Question 1

Alloy Fabrication Limited, engaged in manufacturing of iron and steel rods. The company is in the process of finalisation of the accounts for the year ended 31st March, 2022 and you need to report the following issues in line with the provisions of AS-29:

(i) On 1st April, 2019, the company installed a huge furnace in their plant. The furnace has a lining that needs to be replaced every five years for technical reasons. At the Balance Sheet date 31st March, 2022, the company does not provide any provision for replacement of lining of the furnace.

(ii) A suit has been filed against the company in the consumer court and a notice for levy of a penalty of ₹ 50 Lakhs has been received. The company has appointed a lawyer to defend the case for a fee of ₹ 5 Lakhs. 60% of the fees have been paid…

Accepted Answer

**Treatment under AS-29 (Provisions, Contingent Liabilities and Contingent Assets)**

**(i) Provision for Replacement of Furnace Lining**

Alloy Fabrication Limited should **NOT** create a provision for the replacement of the furnace lining under AS-29. The reason is that a **provision is recognised only when a present obligation exists** as a result of a past event, an outflow of resources is probable, and a reliable estimate can be made.

In this case, the future replacement cost does not constitute a **present obligation** — the company can avoid the expenditure by selling the furnace or ceasing operations. There is no obligating event that has already occurred compelling the company to incur this cost. Since there is no present obligation, the conditions under AS-29 for recognition of a provision are not met.

However, as per **AS-10 (Property, Plant and Equipment)**, the furnace lining should have been recognised as a **separate component** of the furnace at the time of installation (1st April 2019). This component should be depreciated over its useful life of **5 years**. At 31st March 2022, three years of depreciation on the lining component should have been charged to the Profit & Loss Account. The company should ensure this component accounting is correctly applied rather than making an AS-29 provision.

**(ii) Consumer Court Penalty of ₹ 50 Lakhs and Legal Fees of ₹ 5 Lakhs**

**Regarding the penalty (₹ 50 Lakhs):**

There is a **70% chance that the penalty will NOT…

Question 2

Grace Ltd., a firm of contractors provided the following information in respect of a contract in the year ended on 31st March, 2022:

Fixed Contract Price with an escalation clause: ₹ 35,000
Work Certified: ₹ 17,500
Work not Certified (includes ₹ 26,25,000 for materials issued, out of which material bring unused at the end of the period is ₹ 1,40,000): ₹ 3,815
Estimated further cost to completion: ₹ 17,525
Progress Payment Received: ₹ 14,000
Payment to be Received: ₹ 4,900
Escalation in cost is 8% and accordingly the contract price is increased by 8%

From the above information, you are required to:
(i) Compute the contract revenue to be recognised,
(ii) Calculate Profit / Loss for the year ended 31st March, 2022 and additional provision for loss to be made, if any, for the year ended 31st…

Accepted Answer

**Applicable Standard: AS 7 — Construction Contracts (Issued by ICAI)**

**Step 1 — Revised Contract Price**
The contract carries an escalation clause. Cost escalation is 8%, and the contract price is correspondingly increased by 8%.
Revised Contract Price = ₹ 35,000 × 1.08 = **₹ 37,800**

**Step 2 — Cost Incurred to Date**
Under AS 7, costs incurred to date exclude materials on hand (unused at site) since they have not yet been consumed in contract activity.
- Work Certified (cost): ₹ 17,500
- Work not Certified (cost): ₹ 3,815
- Less: Unused materials at period end: (₹ 140)
- **Total costs incurred to date: ₹ 21,175**

**Step 3 — Total Estimated Contract Cost**
Total estimated cost = Costs incurred to date + Estimated further cost to completion
= ₹ 21,175 + ₹ 17,525 = **₹ 38,700**

**Step 4 — Nature of Contract (Profit or Loss)**
Total estimated cost (₹ 38,700) > Revised contract price (₹ 37,800).
This is a **loss-making contract**. Total foreseeable loss = ₹ 38,700 − ₹ 37,800 = **₹ 900**
Under AS 7, Para 35, the **entire foreseeable loss must be recognised immediately** as an expense, irrespective of the stage of completion.

**(i) Contract Revenue to be Recognised**
Stage of completion (cost-to-cost method) = Costs incurred to date ÷ Total estimated costs
= ₹ 21,175 ÷ ₹ 38,700 = **54.71%**
Contract Revenue recognised = 54.71% × ₹ 37,800 = **₹ 20,683** (approx.)

