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Auditing and Cost Accounting
Time: 3 Hours October – 2004 Marks: 100
 

N.B. :

(1)

Question NO.1 and 6 are compulsory and answer any two questions each from the rest from each section.

 
 

(2)

Figures to the right indicate full marks.

   
 

(3)

Working notes should form part of your answer.

   
 

(4)

Answers of both the sections should be written in the same answer book.

   
       
    Section I --- (Auditing)  
       

Q.1.

a)

Define Auditing. What are the principles of auditing?

10

 

b)

Explain the concept of True and Fair view.

8

       

Q.2.

a)

Write the meaning of internal check and explain its objectives.

8

 

b)

How would you, as an auditor, vouch purchase ledger?

8

       

Q.3.

a)

Comment on the following account as an auditor.

Date

2003

Particulars

Rs.

Date

2003

Particulars

Rs.

Jan. 1

To Balnace b/d.

4,000

Jan. 1

By Salaries

1,000

1

To Sales

20,500

2

By Telephone

6,000

2

To Sales

28,350

4

By Carraige

450

5

To Sales

21,240

5

By Bank

8,000

6

To Reena

350

6

By Rita

3,000

7

To Commission

200

7

By Wages

13,600

10

To Bills Receivable

1,200

9

By Bank

42,490

     

10

By Balance c/d.

1,300

   

75,840

   

75,840

8

 

b)

How would you verify the “Fixed Assets”?

8

       

Q.4.

a)

What is audit report? What are the elements of audit report?

8

 

b)

What are the duties of an auditor of a limited company?

8

       

Q.5.

 

Write short notes on any four :­

16

   

(i)

Objectives of valuation of assets

(iv)

Types of frauds

(ii)

Internal audit

(v)

Objectives of window dressing

(iii)

Importance of test checking

(vi)

Auditing techniques.

 
       
    Section II --- (Costing)  
       

Q.6.

 

The following figures have been extracted from the financials Accoutns of Baws Manufacturing Company for the first year of its operations:

 

Rs.

Direct Material Consumption

50,00,000

Direct Wages

30,00,000

Factory Overheads

16,00,000

Administrative Overheads

7,00,000

Selling & Distribution Overheads

9,60,000

Provision for Bad Debts

80,000

Preliminary Expenses written off

40,000

Dividend Received

1,00,000

Interest Received on Deposits

20,000

Sales (1,20,000 units)

1,20,00,000

Closing Stock:

 

      Finished Goods (4,000 units)

3,20,000

      Work in Progress

2,40,000

The cost Accounts for the same period reveal that the Direct Material consumption was Rs. 56,00,000. Factory overheads are recovered at 20% on Prime cost. Administrative overheads are recovered at Rs. 6 per unit of production. Selling and Distribution overheads are recovered at Rs. 8 per unit sold. Prepare the profit and Loss Account as per financial Records and cost sheet as per cost records. Reconcile the profits as per the two records. The cost accounts value closing stock of finshed goods at cost of production,

16

       
       

Q.7.

 

Z Ltd. produces and sales a single article at Rs. 10 each. The marginal cost of production is Rs. 6 each and fixed cost is Rs. 400 per annum.

Calculate:

(i) P/V ratio. (ii) The break even sales (in Rs. and Nos.). (iii) The sales to earn a profit of Rs. 500. (iv) Profit at sales Rs. 3,000 (v) New break even point if sales price is reduced by 10%. (vi) Margin of safety at sales Rs. 1,500 and (vii) Selling price per unit if the break even point is reduced to 80 units.

15

       

Q.8.

 

The following is the Trial Balance of Hindustan Construction Company engaged on the execution of Contract No. 687 for the year ended 31st December,2003.

 

Dr. (Rs.)

Cr. (Rs.)

Contractee’s Account

--

3,00,000

Buildings

1,60,000

--

Creditors

--

72,000

Bank Balance

35,000

--

Capital Account

--

5,00,000

Materials

2,00,000

--

Wages

1,80,000

 

Expenses

47,000

 

Plant

2,50,000

 

Total

8,72,000

8,72,000

The work on Contract No. 687 commenced on 1st January, 2003. Materials costing Rs. 1,70,000 were sent to the site of the contract but those of Rs. 6,000 were destroyed in an accident. Wages of Rs. 1,80,000 were paid during the year. Plant costing Rs. 50,000 was used on the contract all through the year. Plant with a cost of Rs. 2 Lkhs was used from 1st January 2003 to 30th September 2003 & was then returned to the stores. Materials of Rs. 4,000 were at site on 31st December, 2003.

The contract was for Rs. 6,00,000. Contractee pays 75% of work certified, work certified was 80% of the contract price. Uncertified work was estimated at Rs. 15,000 on 31st December, 2003. Expenses are charged to the contract at 25% of wages. Plant is depreciated at 10% for the entire year.

Prepare contract No.687 A/c, Costing Profit and Loss Account and make out Balance Sheet as on 31st December, 2003.

15

       

Q.9. 

 

A product passes through three processes A, B and C 10,000 units at a cost of Rs. 1.10 per unit were isued to process ‘A’. the other direct expenses were as follows:

 

Process

‘A’

Rs.

Process

‘B’

Rs.

Process

‘C’

Rs.

Sundry Materials

1,500

1,500

1,500

Direct Labour

4,500

8,000

6,500

Direct Expenses

1,000

1,000

1,503

Thw wastage of process ‘A’ was 5% and in process ‘B’ 4 % of inputs. The wastage of process ‘A’ was sold at Re 0.25 per unit and that of process ‘B’ at Re. 0.50 per unit and that of process ‘C’ at Re. 1.00 per unit. The overhead charges were 160% of direct labour. The final product was sold at Rs. 10 per unit fetching a profit of 20% on sales.

Prepare all process accounts.

15

       

Q.10.

a)

What do you mean by standard costing?

7

 

b)

State the advantages and limitations of standard costing.

8

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