MUMBAI EDUCATIONAL TRUST
INSTITUTE OF DISTANCE LEARNING
ACCOUNTING FOR MANAGERS
Solved Paper
Date : 23/05/2007
Examination
: May 2006
Time : 10.00 a.m. to 1.00 p.m.
Marks
: 100
Note: 1. Attempt any five questions.
2. All questions carry equal marks.
Minimum Marks : 50
for passing
Q. 1
A)
Select the correct answer for the following multiple choice questions:
i
The properties owned by a business organization are called
a) Assets
b) Liabilities
c) capital
ii
A list of assets, liabilities and owner’s equity of business as on a specific date is called
a) Balance sheet
b) income statement
c) Cash flow statement
iii
On sale of furniture owner’s equity would
a) increase
b) decrease
c) remain unchanged
iv
On 31 March, 2006, assets of the business are Rs 3,00,000 and its capital is Rs 50,000. Total
liabilities of the firm are
a) Rs 3,50,000
b) Rs 6,00,000
c) Rs 2,50,000
v
Which of the following is a liability account ?
a) Debtors
b) Creditors
c) Salary
vi
Transactions are initially recorded in the
a) Trial balance
b) ledger
vii
viii
ix
x
Q. 1
c) Journal
Purchase book records
a) all purchases
b)credit purchases of goods
A cash book is only
a) subsidiary book
b) ledger account
c) book of first entry and also a
ledger account
Balance sheet shows
a) assets and liabilities
b) debit and credit
c) receipts and payments
Debit may signify
a) an increase in asset
b) a decrease in asset c) an increase in capital
B)
c)cash purchases
Explain in brief the following terms
a) Trade discount
b) posting
c) Trial balance
d) Narration
e) Folio
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Q. 2
(Preparation of Journal): Journalise the following transactions in the books of Mr Sujit
March 2006
1
4
6
8
9
13
18
20
25
Rs.
50,000
1,000
3,000
4,500
500
700
2,000
1,800
1,800
Commenced business with cash
Purchased goods for cash
Cash sale
Purchased goods on credit from Mr John
Paid for printing charges
Received commission
Sold goods to Mr. Ajay on credit
Received from Ajay in full settlement
Paid cash to Ms Prerna as salary
Solution: Journal of Mr. Sujit as on March 2006
Date
st
1 March
4th March
6th March
8th March
9th March
13th March
18th March
20th March
25th March
Particulars
LF
Debit (Rs.)
Cash A/c
To Capital A/c
(Being capital brought in business)
Dr.
Goods A/c
To Cash A/c
(Being goods brought for cash)
Dr.
Cash A/c
To Goods A/c
(Being goods sold on cash basis)
Dr.
Goods A/c
To Mr. John A/c
(Being goods purchased on credit)
Dr.
Printing Charges A/c
To Cash A/c
(Being printing charges paid)
Dr.
Cash A/c
To Commission A/c
(Being cash received for commission)
Dr.
Mr. Ajay A/c
To Goods A/c
(Being sold goods for credit)
Dr.
Cash A/c
Discount A/c
To Mr. Ajay A/c
(Being cash paid in full settlement)
Dr.
Dr.
1,800
200
Salary A/c
To Cash A/c
(Being salary paid)
Dr.
1,800
Credit (Rs.)
50,000
50,000
1,000
1,000
3,000
3,000
4,500
4,500
500
500
700
700
2,000
2,000
2,000
1,800
Grand Total (Rs.)
65,300
65,300
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Q. 3
(Preparation of Subsidiary Books): Prepare necessary journals from the following
transactions.
2006
Jan 1 Bought goods worth Rs 18,000 less 10 % trade discount and 2% cash discount from
Mr. Brijesh
2 Invoiced goods to Mr Hinduja worth Rs 30,000 less 10 % trade discount
3 Returned goods to Brijesh Rs. 1000 gross
5 Mr Murthy invoiced goods to us Rs 25,000 less 15% trade discount
10 Mr Hinduja returned goods worth Rs 2,500 net
15 Returned goods to Mr Murthy Rs 5000 gross
18 Received an order from Binita for supply of goods worth Rs 5,000 less 15% trade
discount
20 Executed the order received from Binita
27 Bought furniture worth Rs 10,000 from Dinesh
28 Sold old machinery worth Rs 4,500 for Rs 3,800
Solution:
Purchase Book
Particulars
LF
Date
1st Jan, 2006
5th Jan, 2006
st
31 Jan, 2006
Details
Amount(Rs.)
