MS-04 - Accounting and Finance for Managers

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ASSIGNMENT

Course Code                                   :                            MS-04

Course Title                                    :                            Accounting and Finance for Managers

Assignment Code                          :                            MS-04/TMA/SEM-I/2018

Coverage                                         :                            All Blocks

Note : Attempt all the questions and submit this assignment on or before 30th April, 2018 to the coordinator of your study center.

Question. 1. How is ‘Financial Accounting’ different form ‘Management Accounting’? Discuss the role and activities of an Accountant.

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 concerned about their investment, whereas managers need information quickly to make daily business decisions

Question. 2. The Balance Sheets of XYZ Ltd as on 31st December, 2016 and 2017 are as given below:

Liabilities	2016	2017	Assets	2016	2017
Share Capital	2,00,000	2,00,000	Goodwill	24,000	24,000
General Reserve	28,000	36,000	Buildings	80,000	72,000
Profit and Loss Account	32,000	26,000	Plant	74,000	72,000
Creditors	16,000	10,800	Investments	20,000	22,000
Bills Payable	2,400	1,600	Stock	60,000	46,800
Provision for Taxation	32,000	36,000	Bills Receivable	4,000	6,400
Provision for doubtful debts	800	1,200	Debtors	36,000	38,000
			Cash and bank balance	13,200	30,400
	3,11,200	3,11,600		3,11,200	3,11,600

Additional Information:-

(i) Depreciation provided on plant was 8,000 and on building was Rs. 8,000.

(ii) Provision for taxation made during the year is Rs. 38,000.

(iii) Interim dividend paid during the year is Rs. 16,000.

From the above information, you are required to prepare Schedule of changes in Working Capital and Funds Flow Statement.

Answer: A Balance Sheet is a statement of the financial position of a business which states the assets, liabilities, and owners' equity at a particular point in time. In other words, the balance sheet illustrates your business's net worth.

Question. 3. What do you understand by CVP Analysis. Explain the effect of Price and Volume on the Net Profit, with the help of a suitable illustration.

Answer: Cost-volume-profit (CVP) analysis is used to determine how changes in costs and volume affect a company's operating income and net income. In performing this analysis, there are several assumptions made, including:

·       Sales price per unit is constant.

·      Variable costs per unit are constant.

·       

Question. 4. The Management of ABC Ltd. is considering a proposal to purchase an improved model of a machine which gives increased output. Its existing machine which has been in operation for 2 years has current market value of Rs. 1,00,000, its remaining estimated useful life is 10 years, with no salvage value at the end.

The relevant particulars are as follows:

	Existing Machine	New Machine
Purchase price	Rs.2,40,000	Rs.4,00,000
Estimated life	12 years	10 years
Salvage value	-	-
Annual Operating hours	2,000	2,000
Selling price per unit	Rs.10	Rs.10
Output per hour	15 units	20 units
Material cost per unit	Rs.2	Rs.2
Labour cost per unit	20	40
Consumable stores per year	2,000	5,000
Repairs and Maintenance per year	9,000	6,000
Working Capital	25,000	40,000

The company follows the straight-line method of depreciation and is subject to 50% tax. Should the existing machine be replaced? Assume that the company’s required rate of return is 15% and that the loss on sale of Assets is tax deductible.

Answer: There are two possible treatments about the provision for taxation:

1. Provision for taxation can be treated as a current liability and it will decrease the working capital in the schedule of changes in working capital. However, payment of tax does not affect working capital because it involves both current asset and current liability account, i.e., payment decreases cash or bank balance on the one hand and decreases the current liability (tax provision) by the equivalent amount on the other hand.

Question. 5. As a Finance Manager how would you determine the Optimal Cash balance that would be required by your Organisation? What measures you would take to ensure the smooth and efficient Management of Cashflows in the Orgnisation?

Answer: Business analysts report that poor management is the main reason for business failure. Poor cash management is probably the most frequent stumbling block for entrepreneurs. Understanding the basic concepts of cash flow will help you plan for the unforeseen eventualities that nearly every business faces. Below, you will find useful information regarding the importance of cash management for your small business.

Cash vs. Cash Flow

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