**(ii) Profit / Loss for the Year and Additional Provision**
| Particulars | ₹ |
|---|---|
| Contract Revenue r…

Question 3

TQ Cycles Ltd. is in the manufacturing of bicycles, a labour intensive sector. In April 2022, the Government enhanced the minimum wages payable to workers with retrospective effect from the 1st January, 2022. Due to this legislative change, the additional wages for the period from January 2022 to March 2023 amounted to ₹30 lakhs. The management asked the Finance manager to charge ₹30 lakhs as prior period item while finalizing financial statements for the financial year 2021-22. Further, the Finance manager is of the view that this amount being abnormal should be disclosed as extraordinary item in the Profit and loss account for the financial year 2021-22. Discuss with reference to applicable Accounting Standards.

Accepted Answer

**Applicable Standard: AS 5 — Net Profit or Loss for the Period, Prior Period Items and Changes in Accounting Policies**

**Issue 1: Whether ₹30 lakhs can be treated as Prior Period Items**

As per **AS 5**, prior period items are income or expenses which arise in the current period as a result of **errors or omissions** in the preparation of financial statements of one or more prior periods.

In the given case, the additional wages of ₹30 lakhs arise on account of a **retrospective legislative change** by the Government (enhancement of minimum wages), and NOT due to any error or omission in the preparation of earlier financial statements. When TQ Cycles Ltd. originally prepared its accounts, it correctly paid wages as per the law prevailing at that time. There was no mistake in accounting.

Therefore, the management's instruction to treat the entire ₹30 lakhs as a prior period item is **incorrect and not in accordance with AS 5**.

The correct treatment is as follows: The additional wages must be **apportioned to the relevant periods** and charged as a current period expense in those respective years:
- Additional wages for **January 2022 to March 2022** (3 months) → to be charged as a **current period expense** in the financial statements of FY 2021-22.
- Additional wages for **April 2022 to March 2023** (12 months) → to be charged as a **current period expense** in the financial statements of FY 2022-23.

These are normal operating cost adjustments arising from a change in…

Question 4

NAT, a listed entity, as on 1st April, 2021 had the following capital structure: 10,00,000 Equity Shares having face value of ₹1 each = 10,00,000; 10,00,000 8% Preference Shares having face value of ₹10 each = 1,00,00,000. During the year 2021-2022, the company had profit after tax of ₹90,00,000. On 1st January, 2022, NAT made a bonus issue of one equity share for every 3 equity shares outstanding as at 31st December, 2021. On 1st January, 2022, NAT issued 2,00,000 equity shares of ₹1 each at their full market price of ₹7.60 per share. NAT shares were trading at ₹8.05 per share on 31st March, 2022. Further it has been provided that the basic earnings per share for the year ended 31st March, 2021 was previously reported at ₹62.30.

Accepted Answer

**(i) Basic EPS for year ended 31st March, 2022**

**Step 1 — Earnings available to Equity Shareholders:**
Profit after tax = ₹90,00,000. Less: Preference dividend = 10,00,000 shares × ₹10 × 8% = ₹8,00,000. **Earnings for equity = ₹82,00,000.**

**Step 2 — Weighted Average Number of Shares (WANS):**
Opening shares (1 April 2021) = 10,00,000.

Bonus issue on 1 January 2022: 1 share for every 3 held = 10,00,000 ÷ 3 = 3,33,333 bonus shares. Under **AS-20 (Earnings Per Share)**, bonus shares are treated as if they existed from the beginning of the earliest period; a **bonus adjustment factor of 4/3** is applied retrospectively.

Rights issue on 1 January 2022: 2,00,000 shares at full market price (₹7.60). These are weighted only from the date of issue (1 January 2022), i.e., for 3/12 of the year.

**Period 1 (1 Apr 2021 – 31 Dec 2021): 9/12**
Bonus-adjusted shares = 10,00,000 × 4/3 = 13,33,333
Weighted = 13,33,333 × 9/12 = **10,00,000**

**Period 2 (1 Jan 2022 – 31 Mar 2022): 3/12**
Shares = 13,33,333 + 2,00,000 = 15,33,333
Weighted = 15,33,333 × 3/12 = **3,83,333**

**Total WANS = 13,83,333**

**Basic EPS (2021-22) = ₹82,00,000 ÷ 13,83,333 = ₹5.93**

**Comparative Figure (year ended 31st March, 2021):**
Previously reported EPS = ₹62.30. Under AS-20, the comparative EPS must be **restated** for the bonus issue by dividing by the bonus factor (4/3).

