Financial Accounting For Managers – Assignment

For questions 1 to 8, write answers in 3-5 sentences only.

1. Explain the accounting information System with its inputs, outputs and users.
2. How is accounting information system helping different stakeholders of businesses to
take decisions?
3. Explain the relevance of the assumption of ‘reporting entity’ in the context of holding
company and subsidiary companies.
4. Explain liability of owners in the context of sole proprietorship, partnership and
company form of businesses.
5. Briefly explain the corporate organization structure.
6. Explain the term equity.
7. Why are the rules of debit and credit same for liability and equity?
8. The matching principle poses major challenges to accountants. Explain.
9. Mr. Raj started business with capital of 25,000/-. His equity at the end of first year
was 38,000/-. He had withdrawn 8000/- from his business during the year. He had
brought in additional capital of 10,000/- during the year. Compute profits made by
him during the year.
10. Ms. Lovely had liabilities worth 3,80,000/- in the beginning of a period and 5,80,000/-
at the end of the same period. She had assets worth 4,75,000/- in the beginning and
6,25,000/- at the end of the same period. Compute profit or loss made by Lovely
during the same period.
11. Joseph company’s March 31 balance sheet contained the following items:
Loan payable 34000 Expenses payable ?
Equity 154800 cash 20000
Trade Receivable 34000 Office Supplies 18000
Machinery 48000 Building 43600
Land 62000 Trade payable 6000
Compute the amount of expenses payable.
12. Frame a transaction each for the following:
a. Increases an asset and increases a liability
b. Increases an asset and decreases another asset
c. Increases an asset and increases equity
d. Decreases an asset and decreases a liability
e. Decreases an asset and decreases equity
13. What is the impact of the following on the equity of a firm?
a. Promoters bring in additional capital
b. Firm declares and gives dividend
c. Firm incur an expense
d. Promoters or owners withdraw capital from business or goes for buyback of
shares.
e. Firm gains profit

14. Soumya started a consulting services firm and the following transactions took place
during the first month.
a. Invested in share capital of the firm – 70000/-
b. Paid rent deposit – 20000/-
c. Bought supplies on credit – 3000/-
 d. Took a bank loan – 30000/-
e. Bought laptop for cash – 22000/-
f. Provided services for cash – 15800/-
g. Received cash for services to be provided in future – 7500/-
h. Paid salary – 1400/-
i. Paid for supplies -c- 4000/-
j. Billed customers for services provided – 22000/-
Prepare T accounts and Trial Balance

15. Prepare Profit and Loss account and Balance sheet of Allied Limited from the
adjusted trial balance given below.
Adjusted Trial Balance of Allied Ltd.
Dr Cr
Generator 157500
Accumulated depreciation on Generator 31500
Supplies 16625
Trade receivables 36838
Cash 18987
Prepaid rent 44625
Unbilled revenue 26425
Trad payable 18900
Unearned Revenue 8488
Salaries payable 11462
Share capital 218750
Retained earnings 18900
Dividends 33250
Revenue from services 178950
Salaries expenses 85050
Supplies expense 18900
Insurance expense 12000
Rent expense 21000
Depreciation on generator expense 15750
Total 486950 486950

16. Jack and Jill were schoolmates in their childhood. Both were good in studies and smart
in all extra-curricular activities and sports. After completing 12th Jack moved to
Chennai to join IIT and pursue an engineering degree in computer science. Jill stayed
back in the village with her parents and joined a Government Arts college to pursue
graduation in Kannada Literature. Jack spent around eleven lakhs rupees to complete
his course from IIT whereas Jill completed her BA and MA by spending a mere sum of
eighty thousand rupees. Microsoft recruited Jack from campus itself for an annual
package of Rs.12 lakhs and he moved to Hyderabad where he slowly settled.
 On completing MA, Jill got selected to the nearby Government college as lecturer in the
Languages department for a starting salary of Rs.42000 per month.
Both the friends met after 10 years and started talking about their lives. Their conversations
regarding their financial status is given below.
Jack: I am happily living in my luxurious apartment which I purchased for 2.5 crore 3 years
ago. But I had taken 80% loan for this apartment. In three years I could repay only 11 lakhs of
this loan. But my apartment has appreciated to 2.6 crore now. I also purchased a BMW car for
45 lakhs recently, but of course took a loan of 40 lakhs against it. I have investments in share
market which is worth 12 lakhs now. Not to forget, I have a personal loan of 5 lakhs against
my salary account. Right now my annual salary is around 60 lakhs, but my annual expenses
come around 90% of that. I feel I am financially settled well.
Jill: My story is totally different. I bought 2 acres of land for 40 lakhs and built a villa in it for
55 lakhs. Though I never liked the idea of taking loans, I took just one for 22 lakhs against my
villa to save my tax bill. I have given loans of 5 lakh each to my three cousins. But I feel one
among them will not pay me back. I have gold worth 10 lakhs and horses and cows worth 8
lakhs. At present my annual salary is 11 lakhs and I spent only 60% of that.
Considering the information given above whose financial position is better. (Use accounting
equation)