Accounting For Managers

 Knowledge is Power Accounting for Managers (M.B.A.
I Sem)
Accounting for Managers

Contents
Pg.No.
1. Journal Entries 02
2. Final Accounts 06
3. Depreciation 14
4. Process Costing 16
5. Make or Buy Decisions 18
6. Budgetary Control 22
7. Standard Costing 28
deepeshmahajan@gmail.com, 1
 Knowledge is Power Accounting for Managers (M.B.A. I Sem)
Journal Entries
Q.1 Journalism the following transactions in the books of Mr. Rishi
2007 July 1 Mr. Rishi started his business with an investment of Rs.1,00,000 from his personal
funds.
6 He deposited Rs.40,000 in the current Account of State Bank of Mumbai.
8 He purchased goods for Rs.80,000 on cash basis.
10 He sold goods for Rs.72,000 on cash basis.
14 He purchased goods for Rs.60,000 from Max & Co on credit basis.
14 He withdrew Rs.20,000 from business for personal use.
15 He returned Rs.15,000 goods to Max & Co.
18 He paid Rs.45,000 to Max & Co., in full settlement.
26 He paid telephone charges Rs.1,000.
30 He paid Rs.8000 salary to his employees.
Q.2 Pass compound journal entries for the following transactions.

2007 July 8 Paid salary to employees Rs.60,000.
Paid rent to the building owner Rs.4,000
Paid to BG & Sons, the supplier Rs.84,000.
10 Withdrew Rs.75,000 (including Rs.20,000 for personal use) from Bank.
Q.3 From the following details extracted from the Balance Sheet of Mr.Parikshit as on June 30, 2007, pass
the appropriate opening entry on July 1,2007. Cash in hand Rs.12,000; Cash at bank Rs.40,000;
Inventory
Rs.50,000; Land and buildings Rs.2,40,000; Furniture Rs. 28,000; Machinery Rs.69,000; Debtors
Rs.40,000;
Loan from Mr.Amar Rs.1,28,000; and Creditors (Mr.Gundu) Rs.1,90,000.
Q.4 Enter the following cash transactions in the simple Cash Book of Sir Kelkar and post them to the
respective Ledger Accounts.
2007 July 1 Cash in hand Rs. 6,800.
6 Cash purchase of goods Rs.16,000.
10 Sale of goods on cash basis to Mr.Pandyan Rs.28,000.
14 Paid salary to the office staff Rs.5,200.
14 Rent paid Rs.1,400.
31 Commission paid Rs.560.
Q.5 The following transactions have take place during July 2007. enter these in a Two-column Cash Bank
and prepare the Bank Account and Discount in the leadger.
2007 July 01 Cash in hand Rs.18,000
03 Cash deposited to Bank Rs.6,000
08 Purchased furniture for Rs.4,000 and the same was paid by cheque
09 Paid into Bank Rs.8,000
10 Sold goods for Rs.18,000 for cash
10 Purchased merchandise for Rs.5,000 and it was also paid by cheque
24 Bought another Rs.1,000 worth furniture for cash
25 Paid to Panikar Rs.1,200 in full settlement of his account for Rs.1,250
27 Drew cheque for salary Rs.2,000 and for personal use Rs.1,800
30 Received cash from Mr. Avinash Rs.7,840 and allowed him Rs.160 as discount.
Q.6 Enter the following transactions in the Cash Book with Cash, Bank and Discount columns.
01.6.2007 Cash in hand Rs.18,000
Overdraft at Bank Rs.2,000
16.6.2007 Received cheque of Rs.780 from P and discount allowed to him Rs.20
17.6.2007 Deposited P’s cheque in the Bank
29.6.2007 The cheque received from P on 16.6.2007 was dishonored.
Q.7 Enter the following transactions in the Columnar Petty Cash Book on Imprest System with appropriate
analysis columns. Also post them to the ledger.
2007 Jan. 01 Withdrew from Bank for petty cash imprest Rs.200
03 Paid for postage Rs.15
04 Purchased stationery Rs.8
05 Paid wages to office cleaner Rs.5
06 Paid collie charges Rs.9
14 Paid for advertisement Rs.25
16 Paid train and bus fares Rs.18
18 Registered postage Rs.12
24 Paid for telegram and cable Rs.10
26 Postage charge Rs.18
28 Conveyance charge paid Rs.10
31 Paid for carriage Rs.8
Q.8 Journalise the following transactions and post them into Ledger Accounts
Rs.
July 2007 01 Ram commenced business with cash 10,000
02 Paid in to Bank 8,000
03 Bought goods for cash 500
04 Bought furniture for office and paid by cheque 400
10 Drew from Bank cash for office 1,000
13 Goods sold to Gopal 600
15 Bought goods of Ram Shankar 410
18 Paid Trade expenses 100
19 Received cash from Gopal 590
Allowed discount 10
25 Paid wages 50
28 Paid Ram Shankar in full settlement 400
30 Paid Rent 400
30 Interest on capital 500
(Note: Changed Month & Year)
Q.9 Journalise the following transactions in the books of Mr.Max.

1999 April 02 Max commenced business with cash Rs.10,000 and furniture Rs.5,000
04 Took Loan from Bank Rs.5000
07 Purchased goods from Anand Rs.7,000 and from Babu Rs.3,000
11 Sold goods to Arvind for cash Rs.2,000 and on credit Rs.3,000
12 Paid Babu on account by cheque Rs.3,000
15 Received a cheque from Arvind and deposited the same into bank Rs.2,000
18 Commission due to sunil Rs.100
21 Drew for office use Rs.500
27 Paid salaries Rs.500, Rent Rs.800 and electricity charges Rs.200
30 Arvind is declared insolvent and a dividend of 50 paise in the rupee is received in full
Settlement
Q.10 Journalise the following transactions in the Books of M/S Natasha Traders.
Rs.
1999 June 01 Commences business by introducing capital 1,50,000
02 Bought furniture from M/s furniture House for cash 5,000
03 Purchased a goods for cash 1,00,000
04 Sold a goods to M/s Arathi Traders 50,000
05 Received a cheque for Rs.49,000 in full settlement of the
Transaction from M/s Arathi Traders
06 Purchased a goods from M/s Arvind on credit 25,000
07 Drawn cash for personal use 1,000
08 Settled Arvind’s account by payment in cash 24,500
09 Bought a machinery for Rs.28,000 and installed the same
At a cost of Rs. 2,000
30 Paid a wages Rs.5,000 and Rent Rs.4,000
Q.11 Journalise the following transactions in the books of Vishwanath.

a. Vishwanath started his business with the following:
Cash in hand 1,500
Cash at Bank 3,500
Goods in hand 3,000
Furniture 2,000
Buildings 10,000
b. Gave charity Rs.20
c. Loan taken from the Bank Rs.5,000
d. Purchased a motor car in exchange for goods Rs.2,000 and cheque Rs.3,000
e. Paid proprietor’s life insurance on account Rs.2,000
f. Bought goods from Lakshman on account Rs.2,000
g. Furniture costing Rs.300 was destroyed by fire
Q.12 Journalise the following transactions in the books of X and Y.

Date Particular Amount
02.10.02 X purchased goods from Y Rs.40,000
03.10.02 X sold furniture to Y Rs.20,000
04.10.02 X allowed Y a discount of Rs. 500
06.10.02 X paid on behalf of freight charges Rs. 300
07.10.02 Received cash on account of freight charges Rs. 300
09.10.02 X paid Y Rs.10,000
10.10.02 Y sold goods to X Rs.10,000
14.10.02 X paid Y Rs.15,000
15.10.02 Y received discount from X Rs. 400
16.10.02 X deposited cash in the Bank Rs. 5,000
17.10.02 Y received cash from Z Rs. 5,000
18.20.02 X paid Z on behalf of Y Rs. 2,000
Q.13 Journalise the following transactions:

January 2004 02 Started business with Rs.1,00,000

Paid in to Bank Rs.50,000
04 Bought furniture for cash Rs.6,000
05 Bought furniture for resale Rs.4,000
06 Sold goods to Mr. X Rs.6,000
07 Sold goods Rs.5,000
08 Purchased from Y for Rs.5,000
09 Charged depreciation on Machinery Rs.1,000
10 Withdrew from Bank Rs.3,000 for private use
14 Deposited a cheque into Bank for Rs.6,000
20 Cheque deposited on 14th January was dishonoured
25 Paid rent, salaries, postage Rs.5,000
Rs.6,000 and Rs.150 respectively
Q.14 Journalize the following transactions

January 2003 02 Started business with Rs.1,00,000
Paid into Bank Rs.50,000
January 2003 03 Bought furniture for cash Rs.5,000
January 2003 05 bought goods for cash Rs.3,000
January 2003 06 Sold goods for a cash Rs.600
January 2003 10 Bought one computer for Rs.18,000 from the Compaqc Company on credit
January 2003 13 Sold goods to M/s Ramya & sons for Rs.10,000 on credit
January 2003 14 Bought goods from M/s Mohindra & Co. for Rs.200 on credit
January 2003 15 Paid telephone rent, advertisement, salaries, rent Rs.2,400, Rs.1,000, Rs.2,000
Rs.1,000 respectively
January 2003 26 Sold goods to Mr.Lal & Co. for Rs.8,000 cash
January 2003 30 Withdrew from Bank Rs.300 for private use
January 2003 31 Bought one delivery van for Rs.3,00,000 from the Delhi motor Co., payment
to be made by monthly installment of Rs.20,000 each together with interest at
9%. First installment paid by cheque
Q.15 Journalize the following transactions in the books of Sunshi Kumar.

