Questions and Answers of Financial Accounting For Managers

Ascertain the impact of the following transaction on the profit and loss statement for the financial year 2016–17: 1. The company borrowed ₹ 100 crore from the State Bank of India the rate of
The details of income and expenses of SDTV Limited for the year 2017 is given below:You are required to prepare the statement of profit and loss for the company using suitable heads for income and
Identify the main accounting principles having a bearing on the preparation of the statement of profit and loss.
HCL Technologies Limited is a leading IT solution provider company with operations is 32 countries and 116,000 employees. The global revenue of the company exceeded USD 7.2 billion. HCL Technologies
Classify the following incomes into operating income, other income, exceptional income or extraordinary income: 1. Interest earned by a bank. 2. Interest earned by a manufacturing company on the
Cipla is a leading global pharmaceutical company, dedicated to highquality, branded and generic medicines. We are trusted by healthcare professionals and patients across geographies. Cipla was
‘Interest paid is an expense whereas dividend paid is an appropriation of profit’. Explain.
Classify the following expenses under various heads of statement of profit and loss as per Schedule III of the Companies Act, 2013: 1. Staff welfare expenses2. Interest paid 3. Payment to contract
Hindustan Unilever Limited (HUL) is India’s largest Fast Moving Consumer Goods company. HUL has over 35 brands spanning 20 distinct categories such as soaps, detergents, shampoos, skin care,
Explain the accounting for different types of employees’ cost.
Mahaveer Limited earned a PAT of ₹ 33.80 million for the year 2017. The share capital of the company is made up of eight million equity shares of ₹ 2 each and one million preference shares of ₹
Tech Mahindra Limited made a profit of ₹ 743 crore for the year 2009–10 after making a provision of ₹ 131 crore towards taxes and ₹ 130 crore towards depreciation and amortization. The
Differentiate between basic earnings per share and diluted earnings per share.
Hero MotoCorp Ltd. (Formerly Hero Honda Motors Ltd.) is the world’s largest manufacturer of twowheelers, based in India. In 2001, the company had achieved the coveted position of being the
On the basis of the following information, prepare the profit and loss account for the Jack Paints Limited for the year 2016–17. Show EBITDA, EBIT and PBT separately. Particulars Gross
‘Deferred tax assets and deferred tax liabilities arise due to timing difference between taxable income and reported income’. Explain the statement with suitable examples.
From the following balance extracted from the books of accounts of Solid Steels Limited as on 31st March 2017, prepare the statement of profit and loss. The closing stock as on 31st March 2017:
Explain the different measures of profit.
Star Limited has an authorized capital of ₹ 600 million divided into 60 million equity shares of ₹ 10 each. The trial balance of the company for the year ended 31st March 2017 is as
The share capital of the Jack Paints Limited consists of 96 million equity shares of the face value ₹ 10 each. In addition, the company also has given stock options to its employees which can be
What is the basic principle behind accounting for research and development expenses?
In continuation of Case 5.1 given in Chapter 5, you are required to prepare the balance sheet of Asian Paints Limited for the year ended 31st March 2017. The relevant information extracted from the
‘The balance sheet represents the financial position of an enterprise on a particular date’. Explain.
The authorized share capital of Super Growth Limited consisted of 10 million equity shares of the face value ₹ 10 each and one million 10% preference shares of the face value ₹ 100 each. Out of
Easy Going Financial Services Limited with an authorized share capital of ₹ 100 million (10 million equity shares of ₹ 10 each) issued seven million equity shares for subscription at par.
In continuation of Case 5.2 given in Chapter 5, you are required to prepare the balance sheet of HCL Technologies Limited for the year ended 31st March 2017. The relevant information extracted from
Define the terms asset, liability and equity.
Pee Ess Limited with an authorized share capital of ₹ 50 million divided into five million equity shares of ₹ 10 each made a public issue of two million equity shares at par. The company called
How will you classify the following items in the balance sheet of a company: 1. Goodwill 2. Sundry creditors 3. Provisions for doubtful debts 4. Instalments of longterm loans due for repayment
Use the trial balance and additional information given in Case 5.3 in Chapter 5, and prepare the balance sheet of Cipla Limited as on 31st March 2017.Case 5.3Cipla is a leading global pharmaceutical
In the balance sheet of High Tech Tools Limited on 31st March 2017, the equity appeared as follows: The company decided to issue bonus shares to the existing shareholders in the ratio of 5:1 by
How do you differentiate current liabilities from noncurrent liabilities?
