MS-04 Accounting and Finance for Managers

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ASSIGNMENT

DRIVE FALL	2016
PROGRAM	MANAGEMENT PROGRAM
SUBJECT CODE & NAME	MS-04 Accounting and Finance for Managers
SEMESTER	I
BK ID	MS-04/TMA/SEM-I/2016
CREDITS	4
MARKS	60

Note: Attempt all the questions and submit this assignment on or before 30th April, 2016 to   the coordinator of your study centre. 

Question1. “Accountancy is an Information System”. Do you agree? Substantiate your answer with reasons. How does an Accountant help in planning and controlling a large commercial organization? Explain.  

Answer – Yes, I agree that“Accountancy is an Information System”. The main reason behind the statement is that it is a subset of management information system (MIS). Accounting Information System, also known as AIS,  is responsible for providing timely and accurate financial and statistical reports for internal management decision making, and for external parties such as creditors, investors, and regulatory and taxation authorities.

Importance of Accounting Information Systems

There is an importance for studying Accounting Information System. Anyone pursuing an accounting career must study and understand accounting information systems (AIS) and the related concepts. No matter which particular career path is chosen within accounting, it will in some manner involve the use of an accounting information system. Accountants have several possible roles related to accounting information systems: They may be users of the AIS, part of the design or implementation team of an AIS, and/or auditors of AIS.

An information system is a formal process for collecting data, processing the data into information, and distributing that information to users. The purpose of an accounting information system (AIS) is to collect, store, and process financial and accounting data and produce informational reports that managers or other interested parties can use to make business decisions. Although AIS can be a manual system, today most accounting information systems are computer-based.

Parts of an Accounting Information System

An accounting information system typically has six basic parts:

1. People who use the system, including accountants, managers, and business analysts

2. Procedure and instructions are the ways that data are collected, stored, retrieved, and processed

3. Data including all the information that goes into AIS

4. Software consists of computer programs used for processing data

5. Information technology infrastructure includes all the hardware used to operate the AIS

6. Internal controls are the security measures used to protect data

The Reliability of Accounting Information Systems

Because AIS stores and provides such valuable business information, reliability is vitally important. There are five basic principles important to AIS reliability:

1. Security - Access to the system and its data is controlled and limited only to those authorized.

2. Confidentiality - The protection of sensitive information from unauthorized disclosure.

3. Privacy - The collection, use, and disclosure of personal information about customers is done in an appropriate manner.

4. Processing integrity - The accurate, complete, and timely processing of data done with proper authorization.

5. Availability - The system is available to meet operational and contractual obligations.

As we know accountant plays a vital role in organization. Accountant provides us exact and true picture of the financial position in the firm, through which owner can draw a true and fact figure of financial positions of their firm. With the help of accountant, we can know the actual profit and loss of the company.

An Accountant helps in planning and controlling a large commercial organization in following way-

(i)Maintenance of business records. All financial transactions are recorded in a systematic manner in books of accounts so that there is no need to rely on memory. It is not possible for any human being to remember all what happened in daily operations of a business.

(ii) Preparation of financial statements. Systematic records enable the accountant to prepare the financial statements-trading and profit and loss account to calculate profit or loss during a particular accounting period and balance sheet to state the financial position of the business on a particular date. Profit is a measure of the successful running of thel business.

(iii) Comparison of results. Systematic maintenance of business records enables the accountant to compare profit of one year with those of earlier years to know the significant facts about the changes. This helps the business to plan its future affairs accordingly.

(iv) Decision-making. For day-to-day solving of a number of problems like what should be the selling price of goods produced? Whether a part should be made in the factory or purchased from outside? etc., the accountant helps the management by providing the relevant information.

(v) Good evidence in courts. Records of business transactions are treated as satisfactory evidence in courts of law.

(vi) Planning and control operations. Planning operations like sales, productioncash requirements for next accounting periods are achieved with the help of accounting information and estimates based on that information. Management is also interested in observing that the operations in the business are going on according to plan and all the departments are spending within their prescribed limits.

Question2. The following are the Balance Sheets of XYZ Ltd. for the years ending 31st December, 2014 &2015 .

Particulars	2014 (Rs.)	2015 (Rs.)
Liabilities Equity Share Capital Preference Share Capital Reserves  Profit and Loss a/c Bank overdraft Creditors  Provision for taxation  Proposed Dividend                                   Total   Fixed Assets  Less: Depreciation  Stock  Debtors  Bills Receivable Prepaid expenses Cash in Hand Cash at Bank                                   Total	2,00,000 1,00,000 20,000 15,000 50,000 40,000 20,000 15,000 4,60,000 2,40,000 40,000 1,00,000 20,000 10,000 40,000 10,000 4,60,000	3,30,000 1,50,000 30,000 20,000 50,000 50,000 25,000 25,000 6,80,000 3,50,000 50,000 1,25,000 60,000 12,000 53,000 30,000 6,80,000

Prepare the comparative balance sheet and study its financial position.

Answer-  Comparative balance sheet and its financial position.

Equity and Liability	Amount     2014		Amount     2015	Jan/Dec	% Jan/Dec
	Amount     2014		Amount     2015	Jan/Dec	% Jan/Dec

Question3. ABC Ltd. maintains their books of Cost Accounts under standard costing system in which the work-in-progress is debited with actual costs and credited with standard costs.  The standard cost card for product X shows:  

Cost per unit (Rs.)

Direct material  1pc @ Rs. 1.501.50

Direct labour3hrs @ Re. 1.003.00

Factory overhead   3 hrs.@Rs. 2.50  7.50

(to be charged to product X)

Production data   

Units completed   950 units  

Units in closing WIP  100 units 50% completed

Cost of units remaining work- in- progress Account is transferred to work- in- progress Inventory Account. You are required to compute all possible variances

Answer –

(i) Material price variance – (A R – S R )  X Actual Consumption

( 1.60 – 1.50 )X  1100

                                                 = 110 A

Question 4. As a Manager what strategy you will adopt so that you are able to efficiently manage the cash in business? 

Answer - Cash management is a broad term that refers to the collection, concentration, and disbursement of cash. The goal is to manage the cash balances of an enterprise in such a way as to maximize the availability of cash not invested in fixed assets or inventories and to do so in such a way as to avoid the risk of insolvency. Factors monitored as a part of cash management include a company's level of liquidity, its management of cash balances, and its short-term investment strategies.

In some ways, managing cash flow is the most

Question 5. Visit an organization of your choice and find out the investment appraisal methods that the organization follows. Write a note on your visit.

Answer - Introduction to the company (The Jai Bharat Machine Tools Ltd)

The Jai Bharat Machine Tools Ltd. was established in 1971. To start with, 500 workers, 35 Technicians and 15 technical officers were working in the company. At present the total strength has gone to 3000 workers 150 technicians and 30 officers.

The Jai Bharat Machine tools usually get 2 or 3 projects every year I visited its head office to find how they appraise the investments before starting any project.

I found that they were using many methods for investment appraisals. I will explain the methods which they are as follows:

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