January 2002 01 Started business with Rs.80,000
05 Purchased goods worth Rs.50,000 less 20% discount and 5% cash discount.
11 Bought 100 shares of Bharathi Ltd @ 15 per share, brokerage paid Rs.25
15 Purchased a motor car in exchange of goods Rs.20,000 and cash Rs.30,000.
18 Sold goods to Rajkumar for Rs.50,000 on credit
20 Purchased goods from veerappan Rs.25,000
25 Goods distributed as free samples Rs.1,000
28 Rajkumar become insolvent and only a dividend of 50 paise is recovered from
his estate.
30 Cash Rs.5,000 is withdrew by the proprietor for personal use.
31 Paid into Bank A/c Rs.5,000
Final Accounts:
Manufacturing Account as on…….
Dr. Cr.
Particulars Rs. Particulars Rs.
To Opening Stock:
Raw Materials By Closing Stack:
Work-in-Progress
To Purchases of Raw By Raw Materials
Materials( less R/O) Work-in-Progress
To Wages By Trading A/C
To Gas and Water (Cost of finished goods)
To Factory Rent
To Power
To Factory Insurance
To Consumable Stores
To Freight
Trading Account as on…….
Dr. Cr.
To Opening Stock By Sales
To Purchases Less Sales Returns
Less: Purchases
Returns
Less : Goods
otherwise given away By Closing Stock
To Direct Expenses
To Wages By Gross Loss c/d
To Carriage Inward
To Manufacturing
Expenses
To Motive Power
To Factory lighting
To Coal, Water and
Gas
To Fuel and Power
To Import duty
To Works Rent
To Productive Exp.
To Excise Duty
To Warehousing Exp.
To Wages and
Salaries
To Octroi Duty
To Custom Duty
To Dock Charges
To Royalty
To Consumable Stores
To Railway Freight
To Gross Profit c/d BY Gross Loss C/d
Profit & Loss Account as on …….
Dr. Cr.
To Salaries & Wages By Gross Profit b/d
To Rent! Rates &
Taxes
To Lighting Charges By Discount Received
By Income from
To Insurance Premium Investments
To Printing &
Stationery By Interest Received
To Postage &
Telephone By Commission
To Legal Expenses By Dividends
To Audit Fees By Sundry Incomes
To General Expenses
To Go down Rent
To Packing Expenses
To Advertising
To Carriage Outwards
To Commission
To Traveling Expenses
To Sales Tax
To Donations &
Charity
To Bad Debts
To Discount Allowed
To Interest on Loans
To Interest on Capital
To Repairs
To Depreciation
To Net Profit C/d ########## By Net Loss C/d **********
Balance Sheet as on…….
Liabilities Rs. Assets Rs.

Capital -(-Drawings) Goodwill
Net Profit Land & Buildings (-Dep.)
General Reserve Plant and Machinery –“--
Loans Furniture –“--
Sundry Creditors Investments
Outstanding Expenses Prepaid Expenses
Bills Payable Stores
Bank Overdraft Stock in trade
Sundry Debtors
Bills Receivable
Cash at Bank
Cash in Hand
1.) Prepare Final Accounts from the following data as on 31/03/01;

Rs. Rs.
Purchases 150000 Sales 225000
Op. Stock 25000 Rent 2000
Carriage In. 2500 Creditors 20000
Salaries 12000 Prov.Bad Debts. 500
Carriage out. 4000 Capital 117500
Admn. Exp. 12500 Loans 20000
Debtors 25000
Bad Debts 2000
Return In. 5000
Land/ Building 120000
Cash 2000
Bank 7000
Repairs 18000
385000 385000
I. Closing Stock on 31/3/01 is Rs. 20,000.

II. Further bad debts amounted to Rs. 5,000 and provide 5% for bad debts and create 2 % for
discount on debtors.
III. One third portion of the building was let out, one third was used for residential purpose and one
third for business purpose.
IV. Charge depreciation @ 5% on land and building.
2.) From the following Trial Balance, prepare Manufacturing, Trading and P/L , Balance sheet for the year
ended 31/3/08;
Rs. Rs.
Stock 30000 Capital 100000
Return inward 2500 Return out 1500
Bills Receivable 45000 Bills Payable 10000
Carriage In 7500 Loan 25000
Plant 65000 Bad Debt Prov. 750
Furniture 3500
Debtors 60000 Creditors 28000
Coal, Gas, Water 1200
Wages 10000
Duty & Clearing 1500
Printing & Stat. 500
Office Rent 2500
Insurance 350
Carriage Out 4200
Salaries 18000
Factory Rent 1900
Electrical Exp. 800
Bank Charges 25
Drawings 5000
Cash in Hand 1250
Cash at Bank 4525
365250 365250
I. Closing stock was Rs. 40000.
II. Outstandings: Salary Rs. 24000, Factory Rent Rs. 1500, Office Rent Rs. 550.
III. Further bad debts Rs. 2000.

IV. Create a provision for bad debts @ 2.5 % .
V. Goods withdrawn for private use Rs. 2500.
VI. Depreciation on Plant @ 10 %.
VII. Charge interest on Capital @ 5 %.
VIII. Allow a commission @ 5 % of net profit after charging such commission.
Rs. Rs.
Stock 720000 Capital 5000000
Furniture 100000 Return out 180000
Debtors 500000 Creditors 398000
Car 350000 Loan
Wages Commission 75000
Advertisements 220000
Repairs 130000
Building 4258000
Insurance 70000
General Exp 160000
Salaries 300000
Cash in Hand 35000
Cash at Bank 60000
9153000 9153000
I. Closing stock was Rs. 800000.

II. Prepaid Advertisement was Rs. 18000.
III. Outstanding Salary was Rs. 30000.
IV. Provide Depreciation on Building Rs. 5 %, Furniture 10 %, Car 20 %.
V. Make a Reserve for Bad Debts @ 2 %.
Stock 38,500 Capital 2,28,800

Purchases 1,10,000 Sales 2,31,440
Furniture 5,500 Return out 1,100
Debtors 29,260 Creditors 44,000
Interest on Loan 1,100 Loan@10% 44,000
Wages 35,200 Provision for Bad Debts 880
Loose Tools 2,200 Drawings 13,200
Freight 9,900 Freehold property 66,000
Building 99,000 Postage 1,540
Insurance 1,760 gas and fuel 2970
Factory Lighting 1,100 Bad debts 660
Salaries 3,200 office expenses 2,750
Cash in Hand 2,640 discounts(Dr.) 1,320
Cash at Bank 29,260 Bills payable 5,500
Office Rent 2,860
I. Closing stock was valued at Rs. 72,600.
II. A new machine was installed during the year costing Rs. 15,400, but it was not recorded in the
books as no payment was made for it. Wages Rs.1,100 paid for its erection has been debited to
wages account.
III. Depreciate:-
Plant and machinery by 331/3 %
Furniture by 10%
Freehold property by 5%
IV. Loose Tools Valued at 1,760.
V. Rs. 600 is to be charged as Bad Debts.
VI. Maintain a Provision of 5% on Debtors.
VII. The Manager is entitled to a commission of 10% of Net Profit after charging such commission.
Rs. Rs.
Stock 132,250 Capital 115000
Furniture 15,250 Advertisement 6,750
Printing & Stat. 2,200 Provision for Bad Debts 5700
Wages 22,325 Drawings 15,000
Payable Salaries 5,350 Rent 6,500
Provision for Discounts on ebtors(Dr.) 1,375 Bad Debts Recovered 1250
Prepaid Rent 500 Bad debts 2200
Bank O.D. 160000 Carriage Inward 2,350
Plant 40,500 Carriage Outward 3,250
Salaries 32,650 Cash at Bank 7,250
Cash in Hand 2,300
I. The difference in Trial Balance if any can be taken as Miscellaneous Income/Expenditure.

