Open Questions Q) The financial statements of Matrix limited are shown below: Matrix Limited: Profit & Loss

account for the year ending 31st March 20X1 Rs. in Millions 20X1 20X0 Net Sales 1065 950 Cost of Goods Sold 805 720 Stock Wages & Salaries Other Manufacturing Expenses 85 Gross Profit 260 230 Operating Expenses 90 75 Depreciation 50 40 Selling & General administration 40 Profit before interest & tax 170 155 Interest 35 30 Profit before Tax 135 125 Tax 50 40 Profit After Tax Dividends 35 30 Retained Earnings 50 50

600 120 90

520 110

35

85

80

Matrix Limited: Balance Sheet as at 31st March 20X1 Rs. in Millions 20X1 20X0 I. Sources of funds 1. Shareholder's funds 505 455 (a) Share capital 125 125 (b) Reserve & Surplus 380 330 2. Loan Funds 280 260 (a). Secured Loans 160 (i) Due after one year 130 135

180

(ii) Due Within one year 255 (b). Unsecured Loans 100 100 (i) Due after one year 70 (ii) Due Within one year 40 30 Total 785 715 II. Application of Funds 1. Net fixed Assets 550 495 2. Investments 30 25 (a) Long term investments 20 20 (b) Current investments 10 5 3. Current assets, loans & advances 355 333 (a) Inventories 160 138 (b) Sundry Debtors 120 115 (c) Cash & bank balance 25 20 (d) Loans & advances 50 60 Less: Current liabilities & provisions 150 138 Net current assets 205 195 Total 785 715 i) Prepare a sources & uses of cash statement ii) Prepare the classified cash flow statement iii) Prepare the cash flow identity

50

60

Q) At the end of 2001 the balances in the various accounts of Mahaveer Limited are as follows: Rs. In million Accounts Balance Equity Capital 90 Preference Capital 20

Fixed Assets (net) 150 Reserves & surplus 50 Cash & Bank 20 Debentures (Secured) 60 Marketable Securities 10 Term Loans 70 Receivables 70 Short-term bank borrowing (Un Secured) 40 Inventories 110 Trade Creditors 30 Provisions 10 Pre-paid Expenses 10 Required: Classify the accounts into assets & liabilities. Prepare the balance sheet of Mahaveer limited as per the format specified by the companies act. Q The comparative balance sheets of Saraswati Company are given below: Rs. In million Owners' Equity & Liabilities As on 31.3.2000 As on 31.3.2001 Share Capital 50 50 Reserves & Surplus 60 70 Long - term debt 95 80 Short - Term bank borrowings 70 80 Trade Creditors 50 60 Provision 20 15 Total 345 355 Assets

Fixed Assets (Net) 190 Inventories 60 Debtors 70 Cash 15 Other Assets 20

180 70 60 20 15

Total 345 355 The income statement of Saraswati Company for the year 2001 is given below: Income statement for the period 1.4.2000 to 31.3.2001 million Net Sales 800 Cost of goods sold 520 Stocks 300 Wages 105 Other Manufacturing Expenses 115 Gross Profit 280 Operating Expenses 150 Selling, administration & general Depreciation Operating Profit 130 Non Operating surplus or deficit (50) EBIT 30 Interest 20 Profit before Tax 30 Tax 20 Profit after Tax 30 Dividends 20 Fig in

130 20

Retained Earnings 10 i) Prepare the sources & uses of cash statement for the period 1.4.2000 to 31.3.2001. ii) Prepare the classified cash flow statement for the period 1.4.2000 to 31.3.2001. iii) Develop the cash flow identity for the period 1.4.2000 to 31.3.2001.

Short answer type

1. Define the following a Prepaid expense, accrued income? 2. Explain the terms Bills receivable, bills payable? 3. Why is Bank reconciliation Statement prepared? 4. Why is Fun Flow Statement prepared? 5. Why is a cash flow statement prepared? 6. What is a contra entry? 7. When do use the term suspense account? 8. The matching concept refers to the matching? 9. What is the purpose of Accrual basis accounting? 10. What is a contingent liability ? 11. Which of the following series of accounts all have credit balances? a. Accounts payable, notes payable, interest income b. Accounts payable, notes payable, interest expense c. Accounts payable, depreciation expense, sales d. Notes receivable, accumulated depreciation, sales 12. Why is a trial balance prepared & what are the accounts that follow? 13. Which of the following transactions does not change amount of Net working capital? a. Buying $70 supplies on credit b. Paying long term loan $ 1000 c. Receiving cash on the issue of equity d. All of the above

Balance sheet as at 31 Dec. 2005 (Pounds)

st

Fixed Assets Stock Trade Debtors Prepaid expenses Cash in bank Bank Overdraft Trade creditors Tax payable Long-term loan Share capital Share premium P & L account

20000 5000 3000 1500 500 1500 6000 1000 1000 4000 5000 11500

14. The net assets a. 30,000 pounds b. 29,000 pounds c. 20,500 pounds d. 21,100 pounds 15. The total assets less current liabilities are a. 21,500 pounds b. 20,000 pounds c. 20,500 pounds d. 21,100 pounds 16. The total assets are : a. 10,000 pounds b. 30,000 pounds c. 29,000 pounds d. 20,150 pounds 17. The total outside liabilities are: a. 20,000 pounds b. 9,000 pounds c. 11,500 pounds d. 9,500 pounds 18. X purchased goods of the value of Rs. 10,00from Y, later on he found that the goods are

defective so he returned the goods to Y. later on he found that the goods are defective so he returned the goods to Y. Pass an entry to reflect the return of goods: 15. A company buys 10 items at a price of $ 200 each, all on 14 days free credit. It then sells on the next day 5 units for $ 350 each. One item was sold for cash, the remainder on 21 days free credit. How much profit has the firm made
a. b. c. d.

$ 1,000 $ 150 $ 750 $1,750

16.From the data calculate the current ratio & liquid ratio Cash 3000 Debtors 7000 Closing stock 5000 Fixed assets 5000 Creditors 3000 Bills payable 2000 Shareholders fund 9000

17. In 2005, an equipment owner sold a front-end loader for $ 75,000 with a book value of $100,000 and accumulated depreciation of $70,000. What is the accounting gain/loss on the sale of the loader? a) $25,000 b) $30,000 c) $75,000 d) $45,000 18. Current assets include: a) Stocks & debtors b) Loans & creditors c) Intangible assets d) None 19.The shareholders equity is: a) $4000 b) $20,500 c) $ 8,650 d) $12,500 20. Rectify the following errors by passing journal entries: A) Amount of Rs. 500 being the salary of Mr. Y paid in cash was posted in the books twice. B) Expenditure of Rs. 500 pertaining to the printing was wrongly posted repairs & maintenance account. C) Amount received from Mr. Y of Rs. 5000 was wrongly posted as 500 in the cashbook. 21. Bank debited charges in the Bank statement, but not accounted for in the Bank/ Cash book. While reconciling which of these is performed? a) Debit to bank statement b) Debit to bank book c) Credit to bank statement d) Credit to bank book 22. What is calculated when we talk about a benefit is to cost ratio? 23 .How does one calculate a break-even analysis? 24. What is capital budgeting? 25.What is carrying cost? 26. What is cost of Capital? 27. What is the difference between depreciation & devaluation? 28.Define the following ratios with numerical examples? i) Debt Asset Ratio ii) Current Ratio iii) Liquidity Ratio iv) Quick Ratio 29. Define Profit margin? 30.What is paid up capital?

31. What are bills of exchange? 32. What is break-even analysis? 33. What is the accrual principal?