NEB Class 12 Management Accounting Question Paper 2080 (Set B) Nepal

A public limited company is a corporate structure established under company law whose shares are publically traded on a stock exchange and can be bought and sold by anyone. It requires a minimum number of shareholders (usually 7 in Nepal) and possesses limited liability and perpetual succession features.

A debenture is a long-term debt instrument issued by a company to acknowledge a loan, typically under its common seal. It guarantees payment of a fixed rate of interest periodically and redemption of the principal amount after a specified period, backed by general creditworthiness rather than specific collateral security.

The full form of NFRS is Nepal Financial Reporting Standards.

Cost accounting is a specialized branch of accounting that deals with capturing, recording, allocating, classifying, analyzing, and summarizing various alternative courses of action involving costs control and ascertainment of the cost of production per unit.

Variable overhead refers to indirect production costs that vary in direct proportion to changes in production volume or output levels (e.g., indirect materials, factory power, and lubricants).

A Bin Card is a quantitative record kept by a storekeeper inside the warehouse or store room for each item of inventory. It records only receipts, issues, and running balances of inventory quantities without taking their monetary value into consideration.

Direct wages represent the remuneration paid to laborers who are directly involved in converting raw materials into finished products. These labor costs can be easily and specifically identified with a particular product, job, or cost unit.

Computerized accounting refers to the practice of recording, processing, summarizing, and maintaining business financial transactions using electronic databases and financial accounting software instead of traditional manual ledger books.

Profit and Loss A/c .................... Dr.  Rs. 5,000
    To Provision for Income Tax A/c                  Rs. 5,000
(Being adjusting entry made for income tax provision)

Journal Entries

Calculation of Goodwill / Capital Reserve:

Total Assets = Rs. 3,20,000 (Machinery) + Rs. 2,10,000 (Stock) = Rs. 5,30,000 Agreed Purchase Price = Rs. 4,40,000 Capital Reserve = Total Assets - Purchase Price = 5,30,000 - 4,40,000 = Rs. 90,000

Calculation of Number of Shares Issued:

Issue Price per share = Rs. 100 + 10% of 100 = Rs. 110 Number of Shares = Purchase Price / Issue Price = 4,40,000 / 110 = 4,000 shares

Journal Entries

Calculations:

• Nominal value = 500 × Rs. 1,000 = Rs. 5,00,000
• Premium on Issue = 10% of 5,00,000 = Rs. 50,000
• Premium on Redemption = 5% of 5,00,000 = Rs. 25,000
• Total Amount Received = Nominal Value + Premium on Issue = Rs. 5,50,000

Journal Entries

1. For Issue of Debentures:

2. For Redemption of Debentures (After 5 Years):

(Note: In typical evaluation practice for this question, the Dr. columns for Bad debts and Sales commission are assumed to realistically be Rs. 6,000 and Rs. 4,000 based on standard accounting margins, but the calculation below proceeds with standard placement rules).

a) Trading Account

b) Profit and Loss Account

10-Column Work Sheet

Overhead Definition

Overhead is the aggregate of indirect material cost, indirect labor cost, and indirect expenses. These are expenditures that cannot be directly traced to or identified with any specific cost unit or product line.

Apportionment of Overhead

Apportionment refers to the structural distribution of common or joint indirect costs across multiple cost centers or departments (both production and service) using equitable logical bases (e.g., allocating factory rent based on the floor area occupied by each department).

Re-apportionment of Overhead

Re-apportionment is the subsequent process of gathering the total overheads accumulated under service departments and redistributing them back into primary production departments. Since service areas do not produce goods themselves, their allocated overhead costs must follow service tracking ratios to load onto ultimate productive departments.

A store ledger is a subsidiary ledger maintained by the costing department that records details of materials received, issued, and held in stock both in terms of quantitative units and dynamic monetary costs. It helps maintain inventory valuation data using methods like FIFO or LIFO.

Store Ledger Account (FIFO Method)

Value of Closing Stock on Bhadra 30: 600 kg @ Rs. 22 = Rs. 13,200

Cost Reconciliation Statement

Disadvantages of Accounting Software

• High Implementation Cost: Setup, purchasing proprietary licenses, and procurement of matching high-end hardware infrastructure require substantial capital inputs.
• Training and Maintenance Costs: Staff require extensive regular training to operate evolving software interfaces smoothly, alongside regular paid software updates and developer troubleshooting fees.
• Security Risks and Cyber Vulnerabilities: Digital ledgers are continuously prone to remote virus attacks, unauthorized multi-user hacks, or phishing threats.
• System Crashes and Data Corruption: Unanticipated power grid crashes or structural hardware corruptions run risks of absolute information wipeout if reliable cloud data backups are missed.
• Staff Resistance: Internal human accounting teams often resist adopting system workflows because of structural adaptation stress or psychological fears of job displacement.

Working Notes & Preliminary Calculations:

1. Cost of Goods Sold (COGS): Opening Stock (30,000) + Purchase (96,000) + Wages (13,000 + 2,000 Outstanding) - Closing Stock (50,000) = Rs. 91,000
2. Gross Profit: Sales Revenue (1,44,000) - COGS (91,000) = Rs. 53,000
3. New Bad Debts Provision: 5% of (Debtors 32,000 - Bad Debt 2,000) = 5% of 30,000 = Rs. 1,500
4. Bad Debt Provision Adjustment in P&L: Old Provision (2,000) - [New Bad Debt (2,000) + New Provision (1,500)] = Rs. 1,500 net expense/addition. Alternatively: New Bad debt (2,000) + New Provision (1,500) - Old Provision (2,000) = Rs. 1,500.
5. Interest Earnings / Expenses:
   • Accrued Interest on Investment = 10% of 20,000 = Rs. 2,000
   • Total Interest Due on Loan = 10% of 20,000 = Rs. 2,000. Interest paid is 1,000, so Outstanding Interest on Loan = Rs. 1,000.

SOLVING OPTION 2: MULTI-STEP INCOME STATEMENT

STATEMENT OF FINANCIAL POSITION (BALANCE SHEET)

Cash Flow Statement (Indirect Method)

a) Cost Sheet (for 5,000 units)

• Per unit rates for past period:

  • Material per unit = 1,50,000 / 5,000 = Rs. 30
  • Wages per unit = 2,00,000 / 5,000 = Rs. 40

• Overhead Basis Ratios:

  • Factory Overhead % on Direct Wages = (Factory Overhead / Direct Wages) × 100 = (50,000 / 2,00,000) × 100 = 25%
  • Office Overhead % on Factory Cost:
    • Prime Cost = 1,50,000 + 2,00,000 = Rs. 3,50,000
    • Factory Cost = Prime Cost + Factory Overhead = 3,50,000 + 50,000 = Rs. 4,00,000
    • Office Overhead % = (40,000 / 4,00,000) × 100 = 10%

b) Tender Sheet (for 2,000 units)

• Revised Unit Rates:
  • New Material Rate = Rs. 30 + 10% = Rs. 33 per unit
  • New Wages Rate = Rs. 40 + 20% = Rs. 48 per unit