/C


    		50,000
    4,000
    2,000


    56,00056,000
    Memorandum revaluation A/C
    DateParticularsAmountDateParticularsAmount
    To land & Building A/C
    To machinery A/C
    To investment A/C
    To provision for outstanding bill A/C
    X16,000
    Y10,667
    Z5,333
    		24,000
    50,000
    4,000
    2,000



    32,000    		By machinery A/C
    By investment A/C
    By provision for outstanding bill A/C
    By land & Building
    By partner’s capital A/C
    X21,333
    Y10,667

    		50,000
    4,000
    2000
    24,000


    32,000

    1,12,0001,12,000
  3. A, B and C are partner’s sharing profit and losses in the ratio of ⅖, ⅖ and ⅕ respectively. C retires, A and B decide to share future profits and losses in the ratio 2 : 1. Calculate the gaining ratio.
  4. Aman, Vikram and Sonu are partners sharing profits in the ratio of 4 : 3 : 1. Vikram retires selling his share of profits to Aman & Sonu for Rs. 8,100; Rs. 3,600 paid by Aman and 4,500 paid by Sonu. Profit for the year after Vikram retirement was Rs. 10,500.
    You are required:-
    1. To give necessary journal entries to record the transfer of Vikram’s share to Aman and Sonu.
    2. To calculate new profit sharing ratio and distribute the profits between A and C.
  5. X, Y and Z were in a partnership sharing profits in the ratio of 5 : 3 : 2. X retires and the balance in reserve at the time of retirement of X was 20,000. Pass the necessary journal entry:-
    1. Partner’s decide to distribute the entire reserve
    2. Partner’s decide to distribute only the retiring partners share
    3. Partners decide to show entire amount of reserve in balance sheet and Y and Z share the gains equally.
  6. A, B & C are partners in a firm sharing profits and losses in the ratio of 2 : 2 : 1, their balance sheet on 31.12.17
    Calculate:-
    LiabilitiesAmountAssetsAmount
    Sundry creditors
    General Reserve
    Capital accounts
    A20,000
    B40,000
    C30,000
    		40,000
    5,000



    90,000    		Cash in hand
    Debtors
    Stock
    Furniture
    Building

    		20,000
    25,000
    30,000
    10,000
    50,000

    1,35,0001,35,000
    B died on 31st march 2018 and as per partnership deed his executor were entitled for
    1. His capital as on the date of last balance sheet.
    2. His share in general reserve.
    3. His share of goodwill. The goodwill of the firm was valued at 48,000.
    4. His share of accrued profit, calculated on the basis of last year’s profit. The profit for the last year was Rs. 24,000
    5. Interest on capital up to the date of death at 9% per annum.
    6. Prepare B’s capital account
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GOODWILL: NATURE AND VALUATION

 Goodwill: Nature & Valuation
Important Questions by AARISH SIR
  1. What do you mean by goodwill?
  2. Explain the different methods of valuation of goodwill?
  3. Pooja purchased Ritik’s business on 1st April, 2019. It was agreed to value goodwill at three year’s purchase of average normal profits of the last four years. The profits of Ritik’s business for the last four years were:-
    Year endedRs.
    31st March, 201690,000
    31st March, 20171,60,000
    31st March, 20181,80,000
    31st March, 20192,20,000

