Accounting_for_Managers_Revision_problems_1012

8/7/2019 Accounting_for_Managers_Revision_problems_1012

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Prepared by Jaideep Gupta Page 1

Practice problems:

Basic Accounting

Final Accounts

Ratio Analysis

Funds Flow & Cash Flow Statement

Cost Volume Profit Analysis

Decision Making


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Accounting Concepts

Problem No. AC 1

Anil has prepared the trial balance for his business at the year-end which inter alia contains:Furniture & Equipment Rs. 50,000; Debtors Rs. 8,25,000; Depreciation Rs. 5,000.

On scrutiny he however notices that air-condition machine purchased during the year for Rs.

25,000/- has been wrongly included in the balance of sundry debtors. Depreciation rate applicable

for furniture & equipment is 10%.

You are requested to show the required changes to be made in the income statement and balance

sheet to give effect to the above. Journal entries NOT required.


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Final Accounts

Problem No. FA 1

After taking into consideration the following adjustments you are requested to prepare a Tradingand Profit & Loss Account as on 31.3.08 and a Balance Sheet as on that date from the followingTrial Balance of Mr. Amar:

1. Stock could not be taken on 31.3.08. It was taken on 5.4.08 and found to be Rs. 8,000.Between 1.4.08 and 4.4.08 stock costing Rs. 1,500 were sold

2. One quarter of the insurance premium relates to the next year3. Depreciate furniture by 15%4. Loan to Badshah carries 8% and loan from Chandan carries 6% interest p.a. respectively5. Provide 5% for doubtful debts6. Rs. 1,000 paid to Badshah was incorrectly recorded as salaries7. Rs. 500 worth stock was withdrawn by Mr. Amar

Trial balance as on 31.03.08 of M/s AmarParticulars Rs Particulars Rs

Stock (1.4.07) 6,000 Capital 40,000

Salaries 6,000 Returns Outward 500

Drawings 6,000 Loan from Chandan 5,000

Carriage Inwards 1,000 Outstanding Rent 100

Carriage Outwards 500 Accounts payable 13,000

Returns Inward 800 Liabilities for Expenses 1,900

Loan to Badshah 3,000 Provision for bad debts 1,000

Rent 1,200 Discount 300

Purchases 60,000 Sales 73,700

Account Receivables 30,000 Rent from sub-letting 500

Advertisement 3,000

Bad debts 500

Discount 600

Cash 200

Furniture 3,000

Goodwill 5,000

Wages 100

Insurance premium 600

Bank balance 8,500

Total 1,36,000 Total 1,36,000


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Problem No. FA 2

The following balances were extracted from the books of Mr. V. Giri as on 31.12.2007

Particulars Rs. Particulars Rs.

Bad Debts 1,400 Interest & Bank Charges 400Bank Loan 15,000 Manufacturing Expenses 9,500

Building 25,000 Manufacturing Wages 34,500

Capital 80,000 Motor Car 12,000

Cash at Bank 4,200 Opening Stock 34,200

Cash in Hand 1,120 Plant & Machinery 20,000

Factory Fuel & Power 1,280 Provision for Doubtful Debts 2,000

Factory Lighting 950 Purchase Returns 1,740

Freight on Purchase 1,860 Purchases 1,02,000

Freight on Sales 2,140 Salaries 15,850

Furniture 10,000 Sales 2,50,850

General Expenses 8,200 Sales Returns 3,100Goodwill 25,000 Sundry Creditors 45,560

Insurance & Tax 4,250 Sundry Debtors 78,200

Prepare a Trading and Profit & Loss Account and a Balance Sheet as on 31.12.07 after taking intoaccount the following additional information:

1. The selling price of stock as on 31.12.07 was Rs. 45,000. The goods were usually sold at33.33% profit on selling price.

2. Depreciate - Furniture 5%, Machinery - 10%3. The motor car is estimated to have a useful life of 12 years after which it would have no

value4. Provision for doubtful debts should equal 5% of the debtors balance5. A commission of 1% of the gross profit is to be provided to the Works manager6. A commission of 2% on the net profit (after charging Works Managers commission) is to be

credited to the General Manager. All commissions are indirect expenses.


