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Accounting for Managers

Amity Centre for eLearning

Subject Name : Accounting for Managers
Permanent Enrollment Number (PEN) :
Roll Number (SEN) :
Student Name :

a) Students are required to submit all three assignment sets.


Assignment A Five Subjective Questions 10
Assignment B Three Subjective Questions + Case Study 10
Assignment C 40 Objective Questions 10

b) Total weightage given to these assignments is 30%. OR 30 Marks

c) All assignments are to be completed as typed in word/pdf.
d) All questions are required to be attempted.
e) All the three assignments are to be completed by due dates (specified
from time to time) and need to be submitted for evaluation by Amity

( √ ) Tick mark in front of the assignments submitted

Assignment ‘A’ Assignment ‘B’ Assignment ‘C’

Copyright© 2010 Amity University

Accounting for Managers

Assignment A
Problem 1:
Journalize the following transactions in the books of Mr. Walter:
a) Paid rent of building $ 12,000 half of the building is used by the proprietor for
residential use.
b) Paid fire insurance of the above building in advance $ 1,000.
c) Paid life insurance premium $ 2,000.
d) Paid income-tax $ 3,000.
e) Salary due to clerk $ 500.
f) Charge depreciation on furniture @ 10% p.a. for 1 month (furniture $ 12,000).
g) Provide interest on capital ($ 60,000) at 15% p.a. for 6 months.
h) Charge interest on drawing (10,000) at 18% p.a. for 6 months.
i) Provide interest on loan to Ram ($ 100,000) at 18% p.a. for 2 months.
j) Charge interest on loan to Shyam ($ 200,000) at 18% p.a. for 2 months.
k) Received commission $ 1,000 half of which is in advance.
l) Brokerage due to us $ 500.

Problem 2:
From following figures extracted from the books of Mr. XYZ, you are required to prepare
a Trading & Profit & Loss Account for the year ended 31 st March, 2008 and a Balance
Sheet as on that date after making the necessary adjustments.

$ $
Mr. XYZ’s Capital 228,800 Stock 1.4.2007 38,500
Mr. XYZ ‘ Drawings 13,200 Wages 35,200
Plant & Machinery 99,000 Sundry creditors 44,000
Freehold property 66,000 Postage & Telegrams 1,540
Purchases 110,000 Insurance 1,760
Rtuens outwards 1,100 Gas & fuel 2,970
Salaries 13,200 Bad debts 660
Office Expenses 2,750 Office rent 2,860
Discount A/c (Dr.) 5,500 Loose tools 2,900
Sundry Debtors 29,260 Factory lighting 1,100
Loan to Mr. Krish @10% p.a. 44,000 Provision for doubtful debts 880
Balance on 1.4.2007 Interest on loan to Mr. Krish 1,100
Cash at bank 29,260 Cash in hand 2,640
Bills payable 5,500 sales 231,440

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Accounting for Managers

a) Stock on 31st March, 2008 was valued at $ 72,600
b) A new machine was installed during the year costing $15,400 but it is not
recorded in the books as on payment was made for it. Wages $ 1,100 paid for its
erection has been debited to the wages account.
c) Depreciate :
a. Plant & machine by 33.33%
b. Furniture by 10%
c. Freehold property by 6%
d) Loose tools were valued at $ 1.760 as on 31.3.2008
e) Of the sundry debtors Rs.660 are bad and should be written off.
f) Maintain a provision of 5% on sundry debtors for doubtful debts.
g) The manager is entitled to a commission of 10% of the net profits after charging
such commission.

Problem 3:
Following is the Trial Balance of M/s. Trinity Foods as on 30 th June 2007 (after closing
Nominal Accounts). Prepare a Balance Sheet on the basis of this trial balance.

Particulars Debit (Rs.) Credit (in Rs.)

Cash 10,000
Capital 100,000
Bank 77,000
Furniture 25,000
Ram 15,000
Rahim 50,000
Trading & Profit & Loss 47,000

162,000 162,000

Problem 4:
Given below are the financial statements of Safal Enterprises, using the tool of ratio
analysis comment on the profitability and liquidity position of the firm for the year
2006-07. Total no. of shares outstanding for the firm is 2.69crores. In the view of growth
opportunities in the near future the firm has been maintaining a policy of 45% payout.

