MS 4 Previous Year Question Papers by Ignouassignmentguru

Download More:- https://www.ignouassignmentguru.
com/papers
No. of Printed Pages : 5 I MS-4 1

MANAGEMENT PROGRAMME
Term-End Examination 09498
December, 2011
MS-4 : ACCOUNTING AND FINANCE FOR

MANAGERS
Time : 3 hours Maximum Marks : 100
Note : Attempt any five questions. All questions carry equal

marks.
1. (a) How does an accountant follow the
principle "anticipate no profit, provide for
all losses" ? On which accounting concept
is this based ? Explain it and discuss its
significance.
(b) Distinguish between Financial Accounting
and Management Accounting. What is the
most important role of a Management
Accountant in a business organisation ?
Discuss.
2. (a) Distinguish between revenue expenditure
and Capital expenditure. How are they
treated while preparing the final
accounts ? If by mistake the accountant of
a firm treats a capital expenditure as
revenue expenditure, how will it affect the
final accounts of the' firm ? Give an
example.
MS-4 1 P.T.O.
Download More:- https://www.ignouassignmentguru.com/papers
(b) Why is depreciation charged ? Explain the

two methods of charging depreciation. In
which method the value of the asset is
reduced to zero earlier ? Which one is more
rational ? Explain why ?
3. "Financial Leverage is one of the important

considerations in planning the capital structure
of a company." Explain this statement giving an
example. Briefly describe the other factors which
are also considered while planning the Capital
structure.
4. Distinguish between :
(a) Profit maximisation and Wealth
maximisation goals.
(b) Accounting Rate of Return and Internal Rate
of Return.
(c) Operating Cash flows and Financial cash
flows.
(d) Direct Labour Rate Variance and Direct
Labour Efficiency Variance.
5. Explain fully the following statements :

(a) "Break - even Analysis is not without
limitations".
(b) "Lenders prefer high interest coverage
ratio but a low debt-equity ratio".
MS-4 2
(c) "Weighted average cost of capital would

always be higher, if market value weights
are used."
(d) Zero - based budgeting is a better

alternative to traditional method of
budgeting.
6. (a) "Sales Budget forms the basis on which all

other budgets are built ." Explain.
What factors are taken into consideration

while preparing the sales budget ? Discuss.
(b) What is Rolling Budget ? How does it

differ from flexible Budget ? What purposes
do these budgets serve ? Explain.
7. India Cables Ltd. is manufacturing a special type

of cable used by electricity undeAakings the
company is currently working at 80% capacity
level. Data on annual sales and costs are as
follows:
Sales Rs. 1,200 lakhs
Direct materials Rs. 560 lakhs
Direct Labour Rs. 2210 lakhs

Factory overheads Rs. 180 lakhs
(80%fixed)
MS-4 3
Selling, distribution and
Administration expenses Rs 100 lakhs
(60% variable)
The company has just received an export order

which requires utilisation of 40% of the plant
capacity. The order can not be split and has to be
executed in one lot as quickly as possible. The
price offered is 10% lower than the current
domestic price. Further, it will be necessary to
spend 10% more on variable selling distribution
and administration expenses because of the
special type of export packing required. The
company is considering the following options.
(a) reject the export order and carry on with

the domestic sales.
(b) accept the export order and allow the

domestic sales to fall to the extent required.
(c) Create additional plant capacity by

installing new machinery which will result
in increase of fixed costs by Rs. 20 lakhs per
annum.
Evaluate each of these options and suggest

the best course of action for the company,
assuming that the export order will continue
in future years also.
MS-4 4 P.T.O.
8. From the following details furnished by Global

Traders for the year ended March 31,2010
prepare its Balance Sheet as on that date :
Current Ratio 1.75

Quick Ratio 1.25
Gross Profit Ratio 25%
Reserves and surplus : capital 0.2
Stock Turnover 9
(cost of sales : closing stock)
Average collection period of 11/2 months
credit sales
Cost of sales : Fixed Assets 1.2
Debt : Equity Ratio 0.6
Fixed Assets : Net worth 1.25
The firm sells its products only on credit, credit sales
for the year ended March 31,2010 amounted to
Rs. 120 lakhs.
MS-4 5
No. of Printed Pages : 5 MS-4

Term-End Examination
June, 2012
18650

MANAGERS
marks. Use of calculators allowed. Present value and
annuity tables are to be provided if asked for.
1. What is meant by Capital Structure of a company ?

What factors are taken into account while
designing the Capital structure ? Does the
dividend policy affect the Capital structure ? If
so, explain.
2. (a) Differentiate between "Schedule of Changes

in Working Capital" and "Fund Flow
Statement".
(b) How is "Cash from operating activity"
calculated in Cash flow statement ? Explain
with help of an example.
3. (a) Explain the Accrual Concept, Consistency

Concept and the Periodicity concept of
accounting.
MS-4 1 P.T.O.
(b) Explain Internal Rate of Return and

distinguish it from Accounting Rate of
Return.
4. What are the important decisions of Finance

Function ? Explain their importance and
relevance in Financial Management.
5. (a) The 'Cost-Volume-Profit' relationships

provide management with a simplified
framework for organizing its thinking on a
number of problems". Discuss.
(b) Beta Ltd. furnishes you the following
income information for the current year
divided in two sub-parts.
First Half Second Half

Sales Rs. 8,10,000 Rs. 10,26,000
Profit earned 21,600 64,800
From the above , you are required to

compute the following, assuming that the
fixed cost remains the same in both periods.
(i) Profit /Volume Ratio
(ii) Fixed Cost
(iii) Amount of profit or loss when sales
are Rs. 6,48,000.
(iv) Amount of sales required to earn a
profit of Rs. 1,08,000.
MS-4 2
6. The ABC Company Ltd. makes only one
product. The standard variable costs for the unit
are :
Direct Material : 1 unit @ Rs. 0.50 Rs. 0.50
Direct Labour : 1 hour @ Rs. 2.00 2.00
Variable overhead : 1 hour Rs.@ 1.50
Total variable cost per unit 4,.00
There are no initial inventories. Production for the

month of September was 10,000 units. The
production costs are as follows :
Material purchased (15,000 units @

Rs. 0.40) Rs. 6,000
Material used (units) 11,000
Direct labour, 9,000 hours @ 2.10 18,900
Variable overhead 16,000
The overhead rate is based on direct

labour-hours. Calculate the relevant variances.
7. (a) What do you understand by Return on

Investment ? How does it differ from Net
Profit Margin ?
(b) From the following information of a textile
company, complete the performa balance
sheet if its sales are Rs. 32,00,000.
MS-4 3
Sales to net worth 2.3 times

Current debt to net worth 42%
Total debt to net worth 75%
Current ratio 2.9 times
Net sales to inventory 4.7 times
Average collection period 64 days
Fixed assets to net worth 53.2 %
Proforma Balance Sheet

Net worth .... Fixed assets ....
Long-term debt. .... Cash ....
Current debt. .... Stock ....
Sundry debtors ....
8. An existing company has a machine which has

been in operation for 2 years ; its remaining
estimated useful life is 10 years, with no salvage
value at the end. Its current market value is
Rs.1,00,000. The management is considering a
proposal to purchase an improved model of a
similar machine, which gives increased output.
The relevant particulars are as follows :
MS-4 4 P.T.O.
Existing
New Machine
Machine
Purchase Price Rs. 2,40,000 Rs. 4,00,000
Estimated life 12 years 10 years
Salvage Value Nil Nil
Annual operating hours 2,000 2,000
Selling price per unit Rs. 10 Rs. 10
Output per hour 15 units 30 units
Material cost per unit Rs. 2 Rs. 2
Labour cost per hour 20 40
Consumable stores per
year 2,000 5,000
Repairs and maintenance
per year 9,000 6,000
Working capital 25,000 40,000
The company follows the straight line method of

depreciation and is subject to 50% tax. Should the
existing machine be replaced ? Assume that the
company's required rate of return is 15%.
MS-4 5

cN1 December, 2012
00
O
MANAGERS

marks. Use of calculators is allowed. Present value and
annuity tables are to be provided if asked for.
1. "Accounting is closely connected with control".

