NMIMS University 2006 Diploma Business Administration ADBM - university paper

NARSEE MONJEE INSTITUTE OF MANAGEMENT & HIGHER STUDIES

(DEEMED UNIVERSITY)

Department of Distance Learning

 

COURSE : ADBM TOTAL MARKS: 100

SUBJECT : Accounting Procedures DURATION : 3 hours

 

Note:

1.    Total numbers of questions given in the question paper are seven.

2.    Question no 1 is compulsory.

3.    Attempt any three from the remaining questions

4.    All questions carry equal marks i.e. 25 marks each

5.    Give working notes to support your answers

 

1.    ABC Ltd. furnished the following trial balances as on 31^st March, 2006.

Particulars	Debit	Credit
	Rs	Rs
Sales		8,00,000
Profit on sale of Investment		80,000
Discount received		12,000
Income on Investment		5,000
Interest on deposits		12,000
Interest on fixed deposits		20,000
Sunday Creditors		83,000
Deposit from customers		1,50,000
Bank overdraft		58,000
Share capital		3,00,000
Accumulated Depriciation		10,000
Retained Earnings		50,000
Land	1,000
Building	10,000
Machinery	30,000
Office equipments	9,000
Investments	1,25,000
Sundry debtors	1,71,500
Bad debts	3,500
Insurance	20,000
Fixed deposits	2,00,000
Advance to suppliers	10,000
Opening stock 1-4-2005	35,000
Purchases	7,50,000
Salaries	55,000
Repairs	20,000
Power and fuel	15,000
Travel expenses	19,000
Telephone postage	7,000
Sundry expenses	5,000
Discounts	18,000
Interest paid	18,000
Loss on sale of fixed assets	8,000
Advance tax paid	50,000
	15,80,000	15,80,000

 

 

Following adjustments are required:

1.    Closing stock as on 31-0-2006 was Rs 1,85,000

2.    Out of repairs, Rs 5,000 to be capitalized and to be included in machinery account

3.    Insurance amount includes prepaid insurance of Rs 5,000

4.    Salary for the month of March 2006 to be provided for Rs 5,000

5.    Provide Depreciation on straight line basis on fixed assets, as under:

a.    building 5% per annum

b.    machinery 15% per annum

c.    office equipment 10% per annum

6.    provide for doubtful debts Rs 5000

7.    Tax provision to be made @ 35% of net profits for the year

 

On the basis of the above data / information, please prepare:

1.    Profit & Loss account for the year ending31-03-2006

2.    Balance sheet as at 31-03-2006

 

 

2.    From The following Information, Prepare Cash Flow Statement for the year ended 31^st March, 2006.

Balance Sheet as on

 

Liabilities	31-03-05 Rs	31-03-06 Rs
Equity Capital	70,000/-	70,000/-
Reserve	37,000/-	52,500/-
Sundry Creditors	16,000/-	17,500/-
Outstanding Wages	1,500/-	2,000/-
Outstanding Expenses	5,500/-	1,500/-
Total	1,30,000/-	1,43,500/-

 

Assets	31-03-05 Rs	31-03-06 Rs
Fixed Assets	45,000/-	43,500/-
Cash	37,500/-	48,500/-
Debtors	21,500/-	20,000/-
Stock	24,500/-	29,000/-
Prepaid Rent	1,500/-	2,500/-
Total	1,30,000/-	1,43,500/-

 

1.    Accumulated depreciation was Rs 8,000/- for the year ended 31^st March 2005 and Rs 9,500/- for the year ended 31^st March 2006.

2.    During the year 2005-06, fixed assets of book value Rs 9,000/- have been sold for Rs 10,000/-

 

 

3.    a) The profit of X Ltd. for the year 2002 has been worked out to 12.5% on the capital employed and the relevant figures are as under:

 

Sales Rs 5,00,000, direct materials Rs 2,50,000, direct labour Rs 1,00,000, variable overheads Rs 40,000, capital employed Rs 4,00,000.

 

The new sales manager who joined the company recently has estimated a profit of about 23% on the capital employed for the next year, provided the volume of sales increases by 10%, the selling price increases by 4% and there is an overall cost reduction for all elements by 2%.

 

You are required to find out the cost and profit figures for the next year and make comments on the estimates of the sales manager.

(15 Marks)

 

b) Y Ltd has furnished the following data relating to a product for the year 2005-06.

