CS Foundation

Secretarial Practice in Drafting Notice, Agenda and Minutes of Company’s Meetings – CS Professional Study Material

Leave a Comment / CS Foundation / By Raju / April 13, 2023 April 13, 2023

Chapter 3 Secretarial Practice in Drafting Notice, Agenda and Minutes of Company’s Meetings – CS Professional Drafting, Pleadings and Appearances Notes is designed strictly as per the latest syllabus and exam pattern.

Secretarial Practice in Drafting Notice, Agenda and Minutes of Company’s Meetings – Drafting, Pleadings and Appearances Study Material

Question 1.
Write notes on the following:
Secretarial standard on passing of resolution by circulation (Dec 2016, 4 marks) [CSPP -1]
Answer:
1. Authority
The Chairman of the Board or in his absence, the Managing Director or in his absence, the Wholetime Director and where there is none, any Director other than an Interested Director, shall decide, before the draft Resolution is circulated to all the Directors, whether the approval of the Board for a particular business shall be obtained by means of a Resolution by circulation.

2. Where not less than one-third of the total number of Directors for the time being require the Resolution under circulation to be decided at a Meeting, the Chairman shall put the Resolution for consideration at a Meeting of the Board.

3. Procedure
A Resolution proposed to be passed by circulation shall be sent in draft, together with the necessary papers, individually to all the Directors including Interested Directors on the same day.

The draft of the Resolution to be passed and the necessary papers shall be circulated amongst the Directors by hand, or by speed post or by registered post or by courier, or by e-mail or by any other recognised electronic means.

Each business proposed to be passed by way of Resolution by circulation shall be explained by a note setting out the details of the proposal, relevant material facts that enable the Directors to understand the meaning, scope and implications of the proposal, the nature Of concern or interest, if any, of any Director in the proposal, which the Director had earlier disclosed and the draft of the Resolution proposed. The note shall also indicate how a Director shall signify assent or dissent to the Resolution proposed and the date by which the Director shall respond.

4. Approval
The Resolution is passed when it is approved by a majority of the Directors entitled to vote on the Resolution, unless not less than one-third of the total number of Directors for the time being require the Resolution under circulation to be decided at a Meeting.

The Resolution, if passed, shall be deemed to have been passed on the last date specified for signifying assent or dissent by the Directors or the date on which assent from more than two-third of the Directors has been received, whichever is earlier, and shall be effective from that date, ii no other effective date is specified in such Resolution.

5. Recording
Resolutions passed by circulation shall be noted at the next Meeting of the Board and the text thereof with dissent or abstention, if any, shall be recorded in the Minutes of such Meeting.

6. Validity
Passing of Resolution by circulation shall be considered valid as if it had been passed at a duly convened Meeting of the Board.

Question 2.
Write note on the following :
Describe the applicability of Secretarial Standard – 1 under the Companies Act, 2013, issued by The Institute of Company Secretaries of India on Meeting of Board of Directors. (June 2019, 4 marks)
Answer:
In terms of sub-Section (10) of Section 118 of the Companies Act, 2013, every company is required to observe Secretarial Standard-1 except:

One Person Companies (OPC) having only one Director on its Board and
Such other class or class of companies which are exempted by Central Government through Notification.

Exemptions shall be applicable to a Section 8 company provided it has not committed a default in filing its Financial Statements or Annual Return with the Registrar of Companies. However, such Section 8 companies need to comply with the applicable provisions of the Act relating to Board Meetings. In other words, the Secretarial Standard (SS-1) will be applicable to all companies like private, public, listed or a small company unless, expressly exempted as stated above.

Question 3.
Distinguish between the following:
(iii) ‘Motion’ and ‘resolution’.
(v) ‘Special resolution’ and ‘resolution requiring special notice’. (June 2012, 4 marks each) (CSEM – II)
Answer:
(iii)
Motion :
The question which generally comes for consideration at the general meeting of a company are presented in the form of proposals called motions. Motion may be proposed by the chairman of the meeting or by any other member of the company. The business of a meeting is transacted through motions or definite proposals and no discussion can take place unless there is a definite proposal or subject for discussion before the meeting. A motion should be in writing and signed by the mover and put to the vote at the meeting by the chairman.

Resolution :
A resolution is the formal expression of the decision of a meeting when a motion has been duly voted upon and passed by the requisite majority, with or without amendment it is called a resolution. A resolution once adopted and recorded in the minutes becomes the official decision of the meeting.

(v) Special Resolution (Sec. 114 of C.A. 2013)
1. Situation when a resolution will be Special Resolution :

The intention to propose the resolution as a special resolution has been duly specified in the notice calling the general meeting and the notice has been given to the members in accordance with the provisions of this Act, and.
The votes cast in favour of the resolution by members entitled to vote are not less than three times the number of votes cast against the resolution by members so entitled to vote.

Resolutions requiring special notice (Sec. 115 of CA. 2013)
1. Provisions :
Where, by any provision contained in this Actor in the articles of a company, special notice is required of any resolution, notice of the intention to move such resolution shall be given to the company by such number of members holding not less than 1 % of total voting power or holding . shares on which such aggregate sum not exceeding ₹ 5,00,000/- as may be prescribed has been paid-up and the company shall give its members notice of the resolution in the following manner as prescribed in Rules.

2. Matters in respect of which Special Notice is required :
(a) A resolution for appointment of a person as auditor at the annual general meeting other than the retiring auditor for providing expressly that the retiring auditor shall not be re-appointed [Section 140(4)];
(b) A resolution for removing a director before the expiry of the period of his office and appointing someone in the place of the director so removed [Section 169(2)].

3. Procedure for Special Notice :
(A) Signing of special notice : A special notice required to be given to the company shall be signed, either individually or collectively by such number of members holding not less than one percent of total voting power or holding shares on which an aggregate sum of not more than five lakh rupees has been paid up on the date of the notice.

(B) Sending of notice to the company : Such notice shall be sent by members to the company not earlier than three months but at least 14 days before the date of the meeting at which the resolution is to be moved, exclusive of the day on which the notice is given and the day of the meeting.

(C) On receipt of notice by the company : The company shall immediately after receipt of the notice, give its members notice of the resolution at least seven days before the meeting, exclusive of the day of dispatch of notice and day of the meeting, in the same manner as it gives notice of any general meetings.

(D) Publication of Notice : Where it is not practicable to give the notice in the same manner as it gives notice of any general meetings, the notice shall be published in English language in English newspaper and in vernacular language in a vernacular newspaper, both having wide circulation in the State where the registered office of the Company is situated. Such notice shall also be posted on the website, if any, of the Company. Such notice shall be published at least seven days before the meeting, exclusive of the day of publication of the notice and day of the meeting.

Question 4.
Distinguish between the following:
‘Ordinary resolution’ and special resolution’. (June 2013, 4 marks) (CSEM – II)
Answer:
Kinds of resolutions :
Resolutions under present companies Act, 2013 are of three kinds:
(i) Ordinary
(ii) Special
(iii) Resolution requiring special notice

(i) Ordinary resolution, Sec. 114 of Companies Act, 2013 :
A resolution passed at a general meeting of a company by a simple majority of members entitled to vote and also voting in person or by proxy (where proxies are allowed) is called an ordinary resolution.

(ii) Special resolution :
A special resolution is one passed at a general meeting of a company when:
(a) The intention to propose the resolution as a special resolution has been duly specified in the notice calling the general meeting and the notice has been given to the members in accordance with the provisions of this Act, and
(b) The votes cast in favour of the resolution by members entitled to vote and voting are not less than three times the number of votes cast against the resolution by members so entitled to vote.

Question 5.
Distinguish between the following:
‘e-voting’ and ‘Voting by show of hands’. (June 2017, 4 marks)
Answer:
e-voting’ and ‘voting by show of hands’
Votes before the general meeting can be cast either by ‘e-voting’ method or by showing hands.

e-voting	Voting by show of hands
Governed by the provision of section 108.	Governed by the provisions of section 107.
Provisions applicable to every company which has listed its equity shares on a recognised stock exchange and every company having not less than one thousand members.	Applicable to all companies at their general meetings, wherein resolution is put to the vote unless a poll is demanded under section 109 or the voting is carried out electronically.
The facility for remote e-voting shall remain open for not less than three days and shall close at 5.00 p.m. on the date preceding the date of the general meeting.	The facility of voting by show of hands is available at the time of the meeting.
During the period, when facility for e- voting is provided, the members of the company holding the shares in either physical form or in demat form, as on the cut-off date, may opt for remote e-voting,	In general meeting, members who have not voted in e-voting mode can cast their votes by raising their hands.
Number of votes of a member is equal to the number of shares held.	Only one vote is counted for each shown hand.

Question 6.
Distinguish between “Ordinary Resolution and Special Resolution”. (June 2019, 4 marks)
Answer:
Ordinary Resolution :
An ordinary resolution is one which is passed in the company’s general meeting by a simple majority of votes i.e.- 51%.No notice is required to be given for moving an ordinary resolution. All matters relating to the company’s business, except those which need to be settled by a special resolution, are settled by an ordinary resolution.

Special Resolution :
Special resolution means a resolution in which special majority is needed to pass the resolution at the general meeting i.e the votes cast in favor of the resolution, whether in person or by proxy, should not be less than three times the votes cast against the resolution by members so entitled.

A prior notice needs to be given for moving a special resolution in any meeting of the company and the notice should contain the intention to propose the resolution as special resolution should be mentioned specifically. A special resolution is meant to make decisions in important matters and protect the rights of company’s members.

The significant differences between ordinary resolution and special resolution are:
Ordinary Resolution is one wherein simple majority is required to move the resolution at the general meeting. Special Resolution means a resolution in which supermajority is needed to pass the resolution at the general meeting.

In the ordinary resolution, consent of at least 51 % members, is required for the resolution to be passed. On the other hand, the special resolution requires the consent of at least 75% members, in favour of the resolution.

The copy of an ordinary resolution, signed by the officer of the company should be filed with the registrar only in certain cases. As against this, a printed or handwritten copy of a special resolution, containing the signature of the officer of the company must be filed with the Registrar of Companies (ROC) within 30 days.

Ordinary Resolution is passed to transact ordinary business. However, a special business can be transacted via special resolution or ordinary resolution, as per the requirements of the Companies Act, 2013.

Question 7.
What do you understand by the expression ‘resolution by circulation’? List out four matters which cannot be passed by the directors by resolution by circulation. (June 2013, 4 marks) (CSEM – II)
Answer:

Passing of Resolution by Circulation
1.	Mode of circulation of draft resolution to directors etc.	A company may pass the resolutions through circulation. The resolution in draft form together with the necessary papers may be circulated to the directors or members of committee at their address registered with the company in India or through electronic means which may include e-mail or fax.
2.	Requisite majority	The said resolution must be passed by majority of directors or members entitled to vote.
3.	When a resolution must be passed at meeting?	If more than one third of directors require that the resolution must be decided at the meeting, the chairperson shall put the resolution to be decided at the meeting.
4.	Noting of resolution passed through circulation	The resolution passed through circulation be noted at a subsequent meeting and made part of the minutes of such meeting.
5.	Matters that can be passed by circulation by Board	Some of the matters which cannot be passed by the Board by circulation are: to fill a casual vacancy occurred in the Board; to make calls on shareholders in respect of money unpaid on shares; issue of debentures; to make any political contribution; to make declaration of solvency; to invest the funds of the company.

Question 8.
A company proposes to hold its Board meeting at a shorter notice through video conferencing. As a Company Secretary, explain the requirements and procedures to all the directors. (Dec 2014, 4 marks) [CSPP -1]
Answer:
Notice of Board Meetings: A meeting of the Board shall be called by giving not less than seven days’ notice in writing to every director at his address registered with the company and such notice shall be sent by hand delivery or by post or by electronic means. [Section 173].

A meeting of the Board may be called at shorter notice to transact urgent business subject to the condition that at least one independent director, if any, shall be present at the meeting. In case of absence of independent directors from such a meeting of the Board, decisions taken at such a meeting shall be circulated to all the directors and shall be final only on ratification thereof by at least one independent director, if any.

In the notice of Board Meeting, the following matters are required to be Specific Notice:

Appointment of Managing Director who is already a Managing Director or Manager of another company [Section 203(3)].
Appointment of Manager who is already a Manager or Managing Director of another company [Section 203(3)].

In case of a listed company, notice of the Board Meeting should also be given to the stock exchange(s), where the securities of the company are listed, in accordance with the various clauses of the listing agreement for the items like, unaudited quarterly results, financial statements, issue of securities by way of public/ rights/ bonus or offer for sale, declaration/ recommendation of dividend etc.

Question 9.
List out the additional items of business which cannot be passed through resolution by circulation and have to be placed before the Board at its meeting in case of a listed company. (Dec 2015, 4 marks) [CSPP -1]
Answer:
Passing of Resolution by Circulation: Section 179(3) of Companies Act, 2013:

A company may pass the resolutions through circulation. The resolution in draft form together with the necessary papers may be circulated to the directors or members of committee at their address registered with the company in India or through electronic means which may include e-mail or fax.
The said resolution must be passed by majority of directors or members entitled to vote.
If more than one third of directors require that the resolution must be decided at the meeting, the chairperson shall put the resolution to be decided at the meeting.
The resolution passed through circulation be noted at a subsequent meeting and made part of the minutes of such meeting.

Some of the matters which cannot be passed by the Board by circulation are:

to fill a casual vacancy occurred in the Board;
to make calls on shareholders in respect of money unpaid on shares;
to of issue debentures;
to make any political contribution;
to make declaration of solvency;
to invest the funds of the company,

Question 10.
XYZ Ltd. wishes to convey Meeting of Board of Directors through Electronic mode. Draft a suitable Notice for the same. Assume other informations. (June 2019, 5 marks)
Answer:
Date : 01/06/2019 (ideally, should be on or more than 7 days before the meeting date)
Name of the Company: XYZ Ltd.
Reqistered Address: New Delhi –
CIN : _____________
Email: XYZ @gmail.com
Website: XYZ.com

NOTICE OF 4^th BOARD MEETING

Mr. ABC Director,
New Delhi.

Dear Sir,

1. NOTICE is hereby given that the 4,h Meeting of the Board of Directors of the company will be held on Monday, the 12th June 2019 gt 4.30 pm at New Delhi.
2. The Agenda of the business to be transacted at the Meeting will follow.

3. You may attend the Meeting through video conference, the details of which are enclosed. In case you desire to participate through such mode, please send a confirmation in this regard to Mr. P, the Company Secretary of the Company at XYZ@ gmail. com within 2 days to enable making necessary arrangements.

Kindly make it convenient to attend the Meeting.

Yours faithfully,
For XYZ Limited
(Signature)

(Name)
(Designation)
(Email)

Question 11.
A Company is an artificial judicial person created by Law”. Comment. (June 2019, 5 marks)
Answer:
A company is an artificial judicial person created by law having its own distinct entity form, has perpetual succession and capable of entering into contracts. Perpetual succession implies that upon death or disqualification of its owners or shareholders, the company continues to exist.

Though company is bestowed with the characteristic of separate legal entity but it cannot take decision on its own. It is capable of acting in its own name, entering into contracts. It is capable of owning and holding property in its own name, sue others and to be sued by others in its name. Despite all these powers, since it is not a natural person, it expresses its will or takes its decisions through natural persons (i.e. directors or members) collectively which is known as “resolutions.”

In Solomon vs. Solomon and Company Limited for the first time, the principle of the separate legal entity or separate legal existence of a company was recognized by the House of Lords. It was held that once the company is incorporated, it becomes a separate entity in the eyes of law independent of a company from Mr. Solomon.

Question 12.
What are the provisions regarding quorum for the meeting of Board of Directors under Companies Act, 2013. Can article provide for the different quorum than the Companies Act, 2013? (June 2019, 4 marks)
Answer:
As per Section 174 of the Companies Act 2013:
The quorum for a meeting of the Board of Directors of a company shall be one third of its total strength or two directors, whichever is higher, and the participation of the directors by video conferencing or by other audio visual means shall also be counted for the purposes of quorum under this sub-section.

The continuing directors may act notwithstanding any vacancy in the Board; but, if and so long as their number is reduced below the quorum fixed by the Act for a meeting of the Board, the continuing directors or director may act for the purpose of increasing the number of directors to that fixed for the quorum, or of summoning a general meeting of the company and for no other purpose.

Where at any time the number of interested directors exceeds or is equal to two-thirds of the total strength of the Board of Directors, the number of directors who are not interested directors and present at the meeting, being not less than two, shall be the quorum during such time.

Where a meeting of the Board could not be held for want of quorum, then, unless the articles of the company otherwise provide, the meeting shall automatically stand adjourned to the same day at the same time and place in the next week or if that day is a national holiday, till the next succeeding day, which is not a national holiday, at the same time and place.

The Companies Act 2013 does not provide clarity on higher number of quorum. As per Secretarial Standard-1, Articles of Association may provide for higher number of directors for quorum.