II. Bank O.D. is secured.
III. Purchase includes Sales Return of Rs. 5500 and Sales include Purchase Return of Rs. 4750.
IV. Goods withdrawn by Businessman Rs. 7500 are included in Purchases.
V. Wages paid for installation of Machinery are included in wages Rs. 750.
VI. Depreciation is to be charged Plant @ 15%, Furniture @ 10 %.
VII. Create a Provision for Bad Debts @ 5%, 2.5% on Discount on Debtors.
VIII. A debit balance of Rs. 2500 in the account of Rani a Creditor is included in the list of sundry
debtors.
IX. Free samples distributed for Publicity costing Rs. 1250.

Stock 60,000

Wages 90,000 Provision for Bad Debts
Carriage Inward 10,000 Provision for Income Tax 45,000
Carriage Outward 20,000 P&L A/C 38,000
Preliminary Expenses 20,000 General Reserve 100000
Goodwill 140,000 Share Capital:
Plant 450,000 Equity- Fully Paid 300,000
Salaries 60,000 6% Redeemable Prif. Shares 200,000
Cash at Bank 6,000 6% Debentures 200,000
Power 15000 Salaries & Wages Unpaid 25,000
Manufacturing Expenses 35000 Interest on Govt. Securities 2,000
Insurance 10,000 Sinking Fund 90,000
Sinking Fund Investment (4% Govt. Sec.) 90,000
Debenture Interest 6,000
Land & Building 300,000
Directors Fee 10,000
Audit Fee 6,000
Income Tax Paid 41,000
Dividends Paid:
Preference 6,000
Interim on Equity 30,000
1,815,000 18,15,000
The closing stock for 31/12/06 was Rs. 58,000. A provision for Income Tax is to be made at Rs. 50,000. The
Directors recommend a Dividend @ 10 % after transferring Rs. 25,000 to General Reserve. Rs. 10,000 to be
transferred to Sinking Fund. Charge Depreciation 2% on Land Buildings, 10 % Plant & Machinery, Write
off Rs. 5,000 from Preliminary Expenses.
Q.7. The following is the trial balance of L.N. manufacturing Co. Ltd., as at 31.3.2001.
Debit Credit
st
Stock on 1 April 2000 7,50,000 -
Sales - 35,00,000
Purchases 24,50,000 -
Wages 5,00,000 -
Discounts 70,000 50,000
Salaries 75,000 -
Rent 49,500 -
General expenses including Insurance 1,75,000 -
Profit and loss Account on 1st April 2000 - 1,50,300
Dividends paid 90,000 -
Bad debts 48,300 -
General Reserve - 1,55,000
Cash in hand and at Bank 1,62,000 -
Authorized capital and Issued capital
(full subscribed) (1,00,000 shares of Rs.10 each) - 10,00,000
Sundry debtors and creditors 3,75,000 1,75,000
Plant and machinery 2,90,000
You are required to prepare trading account, and profit and loss account for the year ended
31st March 2001 and Balance Sheet at the date after making following adjustments.
a. Closing stocks Rs.8,20,000.
b. Depreciate machinery @ 15% p.a.

c. Provide 5% discount on debtors
d. Allow 2.5% discount on creditors
e. One month’s rent @ Rs.54,000 p.a. was due on 31st March 2001
f. Six months insurance was unexpired Rs.3,750
g. Make a provision for Income Tax @ 35%
Q.8.The following is the trial balance of Mr.RK as on 31-12-2003. Prepare trading and
profit/loss account for the year ending 31.12.2003 and a balance sheet as on that date.
Adjustments:-
a. Closing stock on 31.12.2003 was Rs.10,000
b. Debtors worth Rs.2,000 was bad.
c. Depreciate machinery by 5% and vans by 15%
d. Prov. For bad and doubtful debts should be increased by Rs.600
e. Commission accrued and not received Rs.500.
f. Goods worth Rs.500 were used by the proprietor for personal use.
g. On 20.12.2003 a fire broke out in the shop and worth Rs.2,000 were completely destroyed. The
insurance company accepted the claim for Rs.1,500 and paid the claim on 1.1.2004.
Trial Balance as on 31.12.2003

Dr. Amount Rs. Cr. Amount Rs.
Capital - 85,000
Drawings 7,500 -
Opening stock 1.1.2003 12,000 -
Purchase and sales 86,000 1,70,000
Returns 2,000 1,000
Discounts 500 700
Commission received - 1,000
Income tax paid 700 -
Office salaries 17,300 -
Office Rent 2,000 -
Advertising 1,700
Sundry debtor and creditors 85,000 30,000
Provision for doubtful debt - 3,000
Manufacturing wages 8,600 -
B/R & B/P 5,000 5,000
Carriage 600 -
Machinery 40,000 -
Motor vans 7,000 -
Land and buildings 10,000 -
Office expenses 1,500 -
Cash at bank 6,000 -
Cash in hand 2,300 -
Total 2,95,700 2,95,700
Q.9. Dr. Reddy after retiring from a Government pharmaceutical Company, started Reddy Pharma ompany
in Bangalore on 1st April, 2004 and provides the following
balances for the year ending 31st March 2005.
Debit Credit
Drawings and Capital 12,000 90,000
Purchases and Sales 4,95,000 6,76,000
Debtors and Creditors 84,000 38,000
Bills receivable and payable 4,900 3,700
Opening balance 40,000
Plant and machinery 56,000
Furniture 8,500
Cash in bank 21,650
Building rent 9,600
Salaries 16,910
Printing and postage 3,800
Traveling 7,900
Other expenses 41,800
Insurance 1,040
Suspense account 3,000
Telephone 1,600
Total 8,07,700 8,07,700
Prepare Reddy’s Trading, profit and loss Account for the year ended 31st March,
2008 and a Balance Sheet as on that date after considering the following:
a. Value of Closing stock amounted to Rs.50,000.
b. Depreciate machinery at 10% p.a. and furniture at 5% p.a.
c. Suspense account includes money advanced to sales manager who was sent to
Delhi for business trip. He has spent Rs.900 for miscellaneous expenses. The
balance is yet to be refund by him.
d. The bad debts amounted to Rs.2,000 and Dr.Reddy has a policy of maintaining
2% of the remaining debtors as provision for future bad debts.
__________
Depreciation Accounting
Q.1. On 1 January 2000, a machine was purchased for Rs. 80,000, rate of depreciation is @ 10 % P.A.,
prepare
machinery account for 3 years when depreciation is charged under fixed installment method.
Q.2. On 1 January 2000 A plant was purchased at Rs. 40000, the working life being 10 years. In the second
year
and third year, new plants were purchased for Rs.4000 and Rs.2500 respectively. Show the plant account, if
depreciation is charged @ 10 % P.A. as per straight line method.
Q.3. On 1 January 2000 a company purchased furniture for Rs. 200,000, its life is three years. Its residual
vale is
Rs. 20,000 on 31 December 2002 the scrap was sold for Rs. 25,000. Give furniture account by fixed
installment
method.
Q.4. On 1 January 2000 a company purchased furniture for Rs. 500,000, its life is three years. Its residual
vale is
Rs. 50,000 on 31 December 2002 the scrap was sold for Rs. 75,000. Give furniture account by Written
Down
Value method.
Q.5. Valuation of a plant was made on 1 January 1992 at Rs. 30,000. the life of the plant was 8 years.
Following
purchase and sales were made up to 31 December 1994;
Purchases: 31/3/1992 Costing Rs. 15,000, life being 10 years.

