Question 1

This is a compulsory question with multiple parts requiring calculations, journal entries, and financial analysis in cost accounting.

Accepted Answer

**Part (a): Inventory Management — Primex Limited (Material 'Rex')**

Given: Annual usage = 60,000 units, Cost = ₹10/unit, Ordering cost = ₹800/order, Carrying cost = 15% p.a., Lead time = 10 days, Safety stock = 600 units, Working days = 300.

Daily consumption = 60,000 ÷ 300 = **200 units/day**

**(i) Economic Order Quantity (EOQ):**
EOQ = √(2 × Annual Usage × Ordering Cost ÷ Carrying Cost per unit)
Carrying cost per unit = 15% × ₹10 = ₹1.50
EOQ = √(2 × 60,000 × 800 ÷ 1.50) = √(6,40,00,000 ÷ 1.50) = √6,40,00,000... = **8,000 units**

**(ii) Re-order Level:**
Re-order Level = Safety Stock + (Daily Consumption × Lead Time)
= 600 + (200 × 10) = **2,600 units**

**(iii) Maximum Stock Level:**
Maximum Stock Level = Re-order Level + EOQ – (Normal Daily Consumption × Normal Lead Time)
= 2,600 + 8,000 – (200 × 10) = **8,600 units**

**(iv) Average Stock Level:**
Average Stock Level = Safety Stock + ½ × EOQ
= 600 + ½ × 8,000 = **4,600 units**

---

**Part (b): Journal Entries — Integrated Cost and Financial Accounts**

**(i) Materials Issued:**
Dr. Work-in-Progress Control A/c ₹3,25,000 | Dr. Factory Overhead Control A/c ₹1,15,000 | Cr. Stores Ledger Control A/c ₹4,40,000
*(Direct materials to WIP; indirect materials to factory overhead)*

**(ii) Wages Allocated (25% indirect):**
Direct wages = 75% × ₹6,50,000 = ₹4,87,500 | Indirect wages = 25% × ₹6,50,000 = ₹1,62,500
Dr. Work-in-Progress Control A/c ₹4,87,500 | Dr. Factory Overhead Control A/c ₹1,62,500 | Cr. Wages Control A/c ₹6,5…

Question 2

The following information relates to a bus operator: Cost of the bus ₹ 18,00,000; Insurance charges ₹ 39 p.a.; Manager-cum accountant's salary ₹ 8,000 p.m.; Annual Tax ₹ 50,000; Garage Rent ₹ 2,500 p.m.; Annual repair & maintenance ₹ 1,50,000; Expected life of the bus 15 years; Scrap value at the end of 15 years ₹ 1,20,000; Driver's salary ₹ 15,000 p.m.; Conductor's salary ₹ 12,000 p.m.; Fuel and oil ₹ 2,900; Stationery ₹ 500 p.m.; Diesel and oil (for 10 kms.) ₹ 52; Commission to driver and conductor (shared equally) 10% of collections; Route distance 20 km long. The bus will make 3 round trips for carrying on the average 40 passengers in each trip. Assume 15% profit on collections. The bus will work on the average 25 days in a month. Calculate fare for passenger-km.

Accepted Answer

**Transport Operator (Bus) Costing — Fare per Passenger-Km**

**Step 1 — Operational Data per Month**

Route distance (one way): 20 km. 3 round trips per day = 6 one-way trips × 20 km = **120 km per day**. Monthly km = 120 × 25 = **3,000 km**. Passengers per month = 6 trips/day × 40 passengers × 25 days = 6,000 passengers. **Passenger-km per month = 6,000 × 20 = 1,20,000**.

**Step 2 — Monthly Fixed (Standing) Charges**

Depreciation = (₹18,00,000 − ₹1,20,000) ÷ 15 years = ₹1,12,000 p.a. ÷ 12 = **₹9,333**. Insurance (₹39,000 p.a. ÷ 12) = **₹3,250** (Note: ₹39 p.a. as stated appears to be a misprint; ₹39,000 p.a. assumed as a reasonable figure for a ₹18 lakh bus). Annual Tax (₹50,000 ÷ 12) = **₹4,167**. Repair & Maintenance (₹1,50,000 ÷ 12) = **₹12,500**. Manager salary = ₹8,000. Garage Rent = ₹2,500. Driver salary = ₹15,000. Conductor salary = ₹12,000. Stationery = ₹500. Fuel & oil (fixed) = ₹2,900. **Total Fixed Charges = ₹70,150**.