**Restated Basic EPS (2020-21) = ₹62.30 × 3/4 = ₹46.73**

| Year | Basic EPS |
|---|---|
| 31st March 2022 | ₹5.93 |
| 31st March 20…

Question 5

The summarized Balance Sheet of A Ltd. and B Ltd. as at 31st March, 2022 are as under:

| Particulars | A Ltd. (₹ in '000) | B Ltd. (₹ in '000) |
|---|---|---|
| Equity shares of ₹ 10 each, fully paid up | 30,00,000 | 24,00,000 |
| Share Premium Account | 4,00,000 | — |
| General Reserve | 6,20,000 | 5,00,000 |
| Profit and Loss Account | 3,60,000 | 3,20,000 |
| Replacement Horticultural Fund Account | 1,00,000 | — |
| 10% Debentures | 20,00,000 | — |
| Unsecured Loans (including loan from A Ltd.) | 6,00,000 | 8,20,000 |
| Trade Payables | 1,00,000 | 3,40,000 |
| **Total** | **71,80,000** | **43,80,000** |
| Land and Buildings | 28,00,000 | 21,00,000 |
| Plant and Machinery | 20,00,000 | 7,60,000 |
| Long term advance to B Ltd. | 2,20,000 | — |
| Inventories | 10,40,000 | 7,00,000 |
| Trad…

Accepted Answer

The question requires preparation of a **Consolidated Balance Sheet** of A Ltd. (Holding Company) and B Ltd. (Subsidiary Company) as at 31st March 2022 under **AS 21 – Consolidated Financial Statements** issued under Companies (Accounting Standards) Rules 2006.

**Important Note:** As presented, A Ltd.'s balance sheet does not include an 'Investment in shares of B Ltd.' line item under assets, and the question does not provide the percentage of shareholding, cost of acquisition, date of acquisition, or pre-acquisition reserves of B Ltd. These are essential for computing Goodwill/Capital Reserve and Minority Interest. The consolidation is demonstrated below with the information available; the inter-company loan elimination is performed in full.

**Step 1 – Identify the Holding-Subsidiary Relationship**
Under AS 21, paragraph 4, a subsidiary is an enterprise controlled by the parent (the holding company). A Ltd. is the parent and B Ltd. is the subsidiary. Consolidated Financial Statements must present the group as a single economic entity by aggregating the financial statements of both entities line by line and eliminating intra-group items.

**Step 2 – Identify and Eliminate Inter-Company Transactions**
One inter-company balance is clearly identifiable from the balance sheets:
- A Ltd. (Asset): **Long-term advance to B Ltd. = ₹2,20,000**
- B Ltd. (Liability): **Unsecured Loans including loan from A Ltd. = ₹8,20,000**
  Loan from A Ltd. embedded therein = ₹2,20,000
  External U…

Question 6

Assuming amalgamation in the nature of purchase, you are required to pass the necessary journal entries (narrations not required) in the books of Z Ltd. and Prepare Balance Sheet of Z Ltd. immediately after amalgamation of both the companies.

Given facts:
(a) The authorized share capital of Z Ltd. is ₹ 60 lakhs divided into 6 lakhs equity shares of ₹ 10 each.
(b) As per Registered Valuer the value of equity shares of A Ltd. is ₹ 18 per share and of B Ltd. is ₹ 12 per share respectively and agreed by respective shareholders of the companies.
(c) 10% Debentures of A Ltd. to be issued 12% Debentures of Z Ltd. at an consideration of their holdings.
(d) A contingent liability of A Ltd. of ₹ 2,00,000 is to be treated as actual liability.
(e) Liquidation expenses (including Registered Valuer fee…

Accepted Answer

**Important Note:** The Balance Sheets of A Ltd. and B Ltd. are not included in the question as presented. They are essential inputs for computing purchase consideration and recording assets/liabilities. The complete solution framework under **AS 14 — Accounting for Amalgamations** is set out below; specific numerical entries require those balance sheets.

**Applicable Method:** Amalgamation in the Nature of Purchase (AS 14, para 28–35). Assets and liabilities of transferor companies are recorded at **agreed/fair values**; difference between purchase consideration and net assets = Goodwill (excess) or Capital Reserve (deficit).

