Financial and Management Accounting -MB0025

MBA -1 SEM Assignment – Set 1

L. Megha Syam 510925494

Q1. Explain the differences between Financial Accounting and

Management Accounting.

Financial accounting is the preparation and communication of financial

information to outsiders such as creditors, bankers, government, customers
and so on. Another objective of financial accounting is to give complete
picture of the enterprise to shareholders. Management accounting on the
other hand aims at preparing and reporting the financial data to the
management on regular basis. Management is entrusted with the
responsibility of taking appropriate decisions, planning, performance
evaluation, control, management of costs, cost determination etc., For both
financial accounting and management accounting the financial data is the
same and the reports prepared in financial accounting are also used in
management accounting But the following are major differences between
Financial accounting and Management accounting.

Mb 0025 Set1 Page 1

Q2. Hiran, a retailer, has prepared the following balance sheets for the years
ending 31st March 2004 and 2005:

Other data: The net profit for the year 2004 was Rs.40000. Hiran is paid a
salary of Rs.16,000. His drawings amounted to Rs.45,200. You are required
to prepare a statement of changes in financial position, on working capital
basis.

The layout for schedule of changes in Working Capital is as follows

Balances as on Effect on

Schedule of changes in Working Capital is as follows:

Year 2004 Year 2005 Increase Decrease
A .CURRENT
ASSETS:
Cash in hand & bank 4000 2000 2000

Sundry Debtors 50000 34000 16000

Stock or Inventory 36000 34000 2000

B. CURRENT
- _
LIABILITIES

Trade and accrued 24000 20000 4000

expenses

Net Working Capital 16,000

Decrease in
Working(A-B)

Mb 0025 Set1 Page 2

Statement of Profit and loss adjustment a/c:

Particulars Amount Particulars Amount

Salaries 16000
Net profit for the
Funds from year 2004 40000
operations
transferred to
applications
24000
Total: 40000 40000

Funds Flow Statement:

Particulars Amount Particulars Amount

Increase in capital 5200

Decrease in
Working capital 16000 Funds from 24000
operations

Total:

Q3. Enter the following transactions in proper subsidiary book. Find

out the total of:

a) Purchase book b) sales book c) purchase return book d) sales

return book.

Purchase book

Date Name of Ledger Inward Amount Rs.

Supplier Folio Invoice No. Dr.

Jan 1 Purchased 34000

from Karthik
Jan 10 Purchased 40000
from Vikas
Jan 12 Purchased 102000
from Naveen
Jan 15 Purchased 100000
from Brinda
Jan 25 Purchased 45000
from Anand
Total: 321000

Mb 0025 Set1 Page 3

Sales book :

Date Name of Ledger Out ward Amount Rs. Cr

customer Folio Invoice No.

Jan 5 Sold goods to 12000

Vinay
Jan 7 Sold goods to 10000
Nagaraj
Jan 20 Sold Goods to 16000
Gururaj
Total 38000

Sales returns Book:

Date Name of Ledger Out ward Amount Rs.

customer/debtor Folio Invoice No. Dr.

Jan 14 Returned good 3000

by Vinay
Jan 22 Natraj returned 2000
goods
Total: 5000

Purchase return book:

Date Name of Ledger Out ward Amount Rs.

Supplier/Creditor Folio Invoice No.

Jan 14 Returned good 4000

to Karthik
Jan 22 Returned goods 2000
to Naveen
Total: 6000

Mb 0025 Set1 Page 4

4a. On 01-04-2007 Mr. Gundu Rao stated business with Rs. 3, 00,000 cash
and opened a bank account with Rs. 1,50,000. He purchased furniture for his
business for Rs. 25000. Goods were bought from selvaraj for Rs. 50000 on
credit. He sold goods for Rs. 27000 in cash and Rs. 30000 on credit. He paid
Rs. 2500 for business expenses during April month. Rs. 10000 was
withdrawn for office purpose form the back. Find out the closing balance of
cash and bank.

Date Particular Cash A/c Bank a/c Date Particulars Cash A/c Bank
s Dr Dr Cr A/c Cr
1-4-2007 To capital 300000 1-04-
a/c of 2007
Gundu
Rao

To bank 150000 By Cash 150000

a/c C A/c C

By
Furniture 25000
a/c

To sales 27000 By
a/c Business 2500
Exp

To bank By Cash -
Office Office
expenses 10000 expenses 10000
C C
31/04/2007 31/04/
2007 By
Balance 160500 140000
c/d
337000 150000 337000 150000
01/05/2007 To Bal 160500 140000
B/d

4b. Following are the extracts from the Trial Balance of a firm as on 31st

December 1998:
TRIAL BALANCE
As on 31st December 1998
Particulars Dr. Cr.
Salaries A/c 10,000
Rent a/c 5,000

Additional Information:
I. Salary for the month of December Rs.2000 has not yet been paid.
II. Rent amounting to Rs.1000 is still outstanding

Mb 0025 Set1 Page 5

You are required to pass the necessary adjusting entries and show how the
above items will appear in the Firm’s Account

Entry:
Salary a/c Dr 2000
To Salary outstanding A/c 2000
Rent a/c Dr. 1000
To rent outstanding 1000

Trial balance
Particulars Dr. Cr.
Salaries 12000
A/c
Rent a/c 6000

Q5. From the following figures extracted from the book if Shri
Govind, you are required to prepare a Trading and Profit & Loss
Account for the year ended 31st March, 1999 and a Balance Sheet as
on that date after making the necessary adjustment.

