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Management Accounting

October 2007

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 From the following Balance Sheets of Z. Ltd. prepare a Cash Flow Statement as per AS-3 for the year ended 31 December, 06 by indirect method. 20
  • Liabilities 2005
    Rs.
    2006
    Rs.
    Assets 2005
    Rs.
    2006
    Rs.
    Equity Share Capital 2,00,000 2,50,000 Fixed Assets 3,02,500 2,85,000
    10% Pref. Share Capital 1,00,000
    -
    Debtors 60,000 70,000
    5% Debentures (issued on 1-7-2006)
    -
    50,000 Stock 1,00,000 90,000
    Capital Redemption Reserve
    -
    50,000 Bank 45,000 30,000
    Profit and Loss A/c. 1,25,000 30,000 Preliminary Expenditure 30,000 20,000
    Creditors 75,000 70,000
    Bills Payable 37,500 45,000
    5,37,500 4,95,000 5,37,500 4,95,000
  • Additional Information:

    1. Preference Shares were redeemed at 10% premium on 1-7-2006 with half yearly dividend.
    2. Fixed assets were purchased for Rs. 97,500 on 1-10-2006.
    3. Dividend of Rs. 20,000 on equity shares was paid.
    4. Fixed Assets having original cost of Rs. 1,00,000 on which accumulated Depreciation was Rs. 30,000 was sold on 30-9-2006 at Rs. 40,000.
  • Q 2. From the following figures, prepare an estimate of the working capital: 16
  • Production 30,000 units
    Selling Price per unit Rs. 10
    Raw Material 60% of selling price
    Direct wages 1/6th of raw material.
    Overheads Twice the Direct wages
    Material in hand 2 months requirement
    Production time 1 month
    Finished goods in stores 3 month
    Credit for material 2 month
    Credit allowed to customers 3 month
    Average cash balance Rs. 40,000
     

    Wages and overheads are paid in the beginning of next month. In production all the material are charged in the initial stage and wages and overheads accrue evenly.

  • Q 3. Prepare a funds flow statement from the following details presented to you by Anand Chemical Ltd. 16
  • Balance Sheet as at 31st March

    Liabilities 2006
    Rs.
    2007
    Rs.
    Assets 2006
    Rs.
    2007
    Rs.
    Share Capital 4,00,000 5,00,000 Land and Building 4,00,000 3,80,000
    Reserves 1,00,000 1,20,000 Plant and Machinery 3,00,000 3,40,000
    Profit and Loss A/c. 50,000 60,000 Goodwill
    10,000
    Bank Loan 1,40,000
    Working Capital 50,000 20,000
    Provision for Taxation 60,000 70,000
    7,50,000 7,50,000 7,50,000 7,50,000
  • Other Details:
    1. Company paid dividend at 11.5% on opening capital.
    2. New shares were issued to a vendor for the business sold by him comprising stock Rs. 40,000 and Machinery Rs. 50,000.
    3. Machinery purchased for cash Rs. 60,000.
    4. Depreciation written off during the year: Building Rs. 20,000 and Machinery Rs. 35,000.
    5. Old Machinery was sold during the year at a Profit of Rs. 5,000.
    6. Income Tax paid during the year Rs. 54,000.
  • Q 4. Following is the Balance Sheet of Abhijeet Ltd. as on 31st March, 2006. 16
  • Liabilities Rs. Assets Rs.
    Equity Share Capital 3,90,000 Cash in Hand 15,000
    10% Preference Share Capital 2,00,000 Cash at Bank 90,000
    9% Debenture 2,50,000 Preliminary Expenses 20,000
    General Reserve 60,000 Goodwill 1,00,000
    Capital Reserve 50,000 Building 3,00,000
    11 % Bank Loan 1,00,000 Investment (Long-Term) 2,00,000
    Creditors 1,25,000 Furniture 2,50,000
    Bank Overdraft 1,35,000 Plant and Machinery 3,00,000
    Provision for Tax 1,40,000 Debtors 1,50,000
    Proposed Dividend 30,000 Prepaid Expenses 50,000
    Profit and Loss A/c 1,40,000 Stock 2,00,000
    Depreciation provision 80,000 Calls in arrears (Equity) 10,000
    Commission on Issue of Shares 15,000
    17,00,000 17,00,000
  • Present the above Balance Sheet in vertical form and show the following:
    1. Net worth.
    2. Borrowed Fund.
    3. Capital Employed.
    4. Net Block.
    5. Working Capital.
    6. Fictitious Assets.
  • Q 5. Rearrange above data of Petrol Ltd. In suitable form for analysis and calculate Trend Percentage and offer your comments. 16
  • Year
    Fixed
    Investments
    Current
    Preliminary
    Total
    Owner's
    Term
    Debenture
    Total
    Assets
    Assets
    Expenses
    Assets
    Fund
    Loan
    Liabilities
    2000
    20
    10
    40
    5
    75
    20
    20
    35
    75
    2001
    22
    9
    30
    4
    65
    20
    20
    25
    65
    2002
    24
    8
    20
    3
    55
    20
    20
    15
    55
    2003
    26
    7
    30
    2
    65
    40
    20
    5
    65
    2004
    28
    6
    40
    1
    75
    60
    15
    0
    75
  • Q 6. Following are the financial statements of two similar companies: 16
  • Balance sheet as at 31st December, 2006
  • Liabilities X Ltd.
    Rs.
    Y Ltd.
    Rs.
    Assets X Ltd.
    Rs.
    Y Ltd.
    Rs.
    Share Capital Land and Building 1,400 1,200
    Equity Share of Rs. 10 each 4,000 4,000 Plant 4,100 3,200
    Revenue Reserve 1,950 1,600 Stock 2,850 2,100
    8% Debenture 1,000 1,000 Debtors 2,600 1,900
    Trade Creditors 2,800 1,400 Investment (Long Term)
    -
    300
    Other Creditors 250 200 Bank 100 300
    Provision for Tax 900 700 Deposit 150 100
    Proposed Dividend 300 200
    11,200 9,100 11,200 9,100

