Kongu Engineering College, Perundurai, Erode 638 052.

(An Autonomous Institution affiliated to Anna University, Coimbatore)

Department of Management Studies

07MB105 Financial & Management Accounting
Part A (1 Mark Questions)
Unit - I
1. The practice of appending notes regarding contingent liabilities in accounting
statement is in pursuant to (DoD2)
a) Convention of consistency
c) Convention of conservatism
b) Money measurement concept
d) Convention of disclosure
2. The convention of conservatism when applied to the balance sheet results in (DoD1)
a) Understatement of assets
c) Overstatement of capital
b) Understatement of
d) None of the above
liabilities
3. The amount brought in by the proprietor in the business should be credited to (DoD2)
a) Cash a/c
c) Drawings a/c
b) Capital a/c
d) None of the above
4. The amount of salary paid to Suresh should be debited to (DoD4)
a) Suresh a/c
c) Cash a/c
b) Salaries a/c
d) None of the above
5. The return of goods by a customer should be debited to (DoD1)
a) Customer a/c
c) Goods a/c
b) Sales return a/c
d) None of the above
6. Huge Sales Promotion Expenses is an example of (DoD1)
a) Revenue Expenditure
c) Deferred Revenue
b) Capital Receipt
Expenditure
d) Capital Expenditure
7. Revenue from a service transaction is generally recognized according to (DoD5)
a) Accrual method
c) Consistency method
b) Proportionate Completion
d) Delivery method
method
8. Which one of the following is not a Capital Expenditure? (DoD2)
a) Cost of issuing Shares and
c) Repairs on a second hand
Debentures
machinery newly purchased
b) Wages paid for construction
d) Purchase of new spark plug
of building
for a two year old car
9. The cost of three small files (of Rs.25 each) was charged to expenses when purchased
even though they had a useful life of 4 years. This was done according to the (DoD1)
a) Cost Principle
b) Conservatism Principle
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c) Full Disclosure Principle

d) Materiality Principle
10. Money Measurement Concept of accounting theory is based on the assumption that
the value of money will (DoD1)
a) Remain constant
c) Decrease
b) Fluctuate
d) Go up
11. From the following find out the correct equation if A represents Opening Stock; B
represents Purchases; C represents Closing Stock; D represents Cost of Goods Sold.
(DoD1)
a) A C = D B
c) D A = B + C
b) A + B = D C
d) A + B = C +D
12. A manufacturing Company spent the following amount on the import and installation
of a machine: (DoD2)
Rs. 50,000
: Price of the Machine
Rs. 5,000
: Freight
Rs. 1,050
: Insurance Premium
Rs. 6,000
: Replacement of a part damaged in transit, not covered
by the Insurance policy.
Based on the above data, Capital Expenditure would be
1. Rs.50,000
3. Rs.62,050
2. Rs.56,050
4. Rs.51,050
13. The main objective of providing Depreciation is to (DoD3)
a) Create Secret Reserves
c) Value the assets properly
b) Reduce the book value of
d) Allocate cost of the assets.
assets
14. Which concept supports the treatment of Prepaid Expenses as assets? (DoD1)
a) Money Measurement
c) Realization Concept
Concept
d) Cost Concept
b) Going Concern Concept
15. Interest on the Capital of the partners is calculated on the basis of (DoD1)
a) Opening Balance of Capital
b) Closing Balance of Capital
c) Capital after all adjustments but before crediting interest
d) Average Capital during the year

Unit - II
16 . Assuming the current ratio is 2, the payment of a current liability will (DoD1)
a) Improve the current ratio
c) Not make any changes in the current
ratio
b) Decrease the current ratio
d) None of the these
17. A firms ability to meet the long term interest charges and repayment dues on long-term
obligations is referred to as its solvency (DoD4)
a) True
b) False
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c) Neither true nor false

d) None of the these

18. Sale of investments indicates (DoD2)

a) Source of funds
b) Application of funds
c) Source and Application of funds
d) Change in Current Assets
19. Four-times stock turnover ratio implies _________ months inventory holding period (DoD1)
c) 2 Months
a) 4 Months
d) 1 Month
b) 3 Months
20. The following information is given about a company: (a) current assets Rs. 900 lakh and current
liabilities Rs. 450 lakh in current year and (b) current assets Rs. 1,100 lakh and current liabilities
Rs. 530 in previous year. The approximate percentage decrease in current ratio is __________

(DoD1)
a) 0.04%
b) 0.4%

c) 4%
d) None of the above

21. Presently, current assets and current liabilities of a company are Rs. 16 lakhs and Rs. 8 lakhs
respectively. The current ratio will _________ on purchase of new machinery of Rs. 6 lakhs
(DoD5).
a) Increase
c) May increase or decrease
b) Decrease
d) We cant say
22. Purchase of treasury bills will (weaken / not affect) acid-test ratio. (DoD2)
a) Weaken
c) Will affect
b) Not affect
d) We cant say
23. Assume that the companys existing debt-equity ratio is 2:1 , the ploughing back of profits by a
company will ___________ it. (DoD1)
a) Increase
c) May increase or decrease
b) Decrease
d) None of the above
24. A two-months debtor collection period implies that debtors turnover ratio is _____________