    Following are noticed:-
    1. During the year ended 31st March, 2016 an asset was sold at a gain (profit) of Rs. 10,000.
    2. During the year ended 31st March, 2017 a machine got destroyed in accident and Rs. 30,000 was written off as a loss in profit and loss account.
    3. During the year ended 31st March 2018, firm’s assets were not insured due to oversight. Insurance premium being Rs. 10,000.
    Calculate the value of goodwill.
  4. Anita and Anaya are partners sharing profits in the ratio of 3 : 2. They admit Ashna into partnership. It was agreed to value goodwill at three year’s purchase on the basis of weighted average profit for the past 5 years. Weights being assigned to each year were:-
    The profits of 5 years were:-
    Year endedProfits
    31st March, 20151,80,000
    31st March, 20161,60,000
    31st March, 20172,50,000
    31st March, 20183,00,000
    31st March, 20193,50,000
    Book revealed:
    1. An abnormal gain of Rs. 20,000 was earned in the year ended 31st March, 2016.
    2. An abnormal loss of Rs. 10,000 was incurred in the year ended 31st March, 2017.
    3. Expense of 50,000 incurred to overhaul a machine on 1st April, 2017 was debited to profit and loss account instead of being debited to machinery account. Depreciation is charged on machinery @20% on written down value method.
    4. Closing stock as on 31st March 2018 was undervalued by Rs. 20,000.
    Calculate the value of goodwill.
  5. Amit and Akshay are partners in twins Ltd. They admit Ashish as partners on 1st April, 2019. They agreed to value goodwill at 3 year’s purchase by super profit method for which they decide to take average of last 5 years profits as follows:-
    Year endedRs.
    31st March 20152,00,000 (including gain of 25000 from the sale of fixed asset)
    31st March 20161,70,000 (including abnormal loss of Rs.50,000)
    31st March 20172,10,000
    31st March 20182,30,000
    31st March 20192,50,000
    Capital employed in the firm is Rs. 15,00,000 and normal rate of return in similar business is 10%.
    Calculate the value of goodwill.
  6. RG and MK are the partners in the firm. Their capitals are 3, 00,000 and 2,00,000. During the year ended 31st March, 2010 the firm earned a profit of 1,50,000. Assuming that the normal rate of return is 20%. Calculate the value of goodwill of the firm:
    1. By capitalization method
    2. By super profit method if the goodwill is valued at 2 years purchase of super profit
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DISSOLUTION OF A PARTNERSHIP

Dissolution of a Partnership Firm

  1. Write the difference between firm’s debts and private debts?
  2. What journal entries would be passed in the books of A and B sharing profits and losses in the ratio of 5 : 2, for the following transactions on the dissolution of a firm, after various assets (other than cash) and third party liabilities would have been transferred to realization account:-
    1. Realization expenses amounted to Rs. 200. B one of the partners has to bear these expenses.
    2. B one of the partners agreed to take over the creditors of Rs. 3,000 for 2,000.
    3. A, one of the partners has given loan to the firm of Rs. 1,000. It was paid back to him at the time of dissolution.
    4. Profit and loss account balance of Rs. 5,600 appeared on the assets side of the balance sheet.
    5. Deferred revenue advertising expenditure appeared at Rs. 2,800
    6. An unrecorded investment of Rs. 700.
  3. Write the difference between dissolution of firm and dissolution of partnership.
  4. What can be the reasons for dissolution of partnership firm?
  5. The following is the balance sheet of X, Y and Z as on 31-12-2017.
    LiabilitiesAmountAssetsAmount
    Creditors
    Bills payable
    Reserve fund
    Capitals:
       X
       Y
       Z    		15,000
    1,800
    6,000

    22,000
    12,000
    10,000    		Cash
    Debtors
    Investment
    Stock
    Furniture
    Buildings
    Goodwill    		6,500
    8,600
    10,000
    13,700
    5,100
    12,900
    10,000
    66,80066,800
    It was decided to dissolve the partnership firm on the following terms:-
    1. X took over the goodwill at Rs.12000 and furniture at Rs. 4,500.
    2. Y took over creditor’s at book value.
    3. Z took over bills payable at book value.
    4. The other assets realized as under:-
      Debtors:   8000
      Investments:   8950
      Stock:   15600
      Buildings:   15750
    5. Realization expenses amounted to Rs. 600. Prepare:-
      1. Realization Account
      2. Partner’s capital Account
      3. Cash Account
  6. X and Y were partners sharing profits in the ratio of 3 : 2. Give journal entries under the following:-
    1. Workmen compensation reserve was Rs. 70,000 and liability for it was Rs. 40,000.
    2. Workmen compensation reserve was Rs. 65,000 and liability was Rs. 70,000.
    3. Workmen compensation reserve was 60,000 and liability was 60,000.
    4. Workmen compensation reserve was zero and liability was Rs. 20,000.
    5. Workmen compensation Reserve in the balance sheet was Rs. 75,000 and there is no liability towards workmen compensation
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PROFIT SHARING RATIO