**Step 3 — Monthly Variable (Running) Charges**

Diesel & oil: 3,000 km ÷ 10 km × ₹52 = **₹15,600**.

**Step 4 — Total Cost Excluding Commission = ₹70,150 + ₹15,600 = ₹85,750**

**Step 5 — Determining Total Collections (C)**

Commission to driver & conductor = 10% of C. Profit = 15% of C. Therefore, cost (excl. commission) + commission + profit = collections.

₹85,750 + 0.10C + 0.15C = C → 0.75C = ₹85,750 → **C = ₹1,14,333**.

**Step 6 — Fare per Passenger-Km**

Fare per passenger-km = ₹1,14,333 ÷ 1,20,000 = **₹0.953 per passenger-km (approx. ₹0…

Question 3

You are required to prepare the Balance Sheet of the company as on 31st March 2013 with the help of following information: Share Capital ₹ 5,75,000; Working capital (CA-CL) ₹ 1,50,000; Gross Margin 25%

Accepted Answer

**Note on Incomplete Data:** The question as presented provides only three pieces of information — Share Capital ₹5,75,000; Working Capital (CA − CL) ₹1,50,000; and Gross Margin 25%. This is **insufficient** to prepare a complete Balance Sheet independently. A standard 8-mark ratio-based Balance Sheet problem typically requires additional ratios such as Current Ratio (to split CA and CL individually), Fixed Assets to Net Worth ratio or total assets figure, Debt-Equity or Long-term loan data, Stock Turnover Ratio, and Net Sales or Net Profit figure. The Gross Margin of 25% is generally used alongside Sales/COGS to derive Stock or Debtors via turnover ratios.

**Framework of Solution (with available data):**

From the given data we can establish:

**Working Capital** = Current Assets − Current Liabilities = ₹1,50,000. Without the Current Ratio, the individual values of CA and CL cannot be determined.

**Share Capital** = ₹5,75,000. This represents the Equity side, but without Reserves & Surplus, Long-term Borrowings, and other liabilities, the total of Sources of Funds cannot be computed.

**Gross Margin 25%** means Cost of Goods Sold = 75% of Sales. This ratio is used to back-calculate Stock (via Stock Turnover Ratio) or Sales (via Net Profit Ratio), neither of which is provided here.

**Conclusion:** The question appears to be **incomplete as stated** — critical ratios/figures are missing. Students appearing for CA Intermediate May 2026 should note that such questions in the …

Question 4

The rate of change of labour force in a company during the year ending 31st March, 2013 was calculated as 1%, 8% and 5% respectively under 'Flux Method', 'Replacement method' and 'Separation method'. The number of workers separated during the year is 40. You are required to calculate: (i) Average number of workers on roll; (ii) Number of workers replaced during the year; (iii) Number of new accessions i.e. new recruitment; (iv) Number of workers at the beginning of the year.

Accepted Answer

**Note:** The Flux Method rate of '1%' in the question appears to be a typographical error and should read **13%**, as 13 = 8 + 5 (Flux rate = Separation rate + Replacement rate under the standard formula). This is consistent with the classic ICAI-pattern problem and yields mathematically consistent results.

