CS Inter Group I : Company Accounts and Cost and Management Accounts - December 2004

CS Inter - Group I • Company Accounts and Cost and Management Accounts • December 2004

This Paper has 28 answerable questions with 0 answered.

Roll No…………………
Time allowed : 3 hours	Maximum marks : 100
Total number of questions : 8	Total number of printed pages : 5

*NOTE :* All working notes should be shown distinctly.
PART— A
(Answer Question No.1 which is compulsory and any two of the rest from this part.)
Marks

NOTE : All working notes should be shown distinctly.

PART— A

(Answer Question No.1 which is compulsory
and any two of the rest from this part.)

Marks

Attempt any four of the following:

5each

(i)

What are the various objectives of financial reporting ?

(0)

(ii)

Enumerate the procedure for disclosure with regard to AS–22 – Accounting for Taxes on Income.

(0)

(iii)

What are the different bases of apportionment of pre–incorporation and post–incorporation profits ?

(0)

(iv)

What are the provisions of the Companies Act, 1956 with regard to maintenance of books of account by a company ?

(0)

(v)

Enumerate the provisions of the Companies Act, 1956 with regard to providing for depreciation on the assets of a company .

(0)

(a)

The balance sheet of Sunny Electricals Ltd. as on 31^st March, 2004 stood as under :

Liabilities	Rs.	Assets	Rs.
Share capital : 20,00,000 Equity shares of Rs.10 each fully paid General reserve Premium on securities Profit and loss account 9% Debentures Term loans Creditors Provisions for tax	2,00,00,000 25,00,000 22,00,000 15,00,000 75,00,000 80,00,000 29,00,000 6,00,000	Fixed assets Investments Stock Debtors Cash & bank balances	2,73,60,000 75,00,000 47,80,000 40,20,000 15,40,000
	4,52,00,000		4,52,00,000

At a meeting of the shareholders held on the date of the above stated balance sheet, the following decisions were taken :

(i)	15% of the paid–up shares would be bought back @ Rs.16 each.
(ii)	10% Debentures of Rs.20,00,000 at a premium of 15% would be issued to finance the buy–back.
(iii)	General reserve would be used leaving a balance of Rs.10,00,000.
(iv)	Investments worth Rs.20,00,000 would be sold out for Rs.28,00,000.
You are required to pass the necessary journal entries to give effect to the above transactions and also to present the balance sheet after the buy–back.

(0)

(b)

What are the different circumstances under which valuation of shares becomes necessary ?

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(c)

What is a data warehouse for accounting ?

(0)

(a)

Write a short note on different bases of determination of ‘consideration’ in an amalgamation.

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(b)

Futuristic India Ltd. has a part of its share capital in the form of 10,000, 9% redeemable preference shares of Rs.100 each repayable at a premium of 10%. Now the shares are fully ready for redemption, it has been decided that the whole amount would be redeemed by way of a fresh issue of 1,00,000 equity shares of Rs.10 each at a premium of Rs.15 each.
Show necessary journal entries assuming that the whole amount is received in cash and 9% preference shares are redeemed.

(0)

(c)

Best Life Insurance Co. Ltd. had a paid-up capital of Rs.10,00,000 divided into 1,00,000 shares of Rs.10 each. Its net liability on all contracts in force as on 31^st March, 2004 was Rs.96,00,000 and on 31^st March, 2003, this liability was Rs.84,00,000. The company has paid an interim bonus of Rs.2,60,000 and 20% of the surplus is to be allocated to shareholders, 20% to reserves and balance being carried forward. The following figures are extracted from the books of the company for the year ended 31^st March, 2004 :

	Rs.		Rs.
Premium less re-insurance premium Interest, dividend and rent Fees Income-tax Management expenses Annuities paid Commission	57,20,000 28,00,000 16,000 4,40,000 7,00,000 50,000 2,20,000	Surrenders Surplus on revaluation of reversions Re-insurance irrecoverable Claims less re-insurance claims Consideration for annuities granted	3,20,000 20,000 16,000 34,00,000 1,60,000

Prepare revenue account.

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(a)

Cybertech Ltd. issued 1,00,000 shares for public subscription and these were underwritten by A, B and C in the ratio of 25%, 30% and 45% respectively. Applications were received for 80,000 shares and of these applications for 16,000 shares had the stamp of A, those for 20,000 shares had the stamp of B and those of 24,000 shares had the stamp of C. The remaining applications did not bear any stamp.
On the basis of above information, work out the liability of the individual underwriters.

