An Capsule Of Accountancy OF class XII[HSEB]

DESTINY TUITION CENTRE AN CAPSULE TO THE ACCOUNTANCY FOR CLASS XII

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“DESTINY FOR DESTINY”

DESTINY TUITION CENTRE SUKULDHOKHA, BHAKTPUR

Attempt all the questions:

1. What is Memorandum of association? Mention any three information contain in it. [2]

2. Mention any three differences between private and public limited company. [3]

3. What is ratio analysis? Mention its two importance. [3]

4. State any four objective of financial statement analysis? [2]

5. State any three limitation of cost accounting. [3]

6. State the objective of inventory management. [2]

7. Show the difference between piece rate system and time rate system of wage payment. [3]

8. Differentiate between fixed cost and variable cost with suitable example. [2]

9. Dabur Co. Ltd forfeited 1,000 shares issued at Rs. 100 each at 10% premium to Mr. shrestha who

paid Rs. 40 on application failed to pay the amount therefore. Out of there forfeited shares

subsequently, 800 shares were reissued at Rs.90 per share as fully paid.

Required: Journal entries for (a) Forfeiture of shares

(b) Reissue of shares

(c) Transfer to capital reserve 3

10. Destiny Co. Ltd invited applications for 12,000 shares of Rs. 100 each payable at 10% premium as

under:

On application Rs. 25

On allotment Rs. 50 (including premium)

On first & final call Rs. 35

Applications were received for 24,000 shares. The allotment was made as follows: -

To the applicant of 4,000 Nil

To the applicant of 8,000 Full

To the applicant of 8000 50%

It was decided to utilize excess application money in part payment of allotment. All money were

duly received except a holder who applied for 1,000 shares and was given 500 shares failed to pay

the allotment and call money. The board of director decided to forfeiture these share.

Required: (a) Share Allotment

(b) Share first & final call

(c) Share forfeiture [2+2+2]

11. Kathmandu Co. Ltd took over the following asset and Liabilities of Bhaktapur Co. Ltd.

Plant and Machinery Rs. 4,00,000 Loan Rs. 2,50,000

Land & Building Rs. 6,50,000 Furniture Rs. 2,50,000

Sundry debtors Rs. 2,50,000 Creditors Rs.1,00,000

The company paid the purchase consideration amount by issuing 10,000 5% debentures at a

premium of 20% .Besides, the company offered 5,000 shares for cash at 5% discount.

Required: Journal Entries for purchase of business. [4]

12. Rosemary Co. Ltd issued 8,000, 10% debentures of Rs. 100 each at a discount of 10% to be

redeemable at a premium of 10% after 10 years.

Required: Journal entries at the time of issue and redemption [4]

13. The trial balance of Dev Co. Ltd as on 31st Ashad 2068 is as follows:

Debit Amount

(Rs.) Credit

Amount

(Rs.)

ACCOUNTANCY HSEB TYPE QUESTION FOR 2070


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Opening Stock 1,50,000 Sales Revenue 8,00,000

Purchases 4,50,000 Discount 6,000

Furniture 50,000 P/L account 68,000

Rent 25,000 Share Capital 10,00,000

Plant and

Machinery

2,50,000 General reserve 50,000

Debtors 1,05,000 Creditors 80,000

Wages 68,000 Transfer fees 24,000

Salaries 50,000 Purchase return 15,000

Carriage Inward 20,000 8% debenture 1,50,000

Preliminary

expenses

22,000 Outstanding interest on

debenture

2,000

Sundry expenses 50,000 Interest on investment 5,000

Calls in arrears 40,000

Cash 65,000

Trade mark 30,000

Goodwill 25,000

Discount 15,000

Advance salary 20,000

Administrative

expenses

25,000

Bad debt 5,000

Interest on

debenture

10,000

10% investment 2,00,000

Land and building 2,80,000

Custom Duty 25,000

Closing stock 2,20,00

22,00,000 22,00,000

Additional Information:

Bad debt worth Rs. 5,000 and create provision for doubtful debt @ 5%

Depreciate plant and furniture by 10% and appreciate land and building @ 5%

Make a provision for tax 25,000

Outstanding rent Rs. 2,500

Interest on investment is due for 3 months.

Directors proposed a dividend of 10% and transfer to general reserve Rs. 10,000

Required: (a) Trading a/c (b) Profit and loss a/c

(c) P/L appropriation (d) Balance Sheet [2+4+2+4]

14. The following information of Rosiska Co. Ltd are provided:

Share Capital Rs. 200,000 Debenture Rs. 80,000

Cash Rs. 30,000 Insurance Rs. 5,000

Advertisement Rs. 20,000 Furniture Rs. 50,000

Commission (cr) Rs. 5,000 Creditors Rs. 50,000

Revenue Rs. 150,000 Debtors Rs. 50,000

Land and building Rs.250,000 Rent Rs. 40,000

Salaries Rs. 30,000 Wages Rs. 10,000

Additional information:

a) Depreciate furniture @ 10%

b) Provide 10% dividend on paid up capital.

c) Wages outstanding Rs. 5000.

Required: i) Journal entries for adjustment ii) Work sheet [5+3]

15. The balance sheet of A Co. ltd as on Chaitra 31:

Liabilities Rs Assets Rs


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Bills payable 90,000 Sundry debtors 60,000

Interest payable 18,000 Cash balance 33,000

12% debenture 150,000 Short term loan 30,000

Reserve and surplus 60,000 Inventories 40,000

Equity shares of Rs.100

each

300,000 Land and

building

325,000

Machinery 125,000

Preliminary

expenses

5,000

Total 618,000 Total 618,000


Debtors turnover ratio : 10 times Net profit margin : 15%

Required: a)sales amount b) Liquid ratio c) Debt equity ratio

d) Fixed Assets turnover ratio e) Earning per share [5]

16. Following information are provided to you:

LIABILITIES 2067 2068 ASSETS 2067 2068 Share capital 400,000 500,000 Machinery 450,000 500,000

Retain Earnings 50,000 70,000 Debtors 70,000 60,000

8% Debenture 200,000 100,000 Goodwill 50,000 40,000

Sundry

creditors

25,000 30,000 Cash &

bank

1,50,000 146,000

Commission

received in

advance

15,000 11,000

Reserve fund 30,000 35,000

720,000 746,000 720,000 746,000 Additional information:

During this year, depreciation charged on machinery Rs. 45,000 and addition to machinery

worth Rs. 95,000.

Fund from operation Rs. 80,000

Required: a) Schedule of change in working capital

b) Fund flow statement [2+3]

17. The following information are provided to you:

LIABILITIES 2008 2007 ASSETS 2008 2007

Share capital 7,00,000 5,00,000 Fixed asset 9,00,000 7,00,000

Share premium 1,20,000 1,00,000 Stock 50,000 1,50,000

Profit and loss

a/c

1,20,000 1,00,000 Bank 15,000 1,00,000

10% debentures 1,00,000 1,50,000 Debtors 1,00,000 50,000

Outstanding

exp.