30/9/1993 Costing Rs. 20,000, life being 8 years.
Sales: 30/6/1994Costing Rs. 5,000 which was included in opening plant was sold for Rs. 4,700.
Prepare plant account for first 3 years after assuming that the residual value of each plant is 10 % of the cost
.
Q.6 A firm purchased on 1 January, 1984 certain machinery for Rs. 116,400 and spent Rs. 3600 on its
erection.
On 1 July 1984 additional machinery for Rs. 40,000 was purchased. On 1 July 1986 the machine purchased
on
1 January 1984 having become obsolete was auctioned for Rs. 57,200 and on the same date new machine
was
purchased for Rs. 80,000. Depreciation was provided @ 10 % on 31 December on W.D.V. In 1987 however
the firm changed this method of providing depreciation and adapted 5 % depreciation P.A. on original cost
basis. Give the machinery account from 1984 to 1987.
Q.7 A machine is acquired on Jan. 12,000 at a total cost of Rs.31, 25,000 with an estimated useful life of 5
Years and estimated salvage value of Rs.32, 000. Depreciation was provided under WDV method but from
th
4 year it was changed to S.L. method. The machine was disposed of on Jan.1, 2005 for Rs.30,000. show
Machinery A/C for all five years.
Q.8 A Company purchased a machinery on 1 January 1994 for Rs. 37,000 and immediately spent Rs. 3,000
for on its erection. On July 1 1995 it purchased machinery for Rs. 10,000 and on July 1 1996 it sold off the
first machine for Rs. 28,000 and bought another for Rs. 25,000 and on July 1 1997 the second machine was
also sold off for Rs. 2,000. Depreciation was provided on machinery @ 10 % on original cost annually on
31 December. In 1995 the company change the method of depreciation and adapted the W.D.V. method, the
rate of Depreciation being 15 % P.A. Give the machinery account for 4 years from the date of purchase of
machinery.
Q.9 The G Transport company purchase 10 trucks at Rs.2,70,000 each on July 1, 1996. On January 1, 1999,
one of the trucks is involved in an accident and is completely destroyed. A sum of Rs.1,62,000 is received
from the insurers in full settlement. On the same date, another truck is purchased by the company for a sum
of Rs.3,00,000. The company writes off 20% on the original cost per annum and closes its books every year
on March 31. Give the motor Trucks Account for two years ending March 31,2000.
Q.10 On January 1,1998, a firm purchased second hand machinery for Rs.40,000 and spent Rs.10,000 on
reconditioning it. On July 1, 1998, the firm purchased on July 1,1998 was sold for Rs.16,000. On July
1,1999, fresh plant was installed at a cost of Rs.30,000. The firm writes of 10% per annum on the
diminishing balance . Show the machinery Account for three years ending December 31,2000.
Q.11 ABC Ltd Co., Purchased second hand machinery on April 1, 1996 for Rs.3,70,000 and installed it at a
cost of Rs.30,000. On October 1, 1997, it purchased another machine for Rs.1,00,000 and on October 1,
1998, it sold off the first machine purchased in 1996, for Rs.2,80,000. On the same date it purchased a
machinery for Rs. 2,50,000.
On October 1, 1999, the second machinery purchased for Rs.1,00,000 was sold off for Rs.20,000. In the
beginning, depreciation was provided on machinery at the rate of 10% p.a. on the original cost each year on
March 31. From the year 1997-98, however, the company changed the method of providing depreciation and
adopted the W.D.V. method, the rate of depreciation being 15%. Give machinery account for the period
1996-2000.
Q.12. A manufacturing firm purchased a machinery on 1/1/03 for Rs. 1,00,000 and spent Rs, 2000 on its
erection. On 1/7/03 additional machine costing Rs. 50,000 was acquired. On 1/1/05 the machine purchased
on 1/1/03 was sold for Rs. 40,000 and on the same date new one was purchased at Rs. 25,000.
Depreciation was provided annually on 31 December @ 10 % P.A. on original cost of asset. In 2005
however this method was changed and W.D.V. method @ 15 % P.A. adapted. Give the machinery account
from 2003 to 2007.
________
Process Costing
Q.1 A product passes through three distinct processes to completion. These processes are numbered
respectively, 1,2 and 3. During the week ended 31st January, 1,000 units are produced. The following
information is obtained:
Process I Processes II Processes III
Rs. Rs. Rs.
Material 6,000 3,000 2,000
Labour 5,000 4,000 5,000
Direct expenses 1,000 200 1,000
The indirect expenses for the period were Rs.2,800 apportioned to the processes on the basis of labour
cost. Prepare process accounts showing total cost and cost per unit.
Q.2 The following information is given in respect of process A.

Material 1,000 Kg. @ Rs.6 per Kg.
Labour Rs.5,000
Direct expenses Rs.1,000
Indirect expenses allocated to process A Rs.1,000.
Normal wastage 10% of input
Prepare process A Account when:
(a) Scrap value of normal loss is nil.
(b) Scrap arising out of normal has a sale value of Re. 1 per unit.
Q.3 Fifty units are introduced into a process at a cost of rupee one each. The total additional expenditure
incurred by the process is Rs. 30. Of the units introduced, 10% are normally spoiled in the course of
manufacture, these posses a scrap value of Re. 0.25 each. Owing to an accident, only 40 units are
produced. You are required to prepare (i) Process Account, and (ii) Abnormal Loss Account.
Q.4 A production passes through three processes A,B and C. The normal wastage of each process is as
follows: Process A-3 percent, process B-5 per cent, and Process C-8 percent. Wastage of process A was
sold at 25 p. per unit, that of process B at 50 p. per unit and that of process C at Re. 1 per unit.
10,000 units were issued to process A in the beginning of October 1998 at a cost of Re. 1 per unit. The
other expenses were as follows:
Process A Process B Process C
Sunday Material Rs. 1,000 Rs.1,500 Rs. 500
Labour 5,000 8,000 6,500
Direct expenses 1,050 1,188 2,009
Actual output 9,500 units 9,100 units 8,100 units
Prepare the process Accounts, assuming that there were no opening or closing stocks. Also give the
Abnormal Wastage and Abnormal Gain Accounts.
Q.5 XYZ Ltd. Manufactures and sells three chemicals produced by consecutive processes known as X, Y
and Z. In each process 2% of the total weight put in is lost and 10% is scrap, which from process X and
Y realized Rs.100 a tonne and from Z Rs.200 a tonne. The products of the three processes given below ;
X Y Z
Sent to warehouse for sale 25% 50% 100%
Passed on the next process 75% 50% -
The following particulars relate to the month of May:
Materials used (tones) 1,000 140 1,348
Cost per tonne of Materials (Rs.) 120 200 80
Mfg. expenses (Rs.) 30,800 25,760 18,100
Prepare an account for each process, showing the cost per tonne of each product.
Penned by Prof. Deepesh Mahajan 16
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Q.6 Chemicals Ltd. Process a patent material used in buildings. The material is produced in three
consecutive grades- soft, medium and hard
Process I Process II Process III

Raw materials used 1,000 tonnes - -
Cost per tonne Rs.200 - -
Manufacturing wages and exp. Rs. 87,500 Rs. 39,500 Rs. 10,710
Weight lost (%of input the process) 5% 10% 20%
Scrap (sale price Rs.50 per tonne) 50 tonne 30 tonnes 51 tonnes
Sale price per tonne Rs. 350 Rs.500 Rs. 800
Q.7 Product X is obtained after it is processed through three distinct process. The following cost information
is available for this operation.
Particular Total
Process
I II III
Materials 5,625 2,600 2,000 1,025
Direct Wages 7,330 2,250 3,680 1,400
Production overheads 7,330 2,250 3,680 1400
500 units @ Rs. 4 per unit were introduced in process I. Production Overheads are absorbed as a
percentage of Direct Wages. The actual output and normal loss of the respective processes are:
Output units Normal loss on input Value of scrap per unit Rs.
Process I 450 10% 2
Process II 340 20% 4
Process III 270 25% 5
There is no stock work-in-progress in any process. Show-(i) the three process accounts, (ii) the abnormal
loss and abnormal gain accounts.
Q.8 The product of a company passes through three distinct processes to completion. From past experience,
it is ascertained that normal wastage in each process is as under:
Process Wastage Sale value of wastage

A 2% 25 paise per unit
B 4% 50 paise per unit
C 2.5% 60 paise per unit
The expenses were as follows:
Process A Process B Process C

Materials 12,000 10,000 9,000
Direct labour 16,000 5,000 4,900
Manufacturing expenses 2,000 3,400 3,590
Other factory expenses 3,500 2,005 2,004
4,000 units were initially introduced in process A at a cost of Rs.13, 560
The out put of each process was as under:
Out put Process

A 3,850 units
B 3,600 units
C 3,500 units

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Q.9. In the process of manufacture of a main product X, by-products P & Q also emerge. The joint expenses
of the process are 119550. All the three products are processed further after separation and sold as per
details as follows;
X P Q
Sales 90,000 60,000 40,000
Cost incurred after separation 6,000 5,000 4,000
Profit as percentage of sales 25 20 15
Total fixed selling expenses are 10 % of total cost of sales which are apportioned to the three products in the
ratio of 20:40:40.
Prepare a statement showing the apportionment of joint costs to the main product and two by-products.
Q. 10. Oil refinery India Ltd. Runs refinery and four products arise out of that. The total cost of input during
the quarter end is Rs. 148,000. Other information is as follows;
Products Output (liters) Processing cost (after split) Total Value
A 8,000 43,000 1, 72,500

B 4,000 9,000 15,000
C 2,000 __ 6,000
D 4,000 1,500 45,000
In case these products are disposed off at the split off before further processing the selling price would be;
A B C D
Rs. 15 6 3 7.5
Prepare a statement of profitability based on;
1. If the product are sold before processing.
2. If they are sold at split off point.
Q.11. In the process of manufacture of a main product X, by-products P & Q also emerge. The joint
expenses of the process are 200,000. All the three products are processed further after separation and sold as
per details as follows;
X P Q
Sales 110,000 80,000 60,000
Cost incurred after separation 8,000 7,000 6,000
Profit as percentage of sales 20 15 15
Total fixed selling expenses are 10 % of total cost of sales which are apportioned to the three products in the
ratio of 40:50:10.
Prepare a statement showing the apportionment of joint costs to the main product and two by-products.

