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