Elaborate this statement and discuss the role of
accounting feedback in the process of control.
2. (a) Differentiate between "Fund Flow

Statement" and Cash Flow Statement".
(b) How is a Statement of Change in Working
Capital" prepared ? Explain with the help
of an illustration.
3. (a) What do you understand by Budgetary

Control in a modern business ? Explain
flexible Budget and distinguish it from fixed
Budget.
(b) Distinguish between Business Risk and
Financial Risk.
MS-4 1 P.T.O.
4. (a) What factors are taken into consideration

while determining the dividend policy of a
company ?
(b) Why do the Companies Capitalise their

reserves ? What is its affect on the price of
the shares of the Company ?
5. (a) What is Break Even Point ? How is it

calculated graphically ? What are the
assumptions made for it ?
(b) From the following data relating to a

company, calculate :
(i) The break - even sales, and
(ii) Sales required to earn a profit of

Rs. 6,000 per year.
Years Total Sales Total Costs

2010 Rs. 42,500 Rs. 38,700
2011 Rs. 39,200 Rs. 36,852
6. From the following data of ABC Ltd. relating to

the budgeted and actual performance for the
month of March, compute direct material and
direct labour cost variances.
MS-4 2
Budgeted data for March :

Units to be manufactured 1,50,000
Unit of Direct material required (based on
standard rates) 4,95,000
Planned purchase for raw material (units) 5,40,000
Average unit cost of direct material (Rs.) 8
Direct labour - hours per unit of finished goods 0.75
Total direct labour costs (Rs.) 29,92,500
Actual data at the end of March :
Units actually manufactured 1,60,000
Direct material costs (purchase costs based on
units actually issued) 43,41,900
Direct material costs (purchase costs based on
units actually purchased) 45,10,000
Average unit cost of direct material (Rs.) 8.20
Total direct labour - hours for March 1,25,000
Total direct labour costs for March (Rs.) 33,75,000
7. (a) Discuss the ratios which reveals the

profitability of a business.
(b) Using the following data, complete the
balance sheet given below.
Gross profit (20% of sales) Rs. 60,000

Shareholder's equity Rs. 50,000
Credit sales to total sales 80%
Total assets turnover 3 times
Inventory turnover (to cost of sales) 8 times
Average collection period (a 360 day
year) 18 days
Current ratio 1.6
Long term debt to equity 40%
MS-4 3 P.T.O.
Balance Sheet
Liabilities Rs. Assets Rs.
Creditors Cash
Long - term debt Debtors
Shareholder's equity Inventory .............
Fixed assets .............
8. A company is considering the replacement of one

of its moulding machines. The existing machine
is in good operating condition, but is smaller than
required if the firm is to expand its operations.
The old machine is 5 years old, has a current
salvage value of Rs 30,000 and a remaining
depreciable life of 10 years. The machine was
originally purchased for Rs 75,000 and is being
depreciated at Rs 5,000 per year for tax purposes.
The new machine will cost Rs 1,50,000 and will
be depreciated on a straight line basis over
10 years, with no salvage value. The management
anticipates that, with the expanded operations,
there will be need of an additional net working
capital of Rs 30,000. The new machine will allow
the firm to expand current operations, and thereby
increase annual revenues of Rs 40,000 and
variable operating costs from Rs 2,00,000 to
Rs 2,10,000. The company's tax rate is 55% and
its cost of capital is 10%. Should the company
replace its existing machine ?
MS-4 4
Term-End Examination )
June, 2013

MANAGERS

marks. Use of calculators is allowed.
1. (a) Explain the Business Entity Concept and the

Consistency Concept. Can a company
deviate from following the consistency
concept ? If so, when and how ?
(b) "Accounting is closely associated with

control". Explain the statement and discuss
the role of accounting feedback in the
process of control.
2. "Every organisation, irrespective of its size and

nature, has to determine the optimum cash
balance". Why ? How is such optimum level
determined ? Explain the Control Theory in this
regard.
MS-4 1 P.T.O.
3. Explain the concepts of financial and operating

leverages. How is the degree of these leverages
measured ? What is the effect on the firm's net
income and earnings per share, if the use of both
these leverages is considerable ? Explain giving
reasons.
4. (a) What is meant by Net Present Value ? Why

is profitability index considered useful ?
(b) How does depreciation act as a tax shield ?

Explain the methods of charging
depreciation, under which method
the value of the asset is reduced to zero
earlier ? Explain.
MS-4 2
5. Following were the balance sheets of X Co. Ltd.

as on 31st December 2010 and 31st December
2011.
Liabilities 2010 2011 Assets 2010 2011

Equity Share Goodwill 50,000 40,000
3,00,000 4,00,000
Capital
Preference Land and
2,00,000 - 1,80,000 2,40,000
Share Capital Building
Profit and Loss Plant and
30,000 70,000 1,60,000 2,20,000
A/c Machinery
Gen. Reserve 60,000 70,000 Investments 60,000 1,10,000
Capital Stock 1,80,000 1,60,000
Redemption - 1,00,000
Reserve
10% Debenture 1,00,000 2,00,000 Bills 35,000 45,000
Receivable
Creditors 30,000 50,000 Debtors 1,10,000 1,40,000
Proposed Cash at
30,000 40,000 50,000 90,000
Dividend Bank
Provision for Preliminary
40,000 45,000 20,000 10,000
Tax Expenses
Provision for
Depreciation on
40,000 60,000
Plant and
Machinery
Bills Payable 15,000 20,000
8,45,000 10,55,000 8,45,000 10,55,000
Additional Information :
(a) During 2011, a part of machinery costing

Rs. 50,000, whose upto date depreciation
was Rs. 20,000 was sold for Rs. 25,000.
MS-4 3
(b) During 2011 a part of the building costing

Rs. 90,000 whose upto date depreciation
was Rs. 50,000 was sold for Rs. 70,000,
depreciation on building for 2011 was
Rs. 15,000.
(c) During 2011 preference shares were
redeemed at a premium of 10%, partly out
of a new issue of equity shares at par and
partly out of profit.
(d) Tax paid during the year amounted to
Rs. 35,000.
(e) During 2011 an interim dividend of
Rs. 20,000 was paid in addition to the
proposed dividend.
(f) Debentures was issued at a discount of 10%.
Prepare a statement showing the changes in the
Working Capital and a funds flow statement for
the year ended on 31st Dec. 2011.
6. From the following data find out :

(a) BEPs in value and volume.
(b) What would be the value and volume of
sales, if products are sold to make a profit
of Rs. 1,20,000 ?
(c) If the selling price per unit is reduced by
Rs. 20 what would be the BEPs in value and
volume ?
MS-4 4 P.T.O.
Material per unit Rs. 50

Labour per unit Rs. 80
Variable overheads per unit 75% of labour
cost
Selling Price per unit Rs. 250
Total fixed overheads Rs. 2,40,000
7. From the following ratios and further information

given below, prepare a trading and profit and loss
A/C and a balance sheet.
Fixed Assets/Capital 5/4
Fixed Assets Rs. 5,00,000
Capital Liabilities 1/2
Net Profit/Capital I /5
Stock Turnover Ratio 10
Fixed Assets/Total Current Assets 5/7
Net Profit to Sales 20%
[c losing Stock Rs. 50,000
Out of the current assets, sundry debtors are
Rs. 6,00,000 and the balance represents cash and
closing stock.
8. Write notes on :
(a) Zero Base Budgeting
(b) Direct Labour Variance
(c) Contingent Liabilities
(d) Absorption Costing
MS-4 5

December, 2013

MANAGERS

1. (a) Explain the concept of conservations and

the continuity concept. Why is the former
concept also called the concept of
producer ?
(b) Explain the two methods of valuation of

inventories. Under which method the
valuation of inventory will be higher in an
inflationary economy and why ?
MS-4 1 P.T.O.
2. Explain the concept of Net Working Capital.

What factors are taken into consideration while
determining the quantum of working capital for
a firm ? Discuss.
3. What do you understand by Budgetary Control ?

Explain its significance in modern business. How
would you instal budgetary control in an
organisation ? Explain.
4. Explain the concept of Cost of Capital. How is

Weighted Average Cost of Capital Computed ?
Explain its significance in Capital Budgeting
decisions.
5. Balance sheets of ABC and Co. as on 31St March

