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Management Accounting
Time: 3 hours March -2004 Marks: 100
 

Q.1.

Following are the Balance Sheets of Swaraj Ltd. as on 31st Dec. 2002 and 31st Dec. 2003 respectively.

Balance Sheet
Liabilities 2002
Rs.
2003
Rs.
Assets 2002
Rs.
2003
Rs.
Equity Share Capital 3,00,000 6,00,000 Goodwill 10,000 5,000
Reserves 1,12,000 1,82,600 Land ( At Cost ) 3,00,000 3,85,000
Profit & Loss A/c. 37,700 75,700

Plant & Machinery

2,10,000 3,00,000
11% Debentures 2,25,000 -

( At Cost )

   
Sundry Creditors 1,67,300 1,72,700

Long Term Investment

1,67,000 1,83,000
Bills Payable 16,000 9,000

( At Cost )

   
Outstanding Expenses. 12,000 24,000

Stock In Trade

27,000 43,000
Bank Overdraft - 5,000

Sundry Debtors

1,31,000 1,34,000
     

Bills Receivable

16,000 11,000
     

Prepaid Expenses

3,000 2,000
     

Cash at Bank

6,000 -
     

Share Issue Expenses

- 6,000

 Total

8,70,000 10,69,000

 Total

8,70,000 10,69,000

Additional Information :

(1)

Balance of Accumulated Depreciation Account as on 31st December 2002 and 31st December 2003 has been included in the balance of 'Reserves" as on 31st December 2002 & 31st December 2003 respectively.

(2)

Verification of Fixed Assets Register of the Co. reveals that the Co. purchased its first Plant & Machinery on 1st January 2002 for Rs. 2,10,000 and 2nd on 1st July 2003 for Rs. 90,000.

(3)

In the year 2003 Investment costing Rs. 27,000 were sold for Rs. 36,000.

(4)

Co. provides depreciation @ 20% p.a. on Plant and Machinery under Diminishing Balance Method.

(5)

One-third of share issue expenses were written off during the year 2003.

You are required to prepare :

(a)

Schedule of changes in Working Capital [Together with itemwise changes (increases or decreases) in working capital].

(b)

Statement of Sources and Applications of Funds for the year ended 31st December, 2003.
20 
     

Q.2.

"Cosmos India Ltd."Balance Sheet as on 31st December, 2003

Liabilities

Rs.

Assets

Rs.
Capital Reserve 1,26,000 Copyright 1,00,000
General Reserve 1,20,000 Cash 21,000
Provision for Tax 50,000 Calls in Arrears 9,575
Commission received in Adv. 10,875 Plant & Machinery 4,20,000
15% Debentures 1,60,000 Debtors 3,00,425
12% Bank Loan 40,000 Prepaid Insurance 15,375
6% Pref. Share Capital 2,00,000 Land & Building 5,00,000
Equity Share Capital 10,00,000 Fixtures 25,000
Bills Payable 49,125 Furniture 75,000
Profit and Loss A/c. 9,000 Preliminary Expenses 18,625
Bank Overdraft 10,740 Goodwill 1,00,000
Share Premium 15,000 Investments (Long Term) 1,75,000
Sundry Creditors 1,89,260 Stock 2,00,700
    Marketable Investments 19,300
  19,80,000   19,80,000

You are required to rearrange the above Balance Sheet in vertical form and compute the following ratios:

(a)

Current Ratio

(b)

Proprietory Ratio

(c)

Capital Gearing Ratio

16
     
Q.3.

Following Trial Balance was extracted from the books of Castalloys Pvt. Ltd. for the year ended 31st Dec. 2003.

Particulars

Rs.

