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Financial and Management Accounting -MB0025

MBA -1 SEM Assignment – Set 1

L. Megha Syam 510925494

Q1. Explain the differences between Financial Accounting and

Management Accounting. Financial accounting is the preparation and communication of financial

information to outsiders such as creditors, bankers, government, customers

and so on. Another objective of financial accounting is to give complete

picture of the enterprise to shareholders. Management accounting on the other hand aims at preparing and reporting the financial data to the

management on regular basis. Management is entrusted with the responsibility of taking appropriate decisions, planning, performance evaluation, control, management of costs, cost determination etc., For both

financial accounting and management accounting the financial data is the same and the reports prepared in financial accounting are also used in

management accounting But the following are major differences between Financial accounting and Management accounting.

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Q2. Hiran, a retailer, has prepared the following balance sheets for the years ending 31st March 2004 and 2005:

Other data: The net profit for the year 2004 was Rs.40000. Hiran is paid a salary of Rs.16,000. His drawings amounted to Rs.45,200. You are required

to prepare a statement of changes in financial position, on working capital basis.

The layout for schedule of changes in Working Capital is as follows Balances as on Effect on

Schedule of changes in Working Capital is as follows: Year 2004 Year 2005 Increase Decrease

A .CURRENT ASSETS: Cash in hand & bank Sundry Debtors Stock or Inventory B. CURRENT LIABILITIES

Trade and accrued expenses Net Working Capital Decrease in Working(A-B)

4000 50000 36000 - 24000

2000 34000 34000 _ 20000

2000 16000 2000 4000 16,000

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Statement of Profit and loss adjustment a/c:

Particulars Amount Particulars Amount

Salaries Funds from operations transferred to applications

16000 24000

Net profit for the year 2004

40000

Total: 40000 40000

Funds Flow Statement:

Particulars Amount Particulars Amount

Increase in capital Decrease in Working capital

5200 16000

Funds from operations

24000

Total:

Q3. Enter the following transactions in proper subsidiary book. Find

out the total of: a) Purchase book b) sales book c) purchase return book d) sales

return book.

Purchase book Date Name of

Supplier Ledger Folio

Inward Invoice No.

Amount Rs. Dr.

Jan 1 Purchased from Karthik

34000

Jan 10 Purchased from Vikas

40000

Jan 12 Purchased from Naveen

102000

Jan 15 Purchased from Brinda

100000

Jan 25 Purchased from Anand

45000

Total: 321000

.

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Sales book : Date Name of

customer Ledger Folio

Out ward Invoice No.

Amount Rs. Cr

Jan 5 Sold goods to Vinay

12000

Jan 7 Sold goods to Nagaraj

10000

Jan 20 Sold Goods to Gururaj

16000

Total 38000

Sales returns Book: Date Name of

customer/debtor

Ledger Folio

Out ward Invoice No.

Amount Rs. Dr.

Jan 14 Returned good by Vinay

3000

Jan 22 Natraj returned goods

2000

Total: 5000

Purchase return book: Date Name of

Supplier/Creditor

Ledger Folio

Out ward Invoice No.

Amount Rs.

Jan 14 Returned good to Karthik

4000

Jan 22 Returned goods to Naveen

2000

Total: 6000

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4a. On 01-04-2007 Mr. Gundu Rao stated business with Rs. 3, 00,000 cash and opened a bank account with Rs. 1,50,000. He purchased furniture for his

business for Rs. 25000. Goods were bought from selvaraj for Rs. 50000 on credit. He sold goods for Rs. 27000 in cash and Rs. 30000 on credit. He paid

Rs. 2500 for business expenses during April month. Rs. 10000 was withdrawn for office purpose form the back. Find out the closing balance of cash and bank.

Date Particular

s Cash A/c Dr

Bank a/c Dr

Date Particulars Cash A/c Cr

Bank A/c Cr

1-4-2007

31/04/2007

To capital a/c of Gundu Rao To bank a/c C To sales a/c

To bank Office expenses C

300000

27000 10000

150000

1-04-2007

31/04/2007

By Cash A/c C By Furniture a/c By Business Exp By Cash - Office expenses C By Balance c/d

150000 25000 2500 160500

10000 140000

337000 150000 337000 150000

01/05/2007 To Bal B/d

160500 140000

4b. Following are the extracts from the Trial Balance of a firm as on 31st

December 1998: TRIAL BALANCE

As on 31st December 1998 Particulars Dr. Cr.