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Make or Buy Decisions (Break Even / Marginal Analysis)
Formulae:
1 S= F + P + V PVr. C/S x 100
2 S: Selling Price/ Sales. B.E.P. in units: (F/C per unit)
3 F: Fixed Cost. B.E.P. in Rs: (F/PVr) x 100
4 V: Variable Cost. M.O.S. S-B.E.P
5 P: Profit. Profit at given Sales: P= (S x PVr)/ 100 - F
6 PVr: Profit Volume Ratio. Sales to earn given S= (F+P) / PVr x 100
Profit:
7 B.E.P.: Break Even Point. PVr. Change in Profit x 100
Change in Sales
8 M.O.S.: Margin of Safety.
Q1. A company’s turnover is Rs. 50,00,000 and its profit is Rs. 500,000 , its PV ratio is 40 %. Calculate its
B.E.P.
Q.2. Sales of XYZ Co. were Rs. 30,000 producing a profit of Rs. 800 per week. In the next week it
augmented to Rs. 38,000 and profit Rs. 2,400. Find out its B.E.P.
Q.3. The promoters of a Company are interested in introduction of a fully automated plant and semi
automated plant for manufacture of automobiles, the details of which are as follows;
FAT SAP
Fixed Cost p.a. 70,00,000 30,00,000
Variable Cost p/u. 300 500
The estimated sales are 50,000 automobiles p.a., the selling price is Rs. 1,000 per automobile; findout
I. B.E.P.
II. Sales to earn equal profit in both the plants.
III. Sales when one plant earns more profit than other.
Q.4. following are the details of a company running two plants;

Plant X Plant Y
Sales 100 90
Variable Cost 75 60
Fixed Cost 15 20
Capacity 80% 60%
Find out;
I. B.E.P. for both plant and merged plant.
II. Capacity of merged plant for Break Even.
III. Turnover of merged plant for a Profit of Rs. 60, 00,000.
IV. Profitability of merged plant at 100 % capacity.

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Q.5.A firm produced 6,000 units in May at a total cost of Rs. 39000 and 7000 units in June at a total cost
of Rs. 43,000 ,the cost conditions remaining unchanged. It sells its product @ Rs. 10 per unit.
(i) How many minimum units should the firm sell to avoid any loss?
(ii) How many units should be sold to make a profit of Rs. 30,000?
(iii) How much profit will the firm make if it sells 8,000 units?
Q.6. A Ltd. operating at 60% level of activity furnishes the following information for2000-01:
Product
A B C
Selling Price per unit (Rs.) 10 12 20
Profit as % on selling price (%) 25 33.33 20
Units produced and sold 10000 15000 5000
Fixed Costs (Rs. 40000 45000 25,000
During 2001 -02, the variable costs are expected to increase by 10%. There will however be no change
in fixed costs, the selling price and the units to be produced and sold. The sales potential of each of the
products' is unlimited:
(a) You are required to prepare a statement showing the P/V ratio , Break-even point and margin of
safety for 2000-01 and 2001-02 for the company as a whole.
(b) The company intends to increase the production of only one of the three products to reach the full
capacity level by utilizing the spare capacity available. Assuming that all the three products take the
same machine time, advise with reasons as to which of the three products should be produced so that
the over all profitability is the maximum.
Q.7. S Ltd. Presented the following information;

Re. per unit
Materials 8.00
Conversion Cost (variable) 6.00
Dealers Margin 2.00
Selling Price 20.00
Fixed Cost: Rs. 2, 50,000.00
Present Sales, (units) 80000.00
Capacity utilization; 60%
There is acute competition. Extra efforts are necessary to sell. Suggestions have been made for increasing
sales: (a) By reducing sales prices by 5%.
(b) By increasing dealer's margin by 25% over the existing rate.
Which of the two suggestions would you recommend if the company desires to maintain the present
profit? Give reasons in support of your answer.
Q.8.The Managing Director of; Pvt. Ltd. asks for your assistance in arriving at a decision as to continue
manufacturing a component X; or buy it from an outside supplier. The component X is used in the
finished products of the company. The following data are supplied:
(a) The annual requirement of component X is 10,000 units. The lowest quotation from an outside
supplier is Rs. 8 per unit.
(b) The component X s manufactured in the machine shop. If the component X is bought out, certain
machinery will be sold at its book value and the residual capacity of the machine shop will remain idle.
(c) The total expenses of the Machine Shop for the year ending 31st March, 2005 are as follows: During
that year the shop manufactured 10,000 units of X:
Rs.
Material l, 35,000
Direct Labor 1, 00,000
Indirect Labor 40,000
Power and Fuel 6,000
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Repairs & Maintenance 11,000
Rate, Taxes and Insurance 16,000
Depreciation 20,000
Other Overhead Expenses 29,600
(d) The following expenses of the Machine Shop apply to manufacturing of component X:
Rs.
Material 35,000
Direct Labor 56,000
Indirect Labor 12,000
Power and Fuel 600
Repairs and Maintenance 1,000
The sale of machinery used for the manufacture of component X would reduce:
Depreciation by As. 4,000, Insurance by Rs. 2000.
(e) If the component X is bought out, the following additional expenses would be incurred:
Freight Re. 1 per unit, Inspection Rs. 10,000 per annum.
You are required to prepare a report to the Managing Director showing the comparison of expenses of
Machine Shop (a) when the component X is made and (b) when bought out.
Q.9.A Company is intending to purchase a new plant. There are two alternative choices a available
Plant A: The operation of this plant will result in a fixed cost of Rs. 40,000 and variable costs of Rs. 4 p/u
Plant B: The purchase of this plant will result in a fixed cost of Rs. 60,000 and variable costs of As. 3 p/u.
Compute the cost break-even point and state which plant is to be preferred and when.
Q.10.ABC Ltd. manufactures a single product for which market demand exists for additional quantity.
Present sale of Rs. 60000 per month utilizes only 70% capacity of the plant. Sales manager assures that
with a reduction of 10% in the price he would be in a position to increase the sale by about 25% to 30%.
The following data is available:
(a) Selling price Rs. 10 p.u.
(b) Variable cost fls. 3 p. u.
(c) Semi-variable cost Rs. 6,000 fixed plus 0.50 per unit.
(d) Fixed cost As. 20,000 at present level estimated to be Rs. 24,000 at 80% output.
You are required to submit the following statements to the Board showing:
(1)The operating profit at 60%, 70% and 80% levels at current selling price and at proposed selling
price.
(2)The % increase in the present output which will be required to maintain the present profit margin at
the proposed selling price.

