MB0041 –Financial and Management Accounting

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Master of Business Administration- MBA Semester 1

MB0041 –Financial and Management Accounting- 4 Credits

(Book ID: B1624)

Assignment Set- 2 (60 Marks)

Note: Answer all questions (with 300 to 400 words each) must be written within 6-8 pages. Each Question carries 10 marks 6 X 10=60

Q1. An accountant finds that the trial balance of his client did not tally and it showed an excess credit of Rs. 69.74. He transferred it to a suspense account and later discovered the following errors.

a) Rs. 44.37 paid to Anand has been credited to his account as Rs. 34.37.

b) A purchase of Rs. 145.50 has been posted as Rs. 154.50 to the purchases account.

c) An expenditure of Rs. 158 on repairs has been debited to the buildings account.

d) Rs. 80 was allowed by B as discount which has not been entered in the books.

e) A sum of Rs. 125.05 realised on the sale of old furniture has been posted to the sales account.

Give journal entries to rectify the errors and show the suspense account as it would appear after adjustments

Hint: Total of suspense a/c = 78.74

Answer :

Q2. Distinguish between management accounting and financial accounting.

Answer : Financial and management accounting are both important tools for a business, but serve different purposes. A business uses accounting to determine operational plans in the future, to review past performance and to check current business functions. Management and financial accounting have different audiences, as investors are not usually involved in the day-to-day operations of the business but are

Q3. Draw the Balance Sheet for the following information provided by Sarawath 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

Hint: B/S total 1100000

Answer :

Q4. Following is the balance sheet for the period ending 31st March 2006 and 2007. If the current year’s net loss is Rs.38,000, calculate the cash flow from operating activities.

	31st MARCH
	2006	2007
Short-term loan to employees	15,000	18,000
Creditors	30,000	8,000
Provision for doubtful debts	1,200	-
Bills payable	18,000	20,000
Stock in trade	15,000	13,000
Bills receivable	10,000	22,000
Prepaid expenses	800	600
Outstanding expenses	300	500

Hint: Net cash lost in operating activities (69800)

Answer :

Q5. The following data are related to the manufacture of a standard product during the month of July 2009.

Raw materials consumed	Rs.15,000
Direct wages	Rs. 9,000
Machine hours worked	900 hours
Machine hours rate	Rs.5
Administrative overheads	20% of works cost
Selling overheads	Re.0.50 per unit
Units produced	17,100
Units Sold	16,000 @ Rs.4 per unit

Prepare a cost sheet from the above to show:

a. The cost per unit

b. The profit per unit sold and profit for the period

Hint: Profit = 24000

Answer :

Q6. Write the differences between absorption costing and management costing.

Answer : What is Absorption Costing?

A management cost accounting method of expensing all the costs related with the production of a particular product is known as absorption costing. Absorption costing utilizes the total overhead costs and total direct costs related with producing a product as the cost base. The GAAP need absorption costing for external reporting. Generally accepted accounting principles (GAAP) require the absorption costing for the

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