**Formulae Used:**

**Separation Method:** Rate = (Number of Separations ÷ Average Workers) × 100

**Replacement Method:** Rate = (Number of Replacements ÷ Average Workers) × 100

**Flux Method:** Rate = (Number of Separations + Number of New Accessions) ÷ Average Workers × 100

**(i) Average Number of Workers on Roll:**
Using the Separation Method:
5 = (40 ÷ Average Workers) × 100
Average Workers = 40 × 100 ÷ 5 = **800 workers**

**(ii) Number of Workers Replaced:**
Using the Replacement Method:
8 = (Number Replaced ÷ 800) × 100
Number Replaced = 8 × 800 ÷ 100 = **64 workers**

**(iii) Number of New Accessions (New Recruitment):**
Using the Flux Method:
13 = (40 + New Accessions) ÷ 800 × 100
40 + New Accessions = 13 × 800 ÷ 100 = 104
New Accessions = 104 − 40 = **64 workers**

This means all 64 new accessions were replacements (net workforce expanded since 64 joined but only 40 left).

**(iv) Number of Workers at the Beginning of the Year:**
Let workers at beginning = B
Workers at end = B + New Accessions − Separations = B + 64 − 40 = B + 24
Average = (B + B + 24) ÷ 2 = 800
2B + 24 = 1600
2B = 1576
**B = 788 workers**

**Verification:** End of year = 788 + 24 = 812; Ave…

Question 5

APZ Limited is considering to select a machine between two machines 'A' and 'B'. The two machines have identical capacity, do exactly the same job, but designed differently. Machine 'A' costs ₹ 8,00,000, having useful life of three years. It costs ₹ 3,00,000 per year to run. Machine 'B' is an economy model costing ₹ 6,00,000, having useful life of two years. It costs ₹ 2,50,000 per year to run. The cash flows of machine 'A' and 'B' are real cash flows. The costs are forecasted in rupees of constant purchasing power. Ignore taxes. The opportunity cost of capital is 10%.

Accepted Answer

**Equivalent Annual Cost (EAC) Method**

Since Machine A and Machine B have **unequal useful lives** (3 years vs. 2 years) but perform identical functions, direct NPV comparison is inappropriate. The correct approach is the **Equivalent Annual Cost (EAC) method**, which converts the total present value of costs into an annual equivalent for fair comparison. The machine with the **lower EAC** should be selected.

**Given Data:**
- Opportunity cost of capital: **10%**
- PVIFA(10%, 3 years) = **2.487**
- PVIFA(10%, 2 years) = **1.736**

---

**Machine A — Life: 3 Years**

Step 1: Present Value of total costs
PV = Initial Cost + (Annual Running Cost × PVIFA(10%, 3))
PV = ₹8,00,000 + (₹3,00,000 × 2.487)
PV = ₹8,00,000 + ₹7,46,100 = **₹15,46,100**

Step 2: Equivalent Annual Cost
EAC(A) = ₹15,46,100 ÷ 2.487 = **₹6,21,538**

---

**Machine B — Life: 2 Years**

Step 1: Present Value of total costs
PV = Initial Cost + (Annual Running Cost × PVIFA(10%, 2))
PV = ₹6,00,000 + (₹2,50,000 × 1.736)
PV = ₹6,00,000 + ₹4,34,000 = **₹10,34,000**

Step 2: Equivalent Annual Cost
EAC(B) = ₹10,34,000 ÷ 1.736 = **₹5,95,622**

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**Decision:**

EAC of Machine B (₹5,95,622) < EAC of Machine A (₹6,21,538)

**APZ Limited should select Machine B**, as its equivalent annual cost is lower by ₹25,916 per year. Even though Machine B has a higher annual running cost (₹2,50,000 vs — wait: Machine B running cost ₹2,50,000 < Machine A ₹3,00,000), its significantly lower capital outlay (₹6,00,000 vs ₹8,00,000) re…

Question 6

SP Limited produces a product 'Tempex' which is sold in a 10 Kg packet. Budgeted output for the third quarter of a year was 10,000 Kg. Actual output and actual cost for this quarter are as follows: Direct Materials 3,900 Kg @ ₹ 45 per Kg: ₹ 4,09,000; Direct Labour 7,000 hours @ ₹ 52 per hour: ₹ 3,64,000; Variable Overhead incurred: ₹ 72,500; Fixed Overhead incurred: ₹ 1,02,000. You are required to calculate: (i) Material Usage Variance, (ii) Material Price Variance, (iii) Material Cost Variance, (iv) Labour Efficiency Variance, (v) Labour Rate Variance, (vi) Labour Cost Variance, (vii) Variable Overhead Cost Variance, (viii) Fixed Overhead Cost Variance.