40,000 50,000

creditors 1,20,000 1,00,000

12,00,000 10,00,000 12,00,000 10,00,000


a. Sales for the year Rs. 6,00,000

b. Cost of goods sold Rs. 4,00,000

c. Operating expenses Rs. 1,15,000 (including interest on debenture Rs 10,000 ad depreciation

Rs. 25,000)

d. Debenture were redeemed at 10% premium

e. Plant cost Rs. 20,000(accumulated depreciation Rs. 8,000) was sold for Rs. 15,000

f. Depreciation for the year Rs. 80,000

g. Dividend distributed Rs. 80,000

h. Plant purchased Rs. 2,92,000

Required: cash flow statement using direct method [10]


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18. The material purchased detail are given below:

Annual requirement 4, 00,000 units

Ordering cost per order Rs. 2,000

Carrying cost per unit 10% of unit value

Purchasing price per unit Rs. 40

Required : (i) economic order quantity (EOQ) (ii) Number of order [1+1]

19. Prepare a whole ledger account from the following transactions asuuming that the issue of store

has been proceed on the principal of first in first out: [5]

Jan 1 opening stock 2000 units @ Rs. 20 each

Jan 3 issued 1800 units

Jan 4 purchased 1500 units @ Rs. 21 each


Jan 6 purchased 1000 units @ Rs. 22 each


Jan 8 returned to vendor, purchased on 6th

Jan 30 units

Jan 9 received back from work order, issued on 5th

Jan 210 units @ Rs. 21 each


20. The weekly working hours in a factory is 50 hours and a worker works 50 week during a year. The

hourly output is 10 units. The wage rate per unit is Rs 10.

Required: Wages payable to a worker for a year by using piece rate system [2]

21. Beginning and ending balances of a manufacturing company for a month are as under:

Beginning Ending

Raw materials 12000 10000

Work in progress 6000 8000

Finished goods Rs. 10000

Finished goods in unit 500

Information available from cost records for the month ended was as follows:

Direct materials purchased Rs. 1,20,000

Indirect labour Rs. 18,000

Direct labour Rs. 32,000

Freight on materials purchased Rs. 6,000

Other factory expenses Rs. 30,000

Indirect materials Rs. 34,000

Selling and distribution overhead Rs. 10,000

Production unit 16,000 units

Sales unit 15,000 units

Profit 10% of cost

Required: Cost sheet showing: a) Cost of materials consumed b) Prime cost

c) Factory cost d) Cost of production e) cost of goods sold

f) Cost of sale g) Sales value [2+1+2+1+2+2]

22. On compression cost and financial account the following facts were disclosed:

a. Interest on investment received Rs. 2,000

b. Interest tax paid in financial account Rs. 8,000.

c. Work overhead over charged in cost account Rs. 15,000

d. Administrative overhead over charged in financial account Rs. 12,500

e. Over valuation of opening stock in financial account Rs. 4,000

f. Under valuation of opening stock in cost account Rs. 3,000

g. Provision for doubtful debt in financial account Rs. 5000

h. Net profit as per cost account Rs. 52,500

Required: Cost Reconciliation Statement [5]

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DESTINY TUITION CENTRE

SUKULDHOKHA, BHAKTPUR

Attempt all the queston:

1. What is Memorandum of association? [2]

2. Write any three characteristics of a Company. [3]

3. Named the parties who are interested in the financial statement. [3]

4. What are the limitations of Ratio Analysis? [2]

5. State three objectives of cost accounting. [3]

6. Differentiate between direct & indirect expenses. [2]

7. Give the specimen of purchase requisition. [3]

8. Mention three differences between time rate and piece rate. [2]

9. Rose Co. Ltd. was registered with an authorized capital of Rs. 10,00,000 divided into 10,000 shares of

Rs. 100 each. The company issued 6,000 shares for public subscription at 10% premium. The amount

was payable as Rs. 30 on application, Rs. 40 on allotment and balance on first and final call. The

applications were received for 8,000 shares. The excess applications were rejected and refunded.

Required: Journal entries for share application and allotment [2]

10. Surya Co. Ltd invited applications for 8,000 shares of Rs. 100 each payable as under:

On application Rs. 20

On allotment Rs. 40

On first & final call Rs. 40

Applications were received for 16,000 shares. The allotment was made as follows: -

To the applicant of 4,000 Nil

To the applicant of 4,000 Full

To the applicant of 8000 50%

It was decided to utilize excess application money in part payment of allotment. All money were duly

received except a holder who applied for 200 shares and was given 100 shares failed to pay the

allotment and call money. The board of director decided to forfeiture these share.

Required: (a) Share Allotment, (b) Share first & final call, (c) Share forfeiture [6]

11. Gold Co. Ltd issued 15,000 shares of Rs. 10 each and cash Rs.60,000 to N. Co. Ltd purchasing the

following assets and liabilities:

Plant and Machine Rs.1,50,000

Debtors Rs. 50,000

Stock Rs. 50,000

Furniture Rs. 80,000

Creditors Rs. 40,000

Required: Journal entries for purchase of assets and liabilities [3]

12. K & K Co. Ltd issued 8,000, 10% debentures of Rs. 100 each at a premium 5% to be redeemable at

the end of 10 year at a premium of 10%

Required: Entries for (a) Issue of debenture [2]

(b) Redemption of debenture [2]

13. The trial balance of ABC Co. Ltd as on 31st December is given below:

Debit Particulars Amount

(Rs.) Credit Particulars

Amount

(Rs.)

ACCOUNTANCY HSEB TYPE QUESTION [SET –A]


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Land and

Building

1,00,000 Sales 5,40,000

Salary 10,000 Purchase return 5,000

Wages 20,000 Share Capital 1,50,000

Preliminary

expenses

20,000 Profit and loss

app. a/c

60,000

Purchases 4,00,000 Interest on

investment

5,000

Debtors 60,000 Provision for

taxation

1,000

Prepaid Insurance 1,00,000 10% debenture 1,00,000

Tax paid for last

year

5,000

Advertising 5,000

Opening Stock 50,000

Interest on

debenture

5,000

Furniture 95,000

8,80,000 8,80,000


- Closing stock was Rs. 3,00,000 at the end of year.

- Write off 20% of preliminary expenses

- Insurance was expired to the extent of Rs. 2,000

- Appreciate land & building by Rs. 10,000 and depreciate furniture by 5%

- Directors proposed 20% dividend on paid-up capital

Required: (a) Trading a/c [2]

(b) Profit and Loss a/c [4]

(c) P/L appropriation a/c [2]

(d) Balance Sheet [4]

15. The trial balance of ‘C’ Co. Ltd as on 31st Chaitra is given below:

Particulars Rs Particulars Rs Purchases 200,000 Share capital 200,000

Building 100,000 Loan 150,000

Salaries 30,000 Sales 350,000

Machinery 150,000 Creditors 50,000

Debtors 100,000

Cash 40,000

Rent 10,000

Investment 100,000

Wages 20,000

Total 750,000 Total 750,000 Additional information:

a) Wages outstanding Rs. 4,000

b) Prepaid rent Rs. 1,000

c) Depreciate machinery by 10%

d) Proposed dividend @ 10%.

Required: i) Journal entries for adjustment ii) Work sheet [2+6]

16. The balance sheet of A Co. Ltd as on Ashadh 31,2066 is given below:


Equity share

capital (Rs 100

each)

200,000 Fixed assets 250,000


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10% Debenture 100,000 Debtors 40,000

General reserve 50,000 Inventory 100,000

Retain earning 20,000 Prepaid expenses 10,000

Creditors 30,000 Cash 30,000

Outstanding exp. 10,000 Preliminary exp. 10,000

Bills payable 30,000

Total 440,000 Total 440,000


Cost of goods sold Rs. 400,000 and net profit after tax Rs. 40,000.

