KSLU Solved Question Papers
Cost Accounting
Previous Year Question Paper with Solution
B.Com. LL.B. (Five Years) · Sem 3
2026 Jan (100 marks) Examination
munotes.in
Mumbai
B.Com. LL.B. (Five Years) Sem 3 Cost Accounting 2026 Jan (100 marks) Question Paper with Solutions
First published on munotes.in on 21 October 2026.
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Contents
The questions below are the paper as Karnataka State Law University set it at the 2026 Jan (100 marks) examination, in the order it was set.
MarksPage
The Paper as Set
The questions in this volume are the questions asked at the 2026 Jan (100 marks) examination, reproduced as Karnataka State Law University set them, in the order it set them. Long reading passages are shortened to their first and last lines and our summary; the original paper prints them in full. Only the answers are ours. See the original question paper.
Duration 3 hours · Total marks 100 · 13 questions answered
How to use this volume
Solve the paper first, under exam conditions and against the clock. Then read the answers here and mark your own. Reading a solution before attempting the question feels productive and teaches very little, because recognising an answer is not the same as being able to write one.
Q1Explain the different types of budget.[16]
Answer
For full marks, cover: what a budget is; the bases on which types are told apart; each type explained with its purpose and, where it helps, a short worked figure (sales, production, materials, labour, overhead, cash, capital expenditure, master budget; long-term, short-term and current; fixed and flexible; zero-base and performance budgets); how they fit together; a table; and a conclusion.
What a budget is
A budget is a plan of action for a future period, approved by management and expressed in figures. It may be stated in money, units, hours or kilograms. A firm does not prepare one budget but a family of them, each with its own job. The types are told apart on four bases. These are the function they plan, the time they cover, their flexibility to changes in output, and the approach used to build them.
Part 1: types of budget by function
1. Sales budget
The sales budget forecasts the quantity and value of sales for the period, by product, by region and by month. It is usually the first budget, because the market decides how much the firm can sell. It rests on past sales, orders in hand, the reports of salesmen, market research, prices of rivals and the general state of trade.
For example, if a firm expects to sell 12,000 units at 50 rupees each, its sales budget is 12,000 × 50 = 6,00,000 rupees.
2. Production budget
The production budget shows how many units must be made. It is built from the sales budget and the planned stocks of finished goods:
Production = budgeted sales + desired closing stock - opening stock.
Suppose sales are 12,000 units, the closing stock wanted is 2,000 units and the opening stock is 1,500 units. Production is then 12,000 + 2,000 - 1,500 = 12,500 units. The production budget must also respect the plant capacity.
3. Materials budget
There are two parts. The materials usage budget shows the quantity of each material needed for the planned production. The materials purchase budget shows how much must be bought, after allowing for opening and closing stocks of material.
If each unit needs 2 kg and production is 12,500 units, usage is 2 × 12,500 = 25,000 kg. With an opening stock of 3,000 kg and a desired closing stock of 4,000 kg, purchases are 25,000 + 4,000 - 3,000 = 26,000 kg.
4. Labour budget
The labour budget shows the hours of each grade of labour needed and their cost. It helps the personnel department plan recruitment, training and overtime. If each unit takes 3 hours at 40 rupees an hour, 12,500 units need 3 × 12,500 = 37,500 hours costing 37,500 × 40 = 15,00,000 rupees.
5. Overhead budgets
Separate budgets are made for factory overheads, administration overheads, and selling and distribution overheads. Each is split into fixed and variable parts, so that it can be adjusted to the actual level of activity.
6. Cash budget
The cash budget forecasts the receipts and payments of cash month by month, and the closing balance of each month. It shows when cash will be short, so a loan can be arranged in time, and when there will be a surplus to invest. A month's closing balance is the opening balance plus receipts less payments. For instance, 20,000 + 90,000 - 75,000 = 35,000 rupees.
7. Capital expenditure budget
This budget plans spending on fixed assets such as land, buildings, plant and vehicles. Such spending is large and long-lasting, so it is usually planned for several years and approved by the board.
8. Research and development budget
This budget plans spending on new products, new processes and improvements. Its results are uncertain, so it is often fixed as a share of sales or as a lump sum.
9. Master budget
The master budget brings all the functional budgets together. It contains the budgeted profit and loss account and the budgeted balance sheet for the period. It is approved by the board and becomes the overall plan of the business.
Part 2: types of budget by time
- Long-term budget. It covers three to ten years. It deals with growth, new plants, new markets and long-term finance. Its figures are broad.
- Short-term budget. It covers a year or less, normally the financial year. Most functional budgets are of this type.
- Current budget. It covers a month or a quarter. It applies the short-term plan to present conditions and is used for close control.
Part 3: types of budget by flexibility
- Fixed budget. It is prepared for one level of output. It is not changed when actual output differs. It is suitable only where activity is steady.
- Flexible budget. It is prepared for a range of output levels. Variable costs are allowed for at the variable rate, fixed costs at their fixed total.
A short example shows the difference. A budget for 10,000 units allows variable cost of 5 rupees a unit and fixed cost of 20,000 rupees. The total is 5 × 10,000 + 20,000 = 70,000 rupees. If only 8,000 units are made, a fixed budget still shows 70,000 rupees. A flexible budget allows 5 × 8,000 + 20,000 = 60,000 rupees. If actual cost is 64,000 rupees, the fixed budget suggests a saving. The flexible budget correctly shows an overspending of 64,000 - 60,000 = 4,000 rupees.
Part 4: types of budget by approach
- Zero-base budget. Each manager must justify every activity and every rupee from zero, as if the activity were new. Last year's figure is not taken as the starting point. It removes old and wasteful spending, but it takes much time.
- Performance budget. It links spending to the work done and the results achieved, such as kilometres of road built or patients treated. It is widely used by government departments.
- Rolling budget. A new month or quarter is added as each one passes, so the budget always looks a full year ahead.
Who prepares the budgets
Budgets are prepared under a budget committee, usually made up of the chief executive and the heads of sales, production, purchase, personnel and finance. A budget officer, often the cost accountant, co-ordinates the work and collects the figures. A budget manual sets out the procedure, the forms, the time-table and the responsibility of each manager. Each functional head drafts the budget for his own area. The committee checks that the drafts agree with one another and with the key factor. It settles differences and sends the master budget to the board for approval. The budget period, the key factor and the order of preparation are fixed at the start.
How the types fit together
The functional budgets form a chain. Sales decide production. Production decides materials, labour and factory overheads. All of them decide the cash budget. The capital expenditure budget adds the long-term spending. The master budget sums them up. Time, flexibility and approach are not separate budgets but ways of preparing any of them. A cash budget may be short-term and flexible; a capital budget may be long-term and zero-based.
Types of budget at a glance
| Basis | Types | Main purpose |
|---|---|---|
| Function | Sales, production, materials, labour, overhead, cash, capital expenditure, R and D, master | Plan each activity and the whole business |
| Time | Long-term, short-term, current | Strategy, the year's plan, close control |
| Flexibility | Fixed, flexible | Steady output, changing output |
| Approach | Zero-base, performance, rolling | Justify spending, link cost to results, keep the plan current |
Limits of any type of budget
Every budget rests on estimates of sales, prices and costs. If the estimates are wrong, the budget misleads. Budgets also cost time to prepare and can make managers rigid. The right type reduces these problems: a flexible budget deals with changes in output, and a rolling budget with changes over time.
Conclusion. Budgets are of many types. By function they are the sales, production, materials, labour, overhead, cash, capital expenditure and research budgets, which combine into the master budget. By time they are long-term, short-term or current. By flexibility they are fixed or flexible, and by approach zero-base, performance or rolling. A firm chooses and links them so that every activity is planned, co-ordinated and controlled in figures.
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