(DoD1)
a) 6 times
b) 2 times

c) 4 times
d) 3 times

25.___________ is a more rigorous test of the solvency position of a business firm (DoD1).
a) Interest coverage Ratio
c) Both of these
b) Debt service coverage ratio
d) None of these
26. Issue of 12% preference shares will ______ debt-equity ratio of a corporate enterprise. (DoD1)
a) Decrease
c) May increase of decrease
b) Increase
d) None of the above
27. Cash from operation is equal to (DoD2)
a) Net profit plus increase in outstanding
expenses
b) Net profit plus increase in debtors

c) Net profit plus increase in stock.

d) Net profit plus increase in prepaid
expenses
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28. Decrease in creditors _________________ cash. (DoD1)

a) Decreases
c) May Decrease or Increase
b) Increases
d) None of the above
29. Decrease in inventory ______________ cash. (DoD2)
a) Decreases
c) May Decrease or Increase
b) Increases
d) None of the above
30. Increase in pre-paid expenses ______ cash. (DoD3)
a) Decreases
b) Increases

c) May Decrease or Increase

d) None of the above

Unit - III
31. Cost accounting mainly helps the management in (DoD2)
a) Earning extra profits.
c) Fixing prices of the products
b) Providing information to the
d) Full filling the legal requirements
management for decision - making.
32. All opportunity costs are (DoD4)
a) Relevant costs
b) Irrelevant costs

c) Increment costs
d) None of these

33. A company makes plastic windows and doors. Which one of the following is likely to be a fixed
cost? (DoD1)
a) The cost of heating the production unit
c) Sales commission
b) The cost of the plastic
d) None of these
34. When units produced increase (within relevant rage), variable cost per unit ___________.

(DoD1)
a) Increase in proportion to the units
produced
b) Increase at a greater rate than unit
produced

c) Increase at a lesser rate than units

produced
d) Do not change

35. A company undertakes job-works. Which one of the following is likely to be a variable cost?

(DoD1)
a) The wages of workers paid on
monthly basis
b) The salary of the factory manager

c) The wages of shop floor workers paid

by piece rate
d) The rent of the factory.

36. When units produced increase, total variable costs____________ (DoD5)

a) Increase in proportion to the units
c) Increase at a lesser rate than units
produced
produced
b) Increase at a greater rate than units
d) Do not change.
produced
37. As production increases (within relevant range), total fixed costs _____________ (DoD1).
a) Increase in proportion to the units
b) Increase at a greater rate than units
produced
produced

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c) Increase at a lesser rate than units

d) Do not change

produced
38. When units produced increase (within relevant range), variable cost per unit ____________.

(DoD2)
a) Increase ink proportion to the units

c) Increase at a lesser rate than units

produced
b) Increase at a greater rate than units
produced

produced

d) Do not change

39. Most of the historical costs are (DoD3)

a) Relevant costs
b) Irrelevant costs

c) Increment costs
d) None of these

40. As production increases, fixed cost per unit _______________. (DoD1)

a) Decreases
c) We cant tell
b) Increases
d) Do not change.
41. Indirect costs are ________________ from the perspective of cost control.
a) Non-controllable costs.
c) May be non-controllable costs or
controllable costs
b) Controllable costs.
d) None of the above
42. The synonymous term for existing fixed costs is ________ from the perspective of decision
making. (DoD2)
a) Sunk Cost
c) Hidden Cost
b) Historical Cost
d) None of the above
43. Fixed costs like rent, insurance, salaries etc. are also known as ________________. (DoD1)
a) Period costs
c) Historical costs
b) Variable costs
d) None of the above
53. The volume range over which cost relationships are valid is termed as ___________ (DoD1)
a) Relevant range
c) Permissible range
b) Irrelevant range
d) None of the above
44. Future costs that differ under proposed alternatives are ________________ (DoD1)
a) Relevant costs
c) Future costs
b) Irrelevant costs
d) None of the above
45. Costs that are important to decision-makers, but are not recorded in financial accounting records
are _________________. (DoD2)
a) Opportunity costs
c) Sunk costs
b) Historical costs
d) None of the above

