NEB Class 12 Management Accounting Question Paper 2081 (Set B) Nepal

A statutory company is a company that is incorporated and established by a special Act passed by the legislature (Parliament). Its powers, objectives and scope of operation are defined by that Act. Examples include Nepal Rastra Bank, Nepal Electricity Authority, etc.

Any two of: (i) Cumulative preference shares, (ii) Non-cumulative preference shares, (iii) Participating preference shares, (iv) Non-participating preference shares, (v) Convertible preference shares, (vi) Redeemable preference shares.

Any two of: Land and building, Plant and machinery, Furniture and fixtures, Vehicles, Equipment.

Any two of: (i) It records only monetary transactions and ignores qualitative/non-monetary factors. (ii) It shows historical cost, not the current/market value. (iii) It does not provide cost information for individual products or departments. (iv) It is affected by personal judgement and accounting policies.

Fixed overhead refers to the indirect costs that remain constant in total irrespective of the level of output or activity within a relevant range (e.g. factory rent, salary of supervisor, insurance of building). Such costs do not change with changes in the volume of production.

A centralized store is a system of storekeeping in which all materials of an organisation are received, stored and issued from one single central store/department, rather than from several scattered stores. It enables better control, supervision and economy in storage of materials.

Any two of: (i) It is simple to understand and easy to calculate. (ii) It ensures a stable and guaranteed wage to workers. (iii) It encourages quality of work since workers are not in a hurry to produce more. (iv) It is suitable where output cannot be measured in quantitative terms.

MS-Excel is a spreadsheet software developed by Microsoft. It arranges data in rows and columns (cells) and is widely used in accounting for recording, calculating and analysing financial data using formulas, functions, charts and tables. It helps in preparing budgets, financial statements and performing automatic calculations.

Shares are issued at Rs. 100 less 10% discount = net Rs. 90 collectible (Application Rs. 30 + Allotment Rs. 40 + First & final call Rs. 20).

Money received on application = 7,000 shares applied x Rs. 30 = Rs. 2,10,000.

• On 5,000 allotted shares: application due = 5,000 x 30 = 1,50,000.
• On 1,000 wholly-rejected shares: 1,000 x 30 = 30,000 (refunded).
• Excess to adjust on allotment = 2,10,000 - 1,50,000 - 30,000 = 30,000 (from the 4,000 applicants who got 3,000 shares: they paid 4,000x30 = 1,20,000, due 3,000x30 = 90,000, excess 30,000).

Allotment due = 5,000 x 40 = 2,00,000; less excess application money adjusted 30,000 = 1,70,000 received.

First & final call due = 5,000 x 20 = 1,00,000; less call-in-arrears 300 x 20 = 6,000 = 94,000 received.

Journal entries (in brief):

1. Bank A/c Dr. 2,10,000 / To Share Application A/c 2,10,000.
2. Share Application A/c Dr. 2,10,000 / To Share Capital A/c 1,50,000 / To Bank A/c 30,000 / To Share Allotment A/c 30,000.
3. Share Allotment A/c Dr. 2,00,000 + Discount on Issue of Shares A/c Dr. (discount Rs.10 x 5,000 = 50,000 — typically adjusted on allotment) / To Share Capital A/c; Bank A/c Dr. 1,70,000 (net allotment received) / To Share Allotment A/c.
4. Share First & Final Call A/c Dr. 1,00,000 / To Share Capital A/c 1,00,000; Bank A/c Dr. 94,000 / To Share First & Final Call A/c 94,000 (300 shares x Rs.20 = Rs.6,000 in arrears).

(I) Purchase of assets and issue of shares at premium

Agreed purchase price = Rs. 5,50,000 (Plant 2,60,000 + Building 3,65,000 = 6,25,000; the vendor's agreed consideration is Rs. 5,50,000 as stated).

Shares issued at Rs. 100 + 10% premium = Rs. 110 each. Number of shares = $\dfrac{5{,}50{,}000}{110} = 5{,}000$ shares.

Entries:

1. Plant A/c Dr. 2,60,000; Building A/c Dr. 3,65,000 / To Vendor A/c 5,50,000 (and difference to capital reserve/goodwill as applicable).
2. Vendor A/c Dr. 5,50,000 / To Share Capital A/c 5,00,000 (5,000 x 100) / To Securities (Share) Premium A/c 50,000 (5,000 x 10).

