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Management Accounting

April 2008

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.
  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.
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