Management Accounting

April 2008

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.
5. Use of simple calculator is allowed

• Q.1 Certain items of the annual accounts of AB Ltd. are missing as shown below 20
• Trading and Profit and Loss Account for the year ending on 31st March, 2007

Particulars	Amount Rs.	Particulars	Amount Rs.
To Opening Stock	4,37,500	By Sales	?
To Purchases	?	By Closing stock	?
To Direct Expenses	1,09,375
To Gross Profit	?
Total	?	Total	?
To Administrative Expenses	2,66,000	By Gross Profit	?
To Interest on Debentures	37,500	By Commission	62,500
To Provision for Taxes	?
To Net profit After Tax	3,30,000
Total	?	Total	?

• Balance Sheet as on 31st March, 2007

Liabilities	Amount Rs.	Assets	Amount Rs.
Share Capital	6,25,000	Plant and Machinery	7,75,000
General Reserve	?	Long Term Investment	?
Profit and Loss Account	1,34,375	Stock	?
(Including Opening Balance)		Debtors	?
10% Debentures	?	Bank Balance	78,000
Creditors	?
Proposed Dividend (C.Y.)	?
Provision for Taxes (C.Y.)	?
Total	?	Total	?

• You are required to complete the Financial Statements with the help of the following information
• 1. Current ratio is 2 : 1.
  2. Stock turn over ratio is 1.60
  3. Proposed dividends are 25% of share capital.
  4. Gross profit ratio is 50%.
  5. Transfer to General Reserve is 70% of proposed dividends.
  6. Provision for Taxes is 50% of profit after tax.
  7. There is no opening balance in General Reserve Account.
  8. Creditors' turn over ratio (on purchases and closing creditors) is 10 : 2
• Q 2. From following information given by Tata Ltd. estimate working capital requirement for year ending 31st March, 2009 16
• Estimated Production 120 NANO CARS (Per Year)

	PER CAR	RATE
STEEL	1000 KG	Rs. 70 per kg.
SPARES	20 KG	Rs. 60 per kg.
ENGINE	1	Rs. 20,000 per engine
LABOUR	50 HRS	Rs. 100 per hr.
OVERHEAD		Rs. 20,000

.
• (1) Steel remains in stock for two months, spares remains in stock for half month and engine remains in stock for one month.
• (2) Suppliers of steel allows credit of two months, suppliers of spares allow credit for one month and suppliers of engine allows credit for half month.
• (3) Production process takes half month.
• (4) Time lag in payment of labour and overhead is one month.
• (5) Car (finished goods) remains in stock for one month.
• (6) Activity is spread evenly throughout the year.
• Q 3. Balance Sheets of Star Ltd. for the year ended 31st December, 2006 and 31st December, 2007 16 are as follows :- 16

Liabilities	31st Dec. 06 Rs.	31st Dec. 07 Rs.	Assets	31st Dec. 06 Rs.	31st Dec. 07 Rs.
Equity Share Capital	8,00,000	8,00,000	Building	6,00,000	5,40,000
10% Pref. Share Capital	6,00,000	6,00,000	Land	2,00,000	2,00,000
General Reserves	4,00,000	4,90,000	Plant	6,00,000	5,40,000
15% Debentures	2,00,000	3,00,000	Furniture	2,00,000	2,80,000
Creditors	3,00,000	4,00,000	Stock	4,00,000	6,00,000
Bills Payable	1,00,000	1,50,000	Debtors	4,00,000	6,00,000
Tax Payable	2,00,000	3,00,000	Cash	2,00,000	2,80,000
	26,00,000	30,40,000		26,00,000	30,40,000

• Prepare Comparative Balance Sheet in vertical form and offer your comments in brief on fixed Assets.
• Q 4. From the following Balance Sheet and information of SNEHAL LTD. prepare fund flow statement and schedule of item-wise changes in working capital for the year ended 31st December, 2006 and 2007. 16
• Balance Sheet as on 31st December

