Print Email Download Reference This Send to Kindle Reddit This
submit to reddit

Elaborate The Concept Of Accounting Standards And Their Role In Accounting Accounting Essay

Discuss the accounting concepts, conventions and postulates. Explain the various branches of accounting and their role, importance and application in business. Explain the various terms used in the accounting process.

Elaborate the concept of financial statement analysis. Explain the various types of Ratio Analysis and their use in analyzing financial statements.

Discuss the concept of double entry system. Elaborate the advantages and disadvantages of double entry system

Elaborate the concept of accounting standards and their role in accounting.

Discuss the various types of accounts, accounting rules and process of recording classifying and summarizing transactions.

What is a trial balance? Elaborate the process of preparation of trial balance. What are the mistakes discovered by the trial balance.

What is a ledger? How is the ledger balancing done? Differentiate between a journal and a ledger.

Elaborate the proforma of balance sheet in horizontal / vertical format according to the requirements of schedule VI of the companies act 1956.

Discuss the concept and application of Depreciation. Explain the various types of depreciation methods and the process of application of depreciation concept.

Explain the concept of Balanced Score Card and its principle & uses in business.

Explain the concept and types of budgets including master budget. Discuss the budgeting process and explain about the limiting or the key factor.

Explain the concept of discounted and non discounted cash flow techniques of capital budgeting. Elaborate the concept of capital budgeting and its role in planning.

Elaborate the concept of Inventory valuation and inventory control. What are the applications of the concept of inventory valuation and inventory control. –ratio analysis FM

Elaborate the concept of cost, cost drivers and cost behavior. Elaborate the various types of costs.

Explain the concept and importance of capital budgeting.

Elaborate the various techniques of evaluating projects in capital budgeting.

Discuss the concept, types and importance of variance analysis. Elaborate the various individual components of the various variances of material, labour and overheads.

Short Notes on

Tangible Asset

Ratio Analysis

Creditors

Profit after tax

Depreciation

Activity Cost Accounting

Master Budget

Bills Payable

Trial Balance

MCS

Distinguish between cost allocation and cost absorption

What is meant by “Profit centre”?

Specify the methods of costing and cost units applicable to the following industries Toy making (ii) Cement (iii) Radio (iv) Bicycle (v) ship building

Practical Questions

Q1. JB ltd. has the following profit and loss account for the year ended 31st March 2010 and the balance sheet as on that date

Profit and Loss Account (for the year ended 31st March, 2010)

 

 

 

Rs. (In Lakhs)

Particulars

Rs.

 

 

Opening Stock

1.75

Sales: Credit

12

Add: Manufacture Cost

10.75

Cash

3

 

12.5

 

 

Less:

1.5

 

15

Cost of Goods Sold

11

Gross Profit

4

Gross Profit

4

Other Income

0.09

 

15

 

4.09

Administrative Expenses

0.35

 

 

Selling Expenses

0.25

 

 

Depreciation

0.5

 

 

Interest

0.47

 

 

Balance Sheet (as on 31st March, 2010)

Equity shares of Rs. 10 each

3.5

Plant and Machinery

10

10% preferential shares

2

Less: Depreciation

2.5

Reserves and surplus

2

Net Plant and Machinery

7.5

Long term loan (12%)

1

Goodwill

1.4

Debentures(14%)

2.5

Stock

1.5

Creditors

0.6

Debtors

1

Bills Payable

0.2

Prepaid Expenses

0.25

Accrued Expenses

0.2

Marketable Securities

0.75

Provision for Tax

0.65

Cash

0.25

 

12.65

 

12.65

The market price of the share of JB Ltd. On 31st March, 1998 is Rs. 45.

Reserves at the beginning

1.465

Net Profit during the year

1.26

Preference Dividends

2.725

Equity Dividends

0.2

Reserves at the close of year

0.525

Calculate the various types of ratios (Any 5)

1) Current Ratio 2) Quick Ratio 3) Debt-Equity Ratio 4) Interest coverage Ratio

5) Fixed charge coverage Ration 6) Stock Turnover Ratio 7) Debtors Turnover Ratio 8) Average Collection Period 9) Gross Profit Ratio 10) Net Profit Ration 11) Operating Ration 12) Return on Capital Employed 13) Return on Shareholders’ Equity 14) Earnings per Share 15) P /E Ratio

Q4. The following is Trial Balance of Mrs. S Kapur on 31st Dec. 2008

Balance

Rs.

Balance

Rs.

Cash in Hand

1080

Capital (Cr.)

