Mb0025 Financial And Management Accounting Set1

MBA- I semester MB0025- Financial & Management Accounting – 3 Credits Assignment Set 1-

1.

Explain any two concepts of accounting with examples.

Ans:

Accounting concept are classified as 

Business separate Entity Concept



Going concern concept



Money measurement concept



Periodicity Concept



Accrual Concept

Money Measurement Concept :All transactions of a business are recorded in terms of money. An event or a transaction that can not be expressed in money terms, can’t find place in the books of account. The honest of the employees, dynamism of the selling agents, promptness and integrity of the cashier, even though influence the business results, can not be brought to the books ,even though influence the business results, cant not be brought to the books of accounts. Beside it makes no sense if a business has 10 ton of raw material. Five vehicles, one premises and a few items of furniture, unless all these assets are expressed in terms of some monetary value. It is said that the value of these assets is Rs. Two Crores, it makes a lot of sense. Money is the common denominator in which the business transactions a should be expressed Periodicity Concept :The time interval for which accounts are prepared is an important factor, even though we assume long life for a business. The time interval is usually one year and this period is called accounting year. Often the accounting period could be half year or even a quarter. The financial statements should be prepared at the end of each accounting period so that income statement shows profit or loss for the accounting period. So also a balance sheet is prepared to deposit the financial position of the business.

2. Mr.X

Prove that accounting equation is satisfied in all the following transactions of 1. Commenced business with cash – Rs.80,000 2. Purchased goods for cash – Rs.40,000 and on credit Rs.30,000 3. Sold goods for cash – Rs.40,000 costing Rs.25,000 4. Paid salary – Rs.2,000 and salary outstanding Rs.1,000 5. Bought scooter for personal use for cash at Rs.20,000

Ans:-

Assets Cash

Liabilities + Owners’ Equity

Goods

Debaters

Creditors

Capital

1

80,000

2

-40,000

70,000

3

40,000

-25,000

4

-2,000

-2,000

5

-20,000

-20,000

+58,000

80,000

+45,000 1,03,000

30,000 15,000

0

30,000

73,000 1,03,000

Note: - Out standing salaries Net profit will be reduced to Rs 1000/- as well as liabilities will be increased to that extent. So that the actual profit is (Rs 15000-1000) = 14,000 and the credit for exp Rs 1000.

So total

Assets

liabilities

1, 03,000

1, 03,000

4. The following balances are extracted from the books of Kiran Trading Co on 31st March 2000. You are required to prepare trading and profit and loss account and a balance sheet as on that date: Opening Stock B/R Purchases Wages Insurance Sundry Debtors Carriage Inwards Commission Paid Interest on Capital Stationery Return Inwards

(20 marks) 5,000 22,500 1,95,000 14,000 5,500 1,50,000 4,000 4,000 3,500 2,250 6,500

Commission received Return Outward Trade Expenses Office furniture Cash in hand Cash at bank Rent and Taxes Carriage Outward Sales Bills Payable Creditors Capital

2,000 2,500 1,000 5,000 2,500 23,750 5,500 7,250 2,50,000 15,000 98,250 89,500

The closing stock was valued at Rs.1, 25,000 Ans:Following is the Trading A/C for Kiran Trading and Co. Dr To opening stock To purchase- Out wards To wages To carriage Inward To trade Exp To Insurance To Commission To Int. on Capital To stationary To rent and Taxes To carriage out ward To Net profit transfer to Balance

5,000 1,92,500 14,000 4,000 1,000 5,500 4,000 3,500 2,200 5,500 7,200 1,26,000

Cr By

sales-

Return 2,50,000- 6500

inward By closing stock By commission

2,43,500 1,25,000 2,000

sheet 3,70,500 The Balance sheet as on 31 Mar 2000

3,70,500

Liabilities Capital Creditors Net profit

89,500 98,250 1,26,000

Total

3,28,750

Assets Cash in Hand Cash at Bank Office Furniture Debtor Bills payable Stock Net loss

