LOYOLA COLLEGE (AUTONOMOUS), CHENNAI – 600 034

QB 27

M.C.A. DEGREE EXAMINATION – COMPUTER APPLICATION

THIRD SEMESTER – November 2008

CO 3901 – ACCOUNTING AND FINANCIAL MANAGEMENT

Date : 14-11-08 Dept. No. Max. : 100 Marks

Time : 9:00 – 12:00

SECTION –A

ANSWER ALL THE QUESTIONS (10 X 2 =20)

1.What is meant by convention of conservatism ?

Distinguish between capital expenditure and revenue expenditure ?
What is meant by accounting ratio ?
Define financial management ?

CHOOSE THE BEST ANSWER

If 60 units of a product cost Rs.1800 and 40 units cost Rs 1200 the variable cost per

unit is ___________?

a) Rs.40 b) Rs.10 c) Rs.30 d) Rs.20
If 20 units of a product costs, Rs.2500 and 50 units costs Rs.3400 to produce, the

linear cost function is :

a) 50x +3900 b)30x +1900 c) 20x +5000 d) 10x +900
a) Which of the following is correct ?
a) Assets = Liabilities – Capital b) Assets = Capital – Liabilities
c) Assets = Liability + Capital
b) The ideal current ratio is :
i) 4:1 ii) 3:1 iii) 2:1 iv) 1:1

STATE IF THE FOLLOWING STATEMENTS ARE True or False

8.a) The appropriate objective of an enterprise is the maximization of owner’s wealth.

b) Withdrawal of money by the owner is an expenses for the business.
a) P/E indicates the number of times the EPS is covered by its market price.
b) The gain from sale of capital assets is an operating income.
a) Sales budget is a functional budget.
b) Low inventory turnover ratio indicates brisk sales.

SECTION – B

ANSWER ANY FIVE QUESTIONS (5 X 8 = 40)

What is book – keeping ? Explain the fundamental accounting concepts and

conventions.

Define the term Ratio. Explain the advantages and limitations of ratio analysis.
Enumerate the objectives of financial management.

Write up a Three – Column Cash Book

2004 Sep . 1 Cash in hand 3000

Cash at bank 200

4 Received a cheque from Mr.Daniel 185

Allowed him discount 15

4 Deposit in to the bank 500

5 Purchased furniture for cash 1700

9 Given a cheque to Mr.Knocks 1280

Received discount 40

18 Received a by cheque from Mr.Bull 4000

19 Paid sundry expenses in cash 30

23 Paid to Sri John in cash Rs.190, Received discount 10

24 Withdrew from bank for office cash 100

The comparative Balance Sheet of M/s.RAGHU brothers for the two years

were as follows :

Liabilities 2004 2005 Assets 2004 2005

Rs. Rs. Rs. Rs.

Capital 1,50,000 1,75,000 Building 1,10,000 1,50,000

Loan from Bank 1,60,000 1,00,000 Machinery 2,00,000 1,80,000

Creditors 90,000 1,00,000 Stock 50,000 45,000

Bills payable 50,000 40,000 Debtors 70,000 80,000

Loan from S.B.I __ 65,000 Cash 20,000 25,000

————————- ————————– 4,50,000 4,80,000 4,50,000 4,80,000

————————– ————————-

Additional Information :

1.Net profit for the year 2005 amounted to Rs .60,000.

2.During the year a machine whose book value Rs.15,000 was sold for

Rs.13,000.

You are required to Prepare a Cash Flow Statement.

From the following information calculate the net present value of the two

projects and suggest which of the two projects should be selected assuming a

discount rate of 10 %:

Project X Project Y

Initial investment Rs.20,000 Rs.30,000

Estimated life 5 years 5 years

Scrap value Rs.1000 Rs.2000

The profit before depreciation and after tax is as follows:

Years 1 2 3 4 5

Project X 5,000 10,000 10,000 3,000 2,000

Project Y 20,000 10,000 5,000 3,000 2,000

P.V factor @ 10% .909 .826 .751 .683 .621

RIL ltd. Plans to sell 1,10,000 units of a certain product line in the first fiscal

quarter. 1,20,000 units in the second quarter,1,30,000 units in the third quarter,

1,50,000 units in the fourth quarter and 1,40,000 units in the fifth quarter.

At the beginning of the first quarter of the current year, there are 14,000

units of the product in stock. At the end of each quarter, the company plans to

have an inventory equal to one- fifth of the sales for the next fiscal quarter.

How many units must be manufactured in each quarter of the current year.

18.Record the following transactions in the book of Journal .

April 2 commenced business with cash Rs. 34,000 and

a bank balance of Rs.20,000

5 Withdrawn from bank for personal use 6,000

12 Cash paid to Rahim

(in full settlement of his a/c for Rs2300). 2,000

14 Cash received from Antony 6,000

15 Purchased machinery on credit from toy Traders 11,000

25 Paid salary 2,000

27 Sold goods to Ram Babu on credit 500

28 Purchased goods for cash by cheque 12,000

SECTIION – C

ANSWER ANY TWO QUESTIONS (2 X 20 = 40)

19.A company expects to have Rs,37,500 cash in hand on 1^st april and requires you to

prepare an estimate of cash position during three months ,April ,May and June.

The following information is supplied to you:

Sales Purchases wages office expenses

February 75,000 45,000 16,500 10,500

March 84,000 48,000 18,000 10,500

April 90,000 52,500 19,500 11,250

May 1,20,000 60,000 24,750 12,570

June 1,35,000 60,000 28,250 14,000

Other information:

Period of credit allowed by suppliers 2 month
20% sales is for cash and period of credit allowed to customers is 1month
Delay in payment of all expenses 1 month.
Income tax of Rs.57,500 is to be paid in June
The company is to pay dividend to share holders in the month of April is

Rs.37,500 and a plant has been ordered to be received and paid in May ,it

will cost Rs.1,20,000.

Sale price Rs.20per unit

Variable manufacturing cost Rs.11 per unit

Variable selling cost Rs.3 per unit

Fixed factory overheads Rs.5,40,000

Fixed selling cost Rs.2,52,000

Calculate:

BEP
sales required to earn a profit of rs.60,000
sales required to earn a profit of 10% on sales
Profit when sales are Rs.20,00,000
if company reduces its selling price by 10%, how does the revised selling

price affect the break even point and the profit –volume ratio?

The following figure relate to ITC ltd. for the year ended 31-03-06

Trading and profit /loss account

To opening stock 75,000 By sales 5,00,000

To purchases 3,25,000 By closing stock 1,00,000

,,Administration exp. 40,000 ,,dividend received 9,000

,,Selling exp. 25,000 ,,profit on sale of shares 11,000

,,loss on sale of assets 5,000

,,Net profit 1,50,000

——— ———–

Calculate a. Gross Profit Ratio. B. Net profit ratio

operating ratio d. operating profit ratio

Following is the balance sheet of ITC ltd .as at 31^st march 2006.

Liabilities Rs. Assets Rs.

Equity share capital 2,00,000 Cash at bank 18,000

10%pref. share capital 2,00,000 Bills receivable 60,000

8% Debenture 80,000 Short term investment 40,000

9%public debts 40,000 Debtors 1,40,000

Bank overdraft 80,000 Stock 80,000

Creditors 1,34,000 Furniture 60,000

Proposed dividend 20,000 Machinery 6,40,000

Reserves 3,00,000 Goodwill 76,000

Provision for tax 40,000 Prepaid expenses 20,000

Profit / loss a/c 40,000

———- ————

11,34,000 11,34,000

———— ———–

Compute : Short Term and Long Term solvency ratios

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