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8/13/2019 Accountancy and Business Statistics Second Paper : Management Accounting
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B. Com (Part-I) Examination, 2011
(10+2+3 Patterns) (Faculty of Commerce)
Accountancy and Business Statistics
Second Paper : Management Accounting
Objective Part-I
2011 Time: One Hour Max. Marks. : 40
Attempt all questions.
1. Answer the following in not more than 20 words each : 10 x 2 =20
(i) Define Management Accounting.
(ii) Write the names of any four theories of capital structure?
(iii) Give any two characteristics of Financial Leverage.
(iv) What is qualitative concept of working capital?
(v) Give any four names of fictitious assets.
(vi) Give the name of five activity ratios.
(vii) Define the Fund Flow Statement.
(viii) Give the formula for calculating cost of redeemable preference shares.
(ix) What is meant by responsibility accounting?
(x) Define activity based costing.
2. Answer following in not more than 50 words each : 5 x 4 = 20
(i) Give five advantage of management accounting.
(ii) What is difference between capital structure and financial structure?
(iii) When does flow of funds take place?
(iv) Explain two differences between control reports and information reports..
(v) Find out the weighted average cost of capital from the following information:
Amount After Tax Cost of Capital
Equity share capital 4,00,000 .15
Preference share capital 1,50,000 .10
Debentures 2,50,000 .10
Retained Earnings 2.00,000 .08
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Descriptive Part-IITime : Two Hour Max. Marks: 60
Attempt three questions in all, selecting at least one question from each section. Each
question carries 20 marks.
Section A3. (a) The following data relate to the companies A and B which are of homogeneous
groups. A B
Net Operating leverage income Rs 50,000 Rs 50,000
Overall cost of capital 12.5% 12.5%
5% debentures Rs 2,00,000
Calculate value of companies under Net Operating Income Theory and also compute cost
of equity capital.
(b) Shivam Enterprises has a turnover of Rs 15,00,000. Variable cost is Rs 8,00,000 while
fixed cost is Rs 3,00,000. Debenture worth Rs 3.00.000 at 12% per annum. Calculate
operating, financial and combined leverage. Rate of tax is 50%.
4. The Board of Directors of Jai Engineering Ltd. request you to prepare a statement showing
the working capital requirements. Forecast for an expected level of production is 26,000
tonnes. The following information is available for your computation.
Raw material to remain in stock on an average 4 weeks
Process period 2 weeks
Permanent material in process 200 tonnes
Finished goods in stock 6 weeks
Credit allowed to customers 8 weeks
Expected ratio of material to sales price 70%
Wages and overheads 20%
Selling price per ton Rs 300
Section B
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5. (a) From the following income statement of ‘X’ Ltd. prepare a common size income
statement .
2009
Amount
2010
Amount
Gross sales 1,38,000 1,65,000
Less: Sales return -3,000 -3,5000
Net Sales 1,35,000 1,61,500
Cost of Good sold -82,000 -90,000
Gross Profit 53,000 71,500
Sales Expenses 27,000 30,000
Administration Expenses +13,500 +15,000
Total Expenses 40,500 16,500
Income from operation 12,500 16,500
Other Incomes +1,500 +2,000
Total Income 14,000 18,500
Less: Other Expenses -2,000 -3,000
Net Income 12,000 15,500
(b) From the following items of the assets side of the balance sheet of ABC Ltd for the period
from 31-3-2007 to 31-3-2010. Calculate trend percentages taking 2007 as the base year:
As on 31st March
Assets 2007 2008 2009 2010
Cash 40 60 80 70
Debtors 20 40 30 15
Stock 50 75 60 70
Other CurrentAssets
20 10 25 30
Land and
Building
400 500 600 600
Furniture 80 100 60 100
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Plant &
Machinery
100 125 130 150
Total Assets 710 910 985 1035
6. (a) A firm had current aeests of Rs 1,50,000. It then paid a current liability of Rs 30,000.
After the payment, the ratio was 2:1. What were the current liabilities before the payment was made?
(b) Current liabilities = Rs 40,000Capital employed= Rs 4,00,000
Fixed Assets = Rs 2,80,000
Calculate current ratio, assuming that there were no long-term investments.
( c) From the following informations calculate cash from operating activities:
2009
31st March
2010
31st March
Profit & Loss Appropriation 20,000 30,000
General Reserve 30,000 35,000
Bills receivables 14,000 18,000
Provision for depreciation 30,000 34,000
Outstanding Rent Payable 1,600 4,000
Prepaid Insurance 1,400 1,200
Goodwill 20,000 16,000
Stock 14,000 18,000Accrued Income 3,000 3,750
Income received in Advance 1,250 600
An old machine costing Rs 20,000 having book value of Rs 14,000 was for Rs 18,000
during the year 2010.
Section C
7. Laxmi Plastic Ltd. desires to purchase a new machine in order to increase its presentlevel of production. The cost of machine will be Rs50,000 and net income after tax but
before depreciation during its life will be as follows:
Year Net Income after tax before depreciation
1 15,000
2 20,000
3 25,000
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4 15,000
5 10,000
Evaluate the project according to:
(i) Net present value method(assuming discount rate 16%)
(ii) Internal rate of return of the project with the help of 20% and 25%discount factor.
