question 1part awhat are the main components of a

Question

QUESTION 1:

Part A

What are the main components of a set of Financial Statements and what are their respective purposes?

Part B

Trial balances of Hans Ltd on 30 June 2008 were as follows:

	Debit Rs	Credit  Rs
Capital (1 July 2007)		1,75,000
Motor vehicles (at cost)	1,50,000
Office equipment (at cost)	37,500
Stock (1 July 2007)	83,750
Debtors and creditors	22,500	25,250
Bank	33,750
Rent	22,750
Repairs and Maintenance	3,400
Carriage outwards	2,700
Carriage inwards	5,750
Purchase returns		5,250
Purchases and sales	1,08,000	2,26,500
Duty on purchases	10,800
Provision for doubtful debts		1,500
Sales returns	1,500
Discounts received		1,400
Bad debts	1,500
Commission		9,000
Provision for depreciation of motor vehicles		45,000
Drawings	5,000
	4,88,900	4,88,900

The following additional information was available:

1. The annual rates used for depreciation are 20% for motor vehicles and 10% for office equipment.
2. Stock at 30 June 2008 was valued Rs 90,000 at cost and at Rs 100,000 at net realizable value.
3. Rent included Rs 1,750 paid to the landlord as deposit.
4. Carriage inwards owing amounted to Rs 3,000.
5. Goods worth Rs 2,750 were removed from the stores for personal use and were not recorded.
6. Provision for doubtful debts is to be adjusted to 5% of debtors

Required: (All workings should clearly be shown)

1. The adjusted Trading Account for Hans Ltd for the year ended 30 June 2008
2. The adjusted Profit and Loss Account of Hans Ltd for the year ended 30 June 2008.
3. The adjusted Balance Sheet of Hans Ltd as at 30 June 2008.

QUESTION 2:

Part A

What are the advantages of using an account to control the Debtors' ledger?

Part B

Prepare a Debtors' ledger control account from the following information:

	Rs
Total debtors' balances at 1 October 2008	44,000
Cash Sales for the month of October	2,84,000
Credit sales for October	1,72,000
Credit sales returned during October	840
Cash received from Debtors	1,74,420
Discount allowed to debtors	2,830
Bad debts written off	500
Doubtful debts provision created	440

Cheque for the amount of Rs 288 from a customer was not honoured by the bank. The customer has given the assurance that the cheque will be settled in August. A cash discount of Rs 32 was allowed to the customer. A customer has an account of Rs 170 in the creditors ledger and it was decided to settle the two by a transfer.

Part C

State where the information for each entry would be recorded in the account before being entered in the ledger.

QUESTION 3:

The summarized profit and loss accounts of Caffyn plc, at 30 April 2007 and 30 April 2008 are given below:

	2007 Rs('000)	2008 Rs('000)
Sales	58,000	66,000
Cost of Sales	43,000	49,000
Gross Profit	15,000	17,000
Operating expenses	10,000	10,500
Profit from operations	5,000	6,500
Interest payable	1,400	2,800
Net profit for the period	3,600	3,700

The Balance Sheets of Caffyn plc, at 30 April 2007 and 30 April 2008 are given below:

	Rs('000)	Rs('000)	Rs('000)	Rs('000)
Assets
Tangible Fixed Assets
Cost	51,000		63,000
Accumulated Depreciation	-12,500	38,500	-16,300	46,700
Current Assets
Stocks	16,400		18,400
Trade Debtors	19,100		20,600
Trade Receivables	3,100		4,000
Total Current Assets	38,600		43,000
Less Current Liabilities
Trade Creditors	11,400		8,400
Accruals	3,400		4,200
Bank Overdraft	13,700		4,800
	28,500		17,400
Working Capital		10,100		25,600
		48,600		72300
Financed By:
Called up Share Capital	10,000		10,000
Share Premium Account	5,000		5,000
Revaluation Reserve	5,000		5,000
Profit and Loss Account	8,600		12,300
7% Debentures (Rs 20m issued 1 May 2007)	20,000	48,600	40,000	72,300

Other Information:

All sales on credit.

Required:

(a) Calculate the following ratios for each of the two years:

1. Gross Profit Margin
2. Net Profit Margin
3. Return on Capital employed
4. Return on owners equity
5. Current Ratio
6. Quick Ratio
7. Gearing Ratio
8. Debtors Period

 (b) Comment briefly on the movements in these ratios between the two years.

QUESTION 4:

Alphabet Limited manufactures product Z and in the year ended 31st March, 1680 units were made and sold. A statement of the sales, costs and profit for the product Z for the year was as follows:

	Rs	Rs
Sales		1,34,400
Production cost of goods sold:
Direct material	38,140
Direct labour	23,620
Overhead: Variable	4,620
Fixed	29,700	96,080
Other costs:
Selling and distribution:
Variable	10,900
Fixed	7,200
Administration: Fixed	5,600	23,700
Total Costs		1,19,780
Profit		14,620

Required:

(a) Calculate the number of units to be sold to break-even.

(b) Produce a break even chart to graphically represent the break-even.

(c) State the profit or loss if 1,100 units were sold.

(d) Calculate the number of units to be sold to make a profit of Rs 27,200 per annum.

(e) What are the main limitations of breakeven charts?