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Q.11. A manufacturing company finds tat while its cost is Rs. 150 each to make component, the same is
available in the market at Rs. 120 each with an assurance of continued supply. The break up of cost is:
Rs.
Material per unit 60
Labor per unit 40
Variable Expenses 10
Fixed Cost 40
150
Should the company go for buy the in place of manufacture the part?
Q.12. X Ltd. is manufacturing a part for one of its major products at a cost of Rs. 22. The cost analysis
is as under: Rs.
Materials 6.00
Labor 8.00
Variable Overheads 5.00
Fixed Overheads 3.00
22.00
Total requirement is 25,000units annually An outsider supplying this very part has offered to supply
this at Rs. 20 per unit with no change in quality and with regular supply. Should the company go for
buying in place of making the part?
Q.13.New Asia Ltd. manufactures bicycles but purchases bells from outside; the normal annual require-
ment being 1,00,000 bells. There is a proposal that the company should itself produce the bells.
Machinery for the purpose will cost Rs. 6,00,000 with an economic life of 10years and annual capacity
being 1,50,000 bells. Materials and labor will cost 60 paisa per unit and 80 paisa p/u respectively.
Power consumption will be Rs. 6000 p.a. The company has the practice to change fixed overheads to
production @ 75% of Labor Cost. The price paid to suppliers is Rs. 2.50 per unit. The management
consults you on the proposal. Advise the management on the following:
(a) Should bells be manufactured in the factory or continued to be bought from outside?
(b) Assuming production of bells is undertaken, the quantity which may be sold to others and the
minimum price which the company should charge per unit.
Q.14. A product X takes 2 hours to produce on a machine which is used to ff11 capacity Its selling price is
Rs. 21 and marginal cost Rs. 13.A component part Z, used in the production of X can be made on the
same machine in 3 hours. The marginal cost of producing Z is Rs. 10. It can be bought at a net price of
Rs. 20 from the market. Should be component make or buy the component?
Q.15. A company is considering a proposal to buy from outside a certain part which it is manufacturing at
present. The cost data of that part are as follows
Variable cost per unit: Rs.
Materials 800
Labor 280
Overhead 140
Fixed cost per unit
Depreciation 84
Others 100
Total cost per unit 1,404
Should the company continue to make the part or buy it from outside if the purchase price is
(a) Rs. 1,300 per unit (Brand A). And (b) Rs. 1,200 per unit (Brand B)?
___________

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Budgetary Control
Q.1 An estimate shows that there is a market for 10,00,000 units of an electric bell. Two big companies
producing this electric bell will probably divide 80% of the market. Among other companies, producing
the bell, Philips Ltd. Should get 15% of the total market. 60% of the Philips`s sales will probably be
evenly divided between the first and last calendar quarters, with twice as many sales being made in the
second quarter as in the third.
The bell sells for Rs.30 per unit, with the manufacturing cost as follows. The cost is worked out with
reference to normal working capacity for the production which is 1,50,000 bells a year.
Direct Material Cost Rs. 15.00

Direct Labor Rs. 7.50
Variable overheads Cost Rs. 2.50
Fixed overheads Cost Rs. 1,00,000
Prepare a sales budget for the year showing cost of production and gross profit by calendar quarters.
Assume no change in the inventory levels during the year.
Q.2 XYZ Ltd. Manufactures product C and G. during January, it expects to sell 5,000 Kgs of C and 20,000
Kgs of G at Rs.20 and Rs.10 each respectively. Direct materials A, B and E are mixed in equal
proportion to produce product C. Material D, B, and are mixed in the proportion of 5:3:2 to produce
product G. There is no loss of weight in the production. Actual and budgeted inventories in quantities
and costs for the month are as follows:
Material Opening Desired Closing Anticipated Cost

Inventory
A 1500 1000 5.5
B 1000 2000 5.0
D 10000 3000 1.0
E 5000 6000 3.5
Product
C 1000 500 --
G 5000 6000 --
You are required to prepare (i) the production budget (ii) the materials purchase budget, indicating the
expenditure on raw material for January.
Q.3 Develop the Performa (estimated) income statement for the months of October, November and
December of Lintas Ltd. From the following information.
(a) Sales are projected at Rs.2,50,000, Rs.3,00,000 and Rs.2,00,000 for October, November and
December respectively.
(b) Cost of goods sold is Rs.75,000 plus 20% of sales per month.
(c) Selling Expenses are 3% of sales.
(d) Rent is Rs.7,500 per month. Administrative Expenses is 15% of sales per month.
(e) The company has Rs.3,00,000 at 10% loan. The interest is payable monthly.
(f) Corporate tax rate is 30%

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Q.4 L.A.Ltd. Produces and sells a single product. Sales budget for the calendar
year 1987 by quarter is as under-
Quarter No. of units to be sold
I 12,000
II 15,000
III 16,500
IV 18,000
The year 1987 is expected to open with an inventory of 4,000 units of finished product and close with an
inventory of 6,500 units. Production is customarily scheduled to provide for two third of the current
quarter’s sales demand plus one third of the following quarter’s demand. Thus production anticipates
sales volume by about one month. The standard cost details for one unit of the product is as below.
Direct Materials 10 lbs @ paisa per lb. Direct Labour 1 hour 30 minutes @ Rs.4 per hour.
Variable overheads 1 hour 30 minutes @ Re.1 per hour. Fixed overheads 1 hour 30 minutes @ Rs. 2 per
hour, based on a budgeted production volume of 90,000 direct labour hours for the year.
(a) Prepare a production budget for 1987, by quarters, showing the number of units to be produced and
the total costs of direct material, direct labour, variable overheads and fixed overheads.
(b) If the budgeted selling price per unit is Rs.17, what would be the budgeted profit for the year as a
whole?
(c) In which quarter of the year is the company expected to break even?
Q.5A single product company estimated its sales for the next year quarter wise as under-
Quarter Sales units
I 30,000
II 37,500
III 41,250
IV 45,000
The opening stock of the finished goods is 10,000 units and the company expects to maintain the
closing stock of finished goods at 18,250 units at the end of the year. The production pattern in each
quarter is based on 80%of the sales of the current quarter and 20% of the sales of the next quarter.
The opening stock at the end of the year is required to be maintained at 5,000 Kgs. Each unit of
finished output requires 2 Kgs. Of raw material. The company proposes to purchase the entire annual
requirement of raw materials to the first three quarters in the proportion and at the prices given below-
Quarter Purchase of raw materials Price per Kgs.
% of total annual requirement Rs.
In quantity
I 30% 2
II 50% 3
III 20% 4
The value of the opening stock of raw materials in the beginning of the year is Rs.20,000. You are
required to present the following for the next year, quarter wise-
(a) Production Budget in units.
(b) Raw Materials consumption budget in quantity.
(c) Raw Materials purchase budget in quantity and value.

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Q.6 Pyramid Ltd. company is formed to take over a running business. It has decided to raise Rs.55 lakhs by
issue of Equity shares and the balance of the capital required in the first six months is to be financed by
a financial institution against an issue for Rs.5 lakhs with 8% Debentures (Interest payable annually) in
its favor.
Initial outlay consists of
Freehold premises Rs. 25 Lakhs

Plant & Machinery Rs. 10 Lakhs
Stock Rs. 6 Lakhs
Vehicle & Other items Rs. 5 Lakhs
Payments on the above items are to be made in the month of incorporation. Sales during the first 6
months ending on 30 th June are estimated as under.
January Rs 14 Lakhs April Rs. 25 Lakhs

February Rs. 15 Lakhs May Rs. 26.50 Lakhs
March Rs. 18.50 Lakhs June Rs. 28 Lakhs
Lag in payment -Debtors 2 months, Creditors 1 month. Other information is as follows;

(1) Preliminary expenses Rs.50,000 (payable in February)
(2) General Expenses Rs. 50,000 p.m. (Payable at the end of each month)
(3) Monthly wages (Payable on 1st day of next month) Rs.80,000 p.m. for first 3 months and Rs.95,000
p.m. there after.
(4) Gross profit rate is expected to be 20% on sales.
(5) The shares and debentures are to be the same as the outlay.
(6) The stock levels throughout is to be the same as the outlay.
Prepare cash budget for the 6 month ended 30th June.
Q.7 A newly started company “Green Co. Ltd.” Wishes to prepare cash budget from January. Prepare a
cash budget for the 6 months from the following estimated revenue and expenditure.
Month Total Sales Material Wages Production Selling & Distribution

Rs. Rs. Rs. Rs. Rs.
January 20000 20000 4000 3200 800
February 22000 14000 4400 3300 900
March 24000 14000 4600 3300 800
April 26000 12000 4600 3400 900
May 28000 12000 4800 3500 900
June 30000 16000 4800 3600 1000
Cash balance on 1st January was Rs.10,000. A new machine is to be installed at Rs.30,000 on credit, to
be repaid by two equal installments in March and April. Sales commission @ 5% on total sales is to be
paid within the month following actual sales Rs.10,000 being the amount of second call may be received
in March.
Share premium amounting to Rs.2,000 is also obtainable with 2nd call.
Period of credit allowed by supplier 2months
Period of credit allowed to customers 1month
Delay in payment of overheads 1month
Delay in payment of wages ½ month
Assume cash sales to be 50% of total sales.

