CS EP - Module I : Company Accounts Cost and Management Accounting - June 2011

CS EP - Module I • Company Accounts Cost and Management Accounting • June 2011

This Paper has 54 answerable questions with 1 answered.

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

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)

PART – A

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

(a)

Write the most appropriate answer from the given options in respect of the following:

(i)

As per section 77A(4) of the Companies Act, 1956 from the date of passing the special resolution, every buy–back should be completed within –

(a)
(b)
(c)
(d)

12 Months
3 Months
6 Months
9 Months

(0)

(ii)

Profit prior to incorporation is Transferred t–

(a)
(b)
(c)
(d)

General reserve
Capital reserve
Profit and loss account
None of the above.

(0)

(iii)

Dividends are usually paid on –

(a)
(b)
(c)
(d)

Paid–up capital
Authorised capital
called up capital
Subscribed capital.

(1)

(iv)

Sinking fund for the redemption of debentures is an instance of –

(a)
(b)
(c)
(d)

Reserve
Provision
Reserve fund
Reserves and surplus.

(0)

(v)

At the time of issuance, shares can be underwritten by –

(a)
(b)
(c)
(d)

Only one underwriter
At least 2 or more persons jointly
Any number of underwriters
None of the above.

(0)

(1 mark each)

(b)

Re–write the following sentences after filling–in the blank spaces with appropriate word(s)/figure(s) :

(i)

Preliminary expenses being of capital nature may be written–off against _______________

(0)

(ii)

Companies declaring, distributing or paying dividends are liable to pay tax on the same at prescribed rate which is known as _____________

(0)

(iii)

An intangible asset should be ___________ on disposal or when no future economic benefits are expected from its use and subsequent disposal.

(0)

(iv)

The value of the right is the difference between___________ and the _____________ of the share.

(0)

(v)

The fair value of a share is the average of the value of the share obtained by the___________ method and __________method.

(0)

(1 mark each)

(c)

State, with reasons in brief, whether the following statements are true or false:

(i)

According to section 80 of the Companies Act, 1956, the redemption of preference shares by a company shall be taken as reducing the amount of its authorised share capital.

(0)

(ii)

A profit and loss account is a point statement whereas a balance sheet is a period statement.

(0)

(iii)

Internally generated goodwill should not be recognised us an asset.

(0)

(iv)

A company can enforce its lien by forfeiting the shares.

(0)

(v)

A limited company can retain excess application money as calls–in–advance even it there is no provision in the articles of association.

(0)

(2 marks each)

(a)

Distinguish between any two of the following:

(i)

‘Bonus shares’ and ‘rights shares’.

(0)

(ii)

‘Interim dividend’ and ‘final dividend’.

(0)

(iii)

‘Statutory books’ and ‘statistical books’.

(0)

(3 marks each)

(b)

Following are the balance sheets of H Ltd. and S Ltd. as at 31^stDecember,2010:

Liabilities	H Ltd. (Rs.)	S Ltd. (Rs.)
Equity share of Rs.100 each fully paid General reserve Profit and loss account 14% Debentures Creditors	5,00,000 1,00,000 80,000 – 75,000	2,00,000 – – 1,00,000 45,000
	7,55,000	3,45,000
Assets
Fixed assets Stock Debtors 14% Debentures in S Ltd.(at par) Equity shares in S Ltd. @ Rs.80 per share Bank Profit and loss account	3,50,000 90,000 60,000 60.000 1,20,000 75,000 –	1,50,000 40,000 30,000 – – 25,000 1,00,000
	7,55,000	3,45,000

H Ltd. acquired 1,500 shares in S Ltd. on 1^st May, 2010. The profit and loss account of S Ltd. showed a debit balance of Rs.1,50,000 on 1^stJanuary, 2010. During March, 2010, goods costing Rs.6,000 were destroyed by fire, against which the insurance company paid Rs.2,000 only to S Ltd. Creditors of S Ltd. include Rs.20,000 for goods supplied by H Ltd. on which H Ltd. made a profit of Rs.2,000. Half of the goods were sold out of this. An item of plant (included in fixed assets) of S Ltd. had book value of Rs.15,000. It was to be revalued at Rs.20,000 on 1^stJanuary. 2010 (ignore depreciation). Prepare consolidated balance sheet as on 31^stdecember, 2010.

(0)

(9 marks)

(a)

Write short notes on any two of the following:

(i)

Purchase of own debentures in the market by a company.

(0)

(ii)

Tax on distributed profit

(0)

(iii)

Lien on shares.