Mr. Brijesh
Less: 10% Trade Discount
18,000
1,800
16,200
Mr. Murthy
Less: 15% Trade Discount
25,000
3,750
21,250
Purchase A/c
Dr.
37,450
Sales Book
Date
nd
2 Jan, 2006
th
25 Jan, 2006
st
31 Jan, 2006
Date
rd
3 Jan, 2006
th
5 Jan, 2006
st
31 Jan, 2006
Date
th
10 Jan, 2006
st
31 Jan, 2006
Particulars
Details
Amount(Rs.)
Mr. Hinduja
Less: 10% Trade Discount
30,000
3,000
27,000
Mr. Binita
Less: 15% Trade Discount
5,000
750
4,250
Sales A/c
LF
Cr.
Purchase Return Book
Particulars
LF
31,250
Details
Amount (Rs.)
Mr. Brijesh
Less: 10% Trade
1,000
100
900
Mr. Murthy
Less: 15% Trade Discount
5,000
750
4,250
Purchase Return A/c
Cr.
Sales Return Book
Particulars
LF
Mr. Hinduja
Less: 10% Trade
Sales Return A/c
Dr.
5,150
Details
Amount (Rs.)
2,778
278
2,500
2,500
Note:
No Entries are to be made in the subsidiary book for the transactions dated 25th, 27th and 28th
January, 2006.
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Q. 4
(Preparation of a Cash Book): Prepare a triple column cash book from the following
particulars
March 2006
1
Cash
Bank overdraft
3
Issued a cheque in favour of Rajesh for Rs 2,500
in full settlement of Rs 2,600
5
Received a cheque from Sujata for Rs 3,250 in
full settlement of Rs 3,300
6
Bank paid on our behalf for insurance
7
Cash sales
8
Cash purchases
9
Purchased machinery for Rs 8,000 and paid by cheque
10
Direct deposit by Karishma in our account
11
Received crossed cheque from Piyush
12
Paid office expenses
13
Paid office rent
Balance the cash book
Rs
200
3,000
200
4,500
2,000
9,500
4,500
400
350
Solution:
Cash Book
Date
R. L Disc. Cash Bank
No. F (Rs.) (Rs.) (Rs.)
1/3/06 To Bal b/d
200
1/3/06
5/3/06 To Sujata
50
3,250 3/3/06
7/3/06 To Sales A/c
4,500
6/3/06
10/3/06 To Karishma
9,500 8/3/06
11/3/06 To Piyush
4,500 9/3/06
12/3/06
13/3/06
31/3/06
50 4,700 17,250
Date
1/3/06
Particulars
To Bal b/d
-
1,950
Particulars
By Bal b/d
By Rajesh
By Drawings
By Purchase
By Machinery
By Office Exp.
By Office Rent
By Bal c/f
V. L
No. F
Disc.
(Rs.)
100
100
Cash Bank
(Rs.) (Rs.)
3,000
2,500
200
2,000
8,000
400
350
1,950 3,550
4,700 17,250
3,550
Q. 5
State with reasons whether the following expenses are Revenue, Capital or Deferred
revenue in nature:
1
Spent on overhauling of machinery
Rs 5,000
2
Paid taxes
Rs 4,600
3
Wages paid to the workers for erection of a new machinery Rs 5,900
4
Heavy expenditure incurred on advertising
Rs 20,000
5
Purchased machinery for
Rs 19,000
6
Cost of replacement of vital part of machinery
Rs 4,700
7
Cost of repairing the factory shed
Rs 3,000
8
Spent on uniform of workers
Rs 2,000
Solution:
1.
Spent on overhauling of machinery Rs. 5,000
This expense is REVENUE in nature because it is incurred for keeping the machinery in the normal
working conditions.
2.
Paid taxes – Rs. 4,600
This expense is REVENUE in nature as it is recurring.
3.
Wages paid to the workers for erection of a new machinery Rs. 5,900
This expense is CAPITAL EXPENDITURE because it increases the cost of machinery.