Unit-IV
46. A budget designed to change in accordance with the level of activity is known as (DoD1)
a) Master budget
b) Cash budget

c) Flexible budget
d) Production budget

47. A summary budget schedule in capsule form made for the purpose of presentation (DoD3)
Page 5 of 21

a) Sales budget
b) Cost of production budget
c) Master budget

d) Selling & Distribution

budget

48. The budget which provides a guidance regarding the procurement amount of capital
assets (DoD2)
a) Cash budget
c) Flexible budget
b) Capital expenditure budget
d) None of the above.
49. A system by which budgets are used as a means of planning and controlling all
aspects of a business (DoD1)
a) Budget
c) Principal budget Factor
b) Budgetary control
d) None of the above.
50. The budget which shows the anticipated sources and utilization of cash (DoD1)
a) Flexible budget
b) Master budget

c) Cash budget
d) Production budget

51. Budgetary control helps management to (DoD1)

a) Plan & control
b) Organize

c) Coordinate
d) None of the above

52. A document that gets out, inter alias, the responsibilities of the persons engaged in,
the routine of and the forms and records required for budgetary control (DoD1)
a) Budget plan
b) Budget record

c) Budget manual
d) None of the above

53. A budget which is designed to remain unchanged irrespective of the level of activity
actually attained (DoD2).
a) Master budget
b) Flexible budget

c) Fixed budget
d) Sales budget

54. Sales budget is a budget based on (DoD4)

a) Function
b) Time

c) Flexibility
d) None of the above

55. Cash budget is a (DoD1)

a) Short term budget
b) Long term budget

c) Medium term budget

d) None of the above

56. The budget which commonly takes the form of budgeted profit and loss account and
balance sheet is (DoD2)
a) Cash budget
b) Master budget

c) Flexible budget
d) Sales budget

Page 6 of 21

57. The different between fixed and variable cost has a special significance in the
preparation of (DoD1)
a) Flexible budget
b) Cash budget

c) Sales budget
d) Production budget

58. The budget which include cost related to material, labour and overheads is (DoD2)
a) Cost of production budget
b) Cash budget

c) Cash budget
d) Cash budget

59. The budget which includes all expenses relating to selling, advertising & delivery of
goods to customer etc is (DoD5)
a) Administrative overheads budget
b) Selling & distribution overheads budget
c) Factory overheads budget
d) None of the above.
60. Estimated sales + desired closing stock- estimated opening stock is equal to (DoD1)
a) Production budget
b) Cost of production budget

c) Sales budget
d) Master budget

Unit-V
61. The cost that does not vary but remain constant within a given period of time and range of
activity is (DoD4)
a) Variable cost
c) Semi variable cost
b) Fixed cost
d) Sunk cost
62. The cost which varies directly proportion to every increase or decrease in the volume of
output is (DoD2)
a) Variable cost
c) Sunk cost
b) Fixed cost
d) Committed cost
63. The cost which does not very proportionately but simultaneously, cannot remain
stationary at all time is (DoD1)
a) Variable cost
c) Semi variable cost
b) Fixed cost
d) Engineered variable cost
64. Contribution margin is also known as (DoD1)
a) Marginal income
c) Net income
b) Gross profit
d) Profit after tax
65. Period cost means (DoD1)
a) Variable cost
c) Prime cost
b) Fixed cost
d) Semi variable cost
66. When fixed cost is Rs 10000 and profit volume ratio is 50%, the break even point will be
(DoD2)
a) Rs 20000
c) Rs 15000
b) Rs 30000
d) Rs 21000
67. When profit volume ratio is 40% and sales value Rs 10000, the variable cost will be
(DoD1)
a) Rs 4000
b) Rs 6000
Page 7 of 21

c) Rs 5000
d) Rs 10000
68 . When margin of safety is 20% and P/V ratio is 60%, the profit will be (DoD1)
a) 30%
c) 20%
b) 35%
d) 12%
69. When sales are Rs 2 lakh, fixed cost Rs 30000, P/V ratio 40% the amount of profit will b
(DoD5)
a) Rs 50000
c) Rs 40000
b) Rs 80000
d) Rs 12000
70. At break even point, total cost is equal to (DoD2)
a) Total sales revenues
c) Fixed cost
b) Marginal cost
d) None of the above
71. At break even point, the contribution will be equal to (DoD1)
a) Variable cost
c) Semi variable cost
b) Fixed cost
d) None of the above
72. The excess of actual sales over break even sales is (DoD1)
a) Margin of safety
c) Profit
b) Contribution
d) None of the above
73. The break even point increases when fixed cost is (DoD3)
a) Increased
c) Constant
b) Decreased
d) None of the above
74. The fixed cost and profit added together will give you (DoD1)
a) Contribution
c) Sales revenue
b) Variable cost
d) Total cost
75. Contribution is the difference between sales and
(DoD2)
a) Fixed cost
c) Variable cost
b) Total cost
d) Semi variable cost

