Hall Ticket No Question Paper Code: CMB002
INSTITUTE OF AERONAUTICAL ENGINEERING
(Autonomous)
MBA I Semester End Examinations (Regular) January, 2018
Regulation: IARE-R16
Financial Accounting and Analysis
(MASTER OF BUSINESS ADMINISTRATION)
Time: 3 Hours Max Marks: 70
Answer ONE Question from each Unit
All Questions Carry Equal Marks
All parts of the question must be answered in one place only
UNIT I
1. Demonstrate the meaning and significance of the following accounting concepts and conventions:
i. Matching concept
ii. Going concern concept
iii. Convention of consistency
iv. Convention of materiality
Describe the different types of transactions. Explain the classification of accounts and rules of
double entry system for each category of accounts.
2. Discuss the meaning of book keeping and accounting. Explain the main functions of
accounting.
Classify the following into personal, real and nominal accounts:
i. Drawings A/c
ii. Discount A/c
iii. Salary A/c
iv. Reserve for doubtful debt A/c
v. Prepaid rent A/c
vi. Sales A/c
vii. Bad debt A/c
viii. Creditors A/c
ix. Capital A/c
x. Purchases A/c
xi. Patent rights A/c
xii. Bank overdraft A/c
xiii. Outstanding commission A/c
xiv. Machinery A/c
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UNIT II
3. In the trial balance given below, some accounts have been included in the wrong column (debit
or credit). As a result, the balance is not matching. Prepare the correct trial balance. Also find
out the missing figure of retained earnings.
Table 1
Accounts Debit Credit
Cash 7,500
Salaries payable 900
Taxes payable 3,000
Accounts receivable 16,500
Inventory 21,000
Capital stock 60,000
Long term debt 34,000
Land 6,000
Buildings 60,000
Other assets 2,000
Accounts payable 7,000
Dividends payable 2,500
Retained earnings
Total 90,000 130,400
The trial balance of Mr.X as on 31 December, 2015 was as follows:
Table 2
Debit Balance Rs. Credit Balance Rs.
Purchases 162,505 Sales 252,400
Sundry debtors 50,200 Provision for doubtful debts 5,200
Opening stock 26,725 Sundry creditors 30,526
Wages 23,137 Bills payable 3,950
Salaries 5,575 Outstanding wages 2,000
Furniture 7,250 Trade expenses accrued but not paid 700
Postage 4,226 Capital account 10,000
Power and fuel 1,350
Trade expenses 5,831
Bad debts 525
Loan at 10 per annum to Ram 1st Sept.2015 3,000
Cash on hand and at bank 10,000
Drawings account 4,452
304,776 304,776
Prepare the trading and profit and loss account for the year ended 31 December, 2015 and the balance
sheet as at that date taking into account the following information:
• Depreciation on furniture is to be charged at 10% per annum.
• Provision for doubtful debts is to be maintained at on sundry debtors.
• Stock as at 31 December, 2015 was Rs.12,550
4. A firm purchases a truck for a sum of Rs.100,000 on 1 January, 2015. It charges 20% depreciation
per annum on December, 31 according to the diminishing balance method. The truck was sold
on 1 July, 2016 for a sum of Rs.80,000. Prepare the truck account for 2015 and 2016.
Prepare sales book and sales returns book in the books of M/s Aishwarya enterprises from the
following transactions:
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Table 3
Date Transaction
13/5/16 Goods of MRP Rs.55,000 sold to Naveen enterprises trade discount.
16/5/16 Goods of MRP Rs.49,500 sold to Ram enterprises trade discount.
21/5/16 Goods of value Rs.5,000 returned by Nitish enterprises
22/5/16 Goods of value Rs.15,400 sold to Nitish enterprises on cash.
24/5/16 Goods of value Rs.16,500 sold to Simson Ltd.
26/5/16 Goods of value Rs.1,500 returned by Ram enterprises
1/6/16 Goods of value Rs.4,500 returned by Simson Ltd.
UNIT III
5. The following transactions occur in the purchase and issue of a material:
Table 4
2016 April
1 Opening stock 100 units@Rs.500
5 Purchases 300 units Rs.6 per unit
6 Issued 250 units
8 Purchases 500 units @Rs.7 per unit
10 Issued 400 units
12 Purchases 600 units Rs.8 per unit
30 Issued 500 units
Prepare stores ledger under LIFO method from the above transactions
Discuss the meaning and types of preference shares.
