Accounting for Manager

Assignment - A
Question 1a): What do you understand by the concept of conservatism? Why it is also called the concept of prudence? Why it is not applied as strongly today as it used to be in the Past?

Question 1 b): What is a Balance Sheet? How does a Funds Flow Statement differ from a Balance Sheet? Enumerate the items which are usually shown in a Balance Sheet and a Funds Flow Statement.

Question 2a: Discuss the importance of ratio analysis for inter-firm and intra-firm comparisons including circumstances responsible for its limitations .If any

Question 2b: Why do you understand by the term 'pay-out ratio'? What factors are taken into consideration while determining pay-out ratio? Should a company follow a fixed pay-out ratio policy? Discuss fully.

Question 3a: From the ratios and other data given below for Bharat Auto Accessories Ltd. indicate your interpretation of the company's financial position, operating efficiency and profitability.

Question 4: Bose has supplied the following information about his business to Summary of Cash book for the year ended 31st March, 2004 is as follows:    
 
Assets and Liabilities    On 1st April 2003

(Rs.)    On 31st March, 2004 
(Rs.)       
Sundry debtors

Stock

Machinery

Furniture

Sundry creditors    1,81,000

1,50,000

2,50,000

40,000

1,10,000    1,93,000

1,40,000

?

?

1,25,000     

           
 
Receipts     Rs.    Payments    Rs.       
To Opening balance

To Cash sales

To Receipt from debtors

To Misc. receipts

To Loan from Dass @ 9% per annum (taken on  1.10.2003)    5,000 

61,000

7,53,000

2,000

1,00,000    By Payments to creditors

By wages

By Salaries

By Drawings

By Sunday office expenses

By Machinery purchased (on  1.10.2003)

By Closing balance    
3,50,000

1,60,000

1,50,000

40,000

1,10,000

95,000

16,000       
    9,21,000           9,21,000     

Discount allowed totaled Rs.7,000 and discount received was Rs.4,000. Bad debts written off were Rs.8,000. Depreciation was written off on furniture @5% per annum and machinery @10% per annum under the straight line method of depreciation. The office expenses included Rs.5,000 paid as insurance premium for the year ending 30th June, 2004. Wages amounting to Rs.20,000 were still due on 31st March, 2004.
Prepare trading and profit and loss account for the year ended 31sl March, 2004 and the balance sheet as on that date.
Question (5a) What procedure would you adopt to study the liquidity of a business firm?

Question 5 b: Who are all the parties interested in knowing this accounting information?

Question 5c: What ratio or other financial statement analysis technique will you adopt for this.

6. From the following particulars, determine the bank balance as per pass book of Priya & Co. as on 28th February 2008.
a)     Credit balance as per cash book on 28th February, 2008 was Rs. 15,000
b)    Interest charged by the bank up to 28th February Rs. 500 was recorded in the pass book.
c)     Bank charges made by the bank Rs. 125 were also recorded only in the pass book.
d)    Out of the cheques of Rs. 25,000 paid into the bank, cheques of Rs. 18,750 were cleared and credited by the bankers
e)     Two cheques of Rs. 7,500 and Rs. 15,000 were issued but out of them only one cheque of Rs. 7,500 was presented for payment upto 28th February.

Dividends on shares Rs. 4,500 were collected by the bankers directly, for which Priya & Co. did not have any information.

CASE STUDY
Question 1: Describe the impact of different types of standards on motivations, and specifically, the likely effect on motivation of adopting the labor standard recommended for Geeta & Company by the engineering firm.
Question 2: Please advise the company in reviewing the standards.

Assignment - C

Question No: 1

Which of the following statements is true concerning assets?

They are recorded at cost and adjusted for inflation. 

They are recorded at market value for financial reporting because historical cost is arbitrary. 

Accounting principles require that companies report assets on the income statement. 

Assets are measured using the cost concept. 

Question No: 2

When the concept of conservation is applied to the Balance Sheet, it results in

Overstatement of Capital 

Understatement of Capital 

Overstatement of Assets 

Understatement of Assets. 

Question No: 3

Which of the following is a correct expression of the accounting equation?

Assets - Liabilities + Owners’ Equity 

Assets = Liabilities - Owners’ Equity 

Assets + Owners’ Equity = Liabilities 

Assets = Liabilities + Owners’ Equity 

Question No: 4

How is the balance sheet linked to the other financial statements?

The beginning retained earnings balance on the statement of retained earnings becomes the amount of retained earnings reported on the balance sheet. 

Retained earnings is added to total assets and reported on the balance sheet. 

Net income increases retained earnings on the statement of retained earnings, which ultimately increases retained earnings on the balance sheet. 