2010 and 2011 are as follows :
MS-4 2
C) 0 0
31.3.2011
0 0 0 C> CD 0
0 0 0 0 0 C>
VI 0 0 0 0 C)
C:' 0 o I'
-6
c) Is) Ni ca3' GO o 0 CN
N if) Ch
•71q t`..‘ O If) c-,
1"
,--, N-■ c.ri 06 N.' '711 00 Lf)
31.3.2010
0 0 0
0 0 0 0 0 0
Cli 0 0 0 0 0 0 0
o o o c) o 6.
O' c= O c)
O o O' ca O' oO ,, Nl~
N
O oo
00 o
O O;
tri CO ca .1.1 a:
r-i ,---, ,i.■
..,tz ..6 in r-I .14
b.() C1) 6
u) _x
• .5 cu
-a 4
X =
V)
CI)
+ +
cn .,
s-, -ci
0 crs
2) ti ,ID :).., 4
,
CZ ■•vs•1 .1.40 ,.....ci.) ;•.v1 m
1■.1 PI F.■ 1 cn i--1 P-, U
31.3.2011
52, 95, 000

o o o o 0 0 C> 0
ci5 C> 0 0 0 0 0 C> 0
0 0 0 0 0 o 0 0
O
O c: O O, O c c) ca; ca>
in .0 c) o co c) .0 N
O U")
N •71",' cli' 06 •SS,' Lr> N c-n- ,---■
000/ 0Z '6f
O c)
31.3.2010
c) o 0 0 C> 0
0 C> 0 0 0 0 C:) C>
Cl) c) CD 6, 0 0 0 0 0
o
0'
6 <=3. c:3 0 O' ,a3' o O' c:3
6. CD in o o 6. o o
O
N .7t∎ N ,-, LI) .7t+ N cri ,• ■
,----.
u a) cr) 0
-ti ---■
cn .t to cu .
CI cu xz4
Liabilities
cu (1)
> ^J cz
7,c; a) ..o1
,.. ■
-I >
, t ),
sa., C2I '21
cs
C.) 7,,d ccs ,-,
c1) ,- 0
., ,..
al c)
(i) •C
-■
;-, -,-.-■
1-1 .-- .,-, 0
Cu
(I) .z., -0 cr) 0_, .4
ct „, 0 j,' Cu -' 0 0
O
4 s., ; c) cis ;-■
Cl) C.) P-■ I—I = U 0
MS-4 3
(a) New machinery for Rs. 3,00,000 was

purchased and an old machinery costing
Rs. 1,45,000 was sold for Rs. 50,000.
Accumulated depreciation thereon was
Rs. 75,000.
(b) 10% Debentures was redeemed at 20%

premium.
(c) Investments was sold for Rs. 45,000 and its

profit was transferred to general reserve.
(d) Income Tax paid during the year 2010-11

was Rs. 80,000.
(e) An interim dividend of Rs. 1,20,000 was

paid during the year 2010-11.
(f) Assume the provision for taxation as current

liability and proposed dividend as
Non-current liability.
(g) Investments are non-trade investments. You

are required to prepare :
(i) Scheduled of changes in Working

Capital and
(ii) Funds flow statement.
MS-4 4 P.T.O.
6. A company manufactures a product, currently

utilising 80% capacity with a turnover of
Rs. 8,00,000 at Rs. 25 per unit. The cost data are
as follows :
Material Cost is Rs. 7.50 per unit
Labour Cost is Rs. 6.25 per unit
Semi - Variable Cost (including the variable cost

of Rs. 3.75 per unit) is Rs. 1,80,000.
Fixed Cost is Rs. 90,000 upto 80% level of the

output and beyond this, an additional amount of
Rs. 20,000 will be incurred.
You are required to calculate :
(a) Activity level at BEP
(b) No. of units to be sold to earn a net income

of 8% of sales.
(c) Activity level needed to earn a profit of

Rs. 95,000.
(d) What should be the Selling Price per unit, if

the BEP is to be brought down to 40%
activity level.
MS-4 5 P.T.O.
7. From the following information prepare Profit and

Loss A/c for the year ended on 31st March 2011
and a Balance Sheet as on that date.
Current Assets to Stock 3:2
Current Ratio 3
Acid Test Ratio 1
Financial Leverage 2.2
Earning Per Share Rs. 40
Book Value Per Share Rs. 100
Average Collection Period - 30 days
(assume 360 days in a year)
Stock Turnover Ratio 5
Fixed Assets Turnover Ratio 5.6
Total Liabilities to Net worth 3.75
Net Working Capital Rs. 10,00,000
Net Profit to sales 10 %
Variable Cost 60%
Interest on Long Term Loans 12%
Tax NIL
8. Write notes on :
(a) Sales Variances
(b) Trading on Equity
(c) Marginal Costing
(d) Net Present Value Method
MS-4 6
No. of Printed Pages 5 MS-4
Term-End Examination ) 14 0
June, 2014

MANAGERS

1. (a) Explain the concept of conservatism in

accounting and describe its importance.
Why should conservation be applied
rationally ? Explain.
(b) What are the uses of earnings
information ? How is the value of the
business ascertained with the help of
earnings ? Explain with an example.
2. (a) What is meant by Cash Cycle ? How is the
duration of Cash Cycle measured ? Explain
with an example.
(b) Explain the two methods of Inventory
Valuation with an example. In an
inflationary situation, which method will
give high value of the inventory, other things
remaining the same ? Explain.
MS-4 1 P.T.O.

Discuss its significance in a modern business and
explain the steps for installing an effective system
of budgetary control in an organisation.
4. Discuss the factors that are taken into

consideration by a company while taking a
decision on dividend to be declared. Under what
circumstances companies issue Bonus Shares ?
What is the effect of issuance of Bonus Shares on
the Debt Equity Ratio and the D.P.S. if other
things remain the same ? Give reasons.
5. "While planning the capital structure, debt

should be used judiciously". Explain this
statement and describe the various factors that
are considered by the promoters of a company
while planning the capital structure.
6. Explain the following statements :

(a) A very high current ratio is not desirable.
(b) High operating leaverage together with
high financial leverage results in a risky
situation.
(c) Lower the break-even point, better it is.
(d) Profitability index is more significant in
evaluation of projects than Internal Rate
of Return.
7. A company produces a single product which is

sold by it presently in the domestic market at
Rs.75 per unit. The present production and sales
is 40,000 units per month representing 50% of
the available capacity. Cost data of the product
are as follows :
MS-4 2
Variable costs per unit : Rs. 50

Fixed costs per month : Rs. 10 lakh.
To improve the profitability the management has
3 proposals on hand as follows :
(a) to accept an export supply order for 30,000
units per month at a reduced price of Rs. 60
per unit, incurring additional variable cost
of Rs. 5 per unit towards export packing,
duties, etc.
(b) to increase the domestic market sales by
selling to a domestic chain store 30,000 units
at Rs. 55 per unit retaining the existing sales
at the existing price.
(c) to reduce the selling price of the entire
increased domestic sales, as advised by the
sales department, as under :
Reduce selling price per Increase in expected

unit by Rs. sales (in units)
5 10,000
8 30,000
11 35,000
Prepare a table to present the results of the

above proposals and give your comment
and advice on the proposals.
8. You have the following information on the

performance of XYZ Ltd. and also the industry
averages. You are required to determine the
indicated ratios for the company and explain the
company's strengths and weaknesses as shown
by your analysis.
MS-4 3
Balance sheet as on 31St Dec. 2013

Liabilities Rs. Assets Rs.
Equity share capital 24,00,000 Net fixed assets 12,10,000
10 % debentures 4,60,000 Cash 4,40,000
Sundry creditors 3,30,000 Sundry debtors 5,50,000
Bills payable 4,40,000 Stock 16,50,000
Other current 2,20,000
liabilities
38,50,000 38,50,000
Statement of profit for the year ending
31st Dec. 2013.
Rs.
Sales 55,00,000
Less : Cost of Goods Sold :
Materials 20,90,000
Wages 13,20,000
Factory overheads 6,49,000 40,59,000
Gross profit 14,41,000
Less : Selling and Distribution cost 5,50,000
Administrative and General 6,14,000 11,64,000
expenses
Earnings before Interest and Taxes 2,77,000
Less : Interest charges 46,000
Earnings before Taxes 2,31,000
Less : Taxes (50%) 1,15,500
Net profit 1,15,500
MS-4 4 P.T.O.
Industry Ratios
Current Ratio 2.4
Debtor Turnover Ratio 8.0
Inventory Turnover Ratio 9.8
Sales / Total Assets 2.0
Net Profit Ratio 3.3%
Net Profit / Total Assest 6.6%
Net Profit / Net Worth 10.7%
Total Debts / Total Assests 63.5%
MS-4 5

December, 2014

MANAGERS

1. (a) What do you understand by Accounting

Standards ? Why are they necessary ?
Explain with examples.
(b) Explain Money Measurement and
Continuity Concepts in accounting and
discuss the limitations of the former concept.
2. (a) What do you understand by the term
'provisions' ? For what purposes are
provisions made and how are they shown
in the final accounts ? Why are pre - paid
expenses and Net loss shown on the asset
side of the balance - sheet ?
(b) Distinguish between :
(i) Current liabilities and Contingent
liabilities
(ii) General Reserves and Specific
Reserves.
MS-4 1 P.T.O.
3. Explain the Internal Rate of Return method of

appraisal of investment proposals. Point out its
merits and limitations. Is this method related to
the Pay Back method ? Explain.
4. What do you understand by Break - even

analysis ? Explain with the help of a chart. Are
there any assumptions underlying the Break -
even analysis ? Explain how do these assumptions
make Break - even analysis unrealistic ?
5. Discuss the concepts of Gross and Net Working

Capital. What factors are taken into
consideration while determining the amount of
working capital for a business entity ? How does
a low Inventory Turnover Ratio affect the working
capital needs of a firm ?

