DECEMBER 2019 P/ID 77928/RMB1D
Time : Three hours Maximum : 80
marks PART A — (10 2 = 20 marks)
Answer any TEN questions in 50 words each.
Write short notes on the following terms given
below
1. Accounting concepts
2. Separate entity concept
3. Ledger
4. Quick Ratio
5. Funds From Operations
6. Common size balance sheet
7. Margin of safety
8. BEP
9. Receipts
10. Material requirement Budget
11. Cost centre
12. Accounting Information
PART B — (5 6 = 30 marks)
Answer any FIVE questions in 250 words each.
13. What are the functions of accounting?
14. Explain the uses of Balance sheet.
15. Justify the need for analysis and interpretation
of financial statements.
16. What are the limitations of ratio analysis?
17. What is meant by contribution? Explain
its significance.
18. Explain the uses of cost sheet.
19. What are the advantages of zero base Budgeting?
PART C — (3 10 = 30 marks)
Answer any THREE questions in 500 words each.
20. Distinguish between Financial and
Management Accounting.
21. Give a detail note on different bases of
cost classification.
2 P/ID 77928/RMB1D
22. The Trial Balance of Mr. Gridhar shows the
following balance on 31st March 2013. Prepare
final accounts.
Debit Balance Amount Credit Balance Amount
Purchases 70,000 Capital 56,000
Sales Returns 5,000 Sales 1,50,00
0
Opening Stock 20,000 Purchase 4,000
Returns
Bank Charges 2,500 Discount 1,000
Received
Salaries 4,500 Sundry Creditors 30,000
Wages 5,000
Freight Inwards 4,000 .
Freight outwards 1,000
Rent, rates and 11,000
Taxes
Cash in hand 1,000
Plant and Machinery 50,000
Sundry debtors 60,000
Cash at bank 7,000
Total 2,41,00 Total 2,41,00
0 0
Adjustments:
Closing stock on 31st March 2013 was 30,000.
ANSWER
To prepare the final accounts (Trading Account and Profit & Loss Account) for Mr. Gridhar,
we'll follow these steps:
Step 1: Prepare the Trading Account
Trading Account for the Year Ended 31st March 2013
Amount
Particulars
(₹)
Sales 1,50,000
Less: Sales Returns (5,000)
Net Sales 1,45,000
Opening Stock 20,000
Add: Purchases 70,000
Less: Purchase Returns (4,000)
Net Purchases 66,000
Add: Freight Inwards 4,000
Cost of Goods Available for Sale 1,10,000
Less: Closing Stock (30,000)
Amount
Particulars
(₹)
Cost of Goods Sold 80,000
Gross Profit 65,000
Step 2: Prepare the Profit & Loss Account
Profit & Loss Account for the Year Ended 31st March 2013
Amount
Particulars
(₹)
Gross Profit 65,000
Expenses:
Salaries 4,500
Wages 5,000
Rent, Rates and Taxes 11,000
Bank Charges 2,500
Freight Outwards 1,000
Total Expenses 24,000
Net Profit 41,000
Summary of Final Accounts
1. Gross Profit: ₹65,000
2. Net Profit: ₹41,000
This completes the final accounts for Mr. Gridhar for the financial year ending on 31st March
2013.
3 P/ID 77928/RMB1D
23. The comparative balance sheets of Thiru
Vetrivel for the two year were as follows:.
Liabilities 1997 1998 Assets 1997 1998
Loan – 20,000 Cash 11,000 15,000
from wife
Bills 12,000 8,000 Debtors 40,000 35,000
payabl
e
Creditors 25,000 52,000 Stock 25,000 30,000
Bank 43,000 60,000 Machinery 20,000 14,000
Overdraft
Capital 66,000 34,000 Buildings 50,000 80,000
1,46,00 1,74,00 1,46,00 1,74,00
0 0 0 0
From the above information, prepare a cash
flow statement.
To prepare a cash flow statement for Thiru Vetrivel based on the comparative balance sheets for
the years 1997 and 1998, we will follow the format of the cash flow statement which includes
cash flows from operating, investing, and financing activities.
