St. Joseph’s College of Commerce (Autonomous)
End Semester Examination – October 2014
MIB – I Semester
ACCOUNTING FOR DECISION MAKING
Duration: 3 hrs Max. Marks: 100
Section – A
- Answer any SEVEN questions. Each carries 5 marks. (7 x 5 = 35)
- From the following Balance Sheet of a Company, calculate the following ratio’s.
- Current Ratio (2) Liquid Ratio
(3) Inventory Turnover Ratio
| Liabilities | Assets | ||
| Share Capital | 2,00,000 | Goodwill | 1,20,000 |
| Reserves and Surplus | 58,000 | Plant and Machinery | 1,50,000 |
| Debentures | 1,00,000 | Stock | 80,000 |
| Creditors | 40,000 | Debtors | 45,000 |
| Bills payable | 20,000 | Cash | 17,000 |
| Other current liabilities | 2,000 | Miscellaneous Current Assets | 8,000 |
| 4,20,000 | 4,20,000 |
Additional Information:
- Credit Sales for the year = Rs.4,00,000
- Gross Profit = Rs.1,60,000
- The following information at 50% capacity is given. Prepare a flexible budget and forecast the profit or loss at 60% capacity. Sales at 60% capacity =11,00,000.
| Particulars | Expenses at 50% capacity (Rs.) |
| Fixed expenses: | |
| Salaries | 50,000 |
| Rent & Taxes | 40,000 |
| Depreciation | 60,000 |
| Administrative Expenses | 70,000 |
| Variable Expenses: | |
| Materials | 2,00,000 |
| Labour | 2,50,000 |
| Others | 40,000 |
| Semi Variable Expenses: | |
| Repairs | 1,00,000 |
| Indirect Labour | 1,50,000 |
| Others | 90,000 |
Additional Information:
- Fixed expenses will remain fixed at all capacities
- Semi variable expenses will not change between 45% and 60% capacity.
- From the following information, calculate Funds From Operations
Profit and Loss Account
| To Salaries | 10,000 | By Gross Profit | 2,00,000 |
| To Rent | 3,000 | By Profit on sale of machinery | 5,000 |
| To Commission | 2,000 | By Refund of tax | 3,000 |
| To Discount allowed | 1,000 | By Dividend received | 2,000 |
| To Provision for Dep | 14,000 | ||
| To Transfer to Gen Res | 20,000 | ||
| To Provision for tax | 10,000 | ||
| To Loss on sale of investments | 5,000 | ||
| To Discount on issue of Debentures | 2,000 | ||
| To Preliminary Expenses | 3,000 | ||
| To Selling Expenses | 20,000 | ||
| To Net Profit | 1,20,000 | ||
| 2,10,000 | 2,10,000 |
- Calculate the trend percentages from the following figures of X Ltd., taking 2009 as the base year and interpret the result.
| Year | Sales | Stock | Profit Before Tax |
| 2009 | 1,881 | 709 | 321 |
| 2010 | 2,340 | 781 | 435 |
| 2011 | 2,655 | 816 | 458 |
| 2012 | 3,021 | 944 | 527 |
| 2013 | 3,768 | 1,154 | 672 |
- Following are the receipts and issues of a raw material in Jatram Ltd., during May 2013.
| 1st May | Opening balance 200 units worth Rs.7,000 |
| 3rd May | Purchased 300 units at Rs.40 per unit |
| 13th May | Purchased 900 units at Rs.43 per unit |
| 23rd May | Purchased 600 units at Rs.38 per unit |
| 5th May | Issued 400 units |
| 15th May | Issued 600 units |
| 25th May | Issued 600 units |
You are required to record the above transactions in Stores Ledger pricing the issues under Weighted Average Method.
- Explain “Depreciation”, and its causes in the books of account. Explain Fixed and Reducing balance method of depreciation using your own examples.
- Prepare daily Balance Sheet of Mr. X
| 1st April | Commenced business with cash Rs.50,000/- Plant and Machinery Rs.1,00,000, Furniture Rs.20,000,Stock Rs.60,000 and Bank loan Rs.70,000 |
| 2nd April | Sold goods costing Rs.10,000 at a profit of 15% on 3 months credit to Mr. Y |
| 5th April | Paid Rent Rs.5,000 and bought goods from Mr. Z worth Rs.10,000, receiving a trade discount @ 5% |
| 10th April | Incomes received in advance Rs.2000 and Prepaid expense Rs.1000 |
| 15th April | Outstanding expenses Rs.10,000 and incomes due to be received Rs.2000 |
- From the following trial balance of Hariprasad of Bombay (containing errors), prepare a correct trial balance.
| Dr. | Cr. | |
| Purchases | 60,000 | – |
| Reserve Fund | 20,000 | – |
| Sales | – | 1,00,000 |
| Purchases Returns | 1,000 | – |
| Sales Returns | – | 2,000 |
| Opening Stock | 30,000 | – |
| Closing Stock | – | 40,000 |
| Expenses | – | 20,000 |
| O/s Expenses | 2,000 | – |
| Bank Balances | 5,000 | – |
| Assets | 50,000 | – |
| Debtors | – | 80,000 |
| Creditors | – | 30,000 |
| Capital | 94,000 | – |
| Suspense account being difference in books | 10,000 | – |
| 2,72,000 | 2,72,000 |
- Briefly explain the following concepts:
- Variance Analysis
- ABC Costing
- Find out the break – even point from the following:
- Fixed cost Rs.40,000, variable cost Rs.2 per unit, selling price Rs.10 per unit.
- It has been found that Rs. 80,000 will be the likely sales turnover for the next budget period. The Cost and Selling price will remain the same. Calculate the estimated contribution.
