I SEMESTER/IYEAR BA5103-Accounting for management

SHORT ANSWER TYPE QUESTIONS

1. Define Financial Accounting?

American institute of certificate public Accountants has defined „ Financial Accounting as

the art of art recording classifying and summarizing in n a significant manner and in term of
money transactions and events which are in part at least of financial character and
interpreting the results thereof „.

2. What are GAAP?

GAAP refers to the set of conventions, rule and procedures that define accepted accounting
practice at a particular time. The accounting profession, regulatory agencies ad tax authorities
a major influence on GAAP. Some of them are money measurement concept, Realization
concept, Goingconcern, Business entity concept, Dual aspect,Materiality, Consistency
concept.

3. What are intangible Assets?

“Fixed Assets that have a physical existence and can be seen and felt “

Intangible assets are those assets which cannot be seen, touched and have no volume but
have value.

Example: Goodwill, Trade mark, Patents, Copyrights

4. What is CVP Analysis?

CVP Analysis refer to cost volume profit analysis. It is managerial tool showing the
relationship between various ingredients of profit planning viz cost (both fixed and variable)
selling price and volume of activity.

5. What are incremental costs?

The Difference is total cost between two alternative is termed as differential cost. In case the
choice of an alternative results increase in total cost, such increased cost are known as
incremental costs.

6. Define the term “Fund”?

a) The term “Fund” refer to money values in whatever from it may exists

b) Funds means all financial resources in the form of men, Meterials, money Machinery.

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c) In popular sense the term “Funds working capital is the excess of current assets over
current liabilities. When the funds movie inwards or outwards they cause a flow or rotation
of funds. The word fund here means net working capital.

7. What is process costing?

If product passes through different stages, each district and well define, it is desirable to
known. The cost of production, at each stage. To ascertion the same, process costing is
employed.

8. What is master budget?

A master budget is the summary budget for the entire enterprise and embodies the
summarized figures for various activities. This is also known as summary budget or finalized
profit plan. This budget incluses the budgetes position of the profits and losses as well as
balance sheet master budget is prepared by committee and becomes a for the company.

9. What is depreciation?

“Depreciation is a gradual deterioration in value due to use”

“Depreciation is defined as the permanent decrease in the value of an asset through wear and
tear in use of passage of time “

The term Depreciation is derived from the Latin word “depreciation means decline and
premium means decrease in the value of fixed assets.

10.What do you mean by inflation Accountings?

Accounting that take into account the price level changes is popularly known as inflation
accounting and it is a method devised to show the effect of changing cost and prices on the
affairs of the company during the course of relative accounting periods .

11. Define inventory turnover ratios?

It is computed by dividing the cost od goods by the average inventory .

Inventory turnover Ratio=Cost of goods sold / Average inventory

The cost of goods sold means sales minus gross profit . The inventory refers to the simple
average of the opening and closing inventory . The retio indicates how flat inventory sold . A
high redio is good from the viewpoint of liquidity and vice versa . A low ratio would signify
that inventory does not sell fast on the warehouse for a long time

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I SEMESTER/IYEAR BA5103-Accounting for management

12. What do you mean by margin of safety?

Margin of safety is the difference between the total sales(actual or projected) and the break event
point sales. It may be expressed in monetary terms (value) or as number of units (volume). It can
be expressed as profit P/V ratio.

13. What do you mean by cash from operation?

A business generates inflows through its normal business operation which is usually the most
important and routine source of cash . it is hypothetical situation where all expenses , incomes
and revenues are paid or received in cash . in such case , the net profits revealed b profit and loss
account.

14. Define target costing?

Target costing is a disciplined process for determining and realization a total cost at which a
proposed product with specified functionality must be produced to generate the desired
profitability at its anticipation selling price in the future.

15. What do you mean by material mix variance?

 (revised STd Qty-Actual Qty)sale price per unit

 Revised Std Qty+(Std Qty/Total Std Qty)Total Actual Qty

16. Define incremental Analysis?

Incremental analysis is the technique of comparing one of action to another course of action
determining the difference expected to arise revenus and its cost

17. What do you mean Responsibility Accounting?

Responsibility accounting is an underlying concept of accounting performance measurement

system. The basic ideais that large diversified organizations are difficult , if not impossible to
manage as a single segment , thus they must be decentralized or separated into manageable parts
. these parts or segment are referred to as responsibility canters that include

a) Revenue centre
b) cost centre
c) profit center
d) investment centre

18. What is HRA?

The committee of HRA of American accounting Association defined HRA as “The process of
identifying and measuring data about Human Resource as end communicating this information to
the interested parties”

