MB0041–Financial and Management Accounting

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Fall-2013

Master of Business Administration - MBA Semester 1

MB0041–Financial and Management Accounting-4 Credits

(Book ID: B1624)

Assignment (60 Marks)

Note: Answers for 10 marks questions should be approximately of 400 words. Each question is followed by evaluation scheme. Each Question carries 10 marks 6 X 10=60.

Q1. Inventory in a business is valued at the end of an accounting period, at either cost or market price, whichever is lower. This is accepted convention or a practice in accounting. Give a small introduction on accounting conventions and elucidate all the eight accounting conventions.

Answer. Accounting Conventions:

Guidelines that arise from the practical application of accounting principles. An accounting convention is not a legally-binding practice; rather, it is a generally-accepted convention based on customs, and is designed to help accountants overcome practical problems that arise out of the preparation of financial statements. As customs change, so to will accounting conventions.

If an oversight organization, such as the Securities and Exchange Commission (SEC) or the Financial Accounting Standards Board (FASB) set forth a guideline that addresses the same topic as the accounting convention, the

Q2. Write down a table with the accounts involved / the nature of account/its affects/ debit or credit. Please have the transactions given below and prepare the table as per the instructions given above for each transaction.

a. 1.1.2011 Sunitha started his business with cash Rs. 5, 00,000

b. 2.1.2011 Borrowed from Malathi Rs. 5, 00,000

c. 2.1.2011 Purchased furniture Rs. 1, 00,000

d. 4.1.2011 Purchased furniture from Meenal on credit Rs. 1, 50,000

e. 5.1.2011 Purchased goods for cash Rs. 50,000

f. 6.1.2011 Purchased goods from Ram on credit Rs. 2, 50,000

g. 8.1.2011 Sold goods for cash Rs. 1, 25,000

h. 8.1.2011 Sold goods to Shyam on credit Rs. 55,000

i. 9.1.2011 Received cash from Shyam Rs. 25,000

j. 10.1.2011 Paid cash to Ram Rs. 90,000

Q4. The reports prepared in financial accounting are also used in the management accounting. But there are few major differences between financial accounting and management accounting. Explain the differences between financial accounting and management accounting in various dimensions.

Answer. Management accounting aims at preparing and reporting the financial data to the management on regular basis.

Financial accounting is the preparation and communication of financial information to outsiders such as creditors, bankers, government, customers, etc. Table below shows the difference between management and

Q5. Draw the Balance Sheet for the following information provided by Sandeep Ltd.

a. Current Ratio: 2.50

b. Liquidity Ratio: 1.50

c. Net Working Capital: Rs.300000

d. Stock Turnover Ratio: 6 times

e. Ratio of Gross Profit to Sales: 20%

f. Fixed Asset Turnover Ratio: 2 times

g. Average Debt collection period: 2 months

h. Fixed Assets to Net Worth: 0.80

I. Reserve and Surplus to Capital: 0.50

Answer. Balance Sheet:

Liabilities	Rs.	Assets	Rs.
Capital	500000	Fixed Assets	600000
Reserves and Surplus	250000	Inventories	200000

Q6. Write the main differences between cash flow analysis and fund flow analysis.

Following is the balance sheet for the period ending 31st March 2011 and 2012. If the current year’s net loss is Rs.38, 000, Calculate the cash flow from operating activities.

	31st MARCH
	2011	2012
Short-term loan to employees	15000	18000
Creditors	30000	8000
Provision for doubtful debts	1200	-
Bills payable	18000	20000
Stock in trade	15000	13000
Bills receivable	10000	22000
Prepaid expenses	800	600
Outstanding expenses	300	500

Answer. Differences:

1. A cash flow statement is merely a record of cash receipts and disbursements. Of course, it is valuable in its own way but if fails to bring to light many important changes involving the disposition of resources. While studying the short-term solvency of a business one is interested not only in cash balance but also in the assets which are easily convertible into cash.

2. Cash flow analysis is more useful

Solved Assignments for Rs.150 each

Mail me at: subjects4u@gmail.com or at

08627023490