AssignmentForAccounts.docx - ASSIGNMENT A QUESTION 1 a What...

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ASSIGNMENT AQUESTION 1a) What do you understand by the concept of conservatism? Why it is also called the concept of prudence? Why it is not applied as strongly today as it used to be in the Past?(b) What is a Balance Sheet? How does a Funds Flow Statement differ from a Balance Sheet? Enumerate the items which are usually shown in a Balance Sheet and a Funds Flow Statement.QUESTION 2Bose has supplied the following information about his business to Summary of Cash book for the year ended 31st March, 2004 is as follows:Assets and LiabilitiesOn 1st April 2003 (Rs.)On 31st March, 2004 (Rs.)Sundry debtorsStock Machinery Furniture Sundry creditors1,81,000 1,50,000 2,50,00040,0001,10,0001,93,000 1,40,000 ??1,25,000receiptsRs.PaymentsRs.To Opening balanceTo Cash salesTo Receipt from debtorsTo Misc. receiptsTo Loan from Dass @ 9%per annum (taken on 1.10.2003)5,000 61,0007,53,0002,0001,00,000By Payments to creditorsBy wagesBy SalariesBy DrawingsBy Sunday office expensesBy Machinery purchased (on 1.10.2003)By Closing balance3,50,0001,60,0001,50,00040,0001,10,00095,00016,0009,21,000 9,21,000
Discount allowed totaled Rs.7,000 and discount received was Rs.4,000. Bad debts written off wereRs.8,000. Depreciation was written off on furniture @5% per annum and machinery @10% per annum under the straight line method of depreciation. The office expenses included Rs.5,000 paid as insurance premiumfor the year ending 30th June, 2004. Wages amounting to Rs.20,000 were still due on 31st March, 2004.Prepare trading and profit and loss account for the year ended 31sl March, 2004 and the balance sheet as on that date. QUESTION 3A company manufactures a single product in its factory utilizing 600% of its capacity. The selling price and cost details are given below:Rs.Sales (6,000 units)5,40,000Direct materials96,000Direct labour1,20,000Direct expenses19,000Fixed overheads :Factory2,00,000Administration21,000Selling and Distribution25,000
12.5% of factory overheads and 20% of selling and distribution overheads are variable with production and sales. Administrative overheads are wholly fixed. Since the 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 the existing plant and machinery.The cost estimates of the new product are as follows:Cost elementsRs. per unitDirect materials16.00Direct labour15.00Direct expenses1.50Variable factory overheads2.00Variable selling and distribution overheads1.50It is expected that 2,000 units of the new product can be sold at a price of Rs. 60 per unit. The fixed factory overheads are expected to increase by 10%, while fixed selling and distribution expenses will go up by Rs. 12,500 annually. Administrative overheads remain unchanged.However, there will be an increase of working capital to the extent of Rs. 75,000, which would take the total cost of the project to Rs. 8.75 lakh.The company considers that 20o/o pre-tax and interest return on investmentis the minimum acceptable to justify any new investment.You are required to(a) Decide whether the new product be introduced.(b) Make any further observation/recommendations about profitability of the company on the basis of the above data, after making assumption that the present investment is Rs. 8 lakh.QUESTION 4

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