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Management Accounting

Time: 3 hours March -2005 Marks: 100
 
Q.1. Brijesh started business by introducing capital of Rs. 1,00,000 on 1-4-2004. He has taken Term Loan from Bank of India of Rs. 4,00,000 at 12% interest & purchased premises of Rs. 3,00,000 & Furniture & Equipment of Rs. 1,50,000. His projected Trading & Profit & Loss Account for the first year ended 31st March, 2005 is as follows :-  
 
  Rs. Rs.   Rs. Rs.
To Opening Stock   -- By Sales    
To Purchases     †††† Cash Sales 1,70,000  
†† Cash Purchases 50,000   †††††† Credit Sales 8,50,000  
†† Credit Purchases 6,50,000     10,20,000  
  7,00,000   Less : Returns 20,000 10,00,000
Less : Returns 10,000 6,90,000 By Closing Stock   50,000
To wages   60,000      
To Gross Profit c/d.   3,00,000      
    10,50,000     10,50,000
To Administrative Expenses   60,000 By Gross Profit b/d   3,00,000
To Selling Expenses   1,00,000 By Profit on sale of Equipment   5,000
To Interest on Bank Loan   48,000 (Cost of Equipment sold Rs. 20,000)    
To Depreciation on Equipment   30,000      
To Net Profit   67,000      
 Total   3,05,000  Total   3,05,000
Prepare Cash Flow Statement for the year ended 31st March, 2005 as per AS-3 & calculate cash & Bank Balance as on that date. Use Indirect Method. Balances on 31st March, 2005 expected are Debtors Rs. 1,50,000. Creditors Rs. 50,000. Last quarter Interest on Bank loan is not yet paid. Reconcile your answer by preparing projected Balance Sheet (in vertical form) as at 31st March, 2005.
 
     
Q.2. The Balance Sheets of Chetan Ltd. as at 31st March, 2003 & 2004. 16
 
  31-3-2003 Rs. 31-3-2004 Rs.
Equity Share Capital (shares of Rs. 10 each fully called) 10,00,000 14,50,000
Less: Calls-in-Arrears (Rs. 2 per share) 5,000 --
  9,95,000 14,50,000
Add: Share Forfeiture Balance (Rs. 8 per share) 8,000 1,600
Paid up Equity Capital 10,03,000 14,51,600
8% Redeemable Preference Share Capital 5,00,000 4,00,000
Securities Premium 1,00,000 40,000
Capital Reserve (Net profit on Forfeited Shares reissued) -- 16,500
General Reserves 2,47,000 3,49,000
Profit & Loss Account 1,50,000 7,42,900
Loans 5,00,000 10,00,000
  25,00,000 40,00,000
Fixed Assets (At cost Less Dep.) 12,00,000 20,00,000
Investments 3,00,000 4,00,000
Working Capital 10,00,000 16,00,000
  25,00,000 40,00,000
 
  Other Information :-  
  (1) During the year Equity shares on which calls were in arrears have been forfeited.  
  (2) Part of the forfeited shares have been reissued at Rs. 7 per share.  
  (3) Bonus shares are issued by using securities premium of Rs. 60,000 and General† Reserve of Rs. 1,40,000.  
  (4) Depreciation on Fixed Assets for the year was Rs. 1,80,000.  
  (5) Investments costing Rs. 75,000 were sold at Rs. 1,00,000/  
  Prepare Fund Flow Statement for the year ended 31st March, 2004.  
     
Q.3. From the following information, you are required to prepare a Balance-Sheet in Horizontal form : 16
 
Current Ratio††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††† 1.75
Liquid Ratio 1.25
Stock Turnover Ratio 9 times (Based on Closing Stock)
Gross Profit Ratio 25%
Debtors collection period 1.5 months
Reserves and surplus to share capital 0.2
Cost of Goods sold to Fixed Assets 1.2
Capital Gearing (Long term Loans to Share Capital) 0.6
Fixed Assets to shareholders Funds 1.25
Sales for the year (All are on Credit Basis) Rs. 12,00,000
Current Assets consisted of Cash, Stock & Debtors only. The company has not issued pref. shares. There are no Bank Overdraft & Fictitious Assets.
 
     
Q.4. Maza Ltd. was formed and incorporated on 1st April, 2002. You are given following trial balance as on 31st March, 2003 & 31st March, 2004. You are required to prepare vertical statement for both the years in columnar form. 16
 
  31st March, 2003 31st March, 2004
  Dr. (Rs.) Cr. (Rs.) Dr. (Rs.) Cr. (Rs.)
Land and Building 25,50,000 -- 25,50,000 --
Machinery 5,50,000 -- 8,00,000 --
Furniture 2,00,000 -- 3,00,000 --
Sundry Debtors 3,00,000 -- 5,00,000 --
Cash & Bank Balance 1,00,000 -- 1,00,000 --
Sundry Creditors -- 2,00,000 -- 3,00,000
Outstanding Expenses -- 20,000 -- 20,000
Sales -- 20,00,000 -- 30,00,000
Purchases 12,00,000 -- 15,00,000 --
Opening Stock -- -- 3,00,000 --
Admin. Expenses 2,76,000 -- 3,70,000 --
P/L Opening Bal. -- -- -- 7,44,000
Selling Expenses 80,000 -- 1,10,000 --
Share Capital -- 20,00,000 -- 20,00,000
Unsecured Loan -- 10,36,000 -- 4,66,000
  52,56,000 52,56,000 65,30,000 65,30,000
 
  Adjustment : (1)† Closing Stock as on 31st March, 2004 is Rs. 4,00,000.  
     
