1. JOSEPH’S COLLEGE OF COMMERCE (AUTONOMOUS)

End Semester examination – APRIL 2014

BBM – VI semESTER

MANAGEMENT ACCOUNTING

Duration: 3 Hrs                                                                                                Max. Marks: 100

Section – A

 

1. Answer ALL the questions. Each carries 2 marks.                              ( 10 x 2 = 20)
2. What is Management Accounting as per American Accounting Association?
3. State any 4 objectives of Management Accounting.
4. What is Trend Analysis?
5. What is Management Reporting?
6. Give the meaning of Ratio Analysis.
7. Mention any 4 Balance Sheet Ratios.
8. State any two uses of fund flow analysis.
9. What is Cash Flow Statement?
10. Distinguish between internal and external analysis.
11. State the significance of Acid Test Ratio.

 

Section – B

 

1. Answer any FOUR Each carries 5 marks.                             ( 4 x 5 = 20)
2. Explain any five functions of Management Accounting.

 

12. “Accounting Reports are a matter of necessity for the management and not a matter of convenience”. Explain critically the above statement.

 

13. Briefly explain the following:
14. Current Ratio b)  Liquid Ratio      c)  Absolute Liquid Ratio.

 

14. State with reasons whether the following transactions result in increase/decrease/ no change in working capital.
15. Bills receivable Rs. 65,000 discounted for Rs. 63,000
16. Fixed Assets Rs. 5,00 ,000 sold
17. Short term loans raised Rs. 1,00,000
18. Issue of shares Rs. 10,00,000 against fixed assets
19. Good will written off Rs. 5000

 

15. From the following details, prepare Land and Buildings A/c and explain the treatment of various items in the preparation of Cash Flow Statement .

• Balance in Land And Buildings A/c as at 1-4-2012 Rs. 5,60,000 and as at 31-3-2013 Rs. 8,04,000
• Purchase of Land and Buildings during the year 2012-13 Rs. 3,00,000.
• There was no sale of any land or buildings during the year.

 

16. From the following data, compute trend percentages taking 2008 as base.

 

Year	Sales (Rs.)	Closing Stock (Rs.)	Profit Before Tax (Rs.)
2008 2009 2010 2011 2012	2,58,680 3,53,460 3,68,550 4,12,430 4,87,560	1,20,580 1,25,760 1,32,540 1,34,780 1,45,730	55,750 63,520 65,120 72,460 87,290

 

Section – C

• Answer any THREE Each carries 15 marks.                  (3 x 15 = 45)

 

17. From the following Balance Sheets of RKS Ltd, prepare comparative balance sheet and comment upon the financial position of the company

Particulars	2012	2013
Assets: Land and buildings Plant and Machinery Furniture Other fixed assets Cash in hand Bills receivables Sundry debtors Stock Prepaid expenses   Total	3,70,000 4,00,000 20,000 25,000 20,000 1,50,000 2,00,000 2,50,000 –	2,70,000 6,00,000 25,000 30,000 80,000 90,000 2,50,000 3,50,000 2,000
	14,35,000	16,97,000
Liabilities Equity share capital Reserves and surplus Debentures Long-term loans Bills payable Sundry creditors Other current liabilities   Total	6,00,000 3,30,000 2,00,000 1,50,000 50,000 1,00,000 5,000	8,00,000 2,22,000 3,00,000 2,00,000 45,000 1,20,000 10,000
	14,35,000	16,97,000

 

18. From the following information, prepare income statement and balance sheet:

Debtors turnover ratio = 2 times

Inventory turnover ratio=1.25

Fixed assets turnover ratio= 0.8

Debts assets ratio= 0.6

Net profit margin = 5%

Gross profit margin = 25%

Return on investments = 2%

 

 

 

 

Income statement:

Particulars	Amount
Sales Less: Cost of goods sold Gross profit Less: other expenses EBT Less: Interest at 5% EAT	1,00,000 – – – – – –

 

Balance sheet

Equity Long term debt Short term debt

– – 50,000

Net fixed assets Inventory Sundry debtors Cash

– – – –

 

19. Balance sheet of Anita ltd as on 31.12.2012 and 31.12.2013 were as follows:

Liabilities	2012	2013	Assets	2012	2013
Share capital Share premium 8% debentures General reserves P & L account Provision for taxation Proposed dividend S. creditors	2,00,000 – 1,00,000 50,000 50,000 30,000 20,000 50,000	3,00,000 10,000 50,000 80,000 70,000 40,000 30,000 70,000	Plant &  Machinery Land & buildings Investment Stock Debtors Cash and bank	2,00,000 50,000 10,000 80,000 90,000 70,000	3,00,000 1,10,000 50,000 60,000 80,000 50,000
	5,00,000	6,50,000		5,00,000	6,50,000

Additional information:

1. Investments costing Rs. 8,000 was sold for Rs. 15,000. The profit being

credited to P & L A/c.

