MS-4 June 2013 Accounting and Finance for Managers

1. Explain in detail the various accounting concepts and discuss the application of these concepts in the preparation of financial statements.

2. Fairdeals Ltd. presents the balance sheets as at 31.12.2009 and 31.12.2010 as follows:

 

31.12.09 31.12.10
Assets

Rs.

    Rs.
Fixed Assets at cost 31,30,000 36,05,000
Less: Depreciation   6,80.000    8,20,000
24,50,000 27,85,000
Investments 12,50,000 13,50,000
Marketable Securities       60,000      30,000
Inventories   4,10,000   5,20,000
Book Debts   5,30,000    5,05,000
Cash and Bank   1,20,000    1,40,000
Preliminary Expenses   1,00,000       50,000
49,20,000  53,80,000
Liabilities
Share Capital 20,00,000 25,00,000
Reserve and Surplus   4,20,000   4,70,000
Profit and Loss Account   3,80,000   4,00,000
13.5% Debentures (Convertible) 10,00,000    8,00,000
Mortgage Loan   3,00,000    2,50,000
Current Liabilities   8,20,000    9,60,000
49,20,000 53,80,000

You are informed that during 2010
(i) Rs. 2,00,000 of debentures were converted into shares at par;
(ii) Rs. 1,00,000 shares were issued to a vendor of fixed assets;
(iii) A machine costing Rs. 50,000 book value Rs. 30,000 as at 31st December, 2009 was disposed off for Rs. 20,000;
(iv) Rs. 30,000 of marketable securities (cost) was disposed off for Rs. 36,000.
You are required to prepare a schedule of working capital changes and funds flow statement of the company for 2010.

3. An Analysis of S Ltd. cost records give the following information.

Variable Cost Fixed Cost
(% of Sales) Rs.
Direct Material 32.8% -
Direct Labour 28.4 -
Factory Overhead 12.6 1,89,000
Distribution Overhead   4.1     58,400
Administration Overhead   1.1     66,700

Budgeted sales for the next year is Rs. 18, 50,000. You are required to determine:
(a) Break even sales value
(b) Profit at the budgeted sales volume
(c) Profit if actual sales: (i) drop by 10% (ii) increase by 5% from the sale.

4. Briefly explain the following
a) Rolling budget
b) Performance budgeting
c) Zero base budgeting
d) Measures of financial beverage

5. What is capital structure? Explain the features and determinants of an appropriate capital structure.

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