assignment of accounts
DESCRIPTION
accountsTRANSCRIPT
1.JOURNAL
Analyse and then journalise the following transactions in the books of Mr. B.2009Jan. 11. Started business with a capital of Rs. 7,500.Jan. 12. Purchased goods from Mr. Z for Rs. 2,000 on credit Jan. 13. Loan taken from W Rs. 300.Jan. 14. Goods sold to Mr. L for cash Rs. 2,500.Jan. 55. Cash paid to Mr. Z Rs. 2,000.Jan. 56. Purchased Furniture for office Rs. 700.Jan. 57. Paid Office Rent out of personal cash of B Rs. 400.SolutionJOURNAL OF BDate2010No.ParticularsLFDr.Amount.Cr.Amount
Jan. 11.Cash A/c Dr.To Bs Capital A/c[Being cash brought in by B to start business]7,5007,500
2.Purchase A/c Dr.To Zs A/c[Being goods purchased from Z on credit]2,0002,000
3.Cash A/c Dr.To Ws A/c[Being Loan received from W]300300
4.Cash A/c Dr.To Sales A/c[Being goods sold to L for cash]2,5002,500
Jan.55.Zs A/c Dr.To Cash A/c[Being cash paid to Z for previous credit purchases]2,0002,000
6.Furniture A/c Dr.The Cash A/c[Being furniture purchased for cash]700700
7.Rent A/c Dr. To capital a/c(Being rent paid out of personal expenditure)400400
Total Rs.15,40015,400
Illustration 2 From the following particulars, prepare the journal of A.2005 Rs.Dec1Started business with cash3,0003Purchased goods for cash4005Advertisement expenses paid2507Sold goods for cash57511Further capital introduced1,00014Paid to B, a creditor90017Received commission from Cin cash60019Paid to D on account17522Received from E, a debtor2,00029Salary paid in cash 1,000Solution:Journal of ADate
No.ParticularsLFDebitAmount.CreditAmount
2005Jan. 11.Cash A/c Dr.To Capital A/c[For cash introduced as capital]3,000
3,000
32.Purchase A/c Dr.To Cash A/c[For cash purchases]400400
53.Advertisement A/c Dr.To Cash A/c[For advertisement expenses paid]250250
74.Cash A/c Dr.To Sales A/c[For cash sales]575575
11
5.Cash A/c Dr.To Capital A/c[For additional capital]1,0001,000
146.Bs A/c Dr.To Cash A/c[For paid against purchases]900900
177.Cash A/c Dr.To Commission A/c[For commission from C]600600
198.Ds A/c Dr.To Cash A/c[For cash paid on account]175175
129.Cash A/c Dr.To Es A/c[For receipt from E]2,0002,000
1010.Salary A/c Dr.To Cash A/c[For salaries paid]1,0001,000
Total Rs.9,9009,900
Illustration 3: Journalise the following transactions:2005Jan.1. B started business with cash worth Rs. 10,000, 2. Purchased goods for Rs. 15,000 in cashPurchased goods from M for Rs. 3,0O0 on credit3. Sold goods to Y for Rs. 4,000 on credit Sold goods for Rs. 5,000 in cash 4. Y returned goods worth Rs. 1,000.Returned goods to M worth Rs. 2,000.5. B took away goods worth Rs. l,000 for personal purposeGoods worth Rs. 2,000 were destroyed in fire.Distributed goods worth Rs. 500 as free samples.Solution:JournalDate
No.ParticularsLFDebitAmount.CreditAmount
2005Jan. 11.Cash A/c Dr.To Bs Capital A/c [For goods brought in by B]10,000
10,000
22.Purchase A/c Dr.To Cash A/c[For cash purchases; see Note(1)]15,00015,000
23.Purchase A/c Dr.To Ms A/c[For credit purchase from M]3,0003,000
34.Ys A/c Dr.To Sales A/c[For credit sale to Y]4,0004,000
35.Cash A/c Dr.To Sales A/c[For goods returned by Y]5,0005,000
46.Sales return A/c Dr.To Ys A/c[For goods returned by Y]1,0001,000
47.Ms A/c Dr.To Purchase return A/c[For goods returned to M]2,0002,000
58. Drawings A/c Dr.To Goods Taken By B A/c[For goods taken by B]1,0001,000
59.Loss of Fire A/c Dr.To Goods Lost by Fire A/c[For goods lost by fire ]2,0002,000
510.Advertisement A/c Dr.To Goods Given as Samples A/c[For goods given as samples]500500
Total Rs.43,50043,500
Illustration 4:Give Journal entries for the following transactions:1. B started business by bringing in cash Rs. 3,000, goods worth Rs. 4,000 and vehicle worth Rs. 5,000.2. B purchased goods worth Rs. 8,000 from X and paid him Rs. 2,000.3. B sold goods worth Rs. 3,000 to A who paid him , immediately.4. B took goods worth Rs. 1,000 and cash Rs. 2,500 for his own use.Solution:Journal of BDate
No.ParticularsLFDebitAmount.CreditAmount
11.Cash A/c Dr.Purchase A/c Dr.Vehicle A/c Dr.To Bs Capital A/c[For items brought in by B to start business]3,0004,0005,000
12,000
22.Purchase A/c Dr.To Cash A/cTo Xs A/c[For purchases from X partly on cash,partly on credit]8,0002,0006,000
23.Cash A/c Dr.As A/c Dr.To Sales A/c[For sales to A partly on cash andpartly on credit]1.0002,000
3,000
34.Bs Drawings A/c Dr.To Goods Taken by BA/cTo Cash A/c[ goods and cash taken by B]3,5001,0002,500