Question 13.
(c) ‘Corporate decision making process has to be collective as per law’. Comment. (Dec 2019, 5 marks)
(d) Write down the required important practical aspects, while drafting agenda and notes thereon. (5 marks)
Answer:
(c) A company is an artificial judicial person created by law having its own distinct entity form and capable of entering into contracts. Though company is bestowed with the characteristic of separate legal entity but it cannot take decision on its own. It is capable of acting in its own name, entering into contracts. It is capable of owning and holding property in its own name, sue others and to be sued by others in its name.

Despite all these powers, since it is not a natural person, it expresses its will or takes its decisions through natural persons (i.e. directors or members) collectively which is known as “resolutions” at validly held meetings.

In case of Re Associated Colour Laboratories Ltd (1970) 12 D.L.R, a meeting has been defined as ‘Coming together of two or more persons face to face, so as to be in each other presence or company.

There are two collective bodies in the company which take decision through resolutions:

Board of Directors – Who manage, control and direct the business of the company
General body of members – Who ultimately own the company. Such decisions pertain to the various corporate activities and management of the company.

Thus corporate decision making process has to be collective as laid down in the Law.

(d) Following are the important practical aspects while drafting agenda and notes thereon:-
1. While preparing the Agenda and notes thereon, good drafting is of the essence. Important or non routine items of the Agenda have to be written with special care, employing not only good drafting skills but also an understanding of commercial considerations and the business environment. The following points needs to be focused for drafting agenda and notes thereon:
(a) Divide the Agenda into two parts: The first part containing usual or routine items and the second part containing other items which can further be bifurcated as (i) items for approval; and (ii) items for information/noting.

(b) For each item of the Agenda an explanatory note should be provided. The explanatory note should give sufficient details of the proposal, including the proposed Resolution, if any, references to the provisions of the Companies Act and other applicable laws, the Memorandum and Articles of Association, other relevant documents, decisions of previous Board or General Meetings, as necessary. The explanatory note may be drafted under the following heads :

Background (or Introduction);
Proposal, with recommendations of the management;
Provisions of Law;
Decision(s) to be taken ; and
Interest, if any, of any Directors.

2. As a good governance practice, the agenda item should be initiated by the concerned Department (Head of Department or other authorised person) and approved by the competent authority as may be decided by the Board.

3. The Company Secretary should refer to the Agenda of previous Meetings, to see whether any items had been deferred and should consider whether such items are to be included for discussion at the ensuing Meeting.

4. The Company Secretary should also refer to the Minutes of the Meeting held during the corresponding period of the previous year to see whether there are any recurring periodic items (e.g. interim/final dividend, quarterly results). The Company Secretary should finalise the Agenda in consultation with the Chairman or in his absence the Managing Director or in his absence the Whole-time Director.

5. Notes on policy matters should present clear-cut issues in order to facilitate due deliberations and precise decisions at the Meeting.

6. The Company Secretary should keep, in addition to a record of matters to be discussed, a separate folder of all such correspondence, notes and documents which need to be dealt with at the Meeting. In preparing the Agenda, the Company Secretary should refer to this folder to ensure that all items which require the decision of the Board are included in the Agenda.

7. A separate Agenda item number should be given for items which are brought forward for discussion from a previous Meeting rather than placing them under the omnibus Agenda items.

A few extra copies of the Agenda should always be kept available at the Meeting.

Question 14.
(a) Draft a specimen notice by Requisitionists convening an Extra-ordinary General Meeting as per annexure VII in this regard under the Companies Act, 2013. (Dec 2019, 8 marks)
(b) ‘Promoter of a company is a person who does the necessary preliminary work in connection with the formation and the establishing of the company’. Comment. (4 marks)
(c) When an urgent resolution by circulation can be initiated? (4 marks)
Answer:
(a) NOTICE is hereby given that the persons named below, who are Members of ……………… (Name of the Company), having its Registered Office at ………………, and who have requisitioned the convening of an Extra-Ordinary General Meeting of the Company, hereby, in exercise of the powers and rights conferred by Section 100 of the Companies Act, 2013, give Notice that the said requisitioned meetings shall be held on ……………………….. day, the …………………. 20 ……………, at ………………… a.m./p.m. at …………………. (address) to consider the following proposal:

State the proposal
{OR
for considering and, if thought fit, passing the following Ordinary/ Special Resolution:
Reproduce the Resolution}
Names of requisitionists:
1. ………………………
2. ………………………
3. ………………………
4. ……………………….
Note:
A Member entitled to attend and vote at the Meeting is entitled to appoint a Proxy to attend and, on a poll, to vote instead of himself and the Proxy need not be a Member of the Company. Proxies, in order to be effective, should be duly completed, stamped (if applicable) and signed and must be received at the Registered Office of the Company not less than forty-eight hours before the time fixed for the Meeting.

By Order of the Board of Directors
For …………………….
……………………. (Signature)

Place …………………..
Date : …………………. 20

…………………… (Name)
Company Secretary
(ACS/FCS No ……………)

Further Notes:
1. A Member entitled to attend and vote at the Meeting is entitled to appoint a Proxy to attend and, on a poll, to vote instead of himself and the Proxy need not be a Member of the Company. Proxies, in order to be effective, should be duly completed, stamped (if applicable) and signed and must be received at the Registered Office of the Company not less than forty-eight hours before the time fixed for the Meeting.

2. The requisition dated …………….. referred to above, signed by the requisite number of Members in terms of Section 100 of the Companies Act, 2013, and all documents referred to in the Notice are available for inspection by any Member at the Registered Office of the Company on any working day of the Company between the hours of 11:00 a.m. and 1:00 p.m. upto the date of this Extra-Ordinary General Meeting and at the venue of the Meeting for the duration of the Meeting.

3. Route-map to the venue of the Meeting is enclosed.

(b) Generally Promoter of a company is a person who does the necessary preliminary work in connection with the formation and the establishment of the company. It is promoters only who conceives an idea, develops it, formulates a scheme or project and takes all the necessary steps for the formation of a company to implement the project or the scheme.

Before the company is registered by the Registrar promoters continue to be known as promoters. They gather funds for meeting the expenses in connection with the formation of the company and spend them, which are known and designated as “preliminary expenses” and a provision is made in the articles of association of the company authorising the company and its directors to reimburse promoters the preliminary expenses incurred by them, and also a provision for the formalisation of the contracts which the promoters of the company had entered into with third parties prior to the birth of the company.

Promoters usually enter into contracts with the prospective directors, solicitors, bankers, brokers, underwriters, auditors, secretary, manager and with those who offer to sell and, plant, machinery equipment etc. for implementing the proposed project.

Such contracts are known as “promoters’ contracts” which are not binding on the company because the company had not come into existence when they were entered into with third parties by the company’s promoters, However, as a matter of practice, the company, on its incorporation enters into fresh contracts with the third parties on the lines of the promoters’ contracts, which then become binding on the company.

(c) The Companies Act, 2013 requires certain business to be approved only at Meetings of the Board. However, other business that requires urgent decisions can be approved by means of Resolutions passed by circulation. Resolutions passed by circulation are deemed to be passed at a duly convened Meeting of the Board and have equal authority.

As per the secretarial standard 1 on ‘Meetings of the Board of Directors’:
1. The Chairman of the Board or in his absence, the Managing Director or in their absence, any Director other than an Interested Director, shall decide, before the draft Resolution is circulated to all the Directors, whether the approval of the Board for a particular business shall be obtained by means of a Resolution by circulation.

Interested Directors shall not be excluded for the purpose of determining the above one-third of the total number of Directors.

Secretarial Standard 1 on ‘Meetings of the Board of Directors’ lists certain items of business which shall not be passed by circulation and shall be placed before the Board at its Meeting.

Question 15.
What are the powers of Board of Directors of a Company that can be exercised only in a full fledged Board Meeting under the provisions of the Companies Act, 2013. (Dec 2020, 4 marks)
Answer:
Powers of the Board to be exercised at Board Meetings as prescribed under the Companies Act, 2013

According to section 179(3) of the Companies Act, 2013 the Board of Directors of a company shall exercise the following powers on behalf of the company by means of resolutions passed at meetings of the Board, namely:

(a) to make calls on shareholders in respect of money unpaid on their shares;
(b) to authorise buy-back of securities under section 68;
(c) to issue securities, including debentures, whether in or outside India;
(d) to borrow monies;
(e) to invest the funds of the company;
(f) to grant loans or give guarantee or provide security in respect of loans;
(g) to approve financial statement and the Board’s report;
(h) to diversify the business of the company
(i) to approve amalgamation, merger or reconstruction;
(j) to take over a company or acquire a controlling or substantial stake in another company;
(k) any other matter which may be prescribed:

To make political contributions
To appoint or remove key managerial personnel (KMP)
To appoint internal auditors and Secretarial Auditor.

Question 16.
Describe the specific contents that minutes of a meeting must contain under the provisions of the Companies Act, 2013. (Dec 2020, 4 marks)
Answer:
According to Section 118(10) of the Companies Act, 2013 provides that every company shall observe secretarial standards with respect to general and Board meetings specified by the Institute of Company Secretaries of India (ICSI) constituted under section 3 of the Company Secretaries Act, 1980 (56 of 1980), and approved as such by the Central Government.

As per Secretarial Standard-1 on ‘Meetings of the Board of Directors’ Minutes shall inter-alia contain:
(a) The name(s) of Directors present and their mode of attendance, if through Electronic Mode.
(b) In case of a Director participating through Electronic Mode, his particulars, the location from where he participated and wherever required, his consent to sign the statutory registers placed at the Meeting.
(c) The name of Company Secretary who is in attendance and Invitees, if any, for specific items and mode of their attendance if through Electronic Mode.
(d) Record of election, if any, of the Chairman of the Meeting.
(e) Record of presence of Quorum.
(f) The names of Directors who sought and were granted leave of absence.
(g) Noting of the Minutes of the preceding Meeting.
(h) Noting the Minutes of the Meetings of the Committees.
(i) The text of the Resolution(s) passed by circulation since the last Meeting, including dissent or abstention, if any.

(j) The fact that an Interested Director did not participate in the discussions and did not vote on item of business in which he was interested and in case of a related party transaction such director was not present in the meeting during discussions and voting on such item.

(k) If any Director has participated only for a part of the Meeting, the Agenda items in which he did not participate.

(l) The fact of the dissent and the name of the Director who dissented from the Resolution or abstained from voting thereon.

(m) Ratification by Independent Director or majority of Directors, as the case may be, in case of Meetings held at a shorter Notice.

(n) Consideration of any item other than those included in the Agenda with the consent of majority of the Directors present at the Meeting and ratification of the decision taken in respect of such item by a majority of Directors of the company.

(o) The time of commencement and conclusion of the Meeting.

Apart from the Resolution or the decision, Minutes shall mention the brief background of all proposals and summarise the deliberations thereof. In case of major decisions, the rationale thereof shall also be mentioned.

Question 17.
What is a Resolution by Circulation as per Section 175 of the Companies Act, 2013? (Dec 2020, 4 marks)

Question 18.
Draft a specimen Board Resolution of appointment of Ripudaman Singh as an Independent Director of M/s. Rudraksh Ltd. (Dec 2020, 4 marks)
Answer:
Proposed by: Mr ……………..
Seconded by: Mr ………………
The following Resolution having been proposed and seconded respectively by the aforementioned Members was put to vote as an Ordinary Resolution: “RESOLVED that pursuant to the provisions of Sections 149, 150(2), 152 and any other applicable provisions of the Companies Acts 2013 and the rules made there under read with Schedule IV to the Companies Act, 2013, approval of the Company be and is hereby accorded for appointment of Mr. Ripudaman Singh (DIN No ……………….), as an Independent Director of the Company to hold the office for a period of 3 years i.e. up to …………………… AND THAT by virtue of sub-section (13) of Section 149 of the Companies Act, 2013 he shall not be liable to retire by rotation.”

The Chairman enquired from the members present if there were any clarifications required on the same. Since none of the Members required any clarification, the Ordinary Resolution was put to vote and on a show of hands declared carried by the requisite majority.

VOTE OF THANKS
There being no other business to transact the Meeting closed with a vote of thanks to the Chair.
Date : ………………….
Place: ………………..

CHAIRMAN
(DIN ……………)

Question 19.
Draft a specimen notice of a board meeting. Assufne facts. (Aug 2021, 4 marks)
Answer:
Name of the Company ………………………
Registered Address ………………………….
CIN – ………………….. Email- …………………… Telephone : ……………………..
Website: …………………..
NOTICE OF ……………………….. (SERIAL NUMBER OF MEETING) BOARD MEETING
Mr. ………………….
Director,
New Delhi.

Dear Sir,

1. NOTICE is hereby given that the (serial number ……………………….. of Meeting) Meeting of the Board of Directors of the company will be held on …………………….. (day of the week), the ………………………… (date) ……………………. (month) …………………… (year) at (a.m./p.m.) at …………………. (Venue)

2. The Agenda of the business to be transacted at the Meeting is enclosed/will follow.

3. You may attend the Meeting through Electronic Mode, the details of which are enclosed. In case you desire to participate through such mode, please send a confirmation in this regard to …………………… (Name of Company Secretary/ Chairman/other Authorised Person), email ……………., Tel No. ………………… within ……………………. days (time frame) to enable making of necessary arrangements.

Kindly make it convenient to attend the Meeting.

Yours faithfully,
For ………………….. Limited/Pvt Limited
(Signature)
(Name)
(Designation)

Question 20.
(ii) Mention the practical aspects while drafting resolutions both for board and general meeting. (Aug 2021, 4 marks)
(iii) Draft a specimen notice in newspaper for postponement of AGM. (4 marks)
(iv) Comment on applicability of Secretarial Standard (SS) under the following circumstances:
(a) One Person Company (OPC) default in filing financial statements u/s 137 and annual return u/s 92 of the Companies Act, 2013.
(b) Private Company having two directors, default in submitting financial statements u/s 137 and annual return u/s 92 of the said Act.
(c) Entity u/s 8 of the Companies Act, 2013, default in filing financial statement u/s 137 of the said Act.
(d) Entity u/s 8 of the Companies Act, 2013, default in filing annual return u/s 92 of the said Act. (1 mark each)
Answer:
(ii) The following points should be kept in mind while drafting resolutions both for Board and General meeting:

All essential facts are included in the resolutions.
Surplus and meaningless words or phrases should not be included.
Reference to documents approved at a meeting should be clearly identified.
Resolutions must indicate the relevant provisions of the Act and the Rules.
If a resolution is one which requires approval the Central Government or confirmation of NCLT/Court, this must be stated in the resolution.
A resolution must indicate when it will be effective.
A resolution must confine itself to one subject matter and two distinct matters should not be covered in one resolution.
A resolution must be concise, precise and flexible enough to take care of eventuality.
” Lengthy resolutions should be divided into paragraphs and arranged in a logical manner.
Anybody not present at the meeting will know clearly what decision was taken.

(iii) Specimen Notice in Newspapers of postponement of Annual General Meeting
Name of the Company …………………………
Registered Address ……………………………
CIN : ………………….. Email : …………………….. Telephone: ……………………..
Website: …………………..

NOTICE: POSTPONEMENT OF ANNUAL GENERAL MEETING

Members are hereby informed that, due to the unforeseen circumstances, it is not possible for the Company to convene the ………………. Annual General Meeting of the Company, which was scheduled to be held on ………………. 20 …………………

Accordingly, the Board of Directors of the Company has decided to postpone the said Annual General Meeting, which now will be
convened on ………………20…. Notice and other documents, if any, relevant to the re-convened Meeting will be dispatched to the Members shortly.

A Member entitled to attend and vote at the Meeting is entitled to appoint a Proxy to attend and, on a poll, to vote instead of himself and the Proxy need not be a Member of the Company. Proxies, in order to be effective, should be duly completed, stamped, signed and must be received at the Registered Office of the Company not less than fortyeight hours before the time fixed for the Meeting.

By Order of the Board of Directors
For ……………………….
……………………. (Signature)

Place: ………………………
Date : ………………. 20 ……….
(ACS/FCS No …………………)

(iv) Secretarial Standard (SS) is applicable to every company except companies as provided under section 118(10) of the Companies Act, 2013:
(a) Secretarial Standard does not apply to One Person Company, it is irrelevant whether there is default in filing financial statement or annual return.

(b) Secretarial Standard applies to a private company, it is irrelevant whether there is default in filing financial statement or annual return.

(c) Secretarial Standard does not apply to section 8 company generally, but if it is in default in filing financial statements u/s 137 of the Companies Act, 2013, then Secretarial Standard will be applicable to such company.

(d) Secretarial Standard does not apply to section 8 company generally, but if it is default in filing annual return u/s 92 of the Companies Act, 2013, then Secretarial Standard will be applicable to such company.

Question 21.
Notice of Annual General Meeting for XYZ Ltd. in which only ordinary businesses are to be transacted. Assume other facts, if required. (Dec 2021, 5 marks)
Answer:
Name of the company: XYZ Ltd.
Registered Address: ……………………..
CIN: ……………………..
Email: ……………………..
Telephone: ……………………..
Website: ……………………..