142000

Cash in Bank

5260

Sales A/C (Cr)

197560

Purchases

81350

Returns outward

1000

Returns Inward

1360

Creditors

12600

Wages

20960

Carriage on Sales

6400

Fuel and Power

9460

Stock (1-1-08)

11520

Carriage on Purchase

4080

Freehold Land

20000

Building

60000

Salaries

30000

Machinery

40000

General Expenses

6000

Patents

15000

Drawings

10490

Insurance

1200

Debtors

29000

Taking into account the following adjustments, prepare Trading and P/L Account and Balance Sheet.

Stock in hand on 31st December is Rs. 13,600.

Machinery is to be depreciated at the rate of 10% and patents at the rate 20%.

Salaries due for the month of Dec. 2008 amounting Rs. 3000 were unpaid.

Insurance include a premium of Rs. 170 for 2009.

Wage include a sum of Rs. 4000 spent on the erection of a scooter shed for employees and customers.

A provision for bad and doubtful debts is to be created to the extent of 5% on Sundry Debtors.

Q5. The following is Trial Balance of Mrs. S Kapur on 31st Dec. 2008

Balance

Rs.

Balance

Rs.

Cash in Hand

1080

Capital (Cr.)

142000

Cash in Bank

5260

Sales A/C (Cr)

197560

Purchases

81350

Returns outward

1000

Returns Inward

1360

Creditors

12600

Wages

20960

Carriage on Sales

6400

Fuel and Power

9460

Stock (1-1-08)

11520

Carriage on Purchase

4080

Freehold Land

20000

Building

60000

Salaries

30000

Machinery

40000

General Expenses

6000

Patents

15000

Drawings

10490

Insurance

1200

Debtors

29000

Taking into account the following adjustments, prepare Trading and P/L Account and Balance Sheet.

Stock in hand on 31st December is Rs. 13,600.

Machinery is to be depreciated at the rate of 10% and patents at the rate 20%.

Salaries due for the month of Dec. 2008 amounting Rs. 3000 were unpaid.

Insurance include a premium of Rs. 170 for 2009.

Wage include a sum of Rs. 4000 spent on the erection of a scooter shed for employees and customers.

A provision for bad and doubtful debts is to be created to the extent of 5% on Sundry Debtors.

Q6. Mr.Mayank and Tushar, started a furniture business under the name Life Style Furniture Private Limited. They introduced Rs.3,00,000 towards Equity share capital by way of cash. Formation expenses of Rs.25,000 were duly paid. Company purchased a vacant plot of Rs.1,75,000 and constructed a shed of Rs.50,000. Company purchased one computer of Rs.30,000 and made the payment immediately. During the year company approached Corporation Bank and accepted a secured Term loan of Rs.100,000 @ 10.75% interest p.a. In the first year company paid only interest to the bank. Installment towards principle will start from the second year. Sale for the year were made for Rs.4,50,000 and all the payments received from the customers except one to whom goods were sold in the month of march for Rs.50,000. During the year following expenses were incurred and paid

Purchase of stock Rs. 2,10,000, Wages & Salaries Rs.35,000, Electricity – Rs.5,500, Advertisement Rs.25,000 and delivery expenses Rs.7,500.

Charge depreciation @ 10% on shed and 25% on computers. Stock lying in stores at the end of the year was of Rs.30,000. Make a provision for tax @ 35%.

Prepare Profit & Loss Account and Balance sheet of the company.

Q7. Enter the following transactions in Samir’s Journal, post them into ledger and prepare the trial balance.

2008

January 01 –Samir commenced business with Cash –Rs. 40000/-

Feb. 05 –Purchased goods –Rs. 25000/-

Feb. 20 –Sold Goods –Rs. 30000/-

May 10-Purchased Goods from Samuel –Rs. 18000/-

May 18-Sold Goods to Rohan –Rs. 20000/-

June 15-Paid to Samuel –Rs. 18000/-

June 28-Received Cash from Rohan –Rs. 20000/-

August 02 –Purchased goods for cash from Dinesh-Rs. 19000/-

August 29-Withdrawn for personal use –Rs. 500/-

Oct. 10 –Purchased goods from Dinesh –Rs. 17000/-

Nov. 20-Paid cash to Dinesh –Rs. 16980

He allowed discount –Rs. 20

Dec. 31 –Paid Salaries –Rs. 500

Q8. From the following details, prepare the balance sheet of ABC ltd

Stock turnover

6

Capital turnover ratio

2

Fixed assets turnover ratio

4

Gross profit (%)

20

Debt collection period (moths)

2

Creditors payment period (days)

73

The gross profit was Rs.60,000. Closing stock was Rs.5,000 in excess of the opening stock

Q9 Taj Metals expects 5,500 units to be sold during the month of January 2011. Selling price is expected to be Rs 1,200 per unit. Two kilograms of direct materials are budgeted per unit at a cost of Rs 10.00 per kilogram. Three direct labor-hours are budgeted per unit at Rs35.00 per hour. Variable overhead is budgeted at Rs 40.00 per direct labor-hour. Fixed overhead is budgeted at Rs 27,000 per month. Variable nonmanufacturing costs are expected to be Rs 0.70 per revenue rupee. Fixed nonmanufacturing costs are Rs 39,000 per month.