Particulars

Rs.
Land & Building 90,000 Sundry Creditors 30,600
Plant & Machinery 1,65,600 Reserves 15,000
Furniture & Fittings 3,600 Profit & Loss A/c 1-1-2003 8,800
Preliminary Expenses 4,900 Bank Overdraft 11,180
Calls in arrears (at Rs. 20 per share) 2,500 Return Outwards 5,000
Cash in hand 500 Sales 3,07,800
5% Govt. Bonds (F.V. 10,000) 9,880 Share Capital 2,00,000
Bills Receivable 23,000 6% debentures 1,00,000
Delivery Van 3,000    
Goodwill 16,000    
Sundry debtors 20,800    
Purchases 2,40,000    
Advertising 2,540    
Sales Return 7,000    
Legal Charges 1,000    
Carriage Inwards 3,700    
Wages 23,200    
Rent, Rates and Insurance 2,900    
Stock 1-1-2003 47,600    
Prepaid Expenses 2,800    
Trade Expenses 1,500    
Repairs to Plant & Machinery 860    
Interim Dividend paid 3,500    
Salaries 2,000    
  6,78,380   6,78,380
You are required to prepare Profit & Loss account and Balance Sheet in Vertical Format as per Management Accounting after taking into consideration the following adjustments:
(1) Charge 5 % Depreciation on Plant and Machinery, 7.5% on Furniture & Fittings and 20% on Delivery Van.
(2) Closing stock was Rs. 54,200 as on 31st December, 2003
(3) The Directors have proposed a final dividend of 6% on paid up share capital.
(4) Interest on Govt. Bonds and Debentures is due for the year 2003.
16
     

Q.4.

Complete the following Comparative Statements of DT Ltd. by ascertaining the missing balances. 16
 
Particulars 2002Rs. 2003Rs. Absolute Increase or Decrease % Increase or Decrease
           
(A) Sales ? ? (+)4,00,000 +25.00%
  Cost of goods sold        
  Opening Stock 80,000 1,20,000 ? ?
  Purchases ? ? (+)2,00,000 +20.00%
  Wages 2,40,000 4,40,000 ? ?
  Less: Closing Stock ? 1,60,000 ? ?
(B) Cost of goods sold ? ? ? ?
(C) Gross Profit (A-B) ? ? ? ?
  Less: Operating Expenses        
  a. Administrative ? ? (+)20,000 +20.00%
  b. Selling 50,000 60,000 ? ?
  c. Finance ? ? (+)4,500 +22.50%
(D) Total Operating Expenses ? ? ? ?
  Net Operating Profit (C-D) ? ? ? ?
  Add : Non-Operating Income 20,000 1,00,000 ? ?
  Net Profit before Tax ? ? ? ?
  Less : Provision for Tax ? ? ? ?
  Net Profit after Tax 2,10,000 2,35,000 ? ?
 
     

Q.5.

From following details, prepare working capital estimate for 2004:

Raw Material

Rs. 125 per unit

Fixed Wages

Rs. 9,00,000 per annum

Variable wages

Rs. 40 per unit

Fixed Overheads

Rs. 6,60,000 per annum

Variable Overheads

Rs. 9 per unit

Level of activity of purchases production and sales

60000 units per annum

Other Information :

(1)

Raw Material stock 1.5 months

(2)

Process time 1 month & to include fixed wages & overheads full, variable wages & overheads 40 %

(3)

Finished goods stock 1 month.

(4)

M.R.P. of the product is arrived at by calculating 20 % profit on sales price.

(5)

25 % of the sales are to wholesalers giving them 10% discount. Credit given to 40% wholesalers two months against acceptance of bill and balance one month credit.

(6)

Balance sales to retailers. Half of it on cash basis by giving 2% discount, balance half on one month credit

(7)

Cash required 15% of net working capital.

(8)

For material purchases we accept bill for two months for 25% of quantity and for balance we receive credit for 1.5 months.

(9)

Fixed wages are paid 1/2 month in advance.

(10)

Fixed overheads are paid 1 month in advance.

(11)

Variable wages time lag is one month.

(12)

Variable overheads time lag is half month.
16
     

Q.6.

(A)

Current Liabilities and Current Assets of D. K. Ltd. were as under:

Current Liabilities Rs. Current Assets Rs.
Creditors 1,00,000 Stock (at cost) 75,000
Bank Overdraft 25,000 Debtors 1,25,000
Total Current Liabilities Rs. 1,25,000 Total current Assets Rs. 2,00,000

Note: The Co. can avail the overdraft facility upto Rs. 75,000.

Explain in detail the effects of the following transactions on Current Ratio and Working Capital of the Co.Consider each transaction separately. (Do not give cumulative effects of the transactions)
(1) Purchased Goods worth Rs. 25,000 and issued a cheque of Rs. 25,000 against the said purchases.