Part B (4 Mark Questions) - Unit I

1. Explain accounting cycle and give any four managerial applications of accounting information.
(DoD1)
2. What are the various Financial Statements? What are the limitations of Financial Accounting
(DoD2)
3. Define Double Entry Book Keeping System and bring out its advantages. (DoD1)
4. How do you measure business income? What are the advantages of Financial Accounting
(DoD3)
5. Prepare the Manufacturing, Trading and Profit & Loss Account From the Following
Figures Relating to the Year, 2003 (DoD1)
PARTICULARS
Stock:
Finished Goods
Raw Materials
Work-in-Progress
Purchases of Materials
Carriage on Purchases
Wages

1/4/2002
33000
16000
11000

31/3/2003
27500
18300
9400
150900
4100
65000
Page 8 of 21

PARTICULARS
Factory Salaries
Office salaries
Repairs &Maintenance:
Machinery
Office Equipment
Depreciation & Maintenance:
Machinery
Office Equipment
Sundry Expenses:
Factory Salaries
Office
Sales

1/4/2002

31/3/2003
26000
18000
8300
1700
25000
8100
5300
17800
360000

It is the Firm's Practice to Transfer Goods from the Factory

to the Sales Godown at Cost Plus 10%
Part B (4 Mark Questions) - Unit - II
6. From the following you are required to comment upon the long term as well as short
term solvency of the company. (DoD3)
Balance Sheet as on 31st December 2000
Liabilities
(Rs.)
Assets
(Rs.)
Share Capital
5,00,000 Fixed assets
6,00,00
Fixed Liabilities
2,50,000 Liquid assets
3,00,000
Current Liabilities
2,50,000 Stock in hand
1,00,000
10,00,00
10,00,000
7. What is a Funds Flow Statement? Examine its managerial uses. (DoD1)
8. Explain why decrease in current liabilities decrease cash and decrease in current assets
increase cash. (DoD1)
9. What procedure would you adopt to study the liquidity of a business firm? (DoD1)
10. What is indicated when the average age of accounts receivable for a firm is 45 days, but credit
terms require customers to pay accounts with 30 days? (DoD2)
Part B (4 Mark Questions) - Unit - III
11. Define Cost Accounting and explain its uses. (DoD2)
12. Define Cost Centre and Cost Unit (DoD1)
13. Write a short note on Cost control and Cost reduction. (DoD1)
14. What do you mean by elements of cost? Describe in brief the two major elements of cost.
(DoD1)
15. Define direct and indirect costs. Give examples. (DoD3)
Part B (4 Mark Questions) - Unit - IV
16. What is Budgetary control? State the main object of budgetary control? (DoD1)
17. What is a flexible budget? Under what circumstances would you recommend flexible
budgeting? (DoD1)
Page 9 of 21

18. Explain the limitations of budgetary control. (DoD1)

19. ABC Co wishes to arrange overdraft facilities with its bankers during the period April
to June when it will be manufacturing mostly for stock. Prepare a Cash Budget for the
above period from the following data. Including the extent of bank facilities the
company will require at the end of each month: (DoD3)
a)
Sales
Purchases
Wages
February
Rs.1, 80, 000
Rs.1, 24,800
Rs. 12,000
March
1, 92, 000
1, 44,000
14,000
April
1, 08, 000
2, 43,000
11,000
May
1, 74, 000
2, 46,000
10,000
June
1, 26, 000
2, 68,000
15,000
b) 50 percent of credit sales is realized in the month following the sale and the
remaining 50 percent in the second month following. Creditors are paid in the
month following the month of purchase.
c) Cash at bank on the 1st April (estimated). Rs.25,000
20. ABC Limited have prepared the budget for the production of a lakh units of the only
commodity manufactured by them for a costing period as under: (DoD2)
Raw Materials
Rs. 2.52. per unit
Direct Material
0.75. per unit
Direct Expenses
0.10. per unit
Works Overheads (60% fixed)
2.50 per unit
Administration Overheads (80% fixed)
0.40 per unit
Selling Overheads (50% fixed)
0.20 per unit
The actual production during the period was only 60, 000 units. Calculate the revised
budgeted cost per unit.
Part B (4 Mark Questions) - Unit V
21. What are the chief advantages of break even analysis? (DoD2)
22. CVP analysis is a technique of analyzing the costs and profits at various levels of
volume. Explain how such analysis help management. (DoD1)
23. Discuss the importance of the following (DoD3)
a) Margin of safety
b) Profit volume ratio
24. The following information is given for the calculation of break-even point : (DoD1)
Sales price per unit
Rs 5
Variable cost per unit
3
Contribution margin per unit
2
Fixed costs
24, 000
You are required to calculate break-even point and desired sales volume if (i) the
desired profit is Rs 30, 000 and (ii) desired profit after income tax is Rs 20, 000 and
income-tax rate is 50 percent.
25. The following data are obtained from the records of a company : (DoD1)
First year
second year
Sales
Rs. 80, 000
Rs. 90, 000
Profit
10, 000
14, 000
Calculate the Break-even point.
Page 10 of 21

