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INSTITUTE OF MANAGEMENT TECHNOLOGY

CENTRE FOR DISTANCE LEARNING


GHAZIABAD

End-Term Examinations June 2011


Subject Code : IMT-57 Subject Name: Financial Accounting
Notes:

Time Allowed : 3 Hours Max. Marks : 70

(a) Answer any FOUR questions from SECTION-A and CASE STUDY as given in SECTION-B. Each Question (SECTION-A) carries 14 MARKS and (SECTION-B) Case Study carries 14 MARKS. (b) For students enrolled before January 2008, the Question Paper would be treated for 50 marks instead of 70 marks. (c) No doubts/clarifications shall be entertained. In case of doubts/clarifications, make reasonable assumptions and proceed.

SECTION-A Q1.

MARKS : 56

Q2.

(a) Define Accounting. How does it differ from book-keeping? Who are the persons who should be interested in accounting information? (b) State under what heading (Personal, Real or Nominal) would you classify each of the following accounts: (i) Rent Account (ii) Bank Account (iii) Salary Prepaid Account (iv) Proprietors Account (v) Furniture Account (vi) Salary Outstanding Account (vii) Bad Debts Account (viii) Goodwill Account (ix) Patents Account (x) Insurance Unexpired Account (c) Pick up the correct answer: (i) The amount brought in by the proprietor in the business is credited to: (1) Capital Account (2) Cash Account (3) Drawing Account (ii) Sales made to Dhoni for cash is debited to: (1) Sales Account (2) Cash Account (3) Dhoni (iii) The amount of salary paid to Sachin is credited to: (1) Cash Account (2) Salaries Account (3) Sachin Account (iv) The return of goods by a customer is debited to: (1) Goods Account (2) Customers Account (3) Sales Return Account (v) The rent paid to landlord is credited to: (1) Landlord Account (2) Rent Account (3) Cash Account (vi) In case of a debt becoming bad, the amount should be credited to: (1)Debtors Account (2) Sales Account (3) Bad Debt Account (vii) The cash discount allowed to a debtor is credited to: (1) Sales Account (2) Customers Account (3) Discount Account Journalise the following transactions (with narrations) for the month of March, 2011: April 2 Started business with Rs. 100,000: paid into Bank Rs. 50,000. 3 Bought furniture for cash, Rs. 5,000. 5 Bought goods for Rs. 30,000. 6 Sold goods for cash, Rs. 6,000. 10 Bought typewriters for Rs.18,000 from Remington on credit. 13 Sold goods to M/s Anand & Sons for Rs. 10,000 on credit. 15 Bought goods from M/s Mahindra & Co. for Rs. 20,000 on credit. 18 Paid Rs. 2,400 for telephone connection. 22 Paid Rs. 1,000 for advertisement. 26 Sold goods to M/s Lal & Co. for Rs. 8,000 for cash. 30 Paid salaries Rs. 12,000. 30 Paid rent Rs. 5,000. Page 1 of 4 IMT-57

ETE-June 2011

30 30

Withdrew from bank RS. 8,000 for private use. Bought one delivery van for Rs. 300,000 from Tata Motors Co., payment to be made by monthly instalments of Rs.20,000 each together with interest at 18%. First instalment was paid by cheque.

Q3. Q4.

From the Journal Entries in Q. No. 2 above, prepare the ledgers and also the Trial Balance. (a) Answer the following briefly: (i) A Cash Book is called a Journal as well as a Ledger. Why? (ii) What are the two things depicted on the right and left side of the Balance Sheet? (iii) What are assets? (iv) What do you understand by intangible assets? (v) What are outstanding expenses? (vi) What is the need for a worksheet? th (b) From the following particulars prepare a Trial balance as on 30 September, 2010: Stock 1st October 2009 Rs. 1380, Debtors Rs.2960, Creditors Rs. 1580, Capital Account 1st Oct 2009 Rs.4100, Drawings Rs 1200, Bills Receivable Rs. 770, Bad Debt written off Rs. 190, Provision for Bad and Doubtful Debts Rs.160, Bills Payable Rs. 470, Wages & Salaries Rs. 1920, Purchases Rs. 6580, Sales Rs. 10670, Bank Rs. 580, Cash Rs. 40, Rent, Rates & Insurance Rs.330, Sales Returns Rs. 410, Purchase Returns Rs. 280, Fixtures & Fittings Rs. 550, General Expenses Rs. 200, Discount allowed Rs. 520, Discount received Rs. 370. The following figures relate to M/S Mohan Meakin Brewaries Ltd of Mohan Nagar, Ghaziabad for the year st ending 31 March 2011. (i) Arrange the figures in a form suitable for analysis. (ii) Calculate the following ratios: (a) Gross Profit ratio (b) Operating Profit ratio (c) Net Profit ratio (d) Operating ratio (e) Stock Turnover ratio Particulars Sales Opening Stock Purchases Closing Stock Sales Return Administrative Expenses: Salaries Rent Stationery Depreciation Other charges Provision for taxation Selling & Distribution Expenses: Salaries Advertising Travelling Non Operating Income: Dividend on Shares Profit on sale of Shares Non Operating Expenses: Loss on sale of fixed assets Amount (Rs) 520,000 76,250 322,250 98,500 20,000 27,000 2,700 2,500 9,300 16,500 4,000 15,300 4,700 2,000 9,000 3,000 4,000