(a) Dividend, Investment and Financing
decisions are inter-dependent.
(b) Debt is a double - edged knife.
(c) Higher profit margin need not necessarily
lead to higher rate of return on investment.
(d) Retained earnings do have a cost.
MS-4 2
7. A company produces 30,000 units of product - A

and 20,000 units of product - B per annum. The
sales value and costs of the two products are as
follows :
Z
Sales Value 7,60,000
Direct Material 1,40,000
Direct Labour 1,90,000
Factory Overheads 1,90,000
Administrative and Selling
overheads 1,20,000
50% of the factory overheads are variable and 50%
of the administrative and selling overheads are
fixed. The selling price of A is Z 12 per unit and B
is Z 20 per unit.
The direct material and labour ratio of
product A is 2 : 3 and for B is 4 : 5. For both the
products the selling price is 40% of direct labour.
The factory overheads are charged in the ratio of
direct labour and administrative and selling
overheads are recovered at a flat ! 2 per unit of A
and Z 3 per unit of B.
Due to fall in demand of the above products
the company has a plan to diversify and make
product - C using 50% capcity. It has been
estimated that for product - C direct material and
direct labour cost will be ! 2.50 and Z 3 per unit
respectively. Other variable costs will be the same
as applicable to product - A. The Selling Price of
MS-4 3
product - C is 14 per unit and production will be

30,000 units. Assuming 50% capacity is used for
manufacture of A and B, calculate :
(a) Present costs and profit,
(b) Costs and profit after diversification and
(c) Give your recommendation as to whether
to diversify or not
8. From the following balance sheets prepare a
statement of changes in working capital and the
Funds flow statement for the year 2012.
Particulars 2011 2012 Particulars 2011 2012
Liabilities Z Z Assets Z Z
Share Capital 6,00,000 7,00,000 Fixed Assets 10,00,000 12,00,000
General Reserve 2,00,000 2,50,000 Less : 2,00,000 2,50,000
Accumulated
Depreciation
Capital Reserve - 10,000 8,00,000 9,50,000
(Profit on sale Investments (at 1,80,000 1,80,000
of investments) cost)
Profit and Loss 1,00,000 2,00,000 Stock (at cost) 2,00,000 2,70,000
Account
7% Debentures 3,00,000 2,00,000 Sundry debtors 2,25,000 2,45,000
(Less Provisions
for Z 20,000
and Z 25,000
respectively)
Creditors for 10,000 12,000 Bills Receivable 40,000 65,000
expenses
Creditors for 1,60,000 2,50,000 Pre-paid 10,000 12,000
supply of goods expenses
Proposed 30,000 35,000 Mis. Expenses 15,000 10,000
Dividend
Provision for 70,000 75,000
taxation
14,70,000 17,32,000 14,70,000 17,32,000
MS-4 4 P.T.O.
Other information :
(a) During the year 2012 fixed assets (WDV
Z 10,000, depreceation written off
Z 30,000) was sold for Z 8,000
(b) Proposed Divident for last year was paid in
2012.
(c) During the year 2012 investments costing
Z 80,000 were sold and later in the year
investments of the same cost were
purchased.
(d) Debentures were redeemed at a premium
of 10% in 2012.
(e) Liability for taxation for 2011 came to
Z 55,000.
(f) During the year 2012 bad debts written off
were Z 15,000 against the provision account.
MS-4 5

June, 2015

MANAGERS
Note : (i) Attempt any five questions.
(ii) All questions carry equal marks.
(iii) Use of calculators is allowed.
1. (a) What do you understand by Accounting
Standards ? How do they differ from
Accounting Concepts ? Why should the
accounting practices be standardised ?
Explain.
(b) Explain the 'Money Measurement Concept'
and the 'Accrual Concept'. What are the
limitations of the former concept ? Explain.
2. (a) What are intangible assets of a firm ? Why

are they shown in the Balance Sheet ? What
is meant by amortisation of such assets ?
Give reasons for the same.
(b) What do you understand by Appropriation
of profits of a company ? How are the profits
appropriated ? What will be the effect on
appropriation of profit of a company if :
MS-4 1 P.T.O.
the company has issued debt instead

of equity shares to finance its
activities, and
the accountant has treated a revenue
expenditure as capital expenditure.
3. What do you understand by cost of capital ? What

is its significance in financial decision making ?
Explain how is the weighted average cost of
capital computed ?
(a) Contingent liabilities and accrued liabilities.
(b) Funds from Operations and Net Profit
(c) Straight line Method and Written down
Value Method of charging depreciation
(d) Direct Material Price Variance and Direct
Material usage Variance
5. (a) "Other things remaining the same, firm with

relatively stable sales are able to incur
relatively high debt ratio". Do you agree
with this statement ? Give reasons for your
answer.
(b) Explain fixed budget, flexible budget and
rolling budget. Point out the differences
between them and explain their utility for a
firm.
MS-4 2
6. Write explanatory notes on :

(a) Zero Based Budgeting
(b) Break even Point
(c) Capitalisation of Earnings
(d) Cumulative Preference Shares and
Redeemable Preference Shares.
7. The management of M/s Rama Ltd. has prepared

the following estimates of working results for the
year ending 31s1 larch 2013 for the purpose of
preparing the budget for the year ending
31st March 2014 :
Direct material Z 8 per unit

Direct wages Z 20 per unit
Variable overheads Z 6 per unit
Selling Price Z 62.50 per unit
Fixed overheads Z 3,37,500 per annum
Sales Z 12,50,000 per annum
It is expected that during 2013-14 the material

prices and variable overheads will go up by 10%
and 5% respectively. As a result of re-organisation
of production methods the overall direct labour
efficiency will increase by 12% but the wage rate
will go up by 5%. The fixed overheads are
expected to increase by 62,500.
The marketing manager states that market
will not absorb any increase in the selling price.
However, he is of the view that if expenditure on
advertisement is increased, the sales quantity will
increase as under :
MS-4 3
Advertisement
40,000 97,000 1,60,000 2,30,000
Expenses (Z)
Additional Sales (units) 2000 4000 6000 8000
You are required to

(a) Prepare an Income Statement for the year
2012-13 and
(b) Evaluate the four alternative proposals and
determine the best sales level to be budgeted
and prepare an overall Income Statement
for 2013-2014 at that level of output and
sales.
8. Summarised Balance Sheet and Profit and Loss

Account of a company is given below.
Determine the following ratios and comment on
the health of the company basing your
conclusions on the industry averages given
below :
Inventory Turnover Ratio 10
Investment Turnover Ratio 1.5
Sales Margin 3.5%
Profit/Assets employed 4.0%
Profit/Net worth 11.5%
Average Realization time 45 days
Debt/Equity ratio 3.2
Balance Sheet
Z Crore Z Crore
Equity 96.8 Net Block 48.4
Secured Loans 17.6 Stocks 66.0
Creditors 13.2 Debtors 22.0
Overdraft 17.6 Bank Balance 17.6
Income Tax due 8.8
154.0 154.0
MS-4 4 p.T.o.
Profit and Loss Account

Z Crores ? Crores 1
Materials 83.6 Sales 220.0
Manpower 52.8
Energy 8.0
Factory Expenses 13.2
Depreciation 4.8
Selling Expenses 22.0
Administration 18.0
Interest 1.6
Profit 16.0
220.0 220.0
MS-4 5
No. of Printed Pages : 5 I MS-4

December, 2015

MANAGERS
Note : (i) Attempt any five questions.
(ii) All questions carry equal marks.
(iii) Use of calculators is allowed.
1. (a) Explain the 'Accrual Concept' and the

'Consistency Concept' in accounting and
signify their importance to an accountant.
(b) Distinguish between 'Operating Profit' and
'Net Profit'. Which is a measure of
operational efficiency of a company ?
Distinguish between Capital expenditure
and Revenue expenditure. Which is taken
into account for determining the Operating
Profit ?
2. What do you understand by Fund Flow

Statement ? How does it differ from a Cash Flow
Statement ? Explain the main items which are
shown in the fund flow statement and the
purpose of preparing this statement.
MS-4 1 P.T.O.
3. What do you understand by Discounted Cash

Flow Techniques of Capital Budgeting ? Briefly
explain the Net Present Value Method and
Internal Rate of Return Method of appraisal of
projects. Which of the two would you rank better
and why ?
(a) Profitability Index and Profitability Ratios.
(b) Earnings Yield and Dividend Yield.
(c) Fixed Budget and Flexible Budget.
(d) Direct Labour Rate Variance and Direct
Labour Efficiency Variance.
5. Explain the following statements, giving

reasons :
(a) Debt is a double-edged weapon.
(b) Depreciation acts as a Tax Shield.
(c) Fixed Costs are variable per unit and
Variable Costs are fixed per unit.
(d) When the use of operating and financial
leverages is considerable, small changes in
sales will produce wide fluctuations in
Return on Equity and E.P.S.
6. "Zero-based Budgeting provides a solution for

overcoming the limitations of a traditional
budget". Explain this statement and describe the
process of preparing a Zero-based Budget.
MS-4 2
7. Following is the abridged Balance Sheet of ABC

Company Ltd. as on 31st March 2013.
Balance Sheet as on 31 M March 2013

Liabilities Z Assets Z
Share Capital 1,00,000 Land and Building 80,000
Profit and Loss A/c 17,000 Plant and Machinery 50,000
Current Liabilities 40,000 Less : Depreciation 15,000 35,000
Stock 21,000
Debtors 20,000
Bank 1,000
1,57,000 1,57,000
With the help of additional information given

below, you are required to prepare Profit and Loss
Account and a Balance Sheet as on 31st March
2014.
(a) The Company went in for re-organisation
of capital structure with the share capital
remaining the same but other liabilities were
as follows :
Share Capital 50%
Reserves 15%
5% Debentures 10%
Trade Creditors 25%
Debentures were issued on 1st April,
interest being paid annually on 31st March.
(b) Land and Buildings remain unchanged.