Part C (10 Mark Questions) - Unit I

1. Discuss in brief the conventions followed in Financial Accounting. (DoD2)
2. Without accounting concepts and conventions objective, reliable, consistent and
comparable accounts cannot be maintained. Commen (DoD1)
3. Describe the characteristics of a good/ideal Financial Statement and discuss the
significance of accounting information from the viewpoint of business stakeholders.
(DoD1)
4. From the following Trial Balance of ABC co. prepare Trading, Profit and Loss
account and Balance Sheet as on 31-12-1998. (DoD1)

Particulars
Cash in hand
Purchases
Stock as on 01.0195
Debtors
Plant and Machinery
Furniture
Bills receivable
Rent and taxes
Wages
Salaries
Capita
Bills Payable
Creditors
Sales

Rs.
2,400
2,40,000
70,000
1,00,000
1,20,000
30,000
40,000
20,000
32,000
37,600

Rs.

2,00,000
44,000
48,000
4,00,000
6,92,000

6,92,000
Adjustments:
(i) Closing inventory as on 31.12.95 Rs. 50,000/(ii) Outstanding wages Rs. 5,000/(iii) Goods with drawn for personal use Rs. 2,000/(iv) Depreciation in plant and Machinery @ 10% and on furniture @5%.
5. Define Accounting and distinguish between Financial and Management Accounting. (DoD3)
Part C (10 Mark Questions) - Unit II
6. Accounting Ratios are mere guides and complete reliance on them in decision making is
suicidal. (DoD1)
7. How would you analyse the financial position of a company from the point of view of (i) an
investor, (ii) a creditor, and (iii) a financial executive of the company? (DoD1)
8. The following details are available from a company (DoD2)
Liabilities
Share capital

31.12.95
(Rs.)
70,000

31.12.96
(Rs.)
74,000 Cash

Assets

31.12.95
(Rs.)
9,000

31.12.96
(Rs.)
7,800

Page 11 of 21

Debentures
Reserve for
doubtful debts
Trade Creditors
P/L a/c

12,000
700
10,360
10,040
1,03,100

6,000 Debtors
Stock
800
11,840 Land
10,560 Goodwill
1,03,200

14,900

17,700

49,200

42,700

20,000
10,000
1,03,100

30,000
5,000
1,03,200

The following additional information are given:

a. Dividend paid in total Rs. 3,500
b. Land was purchased for Rs.10,000
c. Amount provided for amortization of goodwill Rs. 5,000
d. Debentures paid off Rs. 6,000.
Prepare cash flow statement.
9. The comparative statements of income and financial position are given below:
(DoD3)
Particulars
1990 (Rs.) 1991 (Rs.)
Net sales
1,00,000
1,50,000
Less: Cost of sales
70,000
1,10,000
Gross Profit
30,000
40,000
Less: Operating Expenses
20,000
25,000
Net profit
10,000
15,000
Cash in hand
5,000
8,000
Cash at Bank
4,000
2,000
Debtors
40,000
25,000
Stock at cost
15,000
10,000
Fixed Assets (net)
56,000
65,000
1,20,000
1,10,000
Creditors
36,000
12,000
Bills payable
2,000
1,000
Mortgage loan
10,000
20,000
Equity Share capital
60,000
70,000
Reserves and surplus
12,000
7,000
1,20,000
1,10,000
Calculate the following ratios for both the years:
a. Current Ratio
b. Acid Test Ratio
c. Debtors Turnover Ratio
d. Stock Turnover Ratio
10. You have been as appointed as financial executive attached to the central office of AB
Ltd., With special responsibility for monitoring the performance of the divisions with
in the company. Each division is treated as an investment centre. Summaries of the
division X and Y for the year ending 31st December 2000 are given below: (DoD1)
Particulars
X (Rs.)
Y (Rs.)
Sales
7,00,000 9,50,000
Variable costs
3,20,000 4,10,000
Page 12 of 21

Fixed overhead
2,00,000 2,90,000
Divisional assets
2,50,000 3,75,000
You are required to assess the performance of the divisions with the help of ROI.
Part C (10 Mark Questions) - Unit - III
11. Costings are classified according to the nature of the operations. Set out the classification
with a brief description of the operation covered by each heading. (DoD2)
12. Write a short note on (DoD1)
a. Cost estimation and Cost ascertainment
b. Cost allocation and Cost apportionment
c. Cost Reduction and Cost Control
d. Cost Unit and Cost Centre.
13. How the costs can be classified? Elaborate. (DoD1)
14. Describe the various costs used in decision making and explain their characteristics. (DoD1)

