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Monday, December 24, 2012

Dibrugarh University - Business Communication - 2nd Semester (May' 2012)

1.       State whether the following statements are true or false:                            1x4=4
a)      The use of business jargon is the main characteristic of a business letter.
b)      A sales letter is like an advertisement.
c)       The style of a memo is like that of a report.
d)      The resume to be enclosed with an application letter need not give all the details of academic qualifications, achievements and experience.

2.       State the right alternative:                                           1x2=2
(a)    A sales letter should be
(i)      Descriptive
(ii)    Appealing
(iii)   Persuasive
(b)   A participant in a group discussion should
(i)      Dominate the discussion
(ii)    Make personal remarks
(iii)   Listen to the views of others intently

3.       Substitute a concise and suitable word for the following expressions (e.g. Beg to inform - inform)                    1x2=2
(a)    On a few occasions
(b)   Wish to suggest

4.       Write answer  to the following question in about 100 words each:                                            4x4=16
(a)    What are the essentials of an effective business letter?
(b)   Mention any four important points to be borne in mind while writing a request letter.
(c)    Give some tips for meritorious performance in a group discussion.
(d)   Distinguish between proposals and reports.

5.       What is a memo? How does it differ from a business letter?                        14
What is the significance of writing skills in modern business messages?

6.       What is a resume? What are the characteristics of a good resume?                          14
Write a letter on behalf of an educational institution to Ashoka furniture, Delhi, requesting a quotation for steel furniture for office use. Request them to clarify all the terms of sale. Also draft a suitable reply for the same.

7.       “The basic requirements of a report are clarity, conciseness, continuity and objectivity.” Explain each of these in detail.                                   14
Write a letter of application in response to the following advertisement:
Applications are invited for the post of an accounts officer. The candidate should be an M.Com or a Chartered accountant and should have at least five years experience in costing, budgeting and compilation of accounts. Salary in the scale of Rs. 8,500 – 16,000 plus dearness allowance, house rent allowance, provident fund, gratuity and bonus. Age between 28 and 35 years. Apply within 15 days to the Managing Director, Healthwell food Products Limited, 63, Joshi Marg, New Delhi.

8.       What is an interview? What kind of preparation is required by the candidate appearing for a job interview?      14
Discuss the guidelines for an interviewer in smooth and effective conduct of an interview.

Sunday, December 23, 2012

Dibrugarh University - Management Accounting (2012 - Old course)

1.       (a) “The managerial objectives of accounting are to provide data to help the management in planning, decision-making, coordinating and controlling operations.” Discuss.
(b) “Management accounting is nothing more than the use of financial information for management purpose.” Explain the statement and clearly distinguish between financial accounting and management accounting.  7+7=14

2.       (a) (i) You are given the following data for the coming year of a factory :
Budgeted output – 80000 units
Fixed expenses – Rs. 400000
Variable expenses (per unit) – Rs. 10
Selling price (per unit) – Rs. 20
Draw a break even chart showing the break even point. If the selling price is reduced to Rs. 18 per unit, what will be the new break-even point?   7

(ii) The following data are available from the record of a factory:
Sales                                      Rs. 60000
Variable cost                          Rs. 30000
Fixed cost                              Rs. 15000
You are required to calculate profit volume ratio, break – even point and margin of safety at this level.  2.5+2.5+2=7
(b) “Marginal costing is essentially a technique of cost analysis and cost presentation.” Discuss the statement with reference to the application, merits and limitations of marginal costing.  5+5+4=14

3.       (a) A manufacturing company is currently producing 12000 units (at 60% capacity). The following particulars relating to cost structure are available(per unit):
Direct materials                                                     Rs. 50
Direct labour                                                         Rs. 20
Manufacturing overhead (60% fixed)                     Rs. 50
Administrative overhead (Fixed)                            Rs. 20
Selling and distribution overhead(40% variable)     Rs. 30
Profit                                                                    Rs. 30

Prepare a flexible budget for 80% and 100% activity level taking into account the following further information:  14
(i)      If activity exceeds 60%, a 5% quantity discount on raw materials on account of increase in the total quantity will be received.
(ii)    The present fixed cost structure will remain constant up to 90% capacity, beyond which a 20% increase in cost is expected.
(iii)   The present selling price will remain constant up to 85% capacity activity level, beyond which a 5% reduction on total selling price will be considered.
(b) What is zero base budgeting? What are different steps involved in it and how are they useful to the management? 4+6+4=14

4. (a) A cost accountant of a company was given the following information regarding the overheads for the month of july, 2011:
Overhead cost variance – Rs. 1400 (Adverse)
Overhead volume variance – Rs. 1000 (Adverse)
Budgeted hours for july, 2011 – 1200 hours
Budgeted overheads for july, 2011 – Rs. 6000
Actual rate of recovery of overhead – Rs. 8 per hour.
You are required to assist him in computing the following for the month of july, 2011:   2+3+3+3+3=14
(i)      Overhead expenditure variance
(ii)    Actual overhead incurred
(iii)   Actual hours for actual production
(iv)  Overheads capacity variance
(v)    Overhead efficiency variance
(b) What is standard costing? Distinguish between standard cost and estimated cost. Point out its limitations.   4+6+4=14