Additional Plant and Machinery has been
purchased and a further depreciation
(f 5000) written off.
(The total fixed assets then constructed 60%
of the total gross fixed and current assets.)
MS-4 3
(c) Working Capital Ratio was 8 : 5.

(d) Quick Assets Ratio was 1 : 1
(e) Debtors (4/5th of quick assets) to sales ratio

revealed a credit period of 2 months. There
were no cash sales.
(f) Return on Net Worth was 10%.
(g) Gross Profit was @ 15% of sales.
(h) Stock Turnover was eight times for the year
ignore taxation.
8. While finalising the plans for the Coming Year

the excutives of XYZ Co. Ltd. thought that it will
be advisable to have a look at the product-wise
performance during the current year. The
following information is furnished :
Particulars Product A 7 Product B 7 Product C 7
Unit Selling Price (i) 80 60 36

Direct Material 28 24 16
Direct Labour 20 12 12
Factory Overheads :
Variable 8 6 4
Fixed 8 6 1.28
Cost of Production 64 48 33.28
Selling, Distribution and
General Administrative
Expenses :
Variable 4 2 2
Fixed 4 6 1.52
Unit cost (ii) 72 56 36.80
Unit Profit/Loss (i)-(ii) 8 4 (0.80)
Sales Volume (Units) 10,000 15,000 15,000
Profit (Loss) 80,000 60,000 (12000)
MS-4 4 P.T.O.
For the coming year, the selling price, and costs

of the three products are expected to remain
unchanged. There will be an increase in Sales of
Product A by 1000 units and of Product C by 8000
units. Sales of Product B will remain unchanged.
Sufficient additional capacity exists to enable the
increased demand to be met without incurring
additional fixed cost. Some executives contend
that it will be unwise to go for additional
production and Sale of Product C as it is already
losing 0.80 per unit. Their suggestion is to
eliminate Product C altogether. Give your advice
and determine product-wise and overall profit for
the coming year.
MS-4 5

December, 2016 05733
MS-004: ACCOUNTING AND FINANCE FOR

MANAGERS
Note : (i) Attempt any five questions. All questions carry
equal marks.
(ii) Use of calculators is allowed.
1. (a) Explain the continuity concept and

consistency concept of accounting, giving
suitable examples.
(b) What do you understand by Capitalisation
of earnings ? How is the value of a firm
ascertained with the help of its earnings ?
Explain with an example.
2. (a) What do you understand by Net Worth of

a company ? What is the effect of
capitalisation of reserves on the net worth
of the Company and the Earnings Per Share
(EPS) of the company ? Explain with an
example.
(b) Explain the two methods (FIFO and LIFO)
of inventory valuation with example.
Under which method the value of closing
inventory would be higher, if inflationary
conditions prevail ? Give reason.
MS-004 1 P.T.O.
(a) Accounting is a service function.
(b) Depreciation acts as tax shield.
(c) PBIT is better indicator of a company's

profitability than PAT.
(d) Greater the variability of cash flows, higher

should be the minimum cash balance.
4. Distinguish between Operating Leverage and

Financial Leverage. What will be the effect of a
small change in sales on net income, return on
equity and earnings per share if both the leverages
are considerable ? Explain giving example and
reason.
What is Production Budget ? What factors

are taken into consideration while preparing
a Production Budget ? Explain.
What is a Rolling Budget ? Why is it

prepared ? Explain the procedure of
preparing rolling budget.
(a) Price-Earnings Ratio
(b) Accounting Standards
(c) Direct Material Cost Variance
(d) Cash Cycle
MS-004 2
7. A large manufacturing company has three

factories located at places A, B and C. All the
three factories produce the same product which
is sold at 375 per unit. Budgets for the year
2016 for the three factories are given below :
Z La kh
A B C Total
Sales 300 1200 600 2100
Cost of Sales :
Direct Materials 75 350 145 570
Direct Labour 75 280 140 495
Factory Overheads :
Variable 20 110 55 185
Fixed 40 120 60 220
Administrative Overheads 20 90 40 150
Selling and Distribution
Overheads :
Variable 23 70 40 133
Fixed 15 50 30 95
Head Office expenses allocated 12 50 30 92
Total 280 1120 540 1940
Profit 20 80 60 160
Lease of factory at A will expire on 31st December,

2015 and could be renewed by enhancing the
annual lease amount by 12 lakh. The
Management Accountant is therefore asked to
examine the following options, subject to the
additional information given below :
(a) Renew the lease and bear the impact.
MS-004 3
(b) Close down the factory at A and increase

the production of Unit B to meet the
demand hitherto met by A unit.
(c) Close down the factory at A and increase

the production of C unit to meet the
demand hitherto met by A unit.
(i) The sale products of the assets at A factory

will be sufficient to liquidate all liabilities
there.
If production of B factory is increased, the

variable cost for the additional output will
increase by Z 25 per unit to meet additional
freight and other costs. There will be an
increase of 50 lakh in the annual fixed
costs, inclusive of allocation of head office
costs.
If production of C factory is increased the

variable cost for the additional output there
will increase by 35 per unit. The annual
fixed cost of the factory will increase by
40 lakh, inclusive of allocated head office
costs.
You are required to examine the three options by

working out the comparative profit in each case
and give your recommendations.
MS-004 4 P.T.O.
8. From the following information of XYZ Ltd.

Prepare a statement showing changes in Working
Capital along with Funds Flow Statement.
31 st December 31 st December
Particulars
2013 2014
Investments 15,000 21,400
Land 9,000 9,000
Stock 85,000 80,000
Debtors 40,000 39,000
Plant and Machinery 81,000 1,05,000
(Accumulated Depreciation) (24,000) (26,000)
Patents 16,200 12,600
Cash 10,000 8,200
Total Assets 2,32,200 2,49,200
Current Liabilities 24,600 34,800
12% Debentures 43,400 -
14 % Debentures 39,000
Equity Share Capital 90,000 1,00,000
Reserve for Future Losses on
Retained earnings 68,200 71,800
Total Liabilities and Capital 2,32,200 2,49,200
(a) A reconciliation of the balances in retained
earnings is as follows :
Beginning Balance 68,200
Net Income for 2014 3,000
Award Received from settlement
of patent infringement case 15,600
Dividends (15,000)
Closing balance 71,800
MS-004 5 P.T.O.
(b) Net Income for 2014 includes a loss of Z 4,800

on the sale of a part of plant. The plant
was for Z 19,000 at the beginning of the
year, accumulated depreciation being
Z 6,000.
(c) Investments of Z 15,000 were sold during
the year at a loss. The loss was charged to
the Reserve for future loss on Investments
and did not appear on the Income
Statement.
(d) During the year 2014 the 12% debentures
were called for redemption. Most of them
were refunded through the issuance of new
14% Debentures and the rest were refunded
for cash.
(e) Equity shares were issued in exchange of
machinery. The rest of the plant and
machinery were purchased for cash.
MS-004 6
No. of Printed Pages : 4 I MS-004

CD) Term-End Examination
June, 2017

MANAGERS
Note : (i) Attempt any five questions. All questions carry
equal marks.
Explain the Money Measurement Concept

and the Accrual Concept. What are the
limitations of the former concept ? Discuss.
Discuss the two most commonly used
methods of charging depreciation. In which
method the written down value of a
machine becomes zero if depreciation is
charged at the same rate ? Give Reason.
(a) Contingent Liabilities and Accrued
Liabilities.
(b) Equity shares and Perpetual Preference
Shares.
(c) Appropriation of Profit and a charge on
Profit
(d) Internal Auditor and Controller.
MS-004 1 P.T.O.
3. Distinguish between Gross and Net Working

Capital. What factors are taken into
consideration while determining the quantum of
working capital for a business entity ?
4. What do you understand by Zero Base

Budgeting ? Explain the steps involved in Zero
Base Budgeting and also its advantages.
5. What is meant by Discounted Cash Flow Methods

of Capital Budgeting ? Explain the Net Present
Value Method for appraising the Investment
proposals. What is profitability Index and why is
it used for this purpose ?