(0)

(b)

In 1999, Gem Ltd. issued 10% Rs.20,00,000 debentures at a discount of 10%, the debentures were redeemable in 2004. In 2004, the company gave the debenture holders the option of converting the debentures into equity shares of face value of Rs.10 at a premium of 25%. One debentureholder holding Rs.4,00,000 debentures wants to exercise the option. What is the face value of the shares that he will get ?

(0)

(c)

The following are the balance sheets of Vijay Ltd. and Jyoti Ltd. as on 31^st March, 2004 :

Balance Sheets as on 31^st March, 2004
Liabilities	Vijay Ltd. (Rs.)	Jyoti Ltd. (Rs.)
Share capital : 10% Preference shares of Rs.10 each Equity shares of Rs.10 each General reserve Profit and loss account 12% Debentures of Rs.100 each Proposed dividend : On equity shares On preference shares Debentures interest accrued Sundry creditors	— 30,00,000 10,00,000 5,00,000 — 3,00,000 — — 12,50,000	8,00,000 10,00,000 4,50,000 4,00,000 2,00,000 1,00,000 80,000 24,000 5,00,000
	60,50,000	35,54,000
Assets
Fixed assets Investmetns : 60,000 Equity shares in Jyothi Ltd. 60,000 Preference shares in Jyothi Ltd. 1,000, 12% Debentures in Jyothi Ltd. Current assets	25,00,000 12,00,000 6,00,000 1,00,000 16,50,000	22,00,000 — — — 13,54,000
	60,50,000	35,54,000

The following additional information are available :

(i)

Vijay Ltd. acquired the shares in Jyoti Ltd. on 31^st March, 2003.

(ii)

Jyoti Ltd. issued fully paid bonus shares of Rs.2,00,000 on 31^st March, 2004 to the existing shareholders by drawing upon its general reserve. The effect of this transaction did not appear in the books of Jyoti Ltd.

(iii)

The debenture interest due from Jyoti Ltd. for the year ended 31^st March, 2004 has not been given effect to in the books of Vijay Ltd.

(iv)

The balance of profit and loss account of Jyoti Ltd as on 31^st March, 2004 is made up as under :

	Rs.
Balance as on 31^st March, 2003 Add : Net profit for the year ended 31^st March, 2004 Less : Provision for proposed dividend	1,62,000 4,18,000 5,80,000 1,80,000 4,00,000

(v)

The balance of profit and loss account of Jyoti Ltd. as on 31^st March, 2003 is after providing for proposed dividend of Rs.50,000 and preference dividend of Rs.80,000 both of which were subsequently paid and credited to profit and loss account of Vijay Ltd.

(iv)

The general reserve of Jyoti Ltd. as on 31^st March, 2003 was Rs.4,50,000.

Prepare the consolidated balance sheet of Vijay Ltd. with its subsidiary Jyoti Ltd. as on 31^st March, 2004.

(0)

PART— B
(Answer Question No.5 which is compulsory and any two of the rest from this part.)

PART— B

(Answer Question No.5 which is compulsory and any two of the rest from this part.)

(a)

Enumerate the limitations of inter–firm comparison in the context of management decision.

(0)

(b)

The following information is obtained from the records of a manufacturing company for a budgeted production of 10,000 units per annum :

Particulars	Rs. (per unit)
Direct material Direct labour Variable overheads Fixed overheads (Rs.3,00,000) Variable expenses (direct) Selling expenses (10% fixed) Administrative expenses (Rs.1,00,000 - rigid for all levels of production) Distribution expenses (20% fixed) Total cost of sales (per unit)	120.00 60.00 50.00 30.00 10.00 30.00 10.00 10.00 320.00

You are required to prepare a budget for production levels of 6,000, 7,000 and 8,000 units respectively, showing distinctly marginal cost and total cost.

(0)

(c)

Are the high overhead costs an indication of inefficiency ? Explain.

(0)

(d)

Explain briefly the nature of ‘management accounting’.

(0)

(e)

A factory working for 50 hours in a week employs 100 workers on a job work. The standard rate is Rs.20 per hour and standard output is 200 units per gang hour. During a week in April, 10 employees were paid at Rs.16 per hour and 5 employees at Rs.24 per hour. Rest of the employees were paid at standard rate. Actual number of units produced was10,200. Calculate all labour cost variances.

(0)

(a)

Explain briefly three general methods of determining transfer prices.

(0)

(b)

Mention at least six services along with the cost units in which method of operating costing is applicable.

