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Management Accounting - March 2005
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March – 2005

Time: 3 Hours
Marks: 100

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 Sales1,70,000 
Cash Purchases50,000 Credit Sales8,50,000 
Credit Purchases6,50,000  10,20,000 
 7,00,000 Less : Returns20,00010,00,000
Less : Returns10,0006,90,000By 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 60,000By Gross Profit b/d 3,00,000
To Selling Expenses 1,00,000By 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 3,05,000Total 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 31st March, 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 (in vertical form) as at 31st March, 2005. (16)

Q.2. The Balance Sheets of Chetan Ltd. as at 31st March, 2003 & 2004. (16)

 31-3-2003 Rs.31-3-2004 Rs.
Equity Share Capital (shares of Rs. 10 each fully called)10,00,00014,50,000
Less: Calls-in-Arrears (Rs. 2 per share)5,000--
 9,95,00014,50,000
Add: Share Forfeiture Balance (Rs. 8 per share)8,0001,600
Paid up Equity Capital10,03,00014,51,600
8% Redeemable Preference Share Capital5,00,0004,00,000
Securities Premium1,00,00040,000
Capital Reserve (Net profit on Forfeited Shares reissued)--16,500
General Reserves2,47,0003,49,000
Profit & Loss Account1,50,0007,42,900
Loans5,00,00010,00,000
 25,00,00040,00,000
Fixed Assets (At cost Less Dep.)12,00,00020,00,000
Investments3,00,0004,00,000
Working Capital10,00,00016,00,000
 25,00,00040,00,000

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 issued by 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 Ratio1.75
Liquid Ratio1.25
Stock Turnover Ratio9 times (Based on Closing Stock)
Gross Profit Ratio25%
Debtors collection period1.5 months
Reserves and surplus to share capital0.2
Cost of Goods sold to Fixed Assets1.2
Capital Gearing (Long term Loans to Share Capital)0.6
Fixed Assets to shareholders Funds1.25
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)

 31st March, 200331st March, 2004
 Dr. (Rs.)Cr. (Rs.)Dr. (Rs.)Cr. (Rs.)
Land and Building25,50,000--25,50,000--
Machinery5,50,000--8,00,000--
Furniture2,00,000--3,00,000--
Sundry Debtors3,00,000--5,00,000--
Cash & Bank Balance1,00,000--1,00,000--
Sundry Creditors--2,00,000--3,00,000
Outstanding Expenses--20,000--20,000
Sales--20,00,000--30,00,000
Purchases12,00,000--15,00,000--
Opening Stock----3,00,000--
Admin. Expenses2,76,000--3,70,000--
P/L Opening Bal.------7,44,000
Selling Expenses80,000--1,10,000--
Share Capital--20,00,000--20,00,000
Unsecured Loan--10,36,000--4,66,000
 52,56,00052,56,00065,30,00065,30,000

Adjustment : (1) Closing Stock as on 31st 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. (6)

 Rs.
Debtors30,000
Outstanding Manufacturing Exp.17,000
Cash Balance23,000
Bills Payable & Creditors38,000
Machinery (Imported)30,000
Income earned but not received6,000
Bank Overdraft15,000
Bills Receivable7,000
Prepaid traveling expenses4,000

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. (5)

 Rs.
Equity Capital3,00,000
General Reserves4,00,000
Profit & Loss A/c1,50,000 (Cr.)
Sundry creditors2,00,000
Operating Profit3,50,000 (Before Interest & Tax)
Long Term Loan2,00,000 (at 12% p.a. Interest)
Tax Rate is 30%.

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.
Calculate his average working capital and prepare his income statement for the year. (16)

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

ParticularsRs.ParticularsRs.
To Opening Bal. B/d.1,00,000By Sales10,00,000
To Opening Stock : Raw
Material Finished goods
2,00,000
1,50,000
By Dividend received2,00,000
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 Dividend35,000  
To Provision for Tax75,000  
To Audit fees2,500  
To Directors Fees2,000  
To Preliminary Expenses5,000  
To Salaries & Wages1,00,000  
To Depreciation on : Delivery
Van Building for Office
1,000
1,500
  
To Int. on Secured Loan10,000  
To Selling & Distribution Exp.75,000  
To Loss on Sales of Fixed Assets10,000  
To Transfer to General Reserve10,000  
To Proposed Dividend55,000  
To Balance c/d76,000  
 17,00,000 17,00,000

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)

Particulars2003 Rs.2004 Rs.Absolute Increase/Decrease Rs.Increase/Decrease %
Sales6,00,000?+3,00,000?
Cost of Goods Sold : Opening Stock?60,000+10,000?
Purchases4,00,000?+80,000?
Closing Stock????
Cost of Goods Sold??+97,500+25%
Gross Profit????
Operating Expenses
(a) Administrative Exp.40,000??+100%
(b) Financial Exp.60,00072,000??
(c) Selling Exp.?1,50,000+1,00,000+200%
Total Operating Exp.????
Net Profit Before Tax60,0001,10,500??
Provision for Tax????
Net Profit after Tax36,000?+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.

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