NOTICE

NOTICE is hereby given that the …………………….. (Meeting Number) Annual General Meeting (AGM) of XYZ Ltd. (CIN: ……………………..) will be held on …………………….. (day), the ……………………..(date), 20…. at …………………….. am/pm at ….(address) to transact the following business:

Ordinary Business:

To receive, consider and adopt the Audited Financial Statement of the Company for the financial year ended on 31 st March … and the Report of the Board of Directors and Auditors.
To declare dividend for the financial year ended on 31 st March…
To appoint Director in place of Mr …………………….. (DIN ……………………..), who retire by rotation and being eligible, offer himself for reappointment.
To appoint Statutory Auditors and to determine their remuneration. For this grants, to consider and if deemed fit, to pass, with or without modification, the following resolution as an Ordinary Resolution:

“RESOLVED THAT pursuant to the provisions of Section 139 and other applicable provisions if any, of the Companies Act, 2013 and the Rules framed thereunder, as amended from time to time, M/s , ……………………..
Chartered Accountants, (Firm Registration No ……………………..) be and are hereby appointed as Auditors of the Company to hold office from the conclusion of this Annual General Meeting till the conclusion of the ………………… Annual General Meeting of the Company, at a remuneration of ₹ ………………….. / for the year …………………… and ₹ ……………… / – per year for the subsequent ……………….. years plus reimbursement of out of pocket expenses and service tax, as applicable.”

“RESOLVED FURTHER THAT the Board of Directors of the Company be and is hereby authorised to do all such acts, deeds, matters and things as may be considered necessary, desirable or expedient to give effect to this Resolution.”

By Order of the Board of Directors (BO.D)
For ……………………
(Signature)
(Name)

Place
Date : ………………. 20 ……………..

Director/Company Secretary
DIN/ACS/FCS No :

Question 22.
Delegation of powers by Board of Directors. (Dec 2021, 4 marks)
Answer:
Powers of Board
According to Section 179(3) of the Companies Act, 2013 provides that the Board of Directors of a company shall exercise the following powers on behalf of the company by means of resolutions passed at meetings of the Board, namely: —
(a) to make calls on shareholders in respect of money unpaid on their shares;
(b) to authorise buy-back of securities under section 68;
(c) to issue securities, including debentures, whether in or outside India;
(d) to borrow monies;
(e) to invest the funds of the company;
(f) to grant loans or give guarantee or provide security in respect of loans;
(g) to approve financial statement and the Board’s report;
(h) to diversify the business of the company;
(i) to approve amalgamation, merger or reconstruction;
(j) to take over a company or acquire a controlling or substantial stake in another company;
(k) any other matter which may be prescribed:

Note Provided that the Board may, by a resolution passed at a meeting, delegate to any committee of Directors, the managing director, the manager or any other principal officer of the company or in the case of a branch office of the company, the principal officer of the branch office, the powers specified in clauses (d) to (f) on such conditions as it may specify.

Question 23.
Describe Secretarial Standard – 2 as stipulated under the Companies Act, 2013 on the mode of delivery of Notice. (June 2022, 5 marks)

Question 24.
Draft the following as per the instructions (Assume facts, if required): (June 2022)
(iii) Specimen of attendance slip and proxy form under the Companies Act, 2013 . (4 marks)
(iv) Minutes of the third Annual General Meeting of CJV Ltd. with agenda of adoption of accounts and declaration of dividend featured for consideration and decision. (4 marks)

Question 25.
Draft the following (a) in case of a resolution, the body to consider the same and the type of resolution; and (b) in other cases person authorised to issue the same. In all cases, the basis which gives rise to drafting should also be mentioned: (June 2012)
Notice of adjourned Board meeting. (5 marks) [CSPP -1]
Answer:
Authorised person : The Board of Director
Basis: Regulation 73 of Table F of Schedule I to the Companies Act, 2013.

J.K.L. Co. Ltd.
Registered Office : Address
Notice of Adjourned Board Meeting.

Notice is hereby given that the meeting of the Board of Directors of the company convened and held on…. at ………… a.m./p.m. at the Registered Office of the company and adjourned to a date to be fixed by the Chairman has been decided to be convened and to be held on…. at … a.m./p.m. at the Registered Office of the company to transact the following business left incomplete at the said meeting of the Board held on ……….

You are requested to make it convenient to attend meeting.

Signature
Mr ………………..
Company Secretary

Place – Allahabad
Date : 1^st May 2011

Question 26.
Draft the following. In case of a resolution, state the type of meeting to consider such resolution and the nature of the resolution together with any special requirement attached to it. In respect of the rest, mention (a) who can issue the same; and (b) the basis for the issuance:

Notice from an unlisted public company for holding an extra-ordinary General Meeting for consideration of the Board’s proposal to buy-back 15% of the paid-up equity share capital (no explanatory statement is required). (Dec 2012, 5 marks) [CSPP -1]
Answer:
Who can issue – The notice can be issued by the Secretary of the Company, if so authorized by the Board or by a Director authorized by the Board. Basis – Section 68 of the Companies Act, 2013.

SPECIMEN OF NOTICE OF GENERAL MEETING
NOTICE

Notice is hereby given that the Extraordinary General Meeting of the XYZ Limited will be held on ___________, 2013 at 11.00 a.m. at the registered office of the Company at Mumbai to consider and if thought fit, to pass fhe following resolution as a SPECIAL RESOLUTION, with or without modification.

“RESOLVED THAT pursuant to the provision of Sections 68, 69,70 and all other applicable provisions, if any, of the Companies Act, 2013, and the provisions contained in the Private Limited Company and Unlisted public Limited Company (Buy-Back of Securities) Rules, 2014, prescribed by the Ministry of Corporate Affairs including such modifications or re-enactment of the Act or the Rules and subject to such other approvals, permissions and sanctions as may be necessary and subject to such conditions and modifications as may be prescribed while granting such approvals, permissions and sanctions which may be agreed by the Board of Directors of the Company, the consent of the Company be and is hereby accorded to the Board to purchase its own equity fully paid-up equity shares of ₹ 100/-each upto a maximum of 20,082 equity shares of ₹ 100/- each being 15% of the paid-up equity share capital of the Company to be bought back from the existing shareholders of the Company at a price of ₹ 625/- per share payable in cash.

RESOLVED FURTHER that the Directors of the Company be and are hereby authorized to carry out the aforesaid buying back of securities and to take every step that may be necessary in connection therewith or incidental thereto give effect to the above resolution or to accept any change or modification as may be suggested by the appropriate authorities or advisors.

Mumbai
2013

By Order of the Board
Mr. A
Director

Question 27.
A public limited company held its annual general meeting at its registered office and transacted all proposals of ordinary business. As the Company Secretary, draft minutes of the meeting and advise the Chairman regarding legal provisions for recording the minutes. (Dec 2014, 8 marks) [CSPP -1]
Answer:
Minutes of the Proceedings of the Second Annual General Meeting of XYZ Limited

Held on Tuesday, 24^th September 2014 at 3:30 p.m. at ___________ (Address)
The following were present:

Mr. W (in the Chair)
Mr. B (Director and Member)
Mr. C (Director)
Mr. D (Director and Member)
Mr. E (Director, Chairman of Audit Committee)
Mr. F (Company Secretary)
_________ (Members present in person) [state number]
___________ (Members present by Proxy) [state number]

Mr. G, Partner of M/s _________, Chartered Accountants, Auditors of the Company, was present. Mr. H, Practicing Company Secretary, was also present.

Chairman: In accordance with Article ___________ of the Articles of Association, Mr. W, Chairman of the Board of Directors, took the Chair.

{Mr. B was elected Chairman of the Meeting, in terms of Article ________ of the Articles of Association of the Company}.

The Chairman welcomed the Members and introduced the Directors seated on the dais.

The Chairman declared that the requisite Quorum was present and called the Meeting to order. The Register of contracts or arrangements in which directors are interested was placed at the Meeting and was available for inspection.

With the consent of the Members present, the Notice convening the Annual General Meeting of the Company was taken as read. The Chairman requested the Company Secretary to read the Auditors’ Report.

After the Auditor’s Report had been read, the Chairman delivered his speech.

The business of the Meeting as per the Notice thereof was thereafter taken up item wise.
1. Adoption of Accounts ‘
The Chairman requested Mr. __________ to read the Ordinary Resolution for the adoption of the Accounts for the year ended 31^st March, 2014 and Mr. __________ read out the Ordinary Resolution as follows:

“RESOLVED THAT the audited financial statement (including consolidated financial statement) of the Company for the financial year ended on that date, together with the Schedules and Notes attached thereto, along with the Reports thereon of the Directors and the Auditors, as circulated to the Members and laid before the Meeting, be and are hereby approved and adopted.”

After the above Resolution was proposed and seconded, but before it was put to the vote, the Chairman invited Members (other than those present by Proxy) to make observations and comments, if any, on the Report and Accounts, as well as on the other Resolutions set out in the Notice convening the Meeting.

Some Members made their observations and comments and raised queries on the Annual Report and Financial Statement and other items set out in the Notice and the Chairman answered their queries.

Before putting the Resolution to vote, the Chairman reminded the Meeting that Proxies were not eligible to vote on a show of hands. Thereafter, the Chairman put the Resolution for the adoption of the Accounts and the Reports thereon to the vote as an Ordinary Resolution.

On a show of hands, the Chairman declared the aforesaid Ordinary Resolution carried by the requisite majority.

2. Declaration of Dividend
Mr. __________ read the following Resolution as an Ordinary
Resolution:
“RESOLVED THAT the dividend @ ₹ 2 on the equity shares of ₹ 10 each, fully paid-up, be and is hereby declared for payment, after deduction of tax at source, if any, to those Members whose names appear on the Company’s Register of Members on Tuesday, 24^th September, 2014″.

The Resolution was proposed by Mr. __________ and seconded by Mr. ____________ and was put to the vote as an Ordinary Resolution.

On a show of hands, the Chairman declared the aforesaid Ordinary Resolution carried unanimously.

3. Appointment of Director
Proposed by : Mr. _____________
Seconded by : Mr. _____________
The following Resolution having been proposed and seconded by the aforementioned two Members, was put to the vote as an Ordinary Resolution:

“RESOLVED THAT, pursuant to Section 152(6)(a) of the Companies Act, 2013, Mr. A, who retires by rotation and being eligible for re-appointment, offers himself for re-appointment, be and is hereby re-appointed as a Director of the Company and that his period of office be liable to determination by retirement of Directors by rotation.”

On a show of hands, the Chairman declared the aforesaid Ordinary Resolution carried unanimously.

4. Appointment of Director
Proposed by : Mr. _____________
Seconded by : Mr. _____________
The following Resolution having been proposed and seconded by the aforementioned two Members, was put to the vote as an Ordinary Resolution:

“RESOLVED THAT, pursuant to Section 152(6)(a) of the Companies Act, 2013, Mr. B, who retires by rotation and being eligible for re-appointment, offers himself for re-appointment, be and is hereby re-appointed as a Director of the Company and that his period of office be liable to determination by retirement of Directors by rotation.”

On a show of hands, the Chairman declared the aforesaid Ordinary Resolution carried unanimously.

5. Appointment of Auditors
Proposed by : Mr. _____________
Seconded by : Mr. _____________
The following Resolution having been proposed and seconded by the aforementioned two Members, was put to the vote as an Ordinary Resolution:

“RESOLVED THAT M/s. _____________, Chartered, Accountants, _____________, be and are hereby re-appointed as Auditors of the
Company to hold office from the conclusion of this Meeting until the conclusion of the 6^th Annual General Meeting of the Company on a remuneration of ₹ _____________, plus applicable GST and other out of pocket expenses incurred for the purposes of the audit”.

On a show of hands, the Chairman declared the aforesaid Ordinary Resolution carried unanimously.

Question 28.
Draft general notice to the members of the company in respect of the following:
(i) Central Government’s approval for the appointment of Joe as the Managing Director of Shine Ltd.
(ii) Central Government’s approval to increase remuneration of Yash as the Managing Director by Johnson Ltd. (Dec 2016, 4 marks) [CSPP -1]
Answer:
(i) Notice Pursuant to the provisions of Section 201 of the Companies Act,, 2013, notice is hereby given that the Company intends to apply to the Central Government for its approval under section 200 of the Companies Act, 2013 for the appointment of Shri Joe as Managing Director of the Company, for a period of five years effective from …………………… on the terms and conditions as contained in the Draft

Agreement approved by the Board of Directors on ……………………
Registered Office:

For Shine Limited
………………. Secretary

Dated …………………….

(ii) JOHNSON LIMITED
Notice in respect of Central Government’s approval to increase remuneration of Yash as Managing Director of Johnson Limited. Notice is hereby given pursuant to Section 201 of the Companies Act, 2013 (the Act) that the company intends to make an application to the Central Government for its approval under section 200 of the Act to the increase in the remuneration payable to Shri Yash Managing Director of the Company.

Registered Office:

For JOHNSON LIMITED
……………………….. Secretary

Dated …………………….

Question 29.
Ria Technologies Ltd. was incorporated 10 years back. The Board of directors now wants to change its name to Ria Systems Ltd. Draft a notice and the explanatory statement for calling an extraordinary general meeting of the company for change of its name, assuming relevant data. (Dec 2016, 4 marks)
Answer:
NOTICE

Notice is hereby given to the members of the Company that the Extra Ordinary General Meeting of RIA TECHNOLOGIES LIMITED will be held on Friday the ___________ day of ___________ at 11:00 A.M. at its registered office

To consider, and if thought fit, to pass with or without modification(s), the following resolution as Special Resolution:
“RESOLVED THAT pursuant to the provision of Section 21 and all other applicable provisions, if any, of the Companies Act, 2013 and the Cos. (Incorporation) Rules, 2014 name of the company be hereby changed from RIA TECHNOLOGIES LIMITED to RIA SYSTEMS LIMITED and accordingly the name “RIA TECHNOLOGIES LIMITED” wherever it appears in the Memorandum and Article of Association of the Company be substituted by the name “RIA SYSTEMS LIMITED” in due course.

Date: ___________
Place: ___________

By the Order of the Board
RIA TECHNOLOGIES LIMITED
Director

NOTES (forming part of the Notice):
A MEMBER ENTITLED TO ATTEND AND VOTE AT THE MEETING IS ENTITLED TO APPOINT A PROXY TO ATTEND AND VOTE INSTEAD OF HIMSELF AND SUCH PROXY NEED NOT BE A MEMBER OF THE COMPANY.

The instrument(s) appointing the proxy, if any, shall be delivered at the Registered Office of the Company, not less than 48 hours before the commencement of the meeting and in default, the instrument of proxy shall be treated as invalid. Proxy shall have no right to speak at the meeting.

All Statutory Records including Register of Members are open for inspection at the Registered Office of the Company during office hours on all working days except Saturday between 10.00 A.M. & 1.00 P.M. up to the date of Extra Ordinary General Meeting.

Compliance with Section 101 (1) of the said Act for seeking consent of the shareholders for convening EGM at a shorter notice is annexed herewith this notice calling EGM. Members are requested to kindly fill up and submit the same at the Regd. Office of the company by ********.

ANNEXURE TO NOTICE :
EXPLANATORY STATEMENT pursuant to Section 102(1) of the Companies Act, 2013.
Item No. 1:
As per the desire of Board it’s been proposed to change the name of the company in order to revamp the company’s business and support the new venture. The new name proposed is “RIA SYSTEMS LIMITED”. Your Directors trust that this change of name will have the members support and approval. The Registrar of Companies has confirmed that the new name is available for registration under section 13 of the Companies Act, 2013 read with Cos. (Incorporation) Rules, 2014 vide their Name Availability letter dated ___________, and subject to the resolution being passed; an application will be made to the Central Government for approval to the change of name under section 13(2) of the Act.

If the change of name is approved, share certificates already issued will not be called in only for the purpose of exchange into certificates bearing the new name, but will be so exchanged as and when the existing certificates come into the possession of the Company and in the meantime the existing certificates will continue to be accepted for all purposes, as indicating entitlement to shares of the Company. The Board recommends the adoption of the resolution.

None of the directors of the Company or their relatives, Associate company(s) are concerned or interested in the Resolution.

By the Order of the Board
RIA TECHNOLOGIES LIMITED
Director

Question 30.
Beard of Directors of Day Night Prakashani Limited decide to shift its registered office of the company from Mumbai to National Capital Region (NCR). The Board has approved the change. The Board has to seek the approval of the members of the company for going ahead with the legal formalities as required under the Companies Act, 2013, for which the extra-ordinary general meeting of the members is scheduled to be held on 17^th June, 2017. In this connection you are required to draft notice of the EGM for shifting of office outside the state and give explanatory statement in this regard. (June 2017, 8 marks)
Answer:
DAY NIGHT PRAKASHANI LIMITED
CIN: ___________
REG. OFFICE: ___________
EMAIL ID: ___________

Notice
Notice is hereby given that the Extra ordinary General Meeting of the Member of M/s. Day Night Prakashani Limited will be held on Thursday, the 08 day of June, 2017 at 11:00 a.m. at the registered office of the company:

SPECIAL BUSINESS:
Item I: To consider and if thought fit, with or without modification, the following resolution as special Resolution:

“RESOLVED THAT pursuant to provision of Section 12 and Section 13(7), of the Companies Act, 2013, read with Companies (Incorporation) Rules, 2014 and other applicable provision, if any, the consent of the members be and is hereby accorded to make an application to the Central Government for shifting of registered office of the company from Mumbai to National Capital Region (NCR).

