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ADL 03 Accounting for Managers V2
Assignment – A
Question 1. Inder drew upon on Mohan a bill for Rs. 9,000 on 1 April for three
months, for th mutual accommodation. Mohan accepted the draft. On 4 April Inder
got it discounted at 6% p.a. and remitted one- third of the proceeds to Mohan.
At maturity, Inder was not able to send the required sums and asked Mohan to rec
eive tw o month Promissory Note for Rs 6,090 which Moha n did. Mohan go t the
note discounted for Rs 6,000 and met his acceptance. Inder became insolvent just
before his Pro missory Note was due for payment. Only 50% was received from his
estate. Give Journal entries in the books of both Inder and Mohan.
Question 2. Balance Sheet of ASD Co. Ltd. At the end of the 2005 and 2006 are
Share Capital1,00,0001,50,000Freehold Land1,00,0001,00,000
Share Premium—5,000Plant at Cost1,04,0001,00,000
General Reserve50,00060,000Furniture at Cost7,0009,000
Profit & Loss A/C10,00017,000Investments at cost60,00080,000
Provision for Dep. On Plant50,00056,000Stock 60,00065,000
Provision for Dep. On Furniture5,0006,000Cash 30,00045,000
Provision for Taxation20,00030,000
A Plant purchased for Rs. 4,000 (Depriciation Rs 2,000) was sold for cash for
30th September, 2006. On 30, June 2006, an item of furniture was purchased for
2,000. These were the only transactio ns concerning fixed assets during 2006. A
dividend of 22.5 % on original shares was paid.
Quesiton 3. The Cash book of Mr A shows Rs. 8,364 as the balance at bank as on
31st December 2006 but you find that this does not agree with the balance as per
Bank Pass Book. On scrutiny, you find following discrepancies.
1. On 15th December, the payment side of the Cash Book was under cast by Rs 100.
2. A cheque for Rs. 131 issued on 25 December, was recorded in the Cash column.
3. One deposit of Rs. 150 was recorded in the Cash Book as if there is not Bank
column there in.
4. On 18th December, the debit balance of Rs. 1,526 as on the previous day, was
brought forward as a credit balance.
5. Of the total cheq ues amo unting to Rs. 11,514 drawn in the last week of
December, cheq ues aggregating Rs 7,815 were encashed in December.
6. Dividends of Rs.250 collected by the bank and subscription of Rs.100 paid b y
it, were not reco rded in the cash book.
7. One out going cheque of Rs. 350 was recorded twice in the cash Book.
Prepare Bank Reconciliation Statement as on 31 December 2006.
Question 4. “Cost may be classified in a variety of ways according to their
nature and, the informa tio n needs of the manage me nt”. Explain.
Question 5. On 31st March 2006 the following Trail Balance has been extracted
from the books o f a Rahul.
Dr. BalanceCr. Balance
Drawings account3000Rahul’s Capital A/c 30000
Sundry Debtors19100Sundry Debtors 8401
Interest on Loan2005% Loan on Mortgage(01.04.05) 8500
Cash in Hand3050Bad Debts Provision 710
Opening Stock (01.04.05)5839Sales 111243
Moto r Vehicles9000Purchase Returns 1346
Cash at Bank4555Discounts 440
Land & Building12000Bills Payable 2714
Bad Debts625Rent Received 250
Rates, Taxes & Ins.3891
Prepare Trading Profit & Loss account for the year end ing 31.03.2006 and a
Sheet as on that date after considering following matters:
1. Depreciate Land & Bulding at 5% p.a. and motor Vehicles at 15% p.a.
2. Salaries amo unting to Rs 700 and Rates amounting to Rs 400 are due.
3. Goods destroyed due to fire worth Rs 200.
4. A Pro v. For Doubtful debts is to be brought upto 5% of sundry debtors.
5. Stock a on 31.03.06 is Rs.6250.
6. Goods worth Rs. 500 is taken by proprietor for personal use and no entry for
the same is made in books of acco unts.
7. Prepaid insurance amounted to Rs 175.
8. Provide manager’s commission @ 5% on net profit after charging such
Assignment – B
The Chief Cost Accountant of a company running an orchard with an adequate
supply of labour, presents the following data and requests yo u to advice about
the area to be allo tted fo r the cultivation of various types of fruits, which
would result in maximization of profits. The company contemplates growing
Apples, Lemons, Oranges and Peaches:
Selling Price per Box(Rs.) 15153045
Seaso n’s yield in boxes per acre500150100200
Costs: Material per AcreRs. 270Rs. 105Rs. 90Rs. 150
Labour Cost: Growing per AcreRs. 300Rs. 225Rs. 150Rs. 195
Picking and packing cost per boxRs. 1.50Rs. 1.50Rs. 3Rs. 4.50
Transport cost per boxRs 3Rs 3Rs 1.50Rs 4.50
The total fixed costs in each season would be Rs. 2,10,000. The following
limitations are also placed before you.
