Académique Documents
Professionnel Documents
Culture Documents
Assignment - A
Question 1(a) What do you understand by the concept of conservatism ? Why is it also
called the concept of prudence? Why is it not applied as strongly today as it
used to be in the Past?
Question 1(b) What is a Balance Sheet? How does a Funds Flow Statement differ from a
Balance Sheet? Enumerate the items which are usually shown in a Balance
Sheet and a Funds Flow Statement.
Question 2(a) Discuss the importance of ratio analysis for inter-firm and intra-firm
comparisons including circumstances responsible for its limitations. If any
Question 2(b) Why do you understand by the term ‘pay-out ratio'? What factors are
taken into consideration while determining pay-out ratio? Should a company
follow a fixed pay-out ratio policy? Discuss fully.
Question 3. From the ratios and other data given below for Bharat Auto Accessories
Ltd. indicate your interpretation of the company's financial position, operating
efficiency and profitability.
Question 4: Bose has supplied the following information about his business for the year
ended 31 st March, 2004 is as follows:
Question 5:
(a) What procedure would you adopt to study the liquidity of a business firm?
(b) Who are all the parties interested in knowing this accounting information?
(c) What ratio or other financial statement analysis technique will you adopt for this.
Assignment - B
Question 1: From the following particulars, determine the bank balance as per pass
book of Priya & Co. as on 28th February 2008.
a) Credit balance as per cash book on 28th February, 2008 was Rs. 15,000
b) Interest charged by the bank up to 28th February Rs. 500 was recorded in the pass book.
c) Bank charges made by the bank Rs. 125 were also recorded only in the pass book.
d) Out of the cheques of Rs. 25,000 paid into the bank, cheques of Rs. 18,750 were cleared
and credited by the bankers.
e) Two cheques of Rs. 7,500 and Rs. 15,000 were issued but out of them only one cheque of
Rs. 7,500 was presented for payment upto 28th February.
f) Dividends on shares Rs. 4,500 were collected by the bankers directly, for which Priya &
Co. did not have any information.
Rs.
Sales (6,000 units) 5,40,000
Direct materials 96,000
Direct labour 1,20,000
Direct expenses 19,000
Fixed overheads:
Factory 2,00,000
Administration 21,000
Selling and Distribution 25,000
It is expected that 2,000 units of the new product can be sold at a price of
Rs. 60 per unit. The fixed factory overheads are expected to increase by
10%, while fixed selling and distribution expenses will go up by Rs.
12,500 annually. Administrative overheads remain unchanged.
Question 3 (a): What is Master Budget? How it is different from Cash Budget?
Question 3 (b) What are the various methods of inventory valuation? Explain the effect
of inventory valuation methods on profit during inflation. What are the
provisions of Accounting Standard 2 (AS-2) with regards to inventory
valuation?
Case Study
Geeta & Company has experienced increased production costs. The primary area of concern
identified by management is direct labor. The company is considering adopting a standard
cost system to help control labor and other costs. Useful historical data are not available
because detailed production records have not been maintained. To establish labor standards,
Geeta & Company has retained an engineering consulting firm. After a complete study of the
work process, the consultants recommended a labor standard of one unit of production every
30 minutes, or 16 units per day for each worker. The consultants further advised that Geeta's
wage rates were below the prevailing rate of Rs per hour ‘Geeta's production vice-president
thought that this labor standard was too tight, and from experience with the labor force,
believed that a labor standard of 40 minutes per unit or 12 units per day for each worker
would be more reasonable, the president of Geeta & Company believed the standard should
be set at a high level to motivate the workers and to provide adequate information for control
and reasonable cost comparison. After much discussion, management decided to use a dual
standard. The labor standard of one unit every 30 minutes, recommended by the consulting
firm, would be employed in the plant as a motivation device, while a cost standard of 40
minutes per unit would be used in reporting. Management also concluded that the workers
would not be informed of the cost standard used for reporting purposes. The production vice
president conducted several sessions prior to implementation in the plant, informing the
workers of the new standard cool system and answering questions. The new standards were
not related to incentive pay but were introduced when wages were increased to Rs 7 per hour.
The standard cost system was implemented on January 1, 2007. At the end of six months of
operation, these statistics on labor performance were presented to executive management:
*U = Unfavorable; F = Favorable
Materials quality, labor mix, and plant facilities and conditions have not
changed to a significant extent during the six month period.
Questions:
Assignment - C
1. Which of the following statements is true concerning assets?
a) They are recorded at cost and adjusted for inflation.
b) They are recorded at market value for financial reporting because historical cost is
arbitrary.
c) Accounting principles require that companies report assets on the income statement.
d) Assets are measured using the cost concept.
6. If the sum of the debits and credits in a trial balance is not equal, then
a) There is no concern because the two amounts are not meant to be equal.
b) The chart of accounts also does not balance.
c) It is safe to proceed with the preparation of financial statements.
d) Most likely an error was- made in posting journal entries to the general ledger or in
preparing the trial balance.
