DISTANCE EDUCATION
M.B.A. (H.R.M.) DEGREE EXAMINATION, MAY 2017.
First Semester
FINANCIAL AND MANAGEMENT ACCOUNTING
(Upto 2012-13 Academic Year and 2013 Calendar Year)
Time Three hours Maximum 100 marks
PART A — 8 40 marks)
Answer any FIVE questions.
All questions carry equal marks.
1. Discuss the current trends and developments in
Accounting standards in the international forum.
2. Explain the steps involved in preparing the rectification
of errors statement.
3. Compare and contrast Horizontal vs. Vertical analysis of
financial statement analysis.
4. Enumerate the preparation of schedule of changes in the
Fund flow Statement in detail.
5. Discuss the need and importance of budgetary control
system.
6. Define Payback period method. List down its objectives
and merits in detail.
Sub. Code
15
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7. What are the objectives of rectification errors? Highlight
its applications in ensuring the accounting standards
with examples.
8. From the following information of PQR Ltd. prepare a
statement showing changes in working capital positions
along with, funds flow statement
Particulars 31st December
Previous Year Current Year
Current Assets 1,35,000 1,27,200
Investments 15,000 21,400
Land 9,000 9,000
Plant and Machinery 81,000 1,05,000
Accumulated depreciation 24,000 26,000
Patents 16,200 12,600
Total Asset 2,32,200 2,49,200
Current Liabilities 24,600 34,800
12% Debentures 43,400
14% debentures 39,000
Equity share capital 90,000 1,00,000
Reserve for future lose
on investments
6,000 3,600
Retained earnings 68,200 71,800
Total liabilities and capital 2,32,200 2,49,200
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Additional Information
A reconciliation of the balances in retained earnings
is as follows
Beginning balance Rs. 68,200
Net Income for current year Rs. 3,000
Award received from settled of
patent infringmenet cases Rs. 15,600
Dividends Rs. 15,000
Ending Balance Rs. 71,800
Net income of the current year includes a loss of
Rs. on the sale of a part of plant. The plant
was for Rs. at the beginning of the year,
accumulated depreciation being Rs.
Investments of Rs. were sold during the
year at a loss. The loss was charged to the reserve
for future losses on investments and did not appear
on the income statement.
During the current year the 12% debentures were
called for redemption. Most of them were refunded
through the issuance of new 14% debentures and
the rest were retired for cash.
The equity shares were issued in exchange of
machinery. The rest of the plant and machinery
were purchased for cash.
PART B — 15 60 marks)
Answer any FOUR questions.
All questions carry equal marks.
9. Discuss the historical function and managerial
functions of Accounting.
Explain any three accounting convention of your
choice in detail with its managerial scope.
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10. The following is the Trial Balance of Chennai Limited as
on 31st March. 2006. Prepare Profit Loss Account and
balance Sheet as on that date.
Trial balance on 31.03.2010
Debits Rs. Credits Rs.
Land and
Building 7,00,000
Share capital
ordinary share of
Preliminary Rs. 100, Rs. 50 paid up 10,00,000
Expenses 20,000 General reserve 1,50,000
Rent, Rates and debentures 5,00,000
Insurance 14,000 Bank Loan (Unsecured) 20,000
Bank 1,20,000 Sundry Creditors 80,000
Salaries 40,000 Securities premium 50,000
Cash 10,000 Debenture redemption
reserve
2,00,000
Printing and Gross profit 5,20,000
Stationery 6,000 P and L A/c Balance 30,000
Closings stock on
31.03.2010 6,40,000
Furniture and
Fittings
40,000
Trade
investments
30,000
Debenture
Interest
20,000
Advance payment
of income tax 40,000
Sundry debtors 3,50,000
Directors fees 10,000
Machinery 5,00,000
Interest on bank
loan 10,000
25,50,000 25,50,000
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The following information is relevant for the preparation
of final accounts
Outstanding expenses Audit fees Rs.
Interest on debentures for six months Rs.
Provision for income tax Rs.
Machinery worth of Rs. was purchased
and installed on 1st October 2010. Provide
depreciation on Land and Buildings and on
Machinery per annum.
