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Management Accounting

April 2006

Time: 3 Hours
Marks: 100
NB:
  1. Questions No. 1 is compulsory and carries 20 marks.
  2. Attempt any five questions, each carrying 16 marks from remaining questions.
  3. Working notes should form part of your answer.
  4. Proper presentation and neatness is essential.
  • Q.1 M/s. Rajesh & Co. gives you the following information. Prepare trading and profit and loss account for the year ended 31st March, 2004 and balance sheet as on that date in as much detail as is possible. 20
  • Opening Stock Rs. 90,000
    Stock Turnover Ratio 10 times
    Net Profit Ratio on Turnover 15%
    Gross Profit Ratio on Turnover 20%
    Current Ratio 4: 1
    Long Term Loan Rs. 2, 00,000
    Depreciation on Fixed Assets @ 10 Rs. 20,000
    Closing Stock Rs, 1, 02,000
    Credit period allowed by suppliers One month
    Average Debt collection period Two months
     

    On 31st March, 2004 current Assets consisted of stock, debtors and cash only. There was no bank overdraft. All purchases were made on credit. Cash sales were 1/3rd of credit sales.

    Q 2. From the following Balance Sheet and information of TNG Ltd., prepare fund flow statement and schedule of item wise changes in working capital for the year ended 31-12-2005 :- 16
  • Balance Sheet
    Liabilities 2004
    Rs.
    2005
    Rs.
    Assets 2004
    Rs.
    2005
    Rs.
    Equity Share Capital 40,000 70,000 Land 80,000 80,000
    P & L A/c 13,420 16,000 Buildings 40,000 36,000
    General Reserve 13,180 14,200 Furniture 5,000 7,000
    Long Term Loan 16,400 14,000 Debtors 12,200 16,600
    Creditors 36,720 17,000 Bills Receivable 2,000 13,000
    Bills Payable 15,100 5,800 Goodwill 19,000 16,000
    Prov. for Tax 9,000 12,000 Cash 620 5,400
    Proposed Dividend 15,000 25,000
    1, 58,820 1,74,000 1, 58,820 1,74,000
     
  • Additional Information:
    1. Additional land was purchased during the year at a cost of Rs. 1, 20,000 and later on sold at a profit of Rs. 20,000 during the year.
    2. Furniture having book value of Rs. 2,000 was sold for Rs. 1,000.
    3. An interim dividend of Rs. 5,000/- was paid during the year.
    4. Income Tax paid Rs. 8,500/ .
    5. Charged depreciation on Building Rs. 4,000 and Furniture Rs. 300/.
    6. Proposed dividend for last year has been paid during the year.
  • Q 3. Following are summarized Balance Sheets of BDM Ltd. as on 31st Dec., 2004 Balance Sheet 2005. 16
  • Balance Sheet
    Liabilities 2004
    Rs.
    2005
    Rs.
    Assets 2004
    Rs.
    2005
    Rs.
    Equity Share Capital 2,00,000 2,50,000 Bank 35,000 16,000
    12% Debentures 1,00,000 80,000 Stock 40,000 75,000
    10% Preference Share Capital 50,000 80,000 Debtors 90,000 1,50,000
    Bank Loan 70,000 1,10,000 Machinery 75,000 60,000
    Reserves 20,000 25,000 Furniture 10,000 8,000
    P & L A/c 50,000 60,000 Land 1,70,000 2,80,000
    Creditors 60,000 75,000 Buildings 1,40,000 99,000
    Bills Payable 40,000 33,000 Goodwill 30,000 25,000
    5,90,000 7,13,000 5,90,000 7,13,000
       
  • Additional Information:
    1. Depreciation charged during 2005 was Rs. 4,000/- on Furniture. Rs. 12,000/- on Machinery and Rs. 20,000/- on Buildings.
    2. Part of Machinery was sold for Rs. 15,000/- at a loss of Rs. 4,000/.
    3. During 2005 interim dividend was paid Rs. 10,000 & Income Tax was paid Rs. 5,000/-.
    4. During the year part of the Building was sold at book-value.
    5. You are required to prepare Cash Flow Statement as per AS. 3 (Use Indirect method).
  • Q 4. Re-write the following statement of changes in working capital by calculating the missing figures: - 16
  • Statement of Changes in working capital
    Particulars 31-12-2004 31-12-2005 Working Capital
    increase/ (Decrease)
    (A) Current Assets
    Stock 1, 00,000 ? 20,000
    Debtors ? 70,000 ?
    Cash 10,000 15,000 ?
    Bank 25,000 ? 25,000
    Bills Receivables 30,000 25,000 ?
    Prepaid Expenses 5,000 ? 1000
    (A) ? ? -
    (B) Current Liabilities
    Creditors 20,000 ? (10,000)
    Bills Payable 10,000 5,000 ?
    Outstanding Wages 3,000 ? 1,000
    Outstanding Salary ? 4,000 ?
    (B) 40,000 ? -
    Working Capital (A-B) ? ? -
    Increase in working capital 35,000
    60,000
     
