Q1. Accounting is closely associated with control". Explain the statement and discuss the role of accounting feedback in the process of control. What do you understand by Internal Audit? How do the functions of an internal auditor differ from that of External Auditor?
Q2. You are required to prepare a Schedule of Changes in Working Capital and a Statement showing Sources and Application of Funds for XYZ Ltd. The following is the condensed Balance sheet of XYZ Ltd. at the beginning and at the end of the year 2021
Additional information available is:
(a) Dividend was paid @ 10% .
(b) During the year and old machinery costing Rs. 12,000 was sold for Rs. 4,000, on which accumulated depreciation was Rs. 6,000 and a new machinery of Rs. 20,000 was purchased. The factory sheds are fully depreciated.
(c) 5% Debentures of face value of Rs. 100 each worth Rs. 20,000 were redeemed by purchase from the open market at Rs. 96 each.
(d) Rs. 10,000 was debited to the contingency reserve for settlement of previous tax liability.
(e) Investment worth Rs. 26,000 were sold at book value.
Q3. Explain the technique of Marginal Costing and Absorption Costing. Taking a suitable example prepare a Profit and Loss Account according to Marginal Costing and Absorption Costing.
Q4. A firm has sales of Rs. 75, 00,000 variable cost of Rs. 42, 00,000 and fixed cost of Rs. 6,00,000. It has a debt of Rs. 45, 00,000 at 9% and equity of Rs. 55, 00,000.
(i) What is the firm’s ROI?
(ii) Does it have favorable financial leverage?
(iii) If the firm belongs to an industry whose asset turnover is 3, does it have high or low asset leverage?
(iv) What are the operating, financial and combined leverages of the firm?
(v) If the sales drop to Rs. 50.00.000, what will be the new EBIT?
(vi) At what level the EBT of the firm will be equal to zero?
Q5. Discuss the concept of Working Capital. As a financial manager which factors would you take into consideration while estimating working capital needs of your firm.