RESOLVED FURTHER THAT, Board of the Directors of the company, be and is hereby authorised to execute, sign, issue such papers which are necessary to bring the above mentioned resolution in force.

By and on behalf of BOD for DAY NIGHT PRAKASHANI LTD.
Director
(DIN: _________)

Date : 10.05.2017
Place : Mumbai

Notes: (forming part)

The members entitled to attend the meeting is entitled to appoint a proxy and vote instead of himself.
Explanatory statement pursuant to Section 102(1) of the Companies Act, 2013, in respect of Special Business is annexed hereto.

Explanatory Statement
(Pursuant to Section 102(1) of the Companies (Act, 2013)
Your board at their meeting held on 10.05.2017 has decided to shift the registered office of the company from the State of Maharashtra to the State of Uttar Pradesh, for which the approval of shareholders and Central Government is required. At present the registered office of the company is situated at Mumbai, and the current location is not advantageous for the business purpose of the company so the Board decided to shift it to the State of Uttar Pradesh where their corporate office is also situated.

None, of the directors of the company are interested in the above mentioned resolution.

By and on behalf of BOD for DAY NIGHT PRAKASHANI LTD.

Date: 10.05.2017
Place: Mumbai

DIRECTOR
DIN: ___________

Question 31.
Assuming that you are appointed as Scrutinizer for conducting Postal Ballot and for furnishing details of Result of the Postal Ballot to the Chairman of the Company, prepare Scrutinizer’s Report for the Chairman of the company to declare result of the ballot. Assume facts and figures. (Dec 2017, 4 marks) [CSPP -1]
Answer:
SCRUTINIZER’S REPORT TO THE CHAIRMAN ON POSTAL BALLOT FORM NO. MGT. 13

Report of Scrutinizer(s)
[Pursuant to rule section 109 of the Companies Act, 2013 and rule 21 (2) of the Companies (Management and Administration) Rules, 2014]

To,
The Chairman
XYZ Limited
C-XXX, ABC Road
MNO-OOOOOO

Scrutinizers Report on postal ballot in respect of passing of resolutions contained in Notice dated 19^th February, 2017 through postal ballot.

Dear Sir,
I, DKY have been appointed as Scrutinizer(s) by the Board of directors of XYZ Limited for scrutinizing postal ballot voting in respect of passing of resolution contained in Notice dated 19^th February, 2017 through postal ballot.
I, submit my report as under:
1. After the time fixed for closing of the poll by the Chairman, i.e. 5 p.m. on 18^th March, 2017 ballot boxes kept for polling were locked in my presence with due identification marks placed by me.

2. The locked ballot boxes were subsequently opened in my presence and poll papers were diligently scrutinized. The poll papers were reconciled with the records maintained by the Company/Registrar and Transfer Agents of the Company and the authorizations/proxies lodged with the Company.

3. The poll papers, which were incomplete and/or which were otherwise found defective have been treated as invalid and kept separately.
OR
I did not find any poll papers invalid.

4. The result of the Poll is as under:
(a) Ordinary Resolution – Item No. 1 – To appoint Shri DFG (DIN 55555555) as an Independent Director
(i) Voted in favour of the resolution:

Number of members present and voting (in person or by proxy)	Number of votes cast by them	% of total number of valid votes case
21071	5115186	0.2272

(ii) Voted against the resolution:

Number of members present and voting (in person or by proxy)	Number of votes cast by them	% of total number of valid votes case
795	3178437	0.1411

(iii) Invalid votes:

Total number of members (in person or by proxy) whose votes were declared invalid	Total number of votes cast by them
99	231821

5. A Compact Disc (CD) containing a list of equity shareholders who voted “FOR”, “AGAINST” and those whose votes were declared invalid for each resolution is enclosed.

6. The poll papers and all other relevant records were sealed and handed over to the Company Secretary/Director authorized by the Board for safe keeping.

Thanking you,

Yours faithfully,

Place : MNO
Dated : 24^th March, 2017

[The scrutinizer shall submit his report as soon as possible after the last date of receipt of postal ballots but not later than seven days thereof]
Name/s and Signature/s of the Scrutinizer/s

Question 32.
(b) ABC Ltd. called an Annual General Meeting on 28th December, 1998. As the quorum was not present on that day, the meeting was adjourned to 4^th January, 1999 on which date the meeting was duly held. No other AGM was held in 1999. Can the company be prosecuted for not holding AGM every year?

(c) Two shareholders sued the Directors of a Company, alleging various fraudulent and illegal transactions, whereby the Company’s property was misapplied. The transactions were, however, of such nature as the -majority of shareholders had the power to confirm. Will such suit succeed? Why? (June 2019, 4 marks each)
Answer:
(b) Every type of company, must once in a year hold an annual general meeting as per Section 166 of the Companies Act, 1956. Not more than 15 months must elapse between the date of one annual general meeting and that of the next. However, a company may hold its first annual general meeting within 18 months from the date of its incorporation.

In such a case, it need not hold any annual general meeting in the year of its incorporation as well as in the following year. In the case there is any difficulty in holding any annual general meeting (except the first annual meeting), the Registrar may, for any special reasons shown, grant an extension of time for holding the meeting by a period not exceeding 3 months provided the application for the purpose is made before the due date of the annual general meeting.

Case example :
Meenakshi Mill Company Ltd. Vs. Assistant Registrar of Joint Stock Companies AIR 1938, in this case, the company failed to call an annual general meeting. The Company had called general meeting in December, 1934 which was adjourned and held on March 1935. It was pleaded by the company that since the general meeting called on 30^th December. 1934 was adjourned to 31^st March, 1935, and was held on that date.

It follows that general meeting was held in 1934 and in 1935, and the general meeting held on the 28lh January, 1936, was within 15 months of 31^st March, 1935. It was held by the Court that the annual general meeting held in March 1935 was the adjourned meeting of 1934. There shall be a general meeting held once at least in every year, that is, one meeting per year, and as many meetings as there are years. 1935 is a separate year and distinct meeting should be held. The Company was convicted.

In this case ABC Ltd. called an AGM on 28^th December, 1998 and because of want of quorum, the meeting was adjourned and the meeting was held on 4^th January 1999. The meeting held on 4^th January, 1999 was the adjourned meeting of 1998. Thus, the company must held meeting for the financial year 1999. If it is not doing so, company can be prosecuted for not holding AGM every year.

Alternate Answer as per Companies Act 2013:
As per Section 96 of the Companies Act 2013, every company other than a One Person Company shall in each year hold in addition to any other meetings, a general meeting as its annual general meeting and shall specify the meeting as such in the notices calling it, and not more than fifteen months shall elapse between the date of one annual general meeting of a company and that of the next:

Provided that in case of the first annual general meeting, it shall be held within a period of nine months from the date of closing of the first financial year of the company and in any other case, within a period of six months, from the date of closing of the financial year
Provided further that if a company holds its first annual general meeting as aforesaid, it shall not be necessary for the company to hold any annual general meeting in the year of its incorporation
Provided also that the Registrar may, for any special reason, extend the time within which any annual general meeting, other than the first annual general meeting, shall be held, by a period not exceeding three months.

(c) The suit filed by two shareholders against the directors of a company for. alleged fraudulent act causing losses to the company will not succeed because if the majority of shareholders had the power to confirm the act of the directors, in such case any suit against the directors will not survive.

In Foss v. Harbottle (1842), two shareholders commenced legal action against the promoters and directors of the company alleging that they had misapplied the company assets and had improperly mortgaged the company property. The Court rejected the two shareholders’ claim and held that a breach of duty by the directors of the company was a wrong done to the company for which it alone could sue. In other words, the proper plaintiff in that case was the company and not the two individual shareholders.

This rule is derived from two general legal principles of company law. Firstly, a company is a legal entity separate from its shareholders. Secondly, the Court will not interfere with the internal management of companies acting within their powers. Where an ordinary majority of members can ratify the act, the Court will not interfere. This simply means, if the majority can ratify an act, the minority cannot sue.

Question 33.
XYZ Ltd. wishes to shift its registered office from Maharashtra to Rajasthan. Draft a notice to convene Extraordinary General Meeting for this purpose along with Note and Explanatory Statement. Assume other facts, if required. (Dec 2021, 8 marks)
Answer:
Notice of Extra – Ordinary General Meeting (EGM)
Name of the Company ……………………….
Registered Address ………………….
CIN : ………………………
Website : …………………….
Email: …………………..
Telephone: ………………………

Notice NOTICE is hereby given that an Extra-Ordinary General Meeting (EGM) of the Members of XYZ Ltd. will be held on …………… (day), ………………… (date) at …………………. am/pm at ………………..(address) to transact the following Special Business:

Shifting of Registered Office:
To consider and, if thought fit, to pass with or without modification the following Resolution as a Special Resolution:

“RESOLVED that pursuant to Section 13 and other applicable provisions, if any, of the Companies Act, 2013 and subject to the approval of the Regional Director, (RD)the Registered Office of the Company be shifted from Maharashtra to Rajasthan.

RESOLVED FURTHER that clause-ll of the Memorandum of Association (MOA) of the Company be altered by substitution of the words ……………………. in place of the words ……………………..

RESOLVED FURTHER that the poard of Directors (BOD) of the Company be and is hereby authorized to file the necessary petition(s) before the Regional Director ……………………. Region for confirmation of the alteration of Clause-ll of the Memorandum of Association (MOA) of the Company as aforesaid and to carry out all other acts and deeds as are necessary in connection therewith, including compliance of directions, if any, of the concerned authorities.”

By Order of the Board of Directors
For ……………………..
………………… (Signature)

Director/Company Secretary
DIN/ACS/FCS No.

Place : ………………….
Date : …………………..

Notes:
1. The explanatory statement setting out the material facts pursuant to Section 102 of the Companies Act, 2013, relating the special business to be transacted at the meeting is annexed.

2. All members are entitled to attend and vote at the meeting is entitled to appoint proxy to attend and, on a poll, to vote instead of himself and the proxy need not be a member of the Company,

3. Proxies, in order to be effective, must be received in the enclosed Proxy form atm the Registered Office of the Company not less than forty-eight hours before the time fixed for the Meeting.

4. In compliance with provisions of section 108 of the Companies Act, 2013 and rule 20 of the Companies (Management and Administration) Rules, 2014, the Company is pleased to provide members the facility of exercising their right to vote electronically on the item mentioned in this Notice. The Company has appointed Mr ……………….. as scrutinizer for conducting the e-voting process in fair and transparent manner.

EXPLANATORY STATEMENT
As required by section 102 of the Companies Act, 2013, the explanatory statement sets out all material facts relating to business mentioned in item no 1 of the accompanying notice dated ………………………..

Item No 1.
The registered office of the Company has been situated in the State of Maharashtra since the incorporation of the Company. The business of the Company has increased manifold since incorporation particularly in the state of Rajasthan. Directors of the Company too are belonging and residing in Rajasthan. It is expected that such growth trend of business in the State of Rajasthan will be maintained in future.

As the growth of Company’s activities are now emerging in the state of Rajasthan, The Board of Directors are of the opinion that it will be more convenient and economical for the Company to manage the activities efficiently by shifting the Registered office in the state of Rajasthan.

A copy of Memorandum of Association is available for inspection at the Registered Office the Company on all working days of the Company between 11.00 a.m. to 1.00 p.m. up to the date of meeting and at the venue of the meeting for the duration of the Meeting.

The Board commends the passing of the resolution as a Special Resolution. None of the Directors and Key Managerial Personnel (KMP) of the Company or their relatives is concerned or interested in the proposed Resolution.

Secretarial Practice in Drafting Notice, Agenda and Minutes of Company’s Meetings Notes

Secretarial Standards
Section 118(10) of the Companies Act, 2013, provides that every company shall observe Secretarial Standards with respect to general and board meeting specified by the Institute of Company Secretaries of India constituted under section 3 of the Company Secretaries Act, 1980 and approved as such by the Central Government. The Ministry of Corporate Affairs on 10th April, 2015 accorded the approval of the Central Government to the Secretarial Standards (SS) namely

SS-1; Meetings of the Board of Directors and
SS-2 General Meetings

In terms of Section 205(1 )(b), it is the function of the Company Secretary to ensure that the company complies with the applicable Secretarial Standards.

Applicability of SS-1
In terms of sub-section (10) of Section 118 of the Act, every company is required to observe SS-1 except

One Person Companies(OPC)having only one Director on its Board and
Such other class or class of companies which are exempted by Central Government through Notification e.g. companies licensed under Section 8 of the Companies Act, 2013

Exemptions shall be applicable to a Section 8 company provided it has not committed a default in filing its Financial Statements or Annual Return with the Registrar of Companies.

However, Section 8 companies need to comply with the applicable provisions of the Act relating to Board Meetings.

Applicability to Meetings of the Committees
SS-1 is also applicable to the Meetings of Committee(s) of the Board constituted in compliance with the requirements of the Act. At present, the Act provides for the constitution of following committees of the Board:

Audit Committee
Nomination and Remuneration Committee
Corporate Social Responsibility (CSR) Committee
Stakeholders Relationship Committee

In case any other committee of the Board is constituted voluntarily or pursuant to any other statute or regulations etc., the company may comply with SS-1 with respect to meetings of such committee(s) as a good governance practice.

Guidance on the Provisions of SS-1
(i) Convening a Meeting
Authority means who can convene meeting i.e. who shall sign notice of board meeting?
Subject to Articles of Association of a company, Board meeting may be convened by

Any Director of a company
The Company Secretary or where there is np Company Secretary, any person authorized by the Board in this behalf, on the requisition of a Director.
The Company Secretary cannot summon a Meeting on his own, unless authorized by the Board of Directors or the Articles to do so.

(ii) Manner of conducting requisitioned Meeting
Where any Meeting of the Board is called and held on the basis of a requisition by a Director, the provisions of the Act and SS-1 relating to Notice, Agenda, Notes on Agenda, length of Notice and manner of service of Notice and all other applicable provisions have to be complied with.

(iii) Day, Time, Place, Mode and Serial Number of Meeting
It is mandatory for every meeting to have a serial number for ease of reference.
Serial number of the original Meeting and the adjourned Meeting should be the same.

(iv) Day of meeting
Now, Board of Director’s meeting can be convened even on Sunday and national holiday too. Even a meeting of Board of Director’s adjourned for want of quorum can be held on national holiday.

Notice of the meeting
Venue of the meeting: Notice of the Meeting shall clearly mention a venue, whether registered office or otherwise, to be the venue of the Meeting and all the recordings of the proceedings of the Meeting, if conducted through Electronic Mode, shall be deemed to be made at such place. Communication by a Director of his intention to participate through Electronic Mode: A Director intending to participate through Electronic Mode should communicate his intention to the Chairman or the Company Secretary of the company.

Meetings through Electronic Mode: There is no restriction on a company to hold all its Meetings through Electronic Mode provided the company ensures presence of physical Quorum during consideration of any of the restricted items of business and comply with the applicable legal provisions.

Delivery of Notice: Notice in writing of every Meeting shall be given to every Director by hand or by speed post or by registered post or by facsimile or by e-mail or by any other electronic means. Where a director specifies a particular means of delivery of notice, the notice shall be given to him by such means. But, in case of a meeting conducted at a shorter notice, the company may choose an expedient mode of sending notice.

Authority to sign Notice: Notice should be signed by the Company Secretary. If there is no Company Secretary, the Notice should be signed by any Director or any other person who is authorised by the Board to issue Notice.

Essentials of Notice:

The Notice shall specify the serial number, day, date, time and full address of the venue of the Meeting.
The Notice should specify the serial number given to the Meeting, as required under paragraph 1.2.1 of SS-1.
Day and date specified in the Notice should be as per the Gregorian calendar. .

Notice of Requisitioned Meeting: In the case of a requisitioned Meeting, it is advisable to mention in the Notice the fact that the Meeting is being convened on the requisition of a Director.

Notice is mandatory: The Notice of a Meeting shall be given even if meetings are held on pre-determined dates or at pre-determined intervals. Time period for giving Notice: Notice convening a Meeting shall be given at least seven days before the date of the Meeting, unless the Articles prescribe a longer period.

Notice period in the Articles: The company may prescribe a longer Notice period through its Articles, in which case the Articles should be complied with. However, the statutory Notice period of seven days cannot be reduced by the company in its Articles.