Assume that target ending finished goods inventory is 400 units. Beginning finished goods inventory is 500 units. How many units need to be produced?

Each finished unit requires 10 kilograms of direct materials at a cost of Rs 10.00 per kg. Desired ending direct materials inventory equals 15% of the materials required to produce next month’s sales. February sales are forecasted to be 8,000 units. What is the ending inventory of direct materials in January? What is the beginning inventory of direct materials in January?

Q10. Suppose a city has a $100,000 lump-sum budget appropriation to conduct a clinical counseling program. Variable cost per prescription is $400 per patient per day. Fixed costs are $60,000 in the relevant range of 50 to 150 patients.

If the city spends the entire budget appropriation, how many patients can it serve in a year?

If the city cuts the total budget appropriation by 10%, how many patients can it serve in a year?

Q11.a) Explain the concept of Fixed Assets and Depreciation . Can a company change the method of depreciation? If yes then how to give accounting treatment for the change of method ?

b) A company has purchased a machine of Rs.1,00,000 with estimated life of 5 years and the residual value of the machine at the end of the life is Rs.5,000. The usage of the machine in number of units through out the life is 50,000 units whereas the production from the machine per year will be 1st year – 18,000 units, 2nd year – 12,000 units, 3rd year – 10,000 units , 4th year – 6,000 units and 5th year – 4,000 units.

Calculate the depreciation by using 1. Straight Line Method 2. Written Value Method .

Q12. From the following information, show the calculations of depreciation for all the five years under 1. Straight Line Method 2. Written Down Value Method

Sancheti Diagnostic Centre has bought an X-ray machine of Rs.8,00,000. The life of the machine is 5 years and residual value is Rs.80,000. Total capacity of the machine in hours is 1,00,000 whereas the utilization is -1st year 35,000 hours, 2nd year -30,000 hours, 3rd year – 15,000, 4th year -12,000 hours and 5th year – 8,000 hours

Q13. On 1-1-2005 T Ltd purchased a second hand machinery for Rs.80,000 and spend Rs.20,000 on its cartage, repairs and installation. On 31st September 2007 this machine is sold for Rs.50,000. Depreciation is to be provided @ 20% p.a. according to written down value method.

Required: Prepare Machinery Account for the first three years assuming that the accounts are closed on 31st march each year

Q14. Following are the Balance Sheets of Titan Motors Ltd. Prepare a Cash Flow Statement for the year 2005 as per the format given in Accounting Standard - 3

Liabilities

2004

2005

Assets

2004

2005

Share Capital

2,00,000

2,50,000

Land & Buildings

2,00,000

1,75,000

General Reserve

20,000

25,000

Plant & Machinery

1,75,000

1,95,000

Profit & Loss A/c

60,000

50,000

Investments

75,000

80,000

Term Loans

2,50,000

2,25,000

Stock

50,000

60,000

Creditors

40,000

35,000

Debtors

40,000

35,000

Cash

30,000

40,000

Total

5,70,000

5,85,000

Total

5,70,000

5,85,000

During the year 2005, company has declared and paid a dividend of Rs.20,000 on its share capital

Q15. Following details are available from the books of accounts of Sarita Chemicals Limited for the year ended on 31st March, 2009

Stock of materials – Opening 1,68,000

Stock of materials – Closing 1,80,000

Materials purchased during the year 9,52,000

Direct wages paid 3,58,000

Indirect wages 16,000

Salaries to administrative staff 48,000

Freight – Inward 40,000

Freight – Outward 32,000

Cash discount allowed 14,000

Bad debts written off 10,800

Repairs to plant and machinery 42,400

Rent, rates and taxes - Factory 12,000

Rent, rates and taxes - Office 6,400

Traveling expenses 12,400

Salesman’s salaries and commission 33,600

Depreciation written off – Plant and Machinery 28,400

Depreciation written off – Furniture 2,400

Directors fees 34,000

Electricity charges ( factory ) 48,000

Fuel ( for boiler ) 64,000

General charges 24,800

Manager’s Salary 48,000

Dividend paid 25,000

The managers time is shared between the factory and the office in the ratio of 40: 60

From the above prepare the cost sheet.