Required: a) Current ratio b) Quick ratio c) Debt equity ratio d) Stock

turnover ratio e) Earning per share [1×5=5]

16. The following figures are extracted from the two years balance sheet of a company:

Items Last year (Rs) Current year (Rs) Current assets 140,000 170,000

Current liabilities 70,000 90,000

10% Debenture 100,000 80,000

Share Capital 70,000 100,000

-Fixed assets purchased in the current year were Rs. 25,000 and fund from operation is Rs. 25,000.

Required: a) Schedule of change in working capital [2]

b) Fund flow statement [3]

17. The income statement and other details of a company are as follows:

Particular Rs Rs

Sales

Less: Cost of goods sold

Gross profit

Less:

Administrative expense

Depreciation on machinery

Interest on debenture

Premium on redemption of

debenture

Provision for tax

Net income before sale of machine

Add: Profit on sale of machine

90,000

75,000

15,000

7,500

75,000

750,000

450,000

300,000

262,500

37,500

15,000

Profit after sale of machine 52,500

Other details:

Items Previous Year

(Rs)

Current Year

(Rs)

Debtors 120,000 75,000

Creditors 60,000 105,000

Outstanding salary 15,000 7,500

Inventory 75,000 90,000

8% debenture 225,000 150,000

Provision for tax 75,000 75,000

Machinery (net) 525,000 900,000

Investment 75,000 150,000

Share capital 700,000 975,000

Share premium 50,000 75,000

Bank balance 180,000 75,000


- Plant costing Rs. 510,000 was purchased during the year.


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-Tax paid during the year Rs. 75,000.

Required: Cash flow statement under direct method [10]

18. The following information are available relating inventory management:

Re-order period 4 – 6 days

Maximum consumption 3600 units

Re-order quantity 14400 units

Re-order level 21600 units

Minimum consumption 1200 units

Required: Maximum stock level [2]

19. Following receipts and issue of material were made during the month of April. Stock on 1st April was

500 units @ Rs. 20 each.

DATE QUANTITY

PURCHASED

COST PER

UNIT

QUANTITY

ISSUED

April 3 - - 200 nits

April 5 800 units 21 -

April 8 - - 400 units





Issued are to be priced under lst in first out method. On 18th

april a physical verification was made

when the verifier notified that there is storage of 20 units in stock.

Required: store ledger account [5]

20. The weekly working hour in a factory is 48 hours and a worker works 40 weeks, on an average,

during a year. The wage rate per unit is Rs. 10 and production units per hour are 20.

Required: Total wage of worker for a year under piece wage rate [2]

21. A food industry showed the following details of its production for the previous year:

Direct materials 20,000 kgs of Rs 10 per kg

Direct labour Rs.140,000

Factory overhead (based on direct labour) Rs.70,000

Administrative overhead (based on factory cost) Rs. 82,000

The industry wants to estimate the total cost and its selling price for next lot. The costing department

estimated the direct cost as follows:

i)he cost of materials Rs. 40,000 and direct labour Rs. 30,000 are required for the tender.

ii) A profit of 20% on selling price isexpected.

iii) The factory and administrative overhead will maintain the same relation as in the last year.

Required: a) Cost sheet b) Tender price [5+5=10]

22. The net profit as per cost account is Rs. 30,000. On reconciliation of cost and financial account of a

company the following differences are noticed:

a) Work overhead under recovered in cost account Rs. 3,000

b) Bank interest credited in financial account Rs. 2,000

c) Value of opening stock cost account Rs. 50,000 and financial account Rs. 55,000.

d) Provision for doubtful debt in financial account Rs. 1000

e) Loss of Rs. 2,000 on sale of old furniture was recorded in financial account.

Required: Reconciliation statement [5]

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DESTINY TUITION CENTRE

SUKULDHOKHA, BHAKTPUR

Attempt all the queston:

1. Write any three characteristics of a Company. [3]

2. Define shares and name the types of shares. [2]

3. Give any three limitations of ratio analysis. [3]

4. What do you mean by financial statement? [2]

5. What do you mean by bin card? Give a specimen of it. [3]

6. What is prime cost? Give the items of expenses under it. [2]

7. Differentiate between centralized and decentralized stores. [2]

8. State three objectives of cost accounting. [3]

9. Dabur Co. Ltd forfeited 1,000 shares issued at Rs. 100 each to Mr. Thapa who paid Rs. 30 on

application failed to pay the amount therefore. Out of there forfeited shares subsequently, 600 shares

were reissued at Rs.80 per share as fully paid.

Required: Journal entries for (a) Forfeiture of shares

(b) Reissue of shares

(c) Transfer to capital reserve [3]

10. ABC Company Ltd was registered with a share capital of Rs. 10,00,000 divided into 10,000 shares of

Rs. 100 each 4,000 shares were offered to public for subscription of Rs. 110 per share. The money

were payable as follows:

On Application Rs. 20 per share

On Allotment Rs. 50 per share (including premium)

On first call Rs. 20 per share

On final call Rs. 20 per share

Applications were received for 10,000 shares. No allotments were made to the applicant of 4,000

shares. Rest were allotted on pro-rata basis. All calls were duly made and received except:

- A shareholder holding 200 shares paid the full value of shares on allotment

- A shareholder holding 300 shares failed to pay the first call on due date

Required: Journal entries for (a) Application, (b) Allotment, (c) First and final call [6]

11. Samrina Co. Ltd took over the following assets and liabilities of Khyati co. Ltd at an agreed price of

Rs. 7,20,000

Machinery Rs. 6,10,000 Stock Rs. 1,50,000

Outstanding expenses Rs. 30,000 Furniture Rs. 80,000

Sundry creditors Rs. 1,00,000

The company paid the purchase price by issuing 8% debenture of Rs. 100 each at 10% discount.

Required: Journal entries for purchase of assets and liabilities taken over [3]

12. K. Co. Ltd issued 10,000, 5% debentures of Rs. 1000 each at discount of 10% to be redeemable at a

premium of 5% after 7 year.

Required: Journal entries at the time of issue and redemption [4]

13. The trial balance of Ganapati Trading Co. Ltd. on Chaitra 30 is as follows:

Particular Rs Particular Rs

ACCOUNTANCY HSEB TYPE QUESTION [SET –B]


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Stock 1.1.2063 30,000 Sales 800,000

Purchase 550,000 Share Capital 450,000

Building 200,000 Creditors 10,000

Salaries 10,000 Reserve Fund 20,000

Machinery 200,000 P/L Appropriation A/c 20,000

Debtors 100,000 6% Debentures 100,000

Fuel, Power 5,000 General reserve 50,000

Cash at Bank 25,000 Transfer fees 50,000

Wages 20,000

Carriage Outward 5,000

Investment 200,000

Rent 10,000

Stationery 20,000

Goodwill 20,000

Interest on Debenture 5,000

Preliminary expenses 25,000

Store consumable 25,000

Royalities 50,000

1,500,000 1,500,000


a) Stock on 30th

Chaitra 2063 was of Rs 30,000

b) Depreciation on Building at 5%

c) Depreciation on Machinery at 10%

d) Provision for doubtful debts to be maintained at 5% on sundry debtors

e) Outstanding Salary was Rs 2,000

f) Wages was prepaid of Rs 3,000

g) Directors decided to pay 10% dividend on paid up capital

h) Transfer Rs 10,000 to Reserve fund out of profit.

i) Debenture interest is due

Required: (a) Trading a/c (b) P/L a/c (c) P/L

appropriation a/c (d) Balance Sheet [2+4+2+4]

14. Following is a trial balance of a company as on 31stChaitra, last year.

Particulars Debit (Rs.) Credit (Rs.)

