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Auditing & Costing

October 2008

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

Section I-(Auditing)

  • Q.1 (a) What are the advantages and disadvantages of Auditing? Explain. 10
  •   (b) Discuss the different techniques of Audit. 8
  • Q.2 (a) What are the qualifications and disqualifications of a Company Auditor? 8
  •   (b) Explain the meaning and objectives of verification. 8
  • Q.3 (a) State the disclosure requirements relating to "Fixed Assets" as per Schedule-VI of the Companies Act, 1956. 8
  •   (b) What do you mean by Test check? What are its advantages and disadvantages? 8
  • Q.4 (a) Explain basic principles of Auditing. 8
  •   (b) Scrutinise and comments on the following account appearing in the books of Kalakar Ltd. 8
  • Preliminary Expenses A/c
    Date Particulars Amount Date Particulars Amount
    10-01-07 To Bank A/c (paid to Raj Printers) 10,000 31-03-07 By Profit and Loss A/c 79,300
    15-01-07 To Bank A/c (Natwarlal & Co. Solicitors) 26,500 31-03-07 By Balance C/d 3,17,200
    25-01-07 To Equity Share capital
    (Ramanlal, Promoter) 1,00,000
    30-01-07 To Equity Share capital
    (Rajesh, Promoter) 2,60,000
    Total
    3,96,500
    Total
    3,96,000
  • Q.5 Write short notes on any four of the followings:- 16
  •   (a) Clean Audit Report.  
  •   (b) Casual Vacancy.  
  •   (c) Audit in Computer Environment.  
  •   (d) Vouching of Cash Sales.  
  •   (e) Audit Certificate.  
  •   (f) Internal Check.  
  • Section II - (Costing).

  • Q.6 Deepali Ltd. submits the following information in respect of its product which passes through three consecutive process viz U, P and A for the month ended 29th February, 2008: 20
  • Particulars
    U Process P Process A Process
    Quantitative Information
    Basic Raw Material at Rs. 15.00 per k.g. (Kgs.)
    60,000
    -
    -
    Output during the month (Kgs.)
    46,500
    31,000
    19,000
    Stock of Process Output
    On 01-02-2008 (Kgs.)
    6,000
    5,000
    4,000
    On 29-02-2008 (Kgs.)
    7,500
    6,000
    3,000
    Other Additional Information
    Process Material (Rs.)
    2,55,000
    5,40,000
    4,50,000
    Direct Labour (Rs.)
    1,45,000
    1,05,000
    90,000
    Machine Overheads
    80% of
    150% of
    40% of
    Direct
    Other
    Process
    Labour
    Factory
    Material
    Overheads
    Other Factory Overheads (Rs.)
    1,68,000
    2,25,000
    97,000
    Normal Loss (%)
    20%
    30%
    40%
    Value of Opening Stock per kg. (Rs.)
    29
    70
    145
    Scrap Value Per Kg. (Rs.)
    12
    14
    16
  • The Percentage of normal loss is computed on the number of units entering in the process concerned. Closing stock is to be valued at the respective cost of each process during the month. You are required to prepare:

  •   (a) Process Accounts  
  •   (b) Process Stock Accounts  
  •   (c) Normal Loss Account  
  •   (d) Abnormal Loss Account  
  •   (e) ) Abnormal Gain Account.  
  • Q.7 M/s. ABC Enterprises secured a contract for Rs. 45,00,000 and as per the Contract Agreement, the contractee would pay 90% of the work certified immediately upon the Architects Certificate and the balance would paid on completion of the contract. The work was commenced on 01-04-2006. The Actual Expenditure upto 31st March, 2007 and Estimated Expenditure upto,30th September, 2007 are as follows: 15
  • Particulars
    Actual
    Expenditure Upto
    31-03-2007
    Rs.
    Estimated
    Expenditure Upto
    30-09-2007
    Rs.
    Direct Materials
    10,50,000
    9,25,000
    Indirect Materials
    1,77,500
    2,37,500
    Direct Wages
    2,60,820
    2,49,180
    Sub-Contract Charges
    31,030
    16,470
    Architect Fees
    57,500
    90,000
    Administrative Overheads
    2,14,390
    1,37,110
    Hiring Charges for Equipments
    1,45,610
    79,390
    Closing Materials at site
    1,29,000
    -
    Certified Work (Cummulative)
    22,50,000
    45,00,000
    Uncertified Work
    56,250
    -

    A Special Machinery Costing Rs. 4,00,000 Was purchased for use on the contract. Its estimated scrap value at the end of the contract would be Rs. 40,000.

    It was decided that the profit to be taken credit for the year ended 31-03-2007 should be that proportion of the estimated net profit to be realised on the completion of the contract which the cash received for the year bears to the contract price.Prepare Contract Account for the year ended 31-03-2007 and Estimated Contract Account.

  • Q.8 Following is the Summarised Trading and Profit and Loss account of Sheetal Industries for the year ended 31-03-2006. 15
  • Particulars Rs. Particulars Rs.
    To Opening Stock of Raw Materials
    9,000
    By Sales (12000 Units)
    4,80,000
    To Purchases of Raw Materials
    2,10,000
    By Closing Stock
    To Carriage Inwards
    5,000
    Finished Goods (3000 Units)
    66,000
    To Wages
    75,400
    Raw Materials
    24,000
    To Factory Expenses By Interest on Securities
    17,000
    Paid
    52,400
    By Profit on Sale of Assets
    1,20,000
    Add: Outstanding
    2,200
    54,600
    To Administration Overheads
    52,500
    To Selling and Distribution Overheads
    96,000
    To Goodwill Written-off
    12,500
    To Interest on Loans
    1,500
    To Dividend
    2,500
    To Income Tax
    5,000
    To Net Profit
    1,83,000
    Total
    7,07,000
    Total
    7,07,000
  • A standard unit was manufactured during the year. The cost accounting records showed the following:
  •   (a) Materials consumed @ Rs. 10 per unit produced  
  •   (b) Direct Wages @ Rs. 6 per unit produced.  
  •   (c) Factory Overheads were absorbed @ 25% of Prime Cost.  
  •   (d) Administration Overheads were absorbed @ Rs. 5 per unit produced.  
  •   (e) Selling and Distribution Overheads, were absorbed @ Rs. 7 per unit sold  
  •   You are required to prepare the detailed cost statement for the year ended 31-03-2006 and a statement of reconciliation.  
  • Q.9 (a) From the following, calculate Labour cost variance Labour Rate variance and Labour efficiency variance: variance : 9
  • Type of Workers
    Standared Actual
    No. of Workers
    No. of Hours
    Rate per Hour (Rs.)
    No. of Workers
    No. of Hours
    Rate per Hour (Rs.)
    Skilled
    30
    50
    4.00
    25
    50
    4.50
    Semi Skilled
    20
    30
    3.00
    30
    30
    3.00
    Unskilled
    10
    20
    2.00
    10
    15
    2.50
  • (b) From the following records of Disha Ltd. Calculate. 6
  •   (i) Break-Even Point in Rupees.  
  •   (ii) Sales required to earn profit of Rs. 72,000.  
  •   (iii) Profit when sales are Rs. 4,75,000.  
  • Rs.
    Fixed Cost 2,40,000
    Variable Cost Per Unit 8.00
    Selling Price Per Unit 20.00
  • Q.10 Write short notes on any three : 15
  • (a) Features of Marginal Costing.
  • (b) Margin of Safety.
  • (c) Significance of Variance Analysis.
  • (d) Classification of Cost of Function Basis.
  • (e) Need for Reconciliation for Cost and Financial Records.
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