Q.5. a)† Horizon Ltd. engaged in the following transactions. Identify whether it is †††††††††† (a) an Operating† (b) an Investing (c) a Financing (d) none of the above. 5
  (1)         Dividend paid. (2)         Interest paid. (3)         Issued long term bonds. (4)         Purchased long term investment. (5)         Equipment sold. (6)         Dividend received on shares held. (7)         Purchased land. (8)         Received cash from customers. (9)         Wages paid to workers. (10)     Issued bonus shares out of general reserves.  
  b) Given below are some of the information of Parekar Ltd. as on 31st March, 2004.
  Rs.
Debtors 30,000
Outstanding Manufacturing Exp. 17,000
Cash Balance 23,000
Bills Payable & Creditors 38,000
Machinery (Imported) 30,000
Income earned but not received 6,000
Bank Overdraft 15,000
Bills Receivable 7,000
Prepaid traveling expenses 4,000
Using above data calculate current ratio and liquid ratio and comment on it.
6
  c) Calculate Return on Capital employed and Return on Proprietorís Fund from following information.
  † Rs.
Equity Capital 3,00,000
General Reserves 4,00,000
Profit & Loss A/c 1,50,000 (Cr.)
Sundry creditors 2,00,000
Operating Profit 3,50,000 (Before Interest & Tax)
Long Term Loan 2,00,000 (at 12% p.a. Interest)
Tax Rate is 30%.
5
     
Q.6. Chinmag is carrying on trading business in India and gives the following information. (1)         Estimated sales in year Rs. 12,00,000. (2)         His Administrative & Selling expenses are estimated as fixed expenses Rs. 2,000 per month and variable expenses equal to 5% of his turnover. (3)         He expects to fix sale price for each product which will be 25% in excess of his cost of purchase. (4)         He expects to turnover his stock four times in the year. (5)         The sales & Purchases will be evenly spread throughout the year. 20% of sales will be on cash and balance on credit and allowed 2 months credit. He also expects one month credit from his suppliers. (6)         Cash Balance = Fixed and variable expenses for one month. 16
  †††††††† Calculate his average working capital and prepare his income statement for the year.  
     
Q.7. Vinod Honorable Ltd. presents you with their summarized Profit & Loss A/c with the request to convert the same into a common size statement in vertical form after incorporating the information given there under & briefly comment on it. 16
  Profit and Loss Account for the year ended 31-12-2004  
 
Particulars Rs. Particulars Rs.
To Opening Bal. B/d. 1,00,000 By Sales 10,00,000
To Opening Stock : †††† Raw Material †††† Finished goods 2,00,000 1,50,000 By Dividend received 2,00,000
To Purchases : †††† Raw Material †††† Finished goods 3,50,000 60,000 By Closing Stock : †††† Raw Material †††† Finished goods 2,00,000 3,00,000
To Manufacturing Exp. 1,00,000    
To Establishment Exp. 2,82,000    
To Interim Dividend 35,000    
To Provision for Tax 75,000    
To Audit fees 2,500    
To Directors Fees 2,000    
To Preliminary Expenses 5,000    
To Salaries & Wages 1,00,000    
To Depreciation on : ††† Delivery Van ††† Building for Office 1,000 1,500    
To Int. on Secured Loan 10,000    
To Selling & Distribution Exp. 75,000    
To Loss on Sales of Fixed Assets 10,000    
To Transfer to General Reserve 10,000    
To Proposed Dividend 55,000    
To Balance c/d 76,000    
  17,00,000   17,00,000
 
  Other Information : Establishment expenses include a sum of Rs. 12,000 written-off as bad debts.  
     
Q.8. Complete the following comparative statement of Mahesh Pvt. Ltd. by ascertaining the missing figures and underline the missing figures ascertained. 16
 
Particulars 2003
Rs.
2004
Rs.
Absolute Increase/Decrease Rs. Increase/Decrease %
Sales 6,00,000 ? +3,00,000 ?
Cost of Goods Sold : Opening Stock ? 60,000 +10,000 ?
Purchases 4,00,000 ? +80,000 ?
Closing Stock ? ? ? ?
Cost of Goods Sold ? ? +97,500 +25%
Gross Profit ? ? ? ?
Operating Expenses        
(a) Administrative Exp. 40,000 ? ? +100%
(b) Financial Exp. 60,000 72,000 ? ?
(c) Selling Exp. ? 1,50,000 +1,00,000 +200%
Total Operating Exp. ? ? ? ?
Net Profit Before Tax 60,000 1,10,500 ? ?
Provision for Tax ? ? ? ?
Net Profit after Tax 36,000 ? +27,000 +75%
 
     
Q.9. Write note on any four: 16
  a) Liquid Assets.  
  b) Contingent Liabilities.  
  c) Cash Flow v/s Fund Flow.  
  d) Trading on equity.  
  e) Debtors Turnover Ratio & Creditors Turnover Ratio.  
  f ) Selection of Accounting Software.  
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