Vous êtes sur la page 1sur 12

Master of Business Administration - MBA Semester 1 Subject Code MB0041 Subject Name Financial and Management Accounting Assignment

nt Set- 1 (60 Marks)

Q.1 Assume you have just started a Mobile store. You sell mobile sets and currencies of Airtel, Vodaphone, 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.

Answer: Stock Hand set

Particulars Started business with cash purchased nokia handsets purchased BSNL and Reliance recharge vouchers sold a handset for 6000 costing 5850 Sold recharge vouchers of 1500 profit 6% Puchased a second hand cell on crerdit sold a handset for 10000 costing 9150 Repair work of the second hand set Sold the hand set for 5000 Sold a hand set on credit for 10000 costing 9500 on credit Realised 70% from the customer Customer became bad debt

Debtors Cash vouchers

Capital Creditors

25000 5000 -5850 -1500 3000 -9150 -3000 -9500 10000 -7000 -3000 0

40000 40000 25000 -5000 6000 1590

150 90 3000

10000 850 -1000 -1000 5000 2000 500 7000 -3000 38590 39590 42590 3000

500 3500 42590

Q.2a. List the accounting standards issued by ICAI. [5 Marks]

Answer 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 There are altogether 32 accounting standards issued by ASB out of which, one standard (AS8) has been withdrawn pursuant to AS26 becoming mandatory. Accounting Standards (ASs) AS 1 Disclosure of Accounting Policies AS 2 Valuation of Inventories AS 3 Cash Flow Statements AS 4 Contingencies and Events Occurring after the Balance Sheet Date AS 5 Net Profit or Loss for the period, Prior Period Items and Changes in Accounting Policies AS 6 Depreciation Accounting AS 7 Construction Contracts (revised 2002) AS 8 Accounting for Research and Development AS 9 Revenue Recognition AS 10 Accounting for Fixed Assets AS 11 The Effects of Changes in Foreign Exchange Rates (revised 2003), AS 12 Accounting for Government Grants AS 13 Accounting for Investments AS 14 Accounting for Amalgamations AS 15 (revised 2005) Employee Benefits Limited Revision to Accounting Standard (AS) 15, Employee Benefits (revised 2005) AS 15 (issued 1995) Accounting for Retirement Benefits in the Financial Statement of Employers AS 16 Borrowing Costs AS 17 Segment Reporting AS 18, Related Party Disclosures AS 19 Leases AS 20 Earnings Per Share AS 21 Consolidated Financial Statements AS 22 Accounting for Taxes on Income. AS 23 Accounting for Investments in Associates in Consolidated Financial Statements AS 24 Discontinuing Operations AS 25 Interim Financial Reporting AS 26 Intangible Assets AS 27 Financial Reporting of Interests in Joint Ventures AS 28 Impairment of Assets AS 29 Provisions,Contingent` Liabilities and Contingent Assets AS 30 Financial Instruments: Recognition and Measurement and Limited Revisions to AS 2, AS 11 (revised 2003), AS 21, AS 23, AS 26, AS 27, AS 28 and AS 29 AS 31, Financial Instruments: Presentation Accounting Standard (AS) 32, Financial Instruments: Disclosures, and limited revision to Accounting Standard (AS) 19, Leases.


