ASSIGNMENT

for

INDUSTRIAL MANAGEMENT AND ECONOMY

Department of Mechanical Engineering

Wollo University KIOT, Kombolcha,

Course name :

Year IV: Semister I

SUBMITTED TO:-

PREPARED BY:-

Name ID

DECEMBER, 2022

1
 Assignment 1
Q 1. PRODUCT: welding equipment procurement /purchasing process in AMWAE company kombolcha
branch
We select welding equipment like electrodes, welding holders and penetrant purchasing procedure
1. Identify spare part specification collect data from equipments (like name, type, date of manufacturing,
identification, brand name) (1/2/ day)
2. Filling PR (purchasing request) form by responsible technical person of maintenance department. (1/2/
day)
3. Send data filled PR file or document to procurement/ purchasing department team of purchasing
coordinator or officer (1/2/ day)
4. Classify or separate of urgent material or delay material according to order and availability, type of
spare part tool. (1 day)
5. According to PR specification of spare part scanning and recognition of need data on market. (1/2 day)
6. Select purchasing type like (proforma, tender etc..) and prepare document. (1 day)
7. Distribute proforma purchasing type of spare part specification to suppliers (3 day)
8. Approval of technical specification on suppliers by purchasing committee and officers like (mechanic,
maintenance engineer, technician etc…) (3 day)
9. Collecting proforma purchasing document and data from selected suppliers. (2 day)
10. According to supplier or vendor data purchasing officer selecting low cost, high quality, availability and
quantity of spare part on market suppliers using proforma filled data a specification. (2 day)
11. Procurement coordinator or purchasing manager sending an agreement proposal to management leaders
for approval of proforma specification, cost, availability and quantity according to technician approval
of spare part. (2 day)
12. Get feedback agreement proposal letter from a management, leaders or hierarchy. (1 day)
13. Approval of agreement letter for proforma data purchasing type by procurement manager and to
technical committee team to send LC letter for finance department to balance money for payment
procedure. (1 day)
14. Send letter to selected supplier company to prepare spare according to specification & quantity we need.
(1 day)
15. Parallel prepare transaction many by requesting finance manager. Payment to purchased spare part by
check or bank transfer or by on hand money take by purchasing casher officer. (1 day)
16. Supplier company deliver purchased spare part to purchaser office take spare part and hand over to
AWWCE store or warehouse person by using GRN & purchasing price document. (2 day)
17. Preparing GRN file and approval of technician paper parallel to check of invoice recite file. (1/2 day)
18. Material out from store/warehouse using SIV voucher document filling data by responsible welding
department by responsible person. (1/2 day)
19. Use or change equipment for specific purpose to maintenance department for equipment/ car. (3 day)
20. Finish job.
 Assignment 2
Q1. Classification of accounts;
Accounts are classified using two approaches:
1. Traditional approach (also known as the British approach)
2. Modern approach (also known as the American approach)
We discuss briefly how accounts are classified under both approaches.
Classification of Accounts Under the Traditional (or British) Approach

