Question 1)a) What do you understand by balancing an account? What is the procedure for balancing an account?
b) Mention the nature of account (nominal, real or personal) and show which account will be debited and which account will be credited. Also state the rule to be followed during the accounting process.
(i) Rent paid,
(ii) Interested received,
(iii) Building purchased,
(iv) Machinery sold,
(v) Capital introduced.
c) John Bakery has purchased a new kneading machine. Following information is available about it. Initial Cost: Rs.1,00,000 Life: 4 Years Salvage Value after 4 years: Rs.50,000 Depreciation: Straight line method The net present value of this machine is Rs. 60,000. If the profit after tax is a constant amount, what is it? The tax rate is 60%. Assume a cost of capital of 12%.
Question 2)a) The following information is available for Olympic Limited:
Rs. (in millions)
Average stock of raw materials and stores 200
Average work-in-process inventory 300
Average finished goods inventory 180
Average accounts receivable 300
Average accounts payable 180
Average raw materials and stores consumed per day 10
Average work-in-process value of raw materials committed per day 12.5
Average cost of goods sold per day 18
Average sales per day 20
Compute the duration of the operating cycle.
b) From the following information given below, compute
(i) Current Liabilities
(ii) Current Assets
(iii) Liquid Assets
(iv) Inventory Current ratio = 2.5, Acid-test ratio = 1.5, Working Capital = Rs. 60,000.
c) A firm has sales of Rs.10, 00,000, variable cost of Rs.7, 00,000 and fixed cost of Rs.2, 00,000 and debt of Rs.5, 00,000 at 10% rate of interest. What are the operating, financial and combined leverages? If a firm wants to double its Earnings Before Interest and Tax (EBIT), how much of a rise in sales would be needed on a percentage basis.