2b. Write short notes of IFRS. [5 Marks] Answer: IFRS The IFRS Foundation is an independent, not-for-profit private sector organisation working in the public interest. Its principal objectives are: a)to develop a single set of high quality, understandable, enforceable and globally accepted international financial reporting standards (IFRSs) through its standard-setting body, the IASB; b)to promote the use and rigorous application of those standards; c)to take account of the financial reporting needs of emerging economies and small and medium-sized entities (SMEs); and d)to bring about convergence of national accounting standards and IFRSs to high quality solutions. The governance and oversight of the activities undertaken by the IFRS Foundation and its standard-setting body rests with its Trustees, who are also responsible for safeguarding the independence of the IASB and ensuring the financing of the organisation. The Trustees are publicly accountable to a Monitoring Board of public authorities. Standard-setting The IASB (International Accounting Standards Board) The IASB is the independent standard-setting body of the IFRS Foundation. Its members (currently 15 full-time members) are responsible for the development and publication of IFRSs, including the IFRS for SMEs and for approving Interpretations of IFRSs as developed by the IFRS Interpretations Committee (formerly called the IFRIC). All meetings of the IASB are held in public and webcast. In fulfilling its standard-setting duties the IASB follows a thorough, open and transparent due process of which the publication of consultative documents, such as discussion papers and exposure drafts, for public comment is an important component. The IASB engages closely with stakeholders around the world, including investors, analysts, regulators, business leaders, accounting standard-setters and the accountancy profession. The IFRS Interpretations Committee The IFRS Interpretations Committee (formerly called the IFRIC) is the interpretative body of the IASB. The Interpretations Committee comprises 14 voting members appointed by the Trustees and drawn from a variety of countries and professional backgrounds. The mandate of the Interpretations Committee is to review on a timely basis widespread accounting issues that have arisen within the context of current IFRSs and to provide authoritative guidance (IFRICs) on those issues. Interpretation Committee meetings are open to the public and webcast. In developing interpretations, the Interpretations Committee works closely with similar national committees and follows a transparent, thorough and open due process.

Q.3 Prepare a Three-column Cash Book of M/s Thuglak & Co. from the given particulars: Answer: Cash Book Dr Dat e 201 1 1Jan 2In the books of M/s Tuglak& Co. Cash Book L V Dis Partriculars F N Cash Bank c Cr Dis c

To, Balance B/d To, Cash

5000 0 1000

Dat e 201 1 1Jan 2-






By, Balance B/d By, Bank

2000 0 1000

Jan 5Jan 6Jan 7Jan 10Jan 11Jan 12Jan 18Jan 28Jan 29Jan 30Jan 31Jan

0 To, Mohan To, Shyam To, Cash To, Hari To, Shyam To, Bank To, Bills Receivable To, Commission To, Ramesh To, Loan Repayment To, Interest 1000 0 990 500 250 2000 3000 30 25 820 1175 700 700 100


To, Balance c/d 6390 0

2975 0 4604 0

Jan 3Jan 4Jan 7Jan 8Jan 9Jan 9Jan 12Jan 20Jan 22Jan 24Jan 25Jan 26Jan 27Jan 31Jan 31Jan 31Jan

0 By, Hari By, Purchase By, Bank By, Typewriter By, Shyam By, Charges By, Cash By, Bills Payable By, Drawings By, Trade Exp By, Drawings By Machinery By, furniture By, Rent By, Bank Charge By, Balance c/d 700 250 700 10 1000 0 5000 1000 2000 1500 5005 1575 220 50 4975 0 6390 0 200 1980 20


4604 0


Q.4 Choose an Indian Company of your choice that has adopted Balance Score Card and detail on it. [10 Marks] Answer: Tata Motors is the first Indian company to be inducted in the Balance Scorecard Hall of Fame. Joins the thirty-member elite club of organisations including Hilton Hotels, BMW Financial Services, US Army, Korea Telecom, Norwegian Air Force and the city of Brisbane for achieving excellence in company performance.


The commercial vehicle business unit (CVBU) of Tata Motors, India's largest automobile manufacturer, has been inducted in the exclusive club of organisations and corporate houses recognised by the prestigious Balanced Scorecard Collaborative, Inc for achieving excellence in overall company performance. The coveted Steuben crystal 'Rising Star' trophy was presented to the company at the Balanced Scorecard Asia Pacific Summit held at Gold Coast, Queensland Australia. Tata Motors-CVBU has been recognised 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 important part in our objective to become a world-class organisation." 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 organisation. The Balanced Scorecard Hall of Fame pays tribute to the success that each organisation 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, organisations, and government agencies worldwide. Based on the simple premise that "measurement motivates," the BSC puts strategy at the centre of the management process, allowing organisations 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 tonnes. 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 3-million production milestone.