Total Rs.26,50026,500
Illustration 5: Journalise the following transactions in the books of both A and B.2004Jan.1Goods sold by A to B on Credit Rs. 3,000.2 Goods returned by B to A Rs. 500.15 Cash paid by B Rs. 2,500 to A.20 Loan taken by A from B Rs. 10,000.21 Furniture purchased by A from B worth Rs. 2,000 on credit Solution:Journal of ADate
No.ParticularsLFDebitAmount.CreditAmount
Jan. 11.Bs A/c Dr.To Sales[Being goods sold to B on credit]3,0003,000
22.Sales Returns A/cDr.To Bs A/c[Being goods returned by B out ofJan. 1 transaction]500500
153.Cash A/c Dr.To Bs A/c[Being cash received from B againstcredit sales]2,5002,500
204.Cash A/c Dr.To Bs Loan A/c[Being loan taken from B]10,00010,000
225.Furniture A/c Dr.To Bs A/c[Being furniture purchased from B on credit]2,0002,000
Total Rs.18,00018,000
Journal of BDate
No.ParticularsLFDebitAmount.CreditAmount
Jan. 11.Purchase A/c Dr.To As A/c[Being goods purchased from A on credit]3,0003,000
22.As A/cDr.To Purchase Returns A/c[Being goods purchased on Jan. 1, returned to A]500500
153.As A/c Dr.To Cash A/c[Being cash paid to A against creditpurchases]2,5002,500
204.Loan to A A/c Dr.To Cash A/c[Being loan given to A]10,00010,000
225.As A/c Dr.To Furniture A/c[Being furniture sold to A on credit]2,0002,000
Total Rs.18,00018,000
Illustration 7:1. B sold goods having a list price of Rs. 1,000 at 20% trade discount to Y on January 1, 2004. B allows cash discount of 10% if payment is received within 10 days. B receives cash from Y on January 8, 2004.2. B purchased goods having list price of Rs. 800 at 25% trade discount from X on January 10, 2004. X allows 5% cash discount, if payment is made within 20 days. B pays the amount due on 25th January, 2004.3. On January 30, 2004 B sold goods having a list price of Rs. 4,000 at a trade discount of 20% and received the amount due immediately in cash subject to cash discount of 10%.4. On January 30, 2004 B purchased goods having a list price of Rs. 9,000 at a trade discount of 30% and paid the amount due immediately in cash subject to cash discount of 10%.5. On 30th January, 2004 B sold goods having a list price of Rs. 2,000 at 20% trade discount to M and received half the amount due in cash immediately after allowing 10% cash discount.6. On 31st January, 2004 B purchased goods having a list price of Rs. 4,000 at 25% trade discount from C and paid 1/3rd amount in cash subject to 10% cash discount.Pass necessary Journal Entries to record the above transactions.Solution:Journal of BDate
No.ParticularsLFDebitAmount.CreditAmount
Jan. 11.Ys A/c Dr.To Sales[For goods sold to Y: Rs. 1,000 less20% trade discount]800800
82.Cash A/c Dr.Discount Allowed A/c Dr.To Ys A/c[For cash received from Y : Rs. 800 -10% cash discount]72080
800
103.Purchase A/c Dr.To Xs A/c[For goods bought from X Rs. 800 -25% trade discount]600600
254.Xs A/c Dr.To Cash A/cTo Discount Received A/c[For cash paid to X: Rs. 600 - 5%cash discount]60057030
305.Cash A/c Dr.Discount Allowed A/cTo Sales A/c[For goods sold for Rs. 4,000 less 20%trade discount and cash received Rs. 3,200less 10% cash discount]2880320
3,200
306.Purchase A/c Dr.To Cash A/cTo Discount Allowed A/c[For goods bought Rs. 9,000 less 30%trade discount and cash paid Rs. 6,300less 10% cash discount]6,3005,670630
307.Ms A/c Dr.To Sales A/c[For goods sold to M; Rs. 2,000 - 20%trade discount]1,6001,600
308.Cash A/c Dr.Discount Allowed A/cDr. To Ms A/c[1/2 Amount paid by M Rs. 800 - 10%cash discount]72080
800
59.Purchase A/c Dr.To Cs A/c[For goods purchased from C Rs. 4,000-25% trade discount]3,0003,000
510.Cs A/c Dr.To Cash A/cTo Discount Received A/c[1/3 Amount paid to C: Rs. 1,000- 10%cash discount1,000900100
Total Rs.18,70018,700
Illustration 8: Prepare Arohis Journal from the following details for January, 2005:Jan.1 Purchased goods of Rs. 50,000 from Suman.2 Returned goods of Rs. 1,000 to Suman.5 Purchased goods of Rs. 50,000 from Vimal @ 10% trade discount.7 Returned goods having list price of Rs. 1,000 to Vimal.16 Purchased goods of Rs. 1,00,000 from Naren on credit @ 10% trade discount.26 Returned goods having list price of Rs. 10,000 to Naren.31 Purchased goods for Rs. 12,000 @ 5% trade discount from Rakesh.Journal of Arohi
Date
No.ParticularsLFDebitAmount.CreditAmount
2005Jan. 11.Purchase A/c Dr. To Suman
50,00050,000
22.Suman a/c Dr. To Purchase Return
1,0001,000
53.Purchase A/c Dr. To Vimal A/c
45,00045,000
74.Vimal a/c Dr.