(0)

(3 marks each)

(b)

The following particulars of Jag Apna Ltd. are available:

(i)	Share capital: — 10,000 Equity shares of Rs.10 each fully paid — 1,000. 12% Preference shares of Rs.100 each fully paid
(ii)	Reserves and surplus : Rs.15.000
(iii)	External liabilities : — Creditors : Rs.I2,000 — Bills payable : Rs.6,000
(iv)	The average normal profits (after taxation) earned each year by the company : Rs.28,500.
(v)	Assets of the company include one fictitious item of Rs.800.
(vi)	The fair or normal rate of return in respect of the equity shares of this type of company is ascertained at 10%.

Calculate the value of each equity share by using — (i) assets backing method; (ii) yield method; and (iii) fair value method.

(0)

(6 marks)

(c)

A limited company has a paid–up equity share capital of Rs.15,00.000 divided into 1,50,000 shares of Rs.10 each and 11% preference share capital of Rs.5,00,000 divided into 5,000 shares of Rs.100 each. The balance of profit brought ‘forward from the previous balance sheet was Rs.38,000.’
The profit for the year ended 31^st March, 2010 amounted to Rs.5,80,000 after tax. The directors proposed a dividend of 24% on equity share capital after providing for —(i) statutory minimum transfer to general reserve; and (ii) dividend on preference shares. Ignore tax on distributed profit. Prepare profit and loss appropriation account.

(0)

(3 marks)

(a)

Alex Ltd. forfeited 100 shares of Rs.10 each issued at a premium of 20% (to be paid at the time of application money) on which allotment money of Rs.4 and first call money of Rs.3 were not received; the final call money of Rs.2 is not yet called. These shares were originally allotted in the ratio of 4:5. These shares were subsequently re–issued at a discount of Rs.1 per share, credited as Rs.8 paid–up.
Pass journal entries in the books of Alex Ltd.

(0)

(3 marks)

(b)

What are the conditions which must be fulfilled for redemption of preference shares?

(0)

(6 marks)

(c)

Zohar Ltd. has 12%. Rs.4,00,000 debentures outstanding in its books on 1^st April, 2009. It also had Rs.2,40,000 balance in sinking fund account represented by 8% investments (face value of Rs.3,00,000).
On 30^th December, 2009, it sold investments of face value of Rs.40,000 @ Rs.90 and purchased own debentures of the face value of Rs.40,000 out of the proceeds, for immediate cancellation.
The interest dates for both debentures and investments are 30^thseptember and 31^stMarch respectively. All transactions are made on cum interest basis. Show debenture account, sinking fund account and sinking fund investment account.

(0)

(6 marks)

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)

Write the most appropriate answer from the given options in respect of the following :

(i)

When the sales increase from Rs.40,000 to Rs.60.000 and profit increases by Rs.5.000.the P/V ratio is—

(a)
(b)
(c)
(d)

20%
30%
25%
40%

(0)

(ii)

A company which has a margin of safety of Rs.4.00.000 makes a profit or Rs.80.000. Its fixed cost is Rs.5,00,000. Its break–even sales will be—

(a)
(b)
(c)
(d)

Rs.20 lakh
Rs.30 lakh
Rs.25 lakh
Rs.40 lakh

(0)

(iii)

Cost is determined before hand under —

(a)
(b)
(c)
(d)

Standard costing
Historical costing
Marginal costing
None of the above.

(0)

(iv)

Continuous stock taking is a part of —

(a)
(b)
(c)
(d)

Annual stock taking
Perpetual inventory
ABC Analysis
None of the above.

(0)

(v)

Absorption means —

(a)
(b)
(c)
(d)

Charging of overheads to cost centres
Charging of overheads to cost units
Charging of overheads to cost centres or cost units
None of the above.

(0)

(1 mark each)

(b)

Re–write the following sentences after filling–in the blank spaces with appropriate word(s)/figure(s) :

(i)

__________budget is a summary budget incorporating the component functional budgets and which is finally approved, adopted and employed.

(0)

(ii)

Costs which are pertinent for decision–making are termed as ________________

(0)

(iii)

A responsibility centre in which a manager is accountable for costs only is called ______________

(0)

(iv)

Contract in which reimbursement is based on actual allowable cost plus a fixed fee is called _____________.

(0)

(v)

Excess of budgeted revenues over the break–even revenue is called____________________.

(0)

(1 mark each)

(c)

State, with reasons in brief, whether the following statements are true or false:

(i)

Direct costs and variable costs and not necessarily the same.

(0)

(ii)

Idle facility and idle time are the same.

(0)

(iii)

Overtime premium paid to all factory workers is usually considered direct labour.

