Auditing & Costing
March 2008
NB:
- Question Nos. 1 and 6 are compulsory and answer any two from the remaining fromeach section.
- Figures to the right indicate full marks.
- Working notes should form part of answer.
- Answer both the sections in the same answer-book.
Section I-(Auditing)
-
Q.1
(a)
What are the Principles of Auditing ? Discuss briefly.
10
-
(b)
How would you vouch the followings ?
8
-
(a)
Salaries to Staff
-
(b)
Loan Taken.
-
Q.2
(a)
Explain the provisions of the Companies Act, 1956 relating to appointment of an
auditor of company.
8
-
(b)
State the various types of Audit Report.
8
-
Q.3
(a)
Discuss the disclosure requirements of "Reserves and Surplus" as per Schedule VI of the Companies Act, 1956.
8
-
(b)
What points should be considered while framing a system of Internal check ?
8
-
Q.4
(a)
Distinguish between "Auditing and Investigation."
8
-
(b)
Scrutinise and comments on the following ledger account appearining in the books
of M/s. Kunal and Co.
8
| Madhuri A/c |
| Dr. |
|
|
|
|
Cr. |
| Date |
Particulars |
Amount |
Date |
Particulars |
Amount |
| 2007 |
|
Rs. |
2007 |
|
Rs. |
| Oct. 04 |
To Bank A/c |
9,800 |
Oct. 01 |
By Balance B/d |
10,000 |
| Oct, 04 |
To Discount |
200 |
Oct. 15 |
By Purchases |
22,000 |
| Oct. 17 |
To Purchase Returns |
2,000 |
Nov. 02 |
By Purchases |
28,000 |
| Oct. 30 |
To Bank A/c |
19,600 |
Nov. 18 |
By Purchases |
35,000 |
| Oct. 30 |
To Discount |
400 |
Dec. 02 |
By Purchases |
30,000 |
| Nov. 04 |
To Bills Payable |
28,000 |
Dec. 07 |
By Bills Payable |
28,000 |
| Nov. 19 |
To Bills Receivable |
35,000 |
Dec. 07 |
By Interest |
280 |
| Dec. 08 |
To Bills Payable |
28,280 |
Dec. 31 |
by Balance C/d |
45,000 |
| Dec. 17 |
To Bank A/c |
30,000 |
|
|
|
| Dec. 29 |
To Bank A/c |
45,000 |
|
|
|
|
Total |
1,98,280 |
|
Total |
1,98,280 |
-
Q.5
Write short notes on any four of the followings:-
16
-
(a)
Computer Assisted Audit Techniques.
-
(b)
Inspection as Audit Technique.
-
(c)
Removal of First Auditor of a Company
-
(d)
Verification of Investment
-
(e)
Internal Audit
-
(f)
Disqualification of an Auditor under the Companies Act.
-
Section II — (Costing).
-
Q.6
Bhushan Contractors Ltd. obtained the contract to construct a Building for Rs. 35,00,000/-. The contractee agrees to pay 90% of the work certified immediately upon the receipt of the certificate from the Architect and the balance amount would be paid on the completion of contract. The work was commenced on 1st July, 2005 and completed on 30-09-2007.
20
-
A machine costing Rs. 45,000/- was specially bought for use on contract and it would not fetch any value upon completion of the contract.
-
-
Further details are as follows:-
| Particulars |
|
Year
2005 |
Year
2006 |
Year
2007 |
| Work Certified (Cumulative) |
(Rs.) |
8,75,000 |
28,25,000 |
35,00,000 |
| Work Uncertified |
(Rs.) |
— |
50,000 |
— |
| Materials Purchased |
|
|
|
|
| Steel |
(Tons) |
16 |
20 |
15 |
| Price Per Ton |
(Rs.) |
25,000 |
26,000 |
26,500 |
| Bricks |
(Nos) |
16,000 |
20,000 |
10,000 |
| Price Per Brick |
(Rs.) |
5.00 |
5.50 |
6.00 |
| Wages |
(Rs.) |
4,25,000 |
5,65,000 |
4,17,000 |
| Direct Overheads |
(Rs.) |
17,500 |
44,500 |
10,000 |
| Indirect Materials |
(Rs.) |
7,500 |
10,000 |
4,000 |
| Materials Returns |
|
|
|
|
| Steel |
(Ton) |
1 |
— |
— |
| Bricks |
(Nos.) |
1,000 |
— |
— |
| Materials Lost in Accident |
|
|
|
|
| Steel |
(Tons) |
— |
2 |
— |
| Materials Sold |
|
|
|
|
| Steel |
(Tons) |
— |
— |
4 |
| Sale Price Per Ton |
(Rs.) |
— |
— |
27,000 |
| Scrapped Value of Bricks |
(Rs.) |
— |
— |
18,000 |
You are required to prepare Contract Account and contractee accounts for the year 2005, 2006 and 2007 in the books of the company. The accounts are closed on 31st December each year.