There is no link between the balance sheet and the other statements. 

Question No: 5

The process of recording the economic effects of business transactions in a book of original entry:

Double entry system 

Debit 

Credit 

Journalizing 

Question No: 6

If the sum of the debits and credits in a trial balance is not equal, then

There is no concern because the two amounts are not meant to be equal. 

The chart of accounts also does not balance. 

It is safe to proceed with the preparation of financial statements. 

Most likely an error was made in posting journal entries to the general ledger or in preparing the trial balance. 

Question No: 7

Z Ltd had Rs1800 of supplies on hand at January 1, 2006. During 2006, supplies with a cost of Rs7, 000 were purchased. At December 31, 2006, the actual supplies on hand amounts to Rs2, 300. After the adjustments are recorded and posted at December 31, 2006, the balances in the Supplies and Supplies Expense accounts will be:

Supplies, Rs7, 000; Supplies Expense, Rs2, 300. 

Supplies, Rs1, 800; Supplies Expense, Rs7, 000. 

Supplies, Rs2, 300; Supplies Expense, Rs6, 500. 

Supplies, Rs2, 300; Supplies Expense, Rs3, 900. 

Question No: 8

In the statement of changes in financial position, uses of resources are defined as:

Transaction debits 

Fund increases 

Transaction credits 

Fund decreases 

Question No: 9

Most firms elected to define funds in the statement of changes in financial position as:

Cash 

Working capital 

Current assets 

Owners’ Equity 

Question No: 10

The funds flow statement included:

All sources and uses of resources. 

Only cash transactions. 

Only transactions affecting current assets. 

Only transactions affecting fund accounts. 

Question No: 11

Which of the following is not an example of a non-fund adjustment to income required in preparing the statement of changes in financial position when funds were defined as working capital?

Depreciation expense 

Gain from asset disposal 

Interest expense 

Amortization of premium on debt 

Question No: 12

In the cash flow statement, cash is defined as:

Quick assets 

Literal cash on hand or on demand deposit, plus cash equivalents. 

Literal cash on hand or on demand deposit, plus marketable securities. 

All of the above. 

Question No: 13

Flexible budgets

Accommodate changes in the inflation rate. 

Accommodate changes in activity levels. 

Are used to evaluate capacity utilization. 

Are static budgets that have been revised for changes in prices. 

Question No: 14

Which of the following statements regarding changing inventory methods is true?

A change in inventory methods can be justified if the change is made to better match profits with revenue. 

The effect of changing inventory method does not need to be disclosed. 

Tax advantages are valid justification for changing inventory methods. 

One place that the reader of an annual report would be able to identify that a company changed inventory methods is the footnotes to the financial statements. 

Question No: 15

Use the information presented below to answer the questions that follow. Solid Co. received a non-interest-bearing note from Y Ltd. on October 1, 2006. The amount of the note due at the maturity date is Rs6, 200. The note was accepted by Solid for merchandise sold to Bedrock with a selling price of Rs6, 000. The note is due in 3 months.

The difference of Rs200 between the amount of the note (Rs6, 200) and the sales price of the merchandise (Rs6, 000) 

Is the interest explicitly included in the amount of the note. 

Will be recorded in a contra account, Discount on Notes Receivable, by Co. 

Will be recorded as interest revenue on October 1, 2006. 

Is an error made in preparing the note. 

Question No: 16

Use the information presented below to answer the questions that follow. Solid Co. received a non-interest-bearing note from Y Ltd. on October 1, 2006. The amount of the note due at the maturity date is Rs6, 200. The note was accepted by Solid for merchandise sold to Bedrock with a selling price of Rs6, 000. The note is due in 3 months.

The difference of Rs200 between the amount of the note (Rs6, 200) and the sales price of the merchandise (Rs6, 000) 

Which of the following combination of financial statements would provide the most in-    depth information to help understand a company’s liquidity?

Income statement and statement of cash flows. 

Balance sheet and statement of cash flows. 

Balance sheet and income statement. 

Statement of retained earnings and statement of cash flows. 

Question No: 17

Use the information presented below to answer the questions that follow. Solid Co. received a non-interest-bearing note from Y Ltd. on October 1, 2006. The amount of the note due at the maturity date is Rs6, 200. The note was accepted by Solid for merchandise sold to Bedrock with a selling price of Rs6, 000. The note is due in 3 months.

Y Ltd sold equipment for Rs4, 000. This resulted in a Rs1, 500 loss. What is the impact of this sale on the working capital? 

Reduces working capital. 

Increases working capital. 

Has no affect on working capital at all. 

The increase offsets the decrease. 

