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Q.1 Assure 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: We shall consider five transactions and show how they are

accounted for in the booksof the business.

1. Mr. Rajesh brings Rs.100000 cash as capital into his business.

2. He purchases Mobile Set to his shop Rs.10000

3. He buys currencies for cash Rs.50000

4. He sells currencies worth Rs.30000 for Rs.40000 on credit to Arjun

5. He pays wages to servants Rs.1000

Transaction 1:

The business receives capital in cash. Capital is a liability and cash

isan asset to the business.

Liablity assestCapital 100000 cash100000

Transaction 2:Mobile Set is purchased for cash. This transaction can be reflected

asunder

Another way to look at the same equation is that assets equals

liabilities plus owner's equity. Looking at the equation in this way

shows how assets were financed: either by borrowing money

(liability) or by using the owner's money (owner's equity). Balance

sheets are usually presented with assets in one section and

liabilities and net worth in the other section with the two sections"balancing."

AIRTEL VODAPHONE

NET PROFIT 10000 100000

SALES 200000 500000

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NETWORH(CAPITAL) 100000 200000

AIRTEL VODAPHONE

NET PROFIT/SALES*100 5 % 15%

NET PROFIT/ NET WORTH*100 10% 25%

Q.2a. List the accounting standards issued by ICAI.

Ans - The Institute of Chartered Accountants of India (ICAI) isa nationalprofessional accounting body ofIndia. It was established

on 1 July 1949 as abody corporate under the Chartered

Accountants Act, 1949 passed by the Parliament of India to

regulate the profession ofChartered Accountancy in India. ICAI is

the second largest professional accounting body in the world in

terms of membership second only to American Institute of

Certified Public Accountants. ICAI is the only licensing cum

regulating body of the financial audit and accountancy profession

in India.

Accounting Standards

As of 2010, the Institute of Chartered Accountants of India has

issued 32 Accounting Standards. These are numbered AS-1 to AS-

7 and AS-9 to AS-32 (AS-8 is no longer in force since it was

merged with AS-26).Compliance with Accounting Standards

issued by ICAI has become a statutory requirement with thenotification of Companies (Accounting Standards) Rules, 2006 by

the Government of India.Before the the constitution of theNational

Advisory Committee on Accounting Standards (NACAS), the

institute was the sole accounting standard setter in India. However

NACAS is not an independent body. It can only consider

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Accounting Standards recommended by ICAI and advise the

Government of India to notify them under the Companies Act,

1956. Further the accounting standards so notified are applicable

only to companies registered under the companies act, 1956. For

all other entities the accounting standards issued the ICAI continueto apply.

Technical standards

ICAI formulates and issues technical standards to be followed by

Chartered Accountants and others. Non-Compliance of these

standards by the members will lead to disciplinary action against

them. The technical standards issued by ICAI includes, Accounting

Standards, Audit and Assurance Standards, Standards on Internal

Audit, Corporate Affairs Standard, Accounting Standards for Local

Bodies, etc..

Audit and Assurance Standards

As of 2010 ICAI has issued 43 Engagement and Quality Control

Standards (formerly known as Auditing and Assurance Standards)

covering various topics relating to auditing and other engagements.All Chartered Accountants in India are required to adhere to all

these standards. If a Chartered Accountant is found not to follow

the said standards he is deemed guilty of professional misconduct.

These standards are fully compatible with the International

Standards on Auditing (ISA) issued by the IAASB of the IFAC

except for two standards SA 600 and SA 299, where corresponding

provisions do not exist in ISA.

2b. Write short notes of IFRS?

Ans - International Financial Reporting Standards (IFRS) are

principles-based Standards, Interpretations and the Framework

(1989) adopted by the International Accounting Standards Board

(IASB).

http://en.wikipedia.org/wiki/Financial_audithttp://en.wikipedia.org/wiki/International_Standards_on_Auditinghttp://en.wikipedia.org/wiki/International_Standards_on_Auditinghttp://en.wikipedia.org/wiki/International_Auditing_and_Assurance_Standards_Boardhttp://en.wikipedia.org/wiki/International_Federation_of_Accountantshttp://en.wikipedia.org/wiki/International_Accounting_Standards_Boardhttp://en.wikipedia.org/wiki/Financial_audithttp://en.wikipedia.org/wiki/International_Standards_on_Auditinghttp://en.wikipedia.org/wiki/International_Standards_on_Auditinghttp://en.wikipedia.org/wiki/International_Auditing_and_Assurance_Standards_Boardhttp://en.wikipedia.org/wiki/International_Federation_of_Accountantshttp://en.wikipedia.org/wiki/International_Accounting_Standards_Board