Mb 0025 Set1 Page 6

.
Adjustments
1. Stock on 31st March, 1999 was valued at Rs. 72,600
2. A new machine was installed during the year costing Rs. 15,400, but it
was not recorded in the books as no payment was made for it. Wages Rs.
1,100 paid for its erection has been debited to wages account.
3. Depreciate:
Plant and Machinery by 33 1/3 %
Furniture by 10% Freehold property by 5%
4. Loose tools were valued at Rs. 1,760 on 31.3.1999.
5. Of the Sundry Debtors Rs. 600 are bad and should be written off.
6. Maintain a provision of 5% on Sundry Debtors for doubtful debts.
7. The manager is entitled to a commission of 10% of the net profits after
charging such commission.

Ans:

Trading A/c for the year ended 31st March, 1999:

Particulars Amount Total Particulars Amount Total

Amount Dr. Amount Cr.
Sales 231440
Purchases
Closing 72600
Less 110000 Stock
Purchase
return 1100 108900

Wages

Less
erection 35200
34100
Factory 1100
Lighting

Gas & Fuel 1100

Freight
2970
9900
To gross
profit
transferred
to P/L a/c
Total 304040 304040

Mb 0025 Set1 Page 7

Profit & Loss A/c for the year ended 31st March, 1999

Particulars Amount Total Particulars Amount Total

Amount Dr. Amount Cr.
Salaries 13200 By Balance 147070
b/d from
Office exp 2750 Trading A/c

Discount 1320 Interest 1100

Received
Postage &
telegram 1540

Insurance 1760

Office rent 2860

Bad debts 1260

Provision for
Bad debts 1463-880 583

Depreciation
on Furniture 550

Depreciation 38130
on Plant &
machinery

Depreciation
on Free hold 3300
property

Manager’s NP*10/110 13470

Commission

To Net profit
transferred 80723
to B/S
Total 148170 148170

Mb 0025 Set1 Page 8

Balance Sheet for the year ended 31st March, 1999

LIABILITIES Details AMOUNT ASSETS Details AMOUNT

Shri Cash at 29260
Govind’s 228800 Bank
Capital
Cash in 2640
Shri Hand
Govind’s -13200
Drawings

Add net +80723 Plant and

Profit 296323 Machinery 99000+15400

Less Dep 38130 76270

Sundry 44000
Creditors Freehold 66000
Property

Biils 5500 Less Dep 5500 62700

Payable
Office
Furniture 550

Less Dep

Loose Tools 4950

Sundry
Debtors
29260 2200
Less
provision for 583
BD

Closing
Stock 72,600

Total 345823 250620

Mb 0025 Set1 Page 9

6. Differentiate between Standard Cost And Budgetary Control

Following are some of the differences identified:

1. The scope of budgetary control is wider. It is integrated plan of action, a

coordinated plan in respect of all functions of an enterprise The scope of
standard costing, on the other hand, is limited to the operating level. Here
too, it is further linked to costs. Budgetary control is extensive whereas
standard costing is intensive in its application
2. Budgetary control deals with costs and revenues. But standard costing
restricts only with costs.
3. Budgetary control takes into account all activities such as production,
sales, purchase3s, finance, capital expenditure, personnel whereas
standard costing is restricted to deal with only costs.
4. Budgetary control targets are based on past actual adjusted to future
trends. In standard costing, standards are based on technical assessment.
5. At the approach level, budgeted targets work as the maximum limit of
expenses above which the actual expenditure should not normally exceed.
Under standard costing, standards are attainable level of performance.
6. Budget is projection of final accounts. Standard costs are projection of
only cost accounts.
7. Budgetary control emphasizes the forecasting aspect of the future
operations. Standard
8. Costing scope and utility is limited to only operating level of the concern.
9. In budgetary control, the degree of variance analysis tends to be much
less and variances are not revealed through the accounts but are revealed
in total. But in standard costing, variances Financial and Management are
analyzed in details according to their originating causes and ar3e revealed
through different accounts.
10.Budgetary control is possible even in parts of expenses according to the
attitude of management. A standard costing system can not be operated
in parts. All items of expenditure included in cost units are to be
accounted for.

Mb 0025 Set1 Page 10