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HRA will be defined by encompassing three elements:

a) Identification and measurement of human capital in figure

b) Identification and measurement of human capital including non figure terms and
c) Provision of information internally and externally on human capital

19. What are the methods of Pricing in the inventory?

a) The following are the method of pricing in inventory:

b) First in First out(FIFO)
c) Last in First out(LIFO)
d) Highest in First out(HIFO)
e) Simple in Average price
f) Weighted Average price method
g) Base stock

20. What are relationship between management , cost and financial accounting ?

Management Accounting measures and report financial and non information that help. Managers
make the decision too fulfil the goals of an organization

Financial accounting focuses on reports to the external parties . it measures all records business
transactions and provides financial statements that are based on generally accepted accounting
principles

Cost accounting measures and reports financial and non financial information relating to the cost
of acquisition or utilizing resources in an organization

21. What are the uses of balance sheet and profit and loss account?

The user of balance sheet and profit and loss account are :

The shareholder , investors , creditors , suppliers management and employees of the

organizationa and other legislative authorities like income tax authorities.

22. What are the basic records used before preparing trading , profit and loss account and
balance sheet?

The basic records used before prepare trading , profit and loss account and balance sheet are:

Journal book , ledger accounts and trial balance

23. State any four methods of depreciation

a) Fixed instalment method or straight line method

b) Writtern down value method

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c) Annuity method
d) Depletion method

24. From the following details of concern , calculate liquidity ratios:

Current Assets Rs 190,000

Quick Assets Rs 150,000

Current Liability Rs 75000

Liquidity ratio = Liquid assets / Current Liability

=1,50,000/75000

=2:1

25. Distinguish between variable , fixed cost and semi veriable cost?

Variable cost which are varying in proportion to the level of production and sales .

Fixed cost are cost a remain unchanged at any give volume of output increase or decrease .

Semi variable cost are those cosrs including some portion of fixed and remaning are variable

26. What is break even point?

The point which break the total cost and the selling price evenly to show the level of output on
sales at which there shall be no profit or no loss it is called break event point

27. Write short notes on make or buy decisions?

In “make or buy” decision , the management compares the quotation fixed by the supplier with
the marginal cost of the particular product . if outside supplier rate is lower then the marginal
cost then , the management can decide to produce the product in their firm itself otherwise it can
be purchased from outside supplier.

28. What is cash management?

Cash management represents the amount of cash receipt and payments and a balance during the
budgeted period. The object of cash budget is to coordinate the total working capital , sale ,
investments and credit.

29. What are financial statement?

a) Income statement
b) Trading profit and loss account

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c) Balance sheet

30, What is Amortization?

The paying off of deot in regular instalment over a period of time . The deduction of capital
expenses over a specific period of time (usually over assets life) . More specifically , this method
measures the consumption of the value of intangible assets , such as a period or copyright.

While Amortization and depreciation are often used interchangeably technically this is an
incorrect practice because amortization refer t intangible assets and depreciation refer to the
tangible assets

31. What are the accounting ratios?

Accounting ratio are relationship expressed in mathematical terms between accounting figures
which are connect with each other in some manner.

Financial ratios analysis groups the ratio into categories which tells us about different facets of a
company,s finances and operation . An overview of the categories of ratios is given below:

Leverage ratio: Which shows the extent that devt is used in company‟s capital structure .

Liquidity ratio: Which gives a picture of company‟s short term financial situation or solvency.

Operational ratio: Which use turnover measures to show hiow efficient company is in its
operations and of assets.

Profitability ratios: Which use margin analysis and show the return on asles and capital
employed.

Solvency ratio:Which gives a picture of company‟s ability t generate cash flow and pay its
financial obligation.

32. What are Fund flow statement?

Flow of fund refer to change in fund or change in working capital , in other words any increase
or decrease in working capital means flow of fund.

33. What is realization concept?

This concept revolves around the determination of the point of time when revenues are earned. A
business invests money t be made. There can be no profit without realization of sale proceeds .
accounding to realization concept , which is also known as the revenue recognition concept
revenue is considered as being earned on the date on which it is realized ie the date on which
goodsand services are transferred to the customer either for cash or credit . Credit transactions

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create debtors and the promise of debtors to make payment is sufficient for the puepose of
realizing revenue.

34.What is standard costing?

