ASSIGNMENT 1

Managerial Accounting and Analysis

Submitted ByAmbika Sharma

(epg27-022)

1. Given here are a few situations. REQUIRED

State the accounting assumption or principle that describes each of the given situations.
a. Inventory is recorded at its purchase price. -> Cost Concept
b. Financial Statements are prepared on an annual basis. -> Accounting Period Concept
c.

Personal and business transactions are separately maintained. -> Business Entity Concept

d. Expenses are recognized in the same period as the related revenues. -> Matching Concept
e.

The death of the chief executive officer of the company is not recorded in accounts. -> Money
Measurement Concept

f.

In case of doubt, it is considered better to understate rather than overstate income. ->
Conservatism or Prudence Concept

g. Assets are not stated at their liquidation value. -> Cost Concept
h. The accounting records only events that affect the financial position of the entity and at the same
time can be reasonably determined in monetary terms. -> Money Measurement Concept
i.

Same treatment is given to comparable transactions from period to period. -> Consistency
Period

j.

Revenue is recognized when it is earned and expense is recognized when it is incurred. ->
Accrual Concept

2. The manager of a company who did not have proper accounting knowledge prepared the
following balance sheet. He has wrongly classified the items under assets, liabilities and owners
equity.
Owners Equity and
Liabilities

Assets

Share Capital

10,00,000

Retained Earnings

5,00,000

Equipment

9,00,000

Land and Buildings

7,00,000

Cash

2,00,000

Long term loan

4,00,000

Accounts Payable

2,00,000

Accounts Receivables

3,00,000

21,00,000

21,00,000

REQUIRED:
Prepare the correct Balance sheet.
Answer 2) Below is the correct balance sheet:
BALANCE SHEET
Owners Equity

Amount

& Liabilities

(Rs.)

Share Capital

Assets

Amount
(Rs.)

10,00,000 Equipment

9,00,000

Long-Term loan

4,00,000 Cash

2,00,000

Accounts Payable

2,00,000 Land & Buildings

7,00,000

Retained

5,00,000 Accounts

3,00,000

Earnings

Receivables

21,00,000

21,00,000

3. Using Accounting Equation, answer the following independent questions.

a) New Companys assets are 250 lakh and its external liabilities are of 100 lakh, determine
the amount of owners Equity.
Answer a)
Owners Equity =
Owners Equity =
Owners Equity =

Total Assets - Total Liabilities

Rs. 250 Lakh - Rs. 100 Lakh
Rs. 150 Lakh

b) Royal Industries has total assets of 100 lakh and owners Equity of 70 lakh, Compute the
amount of external liabilities.
Answer b)
Liabilities
Liabilities
Liabilities

=
=
=

Total Assets - Owners Equity

Rs. 100 Lakh - Rs. 70 Lakh
Rs. 30 Lakh

c) Small Enterprise has following amounts appearing in Balance Sheet as at 31 st December,

2014:
Capital 50 lakh, Reserves and undistributed profits 15 lakh, and total external
liabilities 35 lakh, Determine the amount of total assets.
Answer c)
Total Assets
Total Assets
Total Assets

=
=

Total Liabilities + Owners Equity

50,00,000 + 15,00,000 + 35,00,000
=
Rs. 100 Lakh

c) At the beginning of the accounting year, Supreme Industries had total assets of 1700 lakh
and its total external liabilities of 1000 lakh. During the year total assets increased
by 300 lakh and total liabilities decreased by 160 lakh, compute the amount of owners
equity at the end of the year.
Answer d)

Owners Equity
= Total Assets - Total Liabilities
Total Asset during the period
= 17,00,00,000 + 3,00,00,000
Total Asset during the period
= Rs. 20,00,00,000
Total Liability during the period
= 10,00,00,000 - 1,60,00,000
Total Liability during the period
= Rs. 8,40,00,000
Owners Equity
= 20,00,00,000 - 8,40,00,000
Owners Equity
= Rs. 1160 Lakh
4. Following are ledger balances extracted from the ledger of a company.
REQUIRED- Prepare a Trial Balance.

Share Capital

25,00,000

Plant

4,00,000

Buildings

9,00,000

Sales

42,00,000

Purchases

40,00,000

Salaries

6,00,000

General Expenses

2,00,000

Rent received

50,000

Long term Loan

2,00,000

Accounts
Receivable

6,00,000

Accounts Payable

3,00,000

Cash at Bank

5,50,000

Answer 4) Following is the trial balance sheet:

S.

PARTICULARS

LF

DEBIT (RS)

CREDIT (RS)

No.
1

Share Capital

Plant

4,00,000

Buildings

9,00,000

Sales

Purchases

Salaries

Rent Received

General Expenses

Long term Loan

2,00,000

10

Accounts Payable

3,00,000

11

Accounts Receivable

6,00,000

12

Cash at bank

5,50,000

TOTAL

25,00,000

42,00,000
40,00,000
6,00,000
50,000
2,00,000

72,50,000

72,50,000