(0)

(iv)

Assuming inflation, if a company wants to maximise net income, it would select FIFO as the method of pricing raw materials.

(0)

(v)

Collection of sundry debtors has no impact on current ratio.

(0)

(2 marks each)

(a)

Distinguish between any two of the following:

(i)

‘Cost accounting’ and ‘management accounting’.

(0)

(ii)

‘Bin card’ and ‘store ledger’.

(0)

(iii)

‘Time keeping’ and ‘time booking’.

(0)

(3 marks each)

(b)

From the following particulars of Bright Ltd., prepare cash flow statement as per AS–3 (Revised):

Balance sheets
Liabilities	As on 31.03.2009 (Rs.)	As on 31.03.2010 (Rs.)
Equity share capital 18% Preference share capital 14% Debentures Reserves and surplus Creditors Provision of doubtful debts	3,00,000 2,00,000 1,00,000 1,10,000 70,000 10,000	3,50,000 1,00,000 2,00,000 2,70,000 1,45,000 15,000
	7,90,000	10,80,000
Assets	As on 31.03.2009 (Rs.)	As on 31.03.2010 (Rs.)
Fixed assets(net) 10% Investments Cash Debtors Stock Discount on debentures	5,10,000 30,000 40,000 1,00,000 1,00,000 10,000	6,20,000 80,000 75,000 2,10,000 90,000 5,000
	7,90,000	10,80,000

You are informed that during the year —

(i)	A machine with a book value of Rs.40,000 was sold for Rs.25,000.
(ii)	Depreciation charged during the year was Rs.70,000.
(iii)	Preference shares were redeemed on 31^stMarch, 2010 at a premium of 5%.
(iv)	An interim dividend @15% was paid on equity shares on 31^stMarch, 2010. Preference dividend was also paid on 31^stMarch,2010.
(v)	New shares and debentures were issued on 31^stMarch.2010.

(0)

(9 marks)

(a)

Write short notes on any two of the following:

(i)

Essential of an effective budgetary control system

(0)

(ii)

Make or buy decisions

(0)

(iii)

Cost–plus contracts

(0)

(3 marks each)

(b)

Following are the ratios to the trading activities of National Traders Ltd.:

Debtor’s velocity
Stock velocity
Creditor’s velocity
Gross profit ratio

3 months
8 months
2 months
25%

Gross profit for the year ended 31^st December, 2009 amounting to Rs.4,00,000.
Closing stock of the year is Rs.10,000 more than the opening stock.
Bills receivable amount to Rs.25,000.
Bills payable amount to Rs.10,000.
Find out

(i)
(ii)
(iii)
(iv)

Sales;
Sundry debtors;
Closing stock and;
Sundry creditors.

(0)

(6 marks)

(c)

Explain the significance of decision–making costs. Briefly explain the various type of costs used by the management in decision–making.

(0)

(3 marks)

(a)

From the following data provided to you, find out the labour turnover rate by applying

(i)	replacement method; and
(ii)	Separation method;
	Number of workers on the payroll: — At the beginning of the month : 500 — At the end of the month : 600.

During the month, 5 workers left, 20 workers were discharged and 75 workers were recruited. Of these, 10 workers were recruited in the vacancies of those leaving and while the rest were engaged for an expansion scheme.

(0)

(4 marks)

(b)

Following information is made available from the costing records of a factory;

(i)	‘The original cost of the machine : Rs.1,00,000 Estimated life : 10 years Residual value : Rs.5,000 Factory operates for 48 hours per week : 52 weeks in a year. Allow 15% towards machine maintenance down time. 5% (of productive time assuming unproductive) may be allowed as setting–up time.
(ii)	Electricity used by the machine is 10 units per hour at a cost of 50 paise per unit.
(iii)	Repairs and maintenance cost is Rs.500 per month
(iv)	Two operators attend the machine during operations along with two other machines. Their total wages including fringe benefits, amounting to Rs.5,000 per month is paid.
(v)	Other overheads attributable to the machine are Rs.10,431 per year.

Using above data, calculate machine hour rate.

(0)

(6 marks)

(c)

Following information is given:

Cost of placing a purchase order
No. of units to be purchased during the year
Purchase price per unit inclusive of transport cost
Annual storage cost per unit
Details of lead time:
— Average
— Maximum
— Minimum
— For emergency purchase
Rate of consumption per day:
— Average
— Maximum

Rs.20
5,000 Nos
Rs.50
Rs.5

10 days
15 days
6 days
4 days

15 units
20 units

Calculate — (i)re–ordering level;(ii)re–order quantity;(iii)maximum level; (iv) minimum level; and (v) danger level.

(0)

(5 marks)

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