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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.)
1. Attempt any four of the following:
(i) What are the various objectives of financial reporting ?
Enumerate the procedure for disclosure with regard to AS22 –
Accounting for Taxes on Income.
(iii What are the different bases of apportionment of preincorporation and
) postincorporation profits ?
(iv What are the provisions of the Companies Act, 1956 with regard to
) maintenance of books of account by a company ?
(v) Enumerate the provisions of the Companies Act, 1956 with regard to
providing for depreciation on the assets of a company .
(5 marks each)
2. (a) The balance sheet of Sunny Electricals
Ltd. as on 31st March, 2004 stood as
Liabilities Rs. Assets Rs.
Share capital : 2,00,00,000 Fixed assets 2,73,60,000
20,00,000 Investments 75,00,000
Equity shares Stock 47,80,000
of Rs.10 each 25,00,000 Debtors 40,20,000
fully paid 22,00,000 Cash & bank 15,40,000
General reserve 15,00,000 balances
Premium on 75,00,000
Profit and loss 29,00,000
At a meeting of the shareholders held
on the date of the above stated balance
sheet, the following decisions were
15% of the paidup shares would be bought back @
10% Debentures of Rs.20,00,000 at a premium of
(ii) 15% would be issued to finance the buyback.
General reserve would be used leaving a balance of
Investments worth Rs.20,00,000 would be sold out
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 buyback.
(b) What are the different circumstances
under which valuation of shares
becomes necessary ?
(c) What is a data warehouse for
3. Write a short note on different bases of
(a) determination of ‘consideration’ in an
(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
Show necessary journal entries
assuming that the whole amount is
received in cash and 9% preference
shares are redeemed.
: 2 :
(c Best Life Insurance Co. Ltd. had a paidup 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 31st March, 2004 was Rs.96,00,000
and on 31st 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 31st March, 2004 :
Premium less Surrenders 3,20,000
reinsurance premium 57,20,000 Surplus on revaluation
Interest, dividend and rent 28,00,000 of reversions 20,000
Fees 16,000 Reinsurance irrecoverable 16,000
Incometax 4,40,000 Claims less
Management expenses 7,00,000 reinsurance claims 34,00,000
Annuities paid 50,000 Consideration for
Commission 2,20,000 annuities granted 1,60,000
Prepare revenue account.
4. (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.
(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 debentureholders 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 ?
(c The following are the balance sheets of Vijay Ltd. and Jyoti Ltd. as on 31st March, 2004 :
) Balance Sheets as on 31st March, 2004
Vijay Ltd. Jyoti Ltd.
Share capital :
10% Preference shares of Rs.10 each — 8,00,000
Equity shares of Rs.10 each 30,00,000 10,00,000
General reserve 10,00,000 4,50,000
Profit and loss account 5,00,000 4,00,000
12% Debentures of Rs.100 each — 2,00,000
Proposed dividend :
On equity shares 3,00,000 1,00,000
On preference shares — 80,000
Debentures interest accrued — 24,000
Sundry creditors 12,50,000 5,00,000
Fixed assets 25,00,000 22,00,000
60,000 Equity shares in Jyothi Ltd. 12,00,000 —
60,000 Preference shares in Jyothi Ltd. 6,00,000 —
1,000, 12% Debentures in Jyothi Ltd. 1,00,000 —
Current assets 16,50,000 13,54,000
: 3 :
The following additional information are available :
Vijay Ltd. acquired the shares in Jyoti
Ltd. on 31st March, 2003.
(ii) Jyoti Ltd. issued fully paid bonus shares
of Rs.2,00,000 on 31st 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 31st 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 31st March, 2004 is
made up as under :
Balance as on 31st March, 1,62,000
Add : Net profit for the year 5,80,000
ended 31st March, 2004 1,80,000
Less : Provision for proposed
(v) The balance of profit and loss account
of Jyoti Ltd. as on 31st 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
) 31st March, 2003 was Rs.4,50,000.
Prepare the consolidated balance sheet of Vijay Ltd.
with its subsidiary Jyoti Ltd. as on 31st March, 2004.
PART — B
(Answer Question No.5 which is compulsory and any two of the rest from this part.)
5. Enumerate the limitations of interfirm comparison in
the context of management decision.
(b) The following information is obtained from the
records of a manufacturing company for a budgeted
production of 10,000 units per annum :
Direct material 120.00
Direct labour 60.00
Variable overheads 50.00
Fixed overheads (Rs.3,00,000) 30.00
Variable expenses (direct) 10.00
Selling expenses (10% fixed) 30.00
(Rs.1,00,000 rigid for 10.00
all levels of production) 10.00
Distribution expenses (20% fixed) 320.00
Total cost of sales (per unit)
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.
Are the high overhead costs an indication of
inefficiency ? Explain.
Explain briefly the nature of ‘management
(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.
Explain briefly three general methods of determining transfer prices.
(b Mention at least six services along with the cost units in which method of operating costing
) is applicable.
(c From the following balance sheets of Winners Ltd. for years ended 31st March, 2003 and
) 2004, prepare a cash flow statement :
Liabilities 31.03.2003 31.03.2004
Equity shares of Rs.100 each 9,00,000 12,00,000
Securities premium — 90,000
Profit and loss appropriation account 3,00,000 3,00,000
Profit for the year 50,000 6,00,000
9% Debentures 4,00,000 3,00,000
Sundry creditors 4,05,000 2,30,000
Provision for taxation 1,50,000 3,00,000
Proposed dividend 45,000 1,00,000
Assets 31.03.2003 31.03.2004
Land 6,00,000 7,50,000
Plant and machinery 12,00,000 13,50,000
Less: depreciation 4,20,000 7,80,000 4,50,000 9,00,000
Loans to subsidiary company 50,000 —
Share in subsidiary company 60,000 60,000
Stock in trade 3,70,000 4,50,000
Debtors 3,00,000 4,00,000
Bank 90,000 5,60,000
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 incometax amounting to Rs.1,80,000.
Explain the interrelationship between ‘standard costing’ and ‘budgetary control’
(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) breakeven point;
(ii) net profit;
(iii) fixed cost; and
(iv) sales required to earn a profit of Rs.30 lakh.
: 5 :
(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 31st March,
Dr. (Rs.) Cr. (Rs.)
OPening stock 24,70,000 Sales 34,65,000
Closing stock 7,50,000 25,40,000
Direct wages 2,30,000
Gross profit (c/
Administrative 98,000 Gross 2,89,500
overheads 1,34,340 profit(b/d) 2,500
Selling 59,660 Dividends
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.
8. What are the principles of reporting in a management
information system ?
(b) Enumerate the objectives of ‘current cost accounting’ ?
(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 :
Raw materials consumption 87,600
Initial processing wages 81,200
Initial processing overheads 1,62,400
Product Production Sales Additional
(Kgs.) (Rs.) Cost After
P 3,20,000 25,60,000 60,000
Q 4,000 2,00,000 80,000
R 40,000 6,00,000 16,000
S 8,000 2,40,000 —
The company sells out ProductS at the point of splitoff
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 splitoff points without further
processing and in such a case, the selling prices would be as
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 splitoff point.
You are required to
(i) Prepare a statement showing the productwise and total
profit and loss based on the further processing of
Products P, Q and R beyond splitoff and selling
ProductS at the splitoff.