Share Capital 1,00,000

Sales revenue 2,50,000

Purchse 1,30,000

Creditors 50,000

Debtors 40,000

Cash at band 20,000

Machinery 1,20,000

Sundry expenses 5,000

Wages 10,000

Interim dividend 4,000

Salaries 16,000

P/L appropriation

a/c 60,000

Insurance 12,000

Advance rent 5,000

Building 1,43,000

General reserve 35,000

Total 5,00,000 5,00,000


- Depreciate building & machinery by 10%


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- Outstanding salaries Rs. 10,000

- Provision for taxation Rs. 10,000

- Proposed dividend is 10% of the paid-up capital

Required: (a) Adjustment entries (b) Worksheet [2+6]

15. The balance sheet of A Co. ltd is given below:


Equity share capital 500,000 Inventory 200,000

Profit & loss a/c 100,000 Debtors 300,000

7% preference share

capital

400,000 Preliminary

expenses

20,000

Provision for tax 30,000 Bank balance 80,000

Creditors 170,000 Fixed assets 600,000

Total 1200,000 Total 1200,000


a)Sales Rs. 1000,000

b) Net profit after tax Rs. 250,000

Required : a) Inventory turnover ratio b) current ratio c) Net profit ratio

d) Return on shareholders fund [1.5×4]

16. Following information are given:

Net profit Rs. 200,000 Refund of tax Rs. 10,000

Transfer to general reserve Rs. 40,000 Dividend paid Rs. 30,000

Depreciation on machinery Rs. 30,000 Issue of share Rs.100,000

Purchased machinery Rs. 100,000 Redemption of debenture Rs. 75000

Required: a) Fund from operation b) Fund flow statement [2+3]

17. Following were the comparative balance sheet of a company:

LIABILITIES 2008 2007 ASSETS 2008 2007

Share capital 7,00,000 5,00,000 Fixed asset 9,00,000 7,00,000

Share premium 1,20,000 1,00,000 Stock 50,000 1,50,000

Profit and loss

a/c

1,20,000 1,00,000 Bank 15,000 1,00,000

10% debentures 1,00,000 1,50,000 Debtors 1,00,000 50,000

Outstanding

exp.

40,000 50,000

creditors 1,20,000 1,00,000

12,00,000 10,00,000 12,00,000 10,00,000


a. Sales for the year Rs. 6,00,000

b. Cost of goods sold Rs. 4,00,000

c. Operating expenses Rs. 90,000

d. Debenture were redeemed at 10% premium

e. Plant cost Rs. 20,000(accumulated depreciation Rs. 8,000) was sold for Rs. 15,000

f. Depreciation for the year Rs. 80,000

g. Dividend distributed Rs. 80,000

h. Plant purchased Rs. 2,92,000

Required: cash flow statement using direct method [10]

18. The following information is available:

Re-order period 10 to 14 days

Daily consumption (Minimum) 100 units

Re-order quantity 1800 units

Maximum Level 3600 units

Required: Re-ordering level [2]

19. The following are the details of receipts and issues of material in a factory during Magh.


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Magh1 opening balance 500 kgs at Rs. 30 per kg

3 Issue 250 kgs

13 received from vendor 200 kgs at Rs.28 per kg

14 refund of surlus from a work order 15 kgs at Rs. 25 prr kg

16 Issue of 180 kg

20 Received from vendor 240 kgs at Rs. 26 per kgs

24 Issue 305 kgs

27 Refund of suplus from a work order 12 kgs(issue on 16th Magh)

Issue are to be priced on the basis of LIFO. The store verifier of the factory mortified

than on 15th Magh he had found a shortage of 10 kgs.

Required: store ledger account. [5]

20. The standard time allowed for one unit of production is 20 minutes. The hourly wage rate is Rs. 150

per hour. A worker produced 24 units in a day.

Required: Total wage payable to a worker per day. [2]

21. The following cost information is available:

Raw materials purchased Rs. 80,000 Direct wages Rs. 120,000

Freight on purchase Rs. 15,000 Factory overhead Rs. 60,000

Goodwill written off Rs. 5,000 Dividend received Rs. 8,000

Office overhead Rs. 32,000

Selling and distribution expenses Rs. 3 per unit

Opening Closing

Stock of materials Rs. 10,000 Rs. 5,000

Stock of finished goods (in unit) 1,000 1,200

The company sold 12,800 units during the year. The expected profit is 10% on sales.

Required: A statement of cost and profit showing: a) Cost of materials consumed

b) Prime cost c) Factory cost d) Cost of production

e) cost of goods sold f) Cost of sale g) Sales value [1+2+2+2+2+1]

22. The net profit of a company for the year was Rs. 60,000 as shown by the Cost Account. On an

examination of financial account and cost account, the following facts were disclosed:

(i) Selling Overhead Over-absorbed in Cost Account Rs. 1,000.

(ii) Factory Overhead under Absorbed in Cost Account Rs. 2,000.

(iii) Depreciation charged in Financial Account Rs. 6,000 and Recovered in Cost a/c Rs. 7,000.

(iv) Interest on Investment not included in Cost Account Rs. 4,000.

(v) Income Tax Paid Rs. 20,000.

(vi) Loss in Stock shown only in Financial Account Rs. 3,000.

Required: Reconciliation Statement [5]

Powered by: DESTINY EDUCATIONAL MATERIALS


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Write about economic order quantity?

Economic order quantity refers to the quantity of materials to be purchased at a time, which reduces the total of

inventory cost i.e. total of ordering cost and carrying cost . The cost is minimum at EOQ as ordering cost and

carrying cost are equal at this level.

Define perpetual inventory system. Write any two advantages of it.

Perpetual inventory system is a technique of controlling stock items by maintaining up to date records with an

objective of knowing the actual balance at any point of time. In order word, a system of keeping the records of

yhe materials used in the business by showing the details of materials received, issued and balance regularly is

known as perpetual inventory system. The main objective of this system is to make available details about the

quantity and value of stock at all times

The advantages of perpetual inventory system are as follows:

a. Checking the physical balance of number of items every day systematically and by rotation.

b. Perpetual inventory system makes store staffs responsible towards their duty. It also helps to prevent

carelessness and other misbehavior.

What is Bin or store card? Give specimen of it.

A pace or cupboard where materials have been kept is denoted by bin and the card issued to identify and

record the materials at the bin known as bin card. The physical movement of each material in store is shown

by bin card. It show the quantity of materials received , issued and an balance at any time . Each bin a card

is attached for identify and showing the stock position and that card is termed as bin card. A specimen of bin

card is given below:

What is classification and codification of materials?

The process of grouping of each material either on the basis of their nature or on the basis of their usage is

known as classification. The procedure for assigning symbols for each item in accordance with a proper

arrangement is known as codification. For example materials used in large business unit may be classified as

raw materials, machinery and equipments and other materials.

What is purchase requisition form? Give specimen of it.

The document which authorizes and records the issue of materials is known s material requisition form.


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Write two function, duties and responsibilities of store keeper.

The store is headed by a competed authority known as storekeeper is responsible for store control. The main

functions of storekeeper are:

a. To prevent production stoppage due to shortage of materials

b. To supply material required by the production department.

c. To provide safety to materials in store.

Duties of Storekeeper

a. To prepare and issue purchase requisition note for materials which have reached to re-order level.

b. To received purchased materials from receiving department.

c. To enter the particulars of materials in the bin card.

d. To store materials in their appropriate place for easy identification.

