Accounting For Managers ADL-03-Ver2

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.

Answer:

Journal entries in the : BOOKS OF INDER

Debit Credit
Yr & date Particulars
Rs. Rs.
Bills receivable a/c 9000
April 1 To Mohan a/c 9000
(being three month bill drawn on Mohan & accounted)

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Question 2. Balance Sheet of ASD Co. Ltd. At the end of the 2005 and 2006 are given
below:

Liabilities 2005 2006 Assets 2005 2206

Share Capital 1,00,000 1,50,000 Freehold Land 1,00,000 1,00,000
Share Premium --- 5,000 Plant at Cost 1,04,000 1,00,000
General Reserve 50,000 60,000 Furniture at Cost 7,000 9,000
Profit & Loss A/C 10,000 17,000 Investments at cost 60,000 80,000
12% Debenture 70,000 50,000 Debtors 30,000 70,000
Provision for Dep. On Plant 50,000 56,000 Stock 60,000 65,000
Provision for Dep. On Furniture 5,000 6,000 Cash 30,000 45,000
Provision for Taxation 20,000 30,000
S. Creditors 86,000 95,000
TOTAL 3,91,000 4,69,000 3,91,000 4,69,000

A Plant purchased for Rs. 4,000 (Depriciation Rs 2,000) was sold for cash for Rs800 on
30th September, 2006. On 30, June 2006, an item of furniture was purchased for Rs.
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 management”. Explain.

Question 5. On 31st March 2006 the following Trail Balance has been extracted from the
books o f a Rahul.

Dr. Balance Cr. Balance

Drawings account 3000 Rahul's Capital A/c 30000
Sundry Debtors 19100 Sundry Debtors 8401
Interest on Loan 200 5% Loan on Mortgage(01.04.05) 8500
Cash in Hand 3050 Bad Debts Provision 710
Opening Stock (01.04.05) 5839 Sales 111243
Moto r Vehicles 9000 Purchase Returns 1346
Cash at Bank 4555 Discounts 440
Land & Building 12000 Bills Payable 2714
Bad Debts 625 Rent Received 250
Purchases 67458
Sales Return 7821
Carriage outward 1404
Advertisement 2264
General expenses 4489
Bills Recoverable 6882
Carriage Inward 3929
Establishment 8097
Rates, Taxes & Ins. 3891

Prepare Trading Profit & Loss account for the year end ing 31.03.2006 and a Balance
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 commission.

Assignment - B
Case Study
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:

Particulars Apples Lemons Oranges Peaches

Selling Price per Box (Rs.) 15 15 30 45
Seaso n's yield in boxes per acre 500 150 100 200
Costs: Material per Acre Rs. 270 Rs. 105 Rs. 90 Rs. 150
Labour Cost: Growing per Acre Rs. 300 Rs. 225 Rs. 150 Rs. 195
Picking and packing cost per box Rs. 1.50 Rs. 1.50 Rs. 3 Rs. 4.50
Transport cost per box Rs 3 Rs 3 Rs 1.50 Rs 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 Concept of Accounting:

3. In case of Debt becoming bad, the amount 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 Commission.

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.