The word “standard „means a benchmark or yardstick. The standard cost is predetermined or
expected cost which determines what each product are service should cost under given
conditions. It is the technique for cost accounting which compares the standard cost of each
product or service with actual cost to determine the efficiency of operation so that remedial
action may be taken immediately.

35. What is management accounting?

“Management Accounting is the term used to describe the accounting methods, systems and
technique which compiled with special knowledge and ability assits management in its task of
maximizing profits or maximizing losses

36. What is Revenue Expenditure?

“Expenditure for ordinary repairs , maintenance , fuel , insurance or other terms needed to
maintain and use buildings , plant and equipment are called revenue expenditure .

An expenditure for ordinary repairs, maintenance, fuel, insurance or other items needed to
maintain and use an assets.

37. Give four examples of intangible assets?

Fixed assets may be either tangible or intangible. The tangible assets have a definite physical
existence. They can be seen and cab, if necessary be sold separately. The tangible assets cannot
be seen through their existence has come effect offer very material, on the profit earning capacity
of the business.

Intangible assets represents the firm‟s and include the following:

1. Patent and trademark

2. Copyrights amd licenses etc
3. Goodwill etc

38. What is the formula for calculating average collection period?

Deptors turnover = credit sales/Average Debtors

Average Debtors =Opening Balance +Closing Blance /2

Debtors Collection period:

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a) Month(or day) in a year / Debtors Turnover

b) Avg Debtors *Month (or date ) in a year /NET Credit sales for year
c) Accounting Receivable /Avg Monthly or daily credit sales

39. How cash flow Statement is different from fund flow statement?

The FFS shows the cause of changes in Net working capital whereas the cash flow statement
shows the cause for the changes in cash

Cash flow statement is started with the opening and closing balance of the while there are no
opening or closing in funds flow statement.

40. Define Activity Based Costing?

Activity based costing is a system that focuses on activities as the fundamental cost object and
use the costs of these activities as building blocks for compiling the cost of other object.

Chartered institute of management accountants, London has define it as “cost attribution to cost
unit on the basis of benefits received from indirect activities is ordering , setting up assuring
quality etc.

41. What is production budget?

It is budget prepared by the production manager the forecast of output. The objectives is to
determine the quality of production for a budgeted period. It is based on sales budget. It is in two
parts one part contains the volume of production and the other shows the cost of the product. A
part from the sales budget, optimum utilization of plant , availability of new material , etcare to
be considered . it must overwork in such seasons . it must maintain a minimum stock of finished
goods.

42. Give four uses of costing?

1. Consatant in nature
2. Effectives cost control
3. Treatment of OH simplified
4. Uniform and realistic valuation
5. Helpful to management
6. Helps in production planning
7. Better result
8. Fixation of selling price
9. Helpful in budgetary control
10. Preparing budgets

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43. What are the different types of budget?

1. Sales budget
2. Production budget
3. Cash budget
4. Research and development budget

44. What is the job costing?

Job costing is the process of tracking the expenses incurred on a job against the revenue
produced by that job . job costing is an important tool for those who are pairing a relatively high
doller vokume per customer with relatively low number of customer . for example , building
contractors , architects and often use jobs costing , where as store or convenience store would not
use job costing.

45. What are sunk cost?

Sunk cost are Hiatorical costs which are incurred is sunk in past are not relavent to the particular
decision making problem being considered.

46. What is budgetary control?

Budgeting is closely related with control. The exercise of control in the organization with the
help of budgets it known as budgetary control. The process of budgetary control includes:

Preparation of various budgets

Continuous comparison of actual performance with budgetary performance

Revision of budgets in the light of changed circumstances

A system of budgetary control should not become rigid. There should be enough scope of
flexibility to provide for individual initiative for making the organization. More efficient on all
fronts. It is an important tool for controlling cost and achieving the overall objectives.

47. What is matching concept?

In order to ascertain the profit made by the business during a period it is necessary that period
should be matched with the costs of that period. The matching means appropriate association of
related revenue and expenses during the same period.

48. What is depreciation accounting?

Depreciation accounting is mainly concerned with a rational; and systematic distribution of cost
over the estimated useful life of the assets.

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49. Name the three fundamental accounting assumptions?

The transaction of the business can be classified into the following three categories:

1. Transaction relating to persons or individuals

2. Transaction relating to property assets or possession and
3. Transaction relating to income and expenditure

Followed by these classes the accounting is categorized into

a) Personal account
b) Real account
c) Nominal account

50. What is called up capital?

Value of the share which have remained fully or unpaid and whose holders have now ben upon
to pay the balance.

