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Financial and Management Accounting -MB0025 MBA -1 SEM

Assignment – Set 1

L. Megha Syam 510925494 Q1. Explain the differences between Financial Accounting and Management Accounting. Financial accounting is the preparation and communication of financial information to outsiders such as creditors, bankers, government, customers and so on. Another objective of financial accounting is to give complete picture of the enterprise to shareholders. Management accounting on the other hand aims at preparing and reporting the financial data to the management on regular basis. Management is entrusted with the responsibility of taking appropriate decisions, planning, performance evaluation, control, management of costs, cost determination etc., For both financial accounting and management accounting the financial data is the same and the reports prepared in financial accounting are also used in management accounting But the following are major differences between Financial accounting and Management accounting.

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Q2. Hiran, a retailer, has prepared the following balance sheets for the years ending 31st March 2004 and 2005:

Other data: The net profit for the year 2004 was Rs.40000. Hiran is paid a salary of Rs.16,000. His drawings amounted to Rs.45,200. You are required to prepare a statement of changes in financial position, on working capital basis. The layout for schedule of changes in Working Capital is as follows Balances as on Effect on Schedule of changes in Working Capital is as follows: Year 2004

Year 2005

A .CURRENT ASSETS: Cash in hand & bank

4000

2000

2000

Sundry Debtors

50000

34000

16000

Stock or Inventory

36000

34000

2000

B. CURRENT LIABILITIES

Trade and accrued expenses Net Working Capital Decrease in Working(A-B)

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24000

Increase

Decrease

_

20000

4000

16,000

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Statement of Profit and loss adjustment a/c: Particulars Salaries

Amount 16000

Particulars Net profit for the year 2004

Funds from operations transferred to applications 24000 40000

Total:

Amount

40000

40000

Funds Flow Statement: Particulars Increase in capital

Amount 5200

Particulars

Amount

Decrease in Working capital

16000

Funds from operations

24000

Total:

Q3. Enter the following transactions in proper subsidiary book. Find out the total of: a) Purchase book b) sales book c) purchase return book d) sales return book. Purchase book Date

Name Supplier

Jan 1

Purchased from Karthik Purchased from Vikas Purchased from Naveen Purchased from Brinda Purchased from Anand

Jan 10 Jan 12 Jan 15 Jan 25

of Ledger Folio

Inward Invoice No.

Amount Dr.

Rs.

34000 40000 102000 100000 45000

Total:

321000

.

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Sales book

:

Date

Name customer

Jan 5

Sold goods to Vinay Sold goods to Nagaraj Sold Goods to Gururaj

Jan 7 Jan 20

of Ledger Folio

Out ward Invoice No.

Amount Rs. Cr

12000 10000 16000

Total

38000

Sales returns Book: Date

Name of Ledger customer/debtor Folio

Jan 14

Returned good by Vinay Natraj returned goods

Jan 22

Out ward Invoice No.

Amount Dr.

Rs.

3000 2000

Total:

5000

Purchase return book: Date

Name of Ledger Supplier/Creditor Folio

Jan 14

Returned good to Karthik Returned goods to Naveen

Jan 22 Total:

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Out ward Invoice No.

Amount Rs.

4000 2000 6000

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4a. On 01-04-2007 Mr. Gundu Rao stated business with Rs. 3, 00,000 cash and opened a bank account with Rs. 1,50,000. He purchased furniture for his business for Rs. 25000. Goods were bought from selvaraj for Rs. 50000 on credit. He sold goods for Rs. 27000 in cash and Rs. 30000 on credit. He paid Rs. 2500 for business expenses during April month. Rs. 10000 was withdrawn for office purpose form the back. Find out the closing balance of cash and bank. Date 1-4-2007

Particular s To capital a/c of Gundu Rao

Cash A/c Dr 300000

To bank a/c C

To a/c

sales

To bank Office expenses C

Bank Dr

Date

150000

27000

Bal

10000

337000 160500

Cash Cr

By Cash A/c C

150000

A/c

By Furniture a/c

25000

By Business Exp

2500

By Cash Office expenses C 31/04/ 2007

To B/d

Particulars

Bank A/c Cr

1-042007

31/04/2007

01/05/2007

a/c

150000 140000

By Balance c/d

10000

160500

140000

337000

150000

4b. Following are the extracts from the Trial Balance of a firm as on 31st December 1998: TRIAL BALANCE As on 31st December 1998 Particulars Dr. Cr. Salaries A/c 10,000 Rent a/c 5,000 Additional Information: I. Salary for the month of December Rs.2000 has not yet been paid. II. Rent amounting to Rs.1000 is still outstanding

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You are required to pass the necessary adjusting entries and show how the above items will appear in the Firm’s Account Entry: Salary a/c Dr To Salary outstanding A/c Rent a/c Dr. To rent outstanding

Trial balance Particulars Dr. Salaries 12000 A/c Rent a/c 6000

2000 2000 1000 1000

Cr.

