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MBA I Semester I

Accounting for Managers Sample Paper

Time: Total Marks: 70
[Note: The Question Paper has five Questions of 14 marks each. It is compulsory to attempt
all the questions.]

Q.1. Answer all the following multiple choice questions: (14 marks)

1. In general, revenue is recognized when the earnings process is virtually complete and:

A Collection of the sales price is reasonably assured.
B A purchase order is received.
C Cash is collected.
D Production is completed.

2. The primary objective of the matching principle is to:
A Provide timely information to external decision-makers.
B Provide full disclosure.
C Recognize expenses in the same period as the related revenue.
D All of the above.
3.3. In last year the current ratio was 3:1 and quick ratio was 2:1.Presently current ratio
is 3:1 but quick ratio is 1:1.This indicates comparably

4.A high liquidity
B higher stock
C lower stock
D low liquidity

4. Debt Equity Ratio is 3:1,the amount of total assets Rs.20 lac,current ratio is 1.5:1
and owned funds Rs.3 lac.What is the amount of current asset?
A Rs.5 lac
B Rs.3 lac
C Rs.12 lac
D none of the above.

5. When revenue is greater than expenses, you have a ___?
A Net Income
B Contributed Capital
C Net Loss
D Historical Valuation

6. Which financial statement shows the results of the operating activities of a firm for a
specific period of time?
A Income Statement
B Balance Sheet
C Trial Balance sheet
D None of the above

7. Which is an example of an intangible asset?
A Cash

8. Earnings that a firm realizes in excess of dividends are called what?
A Revenue
B Retained Earnings
C Expenses
D Income Statement

9. A ____ lists each of the accounts in the general ledger with its balance as of a particular
date. What is it?

A Statement of retained earnings
B General Journal
C Trial Balance
D Balance Sheet

10. The main objective of book keeping is to
A Perform special management anlaysis
B Properly record and classify transactions
C Making sure that the books balance
D All are correct

11. What type of account is accounts payable or amounts owed to creditors
A Owners capital
B Liability
C Asset
D Revenue

12. An asset is
A Owners claims to the good stuff (property) that a business owns
B All the good stuff (property) that a business owns
C Creditors claims to the good stuff (property) that a business owns
D None of the listed answers are correct

13. A sale made to a customer with credit terms is recorded by
A Debiting purchases and crediting accounts payable
B None of the listed
C Debit cash and credit sales
D Debit accounts receivable and credit sales

14. Provision is
A An appropriation out of profits
B A change against the profit
C Both are correct
D None of the above


Q.2.(A) Explain the following terms: 7 marks
2. SLM method
3. Depreciation
4. Contingent liabilities
5. Intangible assets
6. Fund flow analysis

Q.2. (B) Describe the progress made by India so far in the field of human resource (7)
Q.2 (B) Distinguish between periodic and perpetual method of inventory. (7)

Q.3. (A) Explain how the changes to IFRS would affect the depreciation of (7)
revalued assets
(B) Manish Company sold 20,000 crates of a soft drink at Rs. 120 during (7)
the year. Its beginning inventory consisted of 1,000 crates at Rs. 70 per crate. The following
purchases were made during the year; 5,000 crates @Rs. 75; 8,000 Crates @ Rs. 76; 9,000
crates @ Rs. 80. Operating expenses were Rs. 3,65,000. Income tax is payable at 30 per cent.
Calculate Net Profit using the FIFO and LIFO methods


Q.3. (A) Explain the meaning, merits, demerits and suitability of Written Down Value (7)
(B) Company's summary income statement for the most recent four (7)
years is presented below.
a. Prepare an analysis showing trend percentages for the four-year period
using 2005 as the base year.
b. What information is available from this trend analysis?

2008 2007 2006 2005

Net sales 78,100 75,000 67,000 55,000
Cost of goods sold 33,200 32,000 30,000 20,000
Gross profit 44,900 43,000 37,000 35,000
Operating expenses 25,700 22,000 19,000 14,000
Net income 19,200 21,000 18,000 21,000

