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Management Accounting

Octomber 2006

Time: 3 Hours
Marks: 100
NB:
  1. Question No. 1 is compulsory and carries 20 marks.
  2. Attempt any five questions from remaining questions each carrying 16 marks.
  3. All working notes should form part of your answer.
  4. Proper presentation and neatness is essential.

Section I-(Auditing)

  • Q.1 (a) The Balance Sheets of Dinesh Ltd. are as follows: 20
  • Balance sheet as at 31st March, 2005 and 2006.
    Liabilities 2005 2006 Assets 2005 2006
    Rs. Rs. Rs. Rs.
    Equity share capital 3,00,000 5,00,000 Goodwill 1,10,000 90,000
    General Reserve - 60,000 Land and Building 1,60,000 1,80,000
    Profit and Loss A/c - 58,000 Plant and Machinery 80,000 2,00,000
    Debentures 2,00,000 - Stock 84,000 1,06,000
    Sundry Creditors 1,14,000 92,000 Debtors 1,80,000 1,56,000
    Bills Payable 60,000 12,000 Advance Income Tax - 40,000
    Provision for Income Tax - 50,00 Bills Receivable 16,000 24,000
    Proposed Dividend - 40,000 Prepaid Expenses 12,000 8,000
    Cash in Hand 20,000 8,000
    Profit and Loss A/c 12,000  
    6,74,000 8,12,000 6,74,000 8,12,000
     
  • Additional Information:
    1. During the year ended 31-03-2006. Depreciation of Rs. 16,000 and Rs. 20,000 have been charged on Land and Building and Plant and Machinery respectively.
    2. An Interim Dividend of Rs. 15,000 was paid during the year ended on 31-03-2006.
    3. During the year Machinery having book-value of Rs. 16,000 was sold for Rs. 14,000.
  • Prepare cash flow statements by Indirect Method for the year ended 31st March, 2006 as per AS - 3.
  • Q 2. Aman and Ram are partners of M/S Aman Ram sharing Profits and Losses in the ratio of 3:2. Their Balance sheet as on 31st March, 2004 was as under: 16
  • Balance sheet as at 31st March, 2005 and 2006.
    Liabilities Rs. Rs. Assets Rs. Rs.
    Creditors 15,000 Bank 14,000
    Reserves 10,000 Cash 3,000
    Loan from Sanju 20,000 Debtors 29,000
    Capitals: Less: RDD 1,000 28,000
    Aman 30,000 Stock 30,000
    Ram 25,000 55,000 Fixed Assets:
    Cost 35,000
    Less: Depreciation 10,000 25,000
    1,00,000 1,00,000
       
  • As they wanted to go in for heavy expansion they decided upon the following, during the year ended 31st March, 2005:
    1. Introduce fresh capital of Rs 20,000; Rs. 5,000 being by Aman and Rs. 20,000 being by Ram.
    2. Admit Sanju as a partner on the following terms:
    3. (a) Aman, Ram and Sanju are to share profits and losses in the ratio of 2:2:1.

      (b)Goodwill of the firm is worth Rs. 30,000 but it is privately settled by the partners without bringing it into the books of account of the firm.

      (c)Sanju's loan is to be converted into his capital.

      (d)Sanju is to bring in a further sum of Rs. 26,000.

    4. M/s Aman purchased on 1st April, 2004 new fixed assets of Rs. 80,000. They sold part of the fixed assets costing Rs. 20,000 on which depreciation provision was Rs. 8,000 for Rs. 10,000. This amount was used to partially finance the purchase of fixed assets. M/s Aman Ram borrowed Rs. 50,000 from Bank of India for the purpose of financing the purchase of fixed assets. Out of this loan Rs. 10,000 was repaid during the year.

    Aman, Ram and Sanju withdrew Rs. 16,000, Rs. 15,000 and Rs. 10,000 respectively during the year. You are further informed that the partnership firm tax of Rs. 2,000 was paid during the year. Balance Sheet of the firm as on 31st March, 2005 was as under:

    Liabilities Rs. Rs. Assets Rs. Rs.
    Creditors 30,000 Bank 6,000
    Loan from Bank of India   40,000 Cash 6,000
    Capitals: Debtors 60,000
    Aman 39,000 Less: RDD 3,000 57,000
    Ram 48,000 Stock 50,000
    Sanju 43,000 1,30,000 Fixed Assets:
    Cost 95,000
    Less: Depreciation 14,000 81,000
    2,00,000 2,00,000
      Prepare a statement showing flow of fund during the year ended 31st March. 2005 along with statement of changes in working capital, together with item wise changes in working capital.
  • Q.3 While preparing the financial statements for the year ended 31-3-2005 of XYZ Ltd., it was discovered that a substantial portion of the records were missing. However, the accountant was able to gather the following data: 16
  •  
  • Liabilities Rs. Rs. Assets Rs. Rs.
    Paid-up Share Capital Land 3,60,000
    60,000 Equity shares of Rs. 10 6,00,000 Plant and Machinery:
    each) Cost 9,00,000
    Reserves and Surplus: (-) Depreciation 3,60,000 5,40,000
    Balance on 1-4-04 1,80,000 Current Assets:
    + Transfer during the year 1,20,000 3,00,000 Stock ?
    10% Loan 6,00,000 Debtors ?
    Current Liabilities: Cash and Bank ?
    Proposed Dividend ?
    Provision for Tax ?
    Creditors ? 6,00,000
    Total ? Total ?