Frequency of Meetings
Meetings of the Board: The company shall hold at least four Meetings of its Board in each Calendar Year with a maximum interval of one hundred and twenty days between any two consecutive Meetings. Now, the stricter requirement of holding Board Meeting in every quarter has gone away with. Provisions for One Person Company, Small Company and Dormant Company: Further, it shall be sufficient if a One Person Company, Small Company or Dormant Company holds one Meeting of the Board in each half of a calendar year and the gap between the two Meetings of the Board is not less than ninety days.

If a One Person Company, Small Company or Dormant Company holds only two Meetings in a year, then the gap between the two such Meetings should be minimum 90 days. If more than two Meetings are held in a year where the gap between the first and the last Meeting in a year exceeds 90 ’ days then it would be sufficient compliance of the requirement.

Meetings of Committees: Committees shall meet as often as necessary subject to the minimum number and frequency prescribed by any law or any authority or as stipulated by the Board. For example, the Audit Committee of equity listed company should meet at least four times in a year and not more than one hundred and twenty days should elapse between two Meetings.

Meeting of Independent Directors: Where a company is required to appoint Independent Directors under the Act, such Independent Directors shall meet at least once in a Calendar Year.

However, the MCA vide Notification dated 5 th July, 2017 has clarified that the Independent Directors are required to meet at least once in a financial year.

The independent directors of the company shall hold at least one meeting in a financial year without the attendance of non-independent directors and members of management; [Clause Vll(1) of Schedule IV to the Act].

Quorum
Quorum shall be present throughout the Meeting: In order that a meeting may be properly constituted and the business be validly transacted, Quorum should be present.

Interested Director not to participate in Quorum: An Interested Director should neither participate nor vote in respect of an item in which he is interested, nor such Director be counted for Quorum in respect of such item.

However, such Director may be present in the Meeting during discussions on such item.

However, in case of a private company, a Director shall be entitled to participate in respect of such item after disclosure of his interest.

Attendance at Meetings
Attendance register: Every company shall maintain attendance register for the Meetings of the Board and Meetings of the Committee. The pages of the attendance register shall be serially numbered.

Manner of maintaining attendance register: Attendance may be recorded on separate attendance sheets or in a bound book or register. If an attendance register is maintained in loose-leaf form, it shall be bound periodically, at least once in every three years.

Particulars of attendance register: The attendance register shall contain the following particulars:

serial number and date of the Meeting;
in case of a Committee Meeting name of the Committee;
place of the Meeting;
time of the Meeting;
names and signatures of the Directors,
the Company Secretary

Place of maintaining attendance register: The attendance register shall be maintained at the Registered Office of the company or such other place as may be approved by the Board. The attendance register is open for inspection by the Directors. Even after a person ceases to be a Director, he shall be entitled to inspect the attendance register of the Meetings held during the period of his Directorship.

Chairman
Meetings of the Board: The Chairman of the company shall be the Chairman of the Board. If the company does not have a Chairman, the Directors may elect one of themselves to be the Chairman of the Board.

Appointment of Chairman: For a Meeting to be properly constituted, the Chairman of the Board or a validly elected person should be in the chair. The Act does not provide for appointment of a Chairman of the Meeting but the Model Articles provide that the Board may elect a Chairman of its Meetings and determine the period for which he is to hold office [Regulation 70 (i) of Table F of Schedule I to the Act].

Election of Chairman in the absence of elected chairman: The Chairman of the Board shall conduct the Meetings of the Board. If no such Chairman is elected or if the Chairman is unable to attend the Meeting, the Directors present at the Meeting shall elect one of themselves to chair and conduct the Meeting, unless otherwise provided in the Articles.

Role of Chairman: The Chairman shall ensure that the required Quorum is present throughout the meeting and at the end of discussion on each agenda item, the Chairman shall announce the summary of the decision taken thereon.

Interested Chairman should vacate the Chair: If the Chairman is interested in an item of business, he shall entrust the conduct of the proceedings in respect of such item to any Non-lnterested Director with the consent of the majority of Directors present and resume the Chair after that item of business has been transacted.

Passing of Resolution by Circulation
The Act requires certain business to be approved only at Meetings of the Board. However, other business that requires urgent decisions can be approved by means of Resolutions passed by circulation. Resolutions passed by circulation are deemed to be passed at a duly convened Meeting of the Board and have equal authority.

Authority for resolution by circulation: The Chairman of the Board or in his absence, the Managing Director or in their absence, any Director other than an Interested Director, shall decide, before the draft Resolution is circulated to all the Directors, whether the approval of the Board for a particular business shall be obtained by means of a Resolution by circulation.

Minutes
Minutes’ are the official recording of the proceedings of the Meeting and the business transacted at the Meeting. Every company shall keep Minutes of all Board and Committee Meetings in a Minutes Book. Minutes kept in accordance with the provisions of the Act evidence the proceedings recorded therein. There is no restriction in law on the lanquaqe of recordinq Minutes.

Maintenance of Minutes: Minutes shall be recorded in books maintained for that purpose.

A distinct Minutes Book shall be maintained for Meetings of the Board and each of its Committees. A company may maintain its Minutes in physical or in electronic form. Minutes may be maintained in electronic form in such manner as prescribed under the Act and as may be decided by the Board. Minutes in electronic form shall be maintained with Timestamp.

Every listed company or a company having not less than one thousand shareholders, debenture holders and other security holders, may maintain its records in electronic form [Rule 27 of the Companies (Management and Administration) Rules, 2014).

Consistency in the form of maintaining Minutes: A company shall however follow a uniform and consistent form of maintaining the Minutes. Any deviation in such form of maintenance shall be authorised by the Board.

The pages of the Minutes Books shall be consecutively numbered:
This shall be followed irrespective of a break in the Book arising out of periodical binding in case the Minutes are maintained in physical form so as to facilitate easy retrieval of any decision/Resolution and additionally to safeguard the integrity of the Minutes.

Thus, where a Minutes Book is full and a new Minutes Book is prepared, the numbering should continue from the number appearing on the last page of the previous Minutes Book.

No attachment or pasting is allowed in Minutes: Minutes shall not be pasted or attached to the Minutes Book, or tampered with in any manner.

CS Foundation Fundamentals of Accounting and Auditing Notes | CS Foundation Auditing Notes MCQ Study Material

Leave a Comment / CS Foundation / By raja / March 22, 2023 April 1, 2023

CS Foundation Fundamentals of Accounting and Auditing Notes: Are you the one who applied for the CS foundation Exam and feeling nervous that you didn’t get your study materials from the ICSI through Courier? If yes, you do not need to worry about them as you have came to the right page. Here we are gonna provide you with a soft copy of some study materials for the CS Foundation Fundamentals of Accounting and Auditing that were provided by ICSI with a new syllabus. Even we have the option to download them free of cost.

Quickly look into this comprehensive guide to see all the study material links that are related to accounting and auditing with some other relatable information. Go on!!!

CS Foundation Auditing Notes
CS Foundation Fundamentals of Accounting Notes
CS Foundation Fundamentals of Auditing Notes
Safety Tips Needed To Prepare Fundamentals of Accounting and Auditing
Does ICSI provide the study material of CS Foundation Fundamentals of Accounting and Auditing?
What are the 3 fundamentals of accounting?
What are the concepts that we have in auditing?

CS Foundation Auditing Notes | CS Foundation Fundamentals of Accounting and Auditing Notes MCQ Study Material

Look into the below notes that were provided by us for your CS foundation fundamentals of accounting and auditing which were taken from the ICSI official website. Accounting and Auditing are very important subjects for candidates who are studying CA. Download them and prepare well for the exam.

CS Foundation Fundamentals of Accounting Notes

Below are the notes for every chapter in accounting. And this was the revised/new syllabus that was provided by the ICSI (Institute of company secretaries of India) 2023.

CS Foundation Fundamentals of Auditing Notes

Here you gonna look at the complete syllabus that was revised by ICSI is provided. Download the study material if you need it or study online well for exams by clicking on the links below.

Safety Tips Needed To Prepare Fundamentals of Accounting and Auditing

Have a look at the below tips and tricks when you are preparing for CS foundation Fundamentals of accounting and auditing. It may help you the best to score good marks in your exam.

Start preparing for the exam in advance, not at the nick of the moment.
As we have many principles and practices in accounting, you need to practice more than normal.
Once you complete the reading of the syllabus, always revise or recall as many times as possible.
Try to solve practice papers or model papers daily after the completion of your preparation.

FAQs on CS Foundation Fundamentals of Accounting and Auditing PDF Free Download

1. Does ICSI provide the study material of CS Foundation Fundamentals of Accounting and Auditing?

Yes, ICSI provides the PDF offline & Online study materials along with a free download option for people who are preparing for CS foundation fundamentals of accounting and auditing.

2. What are the 3 fundamentals of accounting?

The three fundamentals of accounting are consistency, accuracy, and going concerned.

3. What are the concepts that we have in auditing?

The concepts that we have in auditing are the concept of auditing, types of auditing, tools of auditing, and basic provisions.

Final Outcome

Hope that the notes we have shared on CS foundation fundamentals of accounting and auditing are useful for you. If you still have any doubts, you can comment to us in the below comment section. Still, we have many other CS foundation, professional and executive links like CS Foundation Study Material, check them out at gstguntur.com website.

ICSI CS Foundation Study Material Notes Pdf Free Download New Syllabus

Leave a Comment / CS Foundation / By raja / March 20, 2023 April 1, 2023

ICSI CS Foundation Study Material: CS Foundation is the first-level company secretary exam. The Institute of Company Secretaries of India will provide the detailed study material and new syllabus for the Foundation Programme. Interested aspirants who have filled out the CS Foundation Application Form 2023 can download the CS Foundation New Syllabus 2023 here. Along with the Revised ICSI CS Foundation Syllabus, we have also given the books and ICSI CS Foundation Study Material to you.

CS Foundation New Syllabus Study Material
CS Foundation Subjects
CS Foundation Books
Steps to Download CS Foundation Study Plan
Ultimate Preparation Tips for CS Foundation Exam 2023
What is the CS Foundation exam for?
Which books are best for CS Foundation?
Does ICSI provide study material for CS Foundation?
How to prepare for the CS Foundation exam?

CS Foundation New Syllabus Study Material | CS Foundation Revision Notes Pdf Free Download

Have you applied for the ICSI CS Foundation Exam 2023? If yes, then here is the revised CS Foundation Study Material 2023. Click on the below links to download chapter wise ICAI CS Foundation Study Material 2022-2023 Pdf. Here given CS Foundation Notes includes CS Foundation MCQ with Answers Pdf, Chapter Wise Important Questions and Answers.

Subjects of CS Foundation – CS Foundation Subjects – CS Foundation Syllabus

The revised/ new syllabus of CS Foundation is provided here. Get the names of the subjects and model papers.

CS Foundation Subjects
*Foundation Programme* [4 papers]( New Syllabus – w.e.f. 1st April 2017 )
	1. BUSINESS ENVIRONMENT AND LAW
	2. BUSINESS MANAGEMENT, ETHICS & ENTREPRENEURSHIP
	3. BUSINESS ECONOMICS
	4. FUNDAMENTALS OF ACCOUNTING AND AUDITING
Executive Programme [8 first 4 pappapers] ( New Syllabus – w.e.f. 1st Mar 2018 )
Module I (4papers)	1. JURISPRUDENCE, INTERPRETATION & GENERAL LAWS
	2. COMPANY LAW
	3. SETTING UP OF BUSINESS ENTITIES AND CLOSURE
	4. TAX LAWS
Module II (4 papers)	5. CORPORATE & MANAGEMENT ACCOUNTING
	6. SECURITIES LAWS & CAPITAL MARKETS
	7. ECONOMIC, BUSINESS AND COMMERCIAL LAWS
	8. FINANCIAL AND STRATEGIC MANAGEMENT

CS Foundation Books

ICSI will conduct the CS foundation exam in 12 papers. The first 4 papers are the foundation programme, and the remaining 8 papers are the executive programme. Candidates have to buy these particular books specified by ICSI and prepare for the exams.

Steps to Download CS Foundation Study Plan

Here given are the simple steps to download ICSI CS Foundation Studt Material.

Initially, go to The Institute of Company Secretaries of India (ICSI) official portal https://icsi.edu/home/
Check for the new syllabus option on the homepage.
Open the www.icsi.edu/new-syllabus/ link.
Click on the Study Material link.
Now press on the “Foundation Programme” link to see the four papers of the exam.
Download every paper and prepare.

Ultimate Preparation Tips for CS Foundation Exam 2023

Individuals who want to clear the Compay Secretary Exam on the first attempt can go through these simple preparation tips.

As a first step, you have to collect the best and proper books that include CS Foundation Study Material.
After gathering the new syllabus, decide whether you want to go for coaching or self-study.
Mark the important topics and concentrate more on them. Regularly take the exams.
Practice all the topics without fail.
Plan a schedule that contains the amount of time you have to spend on your studies daily.
Follow the plan and prepare according to it.
Revise the topics after the completion of preparation.
Do a quick revision before the exams.
Try to attempt the exam smartly.

Also, Refer

FAQs on ICSI CS Foundation Study Material

1. What is the CS Foundation exam for?

CS foundation exam is conducted by ICSI for candidates who want to pursue a company secretary course after their 12th class. They have to register for the CSEET exam.

2. Which books are best for CS Foundation?

The list of books that are best for the CS foundation is Business Laws and Management, Mercantile Law, A textbook of Business Law, and Business Studies.

3. Does ICSI provide study material for CS Foundation?

Yes, ICSI provides study material for the CS foundation exam.

4. How to prepare for the CS Foundation exam?

Follow these guidelines to prepare for the CS Foundation exam.

Get the study material that includes the syllabus and books.
Start preparing each topic individually.
Make a proper preparation plan as per your requirements.
Follow the plan and complete preparing all topics.
Revise the concepts before the exam.

Final Words

We are thinking that the information given here about CS Foundation Study Material and Notes is helpful for the students who are preparing for the CS Foundation 2023 examination. You can check the preparation tricks, syllabus, and books on this page. Bookmark our site to know related information.

Depreciation Accounting – CS Foundation Fundamentals of Accounting Notes

Leave a Comment / CS Foundation / By Raju / March 6, 2023 March 6, 2023

Go through this Depreciation Accounting – CS Foundation Fundamentals of Accounting and Auditing Notes will help students in revising the entire subject quickly.

Depreciation Accounting – CS Foundation Fundamentals of Accounting Notes

Depreciation:

Depreciation means a fall in the value of asset due to usage, efflux of time or due to obsolescence.
It is a permanent, continuous or gradual shrinkage in the book value of a fixed asset.
The annual loss in the value of the asset is taken as the expenditure of the business.
Depreciation is a process of allocating the cost of a fixed asset over its estimated useful life in a rational and systematic manner.
“Depreciation is a process of allocation of expired cost and not of valuation of fixed asset”.

Depreciation Accounting:
Definition: “A measure of the wearing out, consumption or other loss of value of a depreciable asset arising from use, effluxion of time or obsolescence through technology and market changes. Depreciation is allocated so as to charge a fair proportion of depreciable amount in each accounting period during the expected useful life of the asset. Depreciation includes amortization of assets whose useful life is predetermined.”

Institute of Charted Accountants of India (ICAI):
“A system of accounting which aims to distribute the cost or other basic value of tangible capital assets less salvage (if any) over the estimated useful life of the unit (which may be a group of assets) in a systematic and rational manner. It is a process of allocation and not of valuation.”

American Institute of Certified Public Accountants (AICPA):
Characteristics of Depreciation –

Depreciation is the reduction in the book value of an asset.
Depreciation reduces the book value of an asset and not the market value.
Depreciation is a charge against profit.
Depreciation is a process of allocation of cost of an asset over the period of its life.
The term depreciation is used for tangible fixed assets. For wasting assets (Like mines) it is called depletion and for fictitious assets such as goodwill it is called amortization.
The amount of depreciation can never be calculated exactly, it can only be estimated.
Depreciation is must, i.e. it always takes place whether the asset is carefully handled or neglected.
If market value of fixed asset is fluctuating, the same does not affect the amount of depreciation so made on respective assets.
Total depreciation cannot exceed its depreciable value or original cost where the scrap value is nil.

The fundamental objectives of depreciation are:

To maintain the nominal capital invested in fixed assets.
To allocate the expired cost of fixed assets over a number of accounting years.

Causes of Depreciation:

Physical wear and tear due to continuous use.
Efflux (passage of time)
Physical deterioration
Obsolescence (asset becoming redundant due to technological changes
Accidents (fire etc.)
Depletion

Objectives of providing Depreciation:

To ascertain correct profit/loss
To show a true and fair view of financial statements
To show assets at their proper value
To make provision for replacement of assets.
Compliance of legal provisions
To get tax benefit

Note : Replacement of asset.
Depreciation is a non cash expenditure, hence the amount debited in the profit and loss account are retained In the business. These are available for the replacement of the asset (buying a new asset), when replacement is required.