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Many of the standards forming part of IFRS are known by the

older name of International Accounting Standards (IAS). IAS were

issued between 1973 and 2001 by the Board of the International

Accounting Standards Committee (IASC). On 1 April 2001, the

new IASB took over from the IASC the responsibility for settingInternational Accounting Standards. During its first meeting the

new Board adopted existing IAS and SICs. The IASB has

continued to develop standards calling the new standards IFRS.

Structure of IFRS

IFRS are considered a "principles based" set of standards in that

they establish broad rules as well as dictating specific treatments.

The objective of financial statement is to provide information about the

financial position,performance and changes in the financial position of an

entity. It should also provide thecurrent financial status of the entity to all

the users of financial information. IFRS followsaccrual basis of

accounting and the financial statements are prepared on the basis

thatan entity will continue for the foreseeable future

International Financial Reporting Standards comprise:

International Financial Reporting Standards (IFRS)

standards issued after 2001

International Accounting Standards (IAS)standards issued

before 2001

Interpretations originated from the International Financial

Reporting Interpretations Committee (IFRIC)issued after

2001

Standing Interpretations Committee (SIC)issued before2001

Framework for the Preparation and Presentation of Financial

Statements (1989)

IAS 8 Par. 11

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"In making the judgement described in paragraph 10, management

shall refer to, and consider the applicability of, the following

sources in descending order:

(a) the requirements and guidance in Standards and Interpretationsdealing with similar and related issues; and

(b) the definitions, recognition criteria and measurement concepts

for assets, liabilities, income and expenses in the Framework."

Q.3 Prepare a Three-column Cash Book of M/s Thuglak &Co. fromThe following particulars:

May 1 st Balance of cash inhand rs 14000 bankoverdreaft at bank5000

4 th investead futhere capital 10000 out ofwhich 6000was depositead in the bank

6 th sold goods for cash 30000

6 th collectead from deboters of last year80000 discount allowead to them 2000

10 th purchesead goods for cash 5500

11 th paid ram vilas our crediter 25000discountallowead by him 650 rs

13 th comsion paid to our agent 5300 rs

14 th rent pad 400 electricity bill 100

14 th drew cheques for personal uses rs 7000

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17 th ash sales 2500

18 th collection from atal bihri 400 depositeadin the bank on

19 april

19 th drew from the bank for offices use 5000

22 drew cheqes for petty expenses 1500

24th divindead receivead by cheque500depositead in the bank of same day

24th comsion res by cheqe 2300 depoisit banksame day

24 th drew saleray 15000

24 th deposit bank 10000

Ans

Cash BankTo bal b/d 14000To capital 4000 6000To saleas 3000To deboters 80000To saleas 28,000 25000To atal 40000To cash 40000

To bank 5000To divend 7,48,400 500

To comm. 2300To cash 2300To cash 20,000 10000

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Total 200300 58800

Cash Bank

By balanceb/d 5000By purchese 55000By ramvilas 25000By comsiion 5300Byofficefurniture

2000

By rent 400By electricity 1000

By dreawings 7000By banks 40000By cash 5000By pettyexpenses

1500

By bank 2300By salary 15000

By bank 10000

total 200300 58800

Q.4 Choose an Indian Company of your choice that has adopted

Balance Score Card and detail on it.?