51. What are capital reserves?

A type of account on a company‟s balance sheet that is reserved long term capital investment
project or any other large and anticipated expenses that will be incurred in three future this type
of reserve fund is set aside to ensure that company has adequate funding partially finance of the
project.

52. Mention the three broad categories of ROIs?

Return on investment (ROI) analysis is one of several approaches to building a financial business
case. The term means the decision makers evaluate the investment by comparing the magnitude

Decision makers will also look for way to improve ROI, the benefit(return) of an investment is
divided by the cost of investment . The result is expressed as a percentage or a ratio.

The return on investment formula;

ROI= (Gain from investment-Cost of investment)/Cost of investment

Return on investment is a very popular metric because of its versatility and simplicity. Thatis, if
an investment does not have a positive ROI, or if there are other opportunities with a higher ROI,
then the investment should not be undertaken.

53. What are financial budgets?

Budgets can be classified into different categories from different point of view:

1. Accounting to time

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a) Long term budget

b) Short term budget
c) Current budget
d) Rolling budget

2. Accounting to Function

a) Sales budget
b) Production budget
c) Cash budget
d) Mater budget
e) Accounting to flexibility
f) Expenditure budget
g) Fixed budget
h) Flexible budget

54. What is Accounting information system?

Accounting information system combine the study and practice of accounting with the design,
implementation and monitoring of information system use modern information technology
resources together with traditional accounting control and method to provide users the financial
information necessary to their organization.

55.DEFINITION OF ACCOUNTING: The American Institute of certified public accountants

(AICPA) defines accounting as “the art of recording, classifying and summarizing in a
significant manner and in terms of money transactions and events which are in part at least of a
financial character and interpreting the results thereof”.

56.FUNCTIONS OF FINANCIAL ACCOUNTING

1. Keeping systematic records

2. Protecting the properties of the business

3. Communicating the results to the stake holders of the business

4. Meeting the legal requirements

57.LIMITATIONS OF FINANCIAL ACCOUNTING

1. Only transactions which can be measured in terms of money can be recorded in the books of
accounts. However events which may be important to the business do not find a place in the
accounts if they cannot be measured in terms of money.

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2. According to the cost concept assets are recorded at the cost at which they are acquired and
therefore, the changes in values of assets brought about by changing value of money and market
factors are ignored.

3. There is conflict between one accounting principle and another. For example, current assets
are valued on the basis of cost or market price whichever less according to the principle of
conservatism is. Therefore in one year cost basis may be taken, whereas in another year market
price may be taken. This principle contravenes the principle of consistency

58.COST ACCOUNTING DEFINITION:

According to the Institute of Cost and Works Accountants (ICWA), London, Cost accounting is
“the process of accounting for costs from the point at which expenditure is incurred or
committed to the establishment of its ultimate relationship with cost centers and cost units. In its
widest usage it embraces the preparation of statistical data, the application of cost control
methods and the ascertainment of the profitability of activities carried out or planned.”

59.OBJECTIVES OF COST ACCOUNTING:

1. To aid in the development of long range plans by providing cost data that acts as a basis for
projecting data for planning.

2. To ensure efficient cost control by communicating essential data costs at regular intervals and
thus minimize the cost of manufacturing.

3. Determine cost of products or activities, which is useful in the determination of selling price
or quotation.

4. To identify profitability of each product, process, department etc of the business

5. To provide management with information in connection with various operational problems by

comparing the actual cost with standard cost, this reveals the discrepancies or variances

60.LIMITATIONS OF COST ACCOUNTING

Cost Accounting like other branches of accountancy is not an exact science but is an art which
was developed through theories and accounting practices based on reasoning and commonsense.
These practices are dynamic. Hence, it lacks a uniform procedure applicable to all the industries
across. It has to be customized for each industry, company etc.

61.MANAGEMENT ACCOUNTING DEFINITION: According to M.A.Sahaf, Management

Accounting is “a system for gathering, summarizing, reporting and interpreting accounting data

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and other financial information primarily for the internal needs of the management. It is designed
to assist internal management in the efficient formulation, execution and appraisal of business
plans.”

