(8 pages)

NOVEMBER 2020 72221/MAM2E

Time : Three hours Maximum :75 marks

PART A — (10  2 = 20 marks)

Answer any TEN questions.

Write short note on the following.

1. Nature of management accounting.

2. Cost accounting.

3. Analysis of financial statements.

4. Return on Investment.

5. Leverage.

6. Funds flow statement.

7. Budgetary control.

8. Cash flow from operating activities

9. Production budget.

10. Flexible budget.

11. Cost of capital.

12. Accounting Rate of Return.

 PART B — (5 × 5 = 25 marks)

Answer any FIVE questions.

13. State any five differences between management

accounting and financial accounting.

14. Calculate the trend percentages from the following

data taking 2012 as the base year.

As at 31st March
Current
Assets 2014 2015 2016 2017
Rs. Rs. Rs. Rs.

Cash at 20,000 24,000 26,000 30,000

bank
Book debts 30,000 36,000 50,000 60,000
Stock 40,000 60,000 80,000 1,00,000
Bills 10,000 15,000 20,000 30,000
receivable

15. From the data, Calculate

(i) Gross Profit ratio

(ii) Net profit ratio

(iii) Return on total assets

(iv) Inventory turnover

(v) Working capital turnover

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 Rs.
Sales 25,20,000
Cost of sales 19,20,000
Net profit 3,60,000
Inventory 8,00,000
Other current assets 7,60,000
Fixed assets 14,40,000
Net worth 15,00,000
Debt 9,00,000
Current liabilities 6,00,000

16. Compute cash from operating activities from the

following figures:
(a) Profit for the year 2018 is a sum of Rs.10,000
after providing for depreciation of Rs.2,000
(b) The current assets of the business for the
year ending 31st March 2017, and 2018 are
as follows:

31st March 31st March

2017 2018
Rs. Rs.
Sundry Debtors 10,000 12,000
Provision for Doubtful 1,000 1,200
Debts
Bills Receivable 4,000 3,000
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 31st March 31st March
2017 2018
Rs. Rs.
Bills Payable 5,000 6,000
Sundry Creditors 8,000 9,000
Inventories 5,000 8,000
Short-term Investments 10,000 12,000
Outstanding Expenses 1,000 1,500
Prepaid Expenses 2,000 1,000
Accrued Income 3,000 4,000
Income Received in 2,000 1,000
Advance
17. A Limited Company is considering the purchase of
a new machine which will carry out some
operations performed by labour. X and Y are
alternative models. From the following
information you are required to prepare a
profitability statement and work out the pay-back
period. Advise which model should be purchased?
Model X Model Y
Estimated Life 5 years 5 years
Rs. Rs.
Cost of machine 3,00,000 6,00,000
Cost of indirect materials 6,000 8,000
Estimated savings in scrap 10,000 15,000
Additional cost of
maintenance 19,000 27,000

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[P.T.O.]
 Estimated savings in
indirect wages
Wages per employee 600 600
Employees not 300 400
required (numbers)
Taxation to be regarded at 50% of profit
18. What are the merits and limitations of ratio
analysis?
19. A company is expecting to have Rs. 25,000 cash in
hand on 1st April 2003 and it requires you to
prepare an estimate of cash position in respect of
three months from April to June 2003, from the
information given below:
Sales Purchase Wages Expenses
Rs. Rs. Rs. Rs.
February 70,000 40,000 8,000 6,000
March 80,000 50,000 8,000 7,000
April 92,000 52,000 9,000 7,000
May 1,00,000 60,000 10,000 8,000
June 1,20,000 55,000 12,000 9,000
Additional Information:
(a) Period of credit allowed by suppliers - two
months.
(b) 25% of sale is for cash and the period of
credit allowed to customer for credit sale one
month.
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 (c) Delay in payment of wages and expenses one
month.
(d) Income Tax Rs. 25,000 is to be paid in June
2003.

PART C — (3 × 10 = 30 marks)

Answer any THREE questions.

20. Briefly explain the various methods of ranking

investment proposals.

21. Calculate the following ratios from the balance

sheet given below:
(a) Debt-Equity Ratio
(b) Liquidity Ratio
(c) Fixed Assets to Current Assets, and
(d) Fixed Assets/ Turnover.
Balance sheet
Liabilities Rs. Assets Rs.
Equity shares 1,00,000 Goodwill 60,000
of Rs.10 each
Reserves 20,000 Fixed Assets
(at cost) 1,40,000
Profit & Loss A/c 30,000 Stock 30,000
Secured Loan 80,000 Sundry Debtors 30,000

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 Liabilities Rs. Assets Rs.
Sundry Creditors 50,000 Advances 10,000
Provision 20,000 Cash balance 30,000
for Taxation
3,00,000 3,00,000

The Sales for the year were Rs.5,60,000.

22. From the following balance sheets, prepare a

sources and application statement.
Liabilities 2017 2018 Assets 2017 2018
Rs. Rs. Rs. Rs. Rs. Rs.
Share capital 2,00,000 2,10,000 Fixed assets 3,50,000 4,75,000

Retained 1,60,000 3,00,000 Inventory 1,00,000 95,000

earnings
Premium on – 5,000 Bills 43,000 50,000
shares receivable
Accumulated Prepaid 4,000 5,000
Depreciation 80,000 1,00,000 expenses
Cash 15,800 10,200
Debentures 60,000 - Commission
Bills payable 37,800 40,200 On shares 25,000 20,000
5,37,800 6,55,200 5,37,800 6,55,200

Additional information:
(a) Depreciation for the year Rs.20,000
(b) Income tax paid was Rs.40,000
(c) Interim dividend paid during the year was
Rs.20,000

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23. With the following data for a 60% activity, prepare
a budget for production at 80% and 100% capacity
Production at 60 % capacity- 300 units
Materials Rs.100 per unit
Labour Rs.40 per unit
Expenses Rs. 10 per unit
Factory expenses Rs.40,000 (40 % fixed)
Administrative expenses Rs.30,000 (60 % fixed)

24. M/s. Pandey Ltd. is contemplating to purchase a

machine A and B each costing of Rs.5,00,000.
Profits before depreciation are expected as follows:
Year Cash Inflows Discounted Factor
Machine A Machine B 10%
Rs. Rs.
1 1,50,000 50,000 0.9092
2 2,00,000 1,50,000 0.8264
3 2,50,000 2,00,000 0.7513
4 1,50,000 3,00,000 0.6830
5 1,00,000 2,00,000 0.6209
Using a 10% discounted rate indicate which of the
machine would be profitable using the Net Present
Value (NPV) method.
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