Liabilities	2006 Rs.	2007 Rs.	Assets	2006 Rs.	2007 Rs.
Equity Share Capital	9,00,000	12,00,000	Fixed Assets	18,80,000	13,40,000
(Rs. 100 each)			Trade Investment	3,00,000	3,00,000
7% Preference Share	8,00,000	6,00,000	Stock	3,40,000	4,50,000
Capital (Rs. 100 each)			Sundry Debtors	5,30,000	8,50,000
General Reserve	3,90,000	1,90,000	Cash and Bank Bal	2,30,000	4,50,000
Profit and Loss A/c.	3,10,000	5,00,000
Capital Reserve	-	20,000
Security Premium	-	10,000
10% Debenture	4,00,000	2,00,000
Creditors	1,80,000	3,40,000
Bills Payable	70,000	40,000
Provision for Tax	2,30,000	2,90,000
	32,80,000	33,90,000		32,80,000	33,90,000

• Additional Information for the Year 2007
• 1. On 31st December, 2007 accumulated Depreciation on Fixed Assets was Rs. 4,80,000 and 31st December, 2006 was Rs. 3,60,000. Machinery costing Rs. 4,20,000 included in Fixed Assets (W.D.V. Rs. 2,60,000) sold for Rs. 1,80,000.
  2. During the year Investment costing Rs. 1,00,000 were sold and profit on sale was credited to Capital Reserve.
  3. Tax paid during the year amounted to Rs. 2,50,000.
  4. Issued 1,000 Equity Shares to the public at a premium of Rs. 10 per Share and Balance indicate Bonus issue out of General Reserve.
  5. Dividend received on Investment was Rs. 30,000 out of which Rs. 10,000 was for a period prior to purchase of Investment.
• Q.5 From the following information prepare the Common size Revenue Statement with Amount and % for the year ended on 31st March, 2007 in a vertical form suitable for analysis : 16

Particulars	% on net sales of Rs. 5,00,000
Opening stock	2
Closing stock	3
Purchases	52
Office expenses	4.75
Other administrative expenses	5.75
Distribution expenses	6
Selling expenses	4
Interest (Dr.)	1.50
Indirect wages	1.50
Direct Wages	2

Provision for Income tax is to be made @ 25% on net profit before tax.

• Q.6 From the following Balance Sheets of XYZ Ltd. as on 31-3-2006 and 31-3-2007, prepare cashflow statement for the year ended 31-3-2007 as per AS-3 by indirect method 16

Liabilities	31-3-06 Rs.	31-3-07 Rs.	Assets	31-3-06 Rs.	31-3-07 Rs.
Equity Share Capital	45,00,000	12,00,000	Land	15,00,000	11,50,000
General Reserve	3,00,000	5,00,000	Machinery	13,50,000	28,70,000
Capital Reserve	-	3,00,000	Investments	9,00,000	7,00,000
Profit and Loss A/c.	3,00,000	4,00,000	Stock	14,00,000	16,00,000
Creditors	6,00,000	9,00,000	Debtors	9,00,000	13,50,000
Provision for Tax	5,00,000	5,50,000	Bills Receivable	2,45,000	2,90,000
Proposed Dividend	3,95,000	4,50,000	Cash/Bank Balance	3,00,000	3,90,000
	65,95,000	83,50,000		65,95,000	83,50,000

• Additional Information for the year ended 31st March, 2007
• (1) During the year Machinery was sold for Rs. 2,00,000 (W.D.V. Rs. 2,25,000).
• (2) During the year Depreciation provided on Machinery was Rs. 3,00,000.
• (3) Profit on sale of land was transferred to Capital Reserve.
• (4) Interim Dividend paid during the year Rs. 2,00,000
• (5) Profit on sale of Investment was transferred to General Reserve.
• (6) Income tax paid during the year 2007 is Rs. 4,50,000,
• Q.7 Profit and Loss A/c. and Balance Sheet of SIDHARTH LTD. for the year ended 31st March, 2007 16  