62.FUNCTIONS OF MANAGEMENT ACCOUNTING:

1. To help the management in planning, forecasting and policy formulation

2. To help in analysis and interpretation of financial information

3. To help in decision making- long term as well as short term

4. To help in controlling and coordinating the business operations

5. To communicate and report the operational results to the share and stock holders of the
business.

6. To motivate the employees by encouraging them to look forward

7. To help the management in tax administration

63.TOOLS AND TECHNIQUES OF MANAGEMENT ACCOUNTING

1. Financial planning

2. Analysis of financial statements

3. Cost accounting

4. Standard costing

5. Marginal costing

6. Budgetary control

7. Funds flow analysis

8. Management reporting

9. Statistical analysis

64.ADVANTAGES OF MANAGEMENT ACCOUNTING:

1. It increases efficiency of business operations

2. It ensures efficient regulation of business activities

3. It ensures utilization of available resources and thereby increases the return on capital
employed.

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4. It ensures effective control of performance

5. It helps in evaluating the efficiency of the companies‟ business policies

65.LIMITATIONS OF MANAGEMENT ACCOUNTING:

1. It is based on historical data, and it suffers from the drawbacks of the financial statements.

2. The application of management accounting tools and techniques requires people who are
knowledgeable in subjects such as accounting, costing, economics, taxation, statistics,
mathematics, etc.

3. Though management accounting attempts to analyse both qualitative and quantitative factors
that influence a decision, the elements of intuition in managerial decision making have not been
completely eliminated.

4. The installation of management accounting system is expensive and hence not suitable for
small firms.

66. Discuss the concept of Human Resource Accounting. Explain its importance in the
present context. According to the American Accounting Association (1973),

HR Accounting is „the process of identifying and measuring data about human resources and
communicating the information to interested parties‟. In the words of Stephen Knauf – HR
Accounting is „the measurement and quantification of human organization inputs, such as
recruiting, training, experience and commitment

‟. • To provide relevant information about the human resource to the management and aid in
its decision making

• To help management in evaluating the performance of its personnel and calculate its return
on investment

• To help the management in planning and controlling the various functions or activities
related to its human resource such as – man power planning, recruiting, training and
retirement etc. 6

67.. What is inventory?

(i) finished goods (ii) work-in-progress and (iii) raw materials and components. In case of a
trading concern, inventory primarily consists of finished goods while in case of a manufacturing

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concern; inventory consists of raw materials, components, stores, work-in-process and finished
goods.

68.. What are the accounting ratios?

A „Ratio: is defined as an arithmetical/quantitative/ numerical relationship between two numbers.

Ratio analysis is a very important and age old technique of financial analysis.

69.Uses of Ratio Analysis:

There are various uses of Ratio analysis, some of which are as follows: • It helps in managerial
decision making. • It helps in financial forecasting and planning. • It helps in communicating the
financial strength of a concern. • It helps in control. • It is an essential part of budgetary control
and standard costing. • It helps an investor/prospective investor in decision making. • It provides
information to the creditors about the solvency of the firm.

70. State the uses and significance of cash flow statement. Uses of cash flow statements: 1. It
enables the effective planning and coordination of financial operations. 2. It enables proper
allocation of cash among the various activities of the firm. 3. It aids the management in its
investment decision. 4. It enables the management in properly analyzing the past business
activities and plan for future. 5. It gives the liquidity picture of the concern.

71.Explain the methods of financial statement analysis.

There are around five techniques of analyzing the Financial Statements. They are:

1. Comparative Financial Statements

2. Common size Financial Statements

3. Trend Analysis

4. Ratio Analysis

5. Funds Flow and Cash Flow Analysis

72. What is budget? Explain various types of budgets.

A BUDGET is a quantitative expression of a business plan for a specified future period, usually
a year. BUDGET is the planned future course of action BUDGET is a plan of action expressed in
financial or non financial terms. BUDGET is a financial or quantitative statement prepared prior
to a defined period of the policy to be pursued during the period for that purpose of attaining a
given objective – ICMA

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73.DEFINITION OF BUDGET

According to the Institute of Cost & Management (ICMA), London, a BUDGET is „a financial
and / or quantitative statement, prepared and approved prior to a defined period of time, of the
policy to be pursued during that period for the purpose of attaining a given objective. It may
include income, expenditure and the employment of capital‟.

74.ESSENTIALS OF SUCCESSFUL BUDGETARY CONTROL

1. Top management support

2. Clearly defined organization structure

3. Efficient accounting system

4. Reporting of deviations

5. Motivation 6. Realistic targets

7. Participation of all departments concerned

8. Flexibility

75.Explain the application of marginal cost analysis for managerial decision making.

