ST. JOSEPH’S COLLEGE OF COMMERCE (AUTONOMOUS)

End Semester ExaminationS– MARCH / APRIL 2015

BBm – VI SEMESTER

M111602: MANAGEMENT ACCOUNTING

Duration: 3 Hours Max. Marks: 100

SECTION – A

Answer ALL the questions. Each carries 2 marks. (10×2=20)

What is meant by Management Reporting?

Give any four examples of Current Assets.

What is the need for calculating Turnover Ratio? State any two turnover ratios.

When will there be a flow of fund? Explain with a suitable example.

Explain briefly Notional Cash Inflow and Outflow.

Distinguish between External Reports and Internal Reports.

Calculate Expenditure Ratios:

Factory Expenses = Rs. 30,000.

Administrative Expenses = Rs. 20,000.

Net Sales = Rs. 1,20,000.

Net Profit = Rs. 50,000.

Who are the users of Financial Statements of a Company? Elaborate.

Give any two points of differences between a funds flow statement and a cash flow statement.

10.

What is the procedure for preparing funds flow statement?

SECTION – B

II)

Answer any FOUR questions. Each carries 5 marks. (4×5=20)

11.

Prepare a Common-Size Income Statement for the following income statements of GT Ltd. for the year ended 31^st March 2013 and 2014.

Particulars	2013 (Rs.)	2014 (Rs.)
Gross Sales	31,00,000	39,00,000
Less: Sales Returns	1,00,000	2,00,000
Net Sales	30,00,000	37,00,000
Cost of Goods Sold	19,00,000	20,00,000
Gross Profit	11,00,000	17,00,000
Operating Expenses:
Administrative Expenses	3,75,000	5,30,000
Selling and Distribution Expenses	2,35,000	2,50,000
Total Expenses	6,10,000	7,80,000
Operating Income	4,90,000	9,20,000
Non- Operating Income	1,35,000	2,15,000
Total Income	6,25,000	11,35,000
Non-Operating expenses: Interest	1,95,000	2,15,000
Profit Before Tax	4,30,000	9,20,000
Less: Tax	2,00,000	4,00,000
Net Profit After Tax	2,30,000	5,20,000

12.

From the following balance sheets of Zain Company prepare a statement showing changes in working capital.

Particulars	31.12.2013 (Rs.)	31.12.2014 (Rs.)
I. Equity and Liabilities
Shareholder’s Funds:
a. Share Capital	1,50,000	1,25,000
b. Reserves and Surplus:
– Profit & Loss A/c	75,000	60,000
– Preliminary Expenses	(3,000)	(5,000)
Non-current Liabilities	—	—
Current Liabilities:
Short-term Borrowings: – Loans (Payable on demand)	20,000	—
Trade Payables:
– Trade creditors	45,000	50,000
– Bills Payable	35,000	20,000
TOTAL	3,22,000	2,50,000

II. Assets
Non-Current Assets:
– Tangible Fixed Assets (Land)	27,000	15,000
– Intangible Assets (Goodwill)	5000	10,000
Non-current Investments	10,000	15,000
Currents Assets:
– Inventories (Stock)	1,20,000	87,000
– Trade Receivables (Debtors)	90,000	98,000
– Cash and Cash Equivalents	70,000	25,000
TOTAL	3,22,000	2,50,000

13.

“The task of management accounting involves furnishing of accounting data to the management for basing its decisions on it”— In the light of this statement describe the various characteristics of management accounting.

14.

Calculate (i) Sales (ii) Closing stock (iii) Sundry Debtors (iv) Sundry Creditors from the following ratios.

Gross Profit Ratio = 20%; Stock Velocity = 5 times; Debtors Velocity = 3 months; Creditors Velocity = 2 months; Gross Profit as on 31^st March, 2014 is Rs. 1,40,000 and Opening stock is Rs. 80,000.

15.

Indicate whether the following transactions result in a flow of funds or not, and whether it will lead to an increase /decrease or does not affect the working capital.

Purchase of fixed assets by borrowing long term loan

ii. Redemption of Preference share capital

Received acceptances from customers
Payment or discharge of bills payable
Purchase of New Machinery.

16.

Diagrammatically depict the traditional classification of ratios.

SECTION – C

III)

Answer any THREE questions. Each carries 15 marks. (3×15=45)

17.

Prepare the Trading and Profit & Loss A/c and Balance Sheet as on 31^st March, 2014 from the following information.

Gross Profit Ratio = 20%	Fixed Assets = Rs. 12,00,000
Net Profit Ratio = 16%	Sundry Debtors = Rs. 70,000
Stock turnover ratio = 5 times	Current Ratio = 3:1
Net Profit to Capital = 1/8	Long Term Loan =Rs. 2,75,000
Fixed Assets to Capital = 6/5	Operating expenses = Rs. 20,000
Fixed Assets to Current Assets = 4	Non- operating expenses = Rs. 11,250.
Capital to Total Liabilities = 2/3	Closing stock = Rs. 1,40,000

18.

The following are the Balance Sheets of a concern for the year 2013 and 2014. Prepare a Comparative Balance Sheet.