 

1. An interim dividend of Rs. 20,000 was paid during the year.

 

1. Accumulated depreciation on

31.12.2012                  31.12.2013

Land & Building      30,000                         40,000

Plant & Machinery   40,000                         60,000

 

1. Depreciation charged during the year

Land & Building Rs. 10,000

Plant & Machinery Rs. 20,000

 

1. Debentures were redeemed at par

 

 

1. Profit & loss account balance 2012 Rs. 50,000

Add: profit for 2013                                     Rs. 40,000

Rs. 90,000

Less: interim dividend                                            Rs. 20,000

Rs. 70,000

Prepare a Cash flow statement

 

 

20. The following schedule shows the balance sheets in condensed form of Machinery manufacturing ltd. At the end of the year 2012 and 2013.

Assets :	2012	2013
Cash and bank balance Sundry debtors Temporary investments Prepaid expenses Stock Land & buildings Machinery	90,000 67,000 1,10,000 1,000 82,000 1,50,000 52,000	90,000 43,000 74,000 2,000 1,06,000 1,50,000 70,000
	5,52,000	5,35,000
Liabilities: Sundry creditors Outstanding expenses 8% debentures Depreciation fund Reserve for contingencies P & L a/c Share capital	2012 1,03,000 13,000 90,000 40,000 60,000 16,000 2,30,000	2013 96,000 12,000 70,000 44,000 60,000 23,000 2,30,000
	5,52,000	5,35,000

The following information concerning the transactions is available:

1. 10% dividend was paid in cash
2. New machinery for Rs. 30,000 was purchased but old machinery costing Rs. 12,000 was sold for Rs. 4,000, accumulated depreciation was Rs. 6,000.
3. Rs. 20,000, 8% debentures were redeemed by purchase from open market at Rs.96 per debentures of Rs. 100.
4. Rs. 36,000 investments were sold at book value.

 

You are required to prepare schedule of changes in working capital and fund flow statement.

 

 

21. The profits of Excellent ltd declined year by year. As a management accountant of the company draft a report to the management exploring the reasons for declining profit and suggest the corrective measures.

 

Section – D

 

1. IV) ONE Compulsory question.                                              (1 x 15 = 15)

22.

Michael Ltd. wants to expand its operations. It needs additional funds. However, HDFC Ltd., its banker is not in a position to provide any additional funds to it due to credit squeeze. Rather it wants the company to reduce its bank overdraft substantially preferably by 50% in the next six months. The management appoints you as a Consultant to ascertain what has gone wrong with the company and suggest appropriate measures.

The Balance sheets of the company as on 31.12.2012 and 31.12.2013 are as follows:

(Rs. In Lakhs)

Liabilities	2012	2013	Assets	2012	2013
Share capital Reserves 6% Debentures(Unsecured) 8% Mortgage on Freehold Property Creditors Proposed Dividend Provision for taxation Secured overdraft ( by  a floating charge on assets)	300.00 225.00 75.00 27.00 45.00 22.50 21.00 15.00	300.00 240.00 75.00 14.25 45.00 23.25 37.50 82.50	Freehold property Plant & Machinery Investment on shares Other investments Stock Debtors Bank	225.00 135.00 150.00 112.50 52.50 45.00 10.50	240.00 165.00 150.00 112.50 75.00 75.00 —
	730.50	817.50		730.50	817.50

 

The following additional information for the year 2013 is relevant:

1. Credit Sales            875 lakh
2. Credit Purchases                          520 lakh
3. Overheads             83.75 lakh
4. Depreciation on Plant and Machinery 17.50 lakh
5. Dividend for 2012 was paid in full
6. Amount paid towards taxations for the year 2013 21.50 lakh

 

You are required to prepare a cash flow statement and briefly comment on the financial position of the company and suggest remedial measures to overcome the financial crisis.

 

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