Change in Profit Sharing Ratio among the Existing Partners

Important Question by AARISH SIR
1.Define Sacrificing Ratio?
2.Define Gaining Ratio?
3.Aman, Yatin and Uma were partners sharing profits and losses in the ratio of 5 : 3 : 2. Uma retired and her share was taken over by Aman and Yatin in 5 : 3 ratios. Calculate the gaining ratio of Aman and Yatin.
4.P, Q and R are partners sharing profits and losses in the ratio of 5 : 4 : 1. Calculate new profit-sharing ratio, sacrificing ratio and gaining ratio in each of the following cases:
Case 1. R acquires ⅕th share from A.
Case 2. R acquires ⅕th share equally form A and B.
Case 3. P, Q and R will share future profits and losses equally.
Case 4. R acquires 1/10th share of A and ½ share of B.
5.Ram and sham are partners sharing profits and losses in the ratio 4 : 1. They decide to share profits in the ratio of 3 : 2 on 1st April 2018. However the decision to change the profit sharing ratio was taken after crediting share of profit for the year ended 31st March, 2019 to capital accounts, which was Rs. 1,00,000.
Goodwill of the firm as at 1st April, 2018 was valued at Rs. 75,000. capital account credit balance were 5,00,000 and 6,00,000
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Admission of a Partner

Admission of a Partner

Important Questions by AARISH SIR
  1. Write the effects of admission of a partner?
  2. Define new profit sharing ratio?
  3. X and Y are partners sharing profit in the ratio of 3 : 2. They admit Z as a new partner for ⅕th shares in profit. Calculate the new profit sharing ratio and sacrificing ratio.
  4. A and B are partners sharing profits and losses equally. They admit C, as a new partner who acquires his share as ⅕th from A and ¼th from B. You are required to calculate the sacrifice ratio and the new profit sharing ratio.
  5. On 1st April 2012 shalu and charu entered into a partnership for sharing profits in the ratio of 4 : 3. They admitted Tanya as a new partner on 1st April 2012 for ⅕th share which she acquired equally from shalu and charu. Shalu, charu and Tanya earned a profit at a higher rate than the normal rate of return for the year ended 31st March 2013. Therefore they decided to expand their business. To meet the additional capital requirement they admitted Anjali as a new partner on 1st April 2013 for 1/7th share in profits which he acquired from shalu and charu in 7 : 3 ratio.
    Calculate:-
    1. New profit sharing ratio of Shalu Charu and Tanya for the year 2012-13.
    2. New profit sharing ratio of Shalu Charu Tanya and Anjali on Anjali’s admission.
  6. A and B are partners sharing profits in the ratio of 3 : 1. C is admitted into partnership for ⅛th profits. Calculate sacrificing and new profit sharing ratio.
  7. A, B and C are partners in a firm sharing profits and losses in the ratio of 6 : 3 : 1. They admit D into partnership on 1st April 2019. New profit sharing ratio among A, B, C & D will be 3 : 3 : 3 : 1. Determine the sacrificing ratio.
  8. Following is the balance sheet of W, X and Y who share profits in the ratio of 2 : 2 : 1.
    Balance sheet as on 31st March 2012
    LiabilitiesAmountAssetsAmount
    Sundry creditors
    Outstanding liabilities
    General reserve
    Capital Account
    Mr. W24,000
    Mr. X24,000
    Mr. Y10,000
    		25,700
    3,000
    13,000



    58,000    		Land and Building
    Furniture
    Stock of goods
    Sundry Debtors
    Cash in hand
    Cash at Bank

    		50,000
    13,000
    23,500
    11,000
    280
    1,920

    The partners have agreed to take Mr. Z as a partner with effect from 1st April 2012 on the following terms:-
    1. Mr. Z shall bring 10,000 towards his capital
    2. The value of stock would be increased by 5,000 and furniture should be depreciated by 10%.
    3. Reserves for bad and doubtful debts should be provided at 10% of the debtors
    4. The value of land and building should be enhanced by 20%
    5. The value of the goodwill should be fixed at Rs. 30,000
    6. General Reserve will be transferred to the partner’s capital accounts.
    7. The new profit sharing ratio shall be:-
      W – 5/15, X – 5/15, Y – 3/15, Z – 2/15
    8. The outstanding liabilities include Rs. 2,000 due to Mr. P which has been paid by Mr. W.
      Necessary entries were not made in the books
      Prepare Revaluation Account and the capital accounts of the partners
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