I. Equity and Liabilities	2013 (Rs.)	2014 (Rs.)
Equity Share Capital	6,00,000	12,00,000
Reserves and Surplus	4,00,000	5,00,000
Debentures	5,00,000	9,00,000
Long Term Loans on Mortgage	2,00,000	5,00,000
Bills Payable	2,00,000	3,00,000
Sundry Creditors	90,000	2,70,000
Other Current Liabilities	10,000	30,000
TOTAL	20,00,000	37,00,000
II. Assets
Land & Buildings	6,00,000	10,00,000
Plant & Machinery	4,00,000	10,00,000
Other Fixed Assets	1,00,000	1,50,000
Cash & Bank	50,000	1,50,000
Inventories	4,50,000	6,50,000
Sundry Debtors	1,00,000	3,90,000
Bills Receivable	3,00,000	3,50,000
Prepaid Expenses	—-	10,000
TOTAL	20,00,000	37,00,000

Comment on:

a. Short term financial position of the concern showing the effect on working capital.

b. Long term financial position.

c. Profitability of the concern.

19.

The following are the summaries of the Balance Sheet of a Limited Company as at 31.12.2013 and 31.12.2014.

Particulars	2013 (Rs.)	2014 (Rs.)
I. Equity and Liabilities:
Shareholder’s Funds:
Share Capital	2,00,000	2,60,000
Reserves and Surplus:
– Reserves	50,000	50,000
– Profit & Loss A/c	39,690	41,220
Non-current Liabilities:
– Provision for Taxation	40,000	50,000
Current Liabilities:
– Bank Overdraft	59,510	—
– Trade Payables:
– Sundry Creditors	39,500	41,135
– Bills Payable	33,780	11,525
TOTAL	4,62,480	4,53,880
II. Assets
Non-Current Assets:
Tangible Assets:
– Land & Building	1,48,500	1,44250
– Plant & Machinery	1,12,950	1,16,200
Intangible Assets: (Goodwill)	—-	20,000
Current Assets:
– Inventories (Stock)	1,11,040	97,370
– Sundry Advances	2,315	735
– Trade Receivables (Sundry Debtors)	85,175	72,625
– Cash at Bank	2,500	2,700
TOTAL	4,62,480	4,53,880

The following additional information is obtained from the general ledger:

a. During the year ended 31^st December, 2014, an interim dividend of Rs. 26,000 was paid.

b. The assets of another company were purchased for Rs. 60,000 payable in fully paid shares of the company. These assets consisted of stock Rs. 21,640, machinery Rs. 18,360 and goodwill Rs. 20,000. In addition, sundry purchases of Plant were made totaling Rs. 5,650.

c. Income tax paid during the year amounted to Rs. 25,000.

d. The net profit for the year before tax was Rs. 62,530.

You are required to prepare a statement showing the sources and applications of funds for the year ended 31.12.2014 with all the necessary workings.

20.

(a) What are the objectives of reports to management? Suggest general principles to be borne in mind when designing reports.

(b) “The purpose of cost accounting is not merely ascertainment of cost, it is also performance evaluation and management decision-making”—In this context bring out the various differences between Cost and Management Accounting. (10+5)

21.

The following are the comparative balance sheets of ABC Ltd. as on 31^st March 2014 and 2013:

Particulars	2013 (Rs.)	2014 (Rs.)
I. Equity and Liabilities
Shareholders Fund’s:
Share Capital (Shares of Rs. 10 each)	3,70,000	3,50,000
Reserve and Surplus:
– Profit & Loss A/c	52,800	50,400
Non-Current Liabilities:
– 9% Debentures	30,000	60,000
Current Liabilities:
– Trade Payables (Creditors)	59,200	51,600
TOTAL	5,12,000	5,12,000

II. Assets
Non-Current Assets:
– Tangible Assets: (Land)	1,50,000	1,00,000
– Intangible Assets: (Goodwill)	25,000	50,000
Current Assets:
– Inventories (stock)	2,13,500	2,46,000
– Trade Receivables (Debtors)	84,500	71,000
– Cash and Cash Equivalents:
Cash and Bank	35,000	42,000
Temporary Investments	4,000	3,000
TOTAL	5,12,000	5,12,000

Other particulars provided to you are as follows:

a. Dividends declared and paid during the year Rs. 17,500.

b. Land was revalued during the year at Rs. 1,50,000 and the profit on revaluation transferred to Profit & Loss A/c.

You are required to prepare Cash Flow Statement for the year ended 31.3.2014 using Indirect Method.

SECTION – D

IV)

Case Study (1×15=15)

22.

KMWD Ltd. furnishes the following financial figures:

Particulars	31.3.2013	31.3.2014
Preference Share Capital	5,00,000	7,00,000
Debentures	3,00,000	2,00,000
Loan	2,50,000	3,25,000
Current Assets	5,00,000	6,00,000
Current Liabilities	2,50,000	3,00,000
Inventory (included in current assets)	15,000	25,000

(a) Calculate Cash Flow from Financing Activities from the above information. (4 marks)

(b) Compute current ratio and liquid ratio for KMWD Ltd. for the both years and Comment on the current financial position of the Company. (6 marks)

(i) Purchase of fixed assets against issue of shares or debentures.

(ii) Writing off of fictitious assets, say goodwill. (2 marks)

(d) From the table above show the Net Working Capital of the company for both the years and Comment. (3 marks)

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