Summarized P & L of Safal Enterprises

For the year ended 31 March
Particulars 2006 2007
( Rs. In crores)
Sales 132.00 144.00
Other income 12.00 15.00

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Accounting for Managers

Cost of sales 102.96 110.02

Gross margin 29.04 33.98
Operating expenses
Administration 12.44 14.36
Selling & distribution 4.42 5.36
Profit before interest & tax (PBIT) 24.18 29.26
Interest 3.00 4.01
Profit before tax (PBT) 21.18 25.26
Provision for taxes 7.94 9.47
Profit after tax (PAT) 13.24 15.79

Balance Sheet of Safal Enterprises

Particulars 31/03/06 31/03/07

(Rs in crores)
Fixed assets 31.25 37.50
Current assets
Inventory 14.56 16.64
Accounts receivable 13.20 15.43
Cash 1.50 1.75
Less: Current liabilities 8.55 11.25
Net current assets 20.71 22.57
Total Assets 51.96 60.07
Liabilities &owners equity
Share capital 27.00 27.00
Reserves & Surplus 4.96 6.36
Debt(long term) 20.00 26.71
Total 51.96 60.07

Problem 5:
Given below are the balance sheets of the two firms- Gloria Ltd and Victoria Ltd as on
31st March 2007.
Gloria Ltd. Victoria Ltd.
Cash and Bank balance 12.70 38.60
Marketable securities 10.00 21.00
Sundry debtors 22.00 23.70
Prepaid expenses 93.50 162.45
Current Assets 1.12 2.14
Fixed Assets (Net) 139.32 247.90
Total Assets 589.00 642.00

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Accounting for Managers

728.323 889.895
Liabilities and Owners Equity
Sundry creditors 6.75 26.45
Notes payable 6.56 6.45
Long term debt 130.01 345.00
Equity 585.00 512.00

Total 728.323 889.895

Can the financial positions of the two firms be compared assuming that the
two firms fall in the same industry?

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Accounting for Managers

Assignment B
Problem 1:
Find out the cost of raw material purchased from the data given below:

Particulars Rs.
Prime cost 200,000
Closing stock of raw material 20,000
Direct labour cost 100,000
Expenses on purchases’ 10,000

Problem 2:
The product of a manufacturing concern passes through two processes A and B and
then to finished stock. It is ascertained that in process A normally 5% of the total input is
scrap which realizes Rs. 80 per tone.

From the following information relating to process A for the month of August 2007,
prepare process A account
Materials 500 tonnes
Cost of materials Rs. 125 per tonne
Wages Rs. 14,000
Manufacturing overheads Rs. 4,000
Output 415 tonnes

Problem 3:
Ahmedabad Company Ltd. manufactures and sells four types of products under the
brand name Ambience, Luxury, Comfort and Lavish. The sales mix in value comprises the

Brand name Percentage

Ambience 33 1/3
Luxury 41 2/3
Comfort 16 2/3
Lavish 8 1/3

The total budgeted sales (100%) are $ 600,000 per month.

The operating costs are:

Ambience 60% of selling price Luxury

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Accounting for Managers

Luxury 68% of selling price Comfort

Comfort 80% of selling price Lavish
Lavish 40% of selling price
The fixed costs are $. 159,000 per month.

A) Calculate the breakeven point for the products on an overall basis.

b) It has been proposed to change the sales mix as follows, with the sales per month
remaining at $. 6,00,000:

Brand Name Percentage

Ambience 25
Luxury 40
Comfort 30
Lavish 05

Assuming that this proposal is implemented, calculate the new breakeven point.

Case study:

Bajaj Auto Limited: The Unprecedented Growth Story

Bajaj Auto Limited is the flagship company of the Bajaj Group. The company
manufactures two & three wheelers. Mr. Rahul Bajaj is the present Chairman of the
company. The company was incorporated in the year 1945 as M/s Bachraj Trading
Corporation Private Ltd. The promoters hold about 30% equity, whereas Indian public
holds about 26% and institutional investors have more than 27% stake in the company.