Ans

The Balanced Score Card is a framework for integrating measures

derived fromstrategy. While retaining financial measures of past

performance, the Balanced ScoreCard introduces the drivers of

future financial performance. (Figure 1) The drivers(customer,

internal business process, learning & growth perspectives) are

derived fromthe organization's strategy translated into objectives

and measures.The Balanced Score Card is more than a

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measurement system it can be used as anorganizing framework for

their management processes. The real power of the BalancedScore

Card is when it is transformed from a measurement system to a

managementsystem. It fills the void that exists in most

management systems - the lack of asystematic process toimplement and obtain feedback about strategy

The balanced scorecard (BSC) is a strategicperformance

management tool - a semi-standard structured report, supported by

proven design methods and automation tools, that can be used by

managers to keep track of the execution of activities by the staff

within their control and to monitor the consequences arising from

these actions.[1]

It is perhaps the best known of several suchframeworks (it is the most widely adopted performance

management framework reported in the annual survey of

management tools undertaken by Bain & Company, and has been

widely adopted in English-speaking western countries and

Scandinavia in the early 1990s). Since 2000, use of the Balanced

Scorecard, its derivatives

2GC Limited (2009), "2GC Balanced Scorecard Usage Survey2009",

2GC Active Management has a very broadexperience having worked with organisations in 33countries across public, private and NGO sectors onthe design, introduction and use of BalancedScorecard. Our clients tell us they are looking forBalanced Scorecard to help them:

To provide reliable information to reassure leadershipteams that their strategic plans arebeing implemented efficiently and effectively and arehaving the impact they expect;

To enable improved alignment behind strategic goalsacross the whole organisation;

http://en.wikipedia.org/wiki/Performance_managementhttp://en.wikipedia.org/wiki/Performance_managementhttp://en.wikipedia.org/wiki/Balance_Score_Card#cite_note-0http://www.bain.com/management_tools/home.asphttp://www.bain.com/management_tools/home.asphttp://en.wikipedia.org/wiki/Bain_%26_Companyhttp://en.wikipedia.org/wiki/Performance_managementhttp://en.wikipedia.org/wiki/Performance_managementhttp://en.wikipedia.org/wiki/Balance_Score_Card#cite_note-0http://www.bain.com/management_tools/home.asphttp://www.bain.com/management_tools/home.asphttp://en.wikipedia.org/wiki/Bain_%26_Company

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To instil greater clarity and consensus withinmanagement teams concerning their shared goalsandpriorities, and to provide them with unambiguous

feedback on their progress in achieving them;To strengthen existing management processes,making them more focused on achieving andmaintaining performance improvements;

To provide a better and wider understanding of therole and contribution of shared services ( HR,Finance) within the overall strategic context;

To provide a more reliable basis for the awarding of

incentive based pay.e Resources section of the 2GC web site contains awealth of useful information on PerformanceManagement ingeneral and the Balanced Scorecard in particular. Inaddition to answers to other Balanced ScorecardFAQs, theResources section contains longer papers (such as

the one cited above) on a variety of topics, casestudies andvarious short presentations, all of which can bedownloaded without charge. e website also hasrecommendations for books and articles on thesubject and links to useful web sites. For informationon 2GC'sprofessional services including consultancy and

training programmes,

About 2GC Active Management...

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Short

teramloans

32000 3600

Ans

Scchedule of changes working capital

Deatalis 2007 2008 Inc d

Cureeant assets

Cash in hand 13000 20,000 7000

Cash it bank 15000 6500 16000

Sundarey

dabators

65000 105000 40000

Billsreceivable

16000 30000 14000

Inventeray 90000 84000 - 60

To curnt assets 199000 259000Current

libilatieas

Sundarey

creadtiors

30000 58000 - 280

Bills paybele 12000 8000 4000 -

Outstandingexpenses

6000 5000 1000 -

Particulaers 2007 2008 particulaers 2007 2008

Equity

shere

50000 65000 Cash

balnce

10000 13000

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capital

P& loss 14750 17000 Debtors 25000 27000

Treade

creditors

29000 31000 Investment 5000 Nil

Morteage 10000 15000 Fxd assests 500000 80000Short teram

loans

15000 16500 Less

deperaction

5250 7000

Accuread

expenses

8000 7500 God will 5000 Nil

stock 37000 39000

Total 126750 15200 126750 152000

Machinery A/c

Particulaers Rs Particulaers Rs

To open blance 15000 By adjustead

p /Loss

12000

To shere

capital a/c

250000 By gen reserve

account

200

To cash a /c 8000 By cah A/Csale

1800

By cl blnce c/d 169000

Total 183000 183000

Q.6 What is a cash budget? How it is useful in managerial decision

making?

