MS-04

Management Programme

ASSIGNMENT
FIRST SEMESTER
2014

MS - 04: Accounting and Finance for Managers

School of Management Studies

INDIRA GANDHI NATIONAL OPEN UNIVERSITY
MAIDAN GARHI, NEW DELHI – 110 068
 ASSIGNMENT
Course Code : MS-04
Course Title : Accounting and Finance for Managers
Assignment Code : MS-04/TMA/SEM-I/2014
Coverage : All Blocks

Note : Attempt all the questions and submit this assignment on or before 30 th April, 2014 to
the coordinator of your study center.
1. a) Distinguish between Revenue expenditure and Capital expenditure. How are they
treated while preparing the final accounts? If by mistake the accountant of a firm
treats a capital expenditure as revenue expenditure, how will it affect the final
accounts of the firm? Give an example.

b) Why is depreciation charged? Explain the two methods of charging depreciation. In

which method the value of the asset is reduced to zero earlier. Which one is more
rational? Explain why?

2. What is meant by appropriate capital structure? Discuss the determinants and features
of an appropriate capital structure for a corporate body.

3. Explain the important determinants of the Working Capital needs of a firm. Can two
firms with different Working Capital achieve the same amount of sales? If so, explain
how.

4. a) What do you understand by Budgetary Control? How is it exercised? What steps

should be taken for installing a Budgetary Control System in an organization? Discuss.

b) What is Rolling Budget? How does it differ from flexible Budget? What purpose do
these budgets serve?

5. Following are the balance sheets of a limited company as on 31 st December, 2000 and
2001.

Liabilities 2000 2001 Assets 2000 2001

Rs. Rs. Rs. Rs.
Share Capital 54,000 74,000 Goodwill 3,000 2,520
Reserves 13,000 15,500 Buildings 50,950 48,000
P. & L. A/c 8,600 8,800 Plant 35,000 43,000
Bank Loan 25,000 - Stock 25,500 18,800
(Long-term)
Creditors 28,000 24,000 Debtors 22,000 16,200
Bills Payable 8,000 8,500 Cash 150 180
Bank - 2,100
1,36,600 1,30,800 1,36,600 1,30,800
Taking into account the following additional information, you are required to prepare
funds flow statement and statement of change in working capital.

(a) Dividend paid was Rs. 6,000.

(b) Rs. 3,600 was written off as depreciation on plant and Rs. 2,950 on buildings.
(c) Profit on sale of plant was Rs. 3,000.