- A profit target of Rs.30,000 has been budgeted. Calculate the turnover required.
Section – B
- II) Answer THREE questions. Each carries 15 marks: (3 x 15 = 45)
- From the following Balance Sheets of A Ltd., prepare:
- Statement of Changes in the Working Capital: and
- Funds Flow Statement
| Liabilities | 31.3.2012 | 31.3.2013 | Assets | 31.3.2012 | 31.3.2013 |
| Equity Share Capital | 6,00,000 | 8,00,000 | Land and Buildings | 1,80,000 | 2,20,000 |
| Profit & Loss A/c | 1,00,000 | 1,60,000 | Plant and Machinery | 5,00,000 | 8,00,000 |
| General Reserve | 50,000 | 70,000 | Stock | 1,00,000 | 85,000 |
| Provision for Taxation | 50,000 | 40,000 | Bills Receivable | 50,000 | 30,000 |
| Sundry Creditors | 1,10,000 | 1,30,000 | Debtors | 1,50,000 | 1,60,000 |
| Bills Payable | 80,000 | 90,000 | Cash in Hand | 20,000 | 20,000 |
| Outstanding Rent | 10,000 | 25,000 | |||
| 10,00,000 | 13,15,000 | 10,00,000 | 13,15,000 |
Additional Information:
- Depreciation on plant and machinery in 2013 Rs.50,000
- A piece of machinery costing Rs.12,000 was sold for Rs.8,000 during 2013 (depreciation of Rs.7,000 had been provided on it)
- An interim dividend of Rs.6,000 was paid during the year.
- Income tax paid during 2013 Rs.45,000
- Following is the balance sheet of AB Co Ltd as at 1/01/ 2013. And 31/12/ 2013
| Liabilities | 1/01/2013 | 31/12/2013 | Assets | 1/01/2013 | 31/12/2013 |
| Equity share capital | 3,00,000 | 3,50,000 | Land & building | 2,30,000 | 3,90,000 |
| Share premium | _____ | 30,000 | Plant & Machinery | 85,400 | 1,40,000 |
| General reserve | 45,000 | 65,000 | Furniture | 5,500 | 6,500 |
| Profit and loss | 30,000 | 80,800 | Stock | 82,400 | 95,700 |
| Debentures | ______ | 70,000 | Sundry debtors | 75,000 | 85,500 |
| Sundry creditors | 85,000 | 90,700 | Bank balance | 34,200 | 44,300 |
| Provision for taxation | 22,500 | 40,500 | |||
| Proposed dividend | 30,000 | 35,000 | |||
| 5,12,500 | 7,62,000 | 5,12,500 | 7,62,000 |
Additional Information:
- Depreciation written off during the year.
Land and building Rs. 60,000
Plant and machinery Rs. 50,000
Furniture Rs. 1,200
- Tax paid during the year Rs. 22,500 and dividend paid is Rs. 30,000
You are required to prepare a Cash Flow Statement.
- A company has Rs.25,000 cash in hand on 1st April 2014 and it requires you to prepare cash budget for the three months. April to June 2014. The following information is supplied to you
| Sales | Purchase | Wages | Expenses | |
| Rs. | Rs. | Rs. | Rs. | |
| February | 70,000 | 40,000 | 8,000 | 6,000 |
| March | 80,000 | 50,000 | 8,000 | 7,000 |
| April | 92,000 | 52,000 | 9,000 | 7,000 |
| May | 1,00,000 | 60,000 | 10,000 | 8,000 |
| June | 1,20,000 | 55,000 | 12,000 | 9,000 |
Other information:
- Period of credit allowed by suppliers is two months:
- 25% of sale is for cash and the period of credit allowed to customers for credit sale is one month:
- Delay in payment of wages and expenses one month.
- Income tax Rs.25,000 to be paid in June 2014
- A Company having a net working capital of Rs.2.8 lakhs as on 30th June 2014 has the following financial ratios and performance figures
| Current ratio | 2.4 |
| Liquidity ratio | 1.6 |
| Inventory turnover (on cost of sales) | 8 |
| Gross profit on sales | 20% |
| Credit allowed (months) | 1.5 |
The company’s fixed assets is equivalent to 90% of its net-worth (share capital plus reserves) while reserves amounted to 40% of share capital. Net worth is also equal to fixed assets plus working capital.
Prepare the Balance Sheet of the company as on 30-06-2014, showing step by step calculations.
- Explain how marginal costing techniques can be used for taking managerial decisions.
Section – C
III) Compulsory Question (1 x 20 = 20 marks)
- From the following information prepare comparative balance sheet. Comment on the financial position and interpret the result.
Balance Sheet
As on 31st December
| Particulars | 2012 | 2013 | Particulars | 2012 | 2013 |
| Equity Capital | 6,857 | 6,862 | Land & Building | 3,772 | 4,719 |
| Reserves | 35,046 | 30,209 | Plant & Machinery | 17,291 | 22,391 |
| Debentures | 2,470 | 8,290 | Furniture & Fixture | 1,053 | 1,194 |
| Loans | 16,690 | 22,667 | Vehicles | 93 | 108 |
| Non – Bank loans | 14,754 | 14,302 | Inventory | 4,971 | 7,206 |
| Creditor | 3,629 | 5,804 | Debtor | 3,143 | 2,803 |
| Provision for Dividend | 651 | – | Cash | 4,784 | 4,784 |
| Others | 4,328 | 10,729 | Bank | 10,966 | 13,817 |
| Tax Payable | 8,302 | 9,564 | Work-in-Progress | 46,654 | 51,405 |
| (Fixed Assets) | |||||
| 92,727 | 1,08,427 | 92,727 | 1,08,427 |
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