To purchase return
900
900
165.Purchase a/c Dr. To Naren
90,00090,000
266.Naren A/C Dr. To Purchase Return
9,0009,000
317.Purchase A/c Dr To Rakesh A/C
11,40011,400
Total Rs.2,07,3002,07,300
Illustration 9 :Prepare Sonias Journal from the following details for January, 2005:Jan.1Sold goods of Rs. 5,000 to Monica.2Monica returned goods of Rs. 1,000.5Sold goods of Rs. 5,000 to Radhika @ 10% traae discount.7Radhika returned goods having list price of Rs. 1,000.16Sold goods of Rs. 10,000 to Namita on credit @ 10% trade discount.26Namita returned half the goods.31Sold goods for Rs. 12,000 @ 5% trade discount to Ruchita.Journal of Monica
Date
No.ParticularsLFDebitAmount.CreditAmount
2005Jan. 11.Monica A/c Dr. To Sales
5,0005,000
22.SalesReturnA/c Dr. To Monica
1,0001,000
53.Radhika A/c Dr. To Sales A/c
4,5004,5000
74.Sales Return a/c Dr. To Radhika A/C
900
900
165.Namita a/c Dr. To Sales A/C
9,0009,000
266.SalesReturnA/C Dr. To Namita
4,5004,500
317.Ruchita A/c Dr To Sales A/C
11,40011,400
Total Rs.36,30036,300
Illustration 10 :Enter the following transactions in Journal of A.Dec.1Cash introduced in business Rs. 10,000.3Purchased goods for cash Rs. 2,700.5 Received Rs. 2,500 from C and allowed discount of C 500.7Paid to B Rs. 450 and received a discount of Rs. 50.11Paid, wages to workers Rs. 4,300.16Paid for office rent Rs. 60019Received from B Rs. 1,800 after allowing him a discount of Rs. 200.23Received interest Rs. 150.27Received Rs. 2,400 from C for the balance due, the amount payable is Rs 3,000Solution:Journal of ADate
No.ParticularsLFDebitAmount.CreditAmount
2005Dec. 11.Cash A/c Dr.To Capital A/c[For cash introduced as capital]10,000
10,000
32.Purchases A/c Dr.To Cash A/c[For cash purchases)2,7002,700
53.Cash A/c Dr.Discount Allowed A/c Dr. To Cs A/c[For cash received and discount allowed]2,500500
3000
74.Bs A/c Dr.To Cash A/cTo Discount Received A/c[For cash paid and discount received]50045050
115.Wages A/c Dr.To Cash A/c[For wages paid)4,3004,300
166.Office Rent A/c Dr.To Cash A/c[For office rent paid]600600
197.Cash A/c Dr.Discount Allowed A/c Dr.To Bs A/c[ cash received and discount allowed)1,800200
2,000
238.Cash A/c Dr.To Interest A/c[For receipt of interest)150150
279.Cash A/c Dr.Discount Allowed A/c Dr.To C A/c[For cash received and discount allowed]2,400600
3,000
Total Rs.26,25026,250
Illustration 11:Record the following transactions in the books of D:2004Jan.1. Purchased machinery from B for Rs. 50,000. Expenses on transportation were Rs. 2,000. Installation charges came to Rs. 3,000.Jan.2Purchased an office building for Rs. 75,000.Feb.20Paid Rs. 3,000 for repairs on machinery and Rs. 4,000 on electricity, to run the machinery. Paid Insurance premium for office building Rs. 7,500.Oct.10Sold office building to M for Rs. 90,000 on credit Oct.20Sold machinery for Rs. 45,000 on cash Solution:Journal of DDate
No.ParticularsLFDebitAmount.CreditAmount
Jan. 11.Machinery A/c Dr.To Bs A/c[For machinery purchased and expenses on transportation and installation )55,00055,000
23.Office Building A/c Dr.To Cash A/c[For office building purchased vide agreement dated .]75,00075,000
Feb. 204.Machinery Repairs A/c Dr.Electricity A/c Dr.Building Insurance A/cDr. To Cash A/c[For various expenses paid]3,0004,0007.500
14,500
Oct. 105.Ms A/c Dr.To Office Building A/cTo Profit on Sale of Fixed Asset A/c[For sale of office building to M at profit:90,000 - 75,000]90,00075,00015.000
206.Cash A/c Dr.Loss on Sale of Fixed Asset A/c Dr.To Machinery A/c[For sale of machinery at loss:50,000 + 5,000 - 45,000]45,00010,000
55,000
Total Rs.2,89,5002,89,500
Illustration 12:Record the following transactions in the books of C:2004Jan.1Purchased 100 Shares of BBC Limited having face value of Rs. 10 at Rs. 20 each. Paid brokerage at 1% of purchase price.Oct.10BBC Limited declared and paid dividend at the rate of 15%.Oct.20Sold the shares of BBC Limited at Rs. 25 each.Solution:Journal of CDate
No.ParticularsLFDebitAmount.CreditAmount
Jan. 11.Investment in Shares A/c Dr.To Cash A/c[For purchase of 100 shares of BBC Ltd.
at Rs. 20 each: 100 20 and paid the brokerage of 1%)2,0202,020
Oct. 103.Cash A/c Dr.To Dividend A/c[Dividend received on shares : at 15% ofRs. 1,000]150150
204.Cash A/cDr. To Investment in Shares A/cTo Profit on Sale of Investment A/c[For profit on sale of shares in BBC Ltd.]2,5002,020480
Total Rs.4,6704,670
2. Depreciation
Q1) On 1/4/2008 Amruta and company purchased a imported Machine from France the cost of the machine is Rs 15,00,000 and import duty of Rs 2,50,000 and installation charges 25,000. On 1/8/2009 the imported Machine was sold for Rs 5,00,000. On the same date it purchased another machine for Rs 1,00,000. On 1/8/2010 the company purchased another machine for Rs 4,00,000
Prepare machinery account and depreciation account for 2008-09, 2009-10, 2010-11, assuming that depreciation is charged on diminishing balance method at 10%.Assume the year to be calendar year
Q2) On 1/8/2008 Shyam and company purchased a imported Machine from France the cost of the machine is Rs 18,00,000 and import duty of Rs 2,55,000 and installation charges 1,25,000. On 1/6/2009 the imported Machine was sold for Rs 5,00,000. On the same date it purchased another machine for Rs 1,00,000. On 1/7/2010 the company purchased another machine for Rs 6,00,000
Prepare machinery account and depreciation account for 2008, 2009, 2010, assuming that depreciation is charged on Reducing balance method at 15% and the year to be the Financial year
3. Final accounts The Trial balance of M/s. Shubhang & Co as on 31st December, 2009 was as followsDebit Balance0---Rs.Credit BalanceRs.