5. (a) The following Balance sheets have been prepared by Suman Ltd. For the year ended on 31st December, 2009 and 2010:
2009 (Rs.)
2010 (Rs.)
2009 (Rs.)
2010 (Rs.)
Equity share Capital
10% preference share capital
5% Debenture
Capital redemption reserve
Profit and loss account
Other liabilities
Fixed assets
Preliminary expenses




Additional information:
(i)      Preference shares were redeemed at 10% premium on 30th june, 2010 and debentures were issued on the same date.
(ii)    Fixed assets were purchased for Rs. 195000.
(iii)   Fixed assets at book value of Rs. 140000 were sold for Rs. 80000.
(iv)  Dividend on equity shares was paid for Rs. 40000.
Prepare cash flow statement.  14
(b) What do you mean by a cash flow statement? Explain clearly the difference between fund flow and cash flow statement.   4+10=14.

Dibrugarh University - Financial Statement Analysis (2012 - Old Course)

1. (a) “Analysis of financial statements is affected by window dressing and bias motive of the analyst.” Explain. Also define the tools used for analysing the financial statements.   7+7=14
(b) Write short notes on the following:  3.5x4=14
(i) Purpose of analysis of financial statements
(ii) Limitation of analysis of financial statements
(iii) Distinction between common size statements and financial statements
(iv) Adoption of Indian GAAP in preparation of financial statements

2.       (a) From the following information presented by BCPL Ltd. For the year ended 31 – 12 – 2010, prepare balance sheet:  14
Sales to net worth                                        5times
Current liabilities to net worth                       50%
Total debts to net worth                               60%
Fixed assets to net worth                              60%
Current ratio                                                 2 : 1
Sales to stock                                               10 times
Debtor’s velocity                                           9 times
Annual sales                                              Rs. 1500000
40% of sales were made on cash.

(b) Discuss the significance of the following:  3.5x4=14
(i) Current ratio
(ii) Debtor’s turnover ratio
(iii) Debt – Equity ratio
(iv) Return on investment

3.       (a) Discuss the qualitative characteristics which make financial reporting useful. “Financial reporting should be a part of annual report of the companies.” Explain.   7+7=14
(b) What are the provisions of AS 25 with regard to recognition and measurement related to interim financial reporting? How does interim financial reporting differ from segment reporting?  7+7=14

4.       (a) How should social accounting information be reported in published annual reports? Distinguish between financial statement related for general price – level changes and current value financial statements.   7+7=14
(b) Disclosure of corporate governance practices followed by indian companies in their published annual reports is the best way to provide information to its shareholders. Comment.   14

5.       (a) “ Accounting standards are something less than the law but more than the professional guidelines.” Elaborate the statement indicating importance of accounting standards. Do you agree with the decision of ICAI of convergence with IFRS w.e.f. april, 2011 for Indian companies? Justify you reasons.  7+7=14
(b) Distinguish between the terms “harmonization” and “Standardisation”. Outline few suggestions that have been made by the RBI’s advisory group on accounting and auditing for financial institutions including NBFC.   4+10=14

Saturday, December 22, 2012

Issue of Bonus Shares

The undistributed profits, after the necessary provisions for taxation, are the property of the equity shareholders and the same may be used by the company for distribution as dividends to them. But the sound financial policy demands that some of the profits at least must be ploughed back into the business. Thus when a company has accumulated substantial amount of past profits as might be found in the credit of capital reserves, revenue or general reserve of profit and loss account; it is desirable to bring the amount of issued share capital closer to the actual capital employed as represented by the net assets (Assets – Liabilities) of the company. This would reflect the true amount of capital invested by the shareholders in the company.
For example, the capital, which the shareholders have contributed for shares, is clearly visible since this was contributed in cash. But the capital, which they have contributed in the form of accumulated profits, remains unknown because this was not a direct contribution in cash.
In order to rectify these, accumulated profits in full or in part are capitalized, that is, accumulated profits are converted into shares. Shares are distributed free of charge and therefore are known as Bonus Shares, which are given to existing shareholders pro rata to their holdings. It may be added the bonus shares may be issued to make up the existing partly paid shares as fully paid.

Object behind the issue of bonus shares:
a)      Company’s cash resources may not be sufficient to pay dividend in cash
b)      Company wants to build up cash resources for expansion or for repayment of a liability.
c)       Company may want to bring its paid up capital more in line with the capital resources employed in the business.
d)      It may be required to with a view to bringing down the rate of dividend though not the quantum of dividend on the issued capital of the company.

