GUJARAT UNIVERSITY
MCA Semester II
MCA Semester II
Accounting & Financial Management
25th July, 1994
SECTION I
Q-1 (a) Answer the following (any one) 3
(1) Distinguish between the cash book and cash account
(2) Briefly explain the errors not disclosed in the trial balance.
(b) Answer the following (any two) 6
(1) Pass the journal entries for the following transactions:
(i) Goods distroyed by fire Rs. 5,000 Insurance company approved the claim for Rs. 3,500.
(ii) Goods purchased from Asha Ltd. Rs.10,000 and 10% trade discount and 2/10 met 30 days terms.
(2) You are given the following details:
Current Ratio = 2.2 :1
Quick Ratio = 1.5 :1
Net Working Capital = Rs. 24,000
Calculate the following:
(i) Total Current Assets
(ii) Total Current Liabilities
(iii) Value of stock
(3) Show the impact of following errors of the current balance:
(i) Salaries paid to Mr. Ashok Rs. 2,000 which was debited to A’s account in ledger.
(ii) Payments received from Mr. Bakul Rs.875 , which was posted on debit side of Bakul’s account at Rs. 857.
(iii) Credit purchases from Mr. Pranav, Rs.5000 which was posted on the debit side of Pranav’s Account in the ledger.
Q-2 The following details are extracted from the books of Surise Computers. Prepare the final accounts for
The year ended on 31-3-1994:
Trial Balance
Dr. Rs. Cr. Rs.
Capital -- 20,00,000
Plant & Machinery 20,00,000 ---
Furniture ` 10,00,000 ---
Purchases & sales 25,00,000 48,00,000
Opening Stock 2,00,000 ---
10% loan from Vikas Bank -- 10,00,000
Salaries (upto 28-2-94) 1,10,000 ---
Bills Receivable & Payable 14,00,000 6,00,000
Discount 1,10,000 2,50,000
Debtors & Creditors 2,00,000 3,00,000
Printing & Stationary 60,000 ---
Bank balance 7,00,000 ---
Cash on hand 40,000 ---
Interest on bank loan 60,000 ---
Administrative Expenses 1,00,000 ---
Rates & taxes 20,000 ---
Postage & telephones 60,000 ---
Commission --- 50,000
Vehicles 4,50,000 ---
-------------- -------------
90,00,000 90,00,000
======== ========
Additional Information:
(1) The cost of closing stock was Rs. 4,50,000, while their market price was higher by 10%.
(2) Provide depreciation : 20% on Plant & machinery, 10% on furniture and 15% on vehicle.
(3) Outstanding printing & Stationary Rs. 20,000
(4) Discount to be received Rs.50,000.
(5) Provide reserve for doubtful debts of 2% on debtors.
OR
Q-2 (a) The following is an extract on a cost centre in a manufacturing comapany. 6
Particulars Units Produced
8000 10,000
Rs. Rs.
1. Direct Material 12,000 10,000
2. Direct labour 4,000 5,000
3. Depreciation 550 550
4. Power 250 300
5. Supervision 350 350
6. Rates & Taxes 275 275
7. Consumable stores 200 300
8. Repairs 175 225
Prepare the flexible budget for 9,000 and 12,000 units of production.
Q-3 The following condensed details are extracted from the accounting records of Data world Ltd. 8
Balance sheet as on 31-3 1994
Rs. Rs.
Share Capital 10,00,000 Fixed Assets (net) 30,00,000
(Each of Rs.10)
Reserves 10,00,000 Stock 10,00,000
14% Debentures 40,00,000 Debtors 35,00,000
Creditors 15,00,000 Cash and Bank 5,00,000
Other Curr Liabilities 5,00,000
------------ ------------
80,00,000 80,00,000
======= =======
Trading & Profit & Loss Account for the year ended on 31-3-1994
Rs. Rs.
To opening stock 5,00,000 By Sales 40,00,000
To Purchases 20,00,000 By closing Stock 10,00,000
To Mfg. expenses 15,00,000
To Msc. Exps. 10,00,000
------------ -------------
50,00,000 50,00,000
======= ========
To Admn Expenses 4,00,000 By Gross Profit 10,00,000
To Sales & Distn Exps 1,20,000
To Misc. Expenses 80,000
To Net Profit 4,00,000
----------- -------------
10,00,000 10,00,000
======= ========
Calculate the following ratios and give your comments on each by comparing it with the industry average given in the bracket:
(1) Current ratio (2.2)
(2) Liquid Ratio (1.25)
(3)Stock Turnover Ratio (3.8)
(4) Rate of Return on Investment (15%)
(5) Debt-Equity Ratio (1.8)
OR
Q-3 (a) Prepare a cash budget for the quarter Oct-Dec. 1994 using the following information 6
Particulars Aug. September October November December
Cash sales 40,000 38,000 40,000 41,000 38,000
Credit Sales 54,000 60,000 64,000 66,000 65,000
Non-operating
Income 10,000 12,000 10,000 16,000 12,000
Mfg. Exps 80,000 1,00,000 90,000 96,000 1,00,000
Admn. & Other Exps 10,000 11,000 10,000 12,000 10,000
Additional Information:
(1) Credit Sales are collected as under:
50% same month
30% following month
20% second month
(2) Time lag in the payment of expenses:
Mfg. expenses ½ month
Administrative Exp. 1 month
(3) An old machine with written down value of Rs.12,000 will be sold for Rs. 8,000 in the month of
October,1994.
