MANAGEMENT PROGRAMME
Term-End Examination
MS4 : Accounting and Finance for Managers
Time: 3 hours
Maximum Marks: 100
(Weightage 70%)
June 2006
1. (a) What is Internal Audit? What functions are undertaken by an Internal Auditor? How does Internal Audit differ from External Audit? Explain.
(b) Explain the Business Entity concept, Accrual concept and Consistency concept of Accounting.
2. Messrs E. Traders is a firm of two partners Mr. S and Mr. N dividing profits and losses in the ratio of 3 : 2. The following are the balances in their ledger as on 31st March 2005.
Capital
Mr. S: 40,000
Mr. N: 26,000
Drawings
Mr. S: 16,000
Mr. N: 14,000
Sundry Creditors: 32,151
Goodwill: 15,000
Cash in hand: 100
Sundry Debtors: 58,170
(Less provision for B/D for Rs. 2,130)
Stock (1-4-2004): 14,577
Plant and MachinerY (1-4-2004): 21,000
Balance with Bank of India: 7,065
Bad Debts: 1,575
Buildings (as on 1-4-2004): 30,000
Purchases (Less Returns of Rs. 4'038): 1,53,336
Sales (Less Returns of Rs. 23,463): 3,25,275
Carriage outwards: 7,010
Wages: 46,455
Land: 6,000
6% Loan on Mortgage: (Cr.) 28,500
Interest on Mortgage loan: 1,185
Salaries: 15,297
Carriage inwards: 2,797
Rent and Rates: 6,000
Gas, Water and Electricity: 2,760
Insurance (for the period 1-1-2005 To 31-12-2005): 513
Advertisement: 9,792
Cash discount received: 3,300
Cash discount allowed: 1,680
Investments: 15,000
General expenses: 11.190
Bills Payable: 8,840
Bills Receivable: 5,400
Dividends Received: 750
Prepare the Trading and profit and Loss Account and the Balance Sheet after making the following adjustments :
(1) (i) Depreciation is to be provided for on plant And
(ii) Provide for rent payable for February And March 2005 at Rs. 300 p.m.
(iii) Provision ior B/D must be maintained at 5% of debtors.
(iv) Provide interest on capital at 10% p.a. No interest on drawings.
(2) Purchases included plant and Machinery costing Rs. 3,000 purchased on 1st April 2004.
(3) The Manager is entitled to a commission of 10% of net profits after charging his commission but before interest on capital accounts of partners.
(4) The closing stock was Rs. 16,800.
3. Explain the concepts of Operating Leverage and Financial Leverage and discuss their significance in business decisions. What will be the effect on net income' return on equity and earnings per share if the use of these leverages is considerable and there is a small change in sales? Explain clearly.
4. Comment on the following statements :
(a) Companies with very high profits generally have a low Payout ratio
(b) Cost of debt is always cheaper as compared to other sources of funds
(c) Where cash flows are uncertain the principle will be "greater the variability, the higher the minimum cash balance."
(d) "Opportunity cost should be taken into account while evaluating the profitability of a project"
5. (a) How would you compare the actual performance of a business with the budgeted performance? Discuss the important ratios used for this purpose'
(b) Distinguish between a Flexible Budget and a Rolling Budget. What purposes do they serve? Explain
6. The comparative Balance Sheets of B. Company Ltd. are indicated in condensed form as under :
| 31st March 2005 | 31st March 2004 | ||
| Fixed Assets | 5,20,000 | 4,90,000 | |
| Less Depreciation | 1,40,000 | 1,08,000 | |
| 3,80,000 | 3,72,000 | ||
| Investment at cost | 50,000 | 1,00,000 | |
| Stocks | 90,500 | 55,600 | |
| Sundry Debtors | 1,67,800 | 1,19,300 | |
| Cash and Bank Balance | 47,500 | 49,900 | |
| Preliminary expenses | - | 7,200 | |
| 7,35,800 | 7,02,900 | ||
| Share Capital | |||
| Equity shares of Rs. 100 each issued for cash | 4,00,000 | 3,60,000 | |
| General Reserve | 60,000 | 1,10,000 | |
| Surplus in P&L a/c | 33,450 | 20,450 | |
| Sundry Creditors | 1,95,350 | 1,33,650 | |
| Proposed Dividend | 15,000 | 28,800 | |
| Provision for taxation | 32,000 | 50,000 | |
| 7,35,800 | 7,02,900 |
The net profit for the year (after providing for depreciation Rs. 40,000, writing off Preliminary expenses Rs. 7,200 and making provision for taxation (Rs. 32,000) amounted to Rs. 38,000.
The company sold during the year old machinery costing Rs. 9,000 for Rs. 3,000. The accumulated depreciation on the said machinery was Rs. 8,000.
A portion of the Company's investment became worthless and was written off to general reserve. The cost of such investment was Rs. 50,000.
During the year the Company paid an interim dividend of Rs. 10,000 and the directors have recommended a final dividend of Rs. 15,000 for the year 2004 - 05.
Prepare (a) Statement of Sources and Application of Funds and (b) Schedule of Working Capital Changes.
7. The following data are obtained from the records of a factory :Sales 4000 units @ Rs. 25 each: Rs. 1,00,000
Material consumed Rs. 40,000
Variable overheads 10,000
Labour charges 20,000
Fixed overheads18,000 88,000
Net Profit 12,000
Calculate :
(a) The number of units the company should sell so that there is neither any loss nor any gain.
(b) The sales needed to earn a profit of 20% on sales.
(c) The extra units which should be sold to obtain the present profit if it is proposed to reduce the selling price by 20% and 25%.
(d) The selling price to be fixed to bring down its break-even point to 500 units under present conditions.
8. Write explanatory notes on :
(a) Sales - price Variance
(b) Price - Earnings Ratio
(c) Operating profit and Net profit
(d) Amortisation of Intangible Assets
(e) Capitalisation of Earnings
No comments:
Post a Comment