Company Reconstruction & Taxable Income Computation: 30 flashcards
All 30 flashcards from this kit, free and with no sign-up.
1. What is capital reduction (internal reconstruction)?
Show the answer
A legal and accounting mechanism that shrinks a company's capital base so the balance sheet reflects reality by writing off accumulated losses and fictitious assets.
2. In Devis Ltd., how is the equity share reduction calculated?
Show the answer
$2000 \times ₹87.50 = ₹1,75,000$
3. In Devis Ltd., how is the preference share reduction calculated?
Show the answer
$1500 \times ₹50 = ₹75,000$
4. What is the total reduction pool in Devis Ltd. before adding depreciation provision?
Show the answer
$₹1,75,000 + ₹75,000 = ₹2,50,000$
5. Why is the Depreciation Provision released in Devis Ltd.?
Show the answer
When Plant and Machinery is written down to ₹75,000, the related depreciation provision of ₹87,500 is no longer needed and is transferred back to the pool.
6. What is the total write-off amount in Devis Ltd.?
Show the answer
$₹50,000 + ₹1,10,375 + ₹7,250 + ₹1,35,000 = ₹3,02,625$
7. What is the final Capital Reserve in Devis Ltd. after reconstruction?
Show the answer
₹40,875 (opening ₹36,000 + surplus ₹34,875)
8. What are the Shareholders' Funds in Devis Ltd. after reconstruction?
Show the answer
₹1,40,875 (Equity ₹25,000 + Preference ₹75,000 + Capital Reserve ₹40,875)
9. What are the Current Liabilities in Devis Ltd. after reconstruction?
Show the answer
₹93,500 (Sundry Creditors ₹42,500 + Bank Overdraft ₹51,000)
10. What are the Current Assets in Devis Ltd. after reconstruction?
Show the answer
₹1,09,375 (Stock ₹79,175 + Debtors ₹30,200)
11. Which section of the Companies Act, 2013 governs internal reconstruction?
Show the answer
Section 66
12. What is the difference between OTR and DTR?
Show the answer
OTR (Optional Tax Regime) offers lower slab rates but sacrifices most deductions; DTR (Default Tax Regime) allows deductions like Section 80U but has higher slab rates.
13. Under DTR, what deduction is available for 82% disability?
Show the answer
₹1,25,000 under Section 80U
14. How is Gross Annual Value (GAV) determined for a let-out property?
Show the answer
GAV = higher of Fair Rent, Municipal Valuation, or Standard Rent
15. Which municipal tax is deductible from GAV?
Show the answer
Only municipal tax paid by the owner is deductible from GAV, not tax paid by the tenant.
16. What is the standard deduction for a let-out property?
Show the answer
30% of Net Annual Value (NAV)
17. For a self-occupied property, what is the GAV and interest deduction limit?
Show the answer
GAV = Nil; interest deduction capped at ₹2,00,000
18. In Mr. Rahul's P&L, what is the depreciation adjustment?
Show the answer
Depreciation as per IT Rules is ₹50,000 vs books ₹45,000 — difference of ₹5,000 is allowed as extra deduction.
19. How is Provision for Doubtful Debts treated in Mr. Rahul's P&L?
Show the answer
Provision for doubtful debts is disallowed; only actual bad debts written off (₹2,000) are allowed.
20. Why is 'Gift to Son ₹12,000' disallowed in Mr. Rahul's P&L?
Show the answer
It is a personal expense, not a business expense.
21. Why is 'Wealth Tax Paid ₹17,000' disallowed in Mr. Rahul's P&L?
Show the answer
Wealth Tax is disallowed under Income Tax.
22. Why is 'Interest on Capital ₹25,000' disallowed for a sole proprietor?
Show the answer
Interest on capital is disallowed for a sole proprietor.
23. Which incomes are taxable in Mr. Rahul's case?
Show the answer
Saving Bank Interest, FD Interest, and Dividend are taxable income heads.
24. What is the equity share reduction percentage in Devis Ltd.?
Show the answer
87.5% (₹87.50 on ₹100 face value)
25. What is the preference share reduction percentage in Devis Ltd.?
Show the answer
50% (₹50 on ₹100 face value)
26. Why do equity shareholders bear a higher percentage cut than preference shareholders?
Show the answer
Equity shareholders are residual owners and rank last for repayment, so they bear a heavier burden.
27. What is the total pool after adding depreciation provision in Devis Ltd.?
Show the answer
$₹2,50,000 + ₹87,500 = ₹3,37,500$
28. What is the surplus credited to Capital Reserve in Devis Ltd.?
Show the answer
$₹3,37,500 - ₹3,02,625 = ₹34,875$
29. What is the reconstructed value of Plant and Machinery in Devis Ltd.?
Show the answer
₹75,000
30. What is the reconstructed value of Leasehold Property in Devis Ltd.?
Show the answer
₹80,000
Your notes can be a kit like these
Every kit here was made from real study material. Point Veda at a chapter, a PDF, a photo or a link and get notes, flashcards, practice MCQs, games and a scored test — free, in 42 languages.
- Chapter notes
- Flashcards
- Practice MCQs
- Scored tests
- Exam prep
Get Veda free See what students get
Free to start · No ads · Works in 42 languages