Discuss and explain the relevance of the following accounting concepts
Business entity
Money measurement
Continuity
Cost
Accrual
Conservatism
Materiality
Consistency
Periodicity
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From the Profit and Loss Account of X Limited given below, find out the amount of funds from operations.
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Profit and Loss Account of X Ltd.
For the year ending 31st December, 2010
To Salaries
To Printing and Stationery
To Advertisement
To Depreciation on Assets
To Discount on Issue of Shares
To Commission
To Good will written of
To Loss on Sale of Investment
To Establishment Expenses
To Provision for Taxation
To Net Profit
To General Reserve
To Proposed Dividend
To Balance c/d
Rs.
15,000
2,000
8,000
15,000
4,000
3,000
12,000
4,500
15,000
80,000
2,41,500
4,00,000
15,000
75,000
1,96,500
2,86,500
By Gross Profit b/d
By Profit on Sales of Fixed
Assets
By Dividend received
By Balance b/d
By Net Profit for the year
By Tax Refunds
Rs.
3,70.000
20,000
10,000
4,00,000
25,000
2,41,500
20,000
2,86,500
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What is CVP analysis? Does it differ from break-even analysis?
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S Limited is considering for purchase of a machine. There are two
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possible machines which will produce the additional output. Details of these machines are
as follows:
Machine x
Machine Y
Rs.
Rs.
Capital Cost
Sales at standard Price
Costs:
Labour
Materials
Factory Overheads
Administration Cost
Selling Costs
Expected life in years
60,000
1,00,000
10,000
8,000
12,000
4,000
2,000
2
60,000
80,000
6,000
10,000
10,000
2,000
2,000
3
Other Information:
The costs shown above relate to annual expenditure resulting from each machine. Sales
are expected to continue at the rates shown for each year for the full life of each machine;
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Tax to be paid may be assumed at 50% of net earnings;
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Interest on capital is to be ignored;
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The appropriate rate of interest for converting to present value may be taken at 10%.
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On the basis of the facts given above, show the most profitable investment by the following methods.
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Pay-back Period,
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Return on Investment; and
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Net Present Value on Investment.
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What is working capital? Explain the importance of working capital management and discuss about the determinants of working capital requirement.
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