(a) The area available is 450 acres but out of this, 300 acres are suitable
for growing only Oranges and Lemons. The balance of 150 acres is suitable for
growing any of the four fruits.
(b) As the produce may be hypothecated to banks area allotted for any fru it
should be demarcated in complete acres and not in fractio ns o f acres.
(c) The marketing strategy of the company requires the compulsor y production
of all the four types of fruits in a season and the minimum quantity of any one
type to be 18,000 boxes.
Calculate the total that would accrue if your advice is fo llowed.
1. Differentiate between Fixed Installment And reducing Balance Metho d of
Depreciation with Suitable example.
3. On Ist June 2003, Anand Tyres company. purchased Machinery worth Rs. 760000/-
and incurred Rs 40000/- on installation. On Ist October 2003 it buys additional
second hand machinery worth Rs. 285000/-and incurred Rs. 15000/- on overhauling
of Machinery. On Ist July 2005, half of the Machinery which was purchased on Ist
April 2003 is sold for Rs. 115000/- The company writes o ff Depreciation at 10%
o n Straig ht Line method. The accounts are closed every year on 31 December.
From Ist Jan 2005 , company has changed the method of depreciation fro m
Straight Line method to Written down value metho d Prepare Machinery Account for
three years and aslso caslculate profit or loss on sale of Machinery.
4. What do you mean Accounting equation? What are its constituents? Briefly
explain with suitable example, purpose of preparation of Accounting Equation?
Assignment – C
1. Accounting principles are generally based on:
(a) Practicability (b) Subjectivity
(c) Convenience in recording. (d) None of the above
2. Explain briefly the Dual Aspect Conce pt of Acc ounting:
3. In case of Debt beco ming bad, the amo unt should be credited to:
(a) Debtor’s account (b) Bad Debt account
(c) Sales Account (d) None of the above
4. Explain the term “Accounting Cycle”.
5. Expain the term Ledger Post ing?
6. When a firm maintains “Three Column Cash Book” it need not maintain:
(a) Cash account in the Ledger (b) Bank Account in the Ledger
(c) Discount Account in the Ledger
(d) Both Cash & Bank Account in the Ledger
7. What is Contra Entry?
8. Purchases book is used to record:
(a) All purchases of goods
(b) All credit purchases
(c) All credit purchases of goods
(d) All credit purchases of assets other than goods.
9. Explain the Imprest system of “Petty Cash Book”.
10. Cost of Goods Sold = Op stock + Net Purchases __ Expenses on Purchasing
Goods __ Cl. Stock.
11. Interest on drawing is:
(a) Expenditure for the business
(b) Expense for the business
(c) Gain for the business.
12. Distinguish between Error of Omission, Error of Principle and Error of
13. What do you understand by the term Depreciation, Deplet ion and
Amortization. Also give example of each.
14. Distinguish between “Straight Line Method of Depreciation” and “Diminishing
Balance Method” of providing depreciation. Which method of depreciation is
suitable for Plant & Machinery and why?
15. Define financial ratios.
16. Give any three formulas of Solvency Ratios.
17. What is the ne ed for Financia l Analysis? How Ratio ana lysis te chnique he
lps in it?
18. Write short note on market value/ Book value of shares.
19. Tax paid is
(a) Application of Fund (b) Source of Fund
(c) No Flow of Fund (d) None of the above
20. Distinguish between Funds Flow Statement and Cash Flow Statement.
21. Cash from operation is equal to
(a) Net Profit plus increase in outstanding expense
(b) Net Profit plus increase in debtors
(c) Net Profit plus increase in stock
(d) None of the above
22. Define Cost Accounting. How is it d ifferent from Management Accounting and
Financial Acco unt ing?
23. Explain Out of Pocket Cost?
24. Define Activity Base Costing, Back Flush Costing Life cycle Costing.
25. Give few examples of purely financial charges.
26. How is Direct cost differ fro m indirect cost?
27. Distinguish between LIFO and FIFO methods of inventory valuations.
28. Why do we require proper inventory valuation.
29. Define Budget and Budgetary Control.
30. Define Ma ster Budget, Progra mme Budget, Production Budget and Cash budget.
31. Define Zero Base Budgeting. Give limitations of ZBB.
32. How Standard Costing d iffers from Histo rical Costing?
33. List major uses of Standard Costing.
34. Direct Material Cost Variance Analysis with the help of an example.
35. Define marginal costing, Break – Even analysis P/V Ratio.
36. Show Break – Even po int, angle of incidence and Margin of safety
graphically with the help of an example.
37. When fixed Cost is Rs 10000 and P/V/Ratio is 50%, the Break even po int is
(a) Rs 40000 (b) Rs. 35000 (c) Rs. 20000 (d ) Rs. 45000
38. When P/V ratio is 40% and Sales Value Rs 10000 the variable cost will be
(a) Rs. 2000 (b) Rs. 6000 (c) Rs. 8000 (d ) Rs 7000
39. Contribution margin is also k nown as ____________.
40. Define absorption costing.
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