State the provisions of Indian Accounting Standards regarding Foreign Exchange Transactions.

1.(b)Distinguish between Internal Reconstruction and External Reconstruction of Companies.

1.(c) Define 'Responsibility Centre'. Explain its various types.

1.(d) Write a note on 'Service Tax'.

1.(e) Verification of Advances is an important function of an auditor of a Bank." Explain.

2.(a) The Balance Sheets of Rakesh Ltd. and Lokesh Ltd. as at 31.12.2013 were as follows .
Liabilities Rakesh Ltd. RS Lokesh Ltd. RS Assets Rakesh Ltd. RS Lokesh Ltd. RS
Equity Share Capital (Shares of RS 10 each) 6,00,000 4,00,000 Fixed Assets (other than Goodwill) 5,00,000 3,50,000
Reserves 1,50,000 1,00,000 Stock-in-trade 95,000 75,000
Profit and Loss A/c 75,000 60,000 Debtors 1,40,000 1,00,000
Sundry Creditors 37,500 30,000 Cash and Bank 1,17,500 60,000
Preliminary Expenses 10,000 5,000
8,62,500 5,90,000 8,62,500 5,90,000

Rakesh Ltd. took over and absorbed Lokesh Ltd. as on 1.7.2014. No balance sheet of Lokesh Ltd. was prepared on the date of takeover, but. the following information is made available to you:
In the six months ended 30.6.2014 Lokesh Ltd. made a net profit of RS 60,000 after providing for depreciation at 10% per annum on fixed assets.

(ii) Rakesh Ltd. during that period made a net profit of RS 1,45,000
after providing for depreciation at 10% per annum on the fixed assets.
(iii) Both the companies had distributed dividends of 10% on 1.4.2014.
Goodwill of Lokesh Ltd. on the date of takeover was estimated at

RS 25,000 and it was agreed that the stocks of Lokesh Ltd. would be appreciated by RS 15,000 on the date of takeover. Rakesh Ltd. to issue shares to Lokesh Ltd. on the basis of the intrinsic value of the shares on the date of takeover.

Prepare the Balance Sheet of Rakesh Ltd. after absorption.

2.(b) How is Differential Cost Analysis helpful in decision-making?

2.(c) "Residential status has its effect on computation of taxable income under the Income Tax Act, 1961." Discuss.

3.(a) A company manufacturing two products furnishes the following data for a year:
Product Annual Output (units) Total Machine Hours Total Number of Purchase Orders Total Number of Set-ups
A 5,000 20,000 160 20
B 60,000 1,20,000 384 44

The annual overheads are as under:
RS
Volume related activity costs 5,50,000
Set-up related costs 8,20,000
Purchase related costs 6,18,000

You are required to calculate the cost per unit of each product and based on
Traditional method of charging overheads

(ii) Activity based costing method

3.(b) Discuss the provisions of Indian Accounting Standards on Accounting for Depreciation.

3.(c) Mr. owns two house properties, and Property is used by him for his own residential purpose, whereas property is let out to a tenant for a monthly rent of RS 15,000 throughout the financial year 2016 -17. The other particulars in respect of the properties are as under:
Particulars ,Property A Property
Municipal Valuation RS 30,000 RS 50,000
Standard Rent under Rent Control Act RS 40,000 RS 1,00,000
Municipal Taxes paid by Mr. RS 8,000 RS 24,000
Maintenance Charges paid RS 6,000 RS 18,000
Date of completion of construction 31.3.2010 31.8.2013
Interest on home loans for construction of I properties from Nationalised Bank RS 70,000 RS 1,20,000
Fire Insurance Premium Payable RS 1,500 RS 3,000

The following further information is available:
Out of interest of RS 1,20,000 on home loan taken for construction of property an amount of RS 30,000 was outstanding payable as at 31.3.2017.

(ii) Mr. was employed by ABC Ltd. on a monthly salary of RS 50,000 plus monthly travelling allowance of RS 10,000.

(iii) He donated during the year RS 1,50,000 to a charitable trust approved under Section 80G of the Income Tax Act, 1961.
He spent RS 7,500 for his health check-up during the year. You are required to compute Total Taxable Income of Mr. for the
Assessment Year 2017 -18.

4.(a) A bank has received an application from a customer for a loan. You have
to investigate on behalf of the bank the accounts of the customer.
Highlight those points you would like to concentrate upon.

4.(b) Define 'Normal Wastage', 'Abnormal Wastage' and 'Abnormal Effectiveness'. State how these are treated in Process Costing.