Trading, Profit and Loss Account for the year ended 31st March 2007
Particulars	Rs.	Particulars	Rs.
To Opening Stock	70,000	By Sales	9,00,000
To Purchases	5,40,000	By Closing Stock	80,000
To Wages	2,14,000
To Gross Profit c/d.	1,56,000
	9,80,000		9,80,000
To Salaries	26,000	By Gross Profit b/d.	1,56,000
To Rent	5,000	By Interest on investment	5,000
To Miscellaneous Expenses	15,000
To Selling Expenses	10,000
To Depreciation	30,000
To Interest	5,000
To Provision for Tax	20,000
To Net Profit c/d.	50,000
	1,61,000		1,61,000

Balance Sheet as on 31st March, 2007
Liabilities	Rs.	Assets		Rs.
Equity Share Capital (Rs. 10)	1,50,000	Fixed Assets	1,60,000
8% Preference Share Capital 1,30,000	1,00,000	(–)Depreciation	30,000	1,30,000
Reserve and Surplus	62,000	investment		1,00,000
10% Debenture	50,000	Stock		80,000
Bank Loan (Payable after 5 years)	40,000	Debtors		60,000
Creditors	60,000	Bills Receivable		50,000
Provision for Tax (C. Y.)	20,000	Cash		85,000
Bank Overdraft	20,000	Preliminary Expenses		5.000
Proposed Pref. Dividend	8,000
	5,10,000			5,10,000

• Note : Market value of Equity share is Rs. 12 and Dividend paid per Equity share is Rs. 2. Calculate the following ratio :
• (a) Acid Test Ratio.
• (b) Capital Gearing Ratio.
• (c) Operating Ratio.
• (d) Dividend Payout Ratio.
• (e) Debt Service Ratio.
• (f) Creditors Turnover Ratio.
• (g) Earning per Share.
• (h) Stock Turnover Ratio.
• Note: Vertical final accounts need not be prepared.
• Q.8 From the following information of Mahindra Ltd. for the year ended 31st March, 2006 and 31st March 2007, you are required to comment with the help of comparative statement after rearranging in Vertical Form suitable for analysis 16  

	2006 Rs.	2007 Rs.
Sales	15,20,000	22,80,000
Return Inward	20,000	30,000
Opening Stock–Raw Material	7,600	7,600
Purchases of Raw Material	3,90,000	5,85,000
Work in Progress–Opening	10,000	10,000
Work in Progress–Closing	10,000/td>	15,000
Closing Stock–Raw Material	7,600	11,400
Power	50,400	75,600
Depreciation on Machinery	70,000	1,05,000
Repairs Factory Building	40,000	60,000
Direct Labour	2,50,500	3,75,750
Selling and Distribution Expenses	1,05,400	1,58,100
Finance Expenses	70,000	70,000
Administrative Expenses	73,500	73,500

• Q.9 (a) State wheather following is True or False 5
• i Payment for purchase of computer will reduce working capital.
• ii As per Standard Current Ratio, Current Assets of a concern must always be equal to its Current Liabilities.
• iii Fund Flow Statement shows movement of cash during the year.
• iv Proprietory Ratio shows turnover of fixed asset during the year.
• v Operating Expenses Ratio and Operating Ratio are same.
• (b) From each of the following sets, state the odd one out clearly :- 5
• i Selling Expense, Financial Expense, Direct Expense, Administration Expense.
• ii Packing charges, Commission on Sales, Advertisement, Rent paid – Office.
• iii Opening Stock, Purchases, Purchase Returns, Commission received.
• iv Fuel Expenses, Carriage outward, Wages paid, Carriage on purchases.
• v Advertisement, Commission paid, Interest received, Royalty paid for Manufacture.
• (c) Write short notes on : (any two) 6
• i Capital Gearing Ratio
• ii Working Capital Cycle
• iii Enumerate MIS Reports
• iv Limitations of Financial Statements.