(II) Issue and redemption of debentures

Issue at par: Bank A/c Dr. 4,00,000 / To Debenture A/c 4,00,000 (4,000 x 100).

Redemption after 5 years at 10% premium (premium = 4,000 x 10 = 40,000):

• Debenture A/c Dr. 4,00,000; Premium on Redemption of Debentures A/c Dr. 40,000 / To Debenture-holders A/c 4,40,000.
• Debenture-holders A/c Dr. 4,40,000 / To Bank A/c 4,40,000.

Trading Account

Gross profit = $25,00,000 + 2,00,000 - (2,00,000 + 17,50,000 + 40,000 + 4,00,000) = 3,10,000$.

Profit & Loss Account

Net profit $= (3,10,000 + 2,00,000) - (1,75,000 + 25,000 + 20,000 + 5,000) = \textbf{Rs. 2,85,000}$.

Work sheet (key adjusted figures):

Adjustments:

• Outstanding wages Rs. 1,000 → added to Wages (4,000 + 1,000 = 5,000) and shown as a current liability.
• Depreciation on machinery @10% of 30,000 = Rs. 3,000 → expense; machinery shown at 27,000.
• Proposed dividend @10% on share capital 20,000 = Rs. 2,000 → appropriation/current liability.

Income statement columns: Sales 30,500 (Cr.) against Purchase 17,000, Wages 5,000, Rent 4,500, Depreciation 3,000. Balance carried forward and combined with opening P&L balance of 7,500 (Cr.) to arrive at the adjusted profit; proposed dividend Rs. 2,000 appropriated.

Balance sheet columns: Machinery 27,000, Debtors 8,000 on the assets side; Share capital 20,000, Loan 2,000, Creditors 3,500, Outstanding wages 1,000, Proposed dividend 2,000 and retained profit on the liabilities side, with both sides tallying.

Cost: Cost is the amount of expenditure (actual or notional) incurred on, or attributable to, a given thing such as producing a product or rendering a service. It is the value of resources consumed to produce goods or services.

Classification of cost on the basis of element:

1. Material cost – cost of all materials used. It is divided into (a) Direct material (forming part of the finished product) and (b) Indirect material (consumable stores, lubricants etc.).
2. Labour cost – wages/remuneration paid to workers. It is divided into (a) Direct labour (engaged directly in production) and (b) Indirect labour (supervisors, storekeepers etc.).
3. Expenses (other than material and labour) – all other costs. Divided into (a) Direct expenses (chargeable directly to a product/job, e.g. cost of special design) and (b) Indirect expenses (rent, lighting, depreciation etc.).

The indirect material, indirect labour and indirect expenses together form overhead.

Material codification: Codification is the process of assigning a systematic symbol, number or code to each item of material so that each material can be identified, recorded and located easily. It helps in efficient store-keeping, avoids confusion among similar items and facilitates mechanised/computerised accounting.

FIFO valuation (periodic):

Total units available = 650 + 500 + 800 = 1,950 units. Closing stock = 550 units; Units sold (issued) = 1,950 - 550 = 1,400 units.

Under FIFO, closing stock comes from the latest purchases:

• Closing stock = 550 units @ Rs. 10 = Rs. 5,500.

Cost of goods available for sale = (650 x 8) + (500 x 9) + (800 x 10) = 5,200 + 4,500 + 8,000 = Rs. 17,700.

Cost of goods sold = 17,700 - 5,500 = Rs. 12,200.

(Check: COGS = 650@8 + 500@9 + 250@10 = 5,200 + 4,500 + 2,500 = 12,200.)

(I) Total wages payable:

Total hours required = $\dfrac{800\ \text{units}}{4\ \text{units/hour}} = 200$ hours. Total wages = 200 hours x Rs. 200 = Rs. 40,000.

(II) Reconciliation statement (starting from profit as per cost account):

Profit as per Financial Account $= 95{,}000 + 20{,}000 + 5{,}000 + 5{,}000 = \textbf{Rs. 1,25,000}$.

Reasoning: items that reduced cost-account profit more than financial profit (over-charged depreciation, under-valued closing stock in cost) and pure financial income (dividend received) are added back to the cost profit to reach financial profit.

