MBA Semester 1

Assignment 1 -

Marks 60 (6X10=60)

MB0041 - Financial and Management Accounting - 4 credits

Subject Code RAKESH PRASHANTH S Name 1205002327 Registration Number

MB0041

*** Please fill in all the details in complete and only in CAPITAL letters

INSTRUCTIONS FOR ASSIGNMENT SUBMISSION

1. Completed assignments must be typed and formatted neatly and soft copies should be

uploaded on or before the dates mentioned above. (September 15,2012)

2. Ensure that you answer all questions according to the marks allocated.

3. Content that has been directly copied from the Internet or the Book will NOT be

accepted.
4. Please attempt all the assignments individually and independently. Assignments that

have been copied and shared among students will be automatically rejected and disqualified.
5. Please attach correct assignments to correct subjects. Incase of any errors the student

will be marked absent for the specific subject

6. Late submissions will NOT be accepted. 7. Follow assignment format and complete all the details for each assignment individually. 8. Roll no/Registration Number found mentioned anywhere else except the place

provided, the assignments will be rejected.

9. Incase students extra details like contact number, Name found listed anywhere on this

document, the assignments will be rejected.

Note: Each question carries 10 Marks. Answer all the questions.

Question 1. Assure you have just started a Mobile store. You sell mobile sets and currencies of Airtel, Vodafone, Reliance and BSNL. Take five transactions and prepare a position statement after every transaction. Did you firm earn profit or incurred loss at the end? Make a small comment on your financial position at the end. ANS: Preparing statements for five transactions. Debtors PARTICULARS Started Business Purchased 30000 SAMSUNG handsets Purchased recharge vouchers Sold a handset for 5000 costing 3500 Sold recharge vouchers charging 1500 profit 6% Purchased a second hand mobile on credit Repairing second hand mobile Sold a handset for 10000 costing 9500 on credit Profit 70% from Customers Bad debt -9500 10000 3000 -1000 -1000 500 -3500 -1500 10000 STOCK HANDSET VOUCHERS 55000 -30000 -10000 5000 1590 1500 90 55000 DEBTORS CASH CAPITAL CREDITORS

3000

-7000 -3000

7000 -3000

20000

8500

22590

53090

3000

51090

56090

Question 2. (a) List the accounting standards issued by ICAI. (b) Write short notes of IFRS. ANS : a) To bring uniformity in terminology, accounting concepts, conventions, and assumptions, the Institute of Chartered Accountants of India (ICAI) established Accounting Standards Board (ASB) in 1977. An Accounting Standard is a selected set of accounting policies or broad guidelines Example: While depreciating an asset the practice of adopting straight line method or diminishing balance method or any other method is a convention regarding the principles and methods to be chosen out of several alternatives. There are altogether 32 accounting standards issued by ASB out of which, one standard (AS8) has been withdrawn pursuant to AS26 becoming mandatory. b) IFRS are standards, interpretations and framework for the preparation and presentation of financial statements. IFRS was framed by International Accounting Standards Board (IASB). The objective of financial statement is to provide information about the financial position, performance and changes in the financial position of an entity. It should also provide the current financial status of the entity to all the users of financial information. IFRS follows accrual basis of accounting and the financial statements are prepared on the basis that an entity will continue for the foreseeable future. IFRS helps entities access global capital market with ease. Under IFRS, we need to submit a statement of financial position (Balance Sheet), Comprehensive income statement (Profit & Loss/ Income and Expenditure account), either a statement of changes in equity or statement of recognized income or expenses, cash flow statement and notes including summary of significant accounting policies. An Accounting Standard is a selected set of accounting policies or broad guidelines regarding the principles and methods to be chosen out of several alternatives. There are altogether 28 accounting standards issued by ASB which have to be adopted by management of different enterprises to improve the quality of presentation of financial statements in our country.