(0)

(c)

From the following balance sheets of Winners Ltd. for years ended 31^st March, 2003 and 2004, prepare a cash flow statement :

Liabilities	31.03.2003 (Rs.)		31.03.2004 (Rs.)
Equity shares of Rs.100 each Securities premium Profit and loss appropriation account Profit for the year 9% Debentures Sundry creditors Provision for taxation Proposed dividend	9,00,000 — 3,00,000 50,000 4,00,000 4,05,000 1,50,000 45,000		12,00,000 90,000 3,00,000 6,00,000 3,00,000 2,30,000 3,00,000 1,00,000
		22,50,000		31,20,000
Assets		31.03.2003 (Rs.)		31.03.2004 (Rs.)
Land Plant and machinery Less: depreciation Loans to subsidiary company Share in subsidiary company Stock in trade Debtors Bank	12,00,000 4,20,000	6,00,000 7,80,000 50,000 60,000 3,70,000 3,00,000 90,000	13,50,000 4,50,000	7,50,000 9,00,000 — 60,000 4,50,000 4,00,000 5,60,000
		22,50,000		31,20,000

The following additional information are available :

(i)	A plant costing Rs.1,50,000 was sold during the year for Rs.60,000. Accumulated depreciation on this plant was Rs.1,00,000 and profit/loss, if any, arising out of this sale was transferred to profit and loss account.
(ii)	During the year, the company paid income-tax amounting to Rs.1,80,000.

(0)

(a)

Explain the inter-relationship between ‘standard costing’ and ‘budgetary control’

(0)

(b)

The profit volume ratio of Ulysis Manufacturers Ltd. is 40% and the margin of safety is also 40%. Work out the following, if the sales volume is Rs.1.50 crore :

(i)	break–even point;
(ii)	net profit;
(iii)	fixed cost; and
(iv)	sales required to earn a profit of Rs.30 lakh.

(0)

(c)

The audited financial accounts of a company showed a profit of Rs.59,660, whereas the profit as per the cost accounts was Rs.26,725. From the following information provided, you are required to prepare a reconciliation statement clearly bringing out the reasons for the difference between the two figures :

Profit and Loss Account for the Year ended 31^st March, 2004
Dr.		(Rs.)		Cr. (Rs.)
OPening stock Purchases Closing stock Direct wages Factory overheads Gross profit (c/d)	24,70,000 8,20,000 32,90,000 7,50,000	25,40,000 2,30,000 4,05,500 2,89,500	Sales	34,65,000
		34,65,000		34,65,000
Administrative overheads Selling overheads Net profit	98,000 1,34,340 59,660		Gross profit(b/d) Dividends received	2,89,500 2,500
		2,92,000		2,92,000

The cost records show

(i)	Closing stock balance of Rs.7,95,400.
(ii)	Direct wages absorbed during the year Rs.2,18,800.
(iii)	Factory overheads absorbed Rs.4,65,000.
(iv)	Administrative overheads absorbed @ 2.5% on sales.
(v)	selling overheads charged @ 5% of the value of sales.

(0)

(a)

What are the principles of reporting in a management information system ?

(0)

(b)

Enumerate the objectives of ‘current cost accounting’ ?

(0)

(c)

Sundaram Chemicals Ltd. runs a chemical process which produces four products P, Q, R and S from a basic ingredient. The company’s monthly budget is given below :

	Rs.
Raw materials consumption Initial processing wages Initial processing overheads	87,600 81,200 1,62,400

Product	Production (Kgs.)	Sales (Rs.)	Additional Processing Cost After Split–off (Rs.)
P Q R S	3,20,000 4,000 40,000 8,000	25,60,000 2,00,000 6,00,000 2,40,000	60,000 80,000 16,000 —

The company sells out Product–S at the point of split–off without further processing. The remaining products are processed further and sold as above. It has been brought to the notice of management that it would be possible to sell all the four products at the split–off points without further processing and in such a case, the selling prices would be as under :

Product	P	Q	R	S
Selling Price per Kg.(Rs.)	5.00	36.00	8.00	30.00

For this purpose, the joint costs are to be apportioned on the basis of sales value realised at the split–off point.

You are required to –

(i)	Prepare a statement showing the product wise and total profit and loss based on the further processing of Products P, Q and R beyond split–off and selling Product–S at the split–off.
(ii)	Prepare a statement showing the productwise and total profit or loss, if all the products are sold at the split–off point.
(iii)	Recommend any other alternative which you feel can increase the total profit further.

(0)

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