Accounting software: Accounting software is a computer program/application designed to record, process, store and report financial transactions automatically. It maintains ledgers, prepares financial statements and generates reports (e.g. Tally, Excel, FACT, etc.).

Any three advantages of an accounting software system:

1. Speed and accuracy – calculations and posting are done automatically, reducing arithmetical errors and saving time.
2. Easy reporting – financial statements, trial balance and reports can be generated instantly at any time.
3. Data storage and security – large volumes of data can be stored safely and retrieved/backed up easily.
4. Reduced cost and manpower – less manual work is required, lowering staffing cost in the long run. (Any three of the above.)

a) Statement of Profit or Loss (NFRS), for the year ended 31 Ashad:

• Revenue (Sales) = 6,70,000
• Cost of goods sold = Opening stock 20,000 + Purchase 3,20,000 − Closing stock 32,000 = 3,08,000
• Gross profit = 6,70,000 − 3,08,000 = 3,62,000
• Add other income: Commission received 18,000 → 3,80,000
• Less operating/other expenses: Rent 36,000 + Salary 60,000 + Sales commission 22,000 + Advertising 16,000 + Audit expenses 34,000 + Insurance expired 12,000 + Depreciation on plant & equipment (10% of 3,00,000 = 30,000) + Interest 10,000 = 2,20,000
• Profit before tax = 3,80,000 − 2,20,000 = 1,60,000
• Less Provision for tax @30% of 1,60,000 = 48,000
• Profit after tax = Rs. 1,12,000

b) Statement of Financial Position (NFRS) as at 31 Ashad:

Assets

• Non-current: Plant & equipment 3,00,000 − Depreciation 30,000 = 2,70,000; Biological assets 80,000; Investment 2,20,000
• Current: Closing stock 32,000; Debtors 40,000; Prepaid insurance 18,000 − 12,000 = 6,000; Cash & bank 42,000
• Total assets = 2,70,000 + 80,000 + 2,20,000 + 32,000 + 40,000 + 6,000 + 42,000 = 6,90,000

Equity and Liabilities

• Share capital 4,00,000; Retained earnings (profit after tax) 1,12,000
• Loan 1,00,000; Creditors 30,000; Provision for tax 48,000
• Total equity & liabilities = 4,00,000 + 1,12,000 + 1,00,000 + 30,000 + 48,000 = 6,90,000

Both sides agree at Rs. 6,90,000.

Cash Flow Statement (Direct Method) for Year II

A. Cash flows from operating activities:

• Cash received from customers ≈ Sales 4,65,000 − increase in debtors 25,000 (45,000→70,000) = 4,40,000
• Cash paid to suppliers ≈ COGS 2,10,000 + increase in stock 15,000 − increase in creditors 32,500 = 1,92,500
• Cash paid for operating expenses ≈ Operating expense 1,45,000 − increase in outstanding expenses 2,500 = 1,42,500
• Tax paid = 35,000
• Net cash from operating activities = 4,40,000 − 1,92,500 − 1,42,500 − 35,000 = 70,000

B. Cash flows from investing activities:

• Purchase of investments = −1,25,000
• Purchase of equipment = −45,000
• Sale of equipment = +30,000
• Net cash used in investing activities = −1,40,000

C. Cash flows from financing activities:

• Issue of capital (Capital 3,80,000→4,95,000 = +1,15,000)
• Redemption of debentures (1,50,000→90,000 = −60,000)
• Dividend paid = −45,000
• Net cash from financing activities = 1,15,000 − 60,000 − 45,000 = 10,000

Net change in cash = 70,000 − 1,40,000 + 10,000 = −60,000. Opening cash 80,000 − 60,000 = Closing cash 20,000 ✓ (agrees with the balance sheet).

a) Cost Sheet (previous year):

Overhead absorption rates (from previous year):

• Factory overhead = $\dfrac{60{,}000}{1{,}20{,}000} \times 100 = 50\%$ of direct wages.
• Office overhead = $\dfrac{36{,}000}{3{,}60{,}000} \times 100 = 10\%$ of factory cost.

b) Tender price for next lot:

Profit is 20% on sales, so total cost = 80% of sales → Sales $= \dfrac{93{,}500}{0.80} = 1{,}16{,}875$; Profit = 1,16,875 − 93,500 = Rs. 23,375.