15. The following data relate to the manufacture of a product during the month of January
1986. (DoD3)
Raw materials consumed Rs. 80,000.
Direct Wages Rs. 48,000.
Machine Hours Worked 8,000.
Machine Hour rate 4.
Office Overhead 10% on work cost.
Selling overhead Rs. 1.50 per unit.
Units produced 4,000.
Units sold 3,600 at Rs. 50 each.
Prepare a cost sheet and show (a) cost per unit and (b) profit for the period.
Part C (10 Mark Questions) - Unit IV
16. Explain different types of budgets and its uses (DoD3)
17. What is a cash budget? Explain the various method of preparing cash budget. (DoD1)
18. Budgeting control improves planning, aids in coordination and helps in having
comprehensive control. Elucidate this statement. (DoD2)
19. M/s AB Ltd. ended with the following profit/loss during last year (all figure in
Rs.lakshs) (DoD1)

Sales
Less Expenses:
Raw material
Stores
Expenses
Interest
Depreciation

35.58
7.42
4.48
20.40
2.00
2.00

36.30
(0.72)
Page 13 of 21

The company had been working at 60 % of the capacity during the previous year. Of the
expenses of Rs. 20.40 lakh, 20% are variable. In the next year, the production/ sales
volume at 80% of the capacity to be achieved. The fixed cost, however is expected to
increase by 1.20 lakh. Draw budget for the next year. State your assumptions.
20. From the following forecast of income and expenditure prepare a cash budget for the
months January to April 1996 : (DoD1)

Months

1995 Nov.

Sales
(Credit)
Rs.

Purchases
(Credit)
Rs.

Wages
Rs.

Manufacturing
Expenses
Rs.

Administrative
expenses
Rs.

Selling
expenses
Rs.

30,000

15,000

3, 000

1,150

1,060

500

1,225
990
1,050
1,100
1,200

1, 040
1, 100
1, 150
1, 220
1,180

550
600
620
570
710

Dec
35, 000
20,000
3, 200
1996 Jan
25,000
15,000
2, 500
Feb
30,000
20,000
3, 000
March
35,000
22,500
2, 400
April
40,000
25,000
2,600
Additional information is as follows:

i. The customers are allowed a credit period of 2 months

ii. A dividend of Rs.10,000 is payable in April
iii. Capital expenditure to be incurred; Plant purchased on 15 th of January for
Rs.5,000; a building purchased on 1st March and the payments are to be made in
monthly instalments of Rs.2,000 each.
iv. The creditors are allowing a credit of 2 months.
v. Wages are paid on the 1st of the next month.
vi. Lag in payment of other expenses is one month.
vii. Balance of cash in hand on 1st January 1996 is Rs.15, 000.
Part C (10 Mark Questions) - Unit V
21.Explain the techniques of marginal costing and state its importance in decision making.
(DoD1)
22.Give a brief account of practical application of managerial costing which you consider
sound from a policy point of view. (DoD2)
23.Quality Products Ltd. Manufactures and markets a single product. The following data are
available: (DoD3)

Materials

Per unit
Rs. 16
Page 14 of 21

Conversion Costs (variable)

Dealers Margin
Selling Price
Fixed Cost
Present sales
Capacity utilization

12
4
40
Rs. 5 lakhs
90, 000 units
60 percent

There is acute competition. Extra efforts are necessary to sell. Suggestions have been made
for increasing sales:
a) By reducing selling price by 5 percent.
b) By increasing dealers margin by 25 percent over the existing rate.
Which of these two suggestions you would recommend, if they company desires to
maintain the present profit? Give reasons.
24. From the following information calculate : (DoD1)
1) P/V Ratio
2) Break-even Point
3) Margin of safety
Total Sales
Rs. 3, 60,000
Selling price per unit Rs. 100
Variable cost per unit Rs. 50
Fixed cost
Rs. 1, 00, 000
4) If the selling price is reduced to Rs. 90 by how much is the margin of safety reduced?
25.There are two similar plants under the same management. The management desires to
merge these two plants. The following particulars are a available : (DoD1)
Capacity Operation
Sales
Variable Costs
Fixed Costs

Factory I
100 %
Rs. 300 Lakhs
220 Lakhs
40 Lakhs

Factory II
60 %
Rs.120 Lakhs
90 Lakhs
20 Lakhs

You are required to calculate: (a) what would be the capacity of the merged plant
to be operated for the purpose of break even, (b) what would be the profitability on working
at 75% of the merged capacity.
Part D (10 Mark Questions) - Unit - I
1. The following is the Trial Balance of Shree Ganesh on 30th June 2006. (DoD1)
Name of the Account
Capital
Drawings
Stock (1.7.2005)
Sundry Creditors
Sundry Debtors

Debt (Rs.)