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Q.8 Prepare a cash budget for the quarter ended 30th September 1987 based on the following information.
Cash at bank on 1dt July 1987 Rs. 25,000

Salaries and wages estimated monthly Rs. 10,000
Interest Payable August 1987 Rs. 5,000
June July August September

Rs. Rs. Rs, Rs.
Estimated Cash sales - 1,40,000 1,52,000 1,21,000
Credit Sales 1,00,000 80,000 1,40,000 1,20,000
Purchase 1,60,000 1,70,000 2,40,000 1,80,000
Other Expenses - 20,000 22,000 21,000
(Payable in same month)
Credit sales are collected 50% in the month of sales are made and 50% in the month following.
Collection from credit sales are subject to 5% discount if payment is received in the month of sales and
2.5% if payment is received in the following month. Creditors are paid either on a prompt or 30days
basis. It is estimated that 10% of the creditors are in the prompt category.
Q.9 From the following information you are required to prepare a cash budget for 3 months from April
2008 to June 2008, month by month, showing also the cash credit facility required from the Bank.
Month Sales Purchases Wages

Rs. Rs. Rs.
February 180000 124800 12000

March 192000 144000 14000
April 108000 243000 11000
May 174000 246000 10000
June 126000 268000 15000
Following further information is available.

I. All sales are on credit basis, 50 % of credit sales are realized in the following month of sales &
remaining 50 % in the following month.
II. Creditors are paid in the month following the month of purchase.
III. Cash at bank on 1/4/08 is Rs. 25,000/-.

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Q.10 The manager of a Repairs and Maintenance Department has submitted the following budget estimates
that are to be used to construct a flexible budget to be used during the coming budget year.
Details of cost Planned at 6000 Planned at 9000

Direct repairs Direct repairs
Hours Hours
Employee salaries 30,000 30,000
Indirect Repair Material 40,200 60,300
Miscellaneous Costs 13,200 16,800
a) Prepare a flexible budget for the department up to activity level of 10,000 repair hours (use
increment of 1000).
b) What would be the budget allowance at 8,500 repair hours?
Q.11Prepare the flexible budget for Antarctica Ltd.for overheads on the basis of data given below.
Ascertain the overheads rates at 50%, 60% and 70% capacity.
At 60% capacity
Rs.
Variable overheads
Indirect Material 6,000
Indirect Labour 18,000
Semi variable overheads
Electricity
(40% fixed, 60% variable) 30,000
Repairs and Maintenance
(80% fixed, 20%variable) 3,000
Fixed overheads:
Depreciation 16,500
Insurance 4,500
Salaries 15,000
Total overheads 93,000
Estimated Direct Labour Hours 1,86,000
Q.12 Shell Ltd. can produce 60,000 units per annum at its 100% capacity. The estimated costs of production
are as under.
Direct Materials Rs.3 per unit
Direct labour Rs.2 per niut
Indirect Expenses
Fixed Rs.1,50,000 per annum
Variable Rs.5 per unit
Semi-variable Rs.50,000 per annum up to 50% capacity and an extra expenses of
RS.10,000 for every 20% increase in capacity or part thereof.
The factory produces only against orders. If the production programme of the factory is as indicated
below, and the management desires to ensure a profit of Rs.1,00,000 for the year, work out the average
selling price at which each unit should be quoted. For three months of the year-50% capacity
Remaining nine months of the year-80% capacity.

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Q.13 ABC Co.Ltd. is presently working at 50% capacity, producing and selling, 1,000 units of a product.
You are required to find out the profits the concern will make by working at 60% and 80% capacity.
At 50% capacity, the selling price is Rs.200 per units, whereas the production cost is Rs.160 as given
below.
Rs.
Material Cost 80
Direct wages 30
Factory overheads 30(of which 60% is variable)
Selling and Admn. Overheads 20(of which 50% is fixed)
At 60% capacity, material price go up by 10% and selling price reduced by 5%. At 80% capacity, there
is increase in labour cost by 10% and variable factory overheads go up by Rs.2 per unit. The variable
selling and administration overheads increase by Rs.1per unit, the other costs and selling price remain
unchanged as at 60%.
Q.14 From the following information you are required to prepare a cash budget for six months from January
1987 to June 1987, month by month, showing also the cash credit facility available from the Bank.
Opening overdrawn balance is Rs.1,50,000.
Month Sales Materials Wages Prod. Selling/Dist Adm.

Purchases Expenses Expenses Expenses
Rs. Rs. Rs. Rs. Rs. Rs.
January 1,44,000 50,000 20,000 12,000 8,000 3,000

February 1,94,000 62,000 24,200 12,600 10,000 3,400
March 1,72,000 51,000 21,200 12,000 11,000 4,000
April 1,77,200 61,200 50,000 13,000 13,400 4,400
May 2,05,000 74,000 44,000 16,000 17,000 5,000
June 2,17,000 77,600 46,000 16,400 18,000 5,000
Following further information is available.

(1) Out of total sales, 50% are cash sales and balance 50% is received in the following month of sales.
(2) Payment for purchase of assets is to be made Rs.16,000 in February, Rs.25,000 to march and
Rs.50,000 in April.
(3) Proceeds from sales of scrap are to be received in May, amounting to Rs.6,000.
(4) Dividend of Rs.90,000 is to be paid in June.
(5) Sales commission is to be paid at 3% of total sales in same month in which sales are made.
(6) Suppliers for materials are paid in the month following the month of purchases of Materials.
(7) Cash credit facility granted is Rs.2,00,000.
(8) Wages are paid in the same month.
(9) Creditors of production, selling & Distribution and Administration expenses are given one month’s
credit period.
_____________

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Standard Costing
Formulae
Material Variance:
 Material Cost Variance (Mcv) = SC- AC

 Material Price Variance (Mpv) = AQ(AP-SP)
 Material Usage Variance (Muv) = SP(AQ-SQ)
 Material Mix Variance (Mmv) = SP(AM-SM) or SP(AQ-RSQ)
 Material Yield Variance (Myv) = SYP(AL-SL)
 Mat. Rev. Usage Variance (Mruv) = SP(RSQ-SQ) or SP(RSQ-AQ)
 SYP= Total Stanard Cost
Total Standard Output
Labour Variance:
 Labour Cost Variance (Lcv) = AC-SC

 Labour Rate Variance (Lrv) = AH(AR-SR)
 Labour Efficiency Variance(Lev) = SR(AH-SH)
 Labour Mix Variance (Lmv) = SR(AH-RSH)
Overhead Variance:
 Total Overhead Variance: Standard O/H Cost – Actual O/H Cost

 Expenditure Variance : Budgeted O/H Cost – Actual O/H Cost
 Volume Variance : SR/U (Actual Production – Budgeted
Production)
 Efficiency Variance: SR/U(Actual Production – Standard
Production in actual hours)
 Capacity Variance: SR/U (STD. Production in Actual Hours –
Revised Budgeted Production)
 Calendar Variance: SR/U (Revised Budgeted Production –
Budgeted Production)
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Q. 1
Material Standard actual

Qty. Kgs Price Total Qty. Kgs. Price Total
Rs. Rs. Rs. Rs.
A 500 6.00 3,000 400 6.00 2,400
B 400 3.75 1,500 500 3.60 1,800
C 300 3.00 900 400 2.80 1,120
1200 1300
Less: 10% Actual
Normal Loss 120 Loss 220
1,080 5,400 1080 5,320
Calculate material cost variances.
Q.2 Following details are available from the records of A Ltd. Company for a month regarding the standard
labour hours and rates of an hour for a product.
Hours Rate per hour Rs. Total Rs.
Skilled 10 3.00 30.00

Semi-Skilled 8 1.50 12.00
Unskilled 16 1.00 16.00
58.00
The actual production for the product was 1,500 units for which the actual hours worked and rates were as
below.
Hours Rate per hour Rs. Total Rs
Skilled 13,500 3.50 47,250

Semi-Skilled 12,600 1.80 22,680
Unskilled 30,000 1.20 36,000
(a) Labour Cost Variance

(b) Labour Rate Variance
(c) Labour Efficiency Variance
(d) Labour mix Variance.
Q.:-3 ABC Engineering Company has furnished you the following data
Budget Actual July 1986
No.of working days 25 27
Production in units 20,000 22,000
Fixed overheads in Rs. 30,000 34,000
Budgeted fixed overhead rate is Rs.1 per hour. In July 1986, the actual hours worked were 31,500.
Calculate the following variances.
(a) Total overheads Variance
(b) Expenditure Variance
(c) Volume Variance
(d) Efficiency Variance
(e) Capacity Variance
(f) Calendar Variance.