Question 3. Prepare a Three-column Cash Book of M/s Thuglak & Co. from the following particulars:

20X1 Jan

1. Cash in hand Rs. 50,000, Bank Overdraft Rs. 20,000

2. Paid into bank Rs. 10,000

3. Bought goods from Hari for Rs, 200 for each

4. Bought goods for Rs. 2,000 paid cheque for them, discount allowed 1%

5. Sold goods to Mohan for each Rs. 1.175

6. Received a cheque from Shyam to whom goods were sold for Rs. 800.Discount allowed 12.5% 7. Shyams cheque deposited into bank

8. Purchased an old typewriter for Rs. 200 , Spent Rs. 50 on its repairs 9. Bank notified that Shyams cheque has been returned dishonored and debited the account in respect of charges Rs. 10

10. Received a money order Rs. 25 from Hari

11. Shyam settled his account by means of a cheque for Rs. 820, Rs. 20 being for interest charged.

12. Withdrew from the bank Rs. 10,000

18. Discounted a B/E for Rs. 1,000 at 1% through bank 20. Honored our own acceptance by cheque Rs. 5,000 22. Withdrew fir personal use Rs. 1,000

24. Paid tread expenses Rs. 2,000 25. Withdrew from bank for private expenses Rs. 1,500 26. Purchased machinery from Rajiv for 5,000 and paid him by means of a bank draft purchased for Rs. 5,005 27. Issued cheque to Ram Saran for cash purchased of furniture Rs. 1,575 28. Received a cheque for commission Rs. 500 from R.& Co. and deposited into bank 29. Ramesh who owned us Rs. 500 became bankrupt and paid us 50 paise in the rupee 30. Received payment of a loan of Rs. 5,000 and deposited Rs. 3,000 out of into bank 31. Paid rent to landlord Mohan by cheque of Rs. 220 31. Interest allowed by bank Rs. 30 31. Half-yearly bank charges Rs. 50

ANS:

Question 4. Choose an Indian Company of your choice that has adopted Balance Score Card and detail on it. ANS: Tata motors Tata Motors is the first Indian company to be inducted in the Balance Scorecard Hall of Fame. Joins the thirty-member elite club of organizations including Hilton Hotels, BMW Financial Services, US Army, Korea Telecom and Norwegian Air Force for achieving excellence in performance. The commercial vehicle business unit (CVBU) of Tata Motors, India's largest automobile manufacturer, received prestigious Balanced Scorecard Collaborative, The coveted Steuben crystal 'Rising Star' trophy was presented at Balanced Scorecard Asia Pacific Summit held at Australia. Tata Motors-CVBU has been recognized for having achieved a significant turnaround in its overall performance. The implementation of the Balanced Scorecard has enabled greater focus on different elements of operational performance. Defining, cascading and communicating strategies across the organisation have brought about transparency and alignment. The scorecard incorporates SQDCM (safety, quality, delivery, cost and morale) and VMCDR (volume, market share, customer satisfaction, dealer satisfaction and receivables).Ravi Kant, executive director, CVBU, Tata Motors, said, "While we were conscious of the benefits of the Balanced Scorecard when we began implementing it three years back, we are extremely pleased that it has helped us achieve significant improvements in our overall performance. I am quite positive that the BSC will play an imp ortant part in our objective to become a world-class organization."Balanced Scorecard Collaborative president Dr David P Norton said, "We created the Hall of Fame to publicly acknowledge the hard work and remarkable results of implementing the Balanced Scorecard to create the strategy-focused organization. The Balanced Scorecard Hall of Fame pays tribute to the success that each organization has attained. Tata Motors- CVBU shares the honour with the city of Brisbane and Korea Telecom (KT).The Balanced Scorecard (BSC) concept-created by Dr Robert S Kaplan and Dr David P Norton in 1992, has been implemented in thousands of corporations, organizations,

and government agencies worldwide. Based on the simple premise that "measurement motivates," the BSC puts strategy at the center of the management process, allowing organizations to implement strategies rapidly and reliably. Balanced Scorecard Collaborative, Inc. is a new kind of professional services firm dedicated to the worldwide awareness, use, enhancement, and integrity of the Balanced Scorecard as a value-added management process. Tata Motors range of commercial vehicles spans over 135 models and can haul loads ranging from 2 to 40 tones. The product portfolio also includes 12 to 60-seater buses, tippers and tractor-trailers. Tata Motors vehicles meet the stringent Euro emission norms. The company currently has an export base in most parts of South Asia, Africa, Middle East and Europe. Tata Motors recently crossed the 3million production milestone.