Marginal cost means the cost of the marginal or last unit produced. It is also defined as the
cost of one more or one less unit produced besides existing level of production. In this
connection, a unit may mean a single commodity, a dozen, a gross or any other measure of
goods.

For example, if a manufacturing firm produces X unit at a cost of 300 and X+1 units at a
cost of 320, the cost of an additional unit will be 20 which is marginal cost. Similarly if the
production of X-1 units comes down to 280, the cost of marginal unit will be 20 (300–280).

77.Limitations of Standard Costing

1. It cannot be used in those organizations where non-standard products are produced. If the
production is undertaken according to the customer specifications, then each job will involve
different amount of expenditures.

2. The process of setting standard is a difficult task, as it requires technical skills. The time and
motion study is required to be undertaken for this purpose. These studies require a lot of time and
money.

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3. There are no inset circumstances to be considered for fixing standards. The conditions under
which standards are fixed do not remain static. With the change in circumstances, if the
standards are not revised the same become impracticable.

4. The fixing of responsibility is not an easy task. The variances are to be classified into
controllable and uncontrollable variances. Standard costing is applicable only for controllable
variances

75. What are the functions performed by the accounting system?

Accounting Information Systems (AISs) Accounting Information Systems (AISs) combine the
study and practice of accounting with the design, implementation, and monitoring of information
systems. Such systems use modern information technology resources together with traditional
accounting controls and methods to provide users the financial information necessary to manage
their organizations.

76.MANAGEMENT INFORMATION SYSTEMS (MIS)

MISs are interactive human/machine systems that support decision making for users both in and
out of traditional organizational boundaries. These systems are used to support an organization's
daily operational activities; current and future tactical decisions; and overall strategic direction.
MISs are made up of several major applications including, but not limited to, the financial and
human resources systems.

77.AIS—INFORMATION SYSTEMS IN CONTEXT

AISs cover all business functions from backbone accounting transaction processing systems to
sophisticated financial management planning and processing systems. Financial reporting starts
at the operational levels of the organization, where the transaction processing systems capture
important business events such as normal production, purchasing, and selling activities. These
events (transactions) are classified and summarized for internal decision making and for external
financial reporting.

78.ENTERPRISE RESOURCE PLANNING (ERP)

ERP systems are large-scale information systems that impact an organization's AIS. These
systems permeate all aspects of the organization and require technologies such as client/server
and relational databases. Other system types that currently impact AISs are supply chain
management (SCM) and customer relationship management (CRM). Traditional AISs recorded
financial information and produced financial statements on a periodic basis according to GAAP
pronouncements. Modern ERP systems provide a broader view of organizational information,
enabling the use of advanced accounting techniques, such as activity-based costing (ABC) and
improved managerial reporting using a variety of analytical techniques.

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79.. What are the limitations of computerized accounting system?

The limitations of computer are depending upon the operating environment they work in. These
limitations are given below as:

1. Cost of Installation Computer hardware and software needs to be updated from time to time
with availability of new versions. As a result heavy cost is incurred to purchase a new hardware
and software from time to time.

2. Cost of Training To ensure efficient use of computer in accounting, new versions of hardware
and software are introduced. This requires training and cost is incurred to train the staff
personnel.

3. Self Decision Making The computer cannot make a decision like human beings. It is to be
guided by the user.

4. Maintenance Computer requires to be maintained properly to help maintain its efficiency. It

requires a neat, clean and controlled temperature to work efficiently.

5. Dangers for Health Extensive use of computer may lead to many health problems such as
muscular pain, eyestrain, and backache, etc. This affects adversely the working efficiency and
increasing medical expenditure.

80. What are the features of computer ?

Computer and its characteristics Computer is an electronic device that can perform a variety of
operations in accordance with a set of instructions called programme. It is a fast data processing
electronic machine. It can provide solutions to all complicated situations. It accepts data from the
user converts the data into information and gives the desired result. Therefore, we may define
computer as a device that transforms data into information. Data can be anything like marks
obtained in various subjects. It can also be name, age, sex, weight, eight, etc. of all the students,
savings, investments, etc., of a country. Computer is defined in terms of its functions. Computer
is a device that accepts data, stores data, processes data as desired, retrieves the stored data as
and when required and prints the result in desired format.

PART B

UNIT I

1) Explain the accounting concepts and conventions.

2) Distinguish between single entry and double entry system of book-keeping.

3) Explain in detail Inflation Accounting.

4) Explain in detail Human Resource Accounting.