**STEP 1 — Purchase Consideration (PC) for A Ltd.**

Let equity shares of A Ltd. = n_A shares.
Agreed value = ₹18 per share (Registered Valuer).
Z Ltd. issues equity shares at ₹20 each (₹10 face value + ₹10 premium).
Shares of Z Ltd. to A Ltd. shareholders = (n_A × 18) ÷ 20 = **0.9 × n_A shares**.
For debenture holders: 10% Debentures of A Ltd. exchanged for 12% Debentures of Z Ltd. at face value (per clause (c)).
PC (A Ltd.) = (0.9 × n_A × ₹20) + Face Value of 12% Debentures issued.
Contingent liability ₹2,00,000 is treated as **actual liability** — included in liabilities taken over.

**STEP 2 — Purchase Consideration for B Ltd.**

B Ltd. declares and pays dividend of ₹1 per share before amalgamation. This reduces B Ltd.'s net assets (cash reduced, reserves reduced) prior to takeover.
Let equity shares of B Ltd. = n_B shares.
Post-dividend agreed va…

Question 7

Quick Ltd has the following capital structure as on 31st March, 2021: Share Capital (Equity Shares of ₹ 10 each, fully paid) ₹ 462 Crores; Reserves and Surplus: General Reserve ₹ 336 Cr, Securities Premium Account ₹ 126 Cr, Profit and Loss Account ₹ 126 Cr, Statutory Reserve ₹ 180 Cr, Capital Redemption Reserve ₹ 87 Cr, Plant Revaluation Reserve ₹ 33 Cr (Total ₹ 888 Cr); Loan Funds: Secured ₹ 2,200 Cr, Unsecured ₹ 320 Cr (Total ₹ 2,520 Cr). On the recommendations of the Board of Directors, on 16th September, 2021, the shareholders of the company have approved a proposal to buy-back of equity shares. The prevailing market value of the company's share is ₹ 20 per share and in order to induce the existing shareholders to offer their shares for buy-back, it was decided to offer a price of 50% …

Accepted Answer

**Part (a): Computation of Maximum Number of Shares that can be Bought Back**

**Preliminary Calculations:**
- Number of Equity Shares outstanding = ₹462 Cr ÷ ₹10 = **46.20 Crore shares**
- Buy-back price = ₹20 × 150% = **₹30 per share**
- Free Reserves (for buy-back purposes) = General Reserve (₹336 Cr) + Securities Premium (₹126 Cr) + P&L (₹126 Cr) = **₹588 Crore**
  *(Note: Statutory Reserve, Capital Redemption Reserve, and Plant Revaluation Reserve are excluded as they are not freely distributable)*
- Paid-up Capital + Free Reserves = ₹462 + ₹588 = **₹1,050 Crore**

**Three Statutory Limits under Section 68 of the Companies Act, 2013:**

**Limit 1 — 25% of Total Paid-up Equity Share Capital:**
Maximum shares = 25% × 46.20 Crore = **11.55 Crore shares**

**Limit 2 — 25% of (Paid-up Capital + Free Reserves):**
Maximum buy-back amount = 25% × ₹1,050 Cr = ₹262.50 Crore
Maximum shares = ₹262.50 Cr ÷ ₹30 = **8.75 Crore shares**

**Limit 3 — Post Buy-back Debt-Equity Ratio ≤ 2:1 [Rule 17 of Companies (Share Capital and Debentures) Rules, 2014]:**
Let x = Crore shares to be bought back.
Post buy-back (Paid-up Capital + Free Reserves) = ₹(1,050 – 30x) Crore *(total shareholders' equity reduces by buy-back price paid)*

**Situation I — Loan Funds = ₹2,520 Crore:**
Pre-buy-back DE ratio = 2,520 ÷ 1,050 = **2.4:1 — Already exceeds 2:1**
Conclusion: **Buy-back is NOT permissible. Maximum shares = NIL.**

**Situation II — Loan Funds = ₹2,100 Crore:**
Pre-buy-back DE ratio = 2,100 ÷ 1,0…

Question 8

(a) White Ltd. acquired 2,250 shares of Black Ltd. on 1st October, 2020. The summarized balance sheets of both the companies as on 31st March 2021 are given below:

[Balance sheet data provided in table format with Equity and Liabilities, Assets sections for White Ltd. (₹) and Black Ltd. (₹)]

Accepted Answer

**Note:** The balance sheet figures for White Ltd. and Black Ltd. were not included in the question as submitted (the table was replaced with a placeholder). The solution framework below follows **AS 21 — Consolidated Financial Statements** methodology applicable for CA Intermediate. Once the actual figures are available, the steps below apply directly.