-Opening stock of Raw Material1,23,000Sundry Creditors27,000
Opening stock of Work in Progress1,50,000Bills Payable10,000
Opening stock of Finished Goods1,60,000Sales of Scrap2,500
Sundry Debtors3,00,000Commission1,000
Carriage Inward18,000Provision for Doubtful Debts3,600
Carriage Outward19,000Shubhang Capital A/c4,47,300
Bills Receivable28,000Sales10,00,000
Wages14,000
Salaries 30,000
Repairs of Plant3,200
Repairs of Office Furniture800
Purchases of raw material 2,00,000
Cash at Bank1,00,000
Plant and Machinery1,00,000
Office Furniture20,000
Rent5,000
Lighting Expenses6,800
Factory Insurance4,000
General Expenses
5,600
Drawings
2,00,000
Bad debts4,000
14,91,40014,91,400
Following additional information is provided to you :1. Closing Stock as on 31st December, 2009 was : Raw Materials Rs.1,20,000, Finished Goods Rs. 1,80,000 Semi Finished Goods Rs. 1,17,000.2. Salaries Rs. 22,000 and Wages Rs.1 2,000 for the month of December was paid in January 2009.3. Lighting expenses were outstanding Rs. 2000 whereas insurance was prepaid Rs. 1000.4. 25% of the lighting expenses and rent is to be charged to office premises and the remaining amount is to be charged to factory.5. Depreciation is to be written off on Machinery at 10% p.a. and on Furniture at 5% p.a.6. Write of Bad debts to the extent of Rs 10,000. The provision for bad and doubtful debts 5%. Provision for discount on debtors is 2%.7. Goods distributed to extent of Rs 1,00,000 as free sample8. Goods destroyed by fire Rs 1,00,000 and insurance claim receivable is 40,000 You are required to prepare manufacturing account, trading account and profit and loss account for the year ended 31-12-2009 and Balance Sheet as on that date.
Q4 You are supplied with the information relating to sales and costs of sales of a manufacturing company. You are required to find out:a. P.V. Ratiob. Break-even Point.c. Margin of Safety in 2002.d. Profit when sales are Rs. 1,20,000e. Sales required to earn a profit of Rs. 75,000.
1) Calculate the revised P.V. ratio, break-even point in each of the following cases:a. Decrease of 10% in selling price.b. Increase of 10% in Variable costs.c. Increase of sales volume to 4000 units and increased in fixed costs by Rs. 40,000d. Increase of Rs. 18,000 in fixed costs.e. Increase of 20% in selling price and increase of Rs. 8,000 in fixed costs.The sales and cost of sales during the two years were as follows:Year Sales Rs.Costs of SalesRs.Units
200120026,00,0007,50,0005,60,0006,80,0002,4003,000
Q5. COST SHEET
Q1)The State Government granted licence to Sweet Sugar Ltd. to manufacture and sell sugar with a stipulation that 40% of the output should be sold to the State Government at a controlled price of Rs. 3,000 per ton and the balance Output can be sold in the open market at any price. Following are the details of Sweet Sugar Ltd. for the year ended 31st March, 2004.During the year 3,600 tons Sugarcane was consumed @ Rs. 1,000 per ton. Direct labour amounted to Rs. 825 per ton of sugar produced.The details of other expenditure are as follows:-Particulars Rs.
Direct ExpensesTelephone ChargesOffice Computer purchasedFactory Rent and InsuranceMachinery purchasedMachinery RepairsCommission on SalesFactory SalariesCarriage OutwardPacking ExpensesBank Interest Factory ElectricityDelivery Van ExpensesCoal ConsumedDepreciation on Machinery Depreciation Computer Depreciation on Delivery VanOffice salariesPrinting and Stationery 4,20,0003,52,6952,75,3503,54,7604,25,56098,8473,37,6502,19,5881,54,0901,94,4501,65,8952,61,8801,06,8503,80,1252,49,6002,04,1801,57,3601,89,3251,13,000
During the year 2,400 tons of sugar was produced.The Companys Profit target for the year, for fixing the open market selling price on the basis of cost sheet, is 10% of its average paid-up Capital of Rs. 1,42,56,000.Prepare cost sheet and find various components of total cost and per unit cost and suggest the Selling Price for Open-Market.
Q2)A Co. manufactures two types of products viz, A and B. the following information is available for the year ended 31st March, 2004:Direct material Rs. 6, 75,000Direct Wages Rs. 9, 90,000Works overheads Rs. 1, 95,000Direct material used per unit in Product A were 3 times that of product B.Direct wages per unit in Product B were 2/3 that of Product A.Works overheads per unit were the same for both the products.Administration overheads were 100% of the Prime Cost in each of the products.Selling and Distribution cost per unit was Rs. 6 for both A & B.35,000 units of Products A were produced, out of which 32,000 units were sold @ Rs. 100/- per unit.30,000 units of Product B were produced, out of which 25,000 units were sold @ Rs. 65/- per unit.Prepare Cost Sheet showing total cost and cost per unit for both the products.
Q3)Vajinath Polymers manufactures and sells a typical brand of tiffin boxes under its own brand name. The installed capacity of the plant is 1, 20,000 units per year, distributable evenly over each month of calendar year. The cost Accountant of the company has informed you about the cost structure of the product, which is as follows:Raw materials Rs. 20 per unit.Direct Labour Rs. 12 per unitDirect Expenses Rs. 2 per unitVariable Overheads Rs. 16 per unitFixed Overheads for the year Rs. 3, 00,000.Semi-Variable Overheads are as follows:-Rs. 7,500 per month up to 50% capacity andAdditional Rs. 2,500 per month for every additional 25% capacity utilization or part thereof.