(4) The company has started a private issue of 10,000 equity shares each of Rs. 10 at a premium of Rs. 2
per share , and the full amount will be collected in November, 1994.
(5) The company has planned a capital expenditure of Rs.1,30,000 during December, 1994.
(6) Half- Yearly interest on a 12% term loan Rs. 1,00,000 is payable in October,1994.
(7) Advance tax of Rs.20,000 is payable during December,1994
(8) Assume the cash balance on 1-10-94 is Rs.10,000.
(b) Explain the importance of sales forecasting in budgetary process. 2
SECTION II
Q-4 (a) Answer the following (any One) 3
(1) Critically evaluate the limitations break-even analysis (BEA).
(2) Discuss the importance of following with reference to project management:
(i) Modernization
(ii) Expansion
(iii) Diversification
(iv) Strategic Investments
(b) Answer the following (any two) 6
(1) You are given the following data:
Capital investments Rs. 1,60,000
Scrap Value at end Rs. 20,000
Life of the project 4 years
Calculate first two full year’s depreciations under:
(i) SLM (ii) Diminishing balance method
(2) Following details are extracted from the stores records of Monica Ltd. For its basic raw material form:
1st July 94 Opening Balance 100 tonnes @ Rs. 20
5th July 94 Purchases 120 tonnes @Rs.21
10th July 94 issues 150 tonnes
12th july 94 Purchases 200 tonnes @Rs.25
15th July,94 issus 210 tonnes
Prepare the stores ledger under FIFO and LIFO method. Compare the cost of production under the tax method and their impact on the reported profits.
(3) The following consolidated data are extracted from the annual accounts of Sony Ltd. :
Year Sales Profit
1993 Rs. 6 lacs Rs. 2 Lacs
1994 Rs. 8 lacs Rs. 3 lacs
Answer the following:
(1) Profit-Volume ratio (P/V ratio)
(2) Break-even point in rupees
(3) Profits when sales are at Rs. 20 lacs.
Q-5 (a) The following details relate to the Cosmic Computers Ltd. 5
The company plans to sell 96,000 units next year. The extracted cost of goods sold is as under:
Unit Cost Monthly cost
Raw Material Cost Rs. 40 Rs. 3,20,000
Mfg. Expenses Rs.16 Rs. 1,28,000
Admn. & Sales Exps Rs.12 Rs. 96,000
Selling price per unit is Rs. 85
The duration of operating cycle component is as under:
Raw material stage 3 months
Work-in-process stage 1 month
Finished goods stage 1 month
Debtors stage 2 months
Assuming minimum cash balance to be kept at Rs. 50,000, Estimate the working capital needs.
(b) Calculate the internal Rate of Return (IRR) of the following investment proposal. 3
Project Cost = Rs. 84,000
Life of the project = 5 years
Annual cash flows= Rs. 25,000
The present value of interest factor of Annuity (PVIFA) for 5 years as under:
12% 14% 16% 18%
PVIFA 3.605 3.433 3.3 3.274
OR
Q-5 (a) Answer the following:
(1) State four characteristics of fixed cost.
(2) State four factors affecting working capital needs.
Q-6 The Usha Business Machines Ltd. Is considering a capital investment project. Relevant details are as under:
Initial Project Cost = Rs. 1,08,000
Life of the project = 5 years
Scrape value at the end = Rs. 8,000
Cash flow before depreciation and taxes:
Year 1- Rs. 26,000
2 Rs. 30,000
3 Rs. 28,000
4 Rs. 20,000
5 Rs. 27,000(including Scrap value)
The company depreciates its investments under stright line method. It falls under 50% tax bracket. The cost of capital of the company is 12%.
Evaluate the project proposal under the following methods:
(1) Pay back period
(2) Accounting Rate of Return
(3) Net Present Value
(4) Profitability Index
Year 1 2 3 4 5
PVIF (12%) 0.893 0.797 0.712 0.630 0.567
OR
Q-6 (a) The Capital structure of Arun Ltd is as under: 4
Rs.
Equity capital 1,00,000
Reserves 1,50,000
12% Preference Capital 40,000
15% Debentures 2,10,000
-----------
TOTAL 5,00,000
=======
The company falls under 40% tax bracket. The cost of equity be taken at 16% and that of reserves 1% less than cost of equity.
Calculate the overall cost of capital of the company.
(b) Distinguish between payback period and Accounting Rate of Return as the methods of evaluating
capital projects.
