Balance Sheet and Labor Standard

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1 . (a) What do you understand by the concept of conservatism ? Why is it also called the concept of prudence? Why is it not applied as strongly today as it used to be in the Past ? (b) What is a Balance Sheet ? How does a Funds Flow Statement differ from a Balance Sheet ? Enumerate the items which are usually shown in a Balance Sheet and a Funds Flow Statement.

2 . (a) Discuss the importance of ratio analysis for inter-firm and intra-firm comparisons including circumstances responsible for its limitations .If any (b) Why do you understand by the term ‘pay-out ratio’? What factors are taken into consideration while determining pay-out ratio? Should a company follow a fixed pay-out ratio policy? Discuss fully.

3 . From the ratios and other data given below for Bharat Auto Accessories Ltd. indicate your interpretation of the company’s financial position, operating efficiency and profitability.
Year IYear IIYear III
Current Ratio265%278%302%
Acid Test Ratio115%110%99%
Working Capital Turnover (times)2.753.003.25
Receivables Turnover9.838.417.20
Average Collection Period (Days)374350
Inventory to Working Capital95%100%110%
Inventory Turnover (times)6.116.015.41
Income per Equity Share5.104.052.50
Net Income to Net Worth11.07%8.5%7.0%
Operating Expenses to Net Sales22%23%25%
Sales increase during the year10%16%23%
Cost of goods sold to Net Sales70%71%73%
Dividend per shareRs. 3Rs. 3Rs. 3
Fixed Assets to Net Worth16.4%18%22.7%
Net Profit on Net Sales7.03%5.09%2.0%

4 .
Bose has supplied the following information about his business to Summary of Cash book for the year ended 31st March, 2004 is as follows :

Assets and Liabilities On 1st April 2003
(Rs.)On 31st March, 2004
(Rs.)
Sundry debtors
Stock
Machinery
Furniture
Sundry creditors1,81,000
1,50,000
2,50,000
40,000
1,10,000 1,93,000
1,40,000
?
?
1,25,000

ReceiptsRs.PaymentsRs.
To Opening balance
To Cash sales
To Receipt from debtors
To Misc. receipts
To Loan from Dass @ 9%
per annum (taken on 1.10.2003)5,000
61,000
7,53,000
2,000

1,00,000By Payments to creditors
By wages
By Salaries
By Drawings
By Sunday office expenses
By Machinery purchased (on 1.10.2003)
By Closing balance3,50,000
1,60,000
1,50,000
40,000
1,10,000
95,000
16,000
9,21,000 9,21,000

Discount allowed totaled Rs.7,000 and discount received was Rs.4,000. Bad debts written off were Rs.8,000. Depreciation was written off on furniture @5% per annum and machinery @10% per annum under the straight line method of depreciation. The office expenses included Rs.5,000 paid as insurance premium for the year ending 30th June, 2004. Wages amounting to Rs.20,000 were still due on 31st March, 2004.

Prepare trading and profit and loss account for the year ended 31sl March, 2004 and the balance sheet as on that date.

5 .
What procedure would you adopt to study the liquidity of a business firm? Who are all the parties interested in knowing this accounting information? What ratio or other financial statement analysis technique will you adopt for this.

6 .
From the following particulars, determine the bank balance as per pass book of Priya & Co. as on 28th February 2008. a) Credit balance as per cash book on 28th February, 2008 was Rs. 15,000 b) Interest charged by the bank up to 28th February Rs. 500 was recorded in the pass book. c) Bank charges made by the bank Rs. 125 were also recorded only in the pass book. d) Out of the cheques of Rs. 25,000 paid into the bank, cheques of Rs. 18,750 were cleared and credited by the bankers. e) Two cheques of Rs. 7,500 and Rs. 15,000 were issued but out of them only one cheque of Rs. 7,500 was presented for payment upto 28th February. Dividends on shares Rs. 4,500 were collected by the bankers...
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