Factors in Measurement of Depreciation –
Cost of Asset:
Cost of the asset refers to the cost at which the asset is purchased. It includes all expenses incurred upto the point the asset is ready for use. Original cost = Purchase price + freight + installation cost

Useful Life of the Asset:
Useful life of the asset means the period for which an asset can be used productively without incurring extraordinary repairs and maintenance expense.
Determination of useful life is a matter of estimation.

Scrap (Residual value):
Residual value is the estimated sale value of the asset at the end of the economic life. Difference between the cost and the residual value is the depreciable amount which is to be written off over the useful life.

Other factors:
The following are the other factors affecting the measurement of depreciation.

Obsolescence i.e. chance of going out of fashion of the asset.
Working hours of the asset.
Repairs and Renewals.
Skills of the operator handling the asset.
Legal provisions relating to the asset.
The addition if any made during the year.

Depreciation Accounting:
Depreciation Accounting is the process of allocating the cost of depreciable asset less its salvage value over its serviceable useful life.

Note:
Depreciable assets are the assets which:

Are expected to be used for more than one accounting period
Have a limited useful life
Are held by the organisation for use in the production or supply of goods and services.
Depreciation is not a process of valuation but it is an allocation.
There are two methods of recording depreciation:
When depreciation is charged to asset account
When provision of depreciation/ accumulated depreciation account is created.

(i) When Depreciation is Charged to Asset A/c:

Depreciation is charged from the asset directly.
At the year end, depreciation A/c is closed by transferring it to the Profit & Loss Account.
In Balance Sheet, asset is shown at the written down value (cost less depreciation).
Depreciation is to be charged whether the business incurs profit or loss.
Depreciation provides funds for replacing the asset when its useful life ends

Journal Entries:
1. Charging Depreciation from Asset:
Depreciation A/c Dr. (With amount of depreciation)
To Asset A/c
(Being depreciation on asset charged)

2. Transferring Depreciation A/c to P/L A/c :
Profit & Loss A/c Dr. (With amount of depreciation)
To Depreciation A/c (Being depreciation transferred to P/L)

(ii) When Provision for Depreciation A/c is Made:

Current year’s depreciation will be transferred to Profit/Loss A/c each year.
In the Balance Sheet, asset will continue to appear at its original cost and total amount of depreciation charged till date will be shown in provision for depreciation or accumulated depreciation A/c.
The balance is calculated by deducting provision for depreciation from original cost of asset.

Journal Entries:
1. Charging Depreciation:
Depreciation A/c Dr. (With amount of depreciation)
To Provision for depreciation A/c
(Being the depreciation on asset charged)

2. Transfer of Depreciation to P/L A/c at the year end:
Profit/Loss A/c Dr. (With amount of current year depreciation)
To Depreciation A/c
(Being depreciation transferred to P/L Account)

3. When asset is sold/discarded/exchanged accumulated depreciation for that asset in provision for Dep. A/c is transferred to asset account Provision for Dep. A/c Dr.
To Relevant Asset A/c

Notes :
1. Accumulated depreciation means total depreciation provided on an asset till date.

2. If the words “p.a.” i.e. per annum are attached to the rate of depreciation, then depreciation must be calculated only for that period when asset was held. Whereas if the words “p.a.” is not attached then depreciation is to be charged for the full year.

Component Method of Depreciation:
It may be noted that Accounting Standards as well as the Companies Act, 2013 allow depreciation to be charged on a component basis. Each part of an item of Property, Plant and Equipment with a cost that is significant in relation to the total cost of the item should be depreciated separately, eg.: It may be appropriate to depreciate separately the airframe and engines of an aircraft.

Methods of Providing Depreciation:
Depreciation Accounting – CS Foundation Fundamentals of Accounting Notes 1

Uniform Charge Method:
(i) Straight Line Method (Fixed Installment Method):
1. Under this method, a percentage of original cost of the asset is written off every year so that asset account may be reduced to its residual value at end of its estimated economic life.

2. If the percentage of depreciation is not given, then the amount of depreciation to be charged every year shall be calculated as follows:
Amount of Depreciation = \(\frac { Cost-Estimated scrao value }{ Expected life }\)
Percentage of Depreciation = \(\frac { Deprecation × 100 }{ Ongnal cost of assete }\)

Example:
A firm bought an asset for ₹ 2,00,000 on 1^st January, 2012. ₹ 10,000 are spent on installation. The life of the asset is estimated to be 5 years. Its scrap value at the end of the period is ₹ 10,000. Find the amount of annual depreciation.
Solution:
Amount of depreciation = \(\frac{\text { Cost – scrapvalue }}{\text { Estimatedlife }}\)
Here;
Cost of asset Original cost + expenses upto installation
= 2,00,000 + 10,000
= ₹ 2,10,000
Scrap value = ₹ 10,000 (given)
Estimated life = 5 years (given)

Applying the above Formula :
Amount of depreciation = \(\frac{\text { Cost – scrapvalue }}{\text { Estimatedlife }}\)
= \(\frac{2,10,000-10,000}{5}\)
= ₹ 40,000.
Therefore, ₹ 40,000 will be charged annually as depreciation.

Note : Calculating rate of depreciation
[Taking figures of above example]
Rate of depreciation = \(\frac{\text { Amount of Annual Depreciation }}{\text { Cost of Asset }}\)
= \(\frac{40,000}{2,10,000} \times 100\)
= 19% (approx)

The amount of depreciation under this method will remain same every year.
If the asset is purchased in between the year, depreciation will be charged only for that part of the year when the asset was held by the company.
If the date on which asset is purchased is not given, depreciation will be charged for half year (assuming that the asset was purchased in the mid of the year).
Value of asset each year in Balance Sheet is reasonably fair.

Merits of this Method:

Simple to calculate
Asset can be completely written off
Amount and rate of depreciation remains same throughout the useful life.
Best suited when asset is depreciating due to efflux of time (passage of time).
The value of the asset each year in the Balance Sheet is reasonably fair.

Demerits of this Method:

It assumes that the asset should be used equally throughout its life. This is not realistic.
Charge on asset will not be uniform because in the later years apart from depreciation, repair expenses to the asset will also be incurred.
It does not take into account the effective utilization of the asset.

Declining Charge Method – Diminishing Balance Method:

This method is also known as written down value method.
Under this method, depreciation is charged at a fixed rate on the reducing balance.
Reducing Balance or Written Down Value = Cost of Asset – Depreciation
The depreciation charge under this method goes on decreasing gradually.

Hence in the earlier years when there are negligible repairs, depreciation is high and in the later years when repairs are high, depreciation charge is low.

Annuity Method:

- Under this method, depreciation takes into account element of interest on capital outlay.
- Here, along with the value of asset, the interest lost over the life of the asset is also written off.
- The amount of Interest is calculated on Book value of the asset in the beginning of each year.
- Since the amount of interest lost cannot be computed easily, hence we make use of annuity tables for calculating the amount of depreciation.
- Here, the amount written off annually is constant.
- This method is best suited for writing off amount paid for long leases which involve a heavy capital outlay.

Note:
What is the element of interest on capital outlay?
When an amount is invested to purchase a capital asset, it is assumed that if that amount was invested elsewhere, it would have earned interest. This notional income is considered as a cost of the asset. It is a type of opportunity cost.

Journal Entries:
(i) On Purchase of Asset:
Asset A/c Dr.
To Bank A/c

(ii) For Charging Interest on Asset:
Asset A/c Dr.
To Interest A/c

(iii) For Charging Depreciation:
Depreciation A/c Dr.
To Asset A/c

(iv) For Transfer of Interest A/c to P/L A/c:
Interest A/c Dr.
To P/L A/c

(v) For Transfer of Depreciation A/c to P/L:
Profit & Loss A/c Dr.
To Depreciation A/c

Depreciation Fund Method (Sinking Fund Method):

Under this method, the amount of depreciation is not charged from the assets and remain same year after year.
Here, the amount annually provided for depreciation is placed to the credit of a special account named as “Sinking Fund A/c”.
The amount so accumulated in the sinking fund account shall be invested in government securities bearing interest at specified rate.
When the asset is due for replacement, the securities are sold and the new asset is purchased with the proceeds of their sale.
The book value of old asset is transferred to the Sinking Fund A/c.
Any amount realised from sale of old asset as well as Profit/Loss on sale of securities is transferred to Sinking Fund A/c.
Sinking Fund A/c is closed by transferring the balance to Asset A/c.

Journal Entries:
(a) At the end of First Year:
(i) For setting aside amount of depreciation :
Depreciation A/c Dr.
To Depreciation Fund A/c

(ii) For investing the amount of depreciation :
Depreciation Fund Investment A/c Dr. (with the amount in dep. fund) To Bank

(b) In the Second and Subsequent Years :
(i) For interest received on investment:
Bank A/c Dr.
To Interest on Dep. Fund Investment A/c

(ii) For transferring interest to depreciation fund A/c :
Interest on depreciation fund
Investment A/c Dr.
To Depreciation Fund

(iii) For annual installment of depreciation :
Depreciation A/c Dr.
To Depreciation Fund A/c

(iv) For investing the amount of depreciation and interest received on investment:
Depreciation Fund Investment A/c Dr.
To Bank

At the end of Last Year:
First three entries will be same as in second year.
In the last year, the amount will not be invested because the old asset is replaced by new one for which investments will need to be sold.
(i) For Sale of Investment:
Bank A/c Dr.
To Depreciation Fund Investment A/c

(ii) For Transfer of Profit or Loss on sale of Investment:

In case of Profit	In case of Loss
Depreciation Fund Investment A/c Dr. To Depreciation Fund A/c (with the amount of net profit on sale of investment)	Depreciation Fund A/c Dr. To Depreciation Fund Investment A/c (with net loss on sale of investment)

(iii) For Sale of Old Asset:
Bank A/c Dr. (with net amount
To Old Asset A/c

(iv) Transferring Depreciation Fund A/c to Old Asset A/c:
Depreciation Fund A/c Dr.
To Old Asset A/c (with the balance of depreciation fund A/c) The Balance in Old Asset A/c represents Profit or Loss. It will be transferred to P/L A/c.

(v) For Purchases of New Asset
New Asset A/c Dr. (with cash realised on sale of old asset)
To Bank

Insurance Policy Method:

Under this method, the company takes an insurance policy for replacement of the asset.
At the beginning of every year, a fixed amount of premium is paid.
At the end of the term, the agreed sum is received from the insurance company which is used for the replacement of asset.
Amount will be paid in the beginning of year.

Journal Entries:
(a) First year and Subsequent years:
(i) Insurance premium paid at the beginning of the year:
Depreciation Insurance Policy A/c Dr.
To Bank A/c

(ii) At year end:
P/L A/c Dr.
To Depreciation Reserve A/c

(b) At the end of Last year:
(i) Amount realised from insurance company:
Bank A/c Dr.
To Depreciation Insurance Policy A/c

(ii) For transfer of profit on insurance policy:
Depreciation Insurance Policy A/c Dr.
To Depreciation Reserve A/c

(iii) For transfer of accumulated depreciation to asset A/c:
Depreciation Reserve A/c Dr.
To Asset A/c

(iv) On purchase of new asset:
New Asset A/c Dr.
To Bank A/c

Note:
Sinking Fund Method and Insurance Policy Method:
Under sinking fund, the amount in the reserve is used for buying government securities whereas in insurance policy method an insurance policy is taken for this purpose.

Example : Cost of asset is ₹ 1,00,000 Rate of depreciation to be written off each year is 10% on the reducing balance. Calculate the depreciation charge for the first 3 years.
Solution:
Depreciation Accounting – CS Foundation Fundamentals of Accounting Notes 2
Depreciation under this method can also be determined using the following formula:
Rate of Depreciation = 1 – n\(\sqrt{\frac{N e t \text { Residual Value(Salvage Value) }}{\text { Costof Acquisition }}}\)
Where n = life of the asset

Merits of this Method:

Uniform weight of charge to P/L A/c for depreciation and repairs
This method is recognized by the Income Tax Act
Easier to compute
Any additions to the asset are depreciated at the same rate.

Demerits of this Method:

Value of asset can never be reduced to zero.
Computation of rate of depreciation is a bit complex.
Depreciation is neither based on use of asset nor a uniform charge is made.

Difference between Straight Line Method and Written Down Value Method:

Basic	Straight Line Method	Written Down Value Method
1. Depreciation Charge	Depreciation is calculated on the original cost of a fixed asset:	Depreciation is calculated on the diminishing balance or written down value of a fixed asset.
2. Amount of Depreciation	The amount of depreciation remains the same for all years.	The amount of depreciation reduces year after year.
3. Zero Balance	At the expiry of the working life of the asset, the balance in the asset account reduces to zero.	The balance in the asset account will not reduce to zero.
4. Cost of Depreciation and Repairs	The combined cost on account of depreciation and repairs is lower in the initial years and higher in the later years.	The combined cost on account of depreciation and repairs are more or less, equal throughout the period.
5. Suitability	This method is more suitable for assets which get depreciated on account of expiry of working life of the asset.	This method is suitable for such assets which require more and more repairs in the later years of their working life.
6. Calculation Easy or Difficult	It is easy to calculate the rate of depreciation.	It is difficult to calculate the rate of depreciation.

Sum of Years Digit Method:

This method is a slight variation of reducing balance method.
Under this method, the charge for depreciation for an accounting period is calculated in proportion of the remaining life of the asset at the beginning of every accounting year.
Depreciation = \(\frac { Remaining life of asset including current year × Cost of asset }{ Sum of digits of life of the asset }\)

In the above Formula :
Remaining life of assets Individual digits used in life of asset taken in reverse order
Sum of digits representing life of asset = n\(\frac { (n+1) }{ 2 }\)

Example
Suppose the estimated life of an asset is 10 years and cost of asset is ₹ 1,00,000.
Depreciation for the First year:
\(\frac { Remaining life including C.Y × Cost of asset }{ Sum of digits of life of asset }\)
→ Remaining life including C.Y. =10
→ Sum of digits n\(\frac { (n+1) }{ 2 }\) = \(\frac { 10×11 }{ 2 }\) = 55
Depreciation = \(\frac { 10 }{ 55 }\) x 1,00,000 = ₹ 18,181.
Depreciation for Second Year = \(\frac { 9 }{ 55 }\) x 1,00,000 = ₹ 16,363

Note : The depreciation is reducing year by year.

Depreciation Accounting MCQ Questions

1. Depreciation is:
(a) a fall in the original cost of an asset
(b) a fall in the book value of an asset
(c) a fall in the market value of asset
(d) a fall in the real value of an asset
Answer:
(b) a fall in the book value of an asset

2. Depreciation is:
(a) a process of valuation of fixed asset
(b) a process of allocation of the cost of fixed asset
(c) a method of providing funds for replacement
(d) a process of writing off losses
Answer:
(b) a process of allocation of the cost of fixed asset

3. The amount of depreciation remains constant year after year under:
(a) Written Down Value Method
(b) Straight Line Method
(c) Sinking Fund Method
(d) Annuity Method
Answer:
(b) Straight Line Method

4. Any Profit of Loss on the sale of Sinking (depreciation)fund investment is transferred to:
(a) Profit and loss account
(b) Asset account
(c) Sinking fund account (depreciation fund account)
(d) Depreciation A/c
Answer:
(c) Sinking fund account (depreciation fund account)

5. Under annuity method, the amount of depreciation is:
(a) Increasing every year
(b) Decreasing every year
(c) Fixed for all the years
(d) Revalued every year
Answer:
(c) Fixed for all the years

6. The number of production units expected to be obtained from the use of an asset by an enterprise is called as:
(a) Unit life
(b) Useful life
(c) Production life
(d) Expected life
Answer:
(b) Useful life

7. In which of the following methods, the cost of the asset is not spread over in equal proportion during its useful economic life?
(1) Straight Line Method
(2) Written Down Value Method
(3) Units of Production Method
(4) All of the above
(a) 2 and 3
(b) 1 and 2
(c) 3 and 4
(d) 1 and 4
Answer:
(a) 2 and 3

8. For charging depreciation, on which of the following assets, the depletion method is adopted?
(a) Plant & machinery
(b) Land & building
(c) Goodwill
(d) Wasting assets like mines and quarries
Answer:
(d) Wasting assets like mines and quarries

9. If a concern proposes to discontinue its business from March 31,2006 and decided to dispose off all its assets within a period of 4 months, the Balance Sheet as on March 31,2006 should show the assets at their:
(a) Historical cost
(b) Net realizable value
(c) Cost less depreciation
(d) Cost price or market value, whichever is lower.
Answer:
(b) Net realizable value

10. Obsolescence of a depreciable asset may be caused by:
I. Technological Changes
II. Improvement in Production Method
III. Change in Market Demand for the Product or Service Output
IV. Legal or Other Restrictions
(a) Only (I) above
(b) Both (I) and (II) above
(c) All (I), (II),(III) and (IV) above
(d) only (IV) above.
Answer:
(c) All (I), (II),(III) and (IV) above