Q5.

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Q6.

(a) From the following information, calculate: (i) Current ratio (ii) Net profit ratio (iii) Debt-equity ratio Rs. 000 Net profit 1,200 Bills receivable 40 Debtors 160 Stock 195 Cash 120 Creditors 209 Bills Payable 47 Debentures 5,000 Long-term bank loan 1,000 Net sales 28,000 Share capital 8,000 Reserves and surplus 2,000 Notes: Show working notes. (b) Compute Return on Capital Employed from the following details: Rs. In laks Net profit after tax 43 Rate of income tax, 50% 14% Debentures 100 Share capital 250 Profit and loss account 158 Loss on issue of debentures 8 Notes: Show working notes on calculation of (i) profit before interest and tax (ii) Shareholders fund, and (iii) Long term debts.

Q7.

(a) Define Financial Reporting. State its objective. (b) Explain the concept of Corporate Governance. State the main provisions, of Clause 49 of the Listing Agreement prescribed by SEBI, relating to corporate governance.

SECTION-B

(Case Study)

MARKS : 14

From the following Trial Balance prepare (1) the Manufacturing Account, (2) the Trading Account, (3) the Profit and Loss Account of Mr. Burke for the year ended March, 20011 and (4) the Balance Sheet as on March 31, 2011: Debit (Rs) Mr. Burkes Capital Account Mr. Burkes Drawing Account Loan from Mrs Burke Sundry Creditors Cash in hand Cash at bank Sundry Debtors Provision for Bad Debts Patents Plant and Machinery Factory Land and Buildings ETE-June 2011 Page 3 of 4 2,000 1,20,000 1,06,000 IMT-57 250 4,000 40,500 1,000 16,400 14,000 45,000 Credit (Rs) 2,31,000

Purchases of Raw Materials Raw Materials: 1 April 2010 Work-in- Progress: 1 April 2010 Finished Stock: 1 April 2010 Carriage Inwards Wages Salary to Works Manager Sundry Factory Expenses Factory Light and Power Royalties paid Sales (less returns) Advertising Office Rent and Insurance Printing and Stationery Miscellaneous Office Expenses Carriage Outwards Discounts Bad Debts Office Salaries Total Additional information: st 1. The Stocks as on 31 March 2011 were as follows: Raw Materials Rs. 14,000 Work-in-Progress Rs. 14,500 Finished Stock Rs. 58,000 2. The Outstanding Expenses were: Factory Light and Power Wages Office Salaries 3. Provide: 5% for Doubtful Debts, and 5% for Discount on Debtors. 4. Depreciate: Buildings 2% Plant and Machineries 7.5% Patents 10% Rs.250 Rs.2,600 Rs. 3,000
st st st

1,35,000 13,500 12,000 48,000 1,100 27,000 15,600 3,400 2,500 2,985 2,98,485 3,000 4,800 1,000 5,800 600 1,400 750 23,000 5,90,585 5,90,585 1,100

4. Allow: (i) 10% interest on the capital provided by Mr. Burke, and (ii) Also allow a salary of Rs. 12,000 to Mr. Burke 5. The Salary of Mr. Burke is to be allocated between factory and office expenses in the ratio of 2:1; that is, rd rd 2/3 for factory expenses and 1/3 for office expenses.

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