DISTANCE EDUCATION
M.Com. DEGREE EXAMINATION, MAY 2017.
FINANCIAL ACCOUNTING AND ANALYSIS
(2005 onwards)
Time Three hours Maximum 100 marks
SECTION A — 8 40 marks)
Answer any FIVE questions.
1. What are the limitations of ratio analysis?
2. What is accounting equation? Illustrate with suitable
example.
3. Explain the CCA method of accounting for price level
changes.
4. Write a short note on inter-firm and intra-firm
comparisions.
5. Explain different types of errors with appropriate
examples.
6. Distinguish between balance sheet and trial balance.
Sub. Code
12
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7. Explain single entry system. How does it differ from
double entry system?
8. From the following details, calculate funds from
operations
Salaries 5,000 Provision for tax 4,000
Rent 3,000 Loss on sale of plant 2,000
Refund of tax 3,000 Closing balance and
profit and loss a/c
60,000
Profit on sale of
building
5,000 Opening balance of
profit and loss a/c
25,000
Depreciation on
plant
5,000 Transfer to general
reserve
1,000
Discount on issue
and debenture
2,000 Preliminary expenses
written off
3,000
Provision for bad
debts
1,000 Proposed dividend 6,000
Goodwill written off 2,000
Dividend received 5,000
SECTION B — × 15 60 marks)
Answer any FOUR questions.
9. Briefly explain accounting concepts and conventions.
10. The comparative balance sheets of Mr. Vijay for the last
two years were as follows.
Liabilities 2008
2009
Assets 2008
2009
Loan from wife 20,000 Cash 11,000 15,000
Bills payable 12,000 8,000 Debtors 40,000 35,000
Creditors 25,000 52,000 Stock 25,000 30,000
Loan from bank 43,000 60,000 Machinery 20,000 14,000
Capital 66,000 34,000 Land and building 50,000 80,000
1,46,000 1,74,000 1,46,000 1,74,000
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Additional information
Net loss for the year 2009 amounted to 13,000.
During the year a machine costing 5,000
(accumulated depreciation 2,000) was sold for
2,500. The provision for depreciation against
machinery as on 31.12.2008 was 6,000 and on
31.12.2009 7,000. From the above information
prepare a cash flow statement.
11. From the following information, prepare a balance sheet.
Show the workings.
Working capital 75,000
Reserves and surplus 1,00,000
Bank overdraft 60,000
Current ratio 1.75
Liquid ratio 1.15
Fixed assets to proprietor's funds 0.75
Long term liabilities Nil
12. The following are the ledger balance extracted from the
books of weifa.
Weifa's capital 50,000 Sales 3,01,000
Bank overdraft 8,400 Return inwards 5,000
Furniture 5,200 Opening stock 44,000
Business premises 40,000 Debtors 36,000
Creditors 26,600 Rent from
tenants
2,000
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Purchases 2,20,000 Taxes and
insurance
4,000
Discount 800 Salaries 18,000
General expenses 8,000 Carriage on
purchases
3,600
Commission allowed 4,400 Bad debts written
off
1,600
Provision for doubtful
debts
1,000
Adjustments
Stock on hand on 31.12.2005 was estimated as
40,120.
Write off depreciation on business premises 600
and furniture 520.
Make a provision on on debtors for bad and
doubtful debts.
Allow interest on capital at and carry forward
1,400 for unexpired insurance.
Prepare final account for the year ended 31.12.2005.
13. Mr. Mano keeps his books of account under single entry
system. His financial position on 31.12.2009 and
31.12.2010 was as follows
2009
2010
Cash 9,860 800
Stock in trade 38,520 57,020
Plant and machinery 54,420 61,000
Bills receivable 16,480
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2009
2010
Sundry debtors 24,840 43,940
Sundry creditors 72,040 80,000
Furniture 4,960 5,220
Drawings 5,000
During the year he introduced additional capital of
20,000. From the above particulars prepare a
statement of profit and loss of Mr. Mano for the year
ended 31.12.2010.
14. A book-keeper failed to balance his trial balance, the
credit side exceeding the debit side by 1,750. This
amount was entered in a suspense account. Later the
following errors were discovered.
Goods worth 6,200 sold to Rahim were correctly
entered in the sales book, but posted to Rahim's
account as 2,600.
A credit balance of 7,550 of rent received account
was shown as 5,700.
The total of returns outward book amounting to
2,000 was not posted to ledger.
Goods worth 1,000 purchases from Prema were
wrongly entered in the sales book. The account of
Prema was correctly credited.
The sales book was under cast by 1,000.
The total of the credit side of David's account was
overcast by 1,000.
Give the journal entries to rectify the above errors
and prepare the suspense account.
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15. Explain the following and indicate their uses as
techniques of financial statement analysis.
Comparative statement
Common size statements
Trend analysis.