MANAGEMENT

ACCOUNTING
CA 2

PAPER CODE – BBA (N) 601

NAME – SWARNARIK CHATTERJEE

ROLL NO. 23405018005
COLLEGE ID – 18234030771
SEMESTER - 6th
 1. ANSWER ALL QUESTIONS:

1. Debtor Turnover Ratio is expressed as.

credit sales
Ans: (b) average debtors

2. Which one is non-current liability?

Ans: (a) Issue of 10% debenture

3. Fixed cost RS. 10,000, P/V Ratio 50% Break Even Sales will be?
¿ Cost
Ans: Break Even Sales¿ pv ratio

10,000
¿
50 %

¿ Rs .20,000 (b)

4. Cash from operation is.

Ans: (c) Both of these

5. Payment of tax is.

Ans: (a) An Application of funds

6. Production Budget is a.

Ans: (a) Functional Budget

7. The difference between actual cost and standard cost is known as.
Ans: (a) Variance

8. The current Ratio of a firm is 5;3. It,s net working capital is Rs20,000.
The value of it,s crrent assets will be.

Ans: Working capital= current Assets-current liabilities

current Assets 5
Current Ratio= currentliabilities ¿ 3

≫3CA=5CL

5CL
≫CA=
3

CA-CL=WC
5 cl
¿ −¿CL=20,000
3

5CL−3 CL
= 3
=20,000

=2CL=60,000

CL=30,000

Here,

Working Capital=RS.20,000

Current Liabilities=Rs.30,000
current Assets 5
Current Ratio= Current Liabilities = 3

x 5
= 30,000 = 3

=3x=1,50,000

= Rs. 50,000(b)

9. Industry Standard Debt Ratio of a private concern.

Ans: 1:1

10. Which of the following ratio is a ratio of solvency?

Ans: (a) Current ratio

ANSWER ALL QUESTION
1.What are the key factors to be taken into consideration while preparing
budget?

Answer:

KEY FACTORS TO BE TAKEN INTO CONSIDERATION WHILE

PREPARING BUDGET:

Consult all the Departments

The annual budget should be created by consulting all the departments and not
only just the accounting department as each department requires their own
budget. For example, from the manufacturing team, you can get information on
the cost involved in the delivery of goods and purchases of materials and the
sales team can give you the revenue assessment details.

Determine the Expense

A good way to avoid unnecessary expenses is to research the costs that will be

involved such as rent, salaries, interest costs, phone and other utilities costs,

marketing cost and so on. This process will help the business holders to make

informed decision regarding the organisation and will help them prepare for any

unexpected financial crises as well.

Estimate Revenues:

As you determine how much money you will be needing you should also
estimate how much revenue you may generate. If you already have information
about the previous year’s revenue you can easily use it as a baseline for the
revenue forecast for this year. Create an estimation of all your funding
resources. Discuss with your sales department how much revenue are they
expecting. Know what your customers are expecting from your products and
services. You may also consider your recent monthly growth and make
estimations about revenues from that.

The Gross Margin Profits:

Make an estimate of how much money is left with you after paying all the

expenses. This is what is stated as gross margin profit. Start with making a list

all the sales. Then subtract the revenue costs from that. Consider the same

process department wise and overall. This will give you a clear picture of how

the money is being utilized by every department and where is the scope of

increasing your profits.

Have a Cash Flow Plan:

A cash flow plan can help you identify when and how much your company

should spend. It is a must for businesses that are seasonal as then you will have

an idea how to manage your expenses in the offseason. Cash flow plan is

generally an estimation of how much money the company is going to produce

and how. With this information, you can easily create a budget and estimate

your monthly expenses.

Know How You Will spend

If you want to maintain the annual budget then you should keep a check of how
you are spending money. Make sure you are spending money on the things that
help your business in growing further. The best way to monitor this is by having
a spending strategy for your business. For example, decide if you want to buy or
rent the office and the technology or keep a check of the old products before
you buy any new ones for your office. 

Q.2: What do you mean by standard costing? How does it differ from
budgetary control?

Answer:

Definition of Standard Costing :

Standard Costing is a cost accounting technique, which helps to measure the

performance of material, labor & overhead and report the variances, to take
corrective actions. The variances are being analyzed in detail and reported by
comparing the actual costs with the standard cost for actual output along with
determining the reasons for the same. There are two types of variances i.e.
favorable (actual cost is less than the standard cost) and adverse (actual costs
exceed standard costs).

The following steps are taken, in the process of Standard Costing:

Fixing Standards

Determining Actual Costs

Comparison between actual and standard figures

Variance analysis and reporting

Taking corrective action for the disposition of variances

Key Differences Between Standard Costing and Budgetary Control

The following are the major differences between standard costing and budgetary
control:

1. Standard Costing is a cost accounting system, in which performance is

measured by comparing the actual and standard costs. Budgetary Control
is a control system in which actual and budgeted results are compared
continuously in order to achieve the desired result.
2. Standard Costing is limited to, cost data, but Budgetary Control is related
to cost as well as economic data of the enterprise.
3. standard costing is a unit concept, unlike budgetary control is a total
concept.
4. Standard Costing has a restricted scope, limited to production costs only,
whereas Budgetary Control, has a comparatively wider scope as it covers
all the operations of the whole organization.
5. In Standard Costing variances are revealed and reported however in
budgetary control, as the control are being exercised at the same time, the
variances are not disclosed.
6. In Standard Costing the comparison is made between actual cost and
standard cost of actual output. On the other hand, in Budgetary Control
the comparison is made between the actual and budgeted performance.
7. Standard costs do not change due to short-term changes in the conditions,
but budgeted costs may change.
8. Standard Costing applies to manufacturing concerns. In contrast to
Budgetary Control, which applies to all the organizations.

Q.3: Discuss the three managerial functions in which management

accounting information can be used?

Answer:

Management accounting plays a vital