MGT101 Final Term Solved Subjective

MGT101 FINAL TERM SOLVED SUBJECTIVE

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Q49. Mr. A, B & C entered into a partnership. At the beginning of the year their capital balances were Rs. 180,000, Rs. 140,000 and Rs. 80,000 respectively. Profit or loss is to be divided as: (3 marks)

Ø Mr. A: one-half Ø Mr. B: one-third Ø Mr. C: one-sixth

Required:

If profit is Rs. 390,000, calculate the share of profit for all the partners.

Answer: Total profit 390,000 Share of A = 390,000 * 1/2 = 195,000 Share of b = 390,000 * 1/3 = 130,000 Share of C = 390,000 * 1/6 = 65000

Q50. Write down the components of Cash Flow Statement. (3 marks)

Answer: Cash Flow statement has three components.

1. Cash related to operating activities of the business
2. Cash related to Investment made by the business
3. Cash related to the financial activities of the business

Q51. What is bank overdraft? Mention an example for this. Why companies have to pay mark up on it. Under which head mark up paid on overdraft is shown in financial statement. (5 marks)

Answer: Bank overdraft is the amount drawn over the balance exists in the account of business in the bank. This amount is the liability of the business and a kind of short term loan. As the bank has provided loan, so the bank charge interest (markup) on this amount as they have provided the short term loan to the business for markup incentive. As we know that the markup on overdraft relates to the finance of the business. So, it is placed under the head of financial charges in the financial statements.

Q52. Write note on following terms. (5 marks)

Ø Net capital employed Ø Share holder's equity Ø Gain on sale of Fixed Assets Ø Return on Investment

Q53. Indicate in which section of the Balance Sheet each of the following accounts is classified. Use the symbols CA for current assets, NCA for non current assets, CL for current liabilities, LTL for long term liabilities, and SHE for stockholders’ equity. (5 marks)

Accounts

Section

Prepaid rent CA Dividends payable CL Salaries payable CL Prepaid insurance CA Retained earnings CA Mortgage payable (due in 15 years) LTL Unearned service revenue CA Accounts receivable CA Land NCA Office supplies NCA

Q54. Write a note on legal documents required for the formation of company. (10 marks)

LEGAL DOCUMENTS REQUIRED FOR FORMATION OF COMPANY:

MEMORENDUM OF ASSOCIATION: It contains the following information

1. Name of company.
2. Place of registered office
3. Objective
4. Amount of share capital with which company registers.

ARTICLES OF ASSOCIATION: It contains the following information A document that contains all the policies and other matters necessary to run the business of the company. It is signed by all the members of the company.

Q52. Briefly explain the financial statements prepared by the organization. Why these are important for manufacturing concern? (10 marks)

Answer: The financial statements prepared by any organization are as follows:

1. Profit and loss account: It shows the performance of the business in a given period. It shows the profitability of business which shows the success or failure of the business.
2. Balance sheet: Balance sheet shows the position of business at a given point. It shows the resources available by the business and the resources invested by the owner and other loans.
3. Cash flow statements: Cash flow statements show the generation of cash and its usage over a given period.

IMPORTANCE OF FINANCIAL STATEMENTS FOR MANUFACTURING

CONCERN: These financial statements are important for manufacturing concern organization as they provide information related to financial affairs of the organization. The profitability and liquidity, the resources available to the company and the generation of cash and its usage over a given period which provides reasonable information to the management to take decisions.

Q54. Pass the rectifying entries to correct the following errors: (10 marks)

Mr. “Ali” purchased goods of Rs. 1,500 on cash, but omitted to enter in the books of accounts. An amount of Rs. 5,000 received from Mr. Amir, was credited to the account of Mr. Ameer. Goods returned worth Rs. 500 to Mr. “B” wrongly debited to sales Account. A purchase of goods from Mr. “B” of Rs. 400 has been wrongly debited to

Rectification of Errors

Error 1.