According to the traditional approach, accounts are classified into three types: real accounts, nominal
accounts, and personal accounts. Given that it is an old system for classifying accounts, it is used rarely in
practice.
a. Personal Accounts
Personal accounts are the accounts that are used to record transactions relating to individual persons, firms,
companies, or other organizations.
Examples of such accounts include an individual’s accounts (e.g., Mr. X’s account), the accounts held by
modern enterprises, and city bank accounts.
b. Impersonal Accounts
Impersonal accounts are those that do not relate to persons. There are two types:
i. Real accounts (or permanent accounts)
ii. Nominal accounts (or temporary accounts)
i. Real Accounts
Real accounts exist even after the end of accounting period. For the next accounting period, these accounts start
with a non-zero balance, which is carried forward from the previous accounting period.
Examples of such accounts include machinery accounts, land accounts, furniture accounts, cash accounts, and
accounts payable accounts.
Usually, real accounts are listed in the balance sheet of the business. For this reason, they are sometimes
referred to as balance sheet accounts.
ii. Nominal Accounts
Nominal accounts are closed at the end of the accounting period. For the next account period, these accounts
start with a zero balance. Nominal accounts typically cover issues such as income, gains, expenses, and losses.
Normally, nominal accounts are used to accumulate income and expense data. In turn, these data can be used to
prepare income statements or trading and profit and loss accounts. For this reason, nominal accounts are
sometimes referred to as income statement accounts.
Examples of nominal accounts include sales, purchases, gains on asset sales, wages paid, and rent paid.
Classification of Accounts Under the Modern (or American) Approach
The modern approach has become a standard for classifying accounts in many developed countries.
The main types of accounts used under this approach are mostly self-explanatory.
Specifically, under the modern approach, accounts are classified into the following five groups:
 1. Asset accounts: Examples include land accounts, machinery accounts, accounts receivable accounts,
prepaid rent accounts, and cash accounts.
2. Liability accounts: Examples include loan accounts, accounts payable accounts, wages payable
accounts, salaries payable accounts, and rent payable accounts.
3. Revenue accounts: Examples include sales accounts, service revenue accounts, rent revenue accounts,
and interest revenue accounts.
4. Expense accounts: Examples include wage expense accounts, commission expense accounts, salary
expense accounts, and rent expense accounts.
5. Capital/owner’s equity accounts: An example is an individual owner’s account (e.g., Mr. X’s
account).
Example
Consider the list of accounts shown below. Our task is to classify these accounts using both the traditional and
modern approaches.
1. Plant and machinery
2. Purchases
3. Sales
4. Rent
5. Land and building
6. Cash
7. Sam’s capital
8. Loan from city bank
Traditional classification:
1. Plant and machinery > Real account
2. Purchases > Nominal account
3. Sales > Nominal account
4. Rent expense > Nominal account
5. Land and building > Real account
6. Cash > Real account
7. Sam’s capital > Personal account
8. Loan from city bank > Personal account
Modern classification:
1. Plant and machinery > Asset account
2. Purchases > Expense account
3. Sales > Revenue account
4. Rent expense > Expense account
5. Land and building > Asset account
6. Cash > Asset account
7. Sam’s capital > Capital/owner’s equity account
8. Loan from city bank > Liability account
Q2. Accounting concepts;

Accounting concepts are theoretical ideas, components and terms that make up the subjects accounting, finance
and economics. These terms help individuals, businesses or organizations systematically record their financial
information and transactions. Accountants use these concepts as guidelines to prepare financial reports and
other documents for individuals and businesses. Companies tend to follow accounting standards, principles and
accounting laws of the countries they operate in. These principles include concepts and conventions that help
those companies report transactions accurately.
Concepts and principles are critical parts of accounting because they set up a universal framework for
discussing particular financial situations, rules and theories. The concepts are crucial, as they can help clarify
the details of complex transactions and assist in resolving any disputes that may arise while creating financial
statements. You could think of these concepts as ‘what accountants do' and accounting principles as ‘how they
do it.'
Why are concepts necessary in accounting?