Ans A proper control over cash is very essential. Cash is an

important component in anyactivity. The control becomes

inescapable. If cash is not properly managed or if it ismismanaged,

the ultimate result would be disastrous. In many times and in

manybusiness situations, business failures are noticed due to the

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lacunae found in the cashmanagement. Hence cash budgeting

occupies a pivotal place in the study of

FinancialManagement.Cash budgeting is the process of forecasting

the expected receipts known as cashinflows, and expected

payments known as cash outflows to meet the futureobligations.The written statement of receipts and payments is

known as the cash budget. It is acrystal ball which enables one to

observe the future movements in cash position. It is amere forecast

of cash position of an undertaking for a definite period of time.

The periodmay be daily, weekly, monthly, quarterly, semi-

annually, or annually. The major twocomponents of cash budget

would be forecast first the cash receipts and then secondforecasting

the cash disbursements.

A budget is a list of all planned expenses and revenues. It is a plan

for saving and spending. A budget is an important concept in

microeconomics, which uses abudget line to illustrate the trade-

offs between two or more goods. In other terms, a budget is an

organizational plan stated in monetary terms.

In summary, the purpose of budgeting is to:

1. Provide a forecast of revenues and expenditures, that is,

construct a model of how our business might perform

financially if certain strategies, events and plans are carried

out.

2. Enable the actual financial operation of the business to be

measured against the forecast.

budgeting approach designed for companies with fluctuating

income, high fixed costs, or income depending on sunk costs, as

well asNPOs andNGOs. The approach builds on the strengths

of proven budgeting approaches, leverages the respective

http://en.wikipedia.org/wiki/Microeconomicshttp://en.wikipedia.org/wiki/Budget_linehttp://en.wikipedia.org/wiki/Good_(economics)http://en.wikipedia.org/wiki/Budgethttp://en.wikipedia.org/wiki/Fixed_costhttp://en.wikipedia.org/wiki/Sunk_costshttp://en.wikipedia.org/wiki/Non-profit_organizationhttp://en.wikipedia.org/wiki/Non-governmental_organizationhttp://en.wikipedia.org/wiki/Microeconomicshttp://en.wikipedia.org/wiki/Budget_linehttp://en.wikipedia.org/wiki/Good_(economics)http://en.wikipedia.org/wiki/Budgethttp://en.wikipedia.org/wiki/Fixed_costhttp://en.wikipedia.org/wiki/Sunk_costshttp://en.wikipedia.org/wiki/Non-profit_organizationhttp://en.wikipedia.org/wiki/Non-governmental_organization

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advantages for situations of fluctuating incomes, and at the

same time reduces possible negative impacts.

The traditional budgeting approach, also called line-item budget,

normally consists of a set of several budgets that build on one-another and have to be integrated. For a manufacturing company,

these budgets may be.

sales budget

production budget

direct materials usage budget

direct materials purchase budget

direct labor budget

factory overhead budget

selling and administration budget

cash budget.

his approach typically builds on the previous year sales and cost

structure and it works fine for unit level costs where the

consumption of resources varies proportionately with the volume

of the final output of products or services. Such approaches are

also called incremental budgeting.

Decision making can be regarded as the

mental processes (cognitive process) resulting in the selection of a

course of action among several alternative scenarios. Every

decision making process produces a final choice.The output can be

an action or an opinion of choice.

Decision-Making Steps

When in an organization and faced with a difficult decision, thereare several steps one can take to ensure the best possible solutions

will be decided. These steps are put into seven effective ways to go

about this decision making process (McMahon 2007).

http://en.wikipedia.org/wiki/Cognitionhttp://en.wikipedia.org/wiki/Choicehttp://en.wikipedia.org/wiki/Cognitionhttp://en.wikipedia.org/wiki/Choice

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The first step - Outline your goal and outcome. This will enable

decision makers to see exactly what they are trying to accomplish

and keep them on a specific path.

The second step - Gather data. This will help decision makers haveactual evidence to help them come up with a solution.

The third step - Brainstorm to develop alternatives. Coming up

with more than one solution ables you to see which one can

actually work.

The fourth step - List pros and cons of each alternative. With the

list of pros and cons, you can eliminate the solutions that have

more cons than pros, making your decision easier.

The fifth step - Make the decision. Once you analyze each

solution, you should pick the one that has many pros (or the pros

that are most significant), and is a solution that everyone can agree

with.

The sixth step - Immediately take action. Once the decision is

picked, you should implement it right away.

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