Question 5. From the following data of Jagdish Company prepare (a) a statement of source and uses of working capital (funds) (b) a schedule of changes in working capital

Assets Cash Short-term investment Debtors Stock Long term Investment Machinery Building Land Total Liabilities and Equity Accumulated depreciation Creditors Bills Payable Secured loans Share capital Share premium Reserves and surplus Total

2008 1,26,000 42,400 60,000 38,000 28,000 2,00,000 2,40,000 14,000 7,48,400

2007 1,14,000 20,000 50,000 28,000 44,000 1,40,000 80,000 14,000 4,90,000

1,10,000

60,000

40,000 20,000 2,00,000 2,20,000 24,000 1,34,400 7,48,400

30,000 10,000 1,00,000 1,60,000 Nil 1,30,000 4,90,000

Income statement Sales Cost of goods sold Gross Profit 2,40,000 1,34,600 1,05,200

Less Operating expenses: Depreciation machinery 20,000 Depreciation building 32,000 Other expenses 40,000 Net profit from operation Gain on sale on long-term investment Total Loss on sale of machinery Net Profit

92,000

13,200 4,800 18,000 2,000 16,000

Adjustments: 1) Machinery worth Rs.70000 was purchased and worth Rs.10000 was sold during the year [Accumulated depreciation on machinery is Rs.18000 after adjusting depreciation on machinery sold]. Proceeds from the sale of machinery were Rs.6000 2) Dividends paid during the year Rs.11600

ANS:

Question 6. What is a cash budget? How it is useful in managerial decision making? ANS: Cash budget is an estimation of the cash inflows and outflows for a business or individual for a specific period of time. Cash budgets are often used to assess whether the entity has sufficient cash to fulfill regular operations and/or whether too much cash is being left in unproductive capacities. A cash budget is extremely important, especially for small businesses, because it allows a company to determine how much credit it can extend to customers before it begins to have liquidity problems. For individuals, creating a cash budget is a good method for determining where their cash is regularly being spent. This awareness can be beneficial because knowing the value of certain expenditures can yield opportunities for additional savings by cutting unnecessary costs. For example, without setting a cash budget, spending a dollar a day on a cup of coffee seems fairly unimpressive. However, upon setting a cash budget to account for regular annual cash expenditures, this expenditure comes out to an annual total of $365, which may be better spent on other things. If you frequently visit specialty coffee shops, your annual expenditure will be substantially more. The importance of cash budget may be summarized as follow:(1) Helpful in Planning. Cash budget helps planning for the most efficient use of cash. It points out cash surplus or deficiency at selected point of time and enables arrange for the deficiency before time or to plan for investing the surplus money as profitable as possible without any threat to the liquidity. (2) Forecasting the Future needs. Cash budget forecasts the future needs of funds, its time and the amount well in advance. It, thus, helps planning for raising the funds through the most profitable sources at reasonable terms and costs. (3) Maintenance of Ample cash Balance. Cash is the basis of liquidity of the enterprise. Cash budget helps in maintaining the liquidity. It suggests adequate cash balance for expected requirements and a fair margin for the contingencies. (4) Controlling Cash Expenditure. Cash budget acts as a controlling device. The expenses of various departments in the firm can best be controlled so as not to exceed the budgeted limit. (5) Evaluation of Performance. It acts as a standard for evaluating the financial performance. (6) Testing the Influence of proposed Expansion Programme. Cash budget

forecasts the inflows from a proposed expansion or investment programme and testify its impact on cash position. (7) Sound Dividend Policy. Cash budget plans for cash dividend to shareholders, consistent with the liquid position of the firm. It helps in following a sound consistent dividend policy. (8) Basis of Long-term Planning and Co-ordination. Cash budget helps in co-ordinating the various finance functions, such as sales, credit, investment, working capital etc. it is an important basis of long term financial planning and helpful in the study of long term financing with respect to probable amount, timing, forms of security and methods of repayment.