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Sunday, September 11, 2011 ·

First Semester
(Regulation 2010)
Time : Three hours Maximum : 100 marks
Answer ALL questions.
PART A — (10 × 2 = 20 marks)
1. List the main elements of Balance Sheet and Income Statement.
2. State whether True or False:
(a) Goodwill appears under the head fixed assets
(b) Share premium account represents revenue reserves
(c) A contingent asset is a possible asset that arises from past events
(d) Materiality concept requires full disclosure of all material
3. Describe the features of a corporate organisation.
4. Explain why buy back of shares are done.
5. What is debt equity ratio?
6. What is the relationship of the assets turnover rate to the rate of return on
total assets?
7. What are fixed overheads? Why are they called burdens?
8. How does ABC differ from traditional costing approach?
9. What is the significance of computerized accounting system?
10. What is a pre packaged accounting software?
PART B — (5 × 16 = 80 marks)
11. (a) (i) What is the function of financial statements?
(ii) Differentiate between financial accounting and management
(b) Zeenath, after completing her Master’s Degree in Computer Science,
established Computer Care Ltd. to provide computer maintenance
services. During August, she completed the following transactions.
Deposited Rs. 40,000 in the company’s bank account in exchange for 4000
2 Paid two months’ office rent in advance Rs. 2,200
3 Bought testing equipment on credit Rs. 6,500
4 Bought office supplies for cash, Rs. 480
7 Received fees for services provided Rs. 6,900
13 Ordered testing equipment Rs. 3,200
16 Paid assistants’ salaries for first fortnight Rs. 2,300
19 Billed customers for services provided Rs. 9.700
20 Received testing equipment ordered on August 13 and agreed to pay for it
on September 5
28 Paid telephone bill for the month Rs. 390
29 Received cash for services to be provided later Rs. 2,700
30 Paid assistants’ salaries for second fortnight, Rs. 2,300
You are required to prepare journal entries to record the transactions in the
general journal. Post entries in ledger. Prepare a trial balance on August 31st.
12. (a) (i) Why are stock option plans popular with software companies? (8)
(ii) Write a note on preferential allotment. (8)
(b) The share capital of Veer Company consists of 10,000 equity shares of
Rs. 10 par value and 2,000 10% cumulative preference shares of Rs. 10
par value. The company declared and paid total dividends in the first
four years of operation as follows: first year, Rs. 800; second year,
Rs. 1200; third year, Rs. 14000; fourth year, Rs. 17000.
Determine the rate of dividend on each class of share capital in each of
the four years. Determine the rate of dividend on each class of share
capital in each of the four years, assuming that the preference share
capital is non-cumulative.
13. (a) (i) Depreciation is a non-cash expense. Still it is an integral part of
cash flows. Explain.
(ii) Differentiate between cash flow analysis and funds flow analysis.
(b) ABC Ltd. finds that its opening bank balance of Rs. 1,80,000 as on April
1 has been converted into an overdraft of Rs 75,000 by the end of the
year. From the information given below, prepare a statement to show
how this happened.
Year beginning Year end
Rs. Rs.
Fixed assets 7,50,000 11,20,000
Stock in trade 1,90,000 3,30,000
Book debts 3,80,000 3,35,000
Trade creditors 2,70,000 3,50,000
Share capital 2,50,000 3,00,000
Share Premium - 25,000
Bills receivable 87,500 95,000
The profit before depreciation and income tax was Rs 2,40,000. During
the year, income tax to the extent of Rs. 1,37,500 was paid. Dividend paid
(i) final on the capital as on April 1 at 10 per cent and
(ii) interim at 5 per cent on the year end capital.
14. (a) Standard equipment Co. operates on standard costing system. The
budgeted overheads for the year ending March 31, were fixed at
Rs. 4,20,000 with a predetermined overhead recovery rate of Rs 7 per
direct labour-hour. The actual direct labour-hours for the year amounted
to 61,000 against which only 60,500 hours should have been spent for the
production completed during the year. The actual overhead rate worked
out at Rs. 6.75 per direct labour-hour. You are required to compute the
following variances: (i) Total overhead cost variance, (ii) Overhead budget
variance, (iii) Overhead efficiency variance and (iv) overhead capacity
(b) Are you in agreement with the view that budgeting should better be
called ‘profit planning and control’? Discuss.
15. (a) How is codification and grouping of accounts in a computerised
environment different from manual accounts?
(b) Do you agree that a computerised environment of accounts will ensure
flawless accounting system?


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