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					              MS-04: ACCOUNTING AND FINANCE FOR MANAGERS


Q1.   What do you mean by ‘accounting’? Explain the various concepts of accounting and the
      need for having accounting standards?

Q2.   The balance sheets of ABC Ltd. as on 31-3-2008 and 31-3-2007 are as given below:

                                       ABC Ltd.
                                     Balance Sheets

                                                 31-3-08                          31-3-07
      Sources of Funds
      Share Capital                                         5,000                        4,000
      Reserves and Surplus
      General Reserve                    1,000                              800
      P&L A/c                              400                              200
      Share Premium                      1,000                                -
      Capital Reserve                    1,000                              500
                                                            3,400                        1,500
      Secured Loans                                         4,000                        3,000
      Unsecured Loans                                       3,000                        1,000
      Total                                                15,400                        9,500

      Applications of Funds
      Fixed Assets –Gross Block         12,000                           10,000
      Less: Accumulated Depn.            3,000                            2,000
      Net Block                                             9,000                        8,000
      Capital Work-in-progress                              3,000                            -
      Investments                                           2,000                         5,00
      Current Assets, Loans and
      Advances
      A. Current Assets
      Inventories     –    Raw             700                              600
      materials
      Work-in-progress                     250                              300
      Finished goods                       150                              200
      Sundry Debtors                     1,200                            1,300
      Prepayments                          200                              150
      Cash and Bank Balances               500                              400
                                         3,000                            2,950
      B. Loans and Advances
      Advance tax                        1,400                             9,00
      Loans to employees (long-          1,000                             5,00
                term)
                                         5,400                            4,350
      Less: Current Liabilities of
                      Provisions
        A Current Liabilities
        Sundry Creditors                       8,00                                 9,50
        Outstanding Expenses                   4,00                                 3,00
        B. Provisions
        Provisions for Retirement              3,50                                 3,00
        Benefits of employees
        Tax Provision                        1,450                              1,000
        Proposed Dividend                    1,000                               8,00
                                             4,000                              3,350
        Net Current Assets                                     1,400                       1,000
        Total                                                 15,400                       9,500

        Additional Information:
        1. Actual tax liability for 2006-07was Rs. 950 lacs;
        2. A piece of machinery costing Rs. 500 lacs, accumulated depreciation Rs. 200 lacs
           was sold for Rs. 250 lacs. The loss was charged to profit and loss account;
        3. A portion of secured loan as on 31-3-07 amounting to Rs. 400 lacs was converted
           into equity at a premium Rs. 200 lacs. There was also fresh issue of equity at 100%
           premium.
        4. Out of secured loans as on 31-3-08 Rs 500 lacs were short-term loans.
        5. Out of unsecured loans, short-term loans were to the extent of Rs. 400 lacs and Rs.
           500 lacs respectively as on 31-3-07 and 31-3-08.
        6. Out of investments Rs. 200 lacs were current investments as on 31-3-07 and Rs. 500
           lacs were current investments as on 31-3-08.
        7. There was a revaluation of fixed assets during 2007-08 and the revaluation profit Rs.
           500 lacs was charged to capital reserve.

        From the information given above, you are required to prepare:

a)      Statement showing changes in working capital
b)      Funds flow statement.

Q3. Explain briefly the technique of marginal costing. In what ways do you consider this
    technique useful in management accounting?

Q4. Ravi Co Ltd. is considering the following investment projects:

                                        Cash flows (Rs.)

        Projects         Year0           Year1           Year2             Year3
        A               -10,000         +10,000         -                -
        B               -10,000         +7,500          +7,500           -
        C               -10,000         +2,000          +4,000           +12,000
        D               -10,000         +10,000         +3,000             +3,000

     a) Rank the projects according to each of the following methods :
        (i) Pay back (ii) ARR (iii) IRR and
        (iv) NPV- assuming discount rates of 10% and 30%
     b) Assuming that the projects are independent, which one should be accepted?
    If the projects are mutually exclusive, which project is the best?

Q5. What role is played by a financial manager in matter of dividend policy. Discuss the
    alternatives that he might consider and the factors which he should take into consideration
    before finalizing his views on dividend policy?

				
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posted:12/10/2010
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