Ques.1 Explain the following accounting concept

1. Concept of conservatism
2. Cost Concept
3. Periodicity Concept
4. Money Measurement Concept

Ques.2: The following is the Trial Balance of a trader as at 31 st December, 2001:

Debit Balances	Rs.	Credit Balances	Rs.
Stock (1-1-2001) Sales returns Purchases Freight and carriage Rate, Rent etc. Salaries and wages Sundry debtors Bank Interest Printing and advertisement Cash at Bank Investments Furniture and fittings Discounts General expense Audit Fees Insurance Travelling expenses Postage and telegrams Cash in hand Deposit with Pran Drawing Account	46,800 8,600 2,43,100 18,600 5,700 9,300 24,000 900 14,600 8,000 5,000 1,800 7,540 3,910 700 600 2,330 870 380 30,000 10,000 4,42,730	Neeru’s capital account Sales Purchases returns Sundry creditors Bank loan at 6% Income from investments Discounts	1,08,090 2,89,600 5,800 14,800 20,000 250 4,190
			4,42,730

 

Adjustments:

• Stock at the end was Rs. 78,600
• Included amongst the debtors is Rs. 3,000 due from Zeenat and included amongst the creditors is Rs. 1,000 due to her.
• The effect of advertising not yet expired, a quarter of the amount ‘Printing and Advertising’ is to be carried forward to the next year.
• Reserve 2 per cent for discount on Debtors and create a bad debts reserve at 5 percent.
• A depreciation of 10% p.a. is to be written off Furniture and fittings.
• Wages owing on 31 st December, 2001 is Rs. 300, salaries owing Rs. 500 and carriage owing Rs. 100.
• Prepaid insurance is Rs. 80.
• Furniture which stood at Rs. 600 in books Ist January, 2001 was disposed of at Rs. 290 on June, in part exchange for new furniture costing Rs. 520. A net invoice at Rs. 230 was passed through the purchase-day book.
• Purchase Invoice amounting to Rs. 400 had been omitted from the books.
• A Neon-sign costing Rs. 100 is included in Advertising.
• Two dishonored cheques for Rs. 200 and Rs. 300 respectively has not been entered in the cast book. The first for Rs. 200 is known to be bad. In the case of a second cheque for Rs. 300, it is expected that 75% of it would be realized.
• Private purchase amounting to Rs. 600 had been included in the Purchase Day Book.
• Charge full year’s interest on Deposit with Pran at 7% p.a.
• Provide for interest on Bank loan for the amount due.

Prepare Final Accounts.

 

Q.3 : From the following Balance Sheets of Sriramco, prepare

(a) Statement of Changes in Working Capital, and (b) Funds Flow Statement: Balance Sheet of Sriramco as on 31 st December…

Assets Goodwill Land and Buildings Plant Investments Book Debts Stock Cash in hand and at Bank Preliminary Expenses         Liabilities Share Capital Equity Share Capital 10% Red. Pref. Share Capital Capital Reserve General Reserve P. and L. Account Proposed Dividend Sundry Creditors Provision for Taxation	2000.	2001
	Rs. 90,000 2,80,000 1,00,000 30,000 1,80,000 80,000 40,000 20,000	Rs. 80,000 2,00,000 2,00,000 40,000 2,10,000 1,20,000 45,000 10,000
	8,20,000	9,05,000
	4,00,000 2,00,000 - 60,000 30,000 60,000 30,000 40,000	5,00,000 1,00,000 30,000 80,000 45,000 60,000 45,000 45,000
	8,20,000	9,05,000

 

The following additional information is also available

• A machine has been sold for Rs. 40,000 whose written down value was Rs. 36,000.

Depreciation of Rs. 15,000 has been charged on plant in 2001;

• A piece of land had been sold out in 2001 and the profit on the sale has been credited to

capital reserve;

• An interim dividend of Rs. 30,000 has been paid in 2001;
• Income tax paid during 2001 amounts to Rs. 45,000;
• Preference Shares were redeemed at 5% premium.

Ques. 4 : The capital structure of Bombay Refrigeration Company Ltd. Consists of an equity share capital of Rs. 3, 00,000 (share of Rs. 10 par value) and Rs. 3,00,000 10% debentures. Sales increased by 20% from 30,000 to 36,000 units, the selling price is Rs. 10 per unit. Variable cost Rs.6 Per unit and fixed costs amount to Rs. 50,000 The company’s tax rate is 50%.

You are required to compute the degree of operating leverage, degree of financial leverage and degree of combined leverage.

 

Ques. 5: The following details relates to the two machines X and Y:

Machine X Machine Y
Cost Estimated Life Estimated salvage value Working Capital required in the beginning	Rs. 56,125	Rs.56,125
	5 years	5 years
	Rs. 3,000	Rs. 3,000
	Rs.10,000	Rs. 20,000

Annual income after tax and depreciation:

 

Year	Rs.	Rs.
I	3,275	11,375
II	5,375	9,375
III	7,375	7,375
IV	9,375	5,375
V	11,375	3,375

 

 

Overhauling charges at the end of third year Rs. 25,000 on machine X. Depreciation has been charged at straight line method. Discount rate is 10%? P.V.F. at 10% for five years are 0.909, 0.826, 0.751, 0.683 and 0.621. Suggest which project should be accepted.

 

Ques. 6: Discuss the concept of working capital what shall be the repercussions if the firm has

• Shortage of working capital
• Excess of working capital

 

Ques 7: What is dividend and why is dividend decision important?