QUALITY QUESTION OF ACCOUNTS NEB 12 | ASSIGNMENT 04 | DUE DATE 6 APRIL

Ultimate Accountancy Challenge: NEB Grade 12

Test your mastery with these high-level, complex board-style questions.

Question 1: Corporate Final Accounts (Advanced Level)

The following Trial Balance was extracted from the books of Himalayan Crest Industries Ltd. as of 31st Ashad, 2080:

Debit Balances	Rs.	Credit Balances	Rs.
Opening Stock (Raw Materials & WIP)	1,20,000	Equity Share Capital (Rs. 100 each)	8,00,000
Purchases	8,50,000	Sales Revenue	14,20,000
Productive Wages	1,80,000	10% Bank Loan (Taken on 1st Kartik, 2079)	2,00,000
Factory Power & Fuel	45,000	Sundry Creditors	1,15,000
Carriage Inwards	18,000	Provision for Bad Debts	8,000
Administrative Salaries	1,20,000	Profit & Loss A/c (Cr. Balance from 2079)	65,000
Rent, Rates & Insurance	42,000	Discount Received	12,000
Plant & Machinery	4,50,000	Outstanding Wages	5,000
Office Furniture	80,000
Sundry Debtors	2,40,000
Cash at Bank	1,85,000
Advance Income Tax Paid	35,000
Director's Fees	25,000
Interim Dividend Paid	40,000
Total	26,25,000	Total	26,25,000

Tricky Additional Information:

1. Closing Stock: Valued at Rs. 1,60,000. However, this includes goods costing Rs. 20,000 which were sent to a customer on "Sale or Return" basis and recorded as actual sales for Rs. 25,000. The approval period has not yet expired.
2. Capital Expenditure Error: Productive wages include Rs. 30,000 paid for the installation of a new Plant & Machinery on 1st Poush, 2079.
3. Depreciation: Depreciate Plant & Machinery at 15% p.a. and Office Furniture at 10% p.a.
4. Unrecorded Transactions: Goods worth Rs. 15,000 were destroyed by an earthquake, and the insurance company admitted a claim of Rs. 10,000. Furthermore, goods worth Rs. 5,000 were distributed as free samples.
5. Debtors & Provision: Write off further bad debts of Rs. 10,000. Create a Provision for Doubtful Debts at 5% and a Provision for Discount on Debtors at 2%.
6. Corporate Tax: Provide for Income Tax at 25% on net profit.
7. Manager's Commission: The managing director is entitled to a commission of 5% on Net Profit after charging both income tax and his commission.
8. Appropriations: Transfer Rs. 20,000 to General Reserve and propose a final dividend of 10% on Equity Share Capital.

Required: Trading Account, Profit & Loss A/c, Profit & Loss Appropriation A/c, and Balance Sheet.

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Question 2: Comprehensive Unit Costing & Tender Sheet

Pioneer Manufacturing Ltd. presents the following detailed data regarding its production for the year ended 31st Chaitra, 2080. During the year, the company produced 25,000 units of its flagship product.

Opening Stock of Raw Materials	Rs. 80,000
Purchases of Raw Materials	Rs. 6,50,000
Carriage Inwards on Materials	Rs. 20,000
Closing Stock of Raw Materials	Rs. 1,00,000
Productive Direct Wages	Rs. 4,00,000
Chargeable Direct Expenses	Rs. 50,000
Opening Work-in-Progress (WIP)	Rs. 35,000
Closing Work-in-Progress (WIP)	Rs. 45,000

• Factory Overheads: Absorbed at 75% of Direct Wages.
• Office & Admin Overheads: Absorbed at 20% of Factory Cost.
• Selling & Distribution Overheads: Rs. 4 per unit sold.
• Finished Goods: There was no opening stock of finished goods. The closing stock of finished goods at the end of the year was 5,000 units.
• Sales: The remaining units were sold to yield a profit of 25% on the Selling Price.

Part B: The Tender Quotation

The company receives a government tender request to supply 10,000 units in the upcoming year. The estimation department provides the following forecasts:

• The price of raw materials will surge by 20%.
• Direct wage rates will increase by 10%.
• Factory overheads will be recovered as a percentage of Direct Wages (based on previous year's ratio).
• Office and Admin overheads will be recovered as a percentage of Factory Cost (based on previous year's ratio).
• Selling & Distribution overheads will decrease by Rs. 1 per unit.
• The company desires a net profit of 20% on Total Cost for this government tender.

