Management Accounting

October 2008

1. Questions No. 1 is compulsory and carries 20 marks.
2. Attempt any five from the rest 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 ABC Ltd. provides you following Balance - sheets as on 31 st March: 20
• Trading and Profit and Loss Account for the year ending on 31st March, 2007

Liabilities	2006 Rs.	2007 Rs.	Assets	2006 Rs.	2007 Rs.
Equity Share Capital	15,00,000	24,00,000	Fixed Assets	30,00,000	31,00,000
10% Preference Share Capital	20,00,000	15,00,000	Investments	22,60,000	28,00,000
Profit & Loss A/c	20,08,000	20,58,000	Inventory	9,20,000	8,00,000
15% Debentures	3,00,000	10,00,000	Debtors	12,00,000	11,00,000
Bank Loan (Long Term)	4,40,000	-	Bills Receivable	5,75,000	6,00,000
Creditors	12,48,000	8,60,000	Cash	2,21,000	5,48,000
Provision for Tax	4,80,000	7,30,000
Proposed Dividend	2,00,000	4,00,000
Total	81,76,000	89,48,000	Total	81,76,000	89,48,000

• The following information is given for the year ended on 31st March, 2007.
1. 10% Preference shares were redeemed out of fresh issue of Equity shares on 1st April, 2006.
2. Partly paid Equity shares were converted into a fully paid shares by utilizing Rs. 4,00,000 from Profit and Loss A/c during the year.
3. Interim dividend of Rs. 1,00,000 was paid.
4. Depreciation was charged during the year Rs. 2,00,000.
5. Fixed Assets were revalued in excess of book value and amount was credited to Profit and Loss A/c.
6. Dividend on Equity shares paid for the year 2005-08 Rs. 2,00,000.
7. Tax paid Rs. 5,50,000.

Prepare fund flow statement and statement showing changes in working capital in detail for the year ended on 31st March, 2007.

• Q 2. You are required to prepare a statement showing the working capital required to finance the level of activity of 12,000 Units per year from the following information: 16
1. Raw materials are in stock on an average for 2 months
2. Materials are in process on an average for half a month.
3. Finished goods are in stock on an average for one month.
4. Credit allowed by the suppliers is 1½ months of purchase of raw materials and credit allowed to the customers is 2 ½ months.
5. Lag in payment of wages and overheads is one month.
6. Cash and Bank balance is expected to be 10% of Net working Capital before considering the Cash and Bank balance.
7. Activities are spread evenly through out the year:
• Cost Per Unit:

Raw Material	Rs. 10
Wages	Rs. 5
Total Cost	Rs. 30

• Profit is 20% on selling price.
• Q 3. The following is financial information of ZN Ltd. for 3 years ended on 31st December every year. 16

Particulars	2005 Rs.	2006 Rs.	2007 Rs.
Share Capital	1,50,000	1,80,000	1,90,000
Gross profit	3,50,000	3,50,000	4,00,000
Current liabilities	40,000	?	?
Fixed Assets	2,40,000	2,50,000	2,35,000
Long Term Loan	1,00,000	?	1,20,000
Cost of Goods Sold	?	4,00,000	3,00,000
Working Capital	60,000	4,50,000	1,40,000
Net Worth	2,00,000	2,20,000	2,55,000
Current Assets	?	1,20,000	2,00,000
Sales	5,50,000	7,50,000	?
Capital Employed	3,00,000	?	?
Reserve and Surplus	?	40,000	65,000

• You are required to prepare vertical Trend Financial Statement taking 2005 as the Base.
• Q 4. Complete the following Balance-sheet from the information given below: 16

Liabilities	Rs.	Assets	Rs.
Equity Share Capital (Rs.100 each)	?	Fixed Assets	?
Reserve and Surplus	?	Current Assets
20% Debentures	5,00,000	Stock	?
Current Liabilities		Debtors	?
Sundry Creditors	?	Bank / Cash Balance	?
Provision for Tax,(Current Year)	?
	?		?

• Following information is available:
• 1. Gross profit ratio is 25% and which is Rs. 12,00,000.
  2. Operating expenses (including Debenture interest) Rs. 8,00,000.
  3. Rate of Income Tax is 50%.
  4. Purchases and Sales are on credit basis.
  5. Debtors Turnover Ratio (Sales / Debtors) = 12 times.
  6. Creditors Turnover Ratio (Cost of sales / creditors) = 12 times
  7. Earning per share Rs. 20
  8. Stock Turnover Ratio = 10 times
  9. Debt Equity Ratio 0.25 : 1
  10. Current Ratio 2 : 1.
• Q.5 Prepare a Comparative Revenue Statement in Vertical Form from the following details: 16

