Financial Accounting

Q.No. 1. Journalize the following transactions of Mis. Ramesh and Co. For the month of March, 2005:
Balances on March 1 ,2005
(a) Cash - Rs 7,000 (b) Bank - Rs 20,000 (c) Stock - Rs 15,000 (d) Furniture - Rs 5,000
(e) Building - Rs 40,000 (f) Debtors: A - Rs 3,000. B - Rs 5,000 (g) Bank loan - Rs
7,000
(h) Creditors: X - Rs 7,000. Y - Rs 8,000.
Transactions during the month of March, 2005 were as follows:
March
2 Received Rs 2,800 cash from Mr. A in full & final settlement.
6 Purchased goods of the list price Rs 10,000 at 10% discount on credit from Mr. Z
8 Sold goods to C on credit Rs 8,000.
11 C pays Rs 7,200 after getting 10% discount for prompt payment.
15 Salaries paid in cash Rs 2,000.
18 Interest on bank loan Rs 700 debited to the current of the business enterprise. 20 Goods
costing Rs 1,000 distributed as free samples.
25 Cash withdrawn by Ramesh for personal use Rs 2,000.
30 Paid Rs. 6,000 to X in full and final settlement of his account.
31 Cash sales at list price Rs 5,000 Trade discount allowed Rs 500.
Q.No.2. A firm takes a lease of land for 4 years for Rs. 10,000. The annual depreciation is charged on the
basis of annuity method presuming t: ,e rate of interest at 6% p.a. The annuity table shows that the
annual amount necessary to write off Re.1 in 4 years at 6% p.a. is Rs. 0.288591. You are required to
prepare the Lease Hold property Account for 4 years and show the net amount to be charged to the Profit
and Loss account for these 4 years.

Q. No.3 •. Distinguish between

(i) Capital expenditure and Revenue expenditure with their examples. –
(ii) Reserves and Provisions .
.

Q. NO.4 Explain 'LIFO' and 'FIFO' method of inventory valuation. Why proper valuation
of inventory is important.

March 30 400 units @ RS.1

Q.No.5 From the following data calculate the cost of goods sold and closing inventory
under FIFO and LIFO method of inventory valuation:
Q. No.6
March 1 Stock in Hand -- 500 units@ Rs. 10
Discuss briefly
Purchases Issues the basic
accounting
March 3 500 units@ Rs.11 March 2 400 units concepts and
conventions.
March 10 1,000 units @ RS.12 March 9 500 units
Q.No.7 (i) What
March 18 600 units @ RS.1 0 March 16 900 units do you mean
by
March 24 500 units @ Rs.12 March 23 500 units
depreciation? What are its causes? Also explain the need and significance of
depreciation?
(ii) Distinguish between “Straight line method" and "diminishing balance method" of
providing depreciation.
Q.No.8 From the following Trial Balance, prepare a Manufacturing account, Trading
account and Profit and loss account and balance sheet as on S 1 December 2006 -
Particulars Amount Amount
Rs Rs
Stock on 1.1 .2D06:
Raw Materials 2,000
Work-in-progress 5,000
Finished Goods 10.000
Manufacturing Wages 10,000
Purchases of Raw Materials 30,000
Factory Rent 5,000
Carriage of Raw Materials 3,u.oo
Sal of the Works Manager 2,000
Office Rent 2,000
Printing and stationary
. 1,000
Bad debts 1,000
Sales 60,000
Land and -Buildings 30,000
Plant and. Machinery 20,000 .
Depreciation on Plant 2,000

--
Sundry Debtors 5,000
Sundry Creditors 30,000
Cash in hand 5,000
Capital 43,000
Total 1,33,000 1,33,000
Closing Stocks on 31 December 2006 were as follows:
Raw Materials Rs 5,000
Work-In-Progress Rs 4,000
Finished Goods Rs 10,000
Q.No.9 (i) What do you mean by Ledger? Explain the rules regarding posting of transactions into the
ledger.
(ii) What is 'Trial Balance'? What are the objectives of preparing a Trial Balance?