Required:
a) Cost Sheet for 2080 (Showing Prime Cost, Factory Cost, Cost of Production, Cost of Goods Sold, Total Cost, and Sales).
b) Tender Sheet for 10,000 units showing estimated Cost and Quotation Price.

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Question 3: Cash Flow Statement (Direct Approach)

Below are the summarized Balance Sheets of Everest Traders for the years ending 31st Ashad 2079 and 2080.

Liabilities	2079 (Rs.)	2080 (Rs.)	Assets	2079 (Rs.)	2080 (Rs.)
Equity Share Capital	5,00,000	7,00,000	Plant & Machinery	6,00,000	8,50,000
Share Premium	-	20,000	Accumulated Depreciation	(1,20,000)	(1,50,000)
General Reserve	1,00,000	1,50,000	Long-term Investments	1,00,000	80,000
Profit & Loss A/c	80,000	1,10,000	Sundry Debtors	1,40,000	1,10,000
12% Debentures	2,00,000	1,00,000	Inventories (Stock)	1,50,000	2,10,000
Sundry Creditors	90,000	60,000	Prepaid Expenses	10,000	15,000
Provision for Tax	40,000	55,000	Cash & Bank Balance	1,30,000	1,80,000
Proposed Dividend	50,000	70,000
Outstanding Expenses	20,000	15,000
Total	10,80,000	12,80,000	Total	10,80,000	12,80,000

Income Statement Extract for 2080:

• Sales Revenue: Rs. 15,00,000
• Cost of Goods Sold (COGS): Rs. 9,00,000
• Operating Expenses (excluding depreciation): Rs. 1,80,000

Additional Tricky Information:

1. During the year, a part of the Plant & Machinery costing Rs. 80,000 (Accumulated depreciation thereon Rs. 30,000) was sold for Rs. 45,000.
2. Investments costing Rs. 20,000 were sold at a profit of 20%, which was credited to the P&L Account.
3. Income tax paid during the year amounted to Rs. 45,000.
4. Dividend paid during the year amounted to Rs. 50,000.
5. Interest on Debentures was paid fully in cash.

Required: Cash Flow Statement for the year ended 31st Ashad, 2080 using the Direct Method.

💡 Pro-Hints for Solving:

For Final Accounts:

• Wage Reclassification: Deduct Rs. 30k from Wages and add it to Plant & Machinery. Don't forget that depreciation on this Rs. 30k will only be for 6 months (Poush 1 to Ashad 31).
• Sale or Return: Deduct Rs. 25k from both Sales and Debtors. Since it was included in closing stock already, do NOT add the Rs. 20k cost to closing stock again, but ensure your Trading account credit side only reflects true stock.
• Hidden Interest: The Bank Loan of 2,00,000 was taken on 1st Kartik. Calculate 10% interest for 9 months (Kartik to Ashad) and record it as outstanding.
• Commission Formula: Commission = [Net Profit (after Tax) * 5] / 105.

For Costing & Tender:

• Closing Stock of FG Valuation: Valued at the current year's Cost of Production per unit. (Total COP / 25,000 units) * 5,000 units.
• Tender Overheads: Find the per-unit material and labor costs from the base year, increase them by 20% and 10% respectively, then multiply by 10,000 units for the tender.
• Tender Profit: Profit is stated as 20% on Total Cost (not Sales), so simply calculate 20% of your estimated Total Cost.

For Cash Flow (Direct Method):

• Plant Ledger: Open a T-account for Plant & Machinery (at cost) AND Accumulated Depreciation. This is the only way to accurately find the cash paid for new machinery purchases.
• Cash from Customers: Sales + Decrease in Debtors.
• Cash paid to Suppliers: COGS + Increase in Inventory + Decrease in Creditors.

✅ Final Verification (Check your balances!)

1. Final Accounts:
Gross Profit: Rs. 6,88,000
Net Profit (After Tax & Commission): Rs. 1,60,714 (Approx.)
Balance Sheet Total: Rs. 15,31,714

2. Costing & Tender:
Cost of Production (Base Year): Rs. 16,68,000 (Rs. 66.72 per unit)
Cost of Goods Sold (Base Year): Rs. 13,34,400
Net Profit (Base Year): Rs. 3,53,600
Tender Total Estimated Cost: Rs. 7,72,560
Tender Quotation Price: Rs. 9,27,072

3. Cash Flow Statement:
Net Cash from Operating Activities (CFO): Rs. 3,23,000
Net Cash from Investing Activities (CFI): Rs. (2,61,000)
Net Cash from Financing Activities (CFF): Rs. (12,000)
Net Increase in Cash & Bank: Rs. 50,000 (Matches opening 1,30,000 to closing 1,80,000)

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