The products manufactured by Bajaj Auto are scooters, motor cycles, auto spares parts,
machine tools, steel and engineering products. The company also produces three-
wheelers as goods carriers such as pick-up or delivery vans and passenger carriers such
as auto-rickshaws. Bajaj Auto has a network of 498 dealers, 1,500 authorized service
centres and 162 exclusive three-wheeler dealers spread across the country.

Bajaj Auto has also diversified into the general as well as life insurance business through
its subsidiaries Bajaj Allianz General Insurance Company Ltd, respectively. The Bajaj
brand has presence in many countries such as Sri Lanka, Mexico, Bangladesh, Columbia,
Peru, Egypt, etc. The main competitors of the company in the two-wheelers and three-
wheelers segment are- Hero Honda Motors Ltd, Kinetic Motor Co Ltd, LML ltd,
Maharashtra Scooters Ltd, and TVS Motor Co. Ltd.

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Accounting for Managers

The company sold close to 23 lakh vehicles in 2005-06, which is a record performance in
its history. The sales of motorcycles manufactured grew by 32% in 2005-06 compared to
a market growth of below 19%. For the fifth successive year, the company raised its
market share in the motorcycle segment. Today it stands at almost 31%. Sales increased
by almost 31% to an all-time high of Rs 9,285 crore in 2005-06. the export of the
company in all its product categories has also been unprecedented during the FY 2005-
06 as is reflected in the figures given below:

Table A Product-wise exports of Bajaj Auto Ltd

Product 2005-06 2004-05 Growth

( in numbers ) (in percentage)
Motorcycles 165,288 123,946 33
Total two-wheelers 174,907 130,945 34
Three-wheelers 75,297 65,765 14
Total vehicles 250,204 196,710 27

Even more impressive has been the growth in company’s operating EBITDA, which
increased by 47% to touch Rs 1805 crore during 2005-06. Consequently the operating
EBITDA margin grew by 220 basis points to 17.9% of the sales and operating income.
Earnings per share have been risen from Rs 75.60 to Rs 111.00 in the current year.
Dividend too has grown to Rs 40 per share (400%) for the year ended 31 st March 2006 as
against Rs 25 per share in 2005.

Over the past few years, Bajaj Auto has focused on his technology development, and
product development in anticipation of market needs, scaling up its manufacturing
facilities, implementing best-in-class production systems, rationalizing vendors, slashing
costs while upgrading quality, restructuring dealerships, and distribution channels.
These capabilities enabled the company to create exciting new products, which have set
benchmarks in styling, design, and technology. The company’s products are creating a
customer pull at all price points and the company has now transformed from being a
price warrior to a price leader. The results of these strategies are reflected in its
financial statements as follows (refer Table B and C):

Table B Profit and Loss Account for Bajaj Auto Ltd for the year ended

March 2003 March 2004 March 2005 March

(Rs in crore)
Sales 4987.05 5721.44 7078.06 9284.84
Other income 297.10 507.04 516.41 602.52
Change in stocks 32.92 10.87 -11.57 50.10
5317.07 6239.35 7582.90 9937.46
Expenditure 4335.16 5017.92 6286.91 8131.87
Profit & Loss

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Accounting for Managers

PBDIT 981.91 1221.43 1295.99 1805.59

Interest 1.12 0.94 0.67 0.34
Depreciation 171.42 184.32 185.66 191.28
PBT 809.37 1036.17 1109.66 1613.97
Tax provision 274.44 285.41 349.32 509.37
PAT 534.93 750.76 760.34 1104.60
Dividends 159.81 285.37 288.64 461.50