Prepaid insurance Rs.
Transfer Rs. to debenture redemption
reserve and Rs. 20,000/ to general reserve.
Write off 50% of preliminary expenses
Directors propose dividend on share capital
Authorized capital consists of 50,000 equity shares
of Rs. 100 each.
11. Following is the Profit and Loss Account and Balance
Sheet ABC Ltd., You are require to redraft them for the
purpose of financial analysis
Profit and Loss Account
For the year ending 31st March, 2009
Rs. Rs.
Operating stock 5,00,000 Sales
Purchases 11,00,000 Cash 3,00,000
Wages 3,00,000 Credit 17,00,000 20,00,000
Factory overheads 2,00,000 Closings tock 6,00,000
Gross profit 5,00,000
26,00,000 26,00,000
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Rs. Rs.
Administrative expenses 75,000 Gross profit 5,00,000
Selling and distribution
expenses
50,000
Dividend on
investment 10,000
Interest on bank overdraft 20,000 Profit on sale of
furniture 20,000
Depreciation on
office equipments
60,000
Loss on sale on motor car 5,000
Net profit 3,20,000
5,30,000 5,30,000
Preference dividend
(net interim)
15,000
Balance b/d 2,71,000
Provision for taxation 1,76,000 Net profit 3,20,000
Balanced c/d 4,00,000
5,91,000 5,91,000
Balance Sheet as on 31st March, 2009.
Liabilities Rs. Assets Rs.
Equity share capital 10,00,000 Goodwill (at cost) 5,00,000
preference share
capital 5,00,000
Plant and Machinery 6,00,000
General Reserve 1,00,000 Land and Building 7,00,000
Profit and Loss Account 4,00,000 Furniture and Fixtures 1,00,000
Provision for Taxation 1,76,000 Stock-in-trade 6,00,000
Bills payable 1,24,000 Bills receivable 30,000
Bank overdraft 1,20,000 Debtors 1,50,000
Creditors 4,80,000 Bank 2,20,000
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12. Discuss the need and managerial applications of
Cash Flow Statement.
Enumerate the challenges associated with the Cash
Flow Statement preparation and its key limitations.
13. A company manufactures Product A and Product B.
During the year ending 31st December 2012, it is expected
to sell 15,000 kg. of Product A and 75,000 kg. of Product
B at Rs. 30 and Rs. 16 kg respectively. The direct
materials Q and R are mixed in the proportion of
in the manufacture of Product A. Materials Q and R are
mixed in the proportion of 1:2 in the manufacture of
Product B. The actual and bud et inventories for the ear
are given below
Opening stock

Expected closing
stock
Anticipated cost
per kg
Material P 4,500 3,000 12
Material Q 3,000 6,000 10
Material R 30,000 9,000 8
Product A 3,000 1,500
Product B 4,000 4,500
Prepare the Production Budget and the Materials Budget
showing the expenditure on purchase of materials for the
year end 31st December, 2012.
14. A Company has developed the following discrete
probability distribution of cash flows for a particular
capital budgeting proposal
Year 1 Year 2 Year 3
Cash Flow Prob. Cash Flow Prob. Cash Flow Prob.
100 0.10 300 0.20 500 0.10
200 0.20 400 0.40 600 0.30
300 0.30 500 0.30 700 0.30
400 0.40 600 0.10 1000 0.30
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Assume that the probability distributions of the flows for
different years are perfectly correlated over time; the
initial cost of the project is 1,000; and the appropriate
discount rate is 10%. Now determine
The mean and standard deviation of the cash flows
for each year.
The expected NPV of the project.
The probability that the project shall have an NPV
greater than zero, assuming that the NPV
distribution follows 'normal' pattern.
The probability that the project would succeed,
assuming that instead of being perfectly correlated,
the successive flows are independent of each other.
The EVPI for the project under the assumptions
perfectly correlated and independent cash
flows.
15. Write a detailed note on Capital rationing and their
rationale.
Highlight the managerial applications of DCF
method in capital appraisal with apt examples