MI 7 ,

M2C -T.2
(FDTNMDPBA)

Serial No.

COMMERCE AND ACCOUNTANCY PaperI

(Time Allowed : Three Hours) (Maximum Marks : 300

INSTRUCTIONS Each question is printed both in Hindi and in English. Answers must be written in the medium specified in the Admission Certificate issued to you, which must be stated clearly on the cover of the answer-book in the space provided for the purpose. No marks will be given for the answers written in a medium other than that specified in the Admission Certificate. Candidates should attempt Question Nos. 1 and 5 which are compulsory, and any three of the remaining questions selecting at least one question from each Section. Assume suitable data if considered necessary and indicate the same clearly. The number of marks carried by each question is indicated at the end of the question. Important : Whenever a Question is being attempted, all its parts/sub-parts must be attempted contiguously. This means that before moving on to the next Question to be attempted, candidates must finish attempting all parts/sub-parts of the previous Question attempted. This is to be strictly followed. Pages left blank in the answer-book are to be clearly struck out in ink. Any answers that follow pages left blank may not be given credit.

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SECTIONA 1. Answer the following in about 150 words each :12x5=60 (a) Discuss how the money value of non-monetary consideration is determined for purpose of Service Tax. (b) What is revaluation reserve and how it is created ? Discuss also the merits and demerits of such action. (c) Discuss contingent liabilities with examples. Where would these items feature in the financial statements of a firm ? What happens when bills are discounted by a firm ? Show the journal entries for such transactions. (d) Discuss how the following streams of revenues are recognised in an IT service company : (i) Software services

(ii) Time and materials contracts (iii) Sale of user's licenses. (e) Explain the financial parameters to be used to evaluate post-merger performance.

(Contd.)

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(Contd.)

2. (a) Following are the balances and other accounting information of SME and Co. as on 31st March 2012 :Particulars Power and Fuel Sundry Creditors Cash in hand Material Purchases Misc. expenses Sundry debtors Drawings Salaries Stores and spares Other consumables Furniture and Fixtures (at depreciated value as on 1-4-2011) Freehold land Opening Stock Carriage paid on sales Bank balance Amount (in Rs.) 74,626 1,13,400 9,720 7,22,025 24,000 2,61,000 94,410 2,23,972 8,577 1,937

30,000 1,50,000 1,03,680 57,600 47,340

(Contd.)

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(Contd.)

Particulars Sales Materials returned Wages Building materials Plant insurance Capital Closing Stock Plant & Machinery (at depreciated value as on 1-4-2011) Buildings (at depreciated value as on 1-4-2011) Plant repairs Carriage on purchases Patents (at depreciated value as on 1-4-2011) Sales returns Other Information :-

Amount (in Rs.) 17,78,040 9,000 1,88,640 76,028 10,800 12,78,000 1,22,400

3,60,000 5,40,000 10,125 36,720 1,35,000 12,240

(1) Rates of depreciation on Plant and Machinery, Patents, Furniture and Fixtures and Buildings are 10%, 20%, 10% and 2% respectively.
6 (Contd.)

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17,78,040 9,000 1,88,640 76,028 10,800 12,78,000

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1,22,400

3,60,000

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36,720

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1,35,000 12,240

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(1)

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(Contd.)

(2) Unexpired insurance : Rs. 3,060. (3) Salaries accrued but unpaid : Rs. 7,000. (4) 5% of Debtors may not pay. (5) Wages include Rs. 36,000 spent on construction of an annexe to Buildings completed on 30th June 2011. Prepare a Trial Balance as on 31st March 2012 and draw up a Manufacturing and Profit and Loss Account for the year ended 31st March 40 2012. (b) M/s Anant Kumar are a registered dealer in West Bengal. During the year ending on 31st March 2012 the firm's local purchases from registered dealers of West Bengal amounted to Rs. 12 lakh. The firm had also made purchases from local unregistered dealers amounting to Rs. 2 lakh. During the period the firm's sales within West Bengal amounted to Rs. 8 lakh and outside West Bengal Rs. 1.50 lakh. Applicable rates for VAT (both for purchases and sales) and CST are 13.5% and 2% respectively. Pass necessary journal entries to record the 20 above transactions.

(Contd.)

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(Contd.)

3. (a) (i) PET Limited manufactures household foodgrade containers of different sizes. It uses a special type of polyethylene sheet for making the body of the containers. The sheets are purchased in large sizes. A particular size of container requires 60 square inches of the polyethylene sheet. The cost of 1 square inch is Re. 0.50. While running a batch of 10,000 containers it is found that 6,50,000 square inches of sheets were consumed at Re. 0.60 per square inch. Show detailed calculations of (a) Total variance, (b) Price variance, (c) Quantity variance, (d) Pure price variance, and (e) 25 Joint Price-quantity variance. (ii) On the basis of your findings prepare a report for top management who shall soon be deciding on bonuses for operating executives. Your report must contain evaluation of each 15 variance. (b) "To arrive at a comprehensive opinion, the auditor reviews evidence that may be classified into three major groups." What are these groups and how do you relate the components of the groups to 20 the purposes of the audit 7

10

(Contd.)