11. Using the equal instalment method for depreciation the relevant formula is:
(a) Annual charge against profit = \(\frac { Originalcost-Residual value }{ Number of year of active life }\)
(b) Annual charge against profits = \(\frac { Number of year of active life }{ Originalcost-Residualvalue }\)
(c) Annual charge against profits = \(\frac { Originalcost-Residual value }{ Estimated number of year remaining }\)
(d) Annual charge against profits = \(\frac { Estimated number of year remaining }{ Originalcost-Residual value }\)
Answer:
(a) Annual charge against profit = \(\frac { Originalcost-Residual value }{ Number of year of active life }\)

12. A Second hand machinery was purchased for ₹ 1,00,000 five years ago and was overhauled by carrying out some repairs at a cost of ₹ 10,000. It has also an accumulated depreciation of ₹ 50,000. It has been disposed off in the beginning of the sixth year for ₹ 60,000.Profit /loss on such disposal shall be:
(a) Profit of ₹ 10,000
(b) Loss of ₹ 50,000
(c) Loss of ₹ 40,000
(d) No Profit, no loss
Answer:
(d) No Profit, no loss

13. An asset was purchased for ₹ 12,500 and under the reducing balance method 20 percent of the reducing value of the asset is written off each year. What is the value of the asset at the end of three years?
(a) ₹ 8,000
(b) ₹ 7,500
(c) ₹ 6,400
(d) ₹ 5,000
Answer:
(c) ₹ 6,400

14. A machine is purchased for ₹ 200. To achieve a residual value of ₹ 128 at the end of the second year (assuming that depreciation is calculated at the end of each year) the percentage depreciation using the reducing balance method must be:
(a) 72%
(b) 36%
(c) 20%
(d) 12%
Answer:
(c) 20%

15. The main objective of providing depreciation is to:
(a) Create secret reserves
(b) Reduce the book value of assets
(c) Value the assets property
(d) Allocate cost of the assets
Answer:
(d) Allocate cost of the assets

16. Charging a period for the proportionate cost of an intangible asset is termed as:
(a) depreciation
(b) diminution
(c) amortisation
(d) expiration
Answer:
(c) amortisation

17. In the books of D Ltd. machinery account shows a debit balance of ₹ 60,000 as on April 1,2003. The machinery was sold on September 30,2004 for 7 20,000. The Company charges depreciation @ 20% P.a. on diminishing balance method Profit / Loss on sale will be:
(a) ₹ 23,200 Profit
(b) ₹ 23,200 loss
(c) ₹ 7,800 Profit
(d) ₹ 7,800 loss
Answer:
(b) ₹ 23,200 loss

18. A new machine costing ₹ 1,10,000 was purchased by a company to manufacture a special product. Its useful life is estimated to be 5 years and scrap value of 7 20,000. The production plan for the next 5 years using the above machine is as follows:
Year 1-10,000 units: Year 2-20,000 units: Year 3-24,000 units: Year4- 40,000 units : year 5- 50,000 units.
The depreciation for the 1sl year under units-of-production method will be
(a) ₹ 6,250
(b) ₹ 12,500
(c) ₹ 15,000
(d) ₹ 25,000
Answer:
(a) ₹ 6,250

19. A Co. purchased a machine on Jan, 1,03 for ₹ 2,20,000. Installation expenses were ₹ 40,000. Residual value after 5 years ₹ 5,000 on 01.07.2003, expenses for repairs were incurred to the extent of ₹ 2,000. Depreciation is provided @ 10% p.a. underwritten down value method. Depreciation for the 4th year will be:
(a) ₹ 52,000
(b) ₹ 26,000
(c) ₹ 21,060
(d) ₹ 18,954
Answer:
(d) ₹ 18,954

20. Original Cost = ₹ 1,30,000: Salvage Value = 4,000. Useful Life = 6 years.
Depreciation for the first year under sum of years digits method will be:
(a) ₹ 6,000
(b) ₹ 12,000
(c) ₹ 18,000
(d) ₹ 36,000
Answer:
(d) ₹ 36,000

21. A Co. purchased a machine on Jan 1,2003 for ₹ 1,20,000. Installation expenses were ₹ 10,000. Residual value after 5 years ₹ 5,000. On July 1, 2003 expenses for repairs were incurred to the extent of ₹ 2,000. Depreciation is provided under straight line method. Annual Depreciation will be:
(a) ₹ 13,000
(b) ₹ 24,000
(c) ₹ 21,000
(d) ₹ 25,000
Answer:
(d) ₹ 25,000

22. Original Cost of a machine was ₹ 1,26,000; Salvage Value was nil, Useful Life was 6 years. Depreciation for the fourth year under sum of years digits method will be:
(a) ₹ 6,000
(b) ₹ 12,000
(c) ₹ 18,000
(d) ₹ 24,000
Answer:
(c) ₹ 18,000

23. Which of the following statements is / are True?
I. The term ‘depreciation’,’depletion’ and ‘amortization’ convey the same meaning.
II. Provision for depreciation a/c is created.
III. The main purpose of charging the Profit and Loss a/c with the amount of depreciation is to spread the cost of an asset over its useful life for the purpose of income determination.
(a) Only (I) above
(b) Only (II) above
(c) Only (III) above
(d) All (I), (II) and (III) above.
Answer:
(d) All (I), (II) and (III) above.

24. Which of the following expenses is not included in the acquisition cost of a Plant and Equipment?
(a) Cost of site preparation
(b) Delivery and handling Charges
(c) Installation costs
(d) Financing costs incurred subsequent to the period after plant and equipment is put to use.
Answer:
(d) Financing costs incurred subsequent to the period after plant and equipment is put to use.

25. The portion of the acquisition cost of the asset, yet to be allocated is known as:
(a) Written down value
(b) Accumulated value
(c) Realizable value
(d) Salvage value
Answer:
(a) Written down value

26. Depreciation is charged because of:
(i) Wear & tear
(ii) Deterioration
(iii) Depletion
(iv) Passage of time
(a) Only (i)
(b) Both (i) & (iii)
(c) Only (ii)
(d) All (i), (ii), (iii) & (iv)
Answer:
(d) All (i), (ii), (iii) & (iv)

27. Objectives of charging depreciation are:
(i) Ascertaining correct profits
(ii) Ascertaining the cost of the product
(iii) To gain tax benefits
(iv) To meet the legal requirements
(a) Both (i) & (ii)
(b) (iii) only
(c) Both (ii) & (iv)
(d) All (i), (ii), (iii) & (iv)
Answer:
(d) All (i), (ii), (iii) & (iv)

28. If an asset is purchased for ₹ 5,00,000 and installation charges are ₹ 50,000. The estimated scrap value is ₹ 1,00,000 and the useful life of the asset is 5 years, then the amount of depreciation to be charged as per SLM method is:
(a) ₹ 90,000
(b) ₹ 80,000
(c) ₹ 1,11,111
(d) ₹ 1,20,000
Answer:
(a) ₹ 90,000

29. Scrap value of an asset refers to the amount that it can fetch at the:
(a) Beginning of its life
(b) End of its life
(c) Middle of its life
(d) None of the above
Answer:
(b) End of its life

30. Obsolescence of a depreciable asset Is caused by:
(a) Change in technology
(b) Innovation
(c) Improvement in the method of production
(d) All of the above
Answer:
(d) All of the above

31. Depreciation is a process of:
(a) Verification of asset
(b) Degradation of asset
(c) Allocation of cost of asset to the period of its life
(d) All of the above
Answer:
(c) Allocation of cost of asset to the period of its life

32. Annuity method of depreciation is suitable for:
(a) Tangible assets
(b) Intangible assets
(c) Leasehold assets
(d) None of the above
Answer:
(c) Leasehold assets

33. A gold mine was taken on lease for ₹ 50,00,00,000. The total production capacity of the mine is 10,000 tonnes. The total production in the year 2010 was 2,000 tonnes. The depreciation for the year 2010 is:
(a) ₹ 10,00,00,000
(b) ₹ 5,00,00,000
(c) ₹ 20,00,00,000
(d) None of the above
Answer:
(a) ₹ 10,00,00,000

34. Depletion method is normally applied in case of:
(a) Wasting Assets
(b) Intangible Asset
(c) Tangible Asset
(d) None of these
Answer:
(a) Wasting Assets

35. In the sinking fund method of charging depreciation, the amount debited to P&L A/c is:
(a) More in the initial years
(b) More in the ending year
(c) Remains the same every year
(d) None of the above
Answer:
(c) Remains the same every year

36. If diminishing value method is used then the amount of depreciation charged to P&L A/c is:
(a) Equal in all years
(b) Decreases year after year
(c) Increases year after year
(d) None of these
Answer:
(b) Decreases year after year

37. In sinking fund investments method, the profit on sale of investments is transferred to:
(a) Asset A/c
(b) Bank A/c
(c) Depreciation Fund A/c
(d) Depreciation Fund Investment A/c
Answer:
(c) Depreciation Fund A/c

38. Under the insurance policy method, the fixed premium is paid:
(a) To the beginning of the year
(b) Middle of the year
(c) End of the year
(d) None of the above
Answer:
(a) To the beginning of the year

39. In group depreciation method:
(a) Assets having similar average life is grouped together
(b) Depreciation is charged on the entire group and not on individual assets
(c) Both (a) and (b)
(d) Neither (a) nor (b)
Answer:
(c) Both (a) and (b)

40. The effect of change in the method of depreciation is to be taken:
(a) Retrospectively
(b) Prospectively
(c) Both (a) and (b)
(d) Neither (a) nor (b)
Answer:
(a) Retrospectively

41. Depreciation is charged on the:
(a) Historical cost
(b) Replacement cost
(c) Realisable cost
(d) None of these
Answer:
(a) Historical cost

42. During inflationary period, which method of depreciation is the most suitable:
(a) Charging depreciation on historical cost
(b) Charging depreciation on realisable value
(c) Charging depreciation on replacement cost
(d) None of the above
Answer:
(c) Charging depreciation on replacement cost

43. A machine was purchased for ₹ 10,000 on Jan, 2008. Depreciation is to be charged @ 25% on WDV method. It was sold for ₹ 6,000 at the end of the third year. Calculate the profit / loss:
(a) Profit ₹ 1,781
(b) Profit ₹ 2,300
(c) Loss ₹ 3,219
(d) Loss ₹ 3,299
Answer:
(a) Profit ₹ 1,781

44. Which of the following is depleted?
(a) Land
(b) Goodwill
(c) Machinery
(d) Quarries
Answer:
(d) Quarries

45. Which method is allowed as per Income Tax Act?
(a) Reducing balance method
(b) Sinking fund method
(c) Annuity method
(d) Straight line method
Answer:
(a) Reducing balance method

46. Under the annuity method, the asset account is debited by:
(a) Depreciation fund A/c
(b) Interest A/c
(c) Sinking fund A/c
(d) None of these
Answer:
(b) Interest A/c

47. Which method of depreciation considers the element of interest on capital outlay?
(a) WDV method
(b) Sinking fund method
(c) Annuity method
(d) SLM method
Answer:
(c) Annuity method

48. The value of an asset is ₹ 50,000. Its working life is 10 years. Firm uses sum of years digits method for providing depreciation. What will be the amount of depreciation for second year?
(a) ₹ 5,000
(b) ₹ 9,091
(c) ₹ 4,500
(d) ₹ 8,181
Answer:
(d) ₹ 8,181
Sum of year digits = 10 + 9 + 8 + 7 + 6 + 5 + 4 + 3 + 2 + 1 = 55
Depreciation for the second year will be:
= 50,000 x \(\frac { 9 }{ 55 }\)
= ₹ 8,181

49. Decrease in value of a fixed asset due to normal wear and tear is known as:
(a) Depreciation
(b) Obsolescence
(c) Appropriation
(d) Spoilage.
Answer:
(a) Depreciation
Depreciation means a fall in the value of asset due to usage, efflux of time or due to obsolescence. In other words we can say, that decrease in value of a fixed assets due to normal wear and tear is known as Depreciation.

50. Dinesh Garments purchased a machine for ₹ 50,000 and spent ₹ 6,000 on its erection. On the date of purchase, it was estimated that effective life of the machine will be ten years and after ten years its scrap value will be ₹ 6,000. The amount of depreciation for second year on straight line basis
is:
(a) ₹ 5,000
(b) ₹ 5,600
(c) ₹ 6,000
(d) ₹ 6,200
Answer:
(a) ₹ 5,000
Cost of Machine = 50,000 + 6,000 = ₹ 56,000
Depreciation as per Straight line basis = \(\frac { Cost of Machine-Scrap value }{ Estimated Life of year }\)
= \(\frac{56,000-6,000}{10}\)
= ₹ 5 000
Depreciation for each year will be ₹ 5,000
Thus, Second year Depreciation = ₹ 5,000

51. A firm charges depreciation on straight line method. The rate of depreciation is reduced from 25% to 10%. What will be the impact of this change on profits?
(a) Decrease in profits
(b) Increase in profits
(c) Decrease in assets
(d) Increase in expenses.
Answer:
(b) Increase in profits
Depreciation is transferred to debit side of profit & loss A/c. If depreciation rate is reduced from 25% to 10%, depreciation amount will be less than other past years. The less amount of depreciation will be transferred to profit & loss A/c while will result in increase in profits.

52. Under straight line method, depreciation is calculated on:
(a) Written Down Value
(b) Salvage Value
(c) Original Cost
(d) Market Value
Answer:
(c) Original Cost
Under straight line method, a fixed proportion of the original cost of the asset is written off each year so that asset account may be reduced to its residual value at the end of its estimated economic useful life. Thus, it can be said that under this method, depreciation is calculated on Original Cost.

53. Which of the following assets are shown at written down value in Balance Sheet?
(a) Current Assets
(b) Liquid Assets
(c) Floating Assets
(d) Fixed Assets
Answer:
(d) Fixed Assets
Depreciation is charged only on fixed assets and depreciation is a permanent, continuous and gradual shrinkage in the book value of fixed assets. So, it can be said that Fixed Assets are shown at written down value in Balance Sheet.

54. On 1^st April, 2012 in Sethi’s Ledger, furniture account showed a balance of ₹ 2,00,000. On 1^st October, 2012 Sethi purchased new furniture by paying ₹ 5,000 and giving old furniture whose book value on 1^st April, 2012 was ₹ 12,000 to the seller. Sethi provides depreciation on furniture @ 10% per annum on diminishing balance method. The net value of furniture in Sethi’s books as on 31^st March, 2013 would be:
(a) ₹ 1,85,080
(b) ₹ 1,83,960
(c) ₹ 1,84,780
(d) ₹ 2,04,400.
Answer:
(c) ₹ 1,84,780
In Books of Sethi
Furniture Account
Depreciation Accounting – CS Foundation Fundamentals of Accounting Notes 3

55. The written down value of machine on 31st March, 2013 is ₹ 72,900. The machine was purchased on 1st April, 2010. Depreciation is being charged @ 10% p.a. by diminishing balance method. The cost price of the machine would be:
(a) ₹ 1,00,000
(b) ₹ 90,000
(c) ₹ 81,000
(d) ₹ 72,900.
Answer:
(a) ₹ 1,00,000
Cost price of machine = \(\frac{72,900}{90 \% \times 90 \% \times 90 \%}\)
= ₹ 1,00,000

56. A company purchased plant for ₹ 50,000. The useful life of the plant is 10 years and the residual value is ₹ 5,000. The management wants to depreciate it by straight line method. Rate of depreciation will be:
(a) 8%
(b) 9%
(c) 10%
(d) None of the above.
Answer:
(b) 9%
Depreciation Accounting – CS Foundation Fundamentals of Accounting Notes 4

57. Madhur and Company purchases a machine for a certain sum. The company has a policy of charging 8% depreciation on written down value. The depreciated value of the machine after three years in the books of Madhur and Company is ₹ 3,89,344. What was the purchase value of machine.
(a) ₹ 5,00,000
(b) ₹ 4,60,000
(c) ₹ 4,23,000
(d) ₹ 5,52,000.
Answer:
(a) ₹ 5,00,000
Depreciation Accounting – CS Foundation Fundamentals of Accounting Notes 5

58. The value of a fixed asset after deducting depreciation is known as its __________.
(a) Book value
(b) Market Value
(c) Face Value
(d) Realisable value.
Answer:
(a) Book value
The value of a fixed asset after deducting depreciation is known as written down value or book value.

59. Dinesh Garments purchased a machine for ₹ 50,000 and spent ₹ 6,000 on its creation. On the date of purchase it was estimated that the effective life of the machine will be ten years and after ten years its scrap value will be ₹ 6,000. The amount of depreciation for each year on straight line basis is __________.
(a) ₹ 5,000
(b) ₹ 5,600
(c) ₹ 6,000
(d) None of the above.
Answer:
(a) ₹ 5,000
Total cost of machinery will be = 50,000 + 6,000 = ₹ 56,000
Scrap value after 10 years will be = ₹ 6,000
Dep. on the basis of straight line
= \(\frac { Cost of machinery – Scrap Value }{ Life of machinery }\)
= \(\frac{56,000-6,000}{10}\)
= ₹ 5,000
Thus, Option (a) is right.