4.(c) Mr. inherited a residential house from his father in January 2015. His father had bought the said house in the year 1979 at a cost of RS 70,000. Mr. sold the house in June 2016 for a sale consideration of RS 17,00,000 and the registered valuer has valued the said house at RS 1,00,000 as at 1.4.1981. The Cost Inflation Index is as under:
Financial Year CIl
1981-82 100
2015 -16 1000
2016 -17 1200
You are required to compute the income from capital gains for the Assessment Year 2017 -18. Also suggest the actions, if any, that may be taken by Mr. to avoid tax on capital gains.

5.(a) Profit maximisation is the goal of Financial Management." Critically examine.

5.(b) Discuss the Risk-Return Trade-off in financial decisions.

5.(c) Distinguish between Money Market and Capital Market.

5.(d) Discuss the various methods of deciding exchange ratio in merger of companies.

5.(e) State the valuation formula put forward by James Walter. Also explain the logic behind it.

6.(a) A company sells 2600 units of at RS 2,000 each, annually. The details of cost per unit are as follows:
RS
Raw and Packing Materials 800
Direct Wages 400
Overhead Expenses 400

Overhead expenses include RS 2.60 lakhs on depreciation. Production is evenly maintained over the year, on a weekly basis. All sales are on credit. Materials are introduced at the beginning ofthe process.
The following additional information is also available:
Average Period
Raw Material and Packing Materials in stock 4 weeks
Work-in-Progress (Material Labour
and Overheads 1 week
Finished Goods 1 week
Credit Allowed to Debtors 6 weeks
Credit Allowed by Suppliers 4 weeks

Cash balance to be maintained is RS 60,000.
Calculate the Net Working Capital Requirements of the company.

6.(b) Discuss the role of SEBI in regulating the Capital Market.

6.(c) Define Capital Rationing. Explain the factors leading to Capital Rationing and also state the situations of Capital Rationing.

7.(a) The following information is related to 'Alpha Co. Ltd.' for the year ended 31.3.2016
RS
Equity Share Capital (RS 10 each) 50 lakhs 12% Bonds of RS 1,000 each 37 lakhs Sales 84 lakhs
Fixed Cost (excluding interest) 6·96 lakhs
Financial Leverage 1.49
Profit Volume Ratio 27·55%
Income Tax Applicable 40%

You are required to calculate
Operating Leverage

(ii) Combined Leverage

(iii) Earning Per Share

7.(b) Explain the techniques used by the Credit Manager in monitoring the status and the composition of Accounts Receivables.

7.(c) What is Commercial Paper Explain its significance and the pre-conditions for the issue of Commercial Paper.

8.(a) The Balance Sheeths of S.K.Ltd as at 31.3.2014 and 31.3.2015 are as under:

Liabilities 31.3.2014 RS 31.3.2015 RS
Equity Share Capital 75,00,000 1,02,50,000
General Reserve 42,50,000 50,00,000
Profit and Loss Account 15,00,000 18,75,000
13% Debentures of RS 100 each 58,00,000 43,50,000
Current Liabilities 30,00,000. 32,50,000
Proposed Dividend 7,50,000 9,10,000
Provision for Income Tax 22,50,000 24,75,000
Total 2,50,50,000 2,81,10,000

Assets 31.3.2014 RS 31.3.2015 RS
Goodwill 10,00,000 ·7,75,000
Land and Building 68,00,000 61,20,000
Plant and Machinery 75,12,000 1,07,95,000
Investment 25,00,000 21,25,000
Stock 33,00,000 27,50,000
Debtors 24,45,000 36,20,000
Cash and Bank 14,93,000 19,25,000
Total 2,50,50,000 2,81,10,000

The following additional information is available:
During the financial year 2014 the company issued equity shares at par.
Debentures were redeemed on 1.4.2014 at a premium of 10%.

(iii) Some investments were sold at a profit of RS 75,000 and the profit was credited to General Reserve Account.
During the year, an old machine costing RS 23,50,000 was sold for RS 6,25,000. Its written down value was RS 8,00,000.
Depreciation is .to be provided on plant and machinery at 20% on the opening balance.
There was no purchase or sale of land and building.

(vii) Provision for tax made during the year was RS 4,50,000.

You are required to prepare a Cash Flow Statement for the year ended 31.3.2015.

8.(b) Define 'Optimum Capital Structure'. Discuss the major considerations in the Optimum Capital Structure planning of a firm.

8.(c) Explain the significance of the following Accounting Ratios: Debt-Equity Ratio

(ii) Acid Test Ratio

(iii) Inventory Turnover Ratio
Operating Profit Ratio
Current Ratio