Cash Flow Statement for the Year Ended 31st March 1998
1. Cash Flows from Operating Activities
Adjustments for changes in working capital:
Increase in Creditors:
52,000−25,000=27,00052,000 - 25,000 = 27,00052,000−25,000=27,000 (Increase in
creditors = cash inflow)
Decrease in Debtors:
40,000−35,000=5,00040,000 - 35,000 = 5,00040,000−35,000=5,000 (Decrease in debtors
= cash inflow)
Increase in Stock:
30,000−25,000=5,00030,000 - 25,000 = 5,00030,000−25,000=5,000 (Increase in stock =
cash outflow)
Net Change in Working Capital:
27,000+5,000−5,000=27,00027,000 + 5,000 - 5,000 = 27,00027,000+5,000−5,000=27,000
Net Cash from Operating Activities:
Since capital decreased, it implies a loss:
34,000−66,000=−32,00034,000 - 66,000 = -32,00034,000−66,000=−32,000
Total Operating Cash Flow:
−32,000+27,000=−5,000-32,000 + 27,000 = -5,000−32,000+27,000=−5,000
2. Cash Flows from Investing Activities
Decrease in Machinery:
20,000−14,000=6,00020,000 - 14,000 = 6,00020,000−14,000=6,000 (Sale of machinery =
cash inflow)
Increase in Buildings:
80,000−50,000=30,00080,000 - 50,000 = 30,00080,000−50,000=30,000 (Purchase of
buildings = cash outflow)
Total Cash Flow from Investing Activities:
6,000−30,000=−24,0006,000 - 30,000 = -24,0006,000−30,000=−24,000
3. Cash Flows from Financing Activities
Loan from Wife:
20,00020,00020,000 (New loan = cash inflow)
Increase in Bank Overdraft:
60,000−43,000=17,00060,000 - 43,000 = 17,00060,000−43,000=17,000 (Increase in
overdraft = cash inflow)
Total Cash Flow from Financing Activities:
20,000+17,000=37,00020,000 + 17,000 = 37,00020,000+17,000=37,000
Summary of Cash Flows
Particulars Amount (₹)
Cash Flow from
-5,000
Operating Activities
Cash Flow from
-24,000
Investing Activities
Cash Flow from
37,000
Financing Activities
−5,000−24,000+37,000=8,000-5,000 - 24,000 + 37,000
Net Increase in Cash
= 8,000−5,000−24,000+37,000=8,000
Cash at Beginning of
11,000
Year (1997)
Cash at End of Year
15,000
(1998)
Conclusion
The cash flow statement indicates that Thiru Vetrivel had a net increase in cash of ₹8,000 during
the year 1998, resulting in a cash balance of ₹15,000 at the end of the year.
24. Prepare a Balance Sheet with as many details
as possible from the following information:
Gross profit ratio 20%
Debtors turnover 6 times
Fixed assets to net worth 0.80
Reserves to capital 0.50
Current ratio 2.50
Liquid ratio 1.50
Net working capital Rs.
3,00,000
Stock turn over 6 times
———————
To prepare a detailed Balance Sheet based on the given information, we’ll derive various
components step by step.
Given Data:
1. Gross Profit Ratio: 20%
2. Debtors Turnover Ratio: 6 times
3. Fixed Assets to Net Worth: 0.80
4. Reserves to Capital: 0.50
5. Current Ratio: 2.50
6. Liquid Ratio: 1.50
7. Net Working Capital: ₹3,00,000
8. Stock Turnover Ratio: 6 times
Step 1: Determine the Components
1. Net Working Capital (NWC):
NWC=Current Assets−Current Liabilities\text{NWC} = \text{Current Assets} - \
text{Current Liabilities}NWC=Current Assets−Current Liabilities
Given NWC = ₹3,00,000.
2. Current Ratio:
Current Ratio=Current AssetsCurrent Liabilities\text{Current Ratio} = \frac{\
text{Current Assets}}{\text{Current
Liabilities}}Current Ratio=Current LiabilitiesCurrent Assets
Given Current Ratio = 2.50.
Let Current Liabilities = CLCLCL.
Then,
Current Assets=2.50×CL\text{Current Assets} = 2.50 \times CLCurrent Assets=2.50×CL
Thus,
2.50×CL−CL=3,00,0002.50 \times CL - CL = 3,00,0002.50×CL−CL=3,00,000
1.50×CL=3,00,0001.50 \times CL = 3,00,0001.50×CL=3,00,000
CL=2,00,000CL = 2,00,000CL=2,00,000
CA=2.50×2,00,000=5,00,000CA = 2.50 \times 2,00,000 =
5,00,000CA=2.50×2,00,000=5,00,000
3. Liquid Ratio:
Liquid Ratio=Liquid AssetsCurrent Liabilities\text{Liquid Ratio} = \frac{\text{Liquid
Assets}}{\text{Current Liabilities}}Liquid Ratio=Current LiabilitiesLiquid Assets
Given Liquid Ratio = 1.50.
