IAS Mains Commerce 2001

Time Allowed: 3 hours Maximum Marks: 300

Candidates should attempt Questions I and 5 which are compulsory, and any three of the remaining questions selecting at least one question from each Section.
Paper I
Section A

Answer any three of the following, in not more than 200 words each:

How does responsibility accounting seek to establish a relationship between planning and controlling

What are accounting conventions

Explain the rights of a company auditor .

Give the rationale of charging depreciation .

Answer the following questions

Discuss the need for evolving accounting standards. What is their primary aim

ABC Co. Ltd. Decided to reconstruct their business. On the eve of reconstruction their Balance Sheet was as follows:
Liabilities Amount (Rs.
Assets Amount (Rs.
Authorised Capital: 50, 000 Preference
Shares of Rs. 100 each 50, 000 Equity Shares of
Rs. 100 each
Paid-up Capital:
30.000 Preference
Shares of Rs. 100 each fully paid
25.000 Equity Shares of
Rs. 100 each fully paid
Sundry Creditors
Bills Payable 50, 00, 000 50, 00, 000 30, 00, 000 25, 00, 000 00, 000 00, 000
Patents
Building
Plant
Machinery
Sundry Debtors
Stock
Discount on issue of Shares
Preliminary
Expenses
P L A/c
Cash and Bank 25, 00, 000 15, 00, 000 00, 000 00, 000 60, 000 39, 000 40, 000 53, 500 500 62, 00, 000 62, 00, 000

The reconstruction was carried out as per the following scheme:

The number of Preference Shares remained the same but their paid-up amount was reduced to Rs. 50 per share.

The number of Equity Shares remained the same but their paid-up amount was reduced to Rs. 25 per share.

The amount available was used to write-off Preliminary Expenses, P L A/c

Discount on Issue of Shares completely; and to write-off Rs. 5.00, 000 on Buildings.

Rs. 00, 000 on Stock, and 20% on Plant and Machinery and on Sundry Debtors. The balance available was used to write-off Patents.

Joumalise the above transactions and prepare the Balance Sheet as it would appear after reconstruction .

Answer the following questions

What is marginal costing? Explain with a suitable example

Alpha Co. Ltd. Are manufacturers of inverter batteries, They have planned to sell 96, 000 batteries in the first quarter of 2002, 02, 000 in the second quarter, 08, 000 in the third quarter and 14, 000 in the fourth quarter; and 26, 000 in the first quarter of 2003.

The opening stock was 16, 000 at the beginning of the first quarter of 2002.

According to the Companys scheme of working there should be an inventory equal to of the planned sales of the next quarter.

Give the production budget for each quarter of 2002

Answer the following questions

If an auditor is not appointed in the Annual General Meeting. How is he subsequently appointed? How can a company auditor be removed before the expiry of his term

Mr. X is an executive in a company in Mumbai. He received a monthly salary of Rs. 25.000.

He gets Rs. 250 per month as dearness salary and Rs. 500 per month as dearness allowance.

His employer paid directly Rs. 45, 000 as his medical expenses to an approved hospital.

The employer incurred an expenditure of Rs. 30, 000 on his treatment by a private medical practitioner.

Mr. X incurred medical expenses of Ps. 50.000 in a hospital approved by the Chief

Commissioner of Income-Tax, which were reimbursed by the employer.

Mr. X travelled abroad with an attendant, which cost him Rs. 50, 000.

The employer also undertook an expenditure of Rs. 00, 000 on Mr. Xs stay and treatment abroad, On this item half of the amount is to be exempted from tax.

Mr. X was paid by his employer a sum of Ps. 000 for the eye-surgery of his maternal uncle dependent upon him.

Mrs. X suffered from cancer and was treated at the Tata

Memorial Hospital, Mumbai which is approved by the Chief Commissioner of Income-Tax.

The employer paid a sum of Rs. 50, 000 for the treatment.

Compute Mr. Xs income from salary on the basis of the above details, assuming the transactions having taken place in the assessment year 2001 02.

Section B

Write short notes on any three of the following in not more than 200 words each:

Factors that determine the nature of the organisation of financial management function .

The concept of working capital .

Nature and types of leasing

Guidelines issued by the Reserve Bank of India relating to commercial papers

Answer the following questions

Point out the limitations of a Balance Sheet, and of a Profit and Loss Account. How are these limitations overcome by a Statement of Changes in Financial Position

Calculate the

Current Ratio

Acid-test Ratio from the following figures:
Rs. Rs.
Cash
Bank
Debtors
Finished Goods 500 000 000 000
Inventory of Raw Material
Creditors
Bills Payable
Bank Credit
Outstanding Expenses 000 000 000 000 000

Answer the following questions

Are dividends irrelevant to the valuation of a firm? Give reasons for, your answer .

A Co. Ltd. Had 50, 000 equity shares of Rs. 10 each as on January 1. Currently the shares are being quoted at par in the market. In the current calendar year the company is going to declare a dividend of Rs. 3 per share. The company belongs to a risk class with an appropriate capitalisation rate of 20 p. c. Use the Modiliani-Miller model to determine the price of the shares of the company when

dividend is declared

no divident is declared, No taxes are to be paid .

Answer the following questions

What is meant by financial distress? State the provisions of Sick Industrial Companies (Special Provisions) Act, 1985 designed to help sick industries in India .

What are the various forms of credit available to industries from banks? Point out their merits and limitations .