  • Q.5 A & B carrying on partnership business. Their position as on 31st March 2005, 2004& 2003 is as follows: 16
  • (i) Balance sheets as at 31st March :
    (Rs. in lacs)
    Assets 2005 2004 2003
    Fixed Assets (at cost less Depreciation) 30.00 25.00 24.00
    Investment 2.00 1.00 2.00
    Stock in Trade 12.00 10.00 8.00
    Accounts Receivable 18.00 15.00 12.00
    Loans & Advances 8.00 8.00 6.00
    Cash & Bank Balances 1.00 1.00 1.00
    71.00 60.00 53.00
    Liabilities
    Partners' Capital Accounts 35.00 30.00 25.00
    Partner's Current Accounts 6.00 4.00 4.00
    Bank Loans 8.00 6.00 6.00
    Sundry Creditors 22.00 20.00 18.00
    71.00 60.00 53.00
  •  
    (ii) Summarised Income Statements for the year ended 31st March :
    (Rs. in lacs)
    Particulars 2005 2004 2003
    Net Sales 240.00 220.00 200.00
    Less : Cost of Sales 180.00 170.00 150.00
    Gross Margin 60.00 50.00 50.00
    Less : Operating Expences 50.00 40.00 36.00
    Net Profit before Tax 10.00 10.00 14.00
     

    Prepare Trend Analysis Statement taking earliest year as the base. Writing Balance Sheet in vertical form suitable for analysis in Trend Statement is necessary.

  • Q. 6 Following financial statement for the year ended 31st March, 2005 are submitted to you by the accountant of Star Ltd. 16
  •  
  • Trading and Profit and Loss Account for the Year ended 31st March, 2005
    Particulars Rs. Particulars Rs.
    To Opening Stock 70,000 By Sales 16,60,000
    To Purchases 15,30,000 By Closing Stock 1,60,000
    ( - ) Returns 30,000 15,00,000
    To Gross Profit 2,50,000
    18,20,000 18,20,000
       
    To Depreciation 36,000 By Gross Profit 2,50,000
    To Administration Expenses 50,000 By Interest 10,000
    To Selling & Distribution Expenses 24,000
    To Provision for Income-tax 40,000
    To Proposed Dividend 16,000
    To Profit Balance 94,000
    2,60,000 2,60,000
     
    Balance Sheet as at 31st March, 2005
    Liabilities Amount
    Rs.
    Assets Amount
    Rs.
    Share Capital 3,00,000 Goodwill 20,000
    Profit and Loss Account 1,80,000 Cash in Hand 8,000
    Proposed Dividend 16,000 Stock in Trade 1,60,000
    Bank Overdraft 38,000 Sundry Debtors 1,78,500
    Sundry Creditors 26,000 Land & Building 92,150
    Provision for Depreciation 55,750 Plant & Machinery 1,28,600
    Provision for Tax 40,000 Prepaid Expenses 1,500
    Expenses on Issue of Shares 7,000
    Short Term Investments 60,000
    6,55,7500 6,55,750
     

    Rearrange the above statements in a form suitable for analysis and determine Net Worth, Quick Assets, Quick Liabilities, Operating Profit and Retained Earnings.

  • Q.7 From the following Profit and Loss Account information for year ending 2004 and 2005 prepare Common Size statement. Arrange information in Vertical Form suitable for analysis 16  
  • 2004
    Rs.
    2005
    Rs.
    Sales 10, 00,000 15, 00,000
    Closing Stock 2, 50,000 3, 00,000
    Opening Stock 1, 50,000 2, 50,000
    Purchases 3, 00,000 4, 50,000
    Wages 2, 00,000 3, 00,000
    Manufacturing Expenses 1, 00,000 1, 50,000
    Administrative Expenses 50,000 50,000
    Selling & Distribution Expenses 50,000 75,000
    Loss on Sale of Furniture 25,000 0
    Interest on Debenturess 10,000 10,000
    Profit on Sale of Shares 50,000 0
     
  • (i) Stock at the end Rs. 40,000 more than the stock, in the beginning.
  • Find Out:
  • (a) Cost of Goods Sold
  • (b) Gross Profit
  • (c) Net Profit
  • (d) Current Assets
  • (e) Capital
  • (f) Total Liabilities
  • (g) Closing Stock
  • (h) Total Assets
  • Q.8 From the following data provided by M/s Alpha Ltd. showing working capital requirements for the year ended 31st March, 2006: 16  
  • (a) Estimated activity/operations for the year 2, 60,000 units (52 weeks).
  • (b) Raw material remains in stock for 2 weeks and production cycle takes 2 weeks.
  • (c) Finished Goods remaining in stock for 2 weeks.
  • (d) 2 weeks credit is allowed by suppliers.
  • (e) 4 weeks credit is allowed to Debtors.
  • (f) Time lag in payment of wages and overheads is 2 weeks each.
  • (g) Cash & Bank Balance to be maintained Rs. 25,000.
  • (h) Selling price per unit is Rs. 15.
  • (i) Analysis of cost per unit as follows:-
  • (1) aterial 331/3% of sales.
  • (2) Labour and overheads in the ratio of 6 : 4 per unit
  • (3) Profit is at Rs. 5 per unit.
  • Assume that operations are evenly spread throughout the year; Wages and Overheads accrue similarly. Manufacturing process requires feeding of material fully at the beginning. Degree of work-in-progress is 50%. Debtors are to be estimated at selling Price.

     
  • Q.9 Write short notes on any four: 16  
  • (a)Window dressing of current ratio.
  • (b)Uses of ratio.
  • (c)Cash from operating activities.
  • (d) MIS report.
  • (e) Limitation of financial statmentsts.
  • (f) Cost of goods sold.
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