(a) Direct Labour Efficiency Variance
(b) Trading on Equity
(c) Break - Even Analysis
(d) Bonus Shares and Rights Shares
7. What is Capital Structure ? Explain the features

of an appropriate Capital Structure and discuss
the determinants of Capital structure.
8. Before finalising the plans for the coming year the

executives of a company thought it advisable to
have a look as the productwise performance
during the current year. The following
information is furnished.
MS-004 2
Product Product Product

A
Z Z Z
Unit Selling Price 80 60 36
Direct Material 28 24 16
Direct Labour 20 12 12
Factory Overhead :
Variable 8 6 4
Fixed 8 6 1.28
Cost of Production 64 48 33.28
Selling, distribution
and General
Administration
Expenses :
Variable 4 2 2
Fixed 4 6 1.52
Unit Cost 72 56 36.80
Unit Profit (Loss) 8 4 0.80
Sales Volume (units) 10000 15000 15000
Profit (Loss) 80000 60000 (12000)
For the coming year, the selling price and costs of

the three products are expected to remain
unchanged. There will be an increase in Sales of
Product A by 1000 units and the increase in sales
of Product C is expected to be 8000 units. The
sales of Product B will remain unchanged.
Sufficient additional capacity exists to enable the
increased demand to be met without incurring
additional fixed costs.
MS-004 3 P.T.O.
Some executives feel that it will be unwise to go

for additional production and sale of Product C
since it is already losing Re 0.80 per unit. Hence
their suggestion is to eliminate Product C
altogether. Do you agree ? Substantiate with
necessary analysis. and determine the
product-use and over-all profit for the coming
year.
MS-004 4
No. of Printed Pages : 3 LMS-0041

-7r
December, 2017
0 MS-004: ACCOUNTING AND FINANCE FOR
MANAGERS
Explain the Business Entity Concept and the

Consistency Concept. Can a Company
deviate from following the Consistency
Explain the two methods of inventory
valuation with an example. Which method
will give high value of inventory in an
inflationary situation, other things
remaining the same ? Explain.
(a) Cash flows from Operating Activities and
cash flows from Investment Activities.
(b) Equity shares and the owners' Equity.
(c) Net Profit and Funds from Operations.
(d) Operating Profit and Retained Net Profit.
3. Explain the concepts of Financial Leverage and

Operating Leverage, giving examples. How is the
degree of these leverage obtained ? What will be
the consequence if the use of both of these
leverages is considerable ? Explain.
MS-004 1 P.T.O.
4. Explain the Internal Rate of Return method of

appraisal of investment proposals. Point out its
merits and limitations. Is this method related to
the Pay Back Method ? Explain.

Discuss , its significance in a modern business and
xplain the steps for installing an effective system
explain'

(a) Debt is a double - edged weapon.
(b) Very high Current Ratio is not desirable.
(c) Profit under Traditional costing system is
higher as compared to Marginal Costing
system.
(d) The greater the variability of cash inflows
the higher will be the requirement of
minimum cash balance.
7. Discuss the concept of working capital. Explain

the concept of operating cycle and discuss how
optimum cash balance is determined.
8. A Company manufactures a single product in its

factory utilising 60% of its capacity. The selling
price and cost details are given below :
Sales (6000 units ) 5,40,000

Direct Materials 96,000
Direct Expenses 18,000
Fixed Overheads :
Factory 2,00,000
Administration 21,000
Selling and
Distribution 25,000
MS-004 2
An analysis of fixed overheads reveals that 12.5%

of factory overheads and 20% of selling and
distribution overheads are variables with
production and sales. Administrative overheads
are wholly fixed.
Since existing product could not achieve the
budgeted level for two consecutive years, the
company decides to introduce a new product with
marginal investment but largely using the present
plant and machinery.
The cost estimates of the new product are as
follows :
Cost element Z Per Unit
Direct Materials 16.00
Direct Labours 15.00
Direct Expenses 1.50
Variable factory overheads 2.00
Variable Selling and Distribution 1.50
Overheads
It is expected that 2000 Units of the new product
can be sold as a price of 60 per unit. The fixed
factory overheads are expected to increase by 10%
while fixed selling and distribution expenses will
go up by 12,500 annually. Administrative
overheads remain unchanged. However, there
will be an increase of working capital to the extent
75,000. The company considers that 20%
pre-tax interest return on investment is the
minimum acceptable to justify any new
investment.
Should the new product be introduced ?
You are required to advise the company on this
point, giving full calculations.
MS-004 3
1/40 MANAGEMENT PROGRAMME

June, 2018
0
MS-004: ACCOUNTING AND FINANCE FOR
MANAGERS
1. Explain the various 'Accounting Concepts' and

discuss their application in preparation of Final
Accounts.
(a) Profitability Ratio and Profitability Index
(b) Revenue Expenditure and Capital
Expenditure
(c) Intangible Assets and Current Assets
(d) Amortisation and Depreciation
3. Explain the concepts of Financial Leverage and

Operating Leverage. Explain the effect on the
firms Net Income and EPS if the use of both the
leverages is considerable.

Discuss its significance in a modern business.
Explain the steps for installing an efficient system
MS-004 1 P.T.O.

(a) High profit margin need not necessarily
result in high rate of return on investment.
(b) As there is no explicit cost of retained
earnings, these are free of cost.
(c) Many reasons account for direct material
variances.
(d) Companies with very high profits generally
have a low pay out ratio.
6. "Irrespective of its size and nature, every business

organisation has to determine the appropriate or
optimum cash balance that it would need." In
the light of this statement, explain the methods
followed to determine such appropriate cash
balance.
7. With the help of the following ratios draw a

Balance Sheet of a company as on March 31, 2017:
Current Ratio 2.5
Liquidity Ratio 1.5
Net Working Capital Z 3,00,000
Stock Turnover Ratio
(Cost of Sales/Closing Stock) 6 times
Fixed Assets Turnover Ratio
(On Cost of Sales) 2 times
Debtor Collection Period 2 months
Fixed Assets to Shareholder's Net Worth 0.80
Reserves and Surplus to Capital 0.50
MS-004 2
8. A Company manufactures a single product in its

factory utilising 60% of its capacity. The selling
price and cost details are given below
Sales (6000 units) 5,40,000

Direct Materials 96,000
Direct Expenses 18,000
Fixed Overheads :
Factory 2,00,000
Administration 21,000
Selling and Distribution 25,000
12.5% of the Factory overheads and 20% of the

Selling and Distribution overheads are variable
with production and sales. Administration
overheads are wholly fixed.
Since existing product could not achieve budgeted

level for two consecutive years, the company
decides to introduce a new product with marginal
investment but largely using present plant and
machinery. The cost estimates of the new product
are as follows :
Direct Materials 16 per unit

Direct Labour 15 per unit
Direct Expenses 1.5 per unit
Variable factory overheads 2.0 per unit
Variable selling and
distribution overheads 1.5 per unit
MS 004
- 3 P.T.O.
It is expected that 2000 units of the new product

can be sold at a price of 60 per unit. The fixed
factory overheads are expected to increase by 10%
while fixed selling and distribution expenses will
go up by 12,500 annually. Administration
overheads remain unchanged. However, there
will be an increase of working capital to the extent
of 75,000/ -
The company considers 20% (pre-tax and pre-
interest) return on investment is the minimum
acceptable to justify new investment.
Should the new product be introduced ?
MS-004 4
No. of Printed Pages : 3 MS-004 I

tr)
‘.0
December, 2018
MANAGERS
Note : (i) Attempt any five questions. All questions carry equal
marks.
1. (a) Explain the concept of conservation in

accounting giving examples. Why should it
be applied rationally ? Explain.
(b) What is meant by Cash Cycle ? How is the
duration of Cash Cycle measured ? Explain
with an example and discuss its
significance.
(a) First in, First out and Last in, First out
(b) Funds from Operations and Net Profit
(c) Financial Accounting and Management
Accounting
(d) Opportunity Cost and Variable Cost
3. What do you understand by Weighted Average

Cost of Capital ? How is it Computed ? Explain
the significance of Weighted Average Cost of
Capital in planning the Capital structure of a
company.
MS-004 1 P.T.O.
4. (a) What do you understand by (i) fixed budget

and (ii) flexible budget ? How do they differ
from a Rolling Budget ? Explain the relative
merits and demerits of all of these budgets.
(b) What is a Cash Budget ? Why is it
prepared ? Does it include Operating Cash
flows only ? Explain giving reasons.