Accepted Answer

**Solution: Standard Costing and Variance Analysis**

**Critical Issue:** The problem statement does not provide actual output or standard quantities and rates, which are essential for variance calculations. The following solution assumes:
- Actual output = Budgeted output = 10,000 Kg
- Standard material consumption = 3,900 Kg (actual used) @ standard rate ₹40/Kg (reasonable assumption given actual ₹45/Kg)
- Standard labour hours = 7,000 hours (actual used) @ standard rate ₹50/hour (reasonable assumption given actual ₹52/hour)
- Standard variable overhead = ₹70,000 for 10,000 Kg
- Standard fixed overhead = ₹1,02,000 (assumed actual = standard)

Variances calculated below:

**(i) Material Usage Variance = (SQ - AQ) × SR**
Where SQ (for 10,000 Kg output) = 3,900 Kg, AQ = 3,900 Kg, SR = ₹40/Kg
= (3,900 - 3,900) × ₹40 = **₹0 (Favorable/Neutral)**

**(ii) Material Price Variance = (SR - AR) × AQ**
Where SR = ₹40/Kg, AR = ₹45/Kg, AQ = 3,900 Kg
= (₹40 - ₹45) × 3,900 = **-₹19,500 (Unfavorable)**

**(iii) Material Cost Variance = MUV + MPV**
= ₹0 + (-₹19,500) = **-₹19,500 (Unfavorable)**

**(iv) Labour Efficiency Variance = (SH - AH) × SR**
Where SH (for 10,000 Kg) = 7,000 hours, AH = 7,000 hours, SR = ₹50/hour
= (7,000 - 7,000) × ₹50 = **₹0 (Favorable/Neutral)**

**(v) Labour Rate Variance = (SR - AR) × AH**
Where SR = ₹50/hour, AR = ₹52/hour, AH = 7,000 hours
= (₹50 - ₹52) × 7,000 = **-₹14,000 (Unfavorable)**

**(vi) Labour Cost Variance = LEV + LRV**
= ₹0 + (-₹14,000) = **-₹14,000 …

Question 7

The following are the summarised Balance Sheet of Pixon Limited as on 31st March 2012 and 2013. Additional information: (1) Depreciation charged during the year 2012-13: On Plant - ₹ 40,000; On Building - ₹ 40,000. (2) Provision for tax of ₹ 10,000 was made during the year 2012-13. (3) Interim dividend paid during the year 2012-13: Interim Dividend - ₹ 80,000; Corporate Dividend Tax - ₹ 13,596. Prepare: (i) Statement of changes in working capital, (ii) Funds flow statement for the year ended 31st March, 2013.

Accepted Answer

**Note:** The question references a 'summarised Balance Sheet of Pixon Limited as on 31st March 2012 and 2013,' but the actual balance sheet figures (share capital, reserves, loans, fixed assets, current assets, current liabilities, etc.) were **not included** in the question as presented. Without those figures, the numerical solution cannot be completed accurately.

However, the **complete methodology** is set out below so the student can apply it once the figures are available.

**Concept: Funds Flow Statement**

In the funds flow framework (as covered in ICAI Intermediate Paper 3 – Financial Management), **'Funds' = Net Working Capital** (Current Assets minus Current Liabilities). The statement has two parts.

**(i) Statement of Changes in Working Capital**

List every current asset and current liability for both years. For each item:
- Increase in a current asset → **Decrease** in working capital (use of funds).
- Decrease in a current asset → **Increase** in working capital (source of funds).
- Increase in a current liability → **Decrease** in working capital (use of funds).
- Decrease in a current liability → **Increase** in working capital (source of funds).

The net figure gives the **Net Increase / Decrease in Working Capital**, which is the balancing figure carried to the Funds Flow Statement.

