March 2005

Management Accounting
March 2005

Time: 3Hours                                       Marks: 100
NB:
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. Brijesh started business by introducing capital of Rs. 1,00,000 on 1-4-2004. He has taken Term Loan from Bank of India of Rs. 4,00,000 at 12% interest & purchased premises of Rs. 3,00,000 & Furniture & Equipment of Rs. 1,50,000. His projected Trading & Profit & Loss Account for the first year ended 31st March, 2005 is as follows :-

 
Rs.
Rs.
 
Rs.
  Rs. 
To Opening Stock
 
--
By Sales
 
 
To Purchases
 
 
     Cash Sales
1,70,000
 
   Cash Purchases
50,000
 
 Credit Sales
8,50,000
 
   Credit Purchases
6,50,000
 
 
10,20,000
 
 
7,00,000
 
Less : Returns
20,000
10,00,000
Less : Returns
10,000
6,90,000
By Closing Stock
 
50,000
To wages
 
60,000
 
 
 
To Gross Profit c/d.
 
3,00,000
 
 
 
 
 
10,50,000
 
 
10,50,000
To Administrative Expenses
 
60,000
By Gross Profit b/d
 
3,00,000
To Selling Expenses
 
1,00,000
By Profit on sale of Equipment 
 
5,000
To Interest on Bank Loan
 
48,000
(Cost of Equipment sold Rs. 20,000)
 
 
To Depreciation on Equipment
 
30,000
 
 
 
To Net Profit
 
 
67,000
 
 
 
 
 Total
 
3,05,000
 Total 
 
3,05,000
Prepare Cash Flow Statement for the year ended 31st March,2005 as per AS-3& calculate cash & Bank Balance as on that date. Use Indirect Method. Balances on 31stMarch, 2005 expected are Debtors Rs. 1,50,000. Creditors Rs.50,000. Last quarter Interest on Bank loan is not yet paid.
Reconcile your answer by preparing projected Balance Sheet (invertical form) as at 31st March, 2005.   
 Q.2.The Balance Sheets of Chetan Ltd.as at 31st March, 2003 & 2004.16 


 
31-3-2003 Rs.
31-3-2004Rs.
Equity Share Capital (shares ofRs. 10 each fully called)
10,00,000
14,50,000
Less: Calls-in-Arrears
(Rs. 2 per share)
5,000
--
 
9,95,000
14,50,000
Add: Share Forfeiture Balance (Rs. 8 per share)
8,000
1,600
Paid up Equity Capital 
10,03,000
14,51,600
8% Redeemable Preference Share Capital
5,00,000
4,00,000
Securities Premium
1,00,000
40,000
Capital Reserve (Net profit on Forfeited Shares reissued)
--
16,500
General Reserves
2,47,000
3,49,000
Profit & Loss Account
1,50,000
7,42,900
Loans
5,00,000
10,00,00
 
 
25,00,000
40,00,000
Fixed Assets (At cost Less Dep.)
12,00,000
20,00,000
Investments
3,00,000
4,00,000
Working Capital
10,00,000
16,00,000
 
25,00,000
40,00,000
  Other Information :-  (1) During the year Equity shares on which calls were in arrears have been forfeited.  (2) Part of the forfeited
shares have been reissued at Rs. 7 per share.  (3) Bonus shares are issuedby using securities premium of Rs. 60,000 and General 
Reserve of Rs. 1,40,000.  (4) Depreciation on Fixed
Assets for the year was Rs. 1,80,000. 
 (5) Investments costing Rs.75,000 were sold at Rs. 1,00,000/  Prepare Fund Flow Statement for the year ended 31st March, 2004.    
Q.3.From the following information, you are required to prepare a Balance-Sheet in Horizontal form :16 
Current Ratio 
1.75
Liquid Ratio
1.25
Stock Turnover Ratio
9 times (Based on Closing
Stock)
Gross Profit Ratio
25%
Debtors collection period
1.5 months
Reserves and surplus to share capital
0.2
Cost of Goods sold to Fixed
Assets
1.2
Capital Gearing (Long term Loans to Share Capital)
0.6
Fixed Assets to shareholders Funds 
1.25
Sales for the year (All are on Credit Basis)
Rs.
12,00,000
Current Assets consisted of Cash, Stock & Debtors only. The company has not issued pref. shares. There are no Bank Overdraft & Fictitious Assets.    Q.4.Maza Ltd. was formed and incorporated on 1st April, 2002. You are given following trial balance as on 31st March, 2003 & 31st March, 2004. You are required to prepare vertical statement for both the years in columnar form.16
 
 
31stMarch, 2003
31stMarch, 2004
 
Dr. (Rs.)
Cr. (Rs.)
Dr. (Rs.)
Cr. (Rs.)
Land and Building 
25,50,000
--
25,50,000
--
 
Machinery
5,50,000
--
8,00,000
--
 Furniture
 
2,00,000
--
3,00,000
--
Sundry Debtors
3,00,000
--
5,00,000
--
Cash & Bank Balance
1,00,000
--
1,00,000
--
 
 
Sundry Creditors
--
2,00,000
--
3,00,00
Outstanding Expenses
--
20,000
--
20,000
Sales
--
20,00,000
--
30,00,000
Purchases
12,00,000
--
15,00,000
--
Opening Stock
--
--
3,00,000
-
Admin. Expenses
2,76,000
--
3,70,000
--
 