Question No: 18

Use the information presented below to answer the questions that follow. Solid Co. received a non-interest-bearing note from Y Ltd. on October 1, 2006. The amount of the note due at the maturity date is Rs6, 200. The note was accepted by Solid for merchandise sold to Bedrock with a selling price of Rs6, 000. The note is due in 3 months.

If a company’s asset turnover rate increased from 2005 to 2006, which of the following conclusions can be made? 

The company was less efficient during 2006 in using its assets to produce profits. 

The company produced more sales in 2006 for each dollar invested in assets. 

The company was more profitable in 2005. 

The company is over-invested in assets in 2006. 

Question No: 19

X Ltd’s master budget calls for the production of 6,000 units of product monthly. The master budget includes indirect labor of Rs396,000 annually; X Ltd considers indirect labor to be a variable cost. During the month of September, 5,600 units of product were produced, and indirect labor costs of Rs30,970 were incurred. A performance report utilizing flexible budgeting would report a flexible budget variance for indirect labor of:-

Rs170 unfavorable. 

Rs170 favorable 

Rs2, 030 unfavorable. 

Rs2, 030 favorable. 

Question No: 20

Which of the following is not an advantage for using standard costs for variance analysis?

Standards simplify product costing. 

Standards are developed using past costs and are available at a relatively low cost. 

Standards are usually expressed on a per unit basis. 

Standards can take into account expected changes planned to occur in the budgeted period. 

Question No: 21

The main purpose of cost accounting is to-

Maximize profits 

Provide information to management for decision making 

help in fixing selling price 

To watch cash flows 

Question No: 22

Conversion cost is total of:

Direct material and direct wages 

Direct material, direct wages, and production overheads 

Direct wages and production overheads. 

None of the above 

Question No: 23

A cost, which does not involve cash outlay, is called:

Historical cost. 

Imputed cost 

Out of pocket cost. 

Explicit cost. 

Question No: 24

Committed fixed costs are those, which:

Arise from yearly budget appropriations 

Are incurred because management can afford. 

Arise from additional capacity. 

All the above 

Question No: 25

Cost of research undertaken at the request of the customer should be:

Charged to costing profit and loss account. 

Charged to selling overheads. 

Recovered from the customer. 

All the above. 

Question No: 26

Salaries due for the month of March will appear

On the Receipt side of the Cash Book 

On the Payment side of the Cash Book 

As a contra entry 

Nowhere in the Cash Book. 

Question No: 27

Liabilities of business are Rs. 11,220 and owner's equity is Rs. 15,000. The assets of the business will be.

Rs. 3,780 

Rs. 26,220 

Rs. 11,220. 

Rs. 15,000. 

Question No: 28

An entry of Rs. 320 has been debited to Eknath's account at Rs. 230. If is an error of

Principle. 

Omission. 

Commission. 

Compensatory. 

Question No: 29

Unearned revenues are:

Prepayments. 

Liabilities. 

Temporary accounts. 

Both a and b above. 

Question No: 30

The revenue recognition principle requires that sales revenues be recognized:

When cash is received. 

When the merchandise is ordered. 

When the goods are transferred from the seller to the buyer. 

None of the above. 

Question No: 31

All of the following are “other receivables” except:

Petty cash. 

Interest receivable. 

Income taxes refundable. 

Advances to employees. 

Question No: 32

Depreciation is dependent on a number of estimates. When a change in an estimate is required, the change is made:

in the current year 

in the future year 

to prior periods 

both a and b above 

Question No: 33

In order to pay a dividend:

The corporation must have adequate retained earnings. 

The board of directors must declare a dividend. 

The corporation must have adequate cash. 

All of the above. 

Question No: 34

Cash flow activities that include the cash effects of transactions that create revenues and expenses and thus enter into the determination of net income are referred to as:

Investing activities. 

Financing activities. 

Operating activities. 

All of the above. 

Question No: 35

All of the following are used in preparing a statement of cash flows except:

A trial balance. 

Comparative balance sheet. 

Current income statement. 

Additional information. 

Question No: 36

Depreciation is result of

Usage 

Time. 

Obsolescence. 

All of the above. 

Question No: 37

Outstanding Expenses are the examples of

Personal Accounts. 

Real Accounts. 

Nominal Accounts. 

None of the above. 

Question No: 38

Liquid Assets are inclusive of all current assets except

Inventories. 

Prepaid Expenses. 

Cash. 

Both (a) and (b) above. 

Question No: 39

Management Accounting is mainly related to

Presentation of Figures from Financial Accounting. 

Presentation of Figures from Cost Accounting. 

Principles.

Both (a) and (b) above

Question No: 40

Variance Analysis is done with regards to actuals with-

Standards.

Budgeted Figures. 

Benchmarks 

All of the above.