The plant was operating at 50% capacity during the first seven months of the calendar year 2003 and at 100% capacity in the remaining months of the year.The selling price for the period from 1st January 2003 to 31st July, 2003 was fixed at Rs. 69 per unit. The firm has been monitoring the profitability and revising the selling price to meet its annual profit target of Rs. 8 lacs.You are required to suggest the selling price per unit for the period from 1st August, 2003 to 31st December, 2003.Prepare cost sheet clearly showing the total and per unit cost and also profit for the period:-From 1st January 2003 to 31st July 2003From 1st August 2003 to 31st December 2003.
Q6. Budgetory control
Illustration 1:ABC manufacturing company produces 7500 units by utilizing its 75% capacity, supplies you the following cost information: Cost information at 75%. Capacity Utilization (For 7500 units)Particulars Rs.
Direct MaterialsDirect Labour Direct ExpensesFactory Overheads Office OverheadsSelling Overheads7,50,0006,00,0003,00,0004,50,0003,00,0001,50,000
Additional Information:a) Direct material, direct labour and direct expenses are variable cost.b) Factory overheads per unit increases by 10%, if capacity utilization goes down below the 75% and decrease by 15% if capacity utilization goes up above the 75%.c) Office overheads are fixed overheads.d) Selling overheads per unit increase by 20% if capacity utilization goes down below 75% and decreases by 25% if capacity utilization goes up above the 75%.e) It is the policy of the company to charge profit at 20% on selling price.You are required to prepare a flexible budget at 50%, 75% and 100% capacity utilization.Solution: ABC Manufacturing Company Flexible BudgetCapacity (%)7550100
Units 7,5005,00010,000
Per UnitRs.Per UnitRs.Per UnitRs.
A. Sales B. Variable Costs Direct Materials Direct Labour Direct Expenses Variable Overheads Factory Overheads Selling Overheads Total Variable CostsC. Contribution (A-B)D. Fixed Costs Administrative Total Fixed CostsE. Total Costs (B + D)F. Profit (A E) [Note]425
1008040
602031,87,500
7,50,0006,00,0003,00,000
4,50,0001,50,000462.50
100.0080.0040.00
66.0024.0023,12,500
5,00,0004,00,0002,00,000
3,30,0001,20,000395
1008040
511539,50,000
10,00,0008,00,0004,00,000
5,10,0001,50,000
30022,50,000310.0015,50,00028628,60,000
1259,37,500152.507,62,50010910,90,000
403,00,00060.003,00,000303,00,000
403,00,00060.003,00,000303,00,000
34025,50,000370.0018,50,00031631,60,000
856,37,50092.504,62,500797,90,000
Note: Profit = 20% of Selling Price = 25% of cost.
Illustration 2:The following information relates to the productive activities of J.K. Ltd. for three months ending on 31st March 2000.Particulars Rs.
Fixed Expenses: Management Salaries Rent and Taxes Depreciation of Machinery Sundry Office Expenses
Semi variable Expenses: (at 50% Capacity) Plant Maintenance Indirect Labour Salesmans Salaries Sundry
Variable Expenses: (at 50% Capacity) Material Labour Salesmens Commission2,10,0001,40,0001,75,0002,22,5007,47,500
62,5002,47,50072,50065,0004,47,500
6,00,0006,40,00095,00013,35,000
It is further noted that semi-variable expenses remain constant between 40 and 70% capacity, increase by 10% of the above figures between 70 and 85% capacity and increase by 15% of the above figures between 85 and 100% capacity.Fixed expenses remain constant whatever the level of activity may be. Sales at 60% capacity are Rs. 25, 50,000, 80% capacity Rs. 34, 00,000 and 100% capacity Rs. 42, 50,000.Assuming that all items produced are sold you are required to prepare a flexible budget at 60, 80 and 100% capacity.Solution In the Books of J. K. Ltd. Flexible Budget for 3 Months ending on 31-3-2000.Capacity 60%80%100%
A. Fixed ExpensesManagement SalariesRent and TaxesDepreciation on MachinerySundry Office Expenses
B. Semi Variable ExpensesPlant Maintenance Indirect LabourSalesmens SalariesSundry
C. Variable ExpensesMaterials Labour Salesmens Commission
D. Total Expenses (A+B+C)E. Sales F. Profit / (Loss)2,10,0001,40,0001,75,0002,22,5002,10,0001,40,0001,75,0002,22,5002,10,0001,40,0001,75,0002,22,500
7,47,5007,47,5007,47,500
62,5002,47,50072,50065,00068,7502,72,25079,75071,50071,8752,84,62583,37574,750
4,47,5004,92,2505,14,625
7,20,0007,68,0001,14,0009,60,00010,24,0001,52,00012,00,00012,80,0001,90,000
16,02,00021,36,00026,70,000
27,97,00033,75,75039,32,125
25,50,00034,00,00042,50,000
2,47,00024,2503,17,875
Illustration 3: For production of 5000 electrical tubes the following are budgeted expenses:Particulars Per Unit Rs.
Direct MaterialDirect LabourDirect ExpensesVariable OverheadsFixed Overheads (Rs. 1,50,000)Selling Expenses (10% Fixed)Administrative Expenses (Rs. 20,000 Fixed)Distribution Expenses (20% Fixed)Total Cost of Sales 60.0030.0010.0025.0030.0030.0010.0010.00205.00
Prepare a budget for production of 3,000; 4,000 and 6,000 units of electrical tubes.Solution: Flexible Cost Budget (for Electrical Tubes)Units 5,0003,0004,0006,000
Per UnitRs.Per UnitRs.Per UnitRs.Per UnitRs.