Q.4. (A) Explain AS-1 Disclosure of Accounting policies (7 marks)
(B) (i) On January 1, 2010, a company acquired a machine costing Rs.50000. (7
The estimated life is 5 years and the salvage value is Rs. 5000. Determine the
depreciation expense for the first 2 years using SLM and also SYD method.
(ii) The cost of a machine is Rs. 20000. Its scrap value is Rs. 4000, and the estimated
total usage is 8000 hours. What is the depreciation per hour?
(iii) The cost of acquiring a machine is Rs. 1,00,000. Its scrap value is Rs. 5,000 and its
useful life is 11 years. Find the percentage of depreciation as per the WDV method.
What will be the WDV for the fourth year?
Q.4. (A) Explain fund flow statement and the difference between fund flow statement (7
and profit and loss account.
(B) Ahuja company bought machinery on 1-april-2011 for Rs 6,00,000. The machinery (7
was expected to have a useful life of 10 years. The company followed the straight line
depreciation method. In 2016 the company engaged a firm of professional valuers to
determine the current value of the machinery. The valuers reported that on 1-Apr-2016 similar
machinery with an estimated useful life of 10 years would cost 1,00,000 Rs. The companys
year end is 31-March.
1) Prepare a journal entry to record the revaluation
2) Compute the depreciaton expense for the year ended 31
March 2017

Q.5. Case Study Analysis: (14 marks)

Zumo Wang came to Northern Ireland from China six years ago to study at university
for a degree in Computing and Electronics. After graduating he worked as an
information technology manager for a computer company and saved his wages to
build up the capital needed to invest in his own business. Zumos friend Charles Wu,
had recently put his computing consultancy business up for sale PC:IT. PC:IT was
set up ten years ago, and seemed quite successful. The premises were located on a
busy street in the town centre of Enniskillen, and operated a collect and return
service, enabling computers to be serviced without the customer having to leave their
Upon purchase of the business from Charles, Zumo acquired a number of fixed assets
for use in the business. These included a personal computer, a laptop computer and
various machines facilitating welding and electronic engineering to be carried out on
computer circuit boards, rebuilding computers and other assembly activities.
The main fixed assets included:
1 personal computer valued at Rs 8000; 1 laptop computer valued at Rs 5000;
welding machine valued at Rs. 2000 and engineering/assembly machinery valued at
Rs.10000. The two computers have a useful economic life of 4 years each, over
which they would be depreciated. The remaining fixed assets have a useful economic
life of 5 years each. The deprecation is calculated using the straight line method in all
cases. Zumo is convinced that the purchase of PC:IT will be a worthwhile
investment, although he does
not see the need to depreciate the fixed assets, due to the specialised nature of the

1. Calculate for each type of asset, the annual depreciation charges which would be
charged to the profit and loss account. ( 7 marks)
2. Calculate for each type of asset, the cumulative depreciation charges which would
apply in the final year of the assets useful economic life, which would be shown in
the balance sheet. ( 7 marks)

Q.5 . Case Study Analysis: (14 marks )

Syndicate Bank is an established bank owned by the Government of India. In 1992, there was
a major financial scandal that resulted in losses running to several thousands of millions of
rupees involving a number of Indian and foreign banks. The scandal related to a, among
others, transactions in government securities entered into between banks and stock brokers. A
Joint Parliamentary Committee was set up to enquire into the scandal. Extracts from a report
quoting extensively from an internal document of the Reserve Bank of India (RBI) that
appeared in a leading newspaper are given below:
The Kurias report of 1986 pinpoints the dealings of Andhra Bank and Syndicate Bank
with broking firms as prime instances of misuse of bankers receipts (BR) and collusion with
brokers. Syndicate Bank, in fact, used V.B.Desai, a broker firm, for window-dressing of
profits in 1985, according to the document. The banks also helped the brokers get exemption
from tax deduction at source for interest on government securities, which was available only
for public sector banks.
The RBI report records how Syndicate Bank used Andhra Bank and V.B.Desai to inflate its
profits for 1985. On December 30, 1985, Syndicate Bank sold government securities to
Andhra Bank (on behalf of V.B.Desai) for Rs 150 million at the rate of Rs 97.75 per 100 and
rebought the same at Rs 91.30 per 100, making a profit of Rs 9.675 million on the balance
sheet date. (Those days the banks financial year was January 1 to December 31). The deal was
reversed on January 6, 1986 and the bank suffered a loss the same amount.
The consideration for the broking firm undertaking the loss at the end of December 1985 and
its reversal on Janurary 6, 1986 may be that the financial year of the broker coincides with
Diwali. Hence from the accounting point of view the firm has no problem as the loss is not
reflected in the balance sheet.
The report also noted. The deal was done with V.B.Desai through Andhra Bank apparently
giving the impression that the bank suffered a loss. However, the books of Andhra Bank
revealed that the broker firm had incurred the loss which was reversed by Syndicate Bank on
January 6, 1986.
The report went on to say: It is interesting to note the comparative figures of the published
profit of Syndicate Bank at the end of 1984 and 1985
Year Published profit
1984 Rs 50,777,180
1985 Rs 59, 860, 415