**Step 1 — Determine Percentage of Holding**

White Ltd. acquired 2,250 shares of Black Ltd. on 1st October 2020. The percentage holding = (2,250 ÷ Total shares of Black Ltd.) × 100. This determines whether Black Ltd. is a subsidiary (holding > 50%) for purposes of AS 21.

**Step 2 — Pre-Acquisition and Post-Acquisition Profits of Black Ltd.**

Since acquisition occurred on 1st October 2020 and the balance sheet date is 31st March 2021, the year of Black Ltd. is split:
- Pre-acquisition period: 1st April 2020 to 30th September 2020 (6 months)
- Post-acquisition period: 1st October 2020 to 31st March 2021 (6 months)

Assuming profits accrue evenly, pre-acquisition profit = Total profit of Black Ltd. for the year × 6/12. Similarly for post-acquisition profit. Opening retained earnings (as on 1st April 2020) are entirely pre-acquisition.

**Step 3 — Calculate Cost of Control (Goodwill / Capital Reserve)**

Cost of Control = Cost of Investment by White Ltd. LESS White Ltd.'s share in the Net Assets of Black Ltd. at the date of acquisition.

Net Assets of Black Ltd. at acquisition date = Share Capital + Pre-acquisition Reserves an…

Question 9

Deluxe Commercial Bank has the following capital funds and assets: Paid up Equity Share Capital ₹ 2,400 Crores, Statutory Reserves ₹ 480 Crores, Securities Premium ₹ 480 Crores, Capital Reserve (of which ₹ 128 Crores were due to revaluation of assets and balance due to sale of assets) ₹ 288 Crores, Profit and Loss Account (Dr. Balance) ₹ 48 Crores.

Accepted Answer

**Computation of Tier I and Tier II Capital for Deluxe Commercial Bank**

Under the **RBI's Basel III Capital Regulations** (Master Circular on Basel III Capital Regulations for Scheduled Commercial Banks), a bank's regulatory capital is divided into **Tier I Capital** (going-concern capital) and **Tier II Capital** (gone-concern capital). Each component must be carefully classified.

**Classification of Components:**

**Tier I Capital** includes paid-up equity share capital, statutory reserves, securities premium on equity shares, and capital reserves created from **sale of assets** (not revaluation). It is reduced by any accumulated losses (debit balance in P&L Account).

**Capital Reserve — Important Distinction:** The total capital reserve is ₹288 Crores. Of this, ₹128 Crores arose from **revaluation of assets** (ineligible for Tier I) and the balance ₹160 Crores (₹288 – ₹128) arose from **sale of assets** (eligible for Tier I).

**Tier II Capital** includes revaluation reserves, but only at **45% of their value** (after applying a 55% discount/haircut as prescribed by RBI under Basel III to account for the illiquid and volatile nature of such reserves). Tier II Capital cannot exceed Tier I Capital.

**Tier I Capital (₹ Crores):**
Paid-up Equity Share Capital — ₹2,400
Statutory Reserves — ₹480
Securities Premium — ₹480
Capital Reserve (from sale of assets only) — ₹160
Less: Debit Balance in Profit & Loss Account — (₹48)
**Total Tier I Capital = ₹3,472 Crores**

**Tier II …

Question 10

Answer any four of the following

Accepted Answer

**(a) Segment Reporting — Profitability Test under AS-17**

**AS-17 (Segment Reporting)** requires that a segment be identified as a **reportable segment** if its profit or loss (in absolute terms) is **10% or more** of the greater of: (i) the combined profit of all profitable segments, or (ii) the combined loss of all loss-making segments (both in absolute terms).

**Step 1 — Separate Profitable and Loss-Making Segments:**

Profitable segments: A (₹225 lakhs), B (₹25 lakhs) → Combined profit = ₹250 lakhs

Loss-making segments: C (₹175 lakhs), D (₹20 lakhs), E (₹105 lakhs) → Combined loss = ₹300 lakhs

**Step 2 — Determine the Higher Absolute Amount:**

Higher of ₹250 lakhs and ₹300 lakhs = **₹300 lakhs**

**Step 3 — Apply 10% Threshold:**

10% of ₹300 lakhs = **₹30 lakhs**

**Step 4 — Classification of Each Segment:**

**Segment A:** ₹225 lakhs ≥ ₹30 lakhs → **Reportable Segment**
**Segment B:** ₹25 lakhs < ₹30 lakhs → **Not a Reportable Segment**
**Segment C:** ₹175 lakhs ≥ ₹30 lakhs → **Reportable Segment**
**Segment D:** ₹20 lakhs < ₹30 lakhs → **Not a Reportable Segment**
**Segment E:** ₹105 lakhs ≥ ₹30 lakhs → **Reportable Segment**

**Conclusion:** Segments A, C, and E are reportable; Segments B and D are not reportable on the basis of the profitability test.