Responsibilities of Storekeeper

a. He is responsible for the timely issue of material. So, the storekeeper has to classify and codify

the materials and store then at appropriate place.

b. He is responsible for shortage of materials on account of theft, damage and spoilage.

c. It is the responsibility of the storekeeper to work in close co-ordination for the smooth

functioning of the factory.

Cost Accounting

What is cost accounting? Write any three objective of cost accounting.

Cost accounting is practice and process of cost which determines the profitability of a business concern

by controlling the cost with the application of cost accounting principles, process and rules. It is an

art as well as science, and is a prime part of accounting system which records systematically the cost

involved in raw materials and labour used in the process of production and at the same time determines the

total cost and unit cost of product . It is the process of accumulating, classifying, analyzing cost and

presenting them in logical manner for management control and decision making.

The main objectives of cost accounting are


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i) To ascertaining cost of production

ii) To determine the selling price of a product

iii) To help to analyses cost

iv) To control cost

v) To minimize or reduce cost

vi) To assist he management

vii) To assist in preparation of final account

Write any three importance of cost accounting.

The cost accounting overcomes the limitations of financial accounting. The following are the advantages of

cost accounting.

i) The profitable and unprofitable activates of a business can be easily disclosed by the use of cost

accounting.

ii) Cost may be controlled effectively from cost accounting.

iii) Cost accounting helps by providing information for decision making in the business.

iv) It helps to fix the selling price at an acceptable rate.

v) It plays a vary important role in the inventory control.

vi) It provides detail information which are indispensable for formulating thefuture policies .

vii) It helps to prepare a cost reduction plan and provides a guide line for how to achieve it.

viii) It helps to identify the reasons of idle capacity.

ix) With the introduction of cost accounting, accuracy of financial accounting can be checked indirectly.

Importance of Cost Accounting

Cost accounting has many importunes , specially the following parties are benefited from it:

i) Management or Manufacturers

ii) Investors

iii) General consumer of society

iv) Employees

v) Government

1) Importance to management of manufacture

Management or manufacturer is highly benefited with the introduction of cost accounting. It helps to:

i) ascertain selling price of the product

ii) form business policies

iii) analyses and classify costs

iv) control for the better utilization of resources

v) submit tender and quotation

vi) make decision regarding different problem

2) Important to investors

Cost accounting provides a guide line to investors to take correct decision regarding whether to invest or

not in specific industry. It provides necessary information regarding cost, price, profitability, financial strength

and credit worthiness of the business.

3. Important to consumers

The ultimate aim of costing is to minimize cost of production. Reduction in cost is usually passed onto the

consumers in the form lower price.

4. Importance to employees


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Cost accounting helps to fix the wages of workers. Efficient workers are rewarded for their efficiency. It

helps to induce incentive wage plans in the business.

5. Important to Government

Cost accounting facilitates the government in assessment of excise duty, income tax and formulation of

policies regarding industry, export and import.

Features of cost accounting

The following are the features of a cost accounting system:

i) It is a basis for accumulating cost. It is the method of accumulating of manufacturing costs. Costs

accumulation may be done by individual jobs or by manufacturing departments of processes.

ii) Cost accounting system is complementary to financial account. It gives cost date regarding stock,

work -in -progress and finished goods which are necessary for repairing financial statement.

iii) It is a basis for ascertainment of product cost. It estimates costs which are desirable in addition to

the actual or historical costs. Actual cost incurred for period is used to computer product cost.

iv) The cost accounting system is simple and practical.

v) It is flexible in nature. Expansion or contraction or contraction may be possible accounting to changed

conditions and circumstances.

4.1.8 Difference between cost accounting and financial accounting.

The followings are some of the most important differences between financial accounting and cost

accounting:

1. Purpose: the purpose of financial accounting is reporting whereas the purpose of cost accounting is for

external reporting.

2. Statutory requirement: financial account is compulsory by law but cost account is kept to meet the

requirement of management and it is optional.

3. Duration if reporting : Financial account covers the transactions of whole form for a definite period but

cost accounting furnishes cost data at frequent interval. Some reports are prepared daily, some are

weekly and some monthly.

4. Efficiency: the information provided by financial accounts is not sufficient to evaluate the efficiency

of departments and business , whereas cost accounting helps in evaluating the efficiency of the departments and

entire organization.

5. Cost Control: Financial account lays importance to recording aspect instead of control. But cost

accounting provides importance to control of cost with recording.

6. Basic: financial account is historical in nature while cost account is historical and futuristic as well.

7. Stock valuation: The stock is valued by financial account at cost or market privet whichever is less.

But the stock is always valued of cost price by cost account.

8. Dealings: financial account deals with actual facets and figures and external transactions, whereas, cost

accounting deals with internal transactions and also partly with estimates.

9. Dependability: the financial account is quite independent of cost accounting while cost accounting is

depend up on financial accounting for basic data.

10. Analysis of Profit: financial accounting discloses profit for the entire business as a whole, whereas, cost

accounts shows the profitability of otherwise of each products, process or operation so as to reveal the area of

profitability.

11. Pricing: financial accounting fails to guide the formulation of pricing policy. But cost accounting provides

adequate data for formulating pricing policy.

12. Usefulness: financial accounting is suitable to all types of business. Whereas cost accounting is useful

specially to production and service industries.

Method of cost accounting


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The concept and rules relating to determine the cost of a product or service is called cost accounting methods

or costing. There are different methods of costing:

i. Job order costing

ii. Unit costing

iii. Process costing

iv. Operating costing

v. Contract costing

vi. Batch costing

vii. Multiple costing

I. Job order costing:

Job order costing is used in an organization where goods are produced according to specification or the

order of the customers. In this method of costing goods are not produced at the producers will. Therefore,

there is no similarity in production process. Each job involves different operation. The object of job costing is

to ascertain the cost of each job separately.

II. Unit Costing

It is a method of costing by production, unit where manufacturing is continuous and units produced are identical

in nature. This method is also called single or output costing. By preparing a COST SHEET, the cost per unit is

arrived at by dividing the total cost by the number of units produced.

III. Process costing

It applies to industries where production is carried on through different stages of processes before

coming a finished product . it is a method of costing where cost is ascertained at the stage of every

process and also after completion of production process.

IV. Operating Costing

Operating costing is used by the organization which renders services like transport, electricity, hostels,

canteens, etc. although they do not produce manufactured goods like manufacturing company, but do need to

cost their unit of output i e. service as in the case of manufacturing industries.

V. Contract Costing

Organization engaged in construction work or contract generally adopt this method of costing . for each

individual contract, separate accounts have to be kept. Basically this type of costing is similar to job costing,

but differs on length of time.

VI. Batch costing

This method is used to determine the cost of group of identical of similar product called batch. It is an extension

of job order costing where a firm receives number of orders for special nature and similar types of goods. In the

method, a batch of similar products is treated as a job and the cost are accumulated in respect of a batch.

VII. Multiple costing

The application of two or more than two costing method for determination of cost of final product is known as

multiple costing. This method is adopted in a manufacturing concerns where a variety of pars are

produced separately and later on they are assembled into a final product. It is also known as composite

costing.

Brief introduction of cost

Cost represents a sacrifice, a foregoing or a release of something for obtaining something. It is the

amount of expenditure, actual (incurred) or notional ( attributable), relating to a specific thing or activity. The

specific thing or activity may be a produce, job, service, process or any other activity.


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A cost is composed of four elements:

i) Material

ii) Labour

iii) Expenses

iv) Overhead

i). Material: all types of goods used in the process of production are called material and the expenses

incurred for material is termed as material cost. It also include all those cost associated with the purchase of

material and its storing an handling costs. The example of which are excise duty, custom duty, dock

charges, inspection cost, etc. Material costs are of two types.