Accountants are professionals who record the financial transactions of a company. Periodic summaries of these
transactions or financial reports give managers, investors, analysts and the government relevant financial
information about a company. If every business follows an independent system for creating and producing
summaries and statements, it could lead to discrepancies and increase the scope of fraud and financial
mismanagement. To overcome this, accounting bodies, governments and regulatory agencies use a universally
agreed-upon set of principles to standardize accounting practices.
common basic important concepts in accounting
Accounting bodies classify concepts as based on assumptions or based on principles. Every type of business—
including a sole proprietorship, partnership or a public or private company—records its financial transactions
based on these assumptions and principles. These are some of the important concepts in accounting:
1. Business entity concept
The business entity, economic entity or separate entity concept assumes that a business is independent of its
owner. A business may not record its owner's personal expenses, income, liabilities and assets. It aids in
tracking a business's expenses, incomes and tax deductions without any ambiguity. In addition, it safeguards a
business owner's personal finances and helps build their creditworthiness. It reflects cash flow and financial
position more accurately. This clear distinction helps stakeholders and creditors take appropriate business
decisions based on a company's performance rather than the owner's financial position.
2. Going concern concept
Going concern concept prescribes that accountant prepare financial statements on the assumption that a business
may continue its operations for the foreseeable future. Under this concept, the definition of a foreseeable future
is a period of 12 months from the end date of the reporting period. If a business owner or the management is
invested in scaling down business operations to zero, they cannot apply the going concern concept for
accounting. Accountants may no longer apply the going concern concept if a company is:
 unable to pay dividends
 unable to raise credit from banks and financial services
 facing losses and negative operating cash flow
 facing an adverse financial position
 unable to pay back crucial debts
 facing an unfavorable legal or regulatory action against it
3. Money measurement concept
This is an accounting concept based on assumption, and it stipulates that companies record only those
transactions that they can quantify and measure in terms of money. If they cannot assign a monetary value to a
transaction, they do not record it in their annual financial statement. Though these transactions affect a
company's financial performance, they may not find a place in financial statements, as monetizing them can be
challenging. Some examples of non-monetary value include employee competence, product quality, employee
efficiency, market sentiment, business productivity and stakeholder satisfaction.
4. Accounting period concept
The accounting period concept prescribes a timeframe within which a business records and reports its financial
performance for the purview of internal and external stakeholders. An accounting period of a company may
coincide with the fiscal year. A company can determine a timeframe for internal reporting, like three or six
months, or prepare monthly financial reports to analyze their cash flow positions. The management can
determine a convenient accounting period for internal reporting, but the reporting for investor, government and
tax purposes is typically for the period of one year.
5. Accrual concept
Accrual is a fundamental concept that guides how a business can record cash or credit transactions. Under this
concept, a business records a financial transaction in the period it occurs. It does not consider whether the
business pays or receives cash at the time of the transaction, or if it pays cash after a certain period. For
example, a company records a credit purchase at the time of purchase rather than when it pays back the seller.
This helps record and report income, expenses, liabilities and receivables accurately. All modern accounting
systems follow the accrual concept in recording financial transactions.
6. Revenue realization concept
Under the revenue realization or revenue recognition concept, a seller records potential revenue from a
transaction, regardless of whether they have or have not received proceeds. The ownership of a product
transfers from a buyer to a seller during a sale. A seller recognizes the transaction by creating a receivable
against the buyer's name in their ledger. An accountant creates another entry when they receive the due amount
in the future.
7. Full disclosure concept
The full disclosure concept requires a business entity to furnish necessary information for the benefit of those
who read financial statements and reports for investment, taxation or audit purposes. This concept aims to
provide important financial information to investors, creditors, shareholders, clients, and other stakeholders.
Disclosure policies cover revenue recognition, depreciation, inventory, taxes, earnings, stock value, leases and
liabilities.
8. Dual aspect concept
Dual aspect concept states that every transaction affects two accounts of a business. A business then records
both aspects to enable accurate accounting. Every financial transaction has a credit or debit or a giver or
receiver aspect. If an accounting process does not represent both, it may lead to faults in the final accounting
record. The dual aspect concept is the foundation of the double-entry system of bookkeeping, which is now a
standard method for auditing and taxation.
9. Materiality concept
The materiality concept prescribes guidelines to identify if a piece of financial information is material and
whether it can influence the person reading a company's financial statements. Based on this concept, an
accountant or a business may remove negligible transactions that may not have a bearing on final accounts. This
concept is open to subjective interpretation and the basis for using the materiality concept varies with the size of
a company. While a large company may round off figures in the final accounts to crores, a small firm may
round off their figures to lakhs.
10. Verifiable objective evidence concept
Under this concept, a business can record only those transactions that they can furnish documentary proof for.
Without proper and valid documentary evidence, a transaction can be biased or undependable, and it can
increase the scope of financial irregularities. For example, a retail employee may present a bill for purchases
and sales, and corroborate it with sale and purchase invoices.
11. Historical cost concept
The historical cost concept states that a business may record assets and liabilities at their historical cost rather
than their current market or sale value. It helps to maintain consistent, reliable and verifiable financial
information. Including the current value of an entity can result in financial irregularities.
12. Conservatism Concept
Revenue is only recognized when there is a reasonable certainty that it will be realized, whereas expenses
are recognized sooner, when there is a reasonable possibility that they will be incurred. This concept tends
to result in more conservative financial statements.
13. Consistency Concept
Once a business chooses to use a specific accounting method, it should continue using it on a go-forward
basis. By doing so, financial statements prepared in multiple periods can be reliably compared.
14. Economic Entity Concept
The transactions of a business are to be kept separate from those of its owners. By doing so, there is no
intermingling of personal and business transactions in a company's financial statements.
15. Matching Concept
The expenses related to revenue should be recognized in the same period in which the revenue was
recognized. By doing this, there is no deferral of expense recognition into later reporting periods, so that
someone viewing a company's financial statements can be assured that all aspects of a transaction have
been recorded at the same time.
16. Cost Concept
The cost concept states that any asset that the entity records shall be recorded at historical cost value, i.e., the
asset’s acquisition cost.
Importance of Accounting Concept