60. An equipment was purchased on 1st January, 2012 for ₹ 25,000 and is to be depreciated at 30% based on reducing balance method. If the company closes its books of account on 31st December every year, what would be the net book value of the equipment as at 31st December, 2013 __________.
(a) ₹ 12,250
(b) ₹ 10,000
(c) ₹ 17,750
(d) ₹ 12,545.
Answer:
(a) ₹ 12,250
Calculation of Net Book Value of the Equipment
Depreciation Accounting – CS Foundation Fundamentals of Accounting Notes 6

61. Coal mine is which type of asset __________.
(a) Fixed Asset
(b) Current Asset
(c) Wasting Asset
(d) Fictitious Asset.
Answer:
(c) Wasting Asset
Coal mines are wasting assets as their value loses because they get exhausted on account of continuous extractions.

62. If the original and current price of machinery is given, it will be recorded at which value?
(a) Historical value
(b) Market value
(c) Realisable value
(d) Original cost.
Answer:
(d) Original cost.
Due to the cost concept, we record the fixed assets at cost price and not at market price.

63. An equipment was purchased on 1st January, 2012 for ₹ 25,000 & is to be depreciated at 30% based on WDV method. If the company closes its books of account on 31st March every year. What would be the net book value of the equipment as at 31^st December 2013:
(a) ₹ 12,250
(b) ₹ 10,000
(c) ₹ 17,750
(d) ₹ 12,545
Answer:
(a) ₹ 12,250
Calculation of Net Book Value of the Equipment
Depreciation Accounting – CS Foundation Fundamentals of Accounting Notes 7

64. Which of the following are amortised :
(a) Patent
(b) Copyright
(c) Goodwill
(d) All of these
Answer:
(d) All of these
Amortization is nothing but the name given to the depreciation charged on intangible assets such as goodwill, patents, copyright, trademark, etc.
Hence, all of the above are amortized.

65. The WDV of machine is ₹ 72,900, rate of depreciation @ 10%, period 3 years. Calculate the original cost of machinery.
(a) ₹ 72,900
(b) ₹ 80,000
(c) ₹ 1,20,000
(d) ₹ 1,00,000.
Answer:
(d) ₹ 1,00,000.
Depreciation Accounting – CS Foundation Fundamentals of Accounting Notes 7a

66. Valueless assets are treated as:
(a) Tangible Asset
(b) Intangible Asset
(c) Fictitious Asset
(d) Current Asset.
Answer:
(c) Fictitious Asset
Fictitious assets are those assets which have no value but are recognised as an asset. Thus, the valueless assets are treated as fictitious assets.

67. A company purchased a mine of ₹ 50,000. Its scrap value is ₹ 5,000 and expected working life is 9 years. 1,00,000 units were expected to be produced during its working life. Units produced in first 3 years are 7,000, 15,000 and 19,000 respectively. Calculate the amount of depreciation for the third year by using depletion method.
(a) ₹ 3,150
(b) ₹ 8,550
(c) ₹ 3,000
(d) ₹ 6,750
Answer:
(b) ₹ 8,550
Rate of depreciation = \(\frac { Total cost of mine }{ Total Units }\)
= \(\frac{50,000-5,000}{1,00,000}\)
= 45
= 45%
Depreciation = Quantity extracted during the year x Rate of depreciation
= 19000 x 45%
= ₹ 8,550 is the depreciation for third year.
Hence option (b) is correct.

68. The value of a fixed asset after deducting depreciation is known as its __________.
(a) Face Value
(b) Market Value
(c) Realisable Value
(d) Book Value
Answer:
(d) Book Value
Depreciation is a process of allocating the cost of a fixed asset over its estimated useful life in a rational and systematic manner. The value of a fixed asset after deduction of depreciation is said as book value of the respective asset.

69. Samar purchased a machinery worth ₹ 1,00,000 and spent ₹ 20,000 on its repairs and ₹ 15,000 on its carriage. He decided to sell the machinery at 25% margin on selling price. What will be the expected sale value of machinery?
(a) ₹ 1,25,000
(b) ₹ 1,53,000
(c) ₹ 1,80,000
(d) ₹ 1,33,000
Answer:
(c) ₹ 1,80,000
Cost of machinery = ₹ 1,00,000 + 20,000 + 15,000
= ₹ 1,35,000.
25% on selling price = \(\frac { 25 }{ 100-25 }\) on cost.
\(\frac { 25 }{ 75 }\) x ₹ 1,35,000 = ₹ 45,000
₹ 1.35,000 + ₹ 45,000 = ₹ 1,80,000

70. A decrease in value of fixed asset due to age, wear and tear:
(a) Appreciation
(b) Written down value
(c) Depreciation
(d) Accumulated depreciation.
Answer:
(c) Depreciation
Depreciation is decrease in value of fixed asset due to physical wear and tear, obsolescence, passage of time.

71. Depletion is charged on:
(a) Fixed Assets
(b) Wasting Assets
(c) Current Assets
(d) All of the above
Answer:
(b) Wasting Assets
Depletion method is applicable in case of wasting assets, example – mines, quarries, oil well etc. from which a certain quantity of output is expected to be obtained.

72. An asset becomes useless because of technical changes this is because of:
(a) Obsolescence
(b) Physical Deterioration
(c) Depletion
(d) Passage of time
Answer:
(a) Obsolescence
Sometimes an asset becomes useless because of technical changes within the industry, technical progress in other industry, change in supply etc., this is known as Obsolescence.

73. Which of the following is not considered while calculating depreciation under straight line method?
(a) Salvage value of asset
(b) Annual repair cost of the asset
(c) Life of the asset
(d) Cost of the asset.
Answer:
(b) Annual repair cost of the asset
Under straight line method, a fixed proportion of the original cost of the asset is written off each year, so that asset account may be reduced to its residual value at the end of its estimated economic useful life. It ignores annual repair cost of the asset.
The formula is:

74. On 14^th April, 2014 tools account showed a balance of ₹ 12,960. On 31^st March, 2015 closing balance of tools was ₹ 14,040. The tools purchased during the year were for ₹ 4,320. Depreciation on loose tools for the year would be:
(a) ₹ 3,240
(b) ₹ 1,080
(c) ₹ 3,600
(d) ₹ 3,000
Answer:
(a) ₹ 3,240
Depreciation Accounting – CS Foundation Fundamentals of Accounting Notes 9

75. As per Income Tax Act, which method of providing depreciation is recognised?
(a) Replacement method
(b) Depletion method
(c) Diminishing balance method
(d) Sum of the year digit method.
Answer:
(c) Diminishing balance method
Diminishing Balance Method is recognised by the income tax authorities. Under this depreciation is calculated at a certain percentage each year on the balance of the assets which is brought forward in the previous year. Thus, amount of depreciation becomes higher in the earlier periods and becomes gradually lower in subsequent periods, while repairs and maintenance charges increase gradually.

76. A company purchased plant for ₹ 50,000. The useful life of the plant is 10 years and the residual value is ₹ 5,000. The management wants to depreciate it by straight line method. Rate of depreciation will be:
(a) 9%
(b) 8%
(c) 10%
(d) 7%
Answer:
(a) 9%
Depreciation Accounting – CS Foundation Fundamentals of Accounting Notes 10

77. On April 1,2013 the debit balance of the Machinery A/c of A Ltd. was ₹ 7,29,000. The machine was purchased on April 1,2010. The company charged depreciation @ 10% p.a, under diminishing balance method. The value of machinery on April 1,2012 was:-
(a) ₹ 10,00,000
(b) ₹ 9,00,000
(c) ₹ 8,10,000
(d) ₹ 12,00,000
Answer:
Let the Original Cost be 100 Dep. @ 10% under WDV
Cost after 1 year = 100 – 10 = 90
Cost after 2 year = 90 – 9 = 81
Cost after 3 year = 81 – 8.1 = 72.9
Original Cost = \(\frac { 100 }{ 72.9 }\) x 7,29,000 = 10,00,000
Cost on 1 April, 2010 = ₹ 10,00,000
Cost on 1 April, 2011= ₹ 9,00,000
Cost on 1 April, 2012 = ₹ 8,10,000

78. The amount of depreciation charged on machinery will be debited to __________.
(a) Machinery A/c
(b) Depreciation A/c
(c) Cash A/c
(d) Repair A/c.
Answer:
(b) Depreciation A/c
The amount of depreciation charged on machinery will be debited to depreciation account. Hence, option (b) is correct.

79. A company purchased a mine of ₹ 50,000. Its scrap value is ₹ 5,000 and expected working life is 9 years. 1,00,000 units were expected to be produced during its working life. Units produced in first 3 years are ₹ 7,000, ₹ 15,000 and ₹ 19,000 respectively. Calculate the amount of depreciation for the third year by using depletion method.
(a) ₹ 3,150
(b) ₹ 8,550
(c) ₹ 3,000
(d) ₹ 6,750
Answer:
(b) ₹ 8,550
Depreciation Accounting – CS Foundation Fundamentals of Accounting Notes 11

80. The written down value of machine on 31^st March 2013 is ₹ 72,900. The machine was purchased on 1^st April, 2010. Depreciation is being charged @ 10% p.a. by diminishing balance method. The cost price of the machine would be:
(a) ₹ 1,00,000
(b) ₹ 90,000
(c) ₹ 81,000
(d) ₹ 72,900
Answer:
(a) ₹ 1,00,000
Cost price of Machine would be ₹ 1,00,000 on 1^st April, 2010.
Written down Value of Machine on 1^st April, 2011 is ₹ 90,000 (1,00,000 – 1,00,000 x 10%).
Written down Value of Machine on 1^st April, 2012 is (90,000 – 90.0 x 10%) = ₹ 81,000.
Written down Value of Machine on 31^st March, 2013 is (81,000 – 81.0 x 10%) = ₹ 72,900.

81. E Ltd. a dealer in second-hand machinery has the following five machines of different models and makes in their stock, at the end of the financial year 2012-13?
Depreciation Accounting – CS Foundation Fundamentals of Accounting Notes 12
The value of stock included in the Balance Sheet of the company as on 31^st March, 2013 was:
(a) ₹ 7,62,500
(b) ₹ 7,70,000
(c) ₹ 7,90,000
(d) ₹ 8,70,000
Answer:
(b) ₹ 7,70,000

So, Closing Stock included in Balance Sheet by following Golden Rule ‘Cost or NRV whichever is lower’.
Machine cost or NRV whichever is less taken
A – 90,000, C – 2,65,000, E – 2,00,000
B – 1,15,000, D-1,00,000
Total Stock included in Balance Sheet is
90,000 + 1,15,000 + 2,65,000 + 1,00,000 + 2,00,000 = ₹ 7,70,000

82. Fire Insurance premium paid on 1^st October, 2011 for the year ended on 30^th September, 2012 was ₹ 2,400 and Fire Insurance Premium paid on 1^st October, 2012 for the year ending on 30^th September, 2013 was ₹ 3,200. Fire Insurance Premium paid as shown in the profit and loss account for the accounting year ended 31^st December, 2012 would be:
(a) ₹ 2,400
(b) ₹ 2,600
(c) ₹ 2,800
(d) ₹ 3,000
Answer:
(b) ₹ 2,600
Premium paid as follows:
1.10.11 – 30.9.12 2,400
1.10.12 – 30.9.13 3,200
Premium to be shown in P/L A/c for the year ending on 31.12.12 would be:
Depreciation Accounting – CS Foundation Fundamentals of Accounting Notes 14

83. A company purchased plant for ₹ 50,000. The useful life of the plant is 10 years and the residual value is ₹ 5,000. The management wants to depreciate it by straight line method. Rate of depreciation will be:
(a) 8%
(b) 9%
(c) 10%
(d) None of the above
Answer:
(b) 9%
Plant purchased for ₹ 50,000 Residual Value = ₹ 5,000
So, Plant Cost after Residual Value is ₹ 45,000 (50,000 – 5,000)
Useful life = 10 years.
Rate of Depreciation = ?
Amount of Depreciation = \(\frac{50,000-5,000}{10}\)
= \(\frac{45,000}{10}\)
= 4,500
Amount of depreciation = Original Cost x \(\frac{Rate of Deprecation}{100}\)
4,500 = 50,000 x \(\frac{Rate of Deprecation}{100}\)
Rate of Depreciation = \(\frac{4,500 \times 100}{50,000}\) = 9%

84. An equipment was purchased on 1^st January, 2012 for ₹ 25,000 and is to be depreciated @ 30% based on written down value method. If the company closes its books of accounts on 31^st March every year. What would be the net book value of the instrument /equipment as at on 31^st December, 2013.
(a) ₹ 12,250
(b) ₹ 10,000
(c) ₹ 17,750
(d) ₹ 12,545
Answer:
(d) ₹ 12,545
Purchase Price of Asset: ₹ 25,000 (Jan. 2012)
Depreciation = \(\frac{Price of on Asset }{100 }\) x Rate of Depreciation
Jan 2012 – March 2012 = \(\frac{25,000}{100} \times 30 \times \frac{9}{12}\) = ₹ 1,875
Value of an asset on 1^st April, 2012 = 25,000 – 1,875 = ₹ 23,125
Dep. for 1^st April, 2012 to 31^st March, 2013 = 23,125 x \(\frac{ 30 }{100}\) = ₹ 6,938
Value of an asset on 1^st April, 2013 = 23,125 – 6,938 = ₹ 16,187
Dep. for 1^st April, 2013 to 31^st Dec. 2013 = 16,187 x \(\frac{ 30 }{100}\) x \(\frac{9}{12}\) = ₹ 3,642
Book Value of An Asset = Purchase Price of Asset – Sum of all depreciation.
Purchase Price : ₹ 25,000
Sum of All depreciation = 1,875 + 6,938 + 3,642 = 12,455
= 25,000 – 12,455 = ₹ 12,545, hence, option (d) is correct.

85. Dinesh Garments purchased a machine for ₹ 50,000 and spent ₹ 6,000 on its erection. On the date of purchase it was estimated that the effective life of the machine will be ten years and after ten years its scrap value will be ₹ 6,000. The amount of depreciation for each year on straight line basis is:
(a) ₹ 5,000
(b) ₹ 5,600
(c) ₹ 6,000
(d) None of the above
Answer:
(a) ₹ 5,000
Depreciation = \(\frac{Cost-Scrap Value}{Estimated useful life}\)
= \(\frac{56,000-6,000}{10}\)
= ₹ 5,000 p.a.

86. An equipment was purchased on 1st January, 2012 for ₹ 25,000 and is to be depreciated at 30% based on reducing balance method. If the company closes its book of accounts on 31^st March every year, what would be the net book value of the equipment as at 31^st December, 2013:
(a) ₹ 12,250
(b) ₹ 10,000
(c) ₹ 17,750
(d) ₹ 12,545
Answer:
(d) ₹ 12,545
Depreciation Accounting – CS Foundation Fundamentals of Accounting Notes 15

87. Madhur and company purchases a machine for a certain sum. The company has a policy of charging 8% depreciation on written down value. The depreciated value of the machine after three years in the books of Madhur and company is ₹ 3,89,344 what was the purchase value of machine:
(a) ₹ 5,00,000
(b) ₹ 4,60,000
(c) ₹ 4,23,000
(d) ₹ 5,52,000
Answer:
(a) ₹ 5,00,000
Cost of Machine = \(\frac{3,89,344}{92 \% \times 92 \% \times 92 \%}\)
= ₹ 5,00,000.

88. The value of a fixed asset after deducting depreciation is known as its:
(a) Book value
(b) Market value
(c) Face value
(d) Realisable value
Answer:
(a) Book value
Value of an asset, less its depreciation is known as its book value or written down value.

89. Under which method of depreciation value can be zero __________.
(a) SLM
(b) WDV
(c) Both ‘a’ and ‘b’
(d) None of the above
Answer:
(a) SLM
As the book value reduces every years, it is also known as the Reducing Balance Method or written down value reduces every year, hence the amount of depreciation also reduces every year. Under this method, the value of asset never reduces to zero.

90. Depreciation is provided under which AS?
(a) AS-1
(b) AS-6
(c) AS-10
(d) AS-4
Answer:
(c) AS-10
Deprecation under AS 10 Property, Plant and Equipment Depreciable amount of any asset should be allocated on a methodical basis over the useful life of asset. Every part of property or P&E (Plant and Equipment) whose cost is substantial with respect to the overall cost of the item must be depreciated separately

91. Among which of the following is changed in depreciation?
(a) SLM or WDV
(b) WDV or SLM
(c) Both
(d) None
Answer:
(c) Both
Method of Deprecation are:

WDV
SLM
Depletion method
Double dealing method
Annuity method
Machine hours method etc.

92. Which of the following is common method of charging depreciation
(a) SLM
(b) WDV
(c) Annuity
(d) None
Answer:
(a) SLM
The most commonly used method for calculating depreciation under generally accepted accounting principles, or GAAP, is the straight line method. This method is the simplest to calculated results in fewer errors, stays the most consistent and transitions well from company prepared statements to tax returns.