Production CostsVariable Costs Direct MaterialsDirect Labour Direct ExpensesVariable Overheads - Factory OH- Admn. OH - Selling OH- Distribution OHTotal Variable CostsFixed Costs- Factory - Administration - Selling - Distribution Total Fixed CostsTotal Costs
60.0030.0010.00
25.006.0027.008.00
3,00,0001,50,00050,000
1,25,00030,0001,35,00040,000
60.0030.0010.00
25.006.0027.008.00
1,80,00090,00030,000
75,00018,00081,00024,000
60.0030.0010.00
25.006.0027.008.00
2,40,0001,20,00040,000
1,00,00024,0001,08,00032,000
60.0030.001.00
25.006.0027.008.00
3,60,0001,80,00060,000
1,50,00036,0001,62,00048,000
166.008,30,000166.004,98,000166.006,64,000166.009,96,000
30.004.003.002.001,50,00020,00015,00010,00050.006.675.003.331,50,00020,00015,00010,00037.505.003.752.501,50,00020,00015,00010,00025.003.332.501.671,50,00020,00015,00010,000
39.001,95,00065.001,95,00048.751,95,00032.501,95,000
205.0010,25,000231.006,93,000214.758,59,000198.5011,91,000
Illustration 4: The following expenses relate to a cost centre operating at 80% of normal capacity (sales are Rs. 2, 40,000). Draw up flexible administration selling and distribution costs budget operating at 90%. 100% and 110% of normal capacity.Particulars Rs.
Administration CostsOffice SalariesGeneral ExpensesDepreciationRates and TaxesSelling CostsSalariesTraveling ExpensesSales OfficeGeneral ExpensesDistribution CostsWages (40% Fixed)Rent Other Expenses 6,0002.5% of Sales4,5003,500
4% of Sales2% of Sales1% of Sales1% of Sales
16,0000.4% of Sales2% of Sales
Solution: Flexible Cost BudgetCapacity (%)8090100110
Units8,0009,00010,00011,000
Per UnitRs.Per UnitRs.Per UnitRs.Per UnitRs.
Sales Variable OH(12.9% of Sales)- Distr. Wages (60%)Total Variable CostsFixed Costs-Depreciation - Off. Salaries- Rates & Taxes-Distr. Wages (40%)Total Fixed CostsTotal Costs 30.002,40,00030.002,70,00030.003,00,00030.003,30,000
3.87
30,960
9.6003.8734,830
10,8003.8738,700
12,0003.8742,570
13,200
4.3540,5604.3545,6305.0050,7005.0055,770
0.560.750.440.804,5006,0003,5006,40050.000.670.390.714,5006,0003,5006,40045.000.600.350.644,5006,0003,5006,40040.910.550.320.584,5006,0003,5006,400
2.5520,40051.7720,40046.5920,40042.3520,400
6.9060,96056.1266,03051.6671,10047.4276,170
Variable Overheads (12.9% of Sales) include expenses (general, salaries, traveling etc.) which vary directly as percentage of sales i.e. 2.5 + 4 + 2 + 1 + 1 + 0.4 + 2 = 12.9%.
Illustration 5: (Budgeted P & L A/c)CTB Ltd. produces and markets three products. C. T and B. the company is presenting its budget for the next quarter ending 31st March 2004. It expects to sell 4,200, 800 and 500 Nos. at selling price of 50, Rs. 85 and Rs. 158 per unit respectively of the products C, T and B during the above period.The following data is furnished:1) Material and Labour requirements C T BTimber per unit (in cu. ft.) 0.5 1.2 2.5Upholstery per unit ((in sq. yds) 0.25 -- --Carpenters time (Mins. Per unit) 45 60 75Fixer and Finishers time (mins per unit) 15 15 30Timber costs Rs. 50 per cu. ft. and upholstery costs Rs. 20 per sq. yds. Fixing and Finishing Material costs 5% of the cost of timber and upholstery. Carpenter get Rs. 6 per hour and Fixer and Finisher gets Rs. 4.80 per hour.2) Inventory Levels Planned: Timber Upholstery C T B (cu. ft.) (sq. yds.) (Nos.) (Nos.) (Nos.)Opening 600 400 400 100 50 Closing 650 260 200 300 503) Fixed overheads would be Rs. 8,000 per month.You are required to prepare:a) A Production Budget showing quantities of C, T, B to be manufactured.b) A Raw Materials Purchases Budget in quantities as well as in Rupees.c) A Direct Wage Cost Budget.d) A statement showing variable cost of manufacture per unit of all three products viz. C, T and B. e) Budget Net Income / Profit for the quarter ending 31st March 2004.Solution: Budget (Production + Wages + Variable Cost + Profit)Particulars Working C T B Total
A. Budgeted Sales (Rs.)B. Budgeted Sales (Units)C. Closing Stock (Units)D. Opening Stock (Units)E. Production (Units)F. Timber:1. Material P.U. (Cu. Ft.)2. Material Consumed3. Rate Per Kg. (Rs.)4. Materials Consumed (Rs.)G. Upholstery1. Material P.U. (Sq. Yd.)2. Material Consumed3. Rate Per Kg. (Rs.)4. Material Consumed (Rs.)H. Timber + Upholstery CostI. Fixing Material @ 5%J. Carpenter:1. Time P.U.2. Time (Hrs.)3. Wages P. Hr. (Rs.)4. Total WagesK. Fixer 1. Time P.U2. Time (hrs)3. Wages P. Hr. (Rs.)4. Total Wages L. Total Variable Costs Variable Costs P.U.M. Contribution N. Fixed OverheadsO. Profits Units x PriceGiven Given Given B + C D
E x 1
2 x 3
2 x 3F + G
Given E x 1Given 2 x 3
Given E x 1Given 2 x 3H + I + J+ KL /EA L
M N2,10,0004,2002004004,000
0.52,000501,00,000
0.251,0002020,0001,20,0006,000
453,000618,000
151,0004.804,8001,48,80037.2068,0008003001001,000
1.21,2005060,000
0.0020060,0003,000
601,00066,000
152504.801,20070,20070.2079,0005005050500
2.51,2505062,500
0.0020062,5003,125
7562563,750
302504.801,20070,575141.15
4,45050
1,00020
2,22,500
20,0002,42,50012,125
27,750
7,2003,57,000
2,89,575
67,42524,00043,425
Purchase BudgetParticulars Timber Upholstery Total
A. Consumption B. Add: Closing Stock
C. Less: Opening StockD. Purchases (Units)E. Rate P.U.F. Purchase Budget (Rs.) [D x E)4,4506505,1006004,500502,25,0001,0002601,2604008602017,200
2,42,200
Illustration 6: (Cash Budget)A newly started SSG. Co. Ltd. wishes to prepare cash budget from May. You are required to prepare a cash budget for the first six months from the following estimated revenue and expenses. Month Total Sales
Rs.Materials Wages Overheads
Rs.