-
Q.7
M/s. Sagar Enterprises Ltd. Provides you the following data for the month of January, 2008, about processes D, C and H :
15
| Particulars |
|
Process D |
Process C |
Process H |
| Basic Raw Material Introduced |
(Units) |
18,000 |
3,156 |
3,450 |
| Cost of basic raw material per unit |
(Rs.) |
5.00 |
6.00 |
7.00 |
| Labour Charges |
(Rs.) |
52,000 |
36,000 |
30,000 |
| Factory Overhead |
(Rs.) |
30,440 |
14,874 |
15,660 |
Normal Loss (% on Total number of
units input) |
|
6% |
5% |
4% |
|
| Scrap Value per unit |
(Rs.) |
3.00 |
4.00 |
5.00 |
| Output sold at the end of process |
(%) |
30% |
40% |
100% |
| Output Transferred to next process |
(%) |
70% |
60% |
— |
Selling price per unit of the output
sold at the end of process |
(Rs.) |
13.50 |
17.50 |
18.50 |
-
(a)
Other common expenses not chargeable to process Accounts
-
(b)
Office and Administrative overheads Rs. 30,000
-
(c)
Selling and Distribution overheads Rs. 23,636
- You are required to prepare process D, C and H Accounts indicating clearly profit or loss in each process and costing Profit and Loss Account.
- Q.8
The following particulars have been extracted from the books of M/s. Sohan Manufacturing Company for the year ended 31-03-2007 :
15
-
| Particulars |
Rs. |
| Opening Stock of Raw Materials |
2,35,000 |
| Closing Stock of Raw Materials |
2,50,000 |
| Raw Materials Purchase |
10,40,000 |
| Drawing Office Salaries |
48,000 |
| Royalty on Production |
70,000 |
| Carriage Inwards |
41,000 |
| Cash Discount Allowed |
17,000 |
| Repairs to Plant and Machinery |
53,000 |
| Rent, Rates and Taxes (Factory) |
15,000 |
| Rent, Rates and Taxes (Office) |
8,000 |
| Office Conveyance |
15,500 |
| Salesmen's Salaries and Commission |
42,000 |
| Productive Wages |
7,00,000 |
| Depreciation on Plant and Machinery |
35,500 |
| Depreciation on Office Furniture |
3,000 |
| Directors Fees |
30,000 |
| Gas and Water Charges (Factory) |
7500 |
| Gas and Water Charges (Office) |
1,500 |
| Manager's Salaries |
60,000 |
| Cost of Catalogues Printing |
10,000 |
| Loose Tools Written off |
8,000 |
| Trade-Fair Expenses |
10,000 |
- Out of 48 hours in a week, Manager devotes 40 hours for factory and 8 hours for office per week for the whole year.
-
The Management has fixed the selling Price @ 110% of cost.
-
Prepare detailed cost statement for the year ended 31-03-2007.
-
Q.9
(a)
From the following, calculate Materials Cost variance Materials Price variance and Materials Usage variance :
9
-
(b)
The following figures relate to M/s. Deepak Industries
6
| Fixed Overheads |
Rs. 2,40,000 |
| Variable Overheads |
Rs. 4,00,000 |
| Direct Wages |
Rs. 3,00,000 |
| Direct Materials |
Rs. 8,00,000 |
| Sales |
Rs. 20,00,000 |
- Calculate :
- i.P/V Ratio
- ii.BEP
- iii.Margin of Safety.
-
Q.10
Write short notes on any three :
15
(a)
Advantages of Standard Costing
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