 

Units produced	2,000
Direct materials (Rs)	80,000
Direct labour (Rs)	90,000
Manufacturing overheads (Rs)	60,000 (25%fixed)
Selling and administrative overheads (Rs)	50,000 (40% fixed)

 

If the company manufactures 2,400 units in the next year, compute the cost per unit.

(10 Marks)

 

 

4.    Answer the following questions:

a)    The following data pertains to product A of Zenith Ltd.

 

Particulars	Rs
Direct Materials	80
Direct Labour	60
Variable overheads	4
Fixed overheads	25
Total cost	210

 

If the selling price equals variable costs plus 25% mark-up, calculate selling price of the product A.

 

(8 Marks)

 

 

 

 

b)    Good Luck Ltd manufactures three components X, Y, and Z. the company has furnished the following information pertaining to the cost per unit of three products:

 

Particulars	X (Rs)	Y(Rs)	Z (Rs)
Fixed Cost	12.00	9.00	6.00
Variable Cost	15.00	12.00	10.00
Total Cost	27.00	21.00	16.00

 

Jayesh Ltd. has offered to supply the components to Good Luck Ltd at the following prices:

X-Rs 19.00 per unit

Y-Rs 15.00 per unit

Z-Rs 7.50 per unit

 

Which of the components Good Luck should buy and which components should it manufacture? Give reasons for your answer.

(10 Marks)

 

c)    The net profit credited to the capital account of the proprietor for a particular year was Rs 1,53,490. The manager of the business was eligible to a commission @10% of net profits after charging such commission. Calculate his commission.

(7Marks)

 

5.    a) What do you understand by the term error and omission? Which of the following are error and which are omissions?

i.      Sale of Rs 100 recorded in the purchase journal.

ii.    Wages paid to Mr. James have been debited to his account

iii.   Total of sales journal have not been posted to the Sales Account.

iv.   Repairs to Buildings have been debited to Buildings Account.

(4x2=8 Marks)

 

b) Consider the following data pertaining to M/S Sox Ltd.

 

Original cost of furniture	Rs 5,000
Rate of depreciation under written down value method	20%
Residual Value of the furniture at the end of useful life	Rs 2,048

 

Calculate the estimated useful life of the furniture.

 

(7 Marks)

 

 

c) Explain with examples the following accounting concepts:

i.      Materiality Concept

ii.    Consistency Concept

iii.   Accounting Period Concept

iv.   Money Measurement Concept

v.    Intangible Assets

(5x2 =10 Marks)

 

6.    Anand & Co Ltd produces three products and is reviewing the production and sales budgets for the next accounting period. Following information is available for the three products.

Rs Per unit	A	B	C
Direct material	12	10	6
Direct Labour	5	7	5
Direct Expenses	6	12	3
Fixed costs	3	6	1.5

 

Direct expenses reflect machine hours charges at Rs 6 per hour. Machine Capacity is limited to 1,200 hours during the normal shift. Demand for products A, B, & C are 600, 300, 600 units respectively.

Due to the machine constraints, the company contacted suppliers and they have quoted a unit price of Rs 22, 25 and 15 for A, B, & C respectively.

1. Advise as to which products should be processed during the normal shift.
2. Which product/s should be sourced from external supplier? Why?
3. Mention other factors to be considered before taking the decision.

 

7.    State with reasons whether the following are Capital or Revenue Expenditure.

a.    Freight & Insurance on the new machinery

b.    Wages paid in connection with the erection of new machinery

c.    Rs 1000 spent on repairing a second hand machine before it is put to use

d.    Rs 2000 spent to remove a worn out part and replace it with a new part

e.    The petrol driven engine of a passenger bus was replaced by a diesel engine

f.     Rs 8, 00,000 spent on advertising for the introduction of a new product in the market, the impact of which will be effective for 3 to 5 years.

g.    Rs 5000 spent on repainting the factory

h.    Heavy amount spent on research for a particular product which ultimately did not result in success

i.      Rs 10,000 paid as compensation to employees who were retrenched

j.      Interest on a term loan for the purchase of machinery. The commercial production has not till the last day of the accounting year.

k.    Compensation paid for breach of contract to acquire stock-in-trade

l.      Rs 30,000 spent as lawyers fee to defend a suit that the firms factory belonged to the plaintiff. The suit was not successful.

 

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