Q.No.l0. From the following balances taken from the books of M/s X & Co., prepare Trading and profit and
loss account for the year ending December 31, 2007 and Balance sheet as on that date:

Particulars Amount Amount

Rs (Dr.)
Stock( 1-1-2007) 17,000 -
Debtors and Creditors 25,000 22,000
Purchases and Sales 89,000 1,15,000
Returns 17,000 12,000
Drawings and Capital 8,000 1,25,000
Fire Insurance Premium 2,000 -
Life Insurance Premium 5,000 -
Income Tax Paid 10,000 -
Bills Receivables and Bills Payables 14,000 16,000
Sales Tax Payables - 12,000
Wages and Salaries 18,000 -
Telephone Expenses 3,000 -
Advertising Expenses 21,000"" -
Cash and Bank-Overdraft 5,000 14,000
Audit Fees' 8,000 -
Discount 4,000 1,000
Inve§tments 60,000 -
Interest on Investments - 5,000
Interest on Bank Overdraft 6,000 -
Rent Paid 12,000 -

Bad Debts Recovered - 2,000

Total 3.24,000 3,24,000

ORIENTAL INSTITUTE OF MANAGEMENT PLOT No: 149, SECTOR: 12,

VASHI
NAVI MUMBAI- 400 703.

MFM/MMM : I Semester
Date: 17/12/2009
Total Marks: 60 Duration: 3 Hrs.
 Sub: Cost Management and Management Control.
N.B. (1 )Q1 is compulsory
(2) Attempt any five questions from remaining questions (02-011).
(3)AII questions carry equal marks
Q1 Select the most appropriate answer form the following alternatives.

1. Margin of safety
(a) Excess of breakeven sales over actual sales
(b) Excess of actual sales over breakeven sales
(c) (b) Excess of actual sales over budgeted sales
2.A budget is-
(a) a qualitative statement prepared prior to a definite period of time
(b) a quantitative statement prepared prior to a definite period of time
(c) a quantitative statement prepared after a definite period of time
. 3.Feature of responsibility accounting
(a) Inputs and outputs
(b) Income and expenditure
(c) Actual and budgeted
4. Flexible budget
(a) Costs budgeted at different levels of activities
(b) Costs budgeted at different levels of sales
(c ) profits budgeted -at different levels of activities
5. Process costing is applicable-
(a)when it is difficult to identify costs with units of work performed during a
period of time.
(b) when unit costs are determined continuously as each job is competed (c )
when production is continuous
6. Market price·
(a) Negotiated price
(b) Adjusted price
(c )Transfer price
7 .. The profit-volume graph portrays the relationship of
(a)profit to contribution
(b )Profit to volume
(c )Cost to volume
8:.Contract costing is also a variant of
(a) Operational costing
(b )Management costing
(c )Job costing
9 .. Under FIFO method of valuation of inventory,
(a) those received last are issued first, value fixed accordingly.
(b) those received first are issued first, value fixed accordingly.
 (c) those received first are issued last value fixed accordingly.
10. A profit center is.:.
. (a) Responsibility centre
(b )Revenue centre
(c )Cost centre
02 .. What is responsibility accounting? Discuss its significance in divisional performance
measurement.

03. Prepare a cash budget for the three months ended 30th September,2008 based on the
following information-
Cash at Bank on 1st July,2008-Rs.12,500 Salaries and wage., estimated monthly-Rs.5,OOO
Interest payable-August,2008-Rs.2,500
Month Cash Sales Credit Sales Purchases Other
Rs. Rs. Rs. Expenses
Rs.
June --- 50,000 80,000 ---
July 70,000 40,000 85,000 10,000
August 76,000 70,000 120,000 11,000
September 60,500 60,000 90,000 10,500
Credit sales are collected 50%in the months sales are made and 50%in the month
following. Collections from credit sales are subject to 5%discount if payment is received
during the month and 2 ~%,if the payment is received in the following month. Creditors
are paid either on 'prompt' or 30 days basis. It is estimated that 1O%of the creditors are in
the prompt category.