How would the following transactions be disclosed in the balance sheet::1. The company has incurred ₹ 320 Crore on the construction of a building that is yet to be completed. 2. An advance of ₹
Use the trial balance and additional information given in Case 5.4 in Chapter 5 and prepare the balance sheet of HUL Limited as on 31st March 2017.Case 5.4Hindustan Unilever Limited (HUL) is
How does the valuation of current assets differ from that of noncurrent assets?
The equity of Sooper Staar Limited as per the last two balance sheets are given as follows: Based upon the above information identify the reasons for changes in the share capital and reserves and
As on 31st December 2011, All Stars Limited has a loan outstanding from the State Bank of India amounted to ₹ 250 million. The loan is secured against mortgage of the land, building, plant and
In continuation of Case 5.5 given in Chapter 5, the summarized balance sheets of Hero Honda Motors Limited and Tech Mahindra Limited for the year ended 31st March 2017 are given below:Case 5.5Hero
As on 31st March 2017, the breakup of borrowed funds of Sabse Taza Retails Limited is as follows: The term loan is secured against the mortgage of company’s fixed assets, whereas the working
Differentiate between a liability, provision and contingent liability.
From the followings balances extracted from the books of SDTV Limited and additional information prepare the balance sheet of the company for the year ended 31st March 2017: Additional Information1.
The details of investments of High Power Electricity Limited as on 31st March 2017 are given as follows: The Regular Electrical Supply Limited is a subsidiary of the company. All other investments
Engineers India Limited (EIL) was set up in 1965 to provide engineering and related technical services for petroleum refineries and other industrial projects. Its range of services include project
The extracts from the books of account of Victoria Limited as on 31st March 2017 are given as follows. Prepare the balance sheet of the company as on 31st March 2017. Make suitable assumptions as
Muscle Power Builder Limited is engaged in the construction business. It follows proportionate completion method for booking revenue and accordingly revenue is booked according to the stage of
High Growth Fertilizers Limited is engaged in the manufacture and distribution of fertilizers in India. During the year 2016–17, the company made a profit of ₹ 693.27 Crore. The Board proposed a
‘Revenue is recognized when earned and not necessarily when received’. Explain.
During the year 2017–18, the invoice value of goods sold by Avon Corporation amounted to ₹325 million. The company offered trade discount aggregating to ₹10 million. In addition, Goods and
Asia Computers Limited is a newly established company in the information technology sector. The company has plans to gradually enter BPO and software development activities. In the initial phases,
Discuss the principles of revenue recognition from sales of goods.
Fair White Limited is a FMCG company largely catering to domestic markets. During the year 2016–17, it received its maiden export order for $ 2 million for supply of fairness cream to USA. The
Desire Limited is in the business of manufacturing high fashion accessories. The company sold certain goods with an invoice price of ₹25 million to one of its customer offering him a discount of 2%
Strong Structure Limited was awarded a contract for construction of a flyover by the Government of Delhi on 1st October 2014. The contact consideration was fixed at ₹280 crore. The flyover was
Super Fast Internet Railway Ticketing Company Limited provides service of booking railway tickets through the Internet. The company made investment for setting up of infrastructure for providing such
Asian Paints is India’s largest and Asia’s third largest paint company. It manufactures a wide range of paints for decorative and industrial use. For the year 2003–04, the company reported a
How is the treatment of cash discount different from that of trade discount or quantity discount?
In which financial year, will revenue be recognized in each of the following cases: 1. Advance received from a customer on 31st December 2016. The goods are manufactured and invoiced on 1st April
Ram Bharose Limited, a steel trader follows a very liberal credit policy of allowing 120 days to its customer to pay against their purchases. This policy has helped the company in attracting new
Shine Info Limited is engaged in software development business. It received a contract for developing and implementing software for credit risk management for a leading bank on 1st January 2016. The
How are the indirect taxes (excise duty, sales tax, value added tax, service tax) treated while recording revenue?
MMTC Limited was established in the year 1963. It is a leading international trading company in India. It was awarded the status of ‘five star export house’ by the government of India for its
Explain method of revenue recognition from services using proportionate completion method.
Satyam Machines Limited is a manufacturer of high tech fabrication machines. Each machine is sold on cash down price of ₹3 million. The company also offers the same machine on instalment payment
Reliable Construction Limited is a real estate subcontractor. It completed some work for a large construction company for a consideration of ₹8 million. In addition to the work scope defined in the
What is the impact of uncertainty on revenue recognition?
RS Finance Limited is a nonbanking finance company in the business of providing loans. On 1st October 2016, it gave a loan of ₹1,000,000 to Mr. Ram at 10% per annum to be repaid after three
Please complete the income statement for the year 2016–17 based upon the information given: Particulars Sales Opening stock Purchases Closing stock Cost of goods sold Gross profit Operating
What are the different types of inventories?