A. Direct Material cost

B. Indirect Material cost

(a) Direct Material cost: Those material cost which can be directly identified with each unit of finished

product, is known as direct material. Direct material generally become a part of the finished product.

(b) Indirect Material cost: Those material which necessary for production but cannot be traced as a part of the

product produced is known as indirect material. Costs of these materials cannot be directly identified whit a

particular unit of product.

(ii) Lab our: cost paid for the work made by a person is known as labour cost . wages, salaries, commission,

bonus, etc. are included in labour cost. There are two classes of lab our involve into production of goods.

They are:

(a) Direct Labour

(b) Indirect Labour

(a) Direct Lab our : The wages paid to the workers directly engaged in manufacturing process a goods in

knows as direct lab our cost. Such wage can be conveniently identified with a particular, job or process.

(b) Indirect Labour: Labour whose wage cannot be allocated, but that can be apportioned to a product

is known as indirect lab our cost . Indirect labour be directly identified with a particular job or cost unit.

(iii) Expenses: all other cost other than materials an lab our costs are termed as expenses for

simplicity, Royalty, Hire charge, rent, cost of training of new employees, etc. are the example of

expenses. These types of expenses may be sub-divided into two heads.

(a) Direct Expenses

(b) Indirect Expenses

(a) Direct Expenses: Expenses other than direct material and direct lab our, which can be conveniently

identified with an unit of output in known as direct expenses. Direct expenses are also known as

chargeable expenses, prime cost , process expenses or productive expenses. Cost of hiring special plant, cost

of designing or pattern of building, royalty, excise duty, cost of rectifying defective work, etc. are the

examples of direct expenses.

(b) Indirect Expenses: expenses other than indirect material and indirect lab our are indirect expenses.

These expenses cannot be identified or traced out for a particular job or product. Rent of building,

insurance premium, depreciation, repairs and maintenance, welfare and medical expenses, etc. are the

examples of indirect expenses.

(iv) Overheads:- The aggregate of indirect of indirect material cost, indirect lab our and indirect expenses is

knows as overheads. Indirect cost refers to cost which cannot be allocated but which should be apportioned or


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absorbed by cost centers or cost unit overheads. Overheads cost are also knows as 'burden'. Overheads may be

sub-divided into the following groups.

a) Production overhead

b) Administrative Overhead

c) Selling Overhead

d) Distribution overhead Accountancy, Grade XII ...178

(a) Production overhead or works overhead or factory overhead or manufacture overhead: it represents

all those costs other than direct material, direct lab our and direct expenses , which are incurred in the

manufacturing process. They are:

1. Indirect materials in work

2. Indirect wages to workshop employees

3. Factory expenses like rent, rates, taxes, insurance, repairs etc.

4. Depreciation on plant, machinery and maintenance of factory building

5. Welfare and medical expenses of factory employees.

(b) Administrative overhead or office overhead: The represent cost associated with the office and

administration. It consists of all expense incurred in formulating the policies, directing. The organization and

controlling he operation of and undertakings. Examples ate:

1. Office expenses including rent, taxes, lighting, printing, stationery, insurance, postage, telegram

telephone, etc.

2. Salaries of office staff, accountant, directors etc.

3. Legal expenses, audit fees, etc.

4. Depreciation on office building and other assets used in the office.

(c) Selling overhead: cost incurred in selling and distribution of product is termed as selling overhead.

Sales department expenses, sales department salary, advertisement, expenses of sales promotion, gifts,

samples, expenses on market research, etc. are the example of selling overhead.

(d) Distribution overhead: These are the expenses concerned with the delivery and dispatch of finished

goods to customers. Cost of packing cases, upkeep of delivery vans, warehouse rent, warehouse insurance,

loading expenses, carriage outward, etc. are the example of distribution overhead.

(Notes: Selling overhead and distribution overhead can be combined together and which may be termed as

selling and distribution overhead)

Classification of costs

Costs have been classified in different ways in accordance with their common characteristics. The

following are the important ways of classification:

i) On the basic of element of costs.

ii) According to functions

iii) According to variability

iv) According to controllability

i) on the basic of element :

Under this basic costs can be classified into:

a) Material cost

b) Lab our cost

c) Expenses


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(ii) on the basic of functions:

according to function classification cost may be sub- divided into four parts. These are:

a) production cost

b) Administration cost

c) Selling cost

d) Distribution cost

(a) Production cost: Those costs incurred in fabrication and assembling of units of output is knows as

production cost.

(b) Administrative cost: as has been defined by the terminology, the sum of those cost

of general management and secretarial accounting and administrative services are called administrative costs.

These cannot be directly related to the production, marketing, research or development functions of the

enter prince.

(c) Selling cost: This has been defined as cost of securing and execution of orders.

(d) Distribution cost: distributions cost refers to those costs which are incurred to promote sale and

also to facilitate the movement of goods into the hands of purchases.

(iii) On the basis of Variability:

Costs can also be classified according to variability or behavior of cost . they are:

(a) Fixed cost

(b) Variable cost

(c) Semi- variable cost

(a) Fixed cost: fixed costs are those cost which will remain constant for all or different level of output costs

which tend to remain constant tat the different level of output are called fixed cost . some important features of

fixed cost.

(i) The amount of fixed cost remain constant for varying level of output.

(ii) Fixed cost per unit will decrease with increased output and vice- versa

(iii) Fixed cost is controllable by the top level

(iv) Some fixed costs ate controllable at the supervisory level and most are not controllable by the

departmental supervisors.

(b) Variable cost: cost that charges directly and proportionately with the change in level of

output , therefore it tends to vary with the volume costs are:

Important features of variable costs are:

(i) Only total cost varies in direct proportion to volume of output or sales

(ii) The variable cost per unit of product remains constant

(iii) The cost incurred for any product of departments may be identified easily

(iv) Control over variable cost lies in the hands of departmental heads.

(c) Semi-variable cost: A cost containing both fixed as well as variable element is knows as semi –

variable cost. The variable portion of semi-variable cost is affected by fluctuation in volume of output

or turn over. Like variable cost the portion increases or decreases proportionately with the increases or

decrease of volume of output, but the fixed portion of the semi-variable cost remains constant for all level of

activities. Therefore a semi-variable cost increases with the increase in level of output, but the will not

be proportionate as in the case of variable cost.

(iv) On the basic of controllability:

on the cost is classified into two types. Those are:

a) controllable cost


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b) non-controllable cost

a) Controllable cost: cost which is influence by the action of management is controllable cost.

Practically all variable costs are controllable.

b) Non-controllable cost: cost which cannot be controlled bu management action is called uncontrollable

cost. All fixed costs are non-controllable cost. E.g. depreciation of plant and machinery, rent of building.

Financial statement

The organized Summary of detailed information about financial position and the performance of the

concern is known as Financial statement. The financial statements are prepared at the end of accounting

period . The financial Statement includes profit and Loss Account or Income Statement and Balance

Sheet .

Importance

i) The valuable information for decision making are provided by Financial statement

ii) It also provide information relating to profitability and operating cost.

iii) The financial statement shows true, clear and fair picture of the organization

Limitations

Limitation of Financial statement are:

- Contain only quantitative but not the qualitative information.

- Includes valueless assets such as goodwill, preliminary expenses, patent, discount on issue of shares and

debentures, etc

- Because of historical account it cannot represent the true position to date

- Management may be biased and feed manipulated information to prove its point of view.