    The following other information is available:

     
    Current Ratio 2:1
    Cash and Bank 30% of Total Current Assets
    Debtors Turnover (Sales/Debtors) 12 Times
    Stock Turnover (Cost of Goods Sold/Stock) 12 Times
    Creditors Turnover (Cost of goods Sold/Creditors) 12 Times
    Gross Profit Ratio on Sales 25%
    Proposed Dividend 20%
     

    You are required to complete the Balance Sheet as on 31-03-2005 with available information, working notes shall form part of your answer.

  • Q.4 From the following Balance Sheet, prepare Vertical balance sheet which is suitable for analysis and calculate TrendPercentages taking 2003 as base year and comment on it.
  • 16  
    Balance Sheets as at 31st December
    Particular 2005
    Rs.
    2004
    Rs.
    2003
    Rs.
    Share Capital 50,000 50,000 50,000
    Reserve and Surplus 5,000 10,000 10,000
    Secured Loan 3,00 5,000 5,000
    Unsecured Loan 2,000 - 6,000
    Current liabilities 5,000 5,000 4,000
    65,000 70,000 75,000
    Particular 2005
    Rs.
    2004
    Rs.
    2003
    Rs.
    Fixed Assets (Net) 40,000 45,000 50,000
    Investment 5,000 7,500 10,000
    Stock 7,000 6,000 5,000
    Debtors 10,000 9,000 7,000
    Cash 3,000 2,500 3,000
    65,000 70,000 75,000
     
  • Q.5 From the information giver, below prepare Balance sheet in a vertical form, suitable for analysis and calculate the following ratios: 16  
    1. Capital Gearing Ratio.
    2. ProDrietory Ratio.
    3. Current Ratio.
    4. Liquid Ratio.
    5. Stock of Working Capital.
    (Rs.) (Rs.)
    Cash at Bank 12,500 Land and Building 2,00,000
    Expenses paid in Advance 15,500 Stock 68,250
    Creditors 1,01,500 Debtors 1,30,750
    Bills Receivable 5,250 Plant and Machinery 1,36,000
    12% Debentures 62,500 Loan from Director 1,00,000
    Equity Share Capital 2,50,000 (Repayable after three years)
    P & L A/c (Cr.) 54,250
     
  • Q.6 The following are the Balancesheets of Hayat Ltd. for the year ending 31st March, 2004 and 2005. 16  
  • Liabilities 31-3-04
    Rs.
    31-3-05
    Rs.
    Assets 31-3-04
    Rs.
    31-3-05
    Rs.
    Equity share capital 4,00,000 4,00,000 Fixed assets less depreciation 4,80,000 9,20,000
    Preference share capital 2,00,000 2,00,000 Stock 80,000 40,000
    Reserves 40,000 60,000 Debtors 2,00,000 1,50,000
    Profit and loss account 30,000 40,000 Bills receivable 40,000 60,000
    Bank overdraft 1,00,000 4,60,000 Prepaid expenses 20,000 24,000
    Creditors 80,000 1,00,000 Cash at bank 1,00,000 1,66,000
    Provision for taxation 40,000 50,000
    Proposed Dividend 30,000 50,000
    9,20,000 13,60,000 9,20,000 13,60,000
     

    From the above prepare Vertical Balance Sheet suitable for analysis and do Horizontal comparison showing absolute Increase/Decrease and Percentage.

  • Q.7 (a) On the morning of 31st December, 2005, the business had stock costing Rs. 50,000, Debtors Rs. 1,70,000, creditors Rs. 1,90,000 and cash at Bank Rs. 50,000. On that day the business has the following transactions: 16  
    1. Purchased goods for cash Rs. 5,000 and credit Rs. 20,000.
    2. Sale of Goods for cash Rs. 25,000 (cost of Goods Sold Rs. 20,000).
    3. Collection from Debtors Rs. 45,000.
    4. Paid Rent for Jan. and Feb. 2006 in advance Rs. 20,000.
    5. Payments to creditors Rs. 1,00,000.
  • All receipts and payments are by cheques.
  • You are required to compute on the morning and evening of 31st December, 2005,

  • (i) Current Ratio.
  • (ii)Acid Test Ratio.
  • (b) Stock Turnover of X Ltd. is 8 times.   4  
  • Sales for the year are Rs. 5,00,000 and Gross Profit Ratio is 25% on cost.
  • Closing Stock is Rs. 10,000 more than Opening Stock
  • Find out closing stock.
  • Q.8 A company plans to manufacture and sell 400 units of domestic appliances per month at price of Rs. 600 each forthe calendar year 2007. The ratio of cost of selling price are as follows: 16  
  • % of selling price
    Raw material 30
    Packing material 20
    Direct lab our 15
    Direct expenses 5
     

    Fixed overhead are estimated at Rs. 4,32,000 per annum.

  • Stock were maintained as per following.
  • Raw material 30 days
    Packing material 15 days
    Work in progress 7 days
    Finished goods 200 Units
     
  • Following additional information is given:
    1. Credit sales represent 80% and customers enjoy 30 working days credit. Balance 20% are cash sales.
    2. Creditors allow 21 working days credit for payment.
    3. Lag in payment in overhead and expenses is 15 working days.
    4. Cash requirements to be 12% of net working capital excluding cash.
    5. Working days in a year are taken as 300.
    Prepare working capital requirement for the year 2007.
  • Q.9 Write short notes on any four: 16  
  • (a) Classification Assets.
  • (b) Drawbacks of comparative statements in Interpretation of final accounts.
  • (c) Selection of Accounting Software.
  • (d) MIS.
  • (e) Explain "Fund" and "Flow of Funds".
  • (f) Consequences of Inadequate working capital.
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