DEC 2000

Question Paper of CS-54 – Finance & Accounting On Computers of Dec 2000 from IGNOU

Note : There are 6 questions in the paper. Question no. 1 is compulsory and carries 35 marks. From the remaining attempt any two questions. Each of these carries 20 marks.

1.
(a) In about one short paragraph, explain the meaning of the following words or phrases:
(i) Social Responsibility
(ii) Accrual Concept
(iii) Contingent Liabilities
(iv) Leverage Ratio
(v) Budgetary Control

(b) Explain briefly the advantages of Zero base budgeting

(c) Describe briefly the various approaches to managing working capital

2. After getting a Masters Degree in Computer Application, Ms. Sweta develops a software for preparing tax returns for individuals. She has a choice of computers on which to install her new process. Under Plan L he would lease a computer for Rs. 5 lakhs per year and process returns with a variable cost of Rs. 2 per return. Under Plan S, he would lease a smaller less efficient computer for Rs. 1 lakh per year, but processing cost under this plan would be Rs. 12 per return. Under either option, the charges to the customer have to be Rs. 22 per return processed.
On the basis of the above data :
(i) Which plan has a higher degree of operating leverage?
(ii) Construct break-even charts for the two options.
(iii) At what volume of tax returns would the operating profit under either option be the same ?
(iv) Which option is more risky ?

3. What is capital structure? Write down the features of an appropriate capital structure.

4.
(a) Explain the various methods of depreciation by taking suitable example.

(b) What is the rate of return on equity for a company whose profit margin is 6%, total assets/ turnover ratio is 2 times and its equity / total ratio is 40% ?

5.
(a) What is the difference between Absorption costing and Marginal costing? Explain it with a suitable example.

(b) A company has a manufacturing capacity of 1,000 units per month. The cost details are as under:
Direct Material : Rs. 3 per unit
Direct labour : Rs. 2 per unit
Variable overheads : Rs. 1 per unit
Fixed overheads : Rs. 2,000 per month
The company has been selling its product at Rs. 10 per unit.
Due to depression in the market, the product can now be solved only at Rs. 7 per unit. The depression is expected to continue for a period of three months. The accountant advises you to discontinue production since the selling price is les than the total cost of the product. What would be your reaction ?

6. What are the emerging changes in the generally accepted accounting principles (GAAP), and their impact on the development of electronic computer based accounting system ?

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