**(ii) Funds Flow Statement**

**Sources of Funds:**
- Funds from Operations (see working note below for treatment of given items)
- Issue of Share Capital (increase in share…

Question 8

यदि निम्नलिखित अभिलेखों को अपने अकाउंट्स में कैसे लिए जाएंगे? प्रश्न 3 के उत्तर देते हुए निम्नलिखित को ध्यान में रखें: प्रारम्भ में 10 लakh या उससे कम विलय, 450; प्रारम्भ में ₹ 4,45 की विलय, 400; पूर्वलेखित अभिलेख के ₹ 10 की विलय, 80; विविध अभिलेख, 200; कुल लाभ 1,130; और जो विलय के लिए आगे दिए गए हैं: प्रारम्भ में 8,000 लakh, या ₹ 46 की विलय, 4,09,000; प्रारम्भ में 7,000 की या ₹ 52 की विलय, 3,64,000; पूर्वलेखित अभिलेख, 72,500; विविध अभिलेख, 1,92,000। निम्नलिखित को समझौते या लेन-देन से संबंधित मदें: (i) सामग्री विलय (ii) सामग्री विलय (iii) सामग्री विलय

Accepted Answer

**Note on Question Clarity:** The question as provided appears to have been significantly corrupted or machine-translated from Hindi, resulting in loss of critical context. Key terms like "विलय" (which can mean merger/amalgamation/write-off depending on context) and the numerical data points are presented without sufficient surrounding context to reconstruct the precise accounting scenario. Below is an interpretation-based answer assuming this relates to **Amalgamation Accounting under AS 14 (Accounting Standard 14 – Accounting for Amalgamations)**, which is the most probable topic given the terminology and Paper 1 context.

**Framework for Amalgamation Journal Entries (AS 14 – Pooling of Interests / Purchase Method):**

**(i) Recording Assets and Liabilities of Transferor Company:**
All identifiable assets and liabilities of the transferor company are recorded at their **book values** (Pooling of Interests) or **fair values** (Purchase Method). Journal Entry: Sundry Assets A/c Dr. / To Sundry Liabilities A/c / To Transferor Company A/c (with difference as goodwill or capital reserve).

**(ii) Discharge of Purchase Consideration:**
The purchase consideration agreed upon is discharged by issue of shares, debentures, or cash. Journal Entry: Transferor Company A/c Dr. / To Share Capital A/c / To Securities Premium A/c (if applicable).

**(iii) Treatment of Goodwill or Capital Reserve:**
If the purchase consideration exceeds net assets acquired → **Goodwill** is recognised (amort…

Question 9

Explain and elaborate the following:

Accepted Answer

**Part (a): Terms in Process Costing**

**(i) Equivalent Production**

**Equivalent Production** (also called equivalent units) refers to the expression of incomplete or partially processed units in terms of fully completed units, so that the total cost of a process can be meaningfully apportioned between completed output and closing work-in-progress (WIP).

For example, if 200 units are 50% complete with respect to conversion costs, they are equivalent to 100 fully completed units. The formula is:

**Equivalent Units = Completed Units + (WIP Units × Degree of Completion)**

The concept is applied separately for materials, labour, and overheads because their stages of completion may differ. This ensures accurate cost-per-unit computation and fair valuation of WIP — which is critical under both FIFO and Weighted Average methods of process costing.

**(ii) Inter-process Profit**

**Inter-process profit** arises when the output of one process is transferred to the next process not at cost, but at a price that includes a notional profit margin (i.e., at market price or a price above cost). The difference between the transfer price and the actual cost of production at that stage is called inter-process profit.

This practice is adopted to: (a) compare the efficiency of each process against market prices, (b) create a sense of accountability at each process centre, and (c) motivate process managers as if they were independent profit centres.

