December 2007/January 2008

Master of Business Administration (MBA) Examination

I Semester

Accounting For Managers

Time : 3 Hours)                                                                                               (Max. Marks : 80

Note : Attempt any two questions from Section A and any three from Section B. All questions carry equal marks.

(Section A)

1.         What are the fundamental accounting assumptions? Discuss briefly.

2.         Check the following statements and explain the inherent accounting concepts :

            (a)        Every transaction or event has two aspects.

            (b)        Any change in value of assets should be recognized only when the business realizes it.

            (c)        No profit should be anticipated but every possible loss should be provided for.

            (d)       Accounting policies should not be changes frequently.

3.         (a)        Cash Account is a :

                        (i)         Personal Account                    (ii)        Real Account

                        (iii)       Nominal Account.

            (b)        Goods worth Rs. 100 taken by the proprietor for personal use should be credited to :

                        (i)         Sales Account                         (ii)        Proprietor's Personal Account

                        (iii)       Purchase Account                   (iv)       Expenses Account.

            (c)        Bad Debts Account is a:

                        (i)         Sales Account                         (ii)        Proprietor's Personal Account

                        (ii)        Purchase Account                   (iv)       Expenses Account.

            (d)       Bad Debts Account is a :

                        (i)         Personal Account                    (ii)        Real Account

                        (iii)       Nominal Account.

            (e)        The Profit and Loss Account shows :

                        (i)         The Financial Position of the Concern.

                        (ii)        The Degree of Honesty with which Accounting Work has been done

                        (iii)       The Capital Invested' in the Business

                        (iv)       Profit Earned or Loss Suffered by the Firm.

            (f)        The Trial Balance checks :

                        (i)         Arithmetical Accuracy of Books

                        (ii)        The Honesty of the Book-keeper

                        (iii)       The Valuation of Closing Stock.

4.         What is Budgetary Control? How is a system of budgetary control  operated in an undertaking engaged in manufacturing business?

(Section B)

5.         Record the following transactions in various subsidiary books and post them into Ledger and prepare a Trial Balance :


June 1        Cash in hand, Rs:15,700, Cash at bank Rs. 25,400 and Capital

                  Account Rs. 41,100

June 3        Bought goods for cash Rs. 4,100

June 4        Purchased goods from Mahesh and Co. for Rs. 5,800 less 10% trade discount.

June 7        Sold gods to Bindle and Co. Rs. 8,900 less 20% trade discount

June 9        Withdrew Rs. 500 from bank for private use.

June 12      Sold goods to Amzad for Rs. 6,400

June 15      Rs. 5,000 paid to Mahesh and Co. in full settlement of their account

June 18      Goods worth Rs. 400 returned by Amzad. June 20 Received Rs. 4,000 from Amzad

June 21      Purchased goods from Shiv and Go. for Rs. 8,700

June 23      Rs. 6,000 paid to Shiv and Co. by cheque : discount allowed Rs. 300

June 24      Purchased Furniture of Rs. 800 from Surjeet Furniture House on credit.

June 26      Paid into Bank Rs. 2,200.

June 28      Amzad declared insolvent : a first and final dividend of 50 paise in a rupee is received from him.

June 29      Goods worth Rs. 600 returned to Shiv and Co.

June 30      Goods worth Rs. 400 taken by the proprietor

June 30      Interest on Capital provided Rs. 411

June 30      Paid Rs. 500 for advertisement by cheque June 30 Cash salaries to staff Rs. 1,800

June 30      Cash sales Rs. 21,800

June 30      Paid into bank Rs. 20,000

June 30      Bought 100 shares in Hind Mills Ltd. At Rs. 11 per share, brokerage paid Rs. 25

June 30      Received Rs. 5,900 from Bindia and Co., discount allowed Rs. 100

6.         (a)        Jain Bros. Acquired a machine on 1° July, 1998 at a cost of Rs. 14,000 and spent Rs. 1,000 on its installation. The firm writes off depreciation at at 10% of the original cost every year. The books are closed on 31" December every year. On March 31g. 2001 the machine is sold for Rs. 9,500. Show the Machinery Account and Depreciation Account.

            (b)        Work out on the basis of the Diminishing Value also

7.         The following are the balances as at 31" march, 2003 extracted from the books of Madan Lal :      Rs.

            Plant and Machinery                                                                                   40,500

            Furniture and Fittings                                                                                  15,250

            Bank Overdraft                                                                                        1,60,000

            Capital Account                                                                                       1,15,000

            Drawings                                                                                                     15,000

            Purchases                                                                                                  2,30,500

            Opening Stock                                                                                          1,32,250

            Wages                                                                                                          22,325

            Provisions for Dciubtful Debts                                                                     5,700

            Provisions for Discount on Debtors                                                              1,375

            Sundry Debtors                                                                                        1,52,500

            Sundry Creditors                                                                                         77,500

            Bad ebts                                                                                                        2,200    

            Bad Debts Recovered                                                                                   1,250

            Salaries                                                                                                        32,650

            Payable Salaries                                                                                             5,350

            Prepaid Rent                                                                                                     500

            Rent                                                                                                               6,500

            Carriage Inward                                                                                            2,350

            Carriage Outward                                                                                          3,250

            Sales                                                                                                         2,90,600

            Advertisement Expenses                                                                               6,750

            Printing and Stationary                                                                                 2,200

            Cash in Hand                                                                                                 2,300

            Cash at Bank                                                                                                 7,250

Additional Information :

(1)        Difference in the Trial balance, if any, can be taken as miscellaneous expenses or miscellaneous income.

(2)        Bank overdraft is secured against hypothecation of stock. The bank overdraft outstanding as on 31-3-2003 accounted for 80% of drawing power. Such drawing power is ascertained by deducting 20% as margin from the value of stock as on that date.

(3)        Purchases include sales return of Rs. 5,500 and sales include purchase returns of us. 4,750.

(4)        Goods withdrawn by Madan Lal for own consumption, us. 7,500, were included in purchases.

(5)        Wages paid for installation of Plant and Machinery amounting to Rs. 750, were included in wages account.

(6)        Depreciation is to be provided on Plant and Machinery @.15% p.a. and on furniture and fittings @ 10% annum.

(7)        Create a provision for doubtful debts @5% and provision for discount on debtors @ 21/2%.

(8)        A debit balance of Rs. 2,500 in the account of rani, a creditor is included In the list of sundry debtors.

(9)        Free samples distributed for publicity costing Rs. 1,250. Prepare a Trading & Profit & Losi Account for the year ended 31st March, 2003 and a Balance Sheet as on that date.

8.         The standard fixed overhead cost per battery is Rs. 10.80 based on the following information for the year.

Budgeted production 10,000 batteries.

Budgeted fixed expenses Rs. 1,08,000

Budgeted total production hours 24,000

For the month of April the following actual data are obtained

Fixed expenses incurred                                 Rs. 9,500

Budgeted production hours for April             2,400

Actual production hours worked                    1,800

Actual Production                                           400

Compute the expense, capacity and efficiency variances.

9.         A company is intending to purchase a new plant. There are two alternative choices a available :

Plant A :          The operation of this plant will result in a fixed cost of Rs. 40,00 and variable costs of Rs. 4 per unit.

Plant B :          The purchase of this plant will result in a fixed cost of Rs. 60,000 and variable costs of Rs. 3 per unit:

Compute the cost break-even point and state which plant is to be preferred and when.