(2)

Received a cheque of Rs. 30,000 from one of the customers and deposited the same into Bank in overdraft A/c.

(3)

Sold Goods costing Rs. 25,000 for Rs. 35,000 on credit.

(4)

Bills Receivable of Rs. 15,000 which was discounted in the Bank is now dishonoured.
12
     
Q.6.(B) Gross Profit Ratio of Jyoti Ltd. for the year 2002 was 25% and in the year 2003 it came down to 15%. What could be the reasons for decrease in Gross Profit Ratio of the Co. (Give only Four Reasons)
     

Q.7.

Following are Balance Sheets of Rudraksha Ltd. as on 31st Dec. 2002 & 31st Dec 2003.

LIABILITIES

31-12-2002Rs. 31-12-2003Rs.

ASSETS

31-12-2002Rs. 31-12-2003Rs.
Equity Share Capital 12,00,000 16,00,000 Land & Building 4,04,000 4,32,000
10% Pref. Share Capital 8,00,000 6,00,000 Machinery 8,40,000 10,20,000
12% Debentures 1,00,000 50,000 Goodwill 50,000 40,000
Profit & Loss A/c 3,70,000 3,04,000 Patents 60,000 48,000
Other Reserves 1,04,000 1,90,000 Investments 8,02,000 8,02,000
Share Premium 20,000 60,000 Inventory 5,70,000 6,74,000
Creditors 1,80,000 2,00,000 Debtors 2,60,000 2,92,000
Bills Payable 24,000 70,000 Prepaid Expenses 8,000 10,000
Bank Overdraft - 18,000 Cash Balance 20,000 4,000
Prov. for Taxation 76,000 80,000 Advance Tax 60,000 70,000
Proposed Dividend          
Equity Share 1,20,000 1,60,000      
Preference Share 80,000 60,000      
  30,74,000 33,92,000   30,74,000 33,92,000

Other Information :

(1)

Liability for taxation for the year 2002 amounted to Rs. 65,000.

(2)

Machinery having w.d.v, of Rs. 22,000 was sold at profit of Rs. 3,000 and new machinery purchased at Rs. 2,30,000

(3)

Equity shares are issued @ 15% premium

(4)

Preference shares were redeemed at a premium of 10%

(5)

Debentures were redeemed at a premium of 10%.

You are required to prepare Cash Flow Statement for the year ended 31st Dec. 2003.

16
     

Q.8.

Complete the following Balance Sheet from the information given below :

Balance Sheet as on 31st December, 2003

Liabilities

Rs.

Assets

Rs.
Equity Share Capital ? Fixed Assets ?
(of Rs. 100 each)      
Reserve & Surplus ? Current Assets  
10% Debentures 400,000 Stock ?
Current Liabilities   Debtors ?
Sundry Creditors ? Other Current Assets ?
Other Current Liabilities 200,000    
  ?   ?

Following information is available :

(1)

Sales for the year Rs. 48 lakhs

(2)

Gross Profit Ratio 25%

(3)

Net Profit after tax Rs. 2,00,000

(4)

Purchases and Sales on credit basis.

(5)

Debtors Turnover Ratio 12 times (Sales/Debtors).

(6)

Creditors Turnover Ratio 12 times (Cost of Sales/Creditors)

(7)

E.P.S. Rs. 20 per share

(8)

Stock Turnover Ratio 10 times

(9)

Debt Equity Ratio 0.25 : 1

(10)

Current Ratio 1.6. : 1.

16
     
Q.9. (A)

State True or False (with reasons)

(1)

All Current liabilities are quick liabilities.

(2)

Contingent liabilities do appear in the Balance sheet.

(3)

Floating assets means fixed assets.

(4)

Intra firm analysis involves analysis of performance of two different organisations.

(5)

Decrease in sale price without corresponding decrease in cost of good sold increases gross profit ratio.

(6)

Payment of cash to creditors will improve Current ratio.

12
     
Q.9. (B)

Write short notes (any one)

(1)

Benefits of using computers for MIS.

(2)

Factors determining working capital.

(3)

Window Dressing of Current Ratio.

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