    Income Statement for 2006

    X Ltd. Y Ltd. X Ltd. Y Ltd.
    Cost of Sales 10,800 9,000 Sales 15,000 12,000
    Operating Expenses 2,900 2,000
    Taxation 550 410
    Net Profit after Tax 750 590
    15,000 12,000 15,000 12,000
  • On the basis of above information. You are required to compute separately the following ratio:

    1. Capital Gearing Ratio.
    2. Current Ratio.
    3. Debtors Turnover Ratio.
    4. Return on Proprietory Fund.
  • Vertical final accounts need not be prepared.
  • Q 7. From the following information find out missing figures and rewrite the Balance Sheet: 16
    1. Current Ratio 2:1
    2. Acid Test Ratio 5:3
    3. Reserves and Surplus are 50% of Equity Share Capital.
    4. Long Term Debts are 60% of Equity.
    5. Stock Turnover Ratio 10 times.
    6. Gross Profit Ratio on sales 20%.
    7. Sales are Rs. 15,62,500 (25% Cash Sales and balance on credit)
    8. Closing stock is Rs. 50,000 more than Opening Stock.
    9. Accumulated Depreciation is 1/6 original Cost of Fixed Assets.

Balance Sheet as at 31st March, 2007

Liabilities
Rs.
Assets
Rs.
Equity Share Capital
?
Fixed Assets (at cost)
?
Reserves and Surplus
?
Less: Accumulated Depreciation
?
?
Long Term Loans
9,00,000
Stock
?
Bank Overdraft
50,000
Debtors
2,00,000
Creditors
?
Cash
?
?
?
  • Q.8 Complete the following common size Income Statement: 16  
Particulars
Rs.
%
Gross sales
9,90,000
?
Less: Sales Return
?
10
Net Sales
?
?
Less :Cost of Sales
?
40
Gross Profit
?
?
Less : Operating expenses
(a)Administrative Expenses
?
?
(b)Finance Expenses
?
2
(c)Selling and Distribution Expenses
72,000
?
Operating Net Profit
?
?
Add Non Operating Income
45,000
?
Less: Non Operating Expenses
?
15
Net Profit before Tax
?
30
  • Q.9 (a)Working Capital is Rs. 90,000. Total Debt are Rs. 1,95,000. Long Term Debt are Rs. 1,50,000. Stock is Rs. 37,500. Prepaid Expenses are Rs. 7,500. Calculate Liquid Ratio. (3)
  • (b) Find out Funds from operations from the following: 3  
Net Profit after tax and appropriations Rs. 1,00,000
Transfer to General Reserve Rs. 25,000
Proposed Dividend Rs. 15,000
Provision for Income Tax Rs. 10,000
Depreciation w/off Rs. 25,000
Profit on sale of Fixed Assets Rs. 10,000
  • (c) Write short notes on any two: 10  
  1. Trading on Equity.
  2. Operating Cycle.
  3. MIS Report.
  4. Limitations of Ratio Analysis.
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