Registration No.

: ___________
Pandit Deendayal Energy University
School of Petroleum Management

Mid-Term Examination
MBA Batch: 2021-23, Trimester: I
Course Name: Accounting for Managers Date: 31-08-2021
Course Code: AC 503 Max. Marks: 50
Instructions:
1. Submit legible hand written answers on foolscap A4 size pages as single pdf- named
with your roll no. and name.
2. Write your name, roll no. and subject name at top of the first page of your answer
book.
3. Show necessary workings/calculations as part of your answer.
4. Assume suitable data wherever essential and mention it clearly.
5. Writing appropriate units, nomenclature, and drawing neat sketches/schematics
wherever required is an integral part of the answer.
6. Upload your PDF file in MS Teams in my class only.
Note: Attempt all questions. Right hand side column indicate Marks along with course
outcome as per bloom’s taxonomy.

Q Give an example of a transaction that has the following effect on the ( {C

: accounting equation: 5 O
1 (a) Increases an asset and increases a liability. ) 3}
(b) Increases an asset and decreases another asset.
(c) Increases an asset and increases equity.
(d) Decreases an asset and decreases a liability.
(e) Decreases an asset and decreases equity.

Q Sampath failed the school final exam and ran away from home. He started ( {C
: working as a building assistant earning between Rs.10,000 and Rs.15,000 a 1 O
2 month. The job was uninteresting and strenuous. Soon he learnt driving and 0 3}
joined a leading car fleet on revenue-sharing terms. His monthly earnings
)
averaged Rs.20,000.
On April 1, 20XX, he started Point Cabs, his own taxi business. He took a bank
loan of Rs.500,000 and invested his savings of Rs.100,000 to buy a car costing
Rs.600,000. In addition, he invested Rs.18,000 for meeting day-to-day cash
needs.
Sampath scribbled his activities in a rough notebook. The following are the
entries for April:
Started business with savings of Rs.118,000.
Took a bank loan of Rs.500,000 to be repaid in monthly instalments of Rs.10,000 with interest at 18 per cent per annum.
Bought a car for cash, Rs.600,000.
Bought an airport parking licence for April, Rs.10,000.
Paid for fuel, Rs.3,600.
Collected from customers, Rs.12,000
Paid for fuel, Rs.6,100
Collected from customers, Rs.5,000. A customer did not pay a bill of Rs.900 and will pay next month.
Collected from customers, Rs.3,000
Bought a mobile phone for cash for business use, Rs.12,000
Collected from customers, Rs.5,000
Paid for fuel, Rs.5,300
Collected from customers, Rs.4,000
Paid a fine for speeding, Rs.500
Collected from customers, Rs.7,000
Paid for fuel, Rs.3,400
Collected from customers, Rs.17,000. Change of Rs.120 not returned, will be adjusted next time.
Filled fuel for Rs.3,920 and paid Rs.3,240. The balance will be paid next time.
Collected from customers, Rs.9,000
Repaired a side-view mirror damaged in an accident, Rs.750
Paid taxi drivers’ union subscription for the month, Rs.500
Collected from customers, Rs.10,000
Withdrew for personal use, Rs.10,000
Paid substitute driver’s salary, Rs.8,000
Paid first monthly instalment to bank along with interest.
From the above transactions, bypass the accounting process and directly
prepare Statement of Profit and Loss and Balance Sheet for the month of
April.

Q The trial balance of Navin Packaging Ltd. for the current reporting period is as ( {C
: follows: 1 O
3 Trial Balance as on March 31, 20X6 0 6}
Dr. balances Rs. )
Packaging equipment 30,000
Office equipment 10,000
Packaging supplies 6,280
Office supplies 2,650
Trade receivables 2,170
Cash 8,820
Prepaid rent 9,600
Salaries expense 17,410
Electricity expense 2,340
Advertisement expense 4,800
Telephone expense 1,200
95,270
After considering following additional information, prepare a statement of
profit and loss and balance sheet.
1. Estimated depreciation on packaging equipment, Rs.3,000.
2. Estimated depreciation on office equipment, Rs.1,000.
3. Inventory of packaging supplies, Rs.2,360.
 4. Inventory of office supplies, Rs.1,190.
5. Prepaid rent includes rent for April to June, 20X6 at Rs.840 per month.
6. Services provided to clients that had been paid for in advance but not
taken as revenue, Rs.1,040.
7. Unbilled revenue, Rs.1,390.
8. Unpaid salaries, Rs.970.
9. Prepaid advertisement, Rs.400.
10. Unpaid telephone expense, Rs.200.

