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Management Accounting
Time: 3 hours
April -1999
Marks: 100
 
Q.1.      The financial statements of XYZ Ltd. for the past two years are summarised below:
 
Liabilities 31st Dec. 1997Rs. 31st Dec. 1998Rs. Assets 31st Dec. 1997Rs. 31st Dec. 1998Rs.
Creditors 32,000 25,000 Cash   2,000
Doubtful Debts Reserve 5,000 5,000 Debtors (Net) 60,000 45,000
Depreciation Provision 15,000 20,000 Stock 55,000 45,000
Bank Overdraft 12,000 --- Prepaid Expenses 3,000 4,000
General Reserves 42,000 18,000 Temporary Investment 10,000 12,000
Debentures 50,000 50,000 Loans: (Receivable after 4 years) 3,000 4,000
Debenture Interest:     Fixed Assets 1,35,000 1,40,000
Accrued & Due 2,000 3,000 Trade Investments 10,000 15,000
Accrued but not Due 3,000 2,000      
Outstanding Expenses 1,000 1,000      
Share Capital 1,14,000 1,43,000      
Total Rs. 2,76,000 2,67,000 Total Rs. 2,76,000 2,67,000
   
 

Other Information: 1/5 of the Debentures are redeemable every year from January 1, 1999 onwards.

 

Company had a practice of valuing stock 10% above the cost as on 31-12-1997 but 105 below the cost from 31-12-1998 onwards, prior to this stock was valued at cost. After making the above adjustments you are requested to:-

 

a) Prepare a schedule showing itemwise changes in working capital indicating therein in particular.

14

 

i) Quick Assets

 

ii) Non Quick Assets

 

iii) Total Current Assets

 

iv) Quick Liabilities

 

v) Non Quick Liabilities

 

vi) Total Current Liabilities

 

vii) Working Capital Gap and Net Working Capital and

   
 

b) Also calculate following ratios:

6

 

i) Current Ratio

 

ii) Quick Ratio

 

iii) Proprietary Ratio.

 

You may further assume that Interest Accrued but not due becomes due in the following year.

   
Q. 2.

From the following data prepare comparative Balance Sheets in vertical form at 31-3-1998 and 31-3-1999 of M/s. APJ Ltd.
 

12

 
Balance Sheet as at 31st March
Liabilities 1998Rs. 1999Rs. Assets 1998Rs. 1999Rs.
Share Capital 70,000 80,000 Building 55,000 80,000
P & L A/c 20,000 20,000 Machinery 43,000 50,000
Debentures 20,000 30,000 Stock 25,000 5,000
Other Secured Loans 10,000 20,000 Debtors 15,000 10,000
Creditors 10,000 3,000 Cash 2,000 15,000
Bank Overdraft 8,000 4,000      
Outstanding Expenses 2,000 3,000      
Total Rs. 1,40,000 1,60,000 Total Rs. 1,40,000 1,60,000
 
 

Also please offer your comments.

   
Q. 3.

Shiv Leela Ltd. furnishes you with the following Financial Statement.

 
Balance Sheet as at 31st March, 1999
  Rs.   Rs.
Share Capital:
Equity  12% Preference

1,00,000   
50,000   
Building                    2,00,000
Less: Depreciation        15,000
1,85,000   
Reserve & Surplus 35,000    Short Term Investments 40,000    
10% Debentures
(secured by Mortgage)
50,000    Stock Debtors 35,000    
 
30,000   
Bills Payable 15,000    Bank 10,000    
Creditors for Goods 20,000       
Outstanding Expenses 10,000       
Provision for Taxation 10,000       
Proposed Dividends 10,000       
Total Rs. 3,00,000    Total Rs. 3,00,000    
 
Profit and Loss Account for the year ended 31-3-1999.
  Rs.   Rs.
To Opening Stock 30,000        By Sales 3,00,000     
To Purchases 1,80,000        By Closing Stock 35,000     
To Expenses:      
Administration  25,000           
Selling 30,000           
Financing 5,000           
To Depreciation 15,000           
To Provision for Taxation 10,000           
To Proposed Dividends 10,000           
To Balance C/f. 30,000           
Total Rs. 3,35,000         Total Rs. 3,35,000
   
 

You are required to:

 

i) Convert the above into common-size statements in Vertical form.

12

 

ii) Comment on above briefly.

4

   
Q. 4.

The following are some figures in the Balance Sheets as on 31st March of an entity.

 
Particulars
1996
Rs.
1997
Rs.
1998
Rs.
1999
Rs.
Fixed Assets at Cost
80,000
1,20,000
1,60,000
2,00,000
Accumulated Provision for Depreciation
(3/5 of wdv)
(5/7 of wdv)
(50% of cost)
(150% of wdv)
Current Assets
5,00,000
6,00,000
7,20,000
8,00,000
Working Capital
3,50,000
4,30,000
5,20,000
5,60,000
Long term Borrowings
1,50,000
(20% of Net Capital Employed)
50,000
Nil
New worth (excluding undistributed profits or losses)
2,00,000
?
4,50,000
?
Accumulated Profit & Loss Account
?
70,000
?
?
   
 

Prepare Balance Sheets in vertical form and trend analysis in percentage form.

12

 

Also prepare fund flow for the year ended 31-3-1999.