Q16. N ltd was following LIFO method of valuation of stock. Due to promulgation of revised accounting standard, they want to switch over to FIFO method. From the following information

Draw up stock ledger under FIO method of valuation of stock

Find out the closing stock and cost of materials consumer under FIFO

Opening stock 5,000 MT

Rs.22 per MT

Rs.1,10,000

Purchases

1.6.2010

1,000 MT @ Rs.30 per MT

5.6.2010

2,000 MT @ Rs.35 per MT

10.6.2010

1,500 MT @ Rs.38 per MT

15.6.2010

1,500 MT @ Rs.35 per MT

20.6.2010

2,000 MT @ Rs.32 per MT

25.6.2010

2,000 MT @ Rs.35 per MT

30.6.2010

1,500 MT @ Rs.30 per MT

Issues:

1-5.6.2010

2,000 MT

6-10.6.2010

3,000 MT

11-20.6.2010

4,000 MT

21-25.6.2010

3,000 MT

26-30.6.2010

3,000 MT

Q17. Concept India Ltd supplies the following information relating to the financial year ended on 31st March 2010 and requests you to find out: (a) sales (b) Purchases (c) Sundry creditors (d) sundry debtors and (e) closing stock

Stock velocity : 4 months

Payables velocity : 3 months

Receivables velocity: 2 months

Gross profit Ratio: 20%

Gross Profit for the year was Rs.56,000. Closing stock of the year was Rs.16,000 higher than the opening stock. Bill receivable and Bills Payable amounted to Rs.40,000 and Rs.23,000 on the closing date of the financial year. 25% of Purchases and 10% of sales were on cash basis.

Q18. A company is considering an investment proposal to install new milling controls at a cost of Rs.50,000. The facility has a life expectancy of 5 years and no salvage value. The tax rate is 35 per cent. Assume the firm uses straight line depreciation and the is allowed for tax purchases. The estimated cash follows before depreciation and tax (CFBT) from the investment proposal are as follows:

Year

CFBT

1

Rs.10,000

2

Rs.10,692

3

Rs.12,769

4

Rs.13,462

5

Rs.20,385

Compute the following:

Pay back period

Average rate of return

Internal rate of rate of return

Net present value at 10 per cent discount factor

Profitability Index

Q19. A limited company is considering investing in a projects requiring a capital outlay of Rs.2,00,000. Forecast for annual income after depreciation but before tax is as follows

Year

Rs

1

1,00,000

2

1,00,000

3

80,000

4

80,000

5

40,000

Depreciation may be taken as 20% on original cost and taxation at 50% of net income

You are required to evaluate the project according to each of the following methods:

Pay back method

Rate of return on average investment method

Net present value method taking cost of capital as 10%

Internal rate of rate of return

Q20.The following date relate tos the working of a factory at Mumbai for the current year:

Capacity worked, 50 per cent

Fixed costs:

Salaries

Rs.84,000

Rent and taxes

Rs.56,000

Depreciation

Rs.70,000

Other administrative expenses

Rs.80,000

Variable costs:

Materials

Rs.2,40,000

Labour

Rs.2,56,000

Other expenses

Rs. 38,000

Possible sales at various levels of working are

Capacity (per cent)

Sales

60

Rs.9,50,000

75

Rs.11,50,000

90

Rs.13,75,000

100

Rs.15,25,000

Prepare a flexible budget and show the forecast of profit at 60,75,90 and 100 percent capacity operation.

Q21. The expenses for budgeted production of 10,000 units in a factory are furnished below:

Per unit Rs.

Materials

70

Labour

25

Variable overhead

20

Fixed overheads (Rs.1,00,000)

10

Variable expenses (Direct)

5

Selling expense (10%fixed)

13

Distribution expenses (20% fixed)

7

Administration expenses (Rs.50,000)

5

Total cost

Rs.155

Prepare a budget for production of : (a) 8,000 units (b) 6,000 units and (c ) Indicate cost per unit at both the levels

Assume that administration expanses are fixed for all levels of production.

Print Email Download Reference This Send to Kindle Reddit This

Share This Essay

To share this essay on Reddit, Facebook, Twitter, or Google+ just click on the buttons below:

Request Removal

If you are the original writer of this essay and no longer wish to have the essay published on the UK Essays website then please click on the link below to request removal:

Request the removal of this essay.


More from UK Essays