(a) Depreciation acts as a tax shield.
(b) Dividend, investment and financing
decisions are inter-dependent.
(c) "Lower the Break-even point, better it is."
(d) "Present Value of future cash flows depends
on the Discount factor."
6. As Finance Manager of a Company what steps

would you take to manage the cash flows properly
and effectively ? If it is estimated that the
Company will have some idle cash balances from
time to time, what advice would you render for
the utilisation of idle funds ? Discuss.
7. What is capital structure ? Discuss the

determinants of capital structure and explain the
features of an appropriate capital structure.
8. The management of M/s Rama Ltd. has prepared

the following estimates of working results for the
year ending 31st March 2016 for the purpose of
preparing the budget for the year ending 31st
March 2017 :
MS-004 2
Direct Material Z 8 per unit

Direct Wages Z 20 per unit
Variable overheads Z 6 per unit
Selling Price Z 62.50 per unit
Fixed overheads Z 3,37,500 per annum
Sales 12,50,000 per armum
It is expected that during the year 2015-16 the
material prices and variable overheads will go up
by 10% and 5% respectively.
As a result of re-organisation of production
methods the overall direct labour efficiency will
increase by 12% but the wage rate will go up by
5%. The fixed overheads are expected to increase
by 62,500.
The Marketing Manager states that the market
will not absorb any increase in the selling price.
However, he is of the view that if advertisement
expenditure is increased, the sales quantity will
increase as under :
Advertisement 40,000 97,000 1,60,000 2,30,000
Expenses (?)
Additional 2000 4000 6000 8000
Units of sales
You are required to
(a) Prepare an Income Statement for the year
2015-16.
(b) Evaluate the four alternative proposals put
forth by the Marketing Manager , determine
the best output and sales level to be budgeted
and prepare an overall Income Statement
for 2016-17 at that level of output and sales.
MS-004 3
No. of Printed Pages : 4
0S9 ? 2
June, 2019

MANAGERS

(Weightage 70%)
Note : Attempt any • five questions. All questions carry
equal marks. Use of calculators is allowed.
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 ? Discuss.
(b) Distinguish between Financial Accounting
and Management Accounting. Explain the
purposes which they serve and
interconnection between them.
2. Discuss the importance of cash and cash flow

statement. How is the length of the cash cycle
determined ? How does the length of the cash
cycle affect the requirement of working capital of
a firm ? Discuss.
MS-004 1 P.T.O.
3. (a) On 1st July 2018, a company purchased

machinery for 50,000, but the
accountant, by mistake, debited this
amount to purchases of stock-in-trade. The
company charges depreciation at the rate of
10% on straight line method and pays tax
at the rate of 30%.
Assess the effect of the above mistake on
the Net Profit after tax of the company for
the year 2018 — 19.
(b) What do you understand by Net Worth of a
company ? Explain the items included
therein and describe their significance to
the company.
4. What do you understand by Flexible Budget ?

How does it differ from a Fixed Budget and a
Rolling Budget ? Explain the significance of
Flexible Budget in a business organisztion.
5. What do you understand by Weighted Average

Cost of Capital ? How is it computed ? Explain
with an example. What is its significance in
capital budgeting decisions ? Explain.
6. Write explanatory notes on the following :

(a) Trading on Equity
(b) Direct Labour Efficiency Variance
(c) Internal Rate of Return Method
(d) Current, Contingent and Accrued
Liabilities
MS-004 2
7. The Balance Sheet of Pioneer Ltd. as at

31st March 2017 and 2018 are given below :
31.3.2017 31.3.2018
Particulars
t T
Share Capital 6,00,000 8,00,000
Capital Reserve 20,000
General Reserve 3,40,000 4,00,000
Profit and Loss A/c 1,20,000 1,50,000
Debentures 4,00,000 2,80,000
Current Liabilities 2,40,000 2,60,000
Provision for Income
Tax 1,80,000 1,70,000
Proposed Dividend 60,000 72,000
Unpaid Dividend — 8,000
19,40,000 21,60,000
Fixed Assets (At cost) 16,00,000 19,00,000
Less : Depreciation 4,60,000 5,80,000
11,40,000 13,20,000
Trade Investments 2,00,000 1,60,000
Current Assets 5,60,000 6,60,000
Preliminary
Expenses 40,000 20,000
19,40,000 21,60,000
MS-004 3 P.T.O.
During the year 2017 — 18 the company :

(a) Sold one machine for 50,000, the cost of
which was 1,00,000 and depreciation
provided on it was 40,000.
(b) Provided 1,80,000 as depreciation.
(c) Redeemed 30% of the Debentures @ 105.
(d) Sold some Trade Investments at a profit of

• 20,000, which was credited to Capital
Reserve.
(e) Decided to value stock at cost, whereas
previously the practice was to value stock
at cost less 10%. The stock according to
books on 31.3.2017 was 1,08,000. The
stock on 31.3.2018 was correctly valued at
• 1,05,000.
(f) Decided to write off Fixed Assets costing
• 28,000 on which deprecation amounting
to 20,000 has been provided.
You are required to prepare the Statement of
Sources and Application of Funds during
2017 — 18 and the Statement of Changes in
Working Capital.
8. "Though the Break-Even Chart and Profit Graph

intend to show the same information, they seem
to differ from each other." Examine this
statement and explain the meaning and
significance of Break-Even Chart and Profit '
Graph.
MS-004 4 4,000
1 011130
(MP)
December, 2019
MS-004 : ACCOUNTING AND FINANCE
FOR MANAGERS
Time : 3 Hours Maximum Marks : 100
Note : Attempt any five question& All questions
carry equal mark& Use of calculators is
allowed.
547 (13-21) P. T. 0.
*
[2] MS-004
1. (a) Explain the business entity concept and
the consistency concept. Can a company
deviate from, following the consistency
(b) Explain, how is the value of a firm
determined with the help of earnings
information. Give an example.
2. "Improved profitability of a firm, to a great
extend, depends on its efficiency in managing
working capital." In the light of this statement,
explain the parameters for judging the
efficiency in managing working capital. Also
explain six important ratios that are used to
measure efficiency in managing working
capital.
(B-21)
13l MS-004
(a) "Fixed costs are variable per unit and
variable costs are fixed per unit."
(b) "A very high current ratio is not desirable."
(c) "The greater the variability of cash flows,
the higher the minimum cash balance
required."
(d) "Debt becomes more expensive after a
certain limit is reached."
4. What is meant by Performance Budgeting ?
How does a Performance Budget differ from a
Traditional Budget ? Discuss the main
objectives of a performance budget and the
procedure adopted for preparing such a
budget.
P. T. O.
MS-004
[4]
notes on the
5. Write explanatory
following :
(a) Opportunity costs and imputed costs
(b) Limitations of Investment Appraisal
Techniques
(c) Flexible Budget
(d) Degree of operating leverage
6. "While formulating a dividend policy, the
management of the company has to reconcile its
own needs with the expectations of
shareholders." Explain this statement. What
policy goals might be considered by
management in taking a decision on
dividends ?
7. You have been given the ahead statement of a

company's assets and liabilities as at 31st
March, 2017 and 31st March, 2018 :
(B-21)
5 MS 004
31-3-2017 31-3-2018
Particulars
(r) . (r)
Assets :
Fixed Assets less

Depreciation 7,20,000 12,00,000
Stock-in-trade 2,85,000 3,92,000
Sundry Debtors 1,81,400 2,80,000
Cash at Bank 2,60,000 90,000
Prepaid-Expenses 28,000 42,000
14,96,900 20,24,000
Liabilities :
Share Capital 3,94,000 4,60,000
Reserves and Surplus 2,96,000 6,24,000
Secured Loan from Bank 1,74,000 —
Provision for taxation 1,30,000 3,44,000
Sundry Creditors 5,02,900 5,96,000
14,96,900 20,24,000
P. T. O.
6] MS-004
Addition information :
(a) Accumulated Depreciation on Fixed Assets
was Z 4,00,000 on 31st March, 2018 and
Z 3,60,000 on 31st March, 2017. Machinery
costing Z 40,000 which was one half
depreciated, was discarded and written off
during the year 2017-18. Depreciation for
the year amounted to Z 60,000.
(b) Investments costing Z 10,000 were sold
during the year 2017-18 for Z 9,600 and
Government Securities of the face value of
Z 8,000 were purchased during the year for
Z 7,500.
(c) Net Profit during the year was
Z 3,97,000. Dividend of Z 69,000 was
distributed.
(B-21)
[7 4111404
You are required to prepare Funds Flow
Statement and statements of changes in
working capital during 2017-18.
8. What do you understand by Variance Analysis ?
Discuss the various types of variances and
point out their importance in operational and
management control.
MS-004 10,000

MANAGEMENT PROGRAMME (MP)
June, 2020
MANAGERS
Time : 3 Hours Maximum Marks : 100
Note : (i) Attempt any five questions. All questions

carry equal marks.
1. (a) Explain the money measurement concept
and the accrual concept. What are the

limitations of the former concept ? Explain.
(b) Explain the difference between the

following :
(i) Operating Profit and Net Profit
(ii) Revenue Receipts and Capital

Receipts
P. T. O.
[2] MS-4
2. What do you understand by Operating and

Financial Leverages ? Explain how is financial
leverage one of the important considerations in
planning the capital structure of a company ?
Explain with an example.