Liquid Assets=1.50×2,00,000=3,00,000\text{Liquid Assets} = 1.50 \times 2,00,000 =
3,00,000Liquid Assets=1.50×2,00,000=3,00,000
4. Calculate Stock:
Liquid Assets = Current Assets - Stock
Thus,
3,00,000=5,00,000−Stock3,00,000 = 5,00,000 - \text{Stock}3,00,000=5,00,000−Stock
Stock=5,00,000−3,00,000=2,00,000\text{Stock} = 5,00,000 - 3,00,000 =
2,00,000Stock=5,00,000−3,00,000=2,00,000
5. Debtors Turnover Ratio:
Debtors Turnover=SalesDebtors=6\text{Debtors Turnover} = \frac{\text{Sales}}{\
text{Debtors}} = 6Debtors Turnover=DebtorsSales=6
Let Debtors = DDD and Sales = SSS.
Then,
D=S6D = \frac{S}{6}D=6S
6. Calculate Sales from Gross Profit Ratio:
Gross Profit = 20% of Sales
Gross Profit=0.20S\text{Gross Profit} = 0.20SGross Profit=0.20S
Therefore,
Cost of Goods Sold (COGS)=S−0.20S=0.80S\text{Cost of Goods Sold (COGS)} = S -
0.20S = 0.80SCost of Goods Sold (COGS)=S−0.20S=0.80S
7. Stock Turnover Ratio:
Stock Turnover=COGSStock=6\text{Stock Turnover} = \frac{\text{COGS}}{\
text{Stock}} = 6Stock Turnover=StockCOGS=6
Thus,
6×2,00,000=COGS6 \times 2,00,000 = \text{COGS}6×2,00,000=COGS
COGS=12,00,000\text{COGS} = 12,00,000COGS=12,00,000
Therefore,
0.80S=12,00,0000.80S = 12,00,0000.80S=12,00,000
S=15,00,000S = 15,00,000S=15,00,000
8. Debtors Calculation:
D=15,00,0006=2,50,000D = \frac{15,00,000}{6} = 2,50,000D=615,00,000=2,50,000
Step 2: Calculate Reserves and Capital
1. Fixed Assets to Net Worth:
Let Net Worth (Net Assets) = NWNWNW.
Given Fixed AssetsNW=0.80\frac{\text{Fixed Assets}}{NW} = 0.80NWFixed Assets
=0.80
Let Fixed Assets = FAFAFA.
Then,
FA=0.80NWFA = 0.80NWFA=0.80NW
2. Reserves to Capital:
Let Capital = CCC.
Then, Reserves = 0.50C0.50C0.50C
So,
NW=C+Reserves=C+0.50C=1.50CNW = C + \text{Reserves} = C + 0.50C =
1.50CNW=C+Reserves=C+0.50C=1.50C
Thus,
FA=0.80×1.50C=1.20CFA = 0.80 \times 1.50C = 1.20CFA=0.80×1.50C=1.20C
3. Total Liabilities (Including Capital and Reserves):
Total Liabilities = Current Liabilities + Long-term Liabilities + Capital + Reserves
Step 3: Prepare the Balance Sheet
Now we can prepare the Balance Sheet using the derived values.
Balance Sheet of the Company
As at 31st March 1998
Amount Amount
Liabilities Assets
(₹) (₹)
Current Liabilities 2,00,000 Current Assets 5,00,000
Fixed Assets
8,00,000 Debtors (2,50,000) 2,50,000
(1.20C)
Capital (C) 5,33,333 Stock (2,00,000) 2,00,000
Cash and Bank
Reserves (0.50C) 2,66,667 50,000
(assumed)
Fixed Assets (1.20C) 8,00,000
Total Assets 10,00,000
Total Liabilities 10,00,000 Total Assets 10,00,000
Conclusion
The above balance sheet reflects the financial position of the company with calculated assets,
liabilities, and equity based on the ratios and relationships provided. Adjust the numbers
accordingly if you have more specific data or constraints!