R.KALAISELVI AP/MBA
I SEMESTER/IYEAR BA5103-Accounting for management

5) Explain the purpose and uses of management accounting systems. 6) The following balance
has been extracted from the books of Mr. Ganesh on 31.03.2010.

Capital 8,00,000 Bad debts 5,000

Drawings 60,000 Sundry creditors 95,000

Machinery (1.4.2009) 2,00,000 Sales 12,00,000

Machinery additions (1/7/09) 50,000 Purchase returns 10,000

Stock on 1.4.2009 1,50,000 Provision for bad and doubtful debts (1/4/09) 8,000

Purchases 8,20,000 Commission received 16,000

Carriage on purchases 20,000 Sundry debtors 52,000

Furniture and fixtures 2,00,000 Insurance charges 10,000

Carriage on sales 25,000 Salaries 2,10,000

Sundry expenses 8,000 Cash in hand 62,000

Printing and stationery 12,000 Cash at bank 2,05,000

Rent, rates and taxes 40,000

Adjustments

(i) Closing stock Rs. 1,40,000.

(ii) Create provision for bad and doubtful debts at 5% on sundry debtors.

(iii) Provide depreciation of 20% on plant and machinery and 10% on furniture and fixtures.

(iv) Insurance paid in advance is Rs. 1,000.

(v) Commission receivable in arrears is Rs. 5,000.

(vi) Salaries payable are Rs. 15,000.

Prepare trading account, profit and loss account and balance sheet for the year ending
31¬3¬2010.

7 ) Distinguish between

(i) Current assets and fixed assets

(ii) Tangible assets and intangible assets

R.KALAISELVI AP/MBA
I SEMESTER/IYEAR BA5103-Accounting for management

(iii) Current liabilities and long¬term liabilities

(iv) Gross profit and operating profit

(v) Nominal, real and personal accounts.

8) From the following Trail Balance of Ravi, prepare trading and Profit and Loss Account for the
year ended December 31st 1993 and a Balance Sheet as on that date:

Trail Balance

Particulars Debit (Rs.) Credit (Rs.)

Capital 40,000
Sales 25000
Purchase 150000
Salaries 2000
Rent 1500
Insurance 300
Drawings 5000
Machinery 28000
Bank balance 4500
Cash 2000
Stock 5200
Debtors 2500
Creditors 1000
Total 66000 66000

Adjustments Required:

-12-93 Rs.4,900

unpaid Rs.300

9) Define Inflation Accounting. What are its merits?

10) What is Human Resource Accounting? What are its advantages?

R.KALAISELVI AP/MBA
I SEMESTER/IYEAR BA5103-Accounting for management

UNIT II

1) Draft the Balance sheet of a limited company in prescribed form as per schedule VI of Indian
companies act with imaginary figure?

2) Under what circumstances valuation of shares will be resorted to?

3) What are the conditions for the issue of shares under discount?

4) For what purposes the share premium can be utilized?

5) Define share and explain its types.

6) How the profit on re-issue of forfeited shares can be treated in accounts?

7) A ltd was registered with an authorized capital of Rs.6,00,000 in equity shares of Rs.10 each.
The following is its Trail Balance on 31 March 2008.

particulars DR CR
Goodwill 25000
Cash 750
Bank 39900
Purchase 185000
Prelimiary Expenses 5000
Share capital 400000
12% Debentures 300000
P&L A/C (Cr.) 26250
Calls-in-arrears 7500
Premises 300000
Plant & Machinery 3300000
Interim Dividend 39250
Sales 415000
Stock (1-4-2007 75000
Furniture & Fixtures 75200
Sundry Debtors 87000
Wages 84865
General Expenses 6835
Freight and Carriage 13115
Salaries 24500
Directors Fees 5725
Bad debts 2110
Debenture Interest paid 18000
Bills Payable 37000
Sundry Creditors 40000

R.KALAISELVI AP/MBA
I SEMESTER/IYEAR BA5103-Accounting for management

General Reserve 25000

Provision for bad debt 3500
Total 124675 1246750

Prepare Profit & Loss Account, Profit & Loss Appropriation A/C and Balance sheet in proper
form after making the following adjustments:

doubtful debts provision at 5% on sundry debtors

-3-2008 was Rs.95,000

8) State the items that are included in the following major heads under which assets of a limited
company are shown: a) Investments b) fixed assets c) Miscellaneous expenses

The pubic applied for 8000 shares which were allotted. All the money due on shares was
received except the final call on 100 shares. These shares were forfeited and re-issued at Rs. 8
per share.