Credit (Rs.)
1,86,000

15,735
17,280
18,900
43,500
Page 15 of 21

Name of the Account

Debt (Rs.) Credit (Rs.)
Machinery
60,000
Patents
22,500
Freehold Land
30,000
Buildings
96,000
Sales
2,96,340
Purchases
1,22,025
Sales return
2,040
Purchase return
1,500
Cash at bank
7,890
Cash in hand
1,620
Insurance
1,800
General Expenses
9,000
Salaries
45,000
Wages
25,440
Factory fuel and Power
14,190
Carriage on purchases
6,120
Carriage on sales
9,600
Rent
27,000
Total
5,29,740
5,29,740
The following adjustments are to be effected:
(a) Stock on 30th June 2006 Rs. 20,400/(b) 5% on sundry debtors is to be written off as bad
(c) Salaries for the month of June 2006 amounting to Rs. 4,500 were unpaid.
(d) Insurance includes a premium of Rs. 510 on a policy expiring on
December 31st 2006.
(e) Rent Rs. 3,000 is accrued but not received.
(f) Depreciate Machinery @ 10% and patents @ 20%.
You are required to prepare Trading and Profit and Loss Account and the
Balance Sheet as on 30th June 2006.
2. The following is the Trial Balance of B Govil on 31st March 2000. (DoD2)
Particulars
Cash in hand
Cash at Bank
Purchases account
Sales account
Returns inwards account
Return outwards account
Wages account
Fuel and power account
Carriage on sales account
Carriage on purchases account
Stock account (1st April, 1999)
Building account
Freehold land account
Machinery account

Debt (Rs.)
540
12,630
1,40,675

Credit (Rs.)

2,58,780
2,680
1,500
20,480
4,730
3,200
2,040
25,760
30,000
20,000
20,000
Page 16 of 21

Particulars
Patents account
Salaries account
General expenses account
Insurance account
Drawing account
Capital account
Sundry debtors

Debt (Rs.)
7,500
15,000
13,000
600
15,245

Credit (Rs.)

82,000
14,500
6,300
3,48,580
3,48,580
Taking into account into the following adjustments, and prepare Trading and Profit
and Loss account and Balance sheet :
o Stock on hand on 31st March, 2000 is Rs. 26,800/o Machinery is to be depreciated at the rate of 10% and patents at the rate of
20%.
o Salaries for the month of March 2000 amounting to Rs. 1,500 were unpaid.
o Insurance includes a premium of Rs. 170 on a policy, expiring on 31.09. 2000
o Wages include a sum of Rs. 2,00/- spent on the erection of a cycle shed for
employees and customers.
o A provision for bad and doubtful debts to be created to the extend of 5 percent
in sundry debtors.
Part D (10 Mark Questions) - Unit II
3. From the following balance Sheet of X Ltd. As on 31st December 2000 and 2001, you
are required to prepare. (DoD2)
(i) Schedule of changes in working capital and
(ii) Funds flow statement.

Liabilities
Share Capital
General Reserve
P & L A/c
Sundry Creditors
Bills Payable
Prov. For tax
Prov. For doubtful
debts

2000
2001
Assets
(Rs.)
(Rs.)
1,00,000 1,00,000 Good will
14,000
18,000 Building
16,000
13,000 Plant
8,000
5,400 Investments
1,200
800 Stock
16,000
18,000 Bills receivable
Debtors
400
600
Cash at Bank
1,55,600 1,55,800

2000
(Rs.)
12,000
40,000
37,000
10,000
30,000
2,000

2001
(Rs.)
12,000
36,000
36,000
11,000
23,400
3,200

18,000

19,000

6,600
1,55,600

15,200
1,55,800

Additional Information:
(a) Depreciation charged on plant was Rs. 4,000/- and on building Rs. 4,000/(b) Provision for taxation of Rs. 19,000/- was made during the year 2001.
(c) Interim dividend of Rs. 8,000/- was paid during the year 2001.

Page 17 of 21

4. With the following ratios and further information given below, prepare a Trading
Account, Profit and Loss Account and a balance Sheet of Shri Narain: (DoD2)
o
o
o
o
o

Gross profit ration 25%

Net profit/sales 20%
Stock-turnover ratio 10%
Net profit /capital 1/5
Capital to total liabilities 1 / 2

o Fixed assets/capital 5/4

o Fixed assets / total current
assets 5/7
o Fixed assets Rs. 10,00,000
o Closing stock Rs. 1,00,000

Part D (10 Mark Questions) - Unit - III

5. The following information has been obtained from the records of Left-Centre
Corporation for the period from June 1 to June 30, 1985 : (DoD1)
Particulars
Cost of raw materials
Cost of work in progress
Cost of stock of finished goods

1985 On June 1st

Rs.
30,000
12,000
60,000

1985 On June 30th

Rs.
25,000
15,000
55,000

Transactions during the month are:

Purchases of raw materials
4, 50,000
Wages paid
2, 30,000
Factory overheads
92,000
Administration overheads
30,000
Selling and Distribution overheads
20,000
Sales
9, 00,000
Prepare
i.
Cost sheet showing (a) Materials consumed ; (b) Prime cost ; (c) Factory cost
incurred and factory cost ; and
ii.
Income statement in traditional for the six months showing gross profit and net
profit.
6. The following extract of costing information relates to commodity A for the half year
ending 31st December, 1985. (DoD1)
Amount
Amount in
Particulars
Particulars
in Rs.
Rs.
Purchases of raw
1,20,000 Stock (31st Dec. 1985) :
22,240
Materials
Raw materials
Works overheads
48,000 Finished products
32,000
Direct wages
1,00,000 (2,000 tons)
Carriage on purchases
1,440 Work in-progress
4,800
st
st
Stock (1 July,1985):
(1 July 1985
Raw materials
20,000 Work- in-progress
16,000
st
(31 Dec., 1985)
Page 18 of 21

Finished products (1,000 tons)

16,000 Sales-finished Products

3,00,000

Selling and distribution overheads are Re. 1 per ton sold. 16,000 tons of commodity
were produced during the period.
You are to ascertain (i) Cost of raw materials used, (ii) Cost of output for the
period, (iii) cost of sales, (iv) Net profit for the period, and (v) Net profit per ton of
the commodity.
Part D (10 Mark Questions) - Unit IV
7. The following data are available in a manufacturing company for half-yearly period :
(DoD1)
Fixed Expenses:
Wages and Salaries
Rent, Rates and Taxes
Depreciation
Sundry Administration Expenses
Semi-variable Expenses: (at 50% of capacity)
Maintenance and Repairs
Indirect Labour
Sales Department Salaries etc.
Sundry Administration Expenses

(Rs. In Lakhs)
8.4
5.6
7.0
8.9
2.5
9.9
2.9
2.6

(Rs.in Lakhs)

29.9

17.9

Variable Expenses: (at 50% of capacity)

Materials

24.0

Labour

25.6

Other Expenses

3.8

53.4

Assume that the fixed expenses remain constant for all levels of production, semi-variable
expenses remain constant between 45% and 65% of capacity, increasing by 10% between
65% and 80% capacity, and by 20% between and 80%and 100% capacity.

and

Sales at the various levels are:

(Rs.in lakhs )
60% capacity
100.00
75% capacity
120.00
90% capacity
150.00
100% capacity
170.00
Prepare a flexible Budget for the half-year and forecast the profits at 60%, 75%. 90%
100% of capacity.

8. ABC Ltd., A newly started company wishes to prepare Cash Budget from January. Prepare
a Cash Budget for the first six months from the following estimated revenue and expenses:
(DoD2)

Page 19 of 21

Months
January
February
March
April
May
June

Total Sales
Rs.

Materials
Rs.

Wages
Rs.

20,000
22,000
28,000
36,000
30,000
40,000

20,000
14,000
14,000
22,000
20,000
25,000

4,000
4,400
4,600
4,600
4,000
5,000

Over heads
Production
Selling &
Rs.
3,200
3,300
3,400
3,500
3,200
3,600

Distribution Rs.
800
900
900
1,000
900
1,200

Cash balance on 1st January was Rs. 10,000. A new machinery is to be installed at
Rs.20, 000 on credit, to be repaid by two equal installments in March and April.
Sales commission @ 5% on total sales is to be paid within a month following actual
sales.Rs.10, 000 being the amount of 2nd call may be received in March. Share premium
amounting to Rs.2, 000 is also obtainable with the 2nd call.
Period of credit allowed by suppliers
Period of credit allowed to customers
Delay in payment of overheads
Delay in payment of wages

: 2 months
: 1 Month
: 1 Month
: 1/2 Month

Assume cash sales to be 50% of total sales.

Part D (10 Mark Questions) - Unit V
9. Following information has been made available from the cost records of AB & Co.Ltd.,
manufacturing spare parts (DoD1)
Direct materials:
X
Y
Direct wages:
X
Y
Variable overheads
Fixed overheads (total)
Selling price:
X
Y

per unit
Rs. 8
Rs. 6
24 hours @ 25 paise per hour
16 hours @ 25 paise per hour
150% of direct wages
Rs. 750
Rs. 25
Rs. 20

The directors want to be acquainted with the desirability of adopting any one of the
following alternative sales mix in the budget for the next period:
1) 250 units of X and 250 units of Y
2) 400 units of Y only
3) 400 units of X and 100 units of Y
4) 150 units of X and 350 units of Y
State which of the alternative sales mix would you recommend to the
alternative?

Page 20 of 21

10.S & Co. Ltd. Has three divisions, each of which makes a different product. The budgeted
data for the next year is as follows : (DoD1)
Divisions
A (Rs.)
B (Rs.) C (Rs.)
Sales
1, 12, 000
56, 000
84, 000
Costs:
Direct material
14,000
7,000
14, 000
Direct labour
5,600
7,000
22,400
Variable overhead
14,000
7,000
28,000
Fixed costs
28,000
14,000
28,000
Total costs
61,600
35,000
92,400
The management is considering to close down Division C. There is no possibility of
reducing variable costs. Advise whether or not division C should be closed down.

Page 21 of 21