Questions :

Q.1. Prepare journal entries that syndicate bank would have recorded on dec 30,1985 and on
jan 6 1986. Explain the effect of the transaction on the net profit of the bank for 1985 and
1986 ( 7 marks)
Q.2. If the syndicate bank had not entered into the transaction with V.B.Desai what would
have been its net profit for 1985? Comment on the observation in the Reserve Bank document:
had this income not been booked by the bank, its published profit for 1985 would not have
registered any significant increase. ( 7 marks)

MBA I Semester I

Economics for Managers - Sample Paper

Time: Total Marks: 70
[Note: The Question Paper has five Questions of 14 marks each. It is compulsory to attempt all
the questions.]

Q.1. Answer all the following multiple choice questions: (14 marks)

1. The quantity that a consumer plans to buy depends upon all of the following EXCEPT
i. Income of the Consumer
ii. Price of the Product
iii. Future Expectation of Price
iv. Technology
2. Suppose wage of labour of a firm rise. What would happen to the equilibrium price and
equilibrium quantity for the firms output?
i. Price Increases; Quantity Decreases
ii. Price Decreases; Quantity Increases
iii. Price Decreases; Quantity Increases
iv. Price Increases; Quantity Increases
3. A good or service for which an increase in income causes customers to demand more of
the good, holding all other variables in the generalised function constant are called
i. Inferior Goods
ii. Normal Goods
iii. Substitute
iv. Complements
4. A Perfectly Competitive firm can sell all the outputs it wants to:
i. By cutting down supply of output
ii. By lowering the price it charges for each additional unit produced
iii. By lowering its cost of production
iv. Without lowering the price
5. A profit maximizing monopolist produces a quantity corresponding to:
i. MR=MC
ii. P=MC
iii. P=MR
iv. P=AR=MR=MC
6. Real GDP is measured
i. At constant Price
ii. At Current Price
iii. At Market Price
iv. At Wholesale Price
7. Consumer Price Index differs from GDP deflator for
i. CPI takes account of all goods and services purchased by consumers
whereas GDP deflator considers domestically produced goods only
ii. CPI is calculated at market price whereas GDP deflator is calculated at
factor cost
iii. CPI shows trends in inflation whereas GDP deflator shows trend in
iv. CPI is calculated by asking consumers preference whereas GDP
deflator is calculated by asking Producers preference
8. Following are the tools used by RBI for money control EXCEPT
i. Open Market Operations
ii. Reserve requirement
iii. The Discount Rate
iv. Deficit finance
9. Many years ago Janaki paid Rs. 500 to put together record collection of Nazia Hussein.
Today she sold her collection at Sunday Gujari Market for Rs. 100. How does this sale affect
current GDP?
10. Why per capita income goes up if a chicken a born whereas it falls if a child is born?
11. Is the slope of the demand curve for monopolistic competition is flatter than that of a
monopoly firm?
12. When an economy is experiencing both stagnation and inflation, what is such an event
called? Show it diagrammatically.
13. Explain the concept of Sunk Cost.
14. Explain the difference between nominal and real exchange rate.

Q.2 (a) Explain the Following with Appropriate Example (7 Marks)

1. Stagflation (3 Marks)
2. Dumping(2 Marks)
3. Natural Monopoly(2 Marks)

Q.2 (b) Define the price elasticity of demand. Explain important determinant of price elasticity
of demand. If demand is unit elastic, how will a decline in price affect total revenue? (7 Marks)

Q.2 (b) How and why does a firms average-total-cost curve differ in the short run and
in the long run? Explain economies of scale and diseconomies of scale.(7 Marks)

Q.3 (a) What is meant by Perfect Competition? Under what conditions will a firm shut down
temporarily? Explain with help of appropriate diagram. (7 Marks)
Q.3 (b)Consider the following table of long-run total cost for three different firms:
Quantity 1 2 3 4 5 6 7
Firm A 60 70 80 90 100 110 120
Firm B 11 24 39 56 75 96 119
Firm C 21 34 49 66 85 106 129
Does each of these firms experience economies of scale or diseconomies of scale?

