CS MAINS COMMERCE AND ACCOUNTANCY Paper I


SECTION A
Ql. Answer the following in ,about .150 words

Accounting is a language of business.' Comment.

Discuss Zero Base Budgeting as a tool 'of-planning and

controlling.

Write short notes on the provisions of Indian Accounting

Standards regarding Inventories.

What are the main provisions of Companies Act, 2013 with

respect to the audit related to Dividends? 10

What are the various' 'Heads of Income' ?Explain briefly each

head of Income. 10


Q2. Modern Toys Ltd. had budgeted the following sales for the

month of June:

Toy A 9000 Units at Rs.50 Per Unit
Toy B 6500 Units at Rs.100 Per Unit
Toy C 12000 Units at Rs.150 per Unit

As Against this, the acatual sales were as under:

Toy A 10,000 Units at Rs.55 Per Unit
Toy B 7000 Units at Rs.95 Per Unit
Toy C 11000 Units at Rs.156 per Unit

The cost per unit of Toy Band C was Rs 45, Rs 85 and Rs 130

respectively. Compute the different variances to explain the

difference between the budgeted and actual profit. 20

An analysis of costs of Namya Polymer Ltd. led to the following

information

Cost of Element Variable cost

Funds


as of Sales Cost Rs.

(1) Direct Materials 32%

-
(2) Direct Labour 28%

-
(3) Factory Overheads 12%

1,89,900
(4) Distrubution Expenses 5%

58,400
(5) Administration Expenses 2%

66,700

Budgeted Sales for the next year are Rs.18,50,000. You are required

to determine

the break-even sales volume.
the profit at the budgeted sales volume.
(iii) the profit, if actual sales drop by 10 percent of budgeted

sales.
the profit, if actual sales increase by 5 percent of

budgeted sales. 20

Describe the salient features relating to 'Value Added Tax'.

Q3. ABC Ltd. invited for 1,00,000 equity shares of

Rs.100 each at a discount of payable as under:

On Application
On Allotment 34
On First and Final Call 35

The applications were received for 90,000 shares and all of these

were accepted. All payments due were received except the first and

final call on 1,000 shares, which were forfeited after doing all legal

formalities. 500 shares out of them were re-issued at 90 each as

fully paid-up.
Pass entries in the Cash Book and Journal Book ofABC Ltd. 20

The following are the balances of Manohar Co. Ltd. as on 31st

March, 2014

Debit Credit



premises 30,72,000 Share Capital

40,00,000
Plant 33,00,000 12% Debentures

30,00,000
Stock(1-4-2013) . 7,50,000 Profit arid Loss A/c

2,62,500
Debtors . 8,70,000 Bills Payable

3,70,000
Goodwill 2,50,000 Creditors

4,00,000
Cash and'Bank 4,06,500 Sales

41,50,000
Calls in Arrear 75,000 General Reserve

2,50,000
Interim Dividend paid 3,92,500 Bad debts provision
Purchases 18,50,000 as on 1-4-2013

35,000
Preliminary Expenses 50,000
Wages 9,79,800
General Expenses 68,350
Salaries 2,02,250
Bad debts 21,100
Debenture Interest
paid 1,80,000

1,24,67,500 1,24,67,500


Additional Information:
Depreciate Plant by 15%.
Write-off 5,OQQ,from Preliminary Expenses.
(iii) Half year's Debenture interest due.
Create provision on Debtors for doubtful
Provide for Income Tax@ 35%.
Stock on 31st March, 2014 was 9,50,000.
(vii) A claim of 25,0'00 for workmen's coinpensation is

being disputed by the company.

Prepare Final Accounts of the company. 30

Q4. Distinguish between Jon Costing and Process Costing.... 20

State the basic conditions of Income-Tax Act to deterinine the

residential status of idividual a company and all other persons. 15

Prepare a note on from gross total income in respect

of certain incomes and cerfain payments for:irldividuals. 15

SECTIONB

Q5. Answer the following in about 150 words each: . 10x5=50

(a)."Internal Rate of Return Method of Capital budgeting is

considered to be superior to Payback Period Method." Critically

evaluate. 10

What is the relationship between leverage and cost of capital as

per the net income approach. and net operating income

approach of theories of capital structure? 10

Banks are permitted to enter the insurance sector. Critically

evaluate the current scenario of Bancassurance in India. 10

Write a note on two important issues of the ratio of current

assets to sale (relative asset liquidity) and the ratio of short-term

financing to long-term financing (relative finanCing liquidity) in

formulating working capital policy. 10

What is the justification for the goal of maximising the wealth of

shareholders? 10


Q6. From the foilowing Balance Sheets as on December, 2012

and 2013, you are required to prepare a Statement of Funds Flow

and Schedule of Changes in Working Capital:

Liabilities' 2012 Rs. 2013 Rs.

