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Auditing and Cost Accounting
Time: 3 Hours
October – 2005
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) Explain Primary and Secondary Objects of Auditing. 10
  b)

What is continuous Audit ? What are its disadvantages ?

8
       
Q. 2. a) What steps an Auditor should take prior to Commencement of a Statutory Audit under the Companies Act 1956 ? 8
  b) What are the dutiies of an Auditor of Company ? 8
       
Q. 3. a)

Explain the term "Capital Expenditure". What are the duties of an Auditor as regards capital expenditure

8
  b) Distinguish between Statutory Audit and Internal Audit. 8
       
Q. 4. a)

What are the qualifications and disqualifications of a Company Auditor ?

8
  b) Scrutinize & give your comments as an Auditor on the following Ledger Account.

In the ledger of Spectrum Ltd.

Bills Receivable Account

Dr.                                                                        Cr.
Date 2004 Particulars Rs. Date 2004 Particulars Rs.
1 oct to Bal. B/fd 59,000

4 Oct.

By Bank 21,000
10 Oct. to Kedar 17,500 27 0ct. By Bank 19,800
16 Oct. to Ranjit 68,000 27 Oct. By Discount 200
30 Nov. to Pandey 41,200 12 Nov. By Mohan 18,000
15 Dec to Kerkar 20,500  13 Dec. By Bank 17,500
      16 Dec. By Nitin 68,000
      31 Dec By Bal.C/fd 61,700
Total 2,06,200 Total 2,06,200
8
       
   

Compostion of Opening Balance

Due From Due Date Rs.
Gopal 4/10/04 21,000
Narayan 27/10/04 20,000
Mohan 12/10/04 18,000
    59000
 
       
Q. 5.   Write short notes on any four :­ 16
   

(a) Objectives of verification of Assets/Liabilities.

(b) Audit Notebook.

(c) Secret Reserves.

(d) Importance of Internal Control.

(e) Appointment of a Company Auditor by Special Resolution.

(f) Test check.

 
    Section II --- (Costing)  
       
Q. 6.  

Following information is available from cost records for the year ended 31st December, 2004.

Direct Material Rs. 36 Per Unit
Direct Labour Rs. 28 Per.Unit.
Chargeable Expenses Rs. 11 Per Unit
Factory Overheads Fixed Rs. 16,00,000
Variable Rs.10 Per Unit
Office Overheads Fixed Rs. 12,50,000
Selling Overheads Fixed Rs. 5,00,000
  Variable Rs. 25 Per Unit
Units Produced & sold 50,000  
Selling price.Per Unit Rs. 210  

Following changes are anticipated during the year ended 31st December, 2005.

(1) Production and sales will increase by 60%.

(2) Direct material cost per unit will increase by 12.5%

(3) Direct labour per unit will decrease by 5%

(4) Chargeable expenses per unit will decrease by 10%

(5) Variable factory overheads per utvit will increase by 25%

(6) Variable selling overheads will decrease by 25%

(7) All fixed overheads will increase by 20%

(8) 75% of the output will sold in Domestic Market at a profit of 20% on sales.

(9) Balance 25% output will be sold in Export Market at a profit of 50 % on sales.

20
   

You are required to :

(1) Prepare cost sheet for the year ended 31st Derember 2004 and estimated cost sheet for the year ended 31st December 2005., Showing total and per unit cost.

(2) Calculate total and per unit profit for the year ended 31st December 2004.

(3) Calculate total sales and profit for Domestic Market and Export Market.

 
Q. 7.   Y Ltd. manufactures a chemical product which passes through three processes. The cost records 15 shows the following particulars for the year ended 30th" June 2004. Input to I process 20,000 units @ Rs. 28 per unit.
Particulars Process I Process II Process III
Materials 48,620 1,08,259 1,03,345
Labour 32,865 84,553 77,180
Expenses 2,515 10,588 16.275
Normal Loss 20% 15% 10%
scrap value epr unit Rs. 1 2 2
Actual Output (Units) 18,000 16,000 15,000
Prepare Process Accounts, Abnormal Gain /Loss Account. Also show process cost per unit for each process.
15
       
Q. 8. a)

The following is the cost structure of a product. Selling price Rs. 100 per unit.


Variable cost per unit

Material Rs. 38

Laoour Rs. 14

Direct Expenses Rs. 8.

Fixed Overheads for the year

Factory overheads Rs. 2,80,000

Office overheads Rs. 2,20,000

Nol of units produced & sold 40,000.

 

Calculate -.

P/V Ratio.

Break Even Points in Units.

Margin of Safety Amount.

Break Even Point if fixed overheads increased by 20%.

Revised P/V ratio when selling price increased by 20%.

9
  b)

The standard material cost for 200 units of output is :

Material kg Rate Per kg
A 50 12
B 100 9
C 100 10

 

The Actual cost for 8000 unit is as follows : '

Material kg Total Cost
A 2100 28,350
B 3750 30,750
C 4150 46,480

Calculate material cost variance, material price variance and material usage variance.

6
       
Q. 9.   

Siddesh Construction company has undertaken three contracts during'the year and the following particulars are available as on 31-12-2004.

Particulars Contract A Contract B Contract C
Contract Price 10,00,000 25,00,000 7,50,000
Material Issued to Contract 1,65,200 2,24,500 1,89,600
Labour 1,02,800 1,26,500 1,75,500
Sub-Contract Charges

72,800

 

65,900

 

28,500
Supervision Charges

12,000

 

18000

 

15,000
Architect fees

10,000

 

15,000

 

28,000
Insurance Charges

3,000

 

6,100

 

7,400
Work Certified 4,00,000 5,00,000 5,00,000
Work Uncertified

35,000

 

40,000

 

25,000
Amount received from contractee 3,20,000 4,50,000 3,75,000
Closing stock of Material 9,000 10,000 20,000

 

All contracts were commenced during the current year. Total Depreciation on plants amounted to Rs. 11,200 and allocate the same to all contracts in the ratio of work.certified.

Prepare Contract Accounts. Show the calculation of profit transferred!to Profit and Loss Account.

15
       
Q.10.   Write short notes on any three :- 15
   

Flexible Budget.

Reasons for differences between Financial profit and Cost profit.

Different Basis of Allocation of overheads.

Batch costing.

 
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