7. Z Ltd had Rs. 1800 of supplies on hand at January 1, 2006. During 2006, supplies with a
cost of Rs. 7,000 were purchased. At December 31, 2006, the actual supplies on hand
amounts to Rs. 2,300. After the adjustments are recorded and posted at December 31, 2006,
the balances in the Supplies and Supplies Expense accounts will be:
a) Supplies, Rs7, 000; Supplies Expense, Rs2, 300.
b) Supplies, Rs1, 800; Supplies Expense, Rs7, 000.
c) Supplies, Rs2, 300; Supplies Expense, Rs6, 500.
d) Supplies, Rs2, 300; Supplies Expense, Rs3, 900.
8. In the statement of changes in financial position, uses of resources are defined as:
a) Transaction debits
b) Fund increases
c) Transaction credits
d) Fund decreases
9. Most firms elected to define funds in the statement of changes in financial position as:
a) Cash
b) Working capital
c) Current assets
d) Owners’ Equity
11. Which of the following is not an example of a non-fund adjustment to income required in
preparing the statement of changes in financial position when funds were defined as working
capital?
a) Depreciation expense
b) Gain from asset disposal
c) Interest expense
d) Amortization of premium on debt
14. Which of the following statements regarding changing inventory methods is true?
a) A change in inventory methods can be justified if the change is made to better match
profits with revenue.
b) The effect of changing inventory method does not need to be disclosed.
c) Tax advantages are valid justification for changing inventory methods.
d) One place that the reader of an annual report would be able to identify that a company
changed inventory methods is the footnotes to the financial statements.
Use the information presented below to answer the questions that follow. Solid Co. received a
non-interest-bearing note from Y Ltd. on October 1, 2006. The amount of the note due at the
maturity date is Rs6, 200. The note was accepted by Solid for merchandise sold to Bedrock
with a selling price of Rs6, 000. The note is due in 3 months.
15. The difference of Rs200 between the amount of the note (Rs. 6,200) and the sales price of
the merchandise (Rs. 6,000)
a) Is the interest explicitly included in the amount of the note.
b) Will be recorded in a contra account, Discount on Notes Receivable, by Co.
c) Will be recorded as interest revenue on October 1, 2006.
d) Is an error made in preparing the note.
16. Which of the following combination of financial statements would provide the most in-
depth information to help under stand a company's liquidity?
a) Income statement and statement of cash flows.
b) Balance sheet and statement of cash flows.
c) Balance sheet and income statement.
d) Statement of retained earnings and statement of cash flows.
17. Y Ltd sold equipment for Rs4, 000. This resulted in a Rs1, 500 loss. What is the impact
of this sale on the working capital?
a) Reduces working capital.
b) Increases working capital.
c) Has no affect on working capital at all.
d) The increase offsets the decrease.
18. If a company's asset turnover rate increased from 2005 to 2006, which of the following
cone usions can be made?
a) The company was less efficient during 2006 in using its assets to produce profits.
b) The company produced more sales in 2006 for each dollar invested in assets.
c) The company was more profitable in 2005.
d) The company is over-invested in assets in 2006.
19. X Ltd's master budget calls for the production of 6,000 units of product monthly; The
master budget includes indirect labor of Rs. 396,000 annually; X Ltd considers indirect labor
to be a variable cost. During the month of September, 5,600 units of product were produced,
and indirect labor costs of Rs. 30,970 were incurred. A performance report utilizing flexible
budgeting would report a flexible budget variance for indirect labor of:-
a) Rs. 170 unfavorable.
b) Rs. 170 favorable.
c) Rs. 2,030 unfavorable.
d) Rs. 2,030 favorable.
20. Which of the following is not an advantage for using standard costs for variance analysis?
a) Standards simplify product costing.
b) Standards are developed using past costs and are available at a relatively low cost.
c) Standards are usually expressed on a per unit basis.
d) Standards can take into account expected changes planned to occur in the budgeted
period.
25. Cost of research undertaken at the request of the customer should be:
a) Charged to costing profit and loss account
b) Charged to selling overheads
c) Recovered from the customer.
d) All of above
27. Liabilities of business are Rs. 11,220 and owner's equity is Rs. 15,000. The assets of the
business will be.
a) Rs. 3,780.
b) Rs. 26,220.
c) Rs. 11,220.
d) Rs. 15,000.
28. An entry of Rs. 320 has been debited to Eknath's account at Rs. 230. If is an error of
a) Principle.
b) Omission.
c) Commission.
d) Compensatory.
30. The revenue recognition principle requires that sales revenues be recognized:
a) When cash is received.
b) When the merchandise is ordered.
c) When the goods are transferred from the seller to the buyer.
d) None of the above.
34. Cash flow activities that include the cash effects of transactions that create revenues and
expenses and thus enter into the determination of net income are referred to as:
a) Investing activities.
b) Financing activities.
c) Operating activities.
d) All of the above.
35. All of the following are used in preparing a statement of cash flows except:
a) A trial balance.
b) Comparative balance sheet.
c) Current income statement.
d) Additional information.