However, inter-process profit creates *…

Question 10

Calculate Machine Hour Rate from the following particulars:
Cost of Machine = ₹ 25,00,000
Salvage Value = ₹ 1,25,000
Estimated life of the machine = 25,000 Hours
Working Hours (per annum) = 3,000 Hours
Hours required for maintenance = 400 Hours
Setting-up time required = 8% of actual working hours

Additional Information:
(i) Power 25 units @ ₹ 5 per unit per hour.
(ii) Cost of repairs and maintenance ₹ 36,000 per annum.
(iii) Chemicals required for operating the machine ₹ 3,600 per month.
(iv) Overhead chargeable to the machine ₹ 11,000 per month.
(v) Insurance Premium (per annum) 2% of the cost of machine
(vi) No. of operators = 02 (looking after three other machines also)
(vii) Salary per operator per month ₹ 18,500

Accepted Answer

**Machine Hour Rate (MHR) Calculation**

**Step 1 — Effective Machine Hours:**
Working hours per annum = 3,000 hrs. Hours for maintenance = 400 hrs. Actual working hours = 3,000 − 400 = **2,600 hrs**. Setting-up time = 8% × 2,600 = **208 hrs**. Effective Machine Hours = 2,600 − 208 = **2,392 hours**.

**Step 2 — Cost Elements:**

**Depreciation:** Calculated on estimated life hours. Rate = (₹25,00,000 − ₹1,25,000) ÷ 25,000 = **₹95.00 per hour**.

**Power:** 25 units × ₹5 per unit per hour = **₹125.00 per hour** (variable, charged per running hour).

**Repairs & Maintenance:** ₹36,000 per annum ÷ 2,392 hours = **₹15.05 per hour**.

**Chemicals:** ₹3,600 × 12 = ₹43,200 per annum ÷ 2,392 = **₹18.06 per hour**.

**Overhead:** ₹11,000 × 12 = ₹1,32,000 per annum ÷ 2,392 = **₹55.18 per hour**.

**Insurance:** 2% × ₹25,00,000 = ₹50,000 per annum ÷ 2,392 = **₹20.90 per hour**.

**Operator Salary:** 2 operators look after this machine plus 3 others = 4 machines total. Annual salary = ₹18,500 × 2 × 12 = ₹4,44,000. Share for this machine = ₹4,44,000 ÷ 4 = ₹1,11,000 per annum ÷ 2,392 = **₹46.41 per hour**.

**Machine Hour Rate = ₹375.60 per hour**

Question 11

PTX Limited is considering a change in its present credit policy. Currently it is evaluating two policies. The company is required to give a return of 20% on incremental cash outlay. The company's variable costs are 70% of the selling price.

Information regarding present and proposed policies:

| | Present Policy | Policy Option 1 | Policy Option 2 |
|---|---|---|---|
| Annual Credit Sales (₹) | 30,00,000 | 42,00,000 | 45,00,000 |
| Debtors turnover ratio | 4 times | 3 times | 2.4 times |
| Loss due to bad debts | 3% of sales | 5% of sales | 6% of sales |

Note: Return on investment in new accounts receivable is based on cost of investment in debtors.

Which option would you recommend?

Accepted Answer

**Evaluation of Credit Policies for PTX Limited**

The evaluation is done by comparing the **incremental benefit (contribution)** from each proposed policy against the **incremental costs (bad debts + opportunity cost of incremental investment in debtors)**.

**Step 1 – Debtors Outstanding (Book Value)**

Debtors = Annual Credit Sales ÷ Debtors Turnover Ratio
- Present: ₹30,00,000 ÷ 4 = ₹7,50,000
- Option 1: ₹42,00,000 ÷ 3 = ₹14,00,000
- Option 2: ₹45,00,000 ÷ 2.4 = ₹18,75,000

**Step 2 – Investment in Debtors (at Cost)**

Since the note specifies return is based on **cost of investment**, investment = Debtors × Variable Cost Ratio (70%):
- Present: ₹7,50,000 × 70% = ₹5,25,000
- Option 1: ₹14,00,000 × 70% = ₹9,80,000
- Option 2: ₹18,75,000 × 70% = ₹13,12,500

**Step 3 – Incremental Investment and Required Return @ 20%**

- Option 1 vs Present: (₹9,80,000 − ₹5,25,000) = ₹4,55,000 → Required return = ₹4,55,000 × 20% = **₹91,000**
- Option 2 vs Present: (₹13,12,500 − ₹5,25,000) = ₹7,87,500 → Required return = ₹7,87,500 × 20% = **₹1,57,500**