 The importance of the accounting concept is visible in the fact that its application is involved in every
step of recording a financial transaction of the entity.
 Following the generally accepted accounting concepts helps save the accountants’ time, effort, and
energy, as the framework is already set.
 It improves the quality of financial statements and reports concerning the understandability, reliability,
relevance, and comparability of such financial statements and reports.

Q3. Accounting statement;

A statement, in accounting terms, is synonymous with “report.” There are several common accounting
statements, all of which draw on the same accounting data but which are prepared for different reasons in
order to show various perspectives of the company’s financial health and performance. These statements
come in standardized formats so as to permit objective financial analysis by business owners, executives,
investors, vendors, lending institutions and tax authorities.
Definition
A financial statement is actually a collection of four separate accounting statements: a balance sheet, an
income statement, a cash flow statement and a statement of shareholder’s, or owner's, equity. Together, they
not only give a picture of the company’s financial health, but they also can help identify trends in order to
correct problems and to take advantage of opportunities.
3.1. Balance Sheet
A balance sheet is a statement of a company’s financial position at a single point in time, usually month-end
or year-end. It shows that the company’s assets equal liabilities plus owner’s equity. Balance sheet assets are
represented as either long-term, such as buildings, furniture and equipment, or short-term, such as inventory,
receivables and cash in the bank. Long-term liabilities include items such as loans, while short-term liabilities
include accounts payable. Owner’s equity is the owner’s capital account showing how much he has invested
in his company.
3.2. Income Statements
The income statement sometimes is referred to as a “profit and loss statement.” It reveals the financial
performance of a company by categorizing the sources of income and expenses. Unlike a balance sheet that
provides a snapshot of a company’s financial condition at a specific point in time, an income statement shows
how well a company has performed over a period of time, usually by month, quarter or year.
3.3. Statement of Owner’s Equity
A statement of owner’s equity details the changes in the owner’s equity that have occurred over a period of
time. It shows the balance of the owner’s equity at the beginning of the period, plus contributions made after
that date, plus how much profit has been reinvested and minus any funds the owner withdrew.
3.4. Cash Flow Statement
The cash flow statement is a report on cash that came in and cash that went out. It categorizes the source and
amount of cash received, such as from sales, interest income and loan proceeds, along with the types of
expenses paid, such as payroll, loan payments, taxes and equipment purchases. It doesn’t matter whether the
income or expenses are long or short-term.
3.5. Reports on Financial Statements
There are three types of reports on financial statements based on the level of assurances provided for their
accuracy and completeness: compilation, review and audit. A compilation is a financial statement report
based on information provided by management; it has not been scrutinized by outside accountants. It comes
with no assurances that it adheres to generally accepted accounting principles, known as GAAP, and usually
only includes a balance sheet and an income statement. A review contains assurances from an outside
accountant that GAAP was followed, but the report is less scrutinized than the audit, which requires the
outside accountant to verify all accounting records and supporting evidence. Audited financial statements
carry the weight of a guarantee from the auditing firm that the financial statements are accurate and complete.
3.6. Statement of Retained Earnings
The statement of retained earnings presents changes in equity during the reporting period. The report
format varies, but can include the sale or repurchase of shares, dividend payments, and changes caused by
reported profits or losses. This is the least used of the financial statements, and is commonly only included
in the audited financial statement package.
When the financial statements are issued internally, the management team usually only sees the income
statement and balance sheet, since these documents are relatively easy to prepare.
Q4. Budgets and budgetary control;
Budget
 Is a short- term financial plan which acts as a guide to achieve the pre -determined targets.
 It is a comprehensive and coordinated plan, expressed in financial terms, for the operations and
resources of an enterprise for some specific period in the future.
 It is a predetermined detailed plan of action developed and distributed as a guide to current
operations and as a partial basis for the subsequent evaluation of performance
Budget-Definition
 The Chartered Institute of Management Accountants, London defines budget as “a financial
and/or quantitative statement, prepared prior to a defined period of time, of the policy to be pursued
during the period for the purpose of attaining a given objective.”
 Kohler in ‘A Dictionary for Accountants’ defines budget as any financial plan serving as an
estimate of and a control over future operation, any estimate of future costs and any systematic plan
for the utilisation of manpower, material or other resources.
Elements of Budget
1. It is a comprehensive and coordinated plan of action prepared in advance and based on a future plan of
action
2. It is a plan for the firm’s operations and resources.
3. It is based on objectives to be attained.
4. It is related to specific future period- the periodicity maybe month, quarter, half year, a year or even
more than that
5. It is expressed in monetary values (like Rupees Dollars etc) and/or physical units (expressed as kilos or
tonnes or quintals)
Reasons for producing budgets
 Aid in the planning of annual operations
 Communicate plans to different responsibility centres
 Coordinate the activities of various parts of the firm & to ensure different parts operate in harmony
with each other
 Motivate managers to strive to achieve organisation goals
 Control and evaluate the performance of managers
Budgeting
 Budgeting is the process of preparing and using budgets to achieve management objectives. It is the
systematic approach for accomplishing the planning, coordination, and control responsibilities of
management by optimally utilizing the given resources.
Elements of Budgeting:
 Clearly state the firm’s expectations and facilitate their attainability.
 Should utilize various persons at different levels while preparing the budgets.
 Authority and responsibility should be properly fixed.
 Realistic targets are to be fixed.
 A good system of accounting is also essential.
 Wholehearted support of the top management is necessary
 Proper reporting system should be introduced.
Forecast & Budgeting