SEBI GUIDELINES on the issue of bonus shares
There are no guidelines for issuing bonus shares by the private companies or unlisted public companies has been issued by the SEBI (Disclosure and investor protection) Guidelines, 2000.
However, the listed public companies for issuing bonus shares to the shareholders must comply with the guidelines issued by the SEBI (disclosure and Investor Protection) Guidelines, 2000.
The requirements of the guidelines of SEBI are given below:-
a)  Right of FCD/PCD holders: No company shall pending the conversion of FCDs/PCDs issue any shares by way of bonus unless similar benefit is extended to the holders of FCDs/PCDs, through reservation of shares in proportion to such convertible part of FCDs/PCDs. The shares so reserved may be issued at the time of conversion of such debentures on the same terms on which the rights or bonus issues were made.
b)  Out of free reserves: the bonus issue shall be made out of free reserves built out of genuine profits or share premium collected in cash only.
c)  Revaluation of fixed assets: reserves created by revaluation of fixed assets should not be capitalised. If assets are subsequently sold and the profits are realized, such profits could be utilised for capitalization.
d)  Bonus issue not to be in lieu of dividend: The declaration of bonus issue, in lieu of dividend, should not be permitted.
e)  Fully paid shares: Bonus issue shall not be made, unless the partly paid shares, if any, existing are made fully paid up.
f)   No default in respect of deposit/debentures: the company should not have defaulted in payment of any interest or principal in respect its fixed deposits and interest on debentures or redemption of debentures.
g)  Statutory dues of the employees: the company should not be defaulted in payment of its statutory dues to the employees such as contribution to PF, gratuity, bonus, minimum wages, workmen’s compensation, retrenchment, payment to contract labour etc.
h) Implementation of proposal: the bonus issue shall be implemented within a period of 15 days after the date of approval of the BoD; it does not require the shareholders’ approval for capitalization of profits or reserves for making bonus issue as per the AoA of the company.
However, if the company is required to get the shareholders’ approval as per AoA of the company for capitalization of profits or reserves, the bonus issue shall be implemented within 2 months from the date of the meeting of the BoD.
i)   Provision in the AoA: the AoA of the company should provide the provision for the capitalization profits, i.e. it must authorize the bonus issue, if not, and steps should be taken to alter the AoA suitably.
j)   Authorised capital: consequent upon bonus issue if the subscribed or paid up capital of the company exceed the authorised capital, then a resolution shall be passed by the company at its GM for increasing its authorised capital to that extent.
k)  Certificate: A certificate duly signed by the issuer company and countersigned by the statutory auditor or the company secretary in practice to the effect that the provisions of the guidelines has been complied with shall be forwarded to the SEBI.

Difference between Bonus Shares and Right shares
Bonus Issue: Bonus shares are additional free shares issued to the shareholder by the company. Profitable Companies in India issue Bonus Shares. These are additional shares issues given the shareholder without any cost to existing shareholders.
Rights Issue: Rights issues are the shares issued by a company only to its existing shareholders which will be cheaper than the current market price of that company share. In Rights Issue, some costs are involved and the shareholders can either subscribe or unsubscribe.

Free reserves that can be used for issue of Bonus shares:
a)      Surplus in profit and loss account.
b)      General reserve.
c)       Dividend equalization reserve.
d)      Capital reserve arising from sale of fixed assets in cash.
e)      Balance in debenture redemption reserve after redemption of debentures.
f)       Capital redemption reserve account created at the time of redemption of redeemable preference shares out of the profits.
g)      Securities premium account collected in cash.

Reserves not available for issue of Bonus Shares:
a)      Capital reserve arising due to revaluation of assets.
b)      Securities premium arising on issue of shares on amalgamation or take over.
c)       Investment allowance reserve/ Development allowance reserve before expiry of 4 years from the date of creation.
d)      Surplus arising from a change in the method of depreciation.
e)      Balance in debenture redemption reserve account before redemption takes place.

Accounting treatment
a)      For fully paid bonus shares
1)      Capital Redemption Reserve A/c                                                                                                             Dr
                Securities Premium A/c                                                                                                                                Dr
                Profit and Loss Account                                                                                                                                 Dr
                General reserve and other Free reserves A/c                                                                                     Dr
                                                To Bonus to Shareholders A/c
2)      Bonus to Shareholders A/c                                                                                                                          Dr
                                                To Equity Share Capital A/c         
                                                To Securities Premium A/c

b)      For bonus shares issued to make partly paid shares fully paid up
1)      Profit and Loss Account                                                                                                                                Dr
                General reserve and other Free reserves A/c                                                                                     Dr
                                                To Bonus to Shareholders A/c
2)      Share Final call A/c                                                                                                                                          Dr.
                                                To Share Capital A/c

3)      Bonus to Shareholders A/c                                                                                                                          Dr
                                                To Share final call A/c