Q Bashir Company sold 50,000 CDs at Rs.28 during the year. Its beginning ( {C
: inventory consisted of 10,000 CDs at Rs.18 per CD. 1 O
4 The following purchases were made during the year: 0 5}
15,000 CDs @ Rs.19; 10,000 CDs @ Rs.21; 20,000 CDs @ Rs.22; 10,000 CDs @
) {C
Rs.23.
O
Operating expenses were Rs.185,000. Income tax is payable at 30 per cent.
Required 2}
1. Compute net profit using the FIFO and WAC methods.
2. Which method is more advantageous to the company for (a) income tax
reporting and (b) shareholder reporting? Why?
3. Suppose that the company makes a purchase of 15,000 CDs at Rs.25 on the
last day of the reporting period. How will the purchase affect the company’s
net profit and income tax expense under the two inventory costing methods?

Q Kamdhenu Dairy has three assets, data on which are as follows: ( {C

: Assets Date of Purchase Cost 1 O
5 Delivery van March 1, 2021 Rs.60,000
0 5}
Refrigerator October 1, 2019 12,000
)
Display shelves December 1, 2018 8,000
The delivery van logged 6,000 kms in the year ended March 31, 2021.
Compute the depreciation expense for the period ended March 31, 2021.
Present the assets on balance sheet and depreciation in statement of profit
and loss.
Show necessary workings as part of your answer.

Q Ashwin Rao is the chief financial officer of Vista Microchips, a rapidly growing ( {C
: manufacturer of advanced chips. The moment he reached his office on 5 O
6 January 3, his secretary told him that the managing director, Mahima Jain, ) 4}
wanted to see him urgently. He rushed to the MD’s office, suspecting that
something must have gone wrong.
His conversation with Mahima went as follows:
Mahima: We are going to be in serious trouble in Q3.
Ashwin: What happened?
Mahima: You know that in the Q2 earnings call we told the analysts that we
were on track to meet the earnings target. It looks like we will miss the target.
We may be short of Rs.1.9 million in profit, or about Rs.1.25 per share.
Ashwin: Well, I don’t think so. I checked the preliminary sales reports
yesterday and we have met the quarterly revenue target. Everything else is in
control.
Mahima: That’s all right. Two unexpected things have happened. One, the
new plant is getting ready for commissioning ahead of schedule. In fact, it was
nearly ready in late December. I have told the engineering department to hold
on.
Ashwin: Isn’t that a good thing? We can start the sales sooner than expected,
so it should help us. And what’s the second thing?
Mahima: It’s the opposite situation. The R & D project is delayed. By now, the
prototype should have been ready and tested. But it’s still giving problems.
Ashwin: Now I see what you are coming to. The depreciation on the plant
would be about Rs.400,000. The R & D project cost should be around Rs.1.4
million. I agree these two items will make a hole in our profit projection.
Mahima: But we can’t let that happen. Investors are getting restive. You know
we have been working on a new strategy. Now everyone will question us. Tell
me how to get out of this situation.
Ashwin: According to accounting principles….
Mahima: The last thing I need now is a lecture on accounting. I need your
ideas on how to meet the target.
Ashwin: We can look at the plant to see if it needs further work. There’s
usually some testing or calibration left. If the plant hasn’t started producing,
we can think of delaying capitalizing it for some time. But I doubt if the
auditors will agree.
Mahima: You should be able to handle the auditors. After all, you know them
well.
Ashwin: On the R & D project, there seems to be little option. It has to be
expensed.
Mahima: Does it have to be either capital or expense? In the real world, we
can’t be that rigid. There should be options. Can you come back with some
ideas?

Ashwin sees himself as being under pressure to meet an earnings target that
appears to have been almost missed.

Required
1. Explain the two issues mentioned by the managing director.
2. What options are available to the chief financial officer on the two issues?
3. What would be your advice to the chief financial officer?