Share Capital 2,00,000 2,50,000
General Reserve 50,000 60,000
Profit and Loss 30,500 30,600
Long Term Loan 70,000
Sundry Creditors 1,50,000 1,35,200
Provision for TaX 30,000 35,000

5,30,500 5,10,800

Assets 2012 Rs. 2013 Rs.

Land and Building 2,00,000 1,90,000
Machinery 1,50,000 1,69,000
Stock 1,00,000 74,000
Sundry Dehtors 80,000 64,200
Cash 500 600
Bank 8,000
Goodwill 5,000

5,30,500 5,10,800


Additional information during the year ended 2013 is as under:

Dividend of s. 23,000 was paid.
(ii)Assets of other company were purchased for 50,000 payable in
shares. Assets purchased were' Stock of Rs.20,000,. Machinery
Rs.25,000 and Goodwill Ra. 5,000.
(iii). Machinery was. further purchased for Rs.8,000.
Depreciation written off on machinery Rs.12,000.
Income Tax proviged during the year Rs.33,000.
Loss sale of machine Rs.200 was written off to General

Reserve. 20


Calculate the explicit cost of debenture for. each of. the following
situations, assuming tax rate of coupon rate·.of:lnterest

face value of debentu;e'Rs.1,000, maturity 20 years:

If debentures are sold at a premium of and floatation costs
are 2%.

If debentures are sold at a discount of and' .fl. oata ;i.on

costs
are 3%.

The present value factor of an annuity of Rs.1 for 20 years, and

present value factor of Rs.1 for the 20th year are as under:

For Rs 1· 9%. 10%· 11%

PV factor of Annuity for years 1 20 9.129 8.514 7.963

PV factor for the year: 20th 0.178 9.149 0.124


What is Corporate Restructuring with special reference to

Mergers and Acquisitions 10

Rudra.Ltd.'s Balance Sheet as on 31-12-2013 is as under:

Balance Sheet (As on 31-12-2013)

Liabilities Rs Assets Rs


Equity Capital 60,000 Net FiXed Assets 1,50,000
(Rs 10 per share)

10% Long-term Loan 80,000 Current Assets 50,000
Retained Earnings 20,000
Current Liabilities 40,000
2,00,000 2,00,000


Calculate the Degree of operating leverage, financialleverage and
combined leverage.
Determine the likely' level of EBIT if EPS is Rs 3 and
Rs 0(zero).

The company's total assets turnover ratio is 3.0. Its fixed operating

costs are Rs 1,00,000. Its variable operating costs to sales ratio is

40%. The income tax rate is 35%.


Earnings per share of Shree Laxmi Textile Ltd. is Rs 20 per

share. The company has an internal rate of return of 12 percent and

the capitalisation rate is 10 percent. Determine the following using

Walter's Dividend Model

Optimum payout ratio of the firm.
The price of the share at this payout.


Using the following information, complete the Balance Sheet

gIven below:

Balance Sheet
Capital and Liabilities Rs Assets Rs

Equity Capital 2,00,000 Plant and Equipments
Retained Earnings 3,00,000 Inventory
Creditors and Bills Payable Debtors
Cash

Total Total

Other Information:
Total debt to Net worth Ratio is 0.5 1.0
Turnover on Total Assets 2
Gross Profit margin 30%
Average Collection Period (based on 360 days year) 40 Days
Inventory Turnover (based on cost of goods sold and year end
inventory) 3 times
Acid Test Ratio: 0.75 1.0 20


Q8. Critically evaluate the functioning of primary and

secondary markets in relation to money market and capital

market instruments. 20
How is venture capital different from traditional financing? What

are the different types of venture capital funds? 10
Critically evaluate Reserve Bank of India and its monetary

policy and
C-DRN-N-EPBA 14its credit policy. 20