Q.3 (a)What is the prisoners dilemma, and what does it have to do with oligopoly? (7 Marks)
Q.3 (b)Suppose there is a sudden increase in preference for chocolates. But the cost of
production rises due to rise in the price of milk. Use demand and supply model, to determine
what happens to the equilibrium price and quantity in this case. (7Marks)

Q.4 (a)Draw a circular flow of income diagram representing the interaction between
households and firms in a simple economy. Explain briefly various parts of the diagram.
(7 Marks)
Q.4 (b) The data on tea demand and tea price in India for two years were as follows:

Year Demand (000 tonnes) Price (1993-94=100)
2001-02 669 128.1
2007-08 871 130.9

The Comment of a prominent politician on this data is as follows:
This clearly shows that the law of demand is not operating in the Indian Sugar market. The
price went up yet consumers bought more. We can not rely on outdated economic concepts from
the previous century for an analysis of current problems.

Do you agree with this observation? How would you interpret the above given data?

Q. 4 (a)How the Phillips curve is related to the model of aggregate demand and
aggregate supply(7 Marks)
Q.4 (b)In the year 2005, the economy produces 100 liters of milk that sell for Rs. 18 each. In the
year 2006, the economy the economy produces 200 liters of milk that sell for Rs. 20 each.
Calculate nominal GDP, real GDP and the GDP deflator for each year. (Use 2005 as the base
year) By what percentage does each of these three statistics rise from one year to the next?

Q.5 Case Study (14 Marks)
MBA syllabus of Gujarat Technological University recommends two books for Managerial
Economics studies. These are the books by Gregory Mankiw and Samuelson &Nordhaus.
Mankiws book is priced at Rs. 140 while Samuelson &Nordhauss book costs Rs. 115. Both the
books are readily available in the market and the publishers ensure that these are never stocked
out. Mankiws book sells more than that by Samuelson &Nordhaus and their publisher tried at
least to have parity with the sale of Mankiws book. Many financial incentives provided by the
publisher proved to be of a little use and the two books continued to maintain a long term ratio of
10:9, though there were temporary marginal variations in the ratio. Samuelson &Nordhaus were
persuaded by thr publishers to revise and enlarge their book. The publishers gave Samuelson
&Nordhaus the examination papers and syllabus of 15 universities across the length and breadth
of the country. The aim was to ensure that the coverage of the subject was improved and
emphasis was placed on the topics which often appear in the examinations. Samuelson
&Nordhaus spent 11 months for revising the book and the publishers ensured that specimen/
complimentary copies of the revised enlarged edition were in the hands of all the concerned
faculty members well before the commencement of the session. The hard work of the author paid
and the sales of the book improved. The sales of two competing book were equal, i.e. a parity
had been achieved between the two books. This sales information brought dismay to the
publishers of Mankiews books. Though Mankiw was not bothered. He did not go through his
book after repeated request ofhis publishers but decided that the book needed no major changed
but for a few topographical mistakes. The publishers tried price elasticity and brought down the
price of Mankiws book to Rs. 11o.
Consider the situation and the environment of the university as described above. What do you
feel will be the reactionn to this price advantage? What are the chances of Mankiws book
improving? Will the earlier ratio of 10:9 in favour of Mankiws book be achieved? Give reasons
for your views. What can the publishers and Mankiw can do to bring back the advantage to
enjoyed by Mankiews books over the years?
(a) Following table provides some of the values of cost for different level of output for an auto
mobile firm. Calculate the missing values. How much should the firm produce in order to attain
the maximum cost efficiency? (7 Marks)
(All Values are in Rs. Crores)
Output Total
100 260 - 60 - - - -
200 - - - - - - 0.30
300 - - - - 0.50 - -
400 - - - - - 1.05 -
500 - - 360 - - - -
600 - - - - - - 3.00
700 - - - - 1.60 - -
800 2,040 - -- - - - -

(b).Explain whether each of the following events shifts the short run aggregate demand curve, the
aggregate supply curve, both, or neither. For each event that shifts a curve, use a diagram to
illustrate the effect on the economy. (7Marks)
a. In the national budget there is more incentive to save, so households decide to
save more.
b. Entire North India suffers 50 per cent deficiency in rain fall.
c. Increased job opportunities overseas cause many people to leave the country.