Discuss its significance in a modern business
organisation and explain the steps for installing
an effective system of budgetary control in an
organisation.

(a) "Dividend, investment and financing
decisions are inter-dependent."
(b) "Fixed costs are variable per unit and
variable costs are fixed per unit."
(c) "Lower the break-even point, better it is."
(d) "Depreciation acts as a tax shield."
5. A company is considering a proposal for

production of a new product. The company
expects to sell 100000 units of the new product
each year at a selling price of Z 5 per unit.
Variable costs will be ! 2 per unit. Regardless of
I3I MS-4
the level of production, the company will incur
cash cost of Z 50,000 per year if the project is
undertaken. The machine for making of the
product will cost Z 5,00,000 and can be sold for
60,000 at the end of its life of 5 years.
Additional working capital required will be

50,000. Overhead cost allowed to the near
product will be Z 24,000 per year. The tax rate
is 30% and the cost of capital for the company is
15%. The company charges depreciation at
25% of the written down value. Should the
company buy the new machine? Explain with
conclusions. Discount factor for the first 5 years
@ 15% are 0.87, 0.756, 0.658, 0.572 and 0.497
respectively.
6. (a) Explain briefly the technique of marginal

costing. In whet ways do you consider this
technique useful in Management
Accounting ?
(b) What do you understand by Direct Labour

Cost Variance ? Distinguish between direct
labour rate variance and direct labour
efficiency variance.
[4] MS-4
7. What is a Funds Flow Statement ? Why is it
prepared ? How does it differ from a Balance
Sheet ? Explain the items which are usually
shown in this statement. Distinguish between
funds from operations and the net profit of the
firm.
8. XYZ Ltd., a profit earning company with

accumulated reserves; intends to expand its
capacity by financing it partly by the issue of new
equity capital. It has paid dividend regularly
during the past years. During the year 2018 it
suffered loss due to prolonged industrial unrest.
The directors of the company differ on the
question of distribution of dividend for the year
2018. Some of them want to skip dividend in view
of the loss sustained by the company and also to
undertake the expansion programme. As
financial adviser, what advice would you give to
Board of Director ? Give reasons of your answer
after considering both viewpoints.
MS 4 - 63&1
February, 2021

MANAGERS

(Weightage 70%)
Note : Attempt any five questions. All questions carry

equal marks. Use of calculators is allowed.
1. (a) Explain the Continuity concept and the

Consistency concept and their significance
in accounting. How does inconsistency open
the doors for manipulation of reported
income and assets ? Explain.
(b) Explain the terms ‘Net worth’, ‘Contingent

liabilities’, ‘Opportunity cost’, ‘Intangible
assets’, and ‘Term loans’ as used in
accounting.
MS-004 1 P.T.O.
2. ‘‘In managing cash, the Finance Manager faces

the problem of compromising the conflicting goals
of Liquidity and Profitability.’’ Comment on this
statement.
What strategy should the Finance Manager
develop to solve this problem ? Explain.
3. ‘‘Zero-based budgeting provides a solution for

overcoming the limitations of traditional budget.’’
Explain this statement and describe the
procedure to be adopted for preparing a
zero-based budget. Also explain its advantages.
(a) ‘‘There is no explicit cost of retained

earnings, yet, these funds are not free of
cost.’’
(b) Matching approach of financing working

capital is most desirable.
(c) Shortening the cash cycle affects the

working capital requirement.
(d) A very high Current Ratio is not desirable.
MS-004 2
5. XYZ Company is considering replacement of its

existing machine by a new machine which is
expected to cost < 1,60,000. The new machine
will have a life of 5 years and will yield cash
revenues of < 2,50,000 and incur annual cash
expenses of < 1,30,000. The estimate salvage of
the new machine is nil.
The existing machine has a book value of
< 40,000 and can be sold for < 20,000 today. It is
good for the next 5 years and is estimated to
generate cash revenue of < 2,00,000 and to
involve annual cash expenses of < 1,40,000. Its
salvage value after 5 years is zero. The corporate
tax rate is 40%. Depreciation rate is 25% on
Written Down Value method. Company’s
opportunity cost of capital is 20%. Advise the
company whether it should replace the machine
or not. Ignore taxes on profit/loss on sale of
machinery. Present Value Discount Factors for
first 5 years @ 20% are 0·8333, 0·6944, 0·5787,
0·4823, 0·4019.
6. What do you understand by Break-Even

Analysis ? Discuss the assumptions underlying
Break-Even Analysis. How do they make
Break-Even Analysis unrealistic ? Prepare a
Break-Even Chart assuming relevant figures.
MS-004 3 P.T.O.
7. (a) What are Bonus Shares ? Why are they

issued ? How do they differ from Rights
Shares ? What is the effect on the price of
the company’s shares after these shares are
issued by the company ? Discuss, giving
reasons.
(b) What do you understand by Funds Flow

Statement ? How does it differ from a
Balance Sheet ? How do you calculate
‘‘Funds from Business Operations’’ ?
Explain.
8. Write notes on the following :
(a) Overhead Cost Variance
(b) Rolling Budget
(c) FIFO and LIFO Methods of Inventory

Valuation
(d) Debt-Equity Ratio
MS-004 4

MS 4 Previous Year Question Papers by Ignouassignmentguru

Uploaded by

Document Information

Original Description:

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

MS 4 Previous Year Question Papers by Ignouassignmentguru

Uploaded by

Copyright:

Available Formats

Download More:- https://www.ignouassignmentguru.

No. of Printed Pages : 5 I MS-4 1

MS-4 : ACCOUNTING AND FINANCE FOR

Time : 3 hours Maximum Marks : 100

Note : Attempt any five questions. All questions carry equal

(b) Why is depreciation charged ? Explain the

3. "Financial Leverage is one of the important

5. Explain fully the following statements :

(c) "Weighted average cost of capital would

(d) Zero - based budgeting is a better

6. (a) "Sales Budget forms the basis on which all

What factors are taken into consideration

(b) What is Rolling Budget ? How does it

7. India Cables Ltd. is manufacturing a special type

Sales Rs. 1,200 lakhs

Direct materials Rs. 560 lakhs

Direct Labour Rs. 2210 lakhs

Selling, distribution and

Administration expenses Rs 100 lakhs

The company has just received an export order

(a) reject the export order and carry on with

(b) accept the export order and allow the

(c) Create additional plant capacity by

Evaluate each of these options and suggest

8. From the following details furnished by Global

Current Ratio 1.75

No. of Printed Pages : 5 MS-4

MS-4 : ACCOUNTING AND FINANCE FOR

1. What is meant by Capital Structure of a company ?

2. (a) Differentiate between "Schedule of Changes

3. (a) Explain the Accrual Concept, Consistency

(b) Explain Internal Rate of Return and

4. What are the important decisions of Finance

5. (a) The 'Cost-Volume-Profit' relationships

First Half Second Half

From the above , you are required to

There are no initial inventories. Production for the

Material purchased (15,000 units @

The overhead rate is based on direct

7. (a) What do you understand by Return on

Sales to net worth 2.3 times

Proforma Balance Sheet

8. An existing company has a machine which has

The company follows the straight line method of

No. of Printed Pages : 4 MS-4

Note : Attempt any five questions. All questions carry equal

1. "Accounting is closely connected with control".

2. (a) Differentiate between "Fund Flow

3. (a) What do you understand by Budgetary

4. (a) What factors are taken into consideration

(b) Why do the Companies Capitalise their

5. (a) What is Break Even Point ? How is it

(b) From the following data relating to a

(i) The break - even sales, and

(ii) Sales required to earn a profit of

Years Total Sales Total Costs

6. From the following data of ABC Ltd. relating to

Budgeted data for March :

7. (a) Discuss the ratios which reveals the

Gross profit (20% of sales) Rs. 60,000

8. A company is considering the replacement of one

No. of Printed Pages : 5 MS-4

MS-4 : ACCOUNTING AND FINANCE FOR