Salaries A/c 10,000 Rent a/c 5,000

Additional Information: I. Salary for the month of December Rs.2000 has not yet been paid.

II. Rent amounting to Rs.1000 is still outstanding

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You are required to pass the necessary adjusting entries and show how the above items will appear in the Firm’s Account

Entry:

Salary a/c Dr 2000 To Salary outstanding A/c 2000 Rent a/c Dr. 1000

To rent outstanding 1000

Trial balance Particulars Dr. Cr.

Salaries A/c

12000

Rent a/c 6000 Q5. From the following figures extracted from the book if Shri

Govind, you are required to prepare a Trading and Profit & Loss Account for the year ended 31st March, 1999 and a Balance Sheet as

on that date after making the necessary adjustment.

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.

Adjustments

1. Stock on 31st March, 1999 was valued at Rs. 72,600 2. A new machine was installed during the year costing Rs. 15,400, but it

was not recorded in the books as no payment was made for it. Wages Rs. 1,100 paid for its erection has been debited to wages account. 3. Depreciate:

Plant and Machinery by 33 1/3 % Furniture by 10% Freehold property by 5%

4. Loose tools were valued at Rs. 1,760 on 31.3.1999. 5. Of the Sundry Debtors Rs. 600 are bad and should be written off. 6. Maintain a provision of 5% on Sundry Debtors for doubtful debts.

7. The manager is entitled to a commission of 10% of the net profits after charging such commission.

Ans:

Trading A/c for the year ended 31st March, 1999: Particulars Amount Total

Amount Dr. Particulars Amount Total

Amount Cr.

Purchases Less Purchase return Wages Less erection Factory Lighting Gas & Fuel Freight To gross profit transferred to P/L a/c

110000 1100 35200 1100

108900 34100 1100 2970 9900

Sales Closing Stock

231440 72600

Total 304040 304040

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Profit & Loss A/c for the year ended 31st March, 1999 Particulars Amount Total

Amount Dr. Particulars Amount Total

Amount Cr.

Salaries Office exp Discount Postage & telegram Insurance Office rent Bad debts Provision for Bad debts Depreciation on Furniture Depreciation on Plant & machinery Depreciation on Free hold property Manager’s Commission To Net profit transferred to B/S

1463-880 NP*10/110

13200 2750 1320 1540 1760 2860 1260 583 550 38130 3300 13470 80723

By Balance b/d from Trading A/c Interest Received

147070 1100

Total 148170 148170

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Balance Sheet for the year ended 31st March, 1999 LIABILITIES Details AMOUNT ASSETS Details AMOUNT

Shri Govind’s Capital Shri Govind’s Drawings Add net Profit Sundry Creditors Biils Payable

228800 -13200 +80723

296323 44000 5500

Cash at Bank Cash in Hand Plant and Machinery Less Dep Freehold Property Less Dep Office Furniture Less Dep Loose Tools Sundry Debtors Less provision for BD Closing Stock

99000+15400 38130 66000 5500 550 29260 583

29260 2640 76270 62700 4950 2200 72,600

Total 345823 250620

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6. Differentiate between Standard Cost And Budgetary Control

Following are some of the differences identified:

1. The scope of budgetary control is wider. It is integrated plan of action, a coordinated plan in respect of all functions of an enterprise The scope of standard costing, on the other hand, is limited to the operating level. Here

too, it is further linked to costs. Budgetary control is extensive whereas standard costing is intensive in its application

2. Budgetary control deals with costs and revenues. But standard costing restricts only with costs.

3. Budgetary control takes into account all activities such as production,

sales, purchase3s, finance, capital expenditure, personnel whereas standard costing is restricted to deal with only costs.

4. Budgetary control targets are based on past actual adjusted to future trends. In standard costing, standards are based on technical assessment.

5. At the approach level, budgeted targets work as the maximum limit of

expenses above which the actual expenditure should not normally exceed. Under standard costing, standards are attainable level of performance.

6. Budget is projection of final accounts. Standard costs are projection of only cost accounts.

7. Budgetary control emphasizes the forecasting aspect of the future operations. Standard

8. Costing scope and utility is limited to only operating level of the concern.

9. In budgetary control, the degree of variance analysis tends to be much less and variances are not revealed through the accounts but are revealed

in total. But in standard costing, variances Financial and Management are analyzed in details according to their originating causes and ar3e revealed through different accounts.

10.Budgetary control is possible even in parts of expenses according to the attitude of management. A standard costing system can not be operated

in parts. All items of expenditure included in cost units are to be accounted for.