Forecast
Forecast is a mere estimate of what is likely to
happen. It is a statement of probable events
which are likely to happen under anticipated
conditions during a specified period of time.
Forecasts, being statements of future events, do
not connote any sense of control.
Forecasting is a preliminary step for budgeting.
It ends with the forecast of likely events.
Forecasts have wider scope, since it can be made
in those spheres also where budgets cannot
interfere.
Budget
Budget shows that policy and programme to be
followed in a future period under planned
conditions.
A budget is a tool of control since it represents
actions which can be shaped according to will
so that it can be suited to the conditions which
may or may not happen.
It begins when forecasting ends. Forecasts are
converted into budgets.
Budgets have limited scope. It can be made of
phenomenon non capable of being expressed
quantitatively.

Budgetary Control
 The use of budgets to control firms’ activities is known as budgetary control.
 It is a system in which budgets are prepared & the actual results are compared with the forecasted
one with the purpose of fixing up responsibility for the deviation.
 Budgetary Control can be defined as a system of controlling costs which includes the preparation
of budgets, coordinating the department and establishing responsibilities, comprising actual
performance with the budgeted and acting upon results to achieve maximum profitability
 CIMA, London defines budgetary control as, “the establishment of the budgets relating to the
responsibility of executives to the requirements of a policy and the continuous comparison of actual
with budgeted result either to secure by individual action the objectives of that policy or to provide
a firm basis for its revision”
Elements of budgetary control:
1. Establishment of budgets for each function and division of the organization.
2. Regular comparison of the actual performance with the budget to know the variations from budget and
placing the responsibility of executives to achieve the desire result as estimated in the budget.
3. Taking necessary remedial action to achieve the desired objectives, if there is a variation of the actual
performance from the budgeted performance.
4. Revision of budgets when the circumstances change.
5. Elimination of wastes and increasing the profitability.
Objectives of budgetary control
Planning
Co-ordinating
Control
Communication
Performance evaluation
Motivation
 Assignment 1
Q 2. Table 1: Show normal cost, normal time, crash cost and crash time
crashcost−normal cost
Slope =
normal time−crashtime

Activi Preced. Normal Crash Crash Normal Crash

ties of activity cost – time – cost per
your Cost Time Cost Time normal crash unit time Remark
projec (birr) (in day) (birr) (in cost time (in (Slope)
t day) (birr) day) (birr)