**Step 4 – Incremental Contribution (Contribution = 30% of Sales)**

- Present contribution: ₹30,00,000 × 30% = ₹9,00,000
- Option 1 contribution: ₹42,00,000 × 30% = ₹12,60,000 → Incremental = **₹3,60,000**
- Option 2 contribution: ₹45,00,000 × 30% = ₹13,50,000 → Incremental = **₹4,50,000**

**Step 5 – Bad Debt Losses**

- Present: ₹30,00,000 × 3% = ₹90,000
- Option 1: ₹42,00,000 × 5% = ₹2,10,000 → Incremental bad debts = **₹1,20,000**
- Opt…

Question 12

Answer any four of the following:

Accepted Answer

**Note to Student: All five sub-parts are solved below. Attempt any four in the examination.**

**(a) Margin of Safety (MOS) and its Relationship with Operating Leverage**

**Margin of Safety (MOS)** refers to the difference between the actual (or budgeted) sales and the Break-Even Point (BEP) sales. It represents the extent to which sales can fall before the firm starts incurring a loss.

**MOS = Actual Sales − Break-Even Sales**
**MOS Ratio = (Actual Sales − BEP Sales) / Actual Sales × 100**

A higher MOS indicates a stronger, more stable business as there is a larger cushion before losses occur.

**Relationship between Operating Leverage (OL) and MOS Ratio:**

**Operating Leverage = Contribution / EBIT (Profit)**

**MOS Ratio = EBIT / Contribution = 1 / Operating Leverage**

Therefore: **Operating Leverage × MOS Ratio = 1**

This inverse relationship means:
- A firm with **high operating leverage** has a **low MOS ratio**, implying it is closer to its BEP and hence more risky.
- A firm with **low operating leverage** has a **high MOS ratio**, indicating greater safety from losses.

This relationship helps management assess the risk profile of the business and the sensitivity of profits to changes in sales volume.

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**(b) Steps Involved in Budgetary Control Technique**

Budgetary control is a system of controlling costs and revenues by comparing actual results with budgeted figures and taking corrective action. The steps are:

1. **Establishment of Budget Centres:** The…

Question 13

Multiple parts question with items (a) कर प्रभाव विलय (b) कर प्रभाव विलय (c) कर प्रभाव विलय (d) कर प्रभाव विलय (viii) कर अभिलेख प्रभाव विलय (b) April 31, 2012 to 2013 के संपर्क विलय से संबंधित:

Accepted Answer

**Note to Examiner/Student:** The question as provided appears to be significantly garbled — the Hindi text ("कर प्रभाव विलय" repeated across sub-parts) does not constitute a coherent, solvable problem. The actual numerical data, Trial Balance figures, and specific adjustment details for the 2012-13 transactions appear to be missing or corrupted in transmission. A meaningful exam-standard solution cannot be constructed without the actual figures.

**What the question likely covers (based on structural clues):**

Paper 3 of CA Intermediate covers **Financial Accounting**. A Trial Balance Adjustments question of 8 marks for the year 2012-13 typically tests the following concepts:

**Trial Balance and Adjustments Framework:** Under **AS 1 (Disclosure of Accounting Policies)** and general accounting principles, a Trial Balance is prepared after posting all ledger entries. Adjustments are then made for items such as: (i) Outstanding expenses, (ii) Prepaid expenses, (iii) Accrued income, (iv) Income received in advance, (v) Depreciation on fixed assets, (vi) Provision for bad and doubtful debts, (vii) Closing stock valuation, and (viii) Interest on capital/drawings.

**Closing Stock** is valued at cost or net realisable value, whichever is lower, as per **AS 2 (Valuation of Inventories)**.

**Depreciation** is charged under **AS 10 (Property, Plant and Equipment)** (or the erstwhile AS 6 applicable for 2012-13 period) using the Straight Line Method (SLM) or Written Down Value (WDV)…

CA Inter Taxation

Drill 5 questions from this paper — instant grading

Worked Solution

Write it like this

1The skeleton

2Examiner-rewarded phrases

3Common trap