- Can show the financial problems and operational inefficiency, but it cannot suggest definite remedies.

Concept of financial statement Analysis

In order to make financial statement more meaningful, analysis of financial statement is made. A

systematic process of analyzing and evaluating the relationship between the component parts of

financial statement is known as financial statement Analysis. Analysis of financial statement is to

classify the complex data in a convenient way and to present the information of financial statement in

rational groups.

Objectives of Financial Statement Analysis

Following are the main objectives of Financial Statement Analysis:

i) To know the profitability of the business

ii) To know the security & solvency of the business

iii) To know the trend of business, sales, purchases, profit and earning Capacity, etc

iv) To ascertain the financial strength and soundness of the business.

v) To judge the efficiency of management.

vi) To compare financial & operating efficiency of different organizations.

vii) To help a great deal in forecasting for the future.

Limitation of Financial Statement Analysis

The limitations are:

i) Financial analysis is based on financial statement. Hence the limitation of financial statement such as

influence of accounting concept, personal, Judgement disclosure of monetary facts, etc are also the limitation

of financial statement analysis.

ii) Financial analysis fails to disclose current worth of the enterprise.


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Ratio Analysis

An arithmetical relationship between two accounting figures is known as Ratio. It is computed by

dividing one item of relationship with the other. Ratio simply means one number expressed in terms of

another.

Ratio analysis is a technique of analysis and interpretation of financial statement . The evaluation of

performances of an organization by creating the ratios from the different accounting figures consisting in

Income statement and the Balance Sheet is Known as Ratio Analysis.

Importance and advantages of ratio analysis

The following are the main advantages of Ratio Analysis"

i) helps in communicating financial information in a meaningful manner and also incenses the value of

financial statement:

ii) useful for making decision on any financial activity

iii) useful for simple assessment of liquidity, profitability, solvency and efficiency of the firm.

iv) Helps management in evolving future 'market strategies'.

v) Helps in co-ordination.

Limitation of Ratio Analysis

The following are the some limitations of Ratio Analysis:

i) It is a means not an end.

ii) Incorrect data gives false ratios.

iii) Without adjustment for price level changes, Ratio analysis may not be correct.

iv) Ratio calculated from the past year data may not be helpful in forecasting.

v) Ratio may not be comparable where different firms follow different account policies.

vi) Ratios based on past financial statement are not indications of future.


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1. Define company/joint Venture Company / joint stock Company. Write three features or characteristics

of company.

A company is a voluntary association of group of people willing to carry out a business for which the

major part of the capital is collected by selling the shares or debentures to the general public. It is

artificial person which is created by the specific law with a perpetual succession.

A company is a voluntary association of group of people which is created by specific law with a

perpetual succession.

According to L.H. Hankey, “A company is an artificial person created by law having separate entity

with perpetual succession and a common seal.”

The features of a company are as follows:

a. Artificial person

A company is an artificial person created by law having separate existences of its own. If can

conduct lawful business and enter into the contract with others. Like a real person, it can buy or

sell properties in its own name. It can sue and sued by others.

b. Perpetual succession

The company has a continuous existence which is not affected by or interrupt by the death,

insolvency, inability or lunacy or retirement of shareholders. It is created by law and only law can

liquidate it.

c. Transferability of shares

The part of capital owned by shareholder is called shares. Ownership of the shares of is easily

transferable. Thus any person can be the member of the company by purchasing the share and

could withdraw his membership by transferring his shares.

d. Common seal

Being an artificial person, a company cannot act and sign itself. Other people do work on the

behalf of using common seal. Common seal is the authorized signature of the company. All the

acts of the company are authorized by its common seal. All the documents are affixed by the

common seal for making valid documents.

e. . Limited liability

The liability of shareholders is limited to the value of shares subscribed to by each of them. Even

if, the assets of the company aren’t sufficient to pay the claims of the creditors, no owners are

bound to pay anything more than the face value or nominal value of shares hold by them.

f. Representative management.

2. Differentiate between private company and public company:

The difference between private company and public company are as follows:

Basis of difference Private company Public company

No. of members It needed at least one member for its It needs at least seven members for


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formation. The maximum number is fifty.

its formation. The maximum number is not limited.

Certificate of commencement

Not needed before starting transaction It required before commencement of transaction.

Issue of prospectus No need to publish prospectus It is necessary

Transfer of share The member of the company generally transfers its share to anyone.

Shares of public company are easily transferable.

Specific word It must use the word Pvt. Ltd at the end of its name.

It uses the word Ltd. at the end of its name.

3. What are the important documents of company?

The important documents of a company limited are those documents that plays essential role in the

company. They are as follows:

a. Memorandum of association

It is the important and basic document of a company. It contains the name and location of the

company, states the fund it could raise and constitute the works it shall undertake. Company should

undertake its every activity accordingly. Thus it limits the strength and defines the boundary of a

company.

b. Articles of association

The internal rule and regulations framed for the purpose of business regulating activity properly is

called Articles of Association of a company. It regulates the internal management of a company and is

prepared and executed within the boundaries of memorandum. The articles must not violate any

provision of the memorandum or any provision of the company.

c. Prospectus

It is a document that includes necessary information about the company to invite investment. Any

circular, advertisement, offer or any other document by which a company gives invitation to the public

to subscribe to its shares and debentures is known as prospectus.

4. What is memorandum of the association? Write any three information contains on it.

a. Right and duties of managing directors.

b. Directors remuneration and allowance

Matters relating to the procedure of calling company are meeting Memorandum of association is the

important document and basic document of a company. The document which defines its objectives,

power and its relationship with the outside world is called memorandum of association. The company

works within the framework of the memorandum.

The main contents of Memorandum of Association according to company Act 2063 are as follows:

a. Full name of the company

b. Address of the head office of the company

c. Objects of the company or objectives of the company

d. Number of shares subscribed by functions

e. Amount of authorized share capital of the company

f. Other necessary particulars/ matters.


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Define article of association. Mention the main contents of memorandum of association.

The memorandum which defines the rights, powers and duties of the management, the modes and

manner of carrying the company’s business is called Article of Association. It shows the relation

between the company and its members and relation among the members.

The article of association shall contain the following particulars as indicated in Company Act 2063.

c. Numbers of directors and their terms and condition

d. and notice to be given for meeting.

e. Minimum shares to be subscribed to quality to become director

f. Other necessary matters.

5. What do you know about Company’s promoters?

Promoters are those people, or group of people who actively takes part from the very beginning to

establish a company and handles each and every activity related to formation of the company. In

other words, the institutions or group who strive to convert a business dream into reality are company

promoters. In other words founder member of the company who give birth to the company is called

promoters.

6. Define share. Mention and explain the types of share.

A share is a document that acknowledges the ownership of a company to the limit of amount

contributed. It represents a unit of share capital reflecting the extent of interest of shareholder.

There are five types of share capital. They are explained as below:

a. Authorized or registered or nominal capital

The maximum amount of capital a company can raise as mentioned in the memorandum of

association at the time of a company registration is called Authorised capital. This amount of

capital cannot be increased or decreased without necessary legal procedure filled. For example, if a

company has been registered with 5,00,000 shares of Rs. 100 each, then its authorized capital is Rs.