6. J.K. Ltd invited application to issue 30,000 equity shares of face value Rs.10 each at 10% premium.
The amount to be paid as to Rs.6 at the time of application, Rs.4 (including premium) on
allotment, Re.1 per share on first and final call. The company received the application for 35,000
shares applicants for 5,000 shares were refused allotment and remaining applicants were given
allotment. One shareholder holding 300 shares paid only the application money. Rest of the
shareholders paid the due amount in time. Show the necessary journal entries.
Discuss the meaning and modes of redemption of debentures.
UNIT IV
7. From the following balance sheets of Joshwa company Ltd as on 31 December, 2014 and 2015,
prepare funds flow statement for the year ended 31 December, 2015:
Table 5
Liabilities 2014 2015 Assets 2014 2015
Share capital 1,00,000 100,000 Goodwill 12,000 12,000
General reserve 14,000 18,000 Building 40,000 36,000
Profit/loss 16,000 13,000 Plant 37,000 36,000
Creditors 8,000 5,400 Investments 10,000 11,000
Bills payable 1,200 800 Stock 30,000 23,400
Provision for taxation 16,000 18,000 Bills receivable 2,000 3,200
Provision for doubtful debts 400 600 Debtors 18,000 19,000
Cash at bank 6,600 15,200
155,600 155,800 155,600 155,800
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Additional information:
i. Depreciation charged to plant Rs.4,000.
ii. Provision for taxation of Rs.19,000 was made during the year 2015.
iii. Interim dividend of Rs.8,000 was paid during the year 2015.
Describe the meaning of funds from operations and its computation procedure.
8. The balance sheets of XYZ Limited as on 31 March, 2015 and 2016 were as follows:
Table 6
2015 2016
Assets:
Land and buildings 80,000 120,000
Plant and machinery 500,000 800,000
Stock 100,000 75,000
Sundry debtors 140,000 150,000
Prepaid expenses 14,000 12,000
Cash at bank 16,000 18,000
8,50,000 11,75,000
Liabilities and capital:
Share capital 500,000 700,000
Profit loss account 100,000 160,000
General reserve 50,000 70,000
Sundry creditors 163,000 200,000
Bills payable 30,000 40,000
Outstanding expenses 7,000 5,000
850,000 1175,000
Additional information:
• Rs.50,000 depreciation has been charged on plant and machinery during the year ,2016
• A piece of machinery was sold for Rs.8,000 during 2016. It had cost Rs.12,000, depreciation
of Rs.7,000 has been provided on it.
Prepare cash flow statement of XYZ Limited
Discuss the usefulness of cash flow statement. Explain the types of cash transactions recorded in
cash flow statement.
UNIT V
9. The Summarised balance sheet of PAI traders Ltd fot he year ended 31 March, 2016 is given
below:
Table 7
Capital and liabilities Rs.in Lakhs Assets Rs. in Lakhs
Equity share capital 140 Fixed asset (at cost) 210
Less: Depreciation 25 185
Reserves and surplus 45 Current Assets:
Profit and loss account 20 Stock 25
Provision for taxation 10 Debtors 30
Sundry creditors 40 cash 15
255 255
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The following further particulars are also given for the year:
Table 8
Rs.in Lakhs
Sales 120
Earnings before interest and tax (EBIT) 30
Net profit after tax 20
Calculate the following for the company
Current ratio.
Liquid ratio
Profitability ratio.
Debtor's turnover
Stock turnover
Return on equity
Discuss the meaning and types of financial statement analysis

10. The following is the profit and loss account of Rupa Co for the year ended on
March 31, 2016:
Table 9
Rs. Rs.
Net sales 3,000,000
Less: cost of goods sold
Opening stock 500,000
Add: purchases 2,000,000
Less: closing stock 700,000 1,800,000
Gross Profit 1,200,000
Less: operating expenses 480,000
Operating profit 720,000
Less: Interest charge 180,000
Profit before tax 540,000
Additional Information:
Table 10
Current assets Rs. 975,000
Current liabilities Rs. 600,000
Fixed assets Rs. 525,000
From the above particulars, calculate the following ratios:
Cost of goods sold ratio
Stock turnover ratio
Operating ratio
Assets turnover ratio
Operating profit ratio
Return on capital employed.
Demonstrate the meaning, significance and computation of turnover ratios.