MB0041- FINANCIAL AND MANAGEMENT ACCOUNTING

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ASSIGNMENT

DRIVE FALL	2013
PROGRAM	MBADS / MBAHCSN3 / MBAN2 / PGDBAN2 / MBAFLEX
SEMESTER	I
SUBJECT CODE & NAME	MB0041- FINANCIAL AND MANAGEMENT ACCOUNTING
BK ID	B1624
CREDITS	4
MARKS	60

Note: Answer all questions. Kindly note that answers for 10 marks questions should be approximately of 400 words. Each question is followed by evaluation scheme.

Q.1 Inventory in a business is valued at the end of an accounting period, at either cost or market price, whichever is lower. This is accepted convention or a practice in accounting.  Give a small introduction on accounting conventions and elucidate all the eight accounting conventions.

Answer : Accounting convention :

Guidelines that arise from the practical application of accounting principles. An accounting convention is not a legally-binding practice; rather, it is a generally-accepted convention based on customs, and is designed to help accountants overcome practical problems that arise out of the preparation of financial statements. As customs change, so to will accounting conventions. If an oversight organization, such as the Securities and Exchange Commission (SEC) or the Financial Accounting Standards Board (FASB) set forth a guideline that addresses the same topic as the accounting convention, the accounting

Q. 2 Write down a table with the accounts involved / the nature of account/its affects/ debit or

credit. Please have the transactions given below and prepare the table as per the instructions given above

for each transaction.

a. 1.1.2011 Sunitha started his business with cash Rs. 5,00,000

b. 2.1.2011 Borrowed from Malathi Rs. 5,00,000

c. 2.1.2011 Purchased furniture Rs. 1,00,000

d. 4.1.2011 Purchased furniture from Meenal on credit Rs. 1,50,000

e. 5.1.2011 Purchased goods for cash Rs. 50,000

f. 6.1.2011 Purchased goods from Ram on credit Rs. 2,50,000

g. 8.1.2011 Sold goods for cash Rs. 1,25,000

h. 8.1.2011 Sold goods to Shyam on credit Rs. 55,000

i. 9.1.2011 Received cash from Shyam Rs. 25,000

j. 10.1.2011 Paid cash to Ram Rs. 90,000

3 .From the given trial balance, draft an Adjusted Trial Balance.

Trial Balance as on 31.03.2013

Debit balances	Rs.	Credit balances	Rs.
Furniture and Fittings	15000	Bank over draft	16000
Buildings	500000	Capital account	400000
Sales return	1000	Purchase returns	4000
Bad debts	2000	Sundry creditors	35000
Sundry debtors	25000	commissions	5000
purchases	90000	sales	235000
advertising	20000
cash	10000
Taxes and insurance	5000
General expenses	7000
salaries	20000
total	695000	total	695000

Adjustments: 

1. Charge depreciation at 10% on Buildings and Furniture and fittings.

2. Write off further bad debts 1000

3. Taxes and Insurance prepaid 2000

4. Outstanding salaries 5000

5. Commission received in advance1000

Q.4  The reports prepared in financial accounting are also used in the management accounting. But there are few major differences between financial accounting and management accounting.

Explain the differences between financial accounting and management accounting in various

dimensions.

Answer : Differences between the financial and management accounting  :

Managerial accounting is concerned with providing information to managers i.e. people inside an organization who direct and control its operations. In contrast, financial accounting is concerned with providing information to stockholders, creditors, and others who are outside an organization. Managerial accounting provides the essential data with which organizations are actually run. Financial accounting provides the scorecard by which a company’s past performance is judged. Because it is manager oriented, any study of managerial accounting must be preceded by some understanding of what managers do, the information managers need, and the general business environment.

Q.5 Draw the Balance Sheet for the following information provided by Sandeep Ltd..

a. current ratio : 2.50

b. liquidity ratio : 1.50

c. net working capital : 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

Answer:

Preparation of Balance sheet (Includes all the ratios) 10

Q.6  Write the main differences between cash flow analysis and fund flow analysis. 

Following is the balance sheet for the period ending 31st   March 2011 and 2012. If the current

year’s net loss is Rs.38,000, Calculate the cash flow from operating activities.

		31st march
	2011	2012
Short-term loan to employees	15000	18000
creditors	30000	8000
Provision for doubtful debts	1200
Bills payable	18000	20000
Stock in trade	15000	13000
Bills receivable	10000	22000
Prepaid expenses	800	600
Outstanding expenses	300	500

Answer : Differences between cash flow and fund flow analysis :

The difference between cash flow and funds flow is that cash flow is based on cash while funds flow is based on working capital. When writing accounting statements, the funds flow statement records the net increase or decrease in working capital while the cash flow statement records individual cash items.

A Cash Flow statement is a statement showing changes in cash position of the firm from one period to another. It explains the inflows (receipts) and outflows (disbursements) of cash over a period of time. The inflows of cash may occur from

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