Rs.Production
Rs.Selling &Distribution Rs.
May June JulyAugustSeptemberOctober20,00022,00024,00026,00028,00030,00020,00014,00014,00012,00012,00016,0004,0004,4004,6004,6004,8004,8003,2003,3003,3003,4003,5003,6008009008009009001,000
Cash balance on 1st May was Rs. 10,000. A new machine is to be installed at Rs. 30,000 on credit to be repaid by two equal installments in July and August.Sales commission at 2.5% on total sales is to be paid within the month following actual sales.Rs. 10,000 being the amount of second call may be received in July, share premium amounting to Rs. 2,000 is also obtainable with Second call.1) Period of credit allowed by suppliers is to be two months.2) Period of credit allowed to customers is to be one month.3) Delay in payment of overheads is to be one month.4) Delay in payment of wages is 15 days (i.e. month)5) Assume cash sales to be 50% of total sales.Solution:Cash BudgetWNM J J A S O
A. OPENINGB. RECEIPTSSales (Cash)Received from Debtors CallPremium C. TOTAL D. PAYMENTSPaid to CreditorsWagesCommission Production OHS and D OHMachine TOTALCLOSING
1
2
3456710,000
10,00018,000
11,000
10,00030,300
12,000
11,00010,0002,00021,050
13,000
12,0007,750
14,000
13,00011,100
15,000
14,000
20,00039,00065,30046,05034,75040,100
2,000
4,2005003,20080020,0004,5005503,30090015,00014,0004,6006003,30080015,00014,0004,7006503,40090012,0004,8007003,500900
2,0008,70044,25038,30023,65021,900
18,00030,30021,0507,75011,10018,200
Working Notes: M No. (M)Month 1M 2J 3J 4A 5S 6O
Sales 1. Sales (Cash)Sales (Credit)2. Received from Debtors (1)Materials 3. Paid to Creditors Wages DueWages Paid (1)Wages Paid (2)4. Wages Paid (Total)5. SalesCommission PaidProduction OHDue 6. Production OHPaid S and D OH Due7. S and D OH Paid(1 / 2)
(M - 1)
(M - 2)
(M-1) /2(M / 2)
2.5% x(M 1)
(M 1)
(M 1)20,00010,00010,000
020,000
4,000
2,000
2,000
0
3,200
80022,00011,00011,000
10,00014,000
4,4002,0002,200
4,200
500
3,300
3,20090080024,00012,00012,000
11,00014,00020,0004,6002,2002,300
4,500
550
3,300
3,30080090026,00013,00013,000
12,00012,00014,0004,6002,3002,300
4,600
600
3,400
3,30090080028,00014,00014,000
13,00012,00014,0004,8002,3002,400
4,700
650
3,500
3,40090090030,00015,00015,000
14,00016,00012,0004,8002,4002,400
4,800
700
3,600
3,5001,000900
Illustration 7: (Production / Consumption / Purchase Budget)A Company estimate sales of its product X during the last five months of 2006 as under. Month UnitsAugust 21,600September 31,200October 24,400November 20,800December 19,600Inventory of product X at the end of every month is to be equal to 50% of sales estimate for the next month. Closing inventory of July was maintained on the above basis. There was no work in progress at the end of any month. Every unit of product requires two types of materials in the following quantities. Materials A 5 ltr. Material B 6 ltr. Materials equal to 25% of the requirement for the next month consumption are kept as closing stock. The stock position on 31st July was as under. Materials A 32000 ltr. Material B 28000 ltr.The purchase price of Material A Rs. 3/- per ltr. and Materials B Rs. 2/- per ltr. There was no closing stock of Material A and B on 30 November 2006. From the above, prepare following Budgets for the period August to November.1) Production Budget2) Materials Consumption Budget3) Purchase Budget showing quantity and value.Solution:1) Production Budget (Units)Particulars Aug.Sep.Oct.Nov.
Units required to saleAdd: Closing Stock (50% of next month sale)Total Units Required (-) Opening Stock (50% of Current Sales)Production Units21,600
15,60031,200
12,20024,400
10,40020,800
9,800
37,200
10,80043,200
15,60034,800
12,20030,600
10,400
26,40027,80022,60020,200
2) Materials Consumption Budget (Liter)Particulars Aug.Sep.Oct.Nov.