04. Product A is manufactured after it passes through three distinct processes. The
following information is obtained from the records of a company, for the year ended 31 st
December, 2008.

Particulars Process I Process II Process III

Direct Material Rs.2,500 Rs.2,OOO Rs.3,000
Direct WaQes Rs.2,000 Rs.3,000 Rs.4,OOO
Product overheads are Rs.9,000/- ,1000 units at RS.5 each were introduced to process I.
There was no stock of materials or work in progress at the beginning and at the end of the
year. The output of each process passes direct to the next process and finally to the
Finished Stock account. Production overheads are recovered on 100% of direct wages. The
following additional data is available:

Output duringthe Percentage of Value of scrap per

week normal loss to unit(Rs.)
input
Process I 950 5% 3
Process II 840 10% 5
Process III 750 15% 5
Prepare Process Cost accounts and Abnormal Gain or Loss accounts for the year ended 31st
December, 2008.

Q5.What is budgetary control? What are the steps involved for installation of
 budgetary control system in a manufacturing organization?

Q6. M/S Bricks and Stones began to trade on 1st April, 2007. The following was the
expenditure on the contract for Rs.30
Material issued to contract -Rs.51 ,000
Plant used for contract -Rs.15,000
Wages incurred -Rs.81,000
Other expenses incurred - Rs.5,000
st
Cash received on account to 31 March, 2008 amounted to Rs.128,OOO being 80% of the
work certified. Of the plant and material charged to the contract, plant which cost Rs.3,000
and materials which cost Rs.2,500 were lost. On 31st March,2008, plant which cost Rs.2,500
was returned to stores: the cost of work done but uncertified was Rs.1 ,000 and materials
costing Rs.2,300 were in hand on site.
Charge 15% depreciation on plant, keep in reserve 1/2 profit received and prepare a
contract account from the above particulars.

Q7. XYZ Limited has the following total operating result for the current year
Sales Revenue: Rs. 56,00,000
Variable cost Rs.37,20,000
Fixed Cost Rs. 10,00,000
Following additional information concerning performance of company's three operating
departments is provided as below.

Particulars A (Rs) B (Rs) C (Rs)

Sales Revenue 24,00,000 20,00,-000 12,00,000
Variable Cost 16,80,000 12,00,000 8,40,000
Direct Fixed. Cost 3,20,000 2,80,000 2,00,000
Rank all three departments on the basis of profits earned and advice the management.

Q8. The Receipts and Issues of product X of during March,2008 are given as be low-
Receipts:
1 st March-1 00 units @Rs 10 per unit
12th March-100 units @Rs.9.80 per unit
15th March-50 units @ RS.9.60 per unit
20th March-100 units @ RS.9.40 per unit
Issues:
10th March-80 units
14th March-100 units
31st March-90 units
There are no opening inventories. Determine the value of Stock under LIFO and FIFO
method
'
09. The Reliable Battery Ltd furnishes you the following income information for the current
year divided In two sub-parts
Particulars First half Second half
Sales RS.2,OO,OO,OOO RS.1,80,OO,OOO
Profit earned RS.10,OO,OOO RS.2,OO,OOO
From the above, you are required to compute the following, assuming that the fixed cost
remains the same in both periods
1.Profit/Volume ratio
2.Fixed Cost
3.Amount of Profit or loss when sales are RS.1,50,OO,OOO
4.Amount of Sales required to earn a profit of RS.2,50,OOO

Q10.Discuss the advantages and disadvantages of LIFO and FIFO system of inventory
valuation with examples.

Q 11 .Answer short Notes-(Any five)

1.Features of contract costing
2.Expense centre
3. Break even chart
4.Transfer pricing
5.0bjectives of Budgetary control
6.Weighted average method of inventory valuation
7.ABC classification of inventory
8.lmportance of CVP relationship in decision making