Q.5 From the data given for Jagdish Company prepare: (a) a statement of source and uses of working capital (funds) (b) a schedule of changes in working capital Assets

Answer: Schedule of change in working capital Effect in working Capital Increase Decrease 12000 22400 10000 10000

Particulars Current Assets Cash Short term investment debtors Stock

2007 114000 20000 50000 28000

2008 126000 42400 60000 38000

(A) Current Liabilities Creditors Bills Payable (B) Net working capital (A-B) Increase in working capital

212000 30000 10000 40000 172000 34400 206400

266400 40000 20000 60000 206400 206400 54400 10000 10000

34400 54400

Adjusted P/L A/c Partriculars dividend paid

Rs 11600

Depreciation on building 32000 Depreciation on machinery 20000 loss on sale of machinery 2000 To, Balance c/d 134400 200000

Partriculars By balance b/d profit on sale investment Fund from operation

Rs 130000 of 4800 65200


Source Loan taken share issued at premium Sale of investment sale of machinery Fund from operation Sale of machinery

Fund flow statement Rs Application increase in working 100000 capital 84000 dividend paid 20800 purchase of building 6000 purchase machinery 65200 32000 308000

Rs 34400 11600 192000 70000


Q.6 What is a cash budget? How it is useful in managerial decision making? [10 Marks] ANSWER:


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 seemingly small daily 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 the management to 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. Cash budget 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.


Master of Business Administration - MBA Semester 1 Subject Code MB0041 Financial and Management Accounting Assignment Set- 2 (60 Marks)

Q.1 Selected financial information about Vijay merchant company is given . Compute the current ratio, quick ratio, average debt collection period and inventory turnover for 2009 and 2010. State whether there is a favorable or unfavorable change in liquidity from 2009 to 2010. At the beginning of 2009, the company had debtors of Rs..2500 and inventory of Rs.3000. [10 Marks]

Answer: Year 2009 2010 Year 2009 2010 Year 2009 2010 Year 2009 2010 Year 2009 2010 Current Assets 12000 24100 Quick Assets 6500 12700 Credit Sales 43000 69000 Current Liabilities 11000 16000 Quick Liability 11000 16000 Average Debtors 4500 6100 Debtors Turnover 9.555555556 11.31147541 Current Ratio 1.090909091 1.50625 Quick ratio 0.590909091 0.79375 Debtors Turn over 9.555555556 11.31147541 Debt Collection period 38.19767442 32.26811594 Stock Turnover period 5.909090909 5

Year in days 365 365 Cost of goods sold Inventory 32500 5500 57000 11400

Q.2 Explain different methods of costing. Your answer should be studded with examples (preferably firm name and product) for each method of costing.[10 Marks] Answer: Job Costing: This is a product related classification of costing system. The cost is ascertained for each job or work order processed. This systems is used where most of the manufacturing activities are planned and carried out for distinct jobs or customers. The utility of this method increases when there is great variability in nature of jobs or work orders processed.

Batch Costing : This method determines the cost associated with each batch pf products manufactured. This differs from job or work order costing in the variability of the production batches. In this case the production batches consist of mostly standard products or components. What varies is mostly the size of batches and the timing of their processing. Process Costing: In this method of costing the costs are determined for various different manufacturing activities or processes. These costs are the assigned to different products on the basis of some criteria like quantity processed or the time taken for processing. This method of costing is suitable for manufacturing units that use continuous processes or mass production techniques. This method is particularly suitable where there are many different products and process routes, where output of one process becomes input for another. Operation Costing: This method is similar to the process costing. However the products manufactured have limited variation. For example a cement plant may use this method. Multiple costing: Most of the organizations use a combination of different costing method rather than just one method. Multiple costing refers to such combinations of different methods. Q.3 State the importance of differentiating between the fixed costs and variable costs in managerial decision. [10 Marks] Answer: Variable costs are costs that can be varied flexibly as conditions change. In the John Bates Clark model of the firm that we are studying, labor costs are the variable costs. Fixed costs are the costs of the investment goods used by the firm, on the idea that these reflect a long-term commitment that can be recovered only by wearing them out in the production of goods and services for sale. The idea here is that labor is a much more flexible resource than capital investment. People can change from one task to another flexibly (whether within the same firm or in a new job at another firm), while machinery tends to be designed for a very specific use. If it isn't used for that purpose, it can't produce anything at all. Thus, capital investment is much more of a commitment than hiring is. In the eighteen-hundreds, when John Bates Clark was writing, this was pretty clearly true. Over the past century, a) education and experience have become more important for labor, and have made labor more specialized, and b) increasing automatic control has made some machinery more flexible. So the differences between capital and labor are less than they once were, but all the same, it seems labor is still relatively more flexible than capital. It is this (relative) difference in flexibility that is expressed by the simplified distinction of long and short run. Of course, productivity and costs are inversely related, so the variable costs will change as the productivity of labor changes. Here is a picture of the fixed costs (FC), variable costs (VC) and the total of both kinds of costs (TC) for the productivity