Materials:A (5 liter / Unit)B (6 liter / Unit)Total Material Consumption1,32,0001,58,4001,39,0001,66,8001,13,0001,35,6001,01,0001,21,200
2,90,4003,05,8002,48,6002,22,200
3) Purchase Budget (Quantity and Value)Particulars AugustSeptemberOctoberNovember
Mat. AMat. BMat. AMat. BMat. AMat. BMat. AMat. B
Materials Consumption Add: ClosingStock (25% of next month Consumption (-) Opening Stock given and 25% of current monthPurchase of Material (Ltr.)Rate / LiterPurchase Price 1,32,000
34,750
32,0001,58,400
41,700
28,0001,39,000
28,250
34,7501,66,800
33,900
41,7001,13,000
25,250
28,2501,35,600
30,300
33,9001,01,000
12,250
25,2501,21,200
14,700
30,300
1,34,75031,72,10021,32,50031,59,00021,10,00031,32,000258,00031,05,6002
4,04,2503,44,2003,97,5003,18,0003,30,0002,64,0002,64,0002,11,200
Working Notes:Material Consumption for DecemberMaterial A 9,800 x 5 = 49,000Material B 9,800 x 6 = 58,800
Illustration 8:The following information is extracted from the various functional budgets prepared for a concern whose financial year starts from 1st April.a) Particulars Jan.Rs.Feb.Rs.Mar.Rs.Apr.Rs.MayRs.JuneRs.July Rs.Aug.Rs. Sept.Rs.
Sales Materials Wages Overhead:Manufacturing AdministrationSelling Distribution 30,00012,5005,000
4,0001,5002,0001,50035,00015,0005,500
4,5002,0002,0002,00030,00015,0005,500
4,5002,0002,0002,00025,00012,5005,000
4,0001,5002,5001,50022,5009,0004,500
3,5001,5002,0001,00032,50015,0004,500
3,5001,5001,5001,00035,00015,0005,000
4,0002,0001,5001,50037,50020,0005,000
4,0002,0001,5002,00040,00015,0005,500
4,5002,0002,0002,000
b) Plant to be purchased for Rs. 30,000. The price is to be in six equal installments, the first installment to start in June.c) A provision of Rs. 2,500 per month has to be made for machinery purchased in the previous period.d) A commission of 10% is required to be paid on sale in the month following the actual sales.e) Cash sales would amount to Rs. 2,000 per month on which no commission is payable.f) Dividend to shareholder amounting to Rs. 50,000 is to be paid on 1st July.g) Interest on investment amounting to Rs. 40,000 will be received on 1st August.h) Income tax to be paid in August Rs. 40,000.i) Balance of call on ordinary shares to be received on 1st April Rs. 20,000.Prepare a monthly cash budget for six months from April to September assuming suitable figures for loan and overdraft whenever required.The periods of credit allowed to debtors and allowed by creditors are 3 months and 2 months respectively and payment of wages and overhead expenses are made one month in arrears.The estimated cash balance on 1st April was Rs. 50,000.Solution: Cash Budget Particulars April May June July Aug.Sept.
A. OPENING B. RECEIPTi. Revenue Sales (Cash)Received from DebtorsInterest on Investment ii. Capital Call Bank LoanC. TOTALD. PAYMENTSi. Revenue Paid to Creditors Expenses Wages Commission Production OH S & D OH Administration OH Cash Discountii. Capital MachineAssets Income Tax Dividends E. TOTALF. CLOSING50,000
2,00028,000
20,000
63,700
2,00033,00064,400
2,00028,00059,850
2,00023,0003,300
2,00020,50040,000
14,000--
2,00030,500
8,050
1,00,00098,70094,40084,85079,80040,550
15,000
5,5002,8004,5002,0002,0002,000
2,500
15,000
5,0002,3004,0002,5001,5001,500
2,500
12,500
4,5002,0503,5002,0001,5001,000
5,0002,500
9,000
4,5003,0503,5001,5001,5001,000
5,0002,500
50,000
15,000
5,0003,3004,0001,5002,0001,500
5,0002,500
40,000
15,000
5,0003,5504,0001,5002,0002,000
5,0002,500
36,30034,30034,55081,55079,80040,550
63,70064,40059,8503,300----
Working Notes:M. No. (M)123456789
Month Jan.Feb.Mar.April May June July Aug.Sept.
a) Sales b) Sales (Cash)c) Sales (Credit)(Total Cash)d) Recd. From Debtors (1) [(M 3)]a) Materials b) Paid to Creditors (M- 2)a) Wages Dueb) Wages Paid (1) [M 1)]a) Sales Eligible for Comm. (Total-Cash)b) Sales Comm. Paid[10% x (M 1)]a) Production OH Dueb) Production OH paid (M-1)a) S & D OH Dueb) S & D OH Paid(M 1)a) Admin. OH Dueb) Admin. OH Paid(M 1)a) Dist. OH Dueb) Distr. OH Paid(M 1)30,0002,000
28,000
--12,500
--5,000
--
28,000
--4,000
--2,000
--1,500
--1,500
--35,0002,000
33,000
--15,000
--5,500
5,000
33,000
2,8004,500
4,0002,000
2,0002,000
1,5002,000
1,50030,0002,000
28,000
--15,000
12,5005,500
5,500
28,000
3,3004,500
4,5002,000
2,0002,000
2,0002,000
2,00025,0002,000
23,000
28,00012,500
15,0005,000
5,500
23,000
2,8004,000
4,5002,500
2,0001,500
2,0001,500
2,00022,5002,000
20,500
33,0009,000
15,0004,500
5,000
20,500
2,3003,500
4,0002,000
2,5001,500
1,5001,000
1,50032,5002,000
30,500
28,00015,000
12,5004,500
4,500
30,500
2,0503,500
3,5001,500
2,0001,500
1,5001,000
1,00035,0002,000
33,000
23,00015,000
9,0005,000
4,500
33,000
3,0504,000
3,5001,500
1,5002,000
1,5001,500
1,00037,5002,000
35,500
20,50020,000
15,0005,000
5,000
35,500
3,3004,000
4,0001,500
1,5002,000
2,0002,000
1,50040,0002,000
38,000
30,50015,000
15,0005,500
5,000
38,000
3,5504,500
4,0002,000
1,5002,000
2,0002,000
2,000