9) Define goodwill and explain the factors to be considered for valuing the goodwill. 10) A
limited company issued 10, 000 equity shares of Rs.

10 each payable as under Rs.2 on application, Rs.5 on allotment, Rs. 3 on final call.

The pubic applied for 8000 shares which were allotted. All the money due on shares was
received except the final call on 100 shares. These shares were forfeited and re-issued at Rs. 8
per share.

Show the Journal Entries in the books of the company

UNIT III

From the following summary of cash account of Y Ltd., prepare cash flow statement for the year
ended March 31 in accordance with AS¬3 using direct method. The company does not have any
cash equivalent.

R.KALAISELVI AP/MBA
I SEMESTER/IYEAR BA5103-Accounting for management

PARTICULAR Rs. in „000 PARTICULAR Rs. in „000

Opening Balance 50 Payment to suppliers 2000
Issue of equity share 300 Overhead expenses 200
Receipts from 2800 Wages and salaries 100
customers
Sale of fixed assets 100 Tax 250
Dividends 50
Repayment of bank 300
loan
Closing Balance 150
Purchase of fixed 200
assets

2) What are the limitations of fund flow statement?

3) Differentiate between fund flow statement and income statement.

4) List down the sources of funds.

5) “A fund flow statement is a better substitute for an income statement.”- Discuss.

6) Distinguish between fund flow statement and balance sheet.

7) Explain the significance of a fund flow statement.

8) What do you mean by funds from operations? How it is determined?

9) “ Fund flow statement presents a decision view of business” - Comment

10) Prepare a statement of Funds flow from the following

Liabilities 2008 2009 Assets 2008 2009 Capital 7,00,000 9,00,000 Land & Building 4,50,000
7,00,000 Profit and loss account 1,50,000 1,90,000 Plant & Machinery 4,70,000 3,30,000
General reserves 75,000 ,95,000 Stock 1,90,000 2,30,000 Debentures 3,00,000 3,60,000 Debtors
1,35,000 1,15,000 Loan 2,00,000 -- Cash 1,55,000 1,90,000 Sundry creditors 70,000 95,000 Bills
Receivable 50,000 25,000

Bills Payable

45,000 10,000 Preliminary expenses

90,000 60,000

Total 15,40,000 16,50,000 15,40,000 16,50,000

R.KALAISELVI AP/MBA
I SEMESTER/IYEAR BA5103-Accounting for management

Adjustments: Depreciation for Land and building Rs. 45,000 Depreciation for plant and
machinery Rs. 35,000; Profit on sale of plant Rs. 20,000 Drawings of capital for the year Rs.
50,000.

UNIT IV

1. What are the different methods of costing?

2. What are the reasons for material and labour variances

3. What is flexible budget and under what circumstances flexible budget is considered
preferable?

4. What are the factors to be considered while preparing a) Sale budget b. Purchase budget c)
production budget etc

5. What is a cash budget and what are the objectives of a cash budget? 6. List out the various
functional budgets any explain its objectives.

7. Explain in detail the advantages and disadvantages of budgetary control system.

8. Explain the concept of ZBB. Also discuss its advantages and disadvantages.

9. The following particulars are obtained from the records of a company manufacturing two
products P and R. Particulars Product P (Per unit)Rs. Product R (Per unit)Rs. Selling Price
200 400 Material Cost (Rs.20 per kg) 40 100 Direct Wages (Rs.6 60 120

per hour) Variable Overhead 20 40 Total fixed overhead is Rs.10,000. Comment on profitability
of each product when production capacity in hours is the limiting factor.

10. Sales Rs. 2,00,000, Profit Rs. 20,000 Variable Cost 60% You are required to calculate:
(1) P I V Ratio (2) Fixed Cost (3) Sales volume to earn a profit of Rs. 50,000

UNIT V

1) Briefly explain the computer application in business.

2) State the meaning and characteristics of computer

3) Explain the components of computer

4) What are the limitations of a computer?

R.KALAISELVI AP/MBA
I SEMESTER/IYEAR BA5103-Accounting for management

5) Explain the role of computers in accounting.

6) Differentiate computerized accounting from manual accounting

7) State the meaning and special features of computerized accounting system.

8) State the objectives of introducing computer in accounting.

9) Enumerate the advantages and disadvantages of computer accounting.

10) Describe the data processing methods.

R.KALAISELVI AP/MBA