2,500 23,750 5,000 1,50,000 22,500 1,25,000 Nil

3,28,750

5. Write short notes on: •

Outstanding Expenses

•

Prepaid Expenses

Ans: Out standing Expenses: - Expenses which are due but not yet are known as outstanding expenses. Wages, salaries, rent, commission etc payable in the current month are paid in the following month. If final account is prepared for the year ending 31 Dec, then the expenses payable for December will be paid in January of the next year. The extent to which the amount belongs to the current year but payable in the next year is called outstanding expenses. To record that aspect m, the journal entry drawn in the journal proper is: Concerned Expenses account Dr To outstanding Expenses account Out standing expenses account indicates liabilities for the current year and it will appear in the balance sheet. Ex:- Advertisement expenses for the year 31.12.2003 outstanding is Rs. 5000. The journal entry is Advertisement expenses account Dr 5000 To Outstanding expenses account 5000

Prepaid Expenses: - Expenses paid in advance are regarded as prepaid expenses. Prepaid expenses form an asset and therefore prepaid expenses account is debited. For Ex insurance premium is paid from Apr, 2004 to March, 2005 and amount is Rs 3600. The financial year ends by 31 Dec 2004. Therefore the premium relating to Jan, Feb and Mar of 2005 Rs 900 is said to have been paid in advance. To record this internal adjustment, the entry is Prepaid Expenses account Dr 900 To Insurance Account 900 Note that outstanding or prepaid accounts are regarded as personal accounts.

3. Show the rectification entries for the following: a. The Sales account is under cast by Rs.15,000 b. Goods returned by the customer Mr.X of Rs.5650 has been posted in the Return Inward Account as Rs.5560 and in Mr.X a/c as Rs.6, 550. c. Salary paid Rs.6,000 has been posted to Rent account d. Cash received from Ram posted to Shyam account Rs.7,000 e. Cash received from Jadu Rs.8,640 has been posted to the debit of Madhu’s a/c

MBA- I semester MB0025- Financial & Management Accounting – 3 Credits Book ID- ( B0907 ) Assignment Set 2- (60 Marks) Note: Answer all the questions: Each question carries 10 Marks 1. Budgetary Control is a technique of managerial control through budgets. Elaborate. 2. a. Given: Current ratio Liquid ratio

= 2.6 = 1.4

Working Capital = Rs.1,10,000 Calculate (1) Current assets (2) current liabilities (3) Liquid Asset (4) Stock b. Calculate Gross Profit Ratio from the following figures: Sales

Rs.5,00,000

Sales return

Rs.50,000

Closing stock

Rs.35,000

Opening stock

Rs.70,000

Purchases

Rs.3,50,000

3. From the following Balance Sheet of William & Co Ltd., you are required to prepare a Schedule of Changes in Working capital & Statement of Sources and Application of funds. Balance Sheet Liabilities Capital P&L a/c Sundry Creditors Long-term Loans

2002 Rs. 80,000 14,500 9,000 -

2003 Rs. 85,000 24,500 5,000 5,000

Assets Cash in Hand Sundry Debtors Stock Machinery Building

2002 Rs. 4,000 16,500 9,000 24,000 50,000

2003 Rs. 9,000 19,500 7,000 34,000 50,000

Total

1,03,500

1,19,500 Total

1,03,500 1,19,500

4. Bring out the difference between cash flow and funds flow statement. 5a. DELL computers sell 100 PCs at Rs.42,000. The variable expenses amount to Rs.28,000 per PC. The total fixed expenses is Rs.14,00,000. Prepare an income statement. b. Calculate BEP and MOS Sales at present are 55,000 units per annum. Selling price is Rs.6 per unit. Prime cost Rs.3 per unit. Variable overheads is Re.1 per unit. Fixed cost Rs.80,000 per annum.

4. What is cost variable analysis?