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. Prove that accounting equation is satisfied in all the following transactions of
Mr.X

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 Liabilities + Owners’ Equity

Cash Goods Debaters Creditors Capital

1 80,000 80,000

2 -40,000 70,000 30,000

3 40,000 -25,000 15,000

4 -2,000 -2,000

5 -20,000 -20,000

+58,000 +45,000 0 30,000 73,000

1,03,000 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: (20 marks)
Opening Stock 5,000 Commission received 2,000
B/R 22,500 Return Outward 2,500
Purchases 1,95,000 Trade Expenses 1,000
Wages 14,000 Office furniture 5,000
Insurance 5,500 Cash in hand 2,500
Sundry Debtors 1,50,000 Cash at bank 23,750
Carriage Inwards 4,000 Rent and Taxes 5,500
Commission Paid 4,000 Carriage Outward 7,250
Interest on Capital 3,500 Sales 2,50,000
Stationery 2,250 Bills Payable 15,000
Return Inwards 6,500 Creditors 98,250
Capital 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 Cr
To opening stock 5,000 By sales- Return 2,50,000- 6500
inward 2,43,500
To purchase- Out wards 1,92,500 By closing stock 1,25,000
To wages 14,000 By commission 2,000
To carriage Inward 4,000
To trade Exp 1,000
To Insurance 5,500
To Commission 4,000
To Int. on Capital 3,500
To stationary 2,200
To rent and Taxes 5,500
To carriage out ward 7,200
To Net profit transfer to Balance 1,26,000
sheet
3,70,500 3,70,500

The Balance sheet as on 31 Mar 2000

 Liabilities Assets
Capital 89,500 Cash in Hand 2,500
Creditors 98,250 Cash at Bank 23,750
Net profit 1,26,000 Office Furniture 5,000
Debtor 1,50,000
Bills payable 22,500
Stock 1,25,000
Net loss Nil
Total 3,28,750 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 = 2.6

Liquid ratio = 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 2002 2003 Assets 2002 2003

Rs. Rs. Rs. Rs.
Capital 80,000 85,000 Cash in Hand 4,000 9,000
P&L a/c 14,500 24,500 Sundry Debtors 16,500 19,500
Sundry Creditors 9,000 5,000 Stock 9,000 7,000
Long-term Loans - 5,000 Machinery 24,000 34,000
Building 50,000 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?