P/L Opening Bal.
--
--
--
7,44,00
Selling Expenses
80,000
--
1,10,000
--
 
Share Capital
--
20,00,000
--
 
20,00,000
 Unsecured Loan
--
10,36,000
--
4,66,000
 
52,56,000
52,56,000
65,30,000
65,30,000
  Adjustment : (1) Closing Stock as on 31 st  March, 2004 is Rs.4,00,000.    Q.5.a)  Horizon Ltd. engaged in the following transactions. Identify whether it is(a) an Operating  (b) an Investing(c) a Financing (d) none of the above.5 
(1) Dividend paid.
(2) Interest paid. 
(3) Issued long term bonds.
(4) Purchased long term investment.
(5) Equipment sold. 
(6) Dividend received on shares held.
(7) Purchased land. 
(8) Received cash from customers.
(9) Wages paid to workers. 
(10) Issued bonus shares out of general reserves.  b) Given below are some of the information of Parekar Ltd. as on 31st March, 2004.


Rs.
Debtors
30,000
Outstanding Manufacturing Exp.
17,000
Cash Balance
23,000
Bills Payable & Creditors
38,000
Machinery (Imported)
30,000
Income earned but not received 
6,000
Bank Overdraft
15,000
 Bills Receivable
7,000
Prepaid traveling expenses
4,000
Using above data calculate current ratio and liquid ratio and comment on it.6  c) Calculate Return on Capital employed and Return on Proprietor’s Fund from following information.
 
  Rs.
Equity Capital
3,00,000
General Reserves
4,00,000
Profit & Loss A/c
1,50,000 (Cr.)
Sundry creditors
2,00,000
Operating Profit 
3,50,000 (Before Interest & Tax)
 
Long Term Loan
2,00,000 (at 12% p.a.Interest)
Tax Rate is 30%. 
5   Q.6.Chinmag is carrying on trading business in India and gives the following information.
(1) Estimated sales in year Rs. 12,00,000.
(2) His Administrative & Selling expenses are estimated as fixed expenses Rs.2,000 per month and variable expenses equal to 5% of his turnover.
(3) He expects to fix sale price for each product which will be 25% in excess
of his cost of purchase.
(4) He expects to turnover his stock four times in the year.
(5) The sales & Purchases will be evenly spread throughout the year. 20% of sales will be on cash and balance on credit and allowed 2 months credit. He also expects one month credit from his suppliers.
(6) Cash Balance = Fixed and variable expenses for one month.16 Calculate his average working capital and prepare his income statement for the year.    Q.7.Vinod Honorable Ltd. presents you with their summarized Profit & Loss A/c with the request to convert the same into a common size statement in vertical form after incorporating the information given there under & briefly comment on it.16 Profit and Loss Account for the
year ended 31-12-2004  



Particulars
Rs.
Particulars
 Rs.
 
To Opening Bal. B/d.
1,00,000
By Sales
10,00,000
To Opening Stock : Raw Material Finished goods
2,00,000 1,50,000
By Dividend received
2,00,000
To Purchases :Raw Material
Finished goods
3,50,000 60,000
By Closing Stock : Raw Material Finished goods
2,00,000 3,00,000
To Manufacturing Exp. 
1,00,000
 
 
To Establishment Exp.
2,82,000
 
 
To Interim Dividend
35,000
 
 
To Provision for Tax
75,000
 
 
To Audit fees
2,500
 
 
To Directors Fees
2,000
 
 
To Preliminary Expenses
5,000
 
 
To Salaries & Wages
1,00,000
 
 
To Depreciation on :Delivery Van    
Building for Office
1,000 1,500
 
 
To Int. on Secured Loan
10,000
 
 
To Selling & Distribution Exp.
75,000
 
 
To Loss on Sales of Fixed Assets
10,000
 
 
To Transfer to General Reserve
10,000
 
 
To Proposed Dividend
55,000
 
 
To Balance c/d
76,000
 
 
 
17,00,000
 
17,00,00
  Other Information : Establishment expenses include a sum of Rs. 12,000 written-off as bad debts.   
 Q.8.Complete the following comparative statement of Mahesh Pvt. Ltd. by ascertaining the missing figures and underline the missing figures ascertained.16 





Particulars
2003 Rs. 
2004 Rs. 
Absolute Increase/Decrease Rs. 
Increase/Decrease%
Sales
6,00,000
?
+3,00,000
?
Cost of Goods Sold : Opening Stock 
?
60,000
+10,000
?
Purchases
4,00,000
?
+80,000
?
Closing Stock 
?
?
?
?
Cost of Goods Sold
?
?
+97,500
+25%
Gross Profit 
?
?
?
?
Operating Expenses
 
 
 
 
(a) Administrative Exp.
40,000
?
?
+100%
(b) Financial Exp.
60,000
72,000
?
?
(c) Selling Exp.
?
1,50,000
+1,00,000
+200%
Total Operating Exp.
?
?
?
?
Net Profit Before Tax
60,000
1,10,500
?
?
Provision for Tax
?
?
?
?
Net Profit after Tax
36,000
?
+27,000
+75%
    Q.9.  Write note on any four:16 a) Liquid Assets.  b) Contingent Liabilities.  c) Cash Flow v/s Fund Flow.  d) Trading on equity.  e) Debtors Turnover Ratio & Creditors Turnover Ratio.  f ) Selection of Accounting Software.