Nilkamal Ltd.
Trading, Profit and Loss Account for the year ended 31st March
Particulars	2006 Rs.	2007 Rs.	Particulars	2006 Rs.	2007 Rs.
To Opening Stock	2,25,000	3,00,000	By Sales	45,00,000	60,00,000
To Purchases	22,50,000	32,10,000	By Closing Stock	3,00,000	3,60,000
To interest on Debenture	1,50,000	1,50,000	By Dividend	12,000	39,000
To Depreciation:			By Profit on Sale of Machinery	24,000	-
Furniture	15,000	15,000
Machinery	36,000	30,000
To Administrative Expenses	2,94,000	4,41,000
To Selling Expenses	4,56,000	7,53,000
To Carriage Outward	75,000	3,15,000
To Loss by Fire	-	15,000
To Wages	1,95,000	3,00,000
To Provision for Tax	5,70,000	4,35,000
To Net Profit	5,70,000	4,35,000
	48,36,000	63,99,000		48,36,000	63,99,000

• Q.6 Telestar Ltd. gives you the following Balance - Sheets for the year ended 31 st March, 2006 and 2007. Prepare a Cash Flow Statement for the year ended 31st March, 2007 as per As - 3 by indirect method. 16

Liabilities	31-3-06 Rs.	31-3-07 Rs.	Assets	31-3-06 Rs.	31-3-07 Rs.
Equity Share Capital	1,20,000	1,20,000	Land	2,10,000	2,70,000
5% Preference Share Capital	90,000	60,000	Building	2,85,000	2,70,000
General Reserve	30,000	42,330	Stock	27,000	36,300
Profit and Loss Account	15,240	28,080	Debtors	40,440	38,460
Provision for Tax	17,000	8,000	Prepaid Expenses	25,880	17,000
Creditors	3,37,920	3,81,990	Bank Balance	15,840	3,240
			Misc Expenditure	6,000	5,400
Total	6,10,160	6,40,400	Total	6,10,160	6,40,400

• Other information for the year ended 31st March,2007
• (1) The company has paid Interim dividend of 5 %on Equity shares.
• (2) Preference shares were redeemed during the year at 10% premium.
• (3) Income Tax paid during the year Rs. 15,000.
• Q.7 From the following information calculate: 16
• (a) Return on Capital Employed.
• (b) Debtors turn over ratio (in Times)
• (c) Stock - working capital ratio
• (d) Current ratio
• (e) Proprietory ratio (on the basis.of Total Fund)
• Some of relevant balances as on 31st March, 2007 are given below:

Particulars	Amount (Rs.)
Equity share capital (of Rs. 10 each)	2,00,000
6% Preference share capital	1,00,000
8% Debentures	1,50,000
Debtors	18,000
Creditors	15,000
Cash in hand	20,000
Bills receivable	12,000
Bank Overdraft	8,000
Reserves and Surplus	43,000
Closing Stock	32,500
Provision for taxation	35,000
Proposed dividends	10,000

• Other information for the year 2006-07

Particulars	Amount (Rs.)
Sales	10,00,000
Cost of Sales	7,50,000
Net profit before Tax	1,00,000

• Q.8 The following information regarding Maruti car Ltd. for the year ended 31st March.2007 is given to you. 16  

	Rs.
Sales	75,00,000
Purchases	50,00,000
Opening Stock (01/04/2006)	5,00,000
Closing Stock (31/03/2007)	7,50,000
Return Inward	75,000
Carriage Outward	57,000
Carriage Inward	50,000
Return Outward	50,000
Salesmen Salary	75,000
Advertising and Publicity	2,52,000
Salesmen Travelling Allowance	7,500
Office Salary	4,00,000
Computer Repairs and Maintenance	84,000
Rent, Rates, Taxes	4000
Printing and Stationery	400
Bad Debts	75,750
Purchase of Computer	40,000
Dividend on Shares (Cr)	10,000
Staff Welfare Expenses	44,000
Interest (Dr.)	50,000
Loss on Sales of Shares	1,25,000

• Rearrange above information in Vertical Form suitable for analysis.
• Q.9 (a) From the following information calculate the amount of Creditors 0pening Stock and Closing Stock: 5

Cost of Sales	Rs.3,25,000
Gross Profit Ratio	35%
Stock Turn Over ratio	2.5
Creditors Turnover Ratio (On Purchaes)	8

• Opening Stock is more by Rs. 6,000 than Closing Stock.
• (b) Working Capital is Rs. 3,00,000.Quick Ratio is 1.25 : 1.and Current Ratio is 2:1.The Bank Overdraft is Rs.20,000.Non quick assets includes closing stock only.Calculate Closing Stock. 4
• (c) Write short notes on : (any two) 6
• i Fund Flow Statement and Cash Flow Statement.
• ii Limitations of Ratio Analysis.
• iii Trend Analysis.
• iv MIS Reporting.