Table C Assets and Liabilities of Bajaj Auto Ltd as on 31 March 2006

Liabilities Mar 05 Mar 06 Assets Mar 05 Mar 06
Rs in crore Rs in crore
Net Worth 4447.16 5349.79 Gross fixed assets 2870.02 3092.28
Paid up Equity 101.18 101.18 Capital WIP 9.14 25.26
Bonus Equity 114.17 114.17 Less: cumulative 1660.32 1834.19
capital depreciation
Minority interest 89.46 148.79 Net fixed Assets 1205.64 1230.77
Reserves & 4256.52 5099.82 Investments 5273.83 6865.43
Free reserves 4233.28 5076.58 Deferred tax 9.20 6.43
Share premium 87.07 285.78 Inventories 224.70 274.47
Other free reserves 4146.21 4790.80 Receivables 3116.05 5799.11
Specific reserves 23.24 23.24 Sundry debtors 176.97 302.54
Borrowings 1229.17 1469.44 Debtors exceeding 0.20 1.13
6 months
Deferred tax 139.90 87.58 Advances/loans to 62.29 33.66
liabilities corporate bodies
Current liabilities 4284.64 7773.20 Group/associate 34.44 19.41
& provisions companies
Sundry Creditors 833.86 1404.40 Other companies 27.85 14.25
Other current 1169.04 3674.37 Advance payment 1823.60 1869.40
liabilities of tax
Provisions 2281.74 2694.43 Other receivables 1053.19 3593.51
Cash & Bank 266.88 476.48
Intangible/DRE 4.57 27.32
not written off

Total Liabilities 10100.87 14680.01 Total Assets 10100.87 14680.01

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Accounting for Managers

Notwithstanding its excellent financial performance in the years following its major
strategic shift, the management of the firm believes in the philosophy that the quest for
perfection is eternal.

To preclude the complacency from setting in, the management not only sets higher
standards it also continuously monitors its performance and benchmarks with the
industry performance in general and their closest competitors’ results in particular.

1. Is the profitability performance of the firm satisfactory? If not, how can it be

2. How attractive is the firm from the short-term and long-term lenders,
perspective? Does the firm appear to be the favorite destination in the
automobile sector (two-wheelers and three-wheelers segment) for the lenders?

3. How efficient is the firm been in utilizing the resources at its disposal? How do
you think the company can improve upon its efficiency?

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Accounting for Managers

Assignment ‘C’
State whether the following are ‘true’ or ‘false’:

1. Accounting is a language of business.

2. Accounting is a service function.

3. Accounting records only those transactions and events which are financial


4. Drawings reduce capital.

5. Capital is increased by profit and decreased by losses.

6. The system of recording transaction on the basis of their two old aspects is

called double entry system.

7. Purchases made from B for cash should be debited to B.

8. Earnings of revenue means increase in Cash/Bank balance

9. The balance of an account is always known by the side which is shorter.

10. The return of goods by a customer should be debited to Returns Inwards


11. Goods bought for resale are referred to as Stocks

12. If the business has any liability, the proprietor’s capital must be more than

the total assets.

13. Withdrawal of money by the owner is an expense for the business.

14. Ledger is called the book of final entry.

15. Cash book is used to record all receipts and payments of cash.

16. Sales book is used to record all credit sales.

17. The journal is not a book of original entry.

18. Goodwill is an intangible asset.

19. Salaries & Wages appearing in the trial balance are shown on the liabilities

side of the balance sheet.

20. The profit & loss account is one of the financial statements.

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Accounting for Managers

21. Share having preferential right as to dividend and repayment of capital

are termed as equity share capital.

22. Shares which are not preference shares are called equity shares.

23. The amount of share premium received by the company is shown under

the heading reserves & surplus in the company’s balance sheet.

24. Debenture holders are not the member of the company.

25. There are no legal restrictions, similar to shares, for issue of debentures at


26. Fixed cost per unit remains constant.

27. Direct cost is that cost which can not be easily allocated to cost units.

28. Selling overheads form a part of cost of production.

29. Manufacturing and administrative overheads are different.

30. Total fixed cost remains unaffected by the change in volume of output.

31. Variable cost per unit remains fixed.

32. In chemical industries unit costing is used.

33. The output of a process is transferred to next process.

34. Good units bear the abnormal loss arising in the process costing.

35. Excess of pre-estimated loss over actual loss is known as abnormal loss.

36. Marginal costing is a method of ascertaining cost.

37. A firm earns no profit or incurs no loss at BEP.

38. Margin of Safety implies ‘Break Even Point’.

39. In marginal costing, stock is valued at fixed costs.

40. Sales below BEP mean profit.

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