The Drink Well Beer Limited runs a number of outlets for selling beer. Some of the bottles sold at these outlets are carried by the customers and are consumed later. In other cases, the beer is
‘Valuation of closing stock affects both the Balance Sheet and the Profit and Loss Statement’. Do you agree with the above statement?
The Bombay Dyeing and Manufacturing Company Limited was established in the year 1879. It is a leading player offering products like stylish linens, towels, home furnishings, leisure clothing and kids
Super Star Trading Limited is evaluating the effect of various inventory costing methods (FIFO, LIFO, Average Cost) on the financial statements of the company. The company expects moderate to high
The profit and loss statement of Ace Trading Limited for the years 2016 and 2017 is given below: While reviewing the numbers, it was revealed that the closing stock for the year 2016 was understated
Differentiate between periodic and perpetual method of keeping inventory records?
STU Electronics Limited is a trader in electronic items and maintains its inventory using periodic inventory system. The following data pertains to quarter ended 31st December 2017 for one of its
How is conservatism principle applied while valuing closing stock?
Explain different steps in inventory valuation?
Due to the introduction of the new model, STU Limited estimates that the remaining 170 units could be sold only at ₹ 12,200 per unit. The company also estimates that it will have to pay ₹ 500 per
Using the following information, determine the closing inventory to be shown in the financial statements: Item A B с D Number of units in stock 20 12 10 22 Cost Per Unit (2) 80 120 150 60 Market
Compare the impact on LIFO, FIFO and average cost method on the financial statements in case of an inflationary economy.
High Power Instruments Limited uses FIFO method for issue of components from its stores department. The details of purchases and issues in respect of a component HT1 during the quarter ended 31st
If High Power Instruments Limited uses LIFO or Weighted Average Method for valuation of inventory what will be the impact on the cost of material consumed and value of closing stock.
HCL Technologies Limited is a leading IT solution provider company with operations is 32 countries and 116,000 employees. The global revenue of the company exceeded USD 7.2 billion. HCL Technologies
‘All expenses necessary to be incurred to bring the asset to its intended use are capitalized’. Explain with suitable examples.
High Fashions Limited is a recognized export house. In the month of January 2017, it imported a highly sophisticated embroidery machine from US at a cost of $ 200,000. At the time of import, the
Sam Limited incurred the following expenditure during the year 2016–17. Please state whether each of them should be treated as operating expenses for the year or capitalized as an asset. 1. A
Differentiate between: 1. Operating expenses and capital expenses 2. Tangible and intangible assets 3. Depreciation, depletion and amortization 4. Repair and improvement 5. Finance lease and
Satluj Cements Limited purchased a machine costing ₹ 15 million. As per suppliers warranty, the physical life of the machine is estimated to be eight years. However, the management would like to
Biocon Limited is India’s largest and fully integrated biopharmaceutical company that develops, manufactures and supplies advanced, lifesaving biopharmaceuticals for diabetes, cancer and
King Kong Limited acquired a piece of land for setting up a factory for ₹ 50 million on 1st October 2016. It took a loan of ₹ 30 million from the State Bank of India at 10% for this purpose, the
Do you agree with the following statements? Give reasons. 1. A company may follow different methods and rates of depreciation for financial accounting and tax accounting.2. Fixed assets are normally
M P Precision Limited bought equipment for ₹ 14.50 million. The company estimates that the useful life of the equipment is 10 years with a residual value of ₹ 2.5 million. 1. Prepare the
GE Shipping is the largest shipping company in private sector in India. As on 31st March 2009, it had 39 ships in its fleet with a total tonnage of 2,881,624. The company reviews the carrying amounts
How is straight line method different from written down value method?
Patni Computers Limited, a leading company in IT sector in India, is engaged in consulting, software development and business process outsourcing. It has grown organically and also through
Pantaloon Retail (India) Limited is the leading retailer of India operating through multiple retail formats. The company was incorporated in the year 1987 and went public during 1992 through its
Prepare the depreciation schedule for Satluj Limited using SOYD method. 1. Compare the depreciation schedule of SOYD with WDV and SLM.2. Why are WDV and SOYD methods called accelerated methods of
Hind Alloy Limited follows straight line method of depreciation for plant and machinery. The company charges proportionate depreciation in the year of acquisition. It bought a machine for ₹ 5
How is the cost model different from revaluation model for the subsequent measurement of PPE?
Fast Track Limited is a provider of cab services in New Delhi. The company purchased a new car with a list price of ₹ 800,000 in exchange of an old car and cash consideration of ₹ 680,000. The

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