Soln 1

FLEXIBLE BUDGET
Particulars 60% 75% 90%
Amount Amount Amount
Fixed Costs
Salary & Allowances 24000 24000 24000
Office Expenses 16000 16000 16000
Total 40000 40000 40000

Semi- Variable
Commission and 36000 39000 42000
Marketing expenses
Delivery and Storage
24000 27000 30000
Expenses

Total 60000 66000 72000

Variable Costs
Materials 90000 112500 135000
Labours 42000 52500 63000
Total 132000 165000 198000

Total Cost 232000 271000 310000

Sales 340000 425000 510000
Profit 108000 154000 200000

Soln 2
Plant sold for cash – Inflow from Investing Activities.
Building purchased in cash- Outflow from Investing Activities.
Goodwill is decreased than base year’s balance- Added to Non- cash Items in Operating
Activities.
Dividend received in cash- Inflow from Investing Activities.
Shares issued against purchase of Buildings- No effect.
Dividend paid in cash. (Cash dividend)- Outflow from Financing Activities.

Soln 3

Management Accounting is the presentation of accounting information in such a

way as to assist management in the creation of policy and the day-to-day operation
of an undertaking. Thus, it relates to the use of accounting data collected with the
help of financial accounting and cost accounting for the purpose of policy
formulation, planning, control and decision-making by the management.
Management accounting links management with accounting as any accounting
information required for taking managerial decisions is the subject matter of
management accounting.
“Management Accounting is the term used to describe accounting methods,
systems and techniques which coupled with special knowledge and ability,
assists management in its task of maximizing profits or minimizing losses.
Management Accountancy is the blending together into a coherent whole,
financial accounting, cost accountancy and all aspects of financial
management.” —Batty
1st: Increase Efficiency:

Management accounting increases the efficiency of operation of company.

Everything is done in management accounting with a scientific system for
evaluating and comparing the performance. With this, we find deviations. We will
take promotional decisions on this basis. Other employees will also be motivated
with this because if their performance will be favorable, they get reward of this.
Thus management accounting increases efficiency.

2nd: Maximizing the Profitability:

Using of management accounting's budgetary control and capital budgeting tool,

company can easily succeed to reduce both operating and capital expenditures.
After this, company can reduce its price and then company will receive super
profits.

3rd : Simplify the Financial Statements

For taking different managerial decisions, management accountant provides deep
technical reports with simple interpretations in which he mentions the facts of
financial statements, after this, company's management officers understand what is
in financial statement and how will they use this for company's progress.

4th: Control of Business's Cash Flow:

It is one of important advantage of management accounting that it can be used for

controlling of business's cash flow. We all know that cash in hand is better than in
fixed properties if there is emergency to pay our loan or debt. So, management
accountant deeply studies from where is money coming and where is it going. To
check on misuse of money will surely control of business's cash flow.

5th: Business-critical Decisions

To take business - critical decisions, now management accounting will become

more powerful. Global management accountants are coming for join on one plate-
form for taking all business critical decisions.

Soln 4
Comparative Size Statement
Particulars 1.1.2016 31.12.2016 Actual % change
Change
Liabilities
Share Capital 1,00,000 4,00,000 300000 300%
8%
Debentures --------- 2,00,000 - -
Retained 60,000 90,000 30000 50%
Earnings
Bills Payable 20,000 40,000 20000 100%
Sundry 40,000 1,00,000 60000 150%
Creditors
Provision for 30,000 40,000 10000 33.33%
taxation
Total 2,50,000 8,70,000 620000 248%
 Assets
Machinery 1,25,000 4,75,000 350000 280%
Goodwill ---- 20,000 - -
Sundry 30,000 1,00,000 70000 233%
Debtors
Stock 20,000 80,000 60000 300%
Cash 25,000 45,000 20000 80%
Bank 50,000 1,50,000 100000 200%
Total 2,50,000 8,70,000 620000 248%

COMMON-SIZE STATEMENT
Particulars 1.1.2016 % change 31.12.2016 % change
Liabilities
Share Capital 1,00,000 40% 4,00,000 45.97%
8% Debentures --------- ------ 2,00,000 22.98%
Retained Earnings 60,000 24% 90,000 10.34%
Bills Payable 20,000 8% 40,000 4.59%
Sundry Creditors 40,000 16% 1,00,000 11.49%
Provision for taxation 30,000 12% 40,000 4.59%
Total 2,50,000 100% 8,70,000 100%

Assets
Machinery 1,25,000 50% 4,75,000 54.60%
Goodwill ---- ------ 20,000 2.29%
Sundry Debtors 30,000 12% 1,00,000 11.50%
Stock 20,000 8% 80,000 9.19%
Cash 25,000 10% 45,000 5.17%
Bank 50,000 20% 1,50,000 17.24%
Total 2,50,000 100% 8,70,000 100%
Soln 5
Gross Profit Ratio = (Gross Profit/Net Sales)*100
= (52,000/1, 68, 000)*100
= 30.95%

Net Profit Ratio = (Net Profit/Net Sales)*100

= (28,000/168000)*100
= 16.67%

Operating Ratio = ((COGS + Operating Expenses)/Net Sales)*100

COGS = Opening Stock + Purchases +Direct Expenses – Closing Stock
= 25,000 + 81,000 + 25,000+15,000-30,000

1, 16, 000

Operating Expenses = Sales expenses + Office expenses + General expenses + Furniture dep.
= 3,000 + 23,800 + 1,200 + 800
= 28, 800

Operating Cost = 144800

Operating Ratio = (144800/168000)*100

= 86.19%

Operating Profit Ratio = 100- 86.19%

= 13.81%
Soln 6

Cash Flow Statement

Particulars Rs Rs Rs
Net Profit before tax & extraordinary items 193000
Add: Non Cash
Depreciation 10000
Amortization 20000
Loss on Sale of machinery 2000 32000
Net Profit before working Capital Changes 225000
Sundry Debtors (30000)
Stock in Trade (32000)
B/R (10000)
Sundry Creditors 22000
B/P (4000)
Liabilities for Expenses 6000 (48000)
Cash flow from Operations 177000
Less: Tax paid (40000)
Net cash flows from Operating Activities 137000

Cash Flows from Investing Activities

Sale of Land 50000
Sale of machine 10000
Purchase of Plant (130000)
Investment (10000) (92000)
Net Cash Outflows from Investing Activities
Cash Flow from Financing Activities
Equity Share Capital 100000
Preference Share Capital (50000)
Proposed Dividend (42000)
Interim Dividend (20000)
Cash Flow from Financing Activities (12000)

Net decrease in cash flows from activities 33000

Opening Balance of Cash & Cash Equivalents 25000
18000