A --- 300 5 400 3 100 2 50

B --- 250 4 300 2 50 2 25

C --- 200 2 300 1 100 1 100

D B 300 3 400 1 100 2 50

E A 400 4 450 1 50 3 16.67

F A 500 3 600 1 100 2 50

G B 300 5 350 2 50 3 16.67

H C, D 250 3 300 1 50 2 25

I C, D 200 2 250 1 50 1 50

J E 300 3 400 1 100 2 50

K F, G, H 400 4 500 2 100 2 50

L F, G, H 500 2 600 1 100 1 100

M I 300 2 450 1 150 1 150

N J, K 250 3 300 1 50 2 25

O L, M 200 4 400 2 200 2 100

P N 300 3 400 1 100 2 50

Q O 400 2 600 1 200 1 200

5350 54 7000 23 1650 31 1108.34

Total allowable crash time = normal time – crash time (in day)

Cost after crashing = Crash cost – normal cost (birr)

Total crush cost per time = cost after crush / crush time (birr/day)

Calculate

1. Draw a network diagram [using both AOA & AON] Predecessor and Successor activity.
2. Determine the Earliest Starting times (ES’s) and Latest Finishing times (LF’s) for each event in the
network diagram.
3. Determine the critical path (the activities that define the duration of the process) and calculate the total
processing duration of product in longest path through a network.
4. Calculate slack or total float for each activity
5. Crashing the project by taking the following normal cost and time as well as crash time and Crash Cost
provided in the table below.
Consider the indirect cost as 100 birrs/day.

Ans.
1. A. network of AOA (Activity On Arrows)

2
5

8 10
1
3 6 12

9 11

4 7

B. Network of AON (Activity On Nodes)

 2. Where,
A = (Activity) ES = (Earliest Start) EF = (Earliest Finish)
t = (Activity time) LS = (Latest Start) LF = (Latest Finish)

When S = 0 => critical activity

Then => B-D-H-K-N-P……………………………………ans.
Then slack (S) = LS – ES or LF – EF
EF = ES + t
LS = LF – t
3. From above network diagram critical path
From zero slack we get
S =0 (free float)

2
5

8 10
1
3 6 12

9 11

4 7

Then, critical path is = B-D-H-K-N-P …………………………..ans

4. Slack of total float of each activity formula S or FT = LS -ES or LF -EF
A = 2-0 or 7-5 => S = 2
*B = 0-0 or 4-4 => S = 0
C = 5-0 or 7-2 => S = 5
*D = 4-4 or 7-7 => S = 0
E = 7-5 or 11-9 => S = 2
F = 7-5 or 10-8 => S = 2
 G = 5-4 or 10-9 => S = 1
*H = 7-7 or 10-10 => S = 0
I = 10-7 or 12-9 => S = 3
J = 11-9 or 14-12 => S = 2
*K = 10-10 or 14-14 => S = 0
L = 12-10 or 14-12 => S = 2
M = 12-9 or 14-11 => S = 3
*N = 14-14 or 17-17 => S = 0
O = 14-12 or 18-16 => S = 2
*P = 17-17 or 20-20 => S = 0
Q = 18-16 or 20-18 => S = 2

5. Crashing the project using indirect cost as 100 birr/day.

I – Iteration
Critical path is
 = B-D-H-K-N-P
Normal project completion time from critical path is 20 days
Total direct normal cost is = 5350 birr
Indirect cost (20 day*100 birr/ day) = 2000 birr
Total project completion cost = 7350 birr

Critical path Critical activity Crashing limit Cost slope Remark

B-D-H-K-N-P
B 4-2 = 2 25
D 3-1 = 2 50 Least slope value to
H 3-1 = 2 25* crash by 1 day
K 4-2 = 2 50
N 3-1 = 2 25*
P 3-1 = 2 50

II – Iteration
We get two (2) critical path is
 = B-G-K-N-P = 4+5+4+2+3 = 18 day
 = B-D-H-K-N-P = 4+3+2+4+2+3 = 18 day
Normal project completion time = 18 day
Critical path time is maximum duration.
Total cost of project
T.C.P = total project cost + (25+25) – 10 birr
= 7350 + 50 – 100 birr
T.C.P = 7300 birr --------------ans