What do you understand by the Concept of Conservatism? Why is it also called the concept of prudence? Why is it not applied as strongly to-day as it used to be in the past?

1.(b) Explain the terms 'Amortisation', 'Contingent Liabilities' 'Opportunity Cost' and 'Authorised Capital' as used in accounting.

2.(a) Distinguish between Operating Profit and Net Profit. Which of these is to be considered for assessing the operational efficiency of a company? From Shareholders' point of view is PAT more significant than PBT Give reasons.

2.(b) Why are Reserves created by companies? Distinguish between 'Free Reserves' and 'Specific Reserve' and

(ii) Revenue Reserve and Capital Reserve.

3. Explain the following statements:
Lower the Break-even point, better it is. Time Value of Money is significant in managerial decision making. Fixed costs are variable per unit and variable costs are fixed per unit. Profitability Ratios and Profitability Index are used for different purposes.


4.(a) What do you understand by Flexible Budget? How does it differ from a Fixed Budget and a Rolling Budget? Explain the significance of Flexible Budget.

4.(b) Discuss the factors which are taken into consideration while preparing the sales Budget.

5.(a) What do you understand by Composite Cost Of Capital? How is it computed Explain with an example.

5.(b) "Debt becomes more expensive after a certain limit is reached". Do you agree with this statement? Give reasons.

6. Write explanatory notes on Trading on Equity Liquidity Ratios Overhead Variances Bonus shares and Rights shares


7. A multi-product company gives the following data on cost and sales of the three products manufactured by it.

Products
x y z

Sales Mix (P.C of sales value) 40 30 30

Selling Price per unit 400 250 200
Variable Cost per unit 200 100 120
Fixed Cost per unit 100 50 40

Total sales 1,00,00,000
The current level of production absorbs the entire fixed cost of the company.
The Management of the company wants to discontinue Z and introduce W to improve profitability. The revised data on production and sales are as follows
Products
X Y W
Sales Mix (P.C of sale value) 50 30 20

Selling Price per unit 400 250 320
Variable Cost per unit 200 100 180

Total Sales RS 1,00,00,000
You are required to determine Fixed costs of the Company per annum. Profit currently earned and profit likely to be earned after the introduction of W. Current break-even sales and break-even sales after introduction of W. If it is possible to increase sales of anyone of the products Y and Z by 20% by keeping the total sales unchanged. What alternate mix would you suggest for higher profit?

8. From the figures given below, prepare a statement showing application and sources of funds during the year 2014-15.
31st March 31st March
2014 2015
Assets
Fixed Assets 5,10,000 6,20,000
Investments 30,000 80,000
Current Assets 2,40,000 3,75,000
Discount on Debentures 10,000 5,000
7,90,000 10,80,000
Liabilities
Equity Share Capital 3,00,000 3,50,000
Preference Share Capital 2,00,000 1,00,000
Debentures 1,00,000 2,00,000
Reserves 1,10,000 2,70,000
Provision for Doubtful Debts 10,000 15,000
Current Liabilities 70,000 1,45,000
7,90,000 10,80,000
Additional Information A machine costing RS 70000 (book value RS 40,000) was disposed of for f 25000.

(ii) Preference shares redemption was carried out at a premium of 5%.

(iii) Dividend at 15% was paid on equity shares for the year 2013-14.
Provision for depreciations stood at RS 150000 as on 31St March 2014 and at f 190000 as on 31st March 2015. Stock which was valued at RS 90000 as on 31st March 2014 was written up to its cost of RS 1,00,000 for preparing the profit and loss Account for 2014-15.