GUJARAT UNIVERSITY
MCA Semester II
Accounting and Financial Management
14th July, 1998
SECTION I
Q-1 Answer any Three of the following: 9
(1) Distinguish between (any one)
(i) Cash book and Cash account (ii) LIFO and FIFO
(2) State whether following statements are TRUE or FALSE:
(1) Pay back method is useful when liquidity is important
(2) Current Assets change their form frequently.
(3) Management Accountancy and Financial Accountancy are the same.
(3) Match (a) with (b) :
(a) (b)
1. NPV 1. Contribution/ Sales
2. PI 2. Present Value – Investment
3. P/V Ratio 3. Present value/ Investment
4. LRV 4. Present value = Investment
5. IRR 5. AH (SR-AR)
6. GP Ratio 6. Sales – Cost of Sales/ Sales
(4) Explain the following concept (any three)
(1) Going Concern concept
(2) Errors of commission
(3) Zero base Budget
(4) Material Price Variance
(5) Critical budget factor
(6) Journal proper
(5) State any three events and show the journal entries for each of them.
Q-2 Guru Nanak & Sons furnished the following trial balance as on 30-6-98. Prepare profit 8
And loss accounts and balance sheet:
Dr (Rs.) Cr (Rs.)
Capital 1,20,000
Sales & Purchases 30,000 70,000
Opening Stock 10,000
Plant & Machinery 2,00,000
Furniture 50,000
Stationary & Printing 5,000
Postage & Telegram 1,000
Travelling Expenses 4,000
10% BOB Loan (1-1-98) 1,50,000
Insurance Premium 2,000
Interest on Bank Loan 3,000
Salaries 15,000
Debtors & Creditors 25,000 20,000
Bank Balance 15,000
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3,60,000 3,60,0000
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Adjustment:
(1) Closing Stock on 30-6-98 was Rs. 25,000
(2) Provide Depriciation @20% on plant & Building and 10% on Furniture.
(3) Provide interest on Capital @10%.
(4) Out standing exp. Salaries Rs. 15,000
(5) Provide @ 2% bad debts on debtors.
(6) The insurance premium was paid on 1-4-98 for the coverage of 12 months.
Q-3 Shetal Industries Ltd. Furnished following information:
Gross profit Rs. 10 lakhs Operating exp. Rs. 5 lakhs
GP ratio 20%
Total Assets (Break up) 60% Fixed Assets
40% Current Assets
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100% Total Assets
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Current Ratio 2:1
Fixed Assets Turnover ratio 2
Inventory Turnover ratio 5
Based on above ratios and information you are required to find out
(1) Liquidity ratio (5) Total Assets
(2) Operating Ratio (6) Working Capital
(3) Sales (7) Closing Stock
(4) Current Assets (8) Current Liabilities
OR
Q-3 (a) Briefly explain the importance of the following functional ratios: 4
(1) Liquidity ratios (2) Profitability ratios (3) Asset-Turnover ratio
(4) Finance structure ratios
(b) Briefly explain the limitations of ratio analysis. 4
SECTION II
Q-4 Attempt any three of the following: 9
(1) Mangaldas Stores Ltd. Maintains stores ledger on FIFO basis work out stock as on 30-6-98 for Buta
Chemical material based on transaction for the month of June, 98:
Receipts 19,000 kgs @ Rs. 5 on 4th June
Receipts 19,000 kgs. @ Rs. 6 on 5th June
Issue 19,000 kgs. On 10th June
Issue 12,000 Kgs on 15th June
Receipts 35,000 kgs @ Rs. 7 on 18th June
Issue 25,000 kgs.
(2) Badal Chemicals furnished the following data for two consecutive years.
Find out (1) P/V ratio (2) Break Even point in rupees (3) Sales required for profits of Rs. 50 lakh:
Particulars 1996 1997
Sales Rs. 100 lac Rs. 150 lac
Profit Rs. 20 lac Rs. 40 lac
(3) Shivshankar presents its capital structure as under. Find out weighted average cost of capital:
Capital Structure Rs. In Lakh Cost of Capital
Equity Shares (Rs.100 each) 500 16%
A series 15% Deb. 400
B series 20% Deb. 1000
12% Pref. Share 100
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2000
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(4) Calculate (I)Ravi materials waiting (ii) Process time (iii) Finished goods waiting (iv) Debtor’s
credit period and (v) Creditor’s credit period with the help of the following information about a company:
Particulars Opening Balance Rs. Closing Balance Rs.
(1) Raw Materials 400 440
(2) Work in process 160 140
(3) Finished goods 500 480
(4) Debtors 480 560
(5) Creditors 320 300
Additional Information:
(a) Total purchases Rs. 5,000
(b) Total Sales Rs. 12,000
(c) Total Mfg. expenses including depreciation Rs. 2,800
(d) Total Administrative expenses Rs. 1200
(5) Following data relates to a fixed asset:
Cost price : Rs. 85,000
Estimated life : 8 years
Scrap value at the end Rs. 5,000
Calculate first two year’s depreciation under the following methods:
(1) Straight Line Method
(2) Written Down Value method
(3) Sum of years’ digit method
Q-5 (a) The condensed projected cash flows details about the PQR Ltd. Are as under: 6
(1) Particulars May June July Aug sept. Oct. Nov.
Sales 80,000 60000 100000 80000 120000 100000 90000
Purchases 60000 64000 80000 70000 76000 80000 80000
25% of the sales are cash sales. Credit sales are collected in the following month. 20% of the purchases are cash on which 2% cash discounts are availed. Credit purchases are paid in full in the following month.
(5) All manufacturing expenses are variable and 5% of the sales. They are paid on fortnightly basis.
(6) Administrative expenses are Rs. 5,000 fixed and 2% are variable in relation to sales. They are in the same month.
(7) Company issued 15% debentures each of Rs. 100 for Rs. 1,00,000 at par, The proceeds were received in July 98 on which 2% issue expenses were incurred and paid.
(8) An old machine having a book value of Rs. 15,000 was sold for Rs. 20,000 in August, 98 and a new machine costing Rs. 1,50,000 was purchase and paid in the same month.
(9) An advance tax of Rs. 12,000 is payable in September, 98
(10) Dividends of Rs. 10,000 are payable in August,98.
Prepare a cash budget for the quarter July-September 98 assuming that cash balance on 1-7-98 as Rs. 5,000.
(b) How is the make or buy decision affected by the sales, variable cost and fixed cost data. 2
OR
Q-5 (a) A company is operating at 75% capacity utilization producing 15,000 units. The cost details and cost behaviour at this level of capacity are as under: 4
(1) Raw materials Rs. 30,000 (100% variable)
(2) Direct Labour Rs. 15,000 (100% variable)
(3) Depreciation Rs. 8000(100% fixed)
(4) Taxes Rs. 2000 (100% fixed)
(5) Power Rs. 5000 (40% Variable)
(6) Maintainance Rs. 4000 ( 75% variable)
Prepare a flexible budget for 60% and 100% capacity utilization and ascertain cost per unit. Give your observations about unit cost behaviour.
(b) Explain: (I) Material cost variance (ii) Material price variance and (iii) Material Usage variance. State the possible reasons for the materials usage variance.
Q-6 (a) Following details relate to a project recently considered by the MN Ltd: 6
Initial Project costs = Rs. 1,20,000
Estimated project life = 4 years
Scrap value at the end = rs. 20,000
Net cash Flows:
Year Rs.
1 30,000
2 40,000
3 50,000
4 54,000 excluding scrap value
The company’s required rate of return is 12% and it provides depreciation under the striaght line method.
Evaluate the project under (I) payabck period.
