Chapter 1 Accounting for valuation of shares (equity shares)
Need for valuation of shares
Ø To amalgamate and absorb the company
Ø To take loan against the shares
Ø To convert preference shares and debentures into equity shares
Ø To pay wealth tax
Ø To dissolve company
Methods
A. Net assets method/Balance sheet method/Break up method/Assets basis method/Intrinsic value method
B. Yield or market value method
a. Earning yield
Where,
b. Dividend yield
Where,
c. Earning capacity
Capitalization method
On the basis of super profit
On the basis of average profit
Annuity table
Chapter 2 Accounting for partnership
Chapter 3 Admission of new partner
Chapter 4 Retirement and death of a partner
Chapter 5 Discussion of a partnership firm and piecemeal distribution
Chapter 6 Amalgamation of a firm and conversion into a limited company
Chapter 7 Accounting for valuation of goodwill and shares
Concept and meaning of goodwill
Need for valuation of goodwill
i. To sell the business
ii. To take new partner in partnership and convert into company
iii. To amalgamate of two or more company
iv. To pay wealth tax
Factors effecting value of goodwill
Location
Capital
Nature of business
Efficient management
Contract
Patent right
Quality of product
Government patronage
Methods of evaluating goodwill
A. Average profit
Simple average method
Average profit= total profit for all years/numbers of years
Weighted average method
Adjustments:
Ø All expenses which are not likely to occur in future should be deducted. For e.g. increasing in price
Ø All actual incomes which may not be borne in future should be deducted. For e.g. salary of directors
Ø All profit expected in the future should be added
Super profit method
Chapter 8 Accounting for consignment of goods
Chapter 9 Accounting for joint ventures
Methods of accounting
A. Without keeping separate set of books
Joint venture account
Co-venture account
B. With keeping separate set of books
Joint venture account
Joint bank account
Co-venture account
Journal entries
Date
|
Particular
|
L/F
|
Dr amount
|
Cr amount
|
Note: if the journal entries are made in the book of the co-venture we must include bank in the name that entries are made.