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4.
Heavy expenditure incurred on advertising Rs. 20,000
This expense is DEFFERED REVENUE in nature because the benefit of such expense is not
exhausted within one year, such an expenditure is spread over 5–7 years. Proportionate amount is
written off every year by debiting to profit and loss account. The amount which is remaining is
shown as an asset in the balance sheet.
5.
Purchased machinery for Rs. 19,000
This expense is CAPITAL EXPENDITURE because by purchasing machinery an asset is being
created for future use in business.
6.
Cost of replacement of vital part of machinery Rs. 4,700
This expense is CAPITAL EXPENDITURE in nature because it is for maintenance of machinery.
7.
Cost of repairing the factory shed Rs. 3,000
This expense is DEFFERED REVENUE EXPENDITURE as this expenditure may be required at
regular interval of few years.
8.
Spent on uniform of workers Rs. 2,000
This expense is REVENUE in nature as they are recurring in nature.
Q. 6
M/S TV Ltd
Balance sheet As on 31st March,2006
Liabilities
Rs
Assets
Share capital
5,00,000
Land and Building
Securities premium
50,000
Machinery
General reserve
2,00,000
Live stock
P&L
5,750
Investments
Bills Receivable
6% Debentures
1,06,000
Accrued Interest
Sundry creditors
33,000
Stock
Provision for taxation
25,000
Debtors
Provision for dividend
25,000
Cash
Discount on Debentures
9,44,750
Rs
2,44,000
2,76,000
20,000
2,65,000
20,750
4,000
50,000
55,000
7,000
3,000
9,44,750
Answer the following questions on the basis of the above balance sheet:
1
What is Net worth?
2
Calculate the amount of Net Worth
3
What is the amount of total capital employed?
4
What do mean by working capital?
5
What is the amount of working capital?
6
What information is required to be disclosed about share capital?
7
What do you mean by fictitious asset?
8
What is the amount of fictitious asset?
9
What information is required to be disclosed about investments?
10 What do you mean by provision?
Solution:
1.
Net Worth
Net worth is a fund contributed by the owner or the shareholders.
Net worth = Share Capital + Reserves – miscellaneous expenditure
Net worth is a combination of share capital plus reserves minus miscellaneous expenditure.
2.
Amount of Net Worth
Amount = 500000 + 200000 + 50000 + 5750 – 3000
Amount Rs = 752750
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3.
Amount of Total Capital Employed
Total Capital Employed = Owner’s Equity + Debt
OR
Fixed Assets + Net Working Capital
4.
Working Capital
Working capital is the capital required to finance day to day requirements of an organization.
Working Capital = CA - CL
CA = Current Assets
CL = Current Liabilities
5.
Amount of Working Capital
Working Capital = Current Assets - Current Liabilities
Working Capital = (20750 + 55000 + 4000 + 50000 + 7000) – (33000 + 25000 + 25000)
Working Capital = 136750 - 83000
Working Capital = Rs. 53750
6.
Information required to be disclosed about share capital is
(i)
Authorised Share Capital
(ii)
Issued Share Capital
(iii)
Subscribed Share Capital
(iv)
Called up Share Capital
(v)
Paid up Capital
These are to be shown in no. of shares as well as amount of share.
7.
Fictitious Asset?
Intangible assets, which cannot be converted into cash. Fictitious Assets as per the balance
sheet are discount or loss on issue of shares & debentures.
Unadjusted development expenditure preliminary expense.
Interest paid out of capital during the period of construction.
8.
Amount of fictitious asset?
Fictitious assets are discount on debentures Rs. 3000.
9.
Information required to be disclosed about investments.
The information required to be disclosed about investments is market value of the investments.
There should be classified under “unquoted” investments and “quoted” investments, they are
further divided into “Trade investment” and “others”. The mode of valuation of these investments
should also be stated in the Balance Sheet.
10.
What do you mean by provision?
Provision is the amount set aside of the Income every year to meet future liabilities. For example
provision for taxation and provision for dividend.
Q. 7
Write short notes on any five of the following:
1
2
3
4
5
6
7
8
Ledger
Petty cash book
Cost concept
Capital expenditure
Deferred revenue expenditure
Current assets
Current liabilities
Fixed assets
Best of Luck