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Code No: 811AE R13
JAWAHARLAL NEHRU TECHNOLOGICAL UNIVERSITY HYDERABAD
MCA I Semester Examinations, August - 2017
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ACCOUNTING AND FINANCIAL MANAGEMENT
Time: 3hrs Max.Marks:60
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Note: This question paper contains two parts A and B.
Part A is compulsory which carries 20 marks. Answer all questions in Part A.
Part B consists of 5 Units. Answer any one full question from each unit. Each question carries 8 marks and may have a, b, c as sub questions.
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PART - A 5 x 4 Marks =20
- a) Explain the following accounting concepts:
- the conservatism concept
- the materiality concept. [4]
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- b) What are the various sources of working capital finance? [4]
- c) Explain how investors and creditors would make use of Cash Flow Statement. [4]
- d) What is Sales budget? What is its importance to budgeting process? [4]
- e) What are the advantages and limitations of Payback period method? [4]
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PART-B 5 x 8 Marks = 40
- M/s Anurag and Co. manages the publishing business. He has come to you for help in preparing an income statement and a balance sheet for the year ended Dec.31, 2016. Several items determined as of Dec.31, 2016 are presented below. No dividends were paid this year. All figures in Rs.”000
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Equity capital 40,000 Loan payable 72,000
Reserves & surplus 12,400 Accounts payable 6,000 (31/12/2015)
Advertising 2000 Land 24,000 Expenses
Cash 17,000 Supplies 2,000
Rent expenses 2,400 Salary expenses 20,000--- Content provided by FirstRanker.com ---
Building (net block) 1,00,000 Revenues 42,000
Interest expenses 700 Other expenses 1,300
Accounts receivable 3,000
a) prepare an income statement for the year ended 31st Dec.2016.
b) prepare a balance sheet as on Dec.31,2016. [4+4]--- Content provided by FirstRanker.com ---
OR - a) What is ‘Double entry system of accounting’? What are its advantages?
b) Prepare a cash book for a trader, enter the following transactions and ascertain the balance as on 7th July 2015.
2015 Rs. | 2015 Rs.
July 01 | Balance in hand 2,500 | July 04 | Paid Daut Ram by Cheque 1,000--- Content provided by FirstRanker.com ---
Balance at bank 35,000 Discount allowed 100
02 | Received from “P” cheque 5,000 05 | Salaries paid to staff in cash 2,000
Discount allowed to him 250
03 | Purchased goods by cash 1,500 06 | Bank withdrawal for office 5,000
07 | Purchase of chair by cheque 5,000--- Content provided by FirstRanker.com ---
Show cash, bank and discount balances. [3+5]
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- a) What is the importance of Financial Management to an organization?
b) Gahlon Gearing Ltd. has a Degree of operating leverage 2 at its current production and sales level of 10,000 units. The resulting operating income figure is $1,000.
I) If sales are expected to increase by 20 percent from the current 10,000 unit sales position, what would be the resulting operating profit?
II) At the company’s new sales position of 12,000 units, what is the firm’s new degree of operating leverage figure? [3+5]
OR - a) The cost of specific sources of capital for Apollo Paper Mills Ltd., are as follows:
Cost of debt =10.00 percent
Cost of preference =12.00 percent
Cost of equity = 18.00 percent
The capital structure of the company is as follows:--- Content provided by FirstRanker.com ---
Source of finance | Book value (Rs. million) | Market value (Rs. million)
Equity 50 120
Preference 10 9
Debt 80 70
Calculate the weighted average cost of capital for Apollo Paper Mills Ltd., using book value weights and market value weights.--- Content provided by FirstRanker.com ---
b) What do you understand by time value of money? [6+2] - A condensed balance sheet for Sheepwell Company prepared at the end of the year appears as follows:
Assets ((in Rupees) Liabilities and Shareholders’ Equity (Rs.)
Cash 55,000 Loan payable ( due 40,000 in 6 months)
Accounts receivable 1,55,000 Accounts payable 1,10,000--- Content provided by FirstRanker.com ---
Inventory 2,70,000 Long term liabilities 3,30,000
Prepaid expenses 60,000 Equity shares, Rs.5 3,00,000 par
Plant& 5,70,000 Reserves & Surplus 4,20,000 Equipment(net)
Other assets 90,000
Total 12,00,000 total 12,00,000--- Content provided by FirstRanker.com ---
During the year the company earned a gross profit of Rs. 11,16,000 on sales of Rs. 27,90,000. Accounts receivable, inventory and plant assets remained almost constant in amount throughout the year.
Compute the following:
a) Current ratio b) Quick ratio c) working capital d) debt ratio e) accounts receivable turnover ( all sales were on credit) f) inventory turnover. [8]
OR - a) What is Quick ratio? Under what circumstances are short-term creditors most likely to regard a company’s quick ratio as more meaningful than its current ratio?
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b) Explain any four of the profitability ratios for evaluating profitability. [3+5]
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- a) A company making single product has the following Sales and net profit for the two half of the financial year.
Period I half of the financial year II half of the financial year
Sales in Rs. 8,00,000 10,00,000
Net profit in Rs. 1,00,000 1,50,000
I) find breakeven point of production and ii) the margin of safety.--- Content provided by FirstRanker.com ---
b) What are the applications of Break even analysis? [5+3]
OR - A company has fixed expenses of Rs.90,000 with sales at Rs. 3,00,000 and a profit of Rs.60,000.
a) Calculate the profit/volume ratio.
b) If in the next period, the company suffered a loss of Rs.30,000 calculate the sales volume.--- Content provided by FirstRanker.com ---
c) What is the margin of safety for a profit of Rs. 60,000? [8] - Two investment proposals are brought before a company with an initial investment of Rs.1,20,00,000 in both the cases. The annual returns for the two proposals are as shown below:
Description Proposal 1 Proposal 2
Return at the end of I year Rs. 48,00,000 Rs. 56,00,000
II year Rs. 80.00,000 Rs. 70,00,000--- Content provided by FirstRanker.com ---
III year Rs. 50,00,000 Rs. 60,00,000
IV year Rs. 50,00,000 Rs. 40,00,000
Evaluate the two proposals on NPV basis-at 12% discount and select the best one. [8]
OR - a) Explain the concept of ‘working-capital cycle’ and show the break up.
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b) How are shares classified? What are their distinct features? [4+4]
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