9827249428
Q.:-4 Following standard and actual data relates to a manufacturing concern.
Material Standard
X 40 Kgs. at Rs.6 240
Y 60 Kgs. at Rs.4 240
Standard output is 80% of input i.e.80 units. Process loss is 20%.
Material Actual
X 600 Kgs. at Rs.4
Y 400 Kgs. at Rs.6
Actual output is 70% of input i.e. 700 units. Process loss is 30%.
Calculate
(1) Cost variance
(2) Price variance
(3) Total Quantity usage variance
(4) Mix variance
(5) Revised usage variance
Q. :- 5 XYZ forecasts its overhead expenditure for a period as under.

Rs.30,000 for 10,000 hours.
Rs.27,500 for 9,000 hours.
Rs.25,000 for 8,000 hours.
The normal volume of activity is 10,000 hours. During a period 8,750
hours were utilized for a total overhead expenditure of Rs.28,750 of
which fixed overheads totaled to Rs.5,250. the standard utilization of
labour should have been less by 5%
How will you analyze the overhead variance?
Q. :- 6 From the following calculate Material Yield variance;
Material Standard Mix Actual Mix

Qty. Rate Amt. Qty. Rate Amt.
P 60 10 600 56 10 560
Q 40 20 800 44 20 880
100 1400 100 1440
Less: 30 ---- 25 ----
70 1400 75 1440
Q. :- 11 From the following calculate Material Yield variance;
Material Standard Mix Actual Mix

Qty. Rate Amt. Qty. Rate Amt.
P 60 10 600 80 10 800
Q 40 20 800 70 20 1400
100 1400 150 2200
Less: 30 ---- 37.5 ----
70 1400 112.5 2200

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Q.7 From the following particulars, compute: (a) Material cost variance, (b) Material Price variance,
and (c) Material usage variance
Quantity of materials purchased 3,000 units
Value of materials purchased Rs. 9,000
Standard quantity of materials
Required per ton of out put 30 units
Standard rate of materials Rs. 2.50 per unit
Opening stock of materials Nil
Closing stock of materials 500 units
Output during the period 80 tons
Q.8 From the following data, calculate material mix variance. Also calculate price and usage variances.
Raw material Standard Actual

X 40 units @ Rs. 50 per unit 50 units @ Rs. 50 per unit
Y 60 units @ Rs. 40 per unit 60 units @ Rs. 45 per unit
Total 100 units 110 units
Q.9 During the month of May, the following data applies:

Raw material Standard mix Actual mix
Units Price Amount Units Price Amount
Kgs Rs. Rs. Kgs. Rs. Rs.
X 60 25 1,500 56 25 1,400
Y 40 50 2,000 44 50 2,200
Total 100 3,500 100 3,600
Less: Loss 30 26
Yield 70 74
The standard loss is 30%. Calculate:

(a) Material yield variance
(b) Material mix variance.
Q.10 The standard mix to produce one unit of product is as follows:

Material A 60 units @ Rs. 15 per unit = 900
Material B 80 units @ Rs. 20 per unit = 1,600
Material C 100 units @ Rs. 25 per unit = 2,500
240 units 5,000
During the month of April, 10 units were actually produced and consumption was as follows:
Material A 640 units @ Rs. 17.50 per unit = 11,200
Material B 950 units @ Rs. 18.00 per unit = 17,100
Material C 870 units @ Rs. 27.50 per units = 23,925
2460 units 52,225
Calculate all material variances.
Q.11Coates of India Ltd. Manufactures a particular product, the standard direct labour cost of which is
Rs.120 per unit whose manufacture involves the following:
Grade of Hours Rate Amount
Workers Rs. Rs.
A 30 2 60
B 20 3 60
50 120
During a period, 100 units of the product were produced, the actual labour cost of which was as follows:
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Grade of Hours Rate Amount
Workers Rs. Rs.
A 3,200 1.50 4,800
B 1,900 4.00 7,600
Calculate (a) Labour cost variance (b) Labour Rate Variance
(c) Labour Efficiency Variance (d) Labour Mix Variance
Q.12 Standard output 500 units.

Actual output 450 units.
Standard time 1000 hrs.
Standard rate Rs.20 per hour
Calculate Labour Yield Variance.
Q.13The standard labour employment and the actual labour engaged in a week for a job are as under:
Skilled Semi-skilled Unskilled
workers workers workers
Standard no. of workers in the gang 32 12 6
Actual no. of workers employed 28 18 4
Standard wage rate per hour 3 2 1
Actual wage rate per hour 4 3 2
During the 40 hours working week, the gang produced 1,800 standard labour hours of work. Calculate:
(a) Labour Cost Variance (b) Labour Rate variance
(c) Labour Efficiency Variance (d) Labour mix Variance
Q.14Calculate variable overhead variances from the following:

Budgeted Actual
Output (units) 20,000 19,000
Hours 5,000 4,500
Overhead-Fixed Rs. 10,000 10,500
Variable Rs. 5,000 4,800
Q.15 The following data is given:

Budgeted Actual
Production in units 12,500 11,000
Man hours 6,250 5,750
Overhead costs:
Fixed 12,500 13,000
Variable 50,000 45,000
Calculate overhead variances when:
(A) Standard overhead rate per hour is used
(B) Standard overhead rate per unit is used.
Q.16 XYZ Ltd. Has furnished you the following information for the month of August:
Budget Actual
Out put (units) 30,000 32,500
Hours 30,000 33,000
Fixed overhead Rs.45,000 50,000
Variable overhead Rs.60,000 68,000
Working days 25 26
Calculate overhead variance.
____________

9827249428

Accounting For Managers - Practical Problems

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 Knowledge is Power Accounting for Managers (M.B.A.

Q.2 Pass compound journal entries for the following transactions.

Q.9 Journalise the following transactions in the books of Mr.Max.

Q.11 Journalise the following transactions in the books of Vishwanath.

Q.12 Journalise the following transactions in the books of X and Y.

Q.13 Journalise the following transactions:

January 2004 02 Started business with Rs.1,00,000

Q.14 Journalize the following transactions

Q.15 Journalize the following transactions in the books of Sunshi Kumar.

Manufacturing Account as on…….

Trading Account as on…….

Profit & Loss Account as on …….

To Net Profit C/d ########## By Net Loss C/d **********

Balance Sheet as on…….

Liabilities Rs. Assets Rs.

1.) Prepare Final Accounts from the following data as on 31/03/01;

I. Closing Stock on 31/3/01 is Rs. 20,000.

III. Further bad debts Rs. 2000.

3.) Prepare Final Accounts from the following data as on 31/03/01;

I. Closing stock was Rs. 800000.

4.) Prepare Final Accounts from the following data as on 31/03/01;

Stock 38,500 Capital 2,28,800

I. Closing stock was valued at Rs. 72,600.

5.) Prepare Final Accounts from the following data as on 31/03/01;

I. The difference in Trial Balance if any can be taken as Miscellaneous Income/Expenditure.

6.) Prepare Final Accounts from the following data as on 31/03/06;

Purchases 320000 Sales 770000

b. Depreciate machinery @ 15% p.a.

Trial Balance as on 31.12.2003

Purchases: 31/3/1992 Costing Rs. 15,000, life being 10 years.

Q.2 The following information is given in respect of process A.

Process I Process II Process III

Process Wastage Sale value of wastage

Process A Process B Process C

Out put Process

Penned by Prof. Deepesh Mahajan 17

Products Output (liters) Processing cost (after split) Total Value

A 8,000 43,000 1, 72,500

Penned by Prof. Deepesh Mahajan 18

Q.4. following are the details of a company running two plants;

Penned by Prof. Deepesh Mahajan 19

Q.7. S Ltd. Presented the following information;

Penned by Prof. Deepesh Mahajan 21

Penned by Prof. Deepesh Mahajan 22

Direct Material Cost Rs. 15.00

Material Opening Desired Closing Anticipated Cost

Penned by Prof. Deepesh Mahajan 23

Penned by Prof. Deepesh Mahajan 24

Freehold premises Rs. 25 Lakhs

January Rs 14 Lakhs April Rs. 25 Lakhs

Lag in payment -Debtors 2 months, Creditors 1 month. Other information is as follows;

Month Total Sales Material Wages Production Selling & Distribution

Penned by Prof. Deepesh Mahajan 25

Cash at bank on 1dt July 1987 Rs. 25,000

June July August September

Month Sales Purchases Wages

February 180000 124800 12000

Following further information is available.

Penned by Prof. Deepesh Mahajan 26

Details of cost Planned at 6000 Planned at 9000

Penned by Prof. Deepesh Mahajan 27

Month Sales Materials Wages Prod. Selling/Dist Adm.