what if balances of unamortised expenses like underwriting commision, share issue expenses are increasing in current year and not declining?

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Solution

If the balance of Unamortised Expenses such as Underwriting Commission, Share Issue Expenses increase from previous year to current year, in that case, they are shown as Cash Outflow under Financing Activities.

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PRACTICAL PROBLEMS

(Call in arrears and Balance Sheet)

The Alfo Ltd. made an issue of 10,000 shares of Rs 20 each payable as follows-

Application	:	Rs 5	Allotment	:	Rs 10
First Call	:	Rs 2	Final Call	:	Rs 3

The company received applications for 15,000 shares of which applications for 5,000 shares were rejected and money refunded. The directors made all the calls. One share holders, holding 100 shares failed to pay first and final call. The expenses of issue amounted to Rs 5,000

Pass journal entries and show the Balance Sheet.

Note: Expenses on issue should be shown as asset. Every year certain amount of expenses should be charged to P&L A/c.

Q. Charles Ltd. earned a profit of ₹ 1,00,000 after charging depreciation of 20,000 on assets and a transfer to General Reserve of ₹ 30,000. Goodwill amortised was ₹ 7,000, and gain on sale of machinery was ₹ 3,000. Other information available is (changes in the value of Current Assets and Current Liabilities): trade receivables showed an increase of ₹ 3,000; trade payables an increase of ₹ 6,000; Prepaid expenses an increase of ₹ 200; and outstanding expenses a decrease of ₹ 2,000.
Ascertain Cash Flow from Operating Activities.

Q. Underwriting commission paid on issue of debentures will appear in _______________.

Q. Underwriting commission will not be paid on shares taken by _____.

Q. Underwriting Expenses relates to which of the following activities of business ?

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