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Ratio Analysis

Problem No. FS 1

From the following information presented by P. Co. Ltd. For the year ended 31.12.2007, prepare

the Balance Sheet

Sales to Net Worth 5 times

Current Liabilities to Net Worth 50%

Total Debts to Net Worth 60%Fixed Assets to Net Worth 60%

Current Ratio 2:1

Sales to Stock 10 timesDebtors' Turnover 9 times

Annual Sales Rs.15,00,00040% of the sales were made on cash.

Problem No. FS 2

From the information below and the abridged balance sheet of Y M Ltd. as at 31st March 2009 find

out:

Debt-Equity RatioProprietary Ratio

Total Liabilities to Net Worth

Information:

1. Secured loan includes Bank Overdraft Rs. 200 lakhs and Term Loan Rs. 600 lakhs2. Unsecured Loan includes Rs. 100 lakhs short-term loan3. Reserve & Surplus consists of

Rs. In Lakhsa. General Reserve 200b. Profit & Loss Account 400c. Revaluation Reserve 100d. Investment Allowance Reserve 100

4. Share Capital consists ofa. Equity Share Capital 1000b. 8% Preference Share Capital 200


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Balance Sheet of Y M Ltd as at 31st March 2009

Particulars Rs in Lakhs Rs in Lakhs

Sources of Fund

Shareholders Fund

Share Capital 1200

Reserve & Surplus 800 200

Loan Funds

Secured Loan 800

Unsecured Loan 600 1400

3400

Application of Fund

Fixed Assets:

Gross Block 3000

Less Accumulated Depreciation 9002100

Capital Work in Progress 600 2700

Investment 200

Current Assets Loans & Advances

Inventories 600

Sundry Debtors 400

Interest Accrued 50

Cash & Bank 100

Loans & Advances 120

1270Less: Current Liabilities & Provision

Sundry Creditors 230

Tax Provision 300

Proposed Dividend 240

770 500

3400


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Funds Flow & Cash Flow

Problem No. FC 1From the following particulars prepare a Funds Flow Statement for the year ended 31st December,

2008:Rs.

1. Issue of shares 50,000

2. Net Profit during the year 17,000

3. Purchase of land 20,0004. Purchase of investment 40,000

5. Sale of plant 10,000

6. Depreciation charged 3,0007. Dividend receivable 1,000

8. Decrease in working capital 9,0009. Redemption of debentures 10,000

10. Redemption of preference shares 20,00011. Dividend paid 5,000

12. Payment of tax 5,00013. Sale of investment 7,000

14. Transfer to reserve 5,000

Problem No. FC 2The summarized Balance Sheets of AS Ltd. as at 31.12.2007 & 31.12.2008 are given:

Liabilities Rs. Rs. Assets Rs. Rs.

Loan from Friend - 40,000 Cash 22,000 30,000

Bills Payable 24,000 16,000 Debtors 80,000 70,000Creditors 50,000 1,04,000 Stock 50,000 60,000

Loan from Bank 86,000 1,20,000 Machinery 40,000 28,000

Capital 1,32,000 68,000 Land & Building 1,00,000 1,60,0002,92,000 3,48,000 2,92,000 3,48,000

Additional Information:1. Net Loss for the year 2008 amounted to Rs. 26,000.

2. During the year a machine costing Rs. 10,000 (accumulated depreciation Rs. 4,000) was sold

for Rs. 5,000. The provision for depreciation against machinery as on 31.12.07 was Rs. 12,000and on 31.12.08.was Rs. 14,000.

You are required to prepare the Cash Flow Statement for the year ended 31.12.2008.


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Cost-Volume-Profit Analysis

Problem No. CV 1

If margin of safety is Rs. 240000 (40% of sales) and PV Ratio is 30% calculate:

1. Break-even sales2. Amount of profit on sales of Rs. 900000

Problem No. CV 2

A company producing a single product sells it at Rs. 50 per unit. Unit variable cost is Rs. 35 and

fixed cost amounts to Rs. 12 lakhs per annum. With this data you are required to calculate:

1.

P/V Ratio and break-even sales2. New break-even sales if variable cost increases by Rs. 3 per unit without increase in selling

price

3. Increase in sales required if profits are to be increased by Rs. 24 lakhs4. Percentage increase/decrease in sales volume units to off-set

a. An increase of Rs. 3 in variable cost per unitb. A 10% increase in selling price without affecting existing profits quantum

5. Quantum of advertisement expenditure permissible to increase sales by Rs. 1.2 lakhswithout affecting existing profits quantum


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Accounting_for_Managers_Revision_problems_1012

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