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Auditing & Costing

March 2008

Time: 3 Hours
Marks: 100
NB:
  1. Question Nos. 1 and 6 are compulsory and answer any two from the remaining fromeach section.
  2. Figures to the right indicate full marks.
  3. Working notes should form part of answer.
  4. 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
  •  
  • (b) Importance of Break-Even Analysis
  •  
  • (c) Limitations of Marginal Costing
  •  
  • (d) Classification of Cost on time-basis
  •  
  • (e) Batch Costing.
  •  
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