4

   
Q. 5.

a) Calculate Return on Capital employed and return on proprietors' or shareholders' funds or net worth from the following information: (figures in Rupees lakhs)

8

 

i)   Share Capital Rs. 200.00

 

ii) General Reserve Rs. 150.00

  iii) Investment Allowance Reserve Rs. 50.00
  iv) 15% Long Term Loan Rs. 300.00 (throughout the year)
  v) Net Profit after tax Rs. 56.00 and tax rate is 60%
  vi) Proposed Dividends Rs. 10.00
   
 

b)Calculate the average collection period and frequency of turnover of debtors from the following    information:-

8

 

i) Average Inventory Rs. 3,60,000

 

ii) Debtors Rs. 2,30,000

 

iii) Inventory Turnover Ratio 6 times

 

iv) Gross Profit Ratio 10%

 

v) Credit Sales to total sales 20%

 

vi) Assume 360 days to an year.

   
Q. 6.

Prepare i) Statement of Changes in Working Capital ii) Fund Flow Statement for the year ended 31st December, 1998, from the following Balance Sheets of Shibani Ltd.

12

 
Liabilities 1997
Rs.
1998
Rs.
Assets 1997
Rs.
1998
Rs.
Equity Share Capital
(Shares of Rs. 10 each Rs. 8 paid up)
1,20,000    --     Fixed Assets 2,10,000      2,30,000
Equity Share Capital
(Shares of Rs. 10 fully paid)
--        1,80,000      Investments 40,000     52,000
12% Preference Share Capital 1,00,000      70,000      Stock 1,10,000     1,36,000
Share                 Premium 5,000      3,500      Debtors 90,000     88,000
General Reserve 80,000      40,000      Cash & Bank 14,000     33,000
Profit & Loss A/c. 26,600      45,000      Preliminary Expenses 2,000     1,000
15% Debentures 20,000      60,000           
Creditors 80,000      95,000           
Proposed Equity Dividend 14,400      22,500           
Provision for Taxation 20,000      24,000           
Total Rs. 4,66,000      5,40,000           Total Rs. 4,66,000     5,40,000
 

Additional Information is as follows:-

 

i) During the year (i.e. 1998), the company has paid a bonus of Rs. 2 per share to make the partly paid shares fully paid up and for this purpose General Reserve was utilised.

 

ii) During the year, the company then issued new equity shares as rights shares in the rate of one for every five held.

 

iii) Preference Shares were redeemed at 5% premium on 31st December, 1998.

 

iv) During the year, a machine costing Rs. 12,000 on which depreciation written off to date was Rs. 3,000 was sold for Rs. 9,500 and current year's depreciation provided on Fixed Assets was Rs. 15,000.

 

v) Paid proposed equity dividend of last year and also paid interim dividend of Rs. 9,000.

 

vi) The preference shares dividend was paid on 31st December each year.

 

vii) Income-tax of Rs. 24,000 was paid during the year.

   
Q. 7. The financial position of Anu and Parmanu as on 1st July, 1997 and 30th June, 1998 was as follows:
 
Assets
1st July, 1997
Rs.
30th June, 1998
Rs.
Cash
4,000         
3,600   
Debtors
35,000            
38,400    
Stock
25,000         
22,000    
Land
20,000         
30,000    
Building
50,000         
55,000    
Machinery
80,000         
86,000    
Total Assets Rs.
2,14,000           
2,35,000    
Liabilities    
Mrs. Anu's Loan
--          
20,000    
Bank Loan
30,000        
25,000    
Current Liabilities
36,000        
41,000    
Capital Accounts
1,48,000         
1,49,000    
Total Liabilities Rs.
2,14,000           
2,35,000    
  Other Information:
  1) Drawings during the year Rs. 26,000.
  2) Provision for Depreciation:
 
  1st July, 1997 30th June, 1998
Machinery 27,000 36,000
Building 8,000 10,000
16
  Prepare cash flow statement showing cash from operations separately for the year ended 30th June, 1998.  
Q. 8. ABC Ltd. provides you with the following information with the request to prepare a statement of working capital.

16

  A. Cost Records: cost of product is Rs. 10 per unit of which 50% is accounted by materials, overheads are 2/3 of the labour cost per unit.
B.
 
Sales Target (Annual): Rs. Terms
Zone A - (Cost + 50%) 6,00,000 Cash
Zone B - (Cost + 25%) 5,00,000 One Month Credit
Zone C - (Cost + 20%) 1,92,000 Two Months Credit
 
  C. Other Details:
 
i) Stock of both Raw Materials and Finished Goods are to be kept for two months, while processing takes one month.
ii) 20% of supplies of material are ensured on cash payment, 20% of supplies are taken on advance payment for 15 days and remaining suppliers have agreed to extend one month credit.
  D. Time lag in payment of wages and overhead is 1/2 month.
  E. Debtors are valued at cost.
  F. Cash Balance is always kept at 10% of Net Working Capital inclusive of Cash.
   
Q. 9. Write short notes on (any four):

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  a)  Features of a Personal Computer
  b)  Funds from Operations
  c)  Debtors' Velocity
  d)  External and Internal Analysis of Financial Statements
  e)  Significance of Management Accounting
  f)   Distinction between Gross and Net Working Capitals.

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