50, 00,000.

b. Issued capital

A part of authorized capital is offered to public for subscription is issued capital. Companies usually

do not issue the whole of its aauthorised capital for public subscription. For example: the company

is registered with 5,00,000 shares of Rs 100 each and company issued 2,50,000 shares, then the

issued capital is Rs 25,000,000.

c. Subscribed capital

It is that part of capital issued capital, which is actually taken by the investors. For example, the

company issued 2,50,000 shares @ Rs. 100 each and application were required for 2,00,000

shares, the subscribed capital is Rs. 2,00,00,000.

d. Called-up capital

Company issuing shares can called the amount of share in full with application or in different

installments. It can be received with application, allotment, first call, second call and other call as

per the requirement of the company. For example: if Rs. 80 per share has been demanded or called

so far from a share of Rs. 100 then called up capital will be Rs. 1,60,00,000. Therefore it is that


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portion of subscribed capital which is actually called up by the company to pay the shares

subscribed by them.

e. Paid-up capital

Amount of capital received from the shareholders out of called-up capital is paid-up capital is paid-

up caoital. If the called up capital is 2,00,000 shares @ Rs. 80 each and a shareholder holding 1000

shares fails to pau the second installment of Rs 20 per share, the paid-up capital will be Rs.

15980000 since Rs. 20000 due on 1000 shares @ Rs. 20 per share fail to pay.

Differentiate between equity share and preference share.

The difference of equity share and preference share are as follows:

Basis of difference

Equity share Preference share

Rate of dividend It is not fixed. It is fixed.

Redeemable Equity shares are irredeemable It may be redeemable.

Arrears of dividend

It cannot be accumulated It may be accumulated.

Facility of conversion

It is not convertible It can be converted into equity shares or debentures.

Voting right Equity shareholders enjoy voting right on general meeting

Preference shareholders have no such voting rights.

7. What is forfuture of share?

The cancellment and withdrawal of share certificates ones issued by the company if a shareholder fails

to pay the amount due on his shares as called by the directors is called forfuture of share.

State the types of preference of share.

The types of preference shares are as follows:

a. Cumulative preference of share

b. Non-cumulative preference of share

c. Redeemable preference of share

d. Irredeemable preference of share

e. Convertible preference share

f. Non- convertible preference share

g. Participating preference share

h. Non- participating preference share

6. Define share capital.

Capital may be defined as a minimum amount of fund to run the business. Share capital is the

ownership capital of a company raised by the issue of its share to finance its activities.

State the meaning of debenture and write any two features of it. State the type of debenture.


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A debenture is a loan certificate issued by the company to its holder under the company seal

acknowledging that it has borrowed loan from the holder with a promise to pay certain rate of

interest annually and the principle sum at maturity.

The features of debenture are:

a. Long term source of capital

b. Fixed rate of dividend

c. Specific maturity period

d. It is issued under the company seal.

Types of debentures:

a. Redeemable debenture

b. Irredeemable debenture

c. Bearer debenture

d. Registered debenture

e. Secured debenture

f. Unsecured debenture

g. Convertible debenture

h. Non- convertible debenture

8. Differentiate between share and debenture.

Basis of difference Share capital Debenture

Capital Share capital is owned capital Debenture is a loan or borrowed capital

Ownership Shareholders are owner of the company Debenture holders are the creditors of the company

Voting right A shareholder can excerase voting right Debenture holder has no voting right

Conversion Equity share is not convertible It is convertible

9. What is financial statement? What are the techniques of financial statement analysis?

Financial statement are organized summary written report of financial affairs of a company which

shows the result of its business operation for a particular period of time and its financial position at

the end of that period. The contents of financial statement are income statement, statement of retain

earning, balance sheet, cash flow etc.

The major techniques of financial statement analysis are as follows:

a. Ratio analysis: It is the analysis of the interrelationship between two financial figures. It is used for

analyzing strength and weakness of the firm.

b. Fund flow statement: It is the analysis of the change in fund position during a period.

c. Cash flow statement: It is the analysis of the change in cash position during a period.

d. Trend analysis: It is the analysis of trend of financial statement of the company over the years.

10. Mention the items of expenses included in financial account only.

Items of expenses or loss shown only in financial account are:


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a. Loss on sale of fixed assets or investment.

b. Interest on debenture, loan etc.

c. Discount on issue of share or debenture written off and share or debenture issue expenses.

d. Preliminary expenses written off

e. Income tax or provision for tax and provision for bad debt, discount and commission

f. Dividend, transfer to general reserve, fund, general reserve etc.

9. Mention items of income or gain shown in financial accounting only.

Items of income or gain shown only in financial accounting are:

a. Dividend received

b. Refund of tax

c. Interest received from bank deposit or investment

d. Gain or sale of assets or investment

e. Discount or commission received

f. Transfer fee on share and debenture.

11. What is prime cost? What are component of prime cost?

Prime cost of product are the sum of direct costs, which varies in proportion to volume of production

like cost of material, direct labour and direct expenses. The major components of direct cost are:

a. Direct material cost

b. Direct labour cost

c. Direct expenses

12. Allocation of overhead

Combination of indirect expenses is called overhead. Allocation of overhead is the process of

distributing indirect costs among the products of a particular department or cost centre. It is

important for ascertaining the product cost, fixing a competitive selling price and maintaining a strict

control over indirect costs.

Appointments of overhead:

It is the process of sharing/distributing the amount of overhead (indirect costs) to the different

departments or cost centre. It is applicable when the overhead cost is associated with two or more

departments or cost centers.

Absorption of overhead

The process of allotment of overhead to cost unit is known as absorption. In other words the process

of ascertaining the total overhead cost of each unit of output or job by using overhead rate is known

as absorption of overhead.

13. What is overhead?


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It refers to the expenses or costs which cannot be directly charged or attributed with any particular

cost centre or cost unit. In other words overheads are all expenses other than direct expenses such as

indirect materials, indirect wages and other indirect expenses.

Differentiate between piece rate system and time wage system.

The difference between piece rate system and time wage system are as follows:

Basis of difference Piece rate system Time rate system

Meaning It is a method of wage payment to workers based on the quantity of output they have produced.

It is a method of wage payment to workers based on time spent by them for the production of output.

Nature of payment It pays the workers according to the unit of output produced.

It pays the workers according to time spent in the factory.

Emphasis Quantity of output Quality of output

Idle time It doesn’t pay for idle time. It pays for idle time.

Supervision It requires strict supervision to get required quality output.

It requires strict supervision to get the required quantity of output.

14. Write any four advantages and disadvantages of piece rate system.

Advantages:

a. It helps to reduce idle time

b. It requires less supervision cost

c. It pays wages according to the output produced by the workers. It encourages efficient workers.

d. It helps the management to determine the exact labour cost per unit for submitting quotation.

Disadvantages:

a. It may adversely affect the worker’s health as well.

b. It doesn’t help in producing quality output as the workers are concentrated more on quantity instead

of quality.

c. It is very difficult to fix an acceptable and reasonable piece rate for each item of output or job.

d. It creates greater chances of ineffective use of materials, tools and equipments due to more

concentration on increasing output.

e.

15. Write any two four advantages and disadvantages of time rate system.

Advantages:

a. It is simple to understand and easy to calculate.

b. It is quite useful for organizations that use costly inputs for quality output.

c. It is beneficial for average and below average workers.

d. It assures regular income and creates the feeling of economic security among the workers.

Disadvantages:


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a. It doesn’t help in increasing output and improving efficiency as there is no correlation between effort

and reward.

b. It is not justifiable to differentiate between efficient and inefficient workers and skilled and unskilled

workers.

c. It pays for idle time which increases the cost of production.

d. It requires strict supervision to get the required quantity of output.

An Capsule Of Accountancy OF class XII[HSEB]

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