---

**(b) Voting Rights and Control Analysis — Companies Act 2013**

**Legal Position — Preference Shareholders Acquiring Voting Rights:**

Under **Section 47(2) of the Companies Act 2013**, preference sharehold…

Question 11

You are required to prepare consolidated Balance Sheet of the group as on 31st March, 2021 as per the requirement of Schedule III of the Companies Act, 2013.

Accepted Answer

**Note: The question as presented is materially incomplete.** The actual Balance Sheets of White Ltd. and Black Ltd. as on 31st March, 2021 have not been provided, nor has the holding percentage of White Ltd. in Black Ltd. or the date/consideration of acquisition been stated. Without these, a complete Consolidated Balance Sheet cannot be numerically prepared. The answer below explains the full methodology and all adjustments that would apply, based on the information available.

**Step 1 – Determine Holding Pattern and Minority Interest**
The percentage of shares held by White Ltd. (parent/holding company) in Black Ltd. (subsidiary) must be ascertained. Minority Interest (MI) is calculated as: MI = (Non-holding %) × Net Assets of Black Ltd. at the date of consolidation.

**Step 2 – Cost of Control / Goodwill / Capital Reserve**
Cost of shares paid by White Ltd. is compared against the proportionate share in the net assets of Black Ltd. at the date of acquisition (i.e., paid-up capital + pre-acquisition reserves and profits/losses).
- Opening Reserves of Black Ltd. = ₹30,000; Opening P&L = ₹10,000 (Loss), as on 1.4.2020.
- Since profits are earned evenly, if acquisition was mid-year, pre-acquisition profits are time-apportioned. If acquisition was before 1.4.2020, the full opening balances form part of pre-acquisition figures.
- **Capital Reserve** arises if cost < proportionate net assets; **Goodwill** arises if cost > proportionate net assets.

**Step 3 – Adjustment for Inte…

Question 12

Balance sheet data provided: Assets - Cash balance with Reserve Bank of India: 192, Claims on Banks: 544, Other Investments: 7,360; Loans and Advances - Guaranteed by Government of India and State Governments: 1,280, Bank Staff Advances-fully covered by superannuation benefits: 160, Other loans and advances: 544; Other Assets - Premises, Furniture & Fixtures: 12,560, Intangible Assets: 48; Off-Balance Sheet Items - Acceptance, Endorsements and Letters of Credit: 4,800, Guarantee and other obligations: 160.

Accepted Answer

**Note:** The question as presented contains only the **asset-side** and **off-balance sheet** data. Capital fund details (Tier I and Tier II components such as paid-up capital, reserves, revaluation reserves, subordinated debt, etc.) appear to be missing from the given data. Part (i) requires that data. The framework and Part (ii) are solved completely below.

**Part (i) — Segregation of Capital Funds into Tier I and Tier II**

Under RBI's Capital Adequacy Framework (Basel I as adopted for Indian banks), capital funds are divided as follows:

**Tier I Capital (Core Capital)** includes: Paid-up Equity Share Capital + Disclosed Free Reserves (Statutory Reserve, Capital Reserve, General Reserve, Share Premium) − **Intangible Assets** (deducted in full) − Accumulated Losses.

**Tier II Capital (Supplementary Capital)** includes: Undisclosed Reserves + Revaluation Reserves (eligible at **55%** of book value, i.e., after 45% discount) + General Provisions and Loss Reserves (maximum **1.25%** of total Risk-Weighted Assets) + Subordinated Debt (maximum **50%** of Tier I Capital).

**Constraints:** (a) Tier II Capital ≤ Tier I Capital; (b) Intangible assets (₹48) are deducted from Tier I before arriving at eligible capital.

Once the capital figures are available, the above framework is applied to compute eligible Tier I and Tier II capital.

**Part (ii) — Risk-Adjusted Assets (RWA) and Capital Adequacy Ratio**

Risk weights are assigned per RBI guidelines. Intangible assets (₹48) ar…

CA Inter Adv Accounting

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