Year 1 2 3 4 5
Discount Factor at 16% 0.862 0.743 0.641 0.552 0.476
Discount Factor at 20% 0.833 0.694 0.579 0.482 0.402
Discount Factor at 25% 0.800 0.640 0.512 0.410 0.328
Minimum rate of return laid down by the management is 16% p.a. Is the investment
desirable? Give your suggestion.
8. Write short note on the following:
(i) Responsibility Reporting
(ii) Investment centre(iii) Management Information System
(iv) Cost Driver
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Accountancy and Business Statistics
Second Paper : Management Accounting
Objective Part-I
2010
Time: One Hour Max. Marks. : 40Attempt all questions.
1. Answer the following in not more than 20 words each : 10 x 2 =20
(i) Give any four techniques of management accounting.
(ii) What is point of indifference?
(iii) What is the difference between favorable and unfavorable financial leverage?
(iv) If the current assets and current liabilities lf a firm are Rs.10 lakhs and 6 lakhs
respectively. What would be the amount of maximum bank credit according to
second method of Tandon Committee?
(v) What is owner's equity?
(vi) Current liabilities of a company are Rs.3,00,000 its current ratio is 3 :1 and quick
ratio 1 : 1 calculate the value of stock in trade.
(vii) Give the meaning of cash flow.
(viii) Differentiate between book value weight and market value weight.
(ix) State any two advantages of responsibility accounting
(x) Define activity based costing.
2. Answer following in not more than 50 words each : 5 x 4 = 20
(i) Explain the policy of trading on equity.
(ii) Ankit limited does not use any debt in its financing. The firm has earnings before
interest and tax of Rs.3,20,000 and the after tax capitalization rate is 16%
assuming the corporate tax of 50%, calculate the value of the firm according to
M.M. hypothesis.
(iii) Write a brief note on trend analysis.
(iv) A project costs Rs.25,000 scrap value Rs.5,000 life 5 years and annual average
income before depreciation and tax Rs.7,000 assuming tax rate at 50% and
depreciation on straight line basis, find out average rate of return.
(v) Give four advantages of ABC system.
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Descriptive Part IITime : Two Hour Max. Marks: 60
Attempt three questions in all, selecting at least one question from each section. Each
question carries 20 marks.
Section A
3. The following details of Sanchit limited for the year ended 31st March 2009 are
furnished below:
Operating leverage 3:1
Financial leverage 2 : 1
Interest charges per annum Rs. 20 lakhs
Corporate tax rate 50%Prepare the income statement of the company 60%
4. What is the concept of "Working Capital"? What factors determine the needs of working
capital and how is it measured?
Section B
5. Balance sheet of Jaipur Limited is given below:
(Rs.) (Rs.)Equity Capital 50,000 Fixed Assets 1,40,000
12% Pref. Capital 30,000 Stock 20,000
15% Debentures 70,000 Debtors 16,000
Capital Reserve 5,000 Bank 14,000Profit & Loss A/C 10,000
Creditors 12,000
Bank Overdraft 8,000Proposed Dividend 5,000
Find out Current Ratio, Liquid Ratio, Capital Gearing Ratio and fixed assets ratio
6. The following are the summarized balances sheets and income statement of Tata motors.
Liabilities 31.12.08 31012.09
Rs. Rs.
Share Capital 7,20,000 8,88,888
P & L A/c 3,03,600 3,27,000Accumulated Depreciation on plant &
Equipment 2,40,000 2,64,000
Sundry Creditors 4,80,000 4,68,000
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Outstanding Exp. 48,000 96,000
Prov. For Taxation 24,000 24,400
18,15,600 20,70,000
Rs. Rs.Land and Building 96,000 1,92,000
Plant and Equipment 7,00,000 11,52,000
Cash 1,20,000 1,44,000Debtors 3,36,000 3,72,000
Stock 5,28,000 1,92,000
Advances 15,600 18,000
18,15,6,00 20,70,000
Note : Cost of equipment sold was Rs. 1,44,000
Income Statement for 2009
Net sales Rs. Rs.Less : Cost of sales 39,60,000 50,40,000
Depreciation 1,20,000
Salaries and wages 4,80,000Operating Expenses 1,60,000
Provision for taxation 1,76,000 48,96,000
1,44,000Add: Non-Recurring income :
Profit on sales of an item ofEquipment 24,000
Retained Earnings 1,68,000
Balance in P & L A/c brought forward 3,03,600
4,71,000Less : Dividend declared and paid during the Year 1,44,000
3,27,600
You are required to prepare a statement of changes in working capital and statement of
changes in working capital and statement of sources and application of funds assuming
provision for taxation as current liability.
Section C
7. The capital structure of Kavita Limited is as under :
2,000 6% debentures of Rs.100 each Rs.
(First issue) 2,000,000
1,000 7% debentures of Rs.100 each
(Second issue) 1,00,000
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2,000 8% cumulative preferebee shares of Rs.100 each 2,00,000
4,000 equity shares of Rs.100 each 4,00,000
Retained Earnings 1,00,000
The earnings per share of the company in the past many years have been Rs. 15. The
shares of the company are sold in the market at book value. The company's tax rate is
50% and shareholders personal tax liability is 10% find out the weighted average cost of
capital.
8. Discuss various kinds of reports prepared by the management accountant for different
levels of management.
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