) ERI 1-1II7 3rTtrIEC 3. (31) ( ) PETiWilraIS Q f4Hful *tor ft I as ft- * arra-Tilt fsrm)' 0 ITC ftrkIsi art fiR 41- 119. r tr f irrci arrt-R 4 mot g i *ilk 60 -cr 4)Gr v*-R * i g i cf, 14, et ter EkTip-r* trrreu tr * 31ra1I*ffr --R 1 kwripitd( tI5( trth g 1 1 it I 10,000 f'sQ * Mir child 0.50 Mir grIgi TfIrT i 0.60 -Lrr Thri Tzrzfrrr f+ 1 6,50,000 '1 :PpIrItITT Inn I (30 11,c1 TrIrrm *--k* fce, (4) m errru rdIg9, (kr) 4112ii Ugr (g) (Tcith *FM. 25 f gl sirck zr( k;*3f' as d (ii) 31(g 31-trt -9-rfkR4 Iq) Virg aart *T: 4 4 .3=-4 gtsl-g FI)) 41 Tr gt tritrff9- mftrs-FW * F*Tf--kur *- -Trri 1 kutit* stirrer ft41 wt-4* *c 15 ch) kikrreg- *(4 art ?t-f1 art# t . d (g) "witch TrZi ER z5,4 3i*ert; 3-ff krrg,t i *t -P4kg cfi-r WIT EV 4 f431-7 - 14iirr r Hchn r fl ft Wikir cil(c4 ft 1" 4 4kKg 4441 ft 3rfit 31T4 31471 -3%74 4 kr4.v'f wrIft 4- lby c!-, ( o (rt. g ? 20
II

(Contd.)

4. (a) (i) A HUF consists of Mr. A (Karta), Mrs. A and a minor child. On 18th December 2011, the Karta sets apart Rs. 5 lakh out of the family fund for maintenance of his wife. Mrs. A deposits the money in her name with a bank at an interest rate of 9% p.a. Discuss whether the interest income will be clubbed with the income of HUF or 15 Mr. A or none. Justify your answer. (ii) Mrs. X, who is an Arts graduate, holds 2,200 out of 10,000 equity shares of a private limited company in which her husband Mr. Y, who is also an Arts graduate, is working as Chief Accountant at an annual salary of Rs. 12 lakh. The ITO claims that the salary income of Mr. Y shall be clubbed together with the income of Mrs. X. Is the ITO correct? 15 Justify your answer. (b) X YZ Ltd. offered for subscription 1 lakh shares of Rs. 10 each at a discount of Re. 1 per share. The subscription money shall be payable as follows :Application Allotment First and Final call
12

: Rs. 2.50 : Rs. 4.00 : Rs. 2.50

(Contd.)

4. (3T) (i)

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(Contd.)

13

The issue was fully subscribed. The entire amount of allotment money was received. When the company made the first and final call, amount from 100 shares was not received. Despite notices and reminders under Articles of Association no amount was forthcoming from the allottees. The company finally decided to forfeit these shares. Subsequently, the company reissued these shares at Rs. 9 per share, fully paid. Pass necessary journal entries to record the above transactions. Show also an extract of 30 Balance Sheet. SECTIONB 5. Answer the following in about 150 words each :12x5=60 (a) What is contingent capital '? Discuss the various instruments used to generate it. (b) Define and distinguish between gross working capital and net working capital. Can a firm survive with zero net working capital ? (c) Discuss in brief the techniques of assets-liability management in a commercial bank. (d) Discuss Sharpe's ratio and Treynor's ratio for evaluation of risk-return performance of Mutual Fund's portfolio.
14 (Contd.)

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(Contd.)

(e) Explain the effect of absorption costing and marginal costing on net profit of a business firm. 6. (a) A company's annual demand of materials is 10,000 units. Presently, the company is procuring these materials at Rs. 10 per unit. A group of suppliers are now willing to offer the following quantity discounts : Order size 1-999 units 1,000 units and above Discount No discount 10%

Ordering cost of the company is Rs. 50 per order and the holding cost is 20% p.a. Find out the particular order size where the 30 total cost is at its lowest. (b) Why do companies resort to 'managing earnings' ? Illustrate the techniques employed for 30 this purpose. 7. (a) Illustrate Operating Leverage and Financial Leverage. What insights you get from these two 30 leverages ? What are their limitations ?

16

(Contd.)

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(Contd.)

(b) "Higher capital requirements might induce banks to seek higher returns in areas that are high risk or outside their core business". Do you agree with this observation ? Justify your answer with 30 suitable examples. 8. (a) From the information given below you are required to value the business under Residual Operating Income method : (Rupees in lakh) Particulars Actual 2012 Net Operating assets Operating income 410 449 480 514 550 2724 2915 3119 3337 3570 Forecasts 2013 2014 2015 2016

Required return of the business is 10.10%. Net operating assets are expected to grow at 7% p.a. As on date the business has net outside 40 liabilities of Rs. 1728 lakh. (b) Critically examine with illustrations the role of Credit Rating Agencies with particular reference to their ownership structure and corporate 20 governance.

18

(Contd.)

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3337 514

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19

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Note : English version of the Instructions is printed on the front cover of this question paper

20