Output produced is measured toward the right on the horizontal axis. The cost numbers are on the vertical axis. Notice that the variable and total cost curves are parallel, since the distance between them is a constant number - the fixed cost.

Q.4 Following are the extracts from the trial balance of a firm as at 31st March 2009, Pass the necessary journal entries and show the sundry debtors account, bad debts account, provision for doubtful debts account, P&L a/c and Balance sheet as at 31st March 2009. Answer 4. Sundry debtors Bad debt PBD 205000 5000 20000 180000 Dr 5000 Cr 5000 5000 5000

Less less


Particulars LF Bad debt A/c . Dr To, Debtors A/c P/L A/c Dr To Bad debt A/c P/L A/c .. Dr To, Provision for bad debt A/c

20000 20000


Bad Debt A/c

10 | P a g e

Date Partriculars To P/L A/c

LF Rs 5000


Partriculars LF Rs By, Debtors A/c 5000



Dr P/L A/c Date Partriculars LF Rs Date To Bad debt A/c 5000 To, PBD 20000 25000


Cr LF Rs

Balance Sheet Liability


Assets Sundry debtors LESS Bad debt LESS PBD

Rs 205000 5000 20000 180000

Q5.A change in credit policy has caused an increase in sales, an increase in discounts taken, a decrease in the amount of bad debts, and a decrease in investment in accounts receivable. Based upon this information, the companys (select the best one and give reason) 1) Average collection period has decreased 2) Percentage discount offered has decreased 3) Accounts receivable turnover has decreased 4) Working Capital has increased. ANSWER: 1) Average collection period has decreased Since sales have increased, you would expect accounts receivable to increase too, if the Average collection period remained the same. But youre told that AR has decreased, so the Average collection period must have decreased, i.e. the customers are taking fewer days to pay up.

11 | P a g e

Q.6 Identify the users of accounting information. [10 Marks] Answer Accounting plays a very important role in all businesses but it is not just the business itself that finds accounting information useful. There are other stake holders who rely on accounting information to make decisions. These stakeholders include: 1. Shareholders - Shareholders use the balance sheet and profit and loss account produced by limited companies to decide if they are going to increase or decrease their holding. 2. Management - Management in every level of the business from director level to supervisor level rely on accounting information to do their job properly. They all use the same information for different purposes. For example, directors use it for strategic purposes and middle management can use it to see if they are meeting their financial targets. 3. Suppliers - Along with other data suppliers will look at a company's balance sheet and profit and loss account to see if and how much credit they are willing to give to present and potential customers. 4. Lenders - Similar to suppliers lenders also need to make sure a company is in a healthy financial situation before they start to lend money. 5. Government - Governments use the information provided by a company about its finances to levy tax on the profits. 6. Customers - Before another company becomes a customer or enters into a joint venture, they will look at the company's finances to make sure the company is not in trouble and that their supplies are not about to dry up. 7. Employees - Employees also have an interest in how well their employer is doing so use financial accounting information for this purpose.

12 | P a g e