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Auditing & Costing

Octomber 2006

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 should be part of answer.
  4. Answer both the sections in the same answer-book.

Section I-(Auditing)

  • Q.1 (a) Explain Basic Principles of Auditing. 10
  •   (b) How would you vouch the followings ? 8
    1.  
    2. (i)Interest Received on Investments.
    3.  
    4. (ii)Cash Purchases of Stationery.
  • Q.2 (a) What are the various techniques of Auditing ? 8
  •   (b) ) Explain in detail the provisions of the Companies Act, 1956, regarding appointment of an Auditor. 8
  • Q.3 (a) Discuss the disclosure requirements of "SHARE CAPITAL" as per schedule VI of the Companies Act, 1956. 8
  •   (b) What are the contents of Good Audit Report ? 8
  • Q.4 (a) Define and explain the term "Auditing". 8
  •   (b) Scrutinise and give your comments as an Auditor on the following Ledger Account. In the Books of M/s. GEC International. 8
  • CEG International Account.
    Date Particulars Amount
    Rs.
    Date Particulars Amount
    Rs.
    1-7-2004 To Balance b/fd. 10,000 31-7-2004 By Bank 10,000
    1-8-2004 To Sales 10,000 1-8-2004 By Bills Receivables 11,000
    1-8-2004 To Debit Note 2,000 1-8-2004 By Credit Note 1,000
    (Rate Difference) (Spoiled Goods)
    2-9-2004 To Sales 15,000
    4-9-2004 To Bills Receivables 11,000 4-9-2004 By Bills Receivables 11,250
    4-9-2004 To Interest 220 20-9-2004 By Bank 14,250
    4-9-2004 To Noting Charges 30 20-9-2004 By Discount 750
    15-09-2004 To Sales 20,000 30-9-2004 By Bank 17,500
    30-9-2004 By Bed debts 2,500
    Total 68,250 Total 68,250
  •  
  • Q.5 Write short notes on any four of the followings:- 16
  •  
  •   (a) Internal check.  
  •   (b) Secret Reserves  
  •   (c) Contingent Liability  
  •   (d) Audit in Computer Environment  
  •   (e) Valuation of Closing Stock.  
  •   (f) Importance of Internal Audit.  

    Section II — (Costing).

  • Q.6 M/s AB & Associates, a partnership firm comprosing of partners A and B, undertook a contract to build a Bridge for Rs. 20,00,000 and commenced the work on 1-10-2003. 20
  • The following is the Trial Balance of firm as on 30-9-2004 :–
  • Particulars Debit (Rs.) Particulars Credit (Rs.)
    Plant & Machinery 2,50,000 Capitals : A 1,20,000
    Office Buildings 3,00,000 B 80,000
    Materials Purchased 4,20,000 Advanced From Contractee 6,00,000
    Wages 1,40,000 Bank Overdraft 1,40,000
    Sub-contracting Charges 80,000 Outstanding Wages 10,000
    Interest 10,000 Creditors 1,50,000
    Office Overheads 50,000 Loans 1,50,000
    Total 12,50,000 Total 12,50,000
     
  • Additional Information :
    1. Materials worth Rs. 4,00,000 were sent to site.
    2. Out standing sub-contracting charges Rs. 20,000 at the year end.
    3. Allocate 50% of Office overheads and 100% wages to contract.
    4. Plant and Machinery were used for the whole year on contract and provide depreciation @ 10%. p.a.
    5. Partner A was entitled to salary of Rs. 20,000 for site supervision for the year. Provide the same in Account
    6. Contractee pays 75% of the work certified.
    7. Partner A & B share profit and Losses in the ratio of 6 : 4 respectively.
    8. At the end of the year, work uncertified valued at Rs. 10,000 and materials at site Rs. 20,000. Prepare Contract Account.
    9. Profit and Loss Account for the year ended 30-09-2004 and Balance sheet as on that date.
  • Q.7 Tea Estate Ltd. manufactures flavored Tea which passes through three processes. The following particular are available for the year ended 30-06-2003:- 15
  • Particulars Process I Process II Process III
    Raw Material (kg) 10000 4600 1500
    Cost of Raw Materials Per kg (Rs.) 5 6 8
    Direct Wages (Rs.) 24,000 18,000 12,250
    Direct Expenses (Rs.) 15,200 10,736 8,590
    Factory Expenses (Rs.) 20,960 6,000 4,255
    Normal Loss (%) 4% 8% 5%
    Weight Loss (%) 6% 2% NIL
    Scrap Value Per kg (Rs.) 1.80 2.50 4
    Output Transferred
    to next Process 60% 50% NIL
    Output Sold 40% 50% 80%
    Selling Price of Output Per kg 14 16 17
    Transferred to Finished Stock NIL NIL 20%
  • % of normal Loss and % of weight loss are based on total input in the process.
  • Prepare Process Account and Profit and Loss Account.
  • Q.8 (a) The XL Ltd. furnish the following information :10
    Ist Period IInd Period
    Sales 2000000 3000000
    Profit 200000 400000
  •  
  • From the above, calculate the followings:
    1. P/V Ratio
    2. Fixed Expenses.
    3. BEP
    4. Sales to Earn Profit Rs. 5,00,000
    5. Profit when sales are Rs. 15,00,000
  •   (b) From the following information, calculate labour variances:- 5 
  • Standard for 100 units

    500 Labour Hours

  • Rate Rs. 24/- Per Hour
  • Actual production

  • 1000 units were produced.
  • Total wages paid Rs. 1, 30,000 for 5200 Hours.
  • Rate Rs. 24/- Per Hour
  • Q.9 (a) From the following particulars prepare cost sheet showing various elements of cost:-: 10
  • Opening Stock of Raw Materials Rs. 1, 10,000
    Purchases of Raw Material Rs. 8, 25,000
    Carriage Outwards Rs.28,500
    Direct Wages Rs.4, 21,400
    Direct Power Rs.25,840
    Technical Directors Salary Rs.40,590
    Factory Rent, Rates & Insurance Rs.10,140
    Sale of Factory Scraps Rs.1,460
    Depreciation on Factory Buildings Rs.75,200
    Closing Work in Progress Rs. 1, 20,260
    Factory Stationary Rs.12,340
    Opening Stock of Finished Goods Rs.45,280
    Opening Stock of Raw Materials Rs.36,920
    Fees to Brand Ambassador Rs. 2, 00,000
    Stationery and Printing Rs.12,200
    Staff Salaries Rs. 6, 30,000
    Trade Discount Rs. 1, 20,000
    Office Rent Rs.60,000
    Free Sample Expenses Rs.20,320
    Closing Stock of Finished Goods Rs.50,240
  • Sales are made to earn profit @ 10% on Cost Price
  •   (b) From the following, prepare Reconciliation Statement of M/S XYZ and Company as on 30-6-2004: 5
    1. Net profit as per Financial Accounts Rs. 40,340.
    2. Income Tax Provision made Rs. 30,000.
    3. Material Purchases of 5,000 units were recorded in cost at standard cost Rs. 24/- per unit whereas in Finance it was recorded at actual cost Rs. 22/- per unit.
    4. Old Bad debts recovered Rs. 20,500.
    5. Loss on sale of furniture was Rs. 4,120.
    Q.10 Write short notes on any three : 15
  • (a) Classification of Costs.  
  • (b) Material Purchases Requisition.  
  • (c) Labour Idle Time.  
  • (d) Advantages of Job Order Costing.  
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