Hall Ticket No Question Paper Code: CMB002
INSTITUTE OF AERONAUTICAL ENGINEERING
(Autonomous)
MBA I Semester End Examinations (Regular) February, 2017
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. "Accounting is the language of business"-Explain the statement with its practical implications.

"Accounting is a service activity. Its function is to provide qualitative information, Primarily
financial in nature, about economic entities that is intended to be useful in making economic
decisions."
2. "Accounting Conventions are adopted to make the financial statements clear and meaningful".
Elucidate the statement with important conventions of accounting.
"Every business transaction has two elements OR aspects" Justify and explain the statement
with suitable examples.
UNIT II
3. Give accounting equation for the following transactions of Hitesh for the year 2015.
i. Started business with cash Rs. 18,000.
ii. Paid rent in advance Rs. 400.
iii. Purchased goods for cash Rs. 5000 and on credit Rs. 2,000.
iv. Sold goods for cash Rs. 4,000 (costing Rs. 2,400).
v. Rent paid Rs. 1,000 and rent outstanding Rs. 200.
vi. Bought motor-cycle for personal use Rs. 500.
vii. Purchased equipments for cash Rs. 500.
viii. Paid to creditors Rs. 600.
The Table 1 Trial Balance has been prepared wrongly. You are asked to prepare the trial balance
correctly.
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Table 1
Name of accounts Debit balance Credit balance
Cash in hand 2,000
Purchases returns 4,000
Wages 8,000
Establishment expenses 12,000
Capital 22,000
Carriage outward 2,000
Discount received 1,200
Commission earned 800
Machinery 20,000
Stock 10,000
Creditors 12,000
Sales 28,000
Purchases 28,000
Bank overdraft 14,000
Grand total 58,000 58,000
4. Ram and Shyam Bros. acquired a machine on July 2014 at a cost of 70,000 and spent 5,000
on its installation. The firm writes off depreciation 10% on straight line method. The books
are closed on December 31 every year. Show the machinery and depreciation account for three
years.
From the Table 2 Trial balance of Ravi enterprises, prepare the final accounts for the year ended
31st March, 2015:
Table 2
Particulars Debit Credit
Land and building 50,000
Purchases 1,10,000
Stock 40,000
Returns 1,500 2,500
Wages 10,000
Salaries 9,000
Office expenses 2,400
Carriage inwards 1,200
Carriage outwards 2,000
Discounts 750 1,200
Bad debts 1,200
Sales 2,05,000
Capital account 1,30,000
Insurance 1,500
Commission 1,500
Plant and machinery 50,000
Furniture and fixtures 10,000
Bills receivable 20,000
Sundry debtors 40,000
Sundry creditors 25,000
Cash in hand 1,500
Cash at bank 4,500
Office equipment 12,000
Bills payable 2,350
Total 3,67,550 3,67,550
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Adjustments:
1. Closing stock amounted to Rs. 60, 000.
2. Outstanding liabilities; Wages Rs. 2,000 and Rent Rs. 3,000.
3. Depreciation; Land and buildings at Plant and machinery at Office equipments at
10% and Furniture and Fixtures at 10%.
4. Provide further bad debts reserve at on Sundry debtors.
5. Insurance premium prepaid Rs. 200.
6. Provide interest on capital at 5%.
UNIT III
5. A firm maintains its stores ledger on the basis of FIFO method. Following is the summary of the
receipts and issues of raw materials during the month of April 2006:
April 01 Opening balance 300 units Rs.22 per unit " 03 Issue vide Material requisition No. 14,
150 units.
" 08 Purchase order No.07, 200 units 25 per unit.
" 12 Purchase order No.09, 400 units 23 per unit
" 17 Issue vide Material requisition No. 16, 500 units.
" 20 Issue vide Material requisition No. 18, 100 units.
" 23 Purchase order No. 11, 600 units 20 per unit.
" 25 Issue vide Material requisition No.26, 600 units.
" 28 Purchase order No.12, 200 units 26 per unit.
" 29 Issue vide Material requisition No.32, 300 units.
" 30 Shortage 10 units
Critically examine the different types of preference Shares.
6. What is an ordinary share? How does it differ from a preference share and debenture? Explain
its most important features.
Fashion Fabrics Ltd. issued 100000 shares of Rs. 10 each on 1st April, 2006.
The amount payable on these shares was as under:
Rs 2 per share on application.
Rs 3 per share on allotment.
Rs 5 per share on call.
Make necessary journal entries in the books of company.
UNIT IV
7. "A Fund flow statement is a better substitute for an income statement" Comment.
Table 3 is the Balance sheet of Anand and Sons.
During the year a machine costing Rs. 10000 (accumulated depreciation Rs. 3000) sold for
Rs.5000. The provision for depreciation against Machinery as on 1.1.2015 was Rs. 25000 and on
31.12.2015 Rs. 40000. Net profit for the year amount to Rs. 45000. You are required to prepare
Cash flow statement.
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Table 3
Liabilities 1.1.2015 31.12.2015 Assets 1.1.2015 31.12.2015

Creditors 40000 44000 Cash 10000 7000
Mrs. Loan 25000 Debtors 30000 50000
Loan from Bank 40000 50000 Stock 35000 25000
Capital 125000 153000 Machinery 80000 55000
Land 40000 50000
Building 35000 60000
230000 247000 230000 247000
8. Discuss briefly the major classification of cash flow as per AS-3 (revised)
Table 4 summaries of the Balance sheet of ABC Ltd., for two years.
Table 4
31.12.2014 31.12.2015
Share Capital 200000 260000
P L Account 39690 41220
Reserves 50000 50000
Sundry creditors 39500 41135
Bills payable 33780 11525
Bank overdraft 59510
Provision for taxation 40000 50000
462480 453880
Good will 20000
Land and Building 112450 116200
Plant and Machinery 148000 144250
Stocks 111040 97370
Sundry Debtors 85175 72625
Bills receivable 2315 735
Cash 2500 2700
461480 453880
Additional information:
1. During the year ending 31.12.2015, an interim dividend of Rs. 2600 was paid.
2. Income tax paid during the year amounted to Rs. 25000
3. The net profit for the year before tax was Rs. 62530 You are required to prepare statement of
changes on working capital, treating provision for taxation as a current liability.
UNIT V
9. "Financial analysis is a continuous process being applicable to every business to evaluate its past
performance and current financial position" Comment.
From the balance sheet given in Table calculate:
i. Working capital
ii. Current Ratio
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iii. Acid test Ratio
iv. Debt Equity Ratio
v. Assets Proprietorship Ratio
Table BALANCE SHEET OF COMPANY LTD., as on 31st December 2006
Liabilities Amount Assets Amount
Shareholders' fund: Fixed assets 1,80,000
Equity share capital: 1,50,000 Current assets:
12% Pref. share capital: 30,000 Cash in Hand: 2,000
Reserves and surplus: 24,000 2,04,000 Cash at bank 4,000
15% Debentures 48,000 Sundry Debtors: 10,000
Bank overdraft: 12,000 Stores: 12,000
Sundry creditors: 16,000 Stock-in-Trade: 32,000 60,000
Proposed dividend: 2,000 Preliminary expenses 48,000
Provision for taxation: 10,000 40,000 Discount 4,000
on issue of Debenture
2,92,000 2,92,000
10. Explain Du point analysis with chart
Mention any 5 Accounting Standards. Explain the significance of Accounting Standard.
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