Q5. From the following figures extracted from the book if Shri Govind, you are required to prepare a Trading and Profit & Loss Account for the year ended 31st March, 1999 and a Balance Sheet as on that date after making the necessary adjustment.

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. Adjustments 1. Stock on 31st March, 1999 was valued at Rs. 72,600 2. A new machine was installed during the year costing Rs. 15,400, but it was not recorded in the books as no payment was made for it. Wages Rs. 1,100 paid for its erection has been debited to wages account. 3. Depreciate: Plant and Machinery by 33 1/3 % Furniture by 10% Freehold property by 5% 4. Loose tools were valued at Rs. 1,760 on 31.3.1999. 5. Of the Sundry Debtors Rs. 600 are bad and should be written off. 6. Maintain a provision of 5% on Sundry Debtors for doubtful debts. 7. The manager is entitled to a commission of 10% of the net profits after charging such commission. Ans: Trading A/c for the year ended 31st March, 1999: Particulars

Amount

Total Amount Dr.

Particulars Sales

Amount

Total Amount Cr. 231440

Purchases Less Purchase return

Closing Stock

110000 1100

72600

108900

Wages Less erection

35200 34100

Factory Lighting Gas & Fuel Freight

1100

1100 2970 9900

To gross profit transferred to P/L a/c Total

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304040

304040

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Profit & Loss A/c for the year ended 31st March, 1999 Particulars Salaries

Total Amount Dr. 13200

Office exp

2750

Discount

1320

Postage telegram

Amount

Particulars By Balance b/d from Trading A/c Interest Received

Amount

Total Amount Cr. 147070

1100

& 1540

Insurance

1760

Office rent

2860

Bad debts

1260

Provision for Bad debts 1463-880

583

Depreciation on Furniture

550

Depreciation on Plant & machinery

38130

Depreciation on Free hold property

Manager’s Commission

To Net profit transferred to B/S Total

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3300

NP*10/110

13470

80723 148170

148170

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Balance Sheet for the year ended 31st March, 1999 LIABILITIES Shri Govind’s Capital

AMOUNT

228800

ASSETS Details Cash at Bank Cash Hand

Shri Govind’s Drawings Add Profit

Details

in

AMOUNT 29260

2640

-13200 net +80723 296323

Plant and Machinery 99000+15400 Less Dep

Sundry Creditors

44000

Biils Payable

5500

38130

Freehold Property

66000

Less Dep

5500

Office Furniture

550

76270

62700

Less Dep Loose Tools

4950

Sundry Debtors 29260

2200

Less provision for 583 BD Closing Stock

Total

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345823

72,600

250620

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6. Differentiate between Standard Cost And Budgetary Control Following are some of the differences identified: 1. The scope of budgetary control is wider. It is integrated plan of action, a coordinated plan in respect of all functions of an enterprise The scope of standard costing, on the other hand, is limited to the operating level. Here too, it is further linked to costs. Budgetary control is extensive whereas standard costing is intensive in its application 2. Budgetary control deals with costs and revenues. But standard costing restricts only with costs. 3. Budgetary control takes into account all activities such as production, sales, purchase3s, finance, capital expenditure, personnel whereas standard costing is restricted to deal with only costs. 4. Budgetary control targets are based on past actual adjusted to future trends. In standard costing, standards are based on technical assessment. 5. At the approach level, budgeted targets work as the maximum limit of expenses above which the actual expenditure should not normally exceed. Under standard costing, standards are attainable level of performance. 6. Budget is projection of final accounts. Standard costs are projection of only cost accounts. 7. Budgetary control emphasizes the forecasting aspect of the future operations. Standard 8. Costing scope and utility is limited to only operating level of the concern. 9. In budgetary control, the degree of variance analysis tends to be much less and variances are not revealed through the accounts but are revealed in total. But in standard costing, variances Financial and Management are analyzed in details according to their originating causes and ar3e revealed through different accounts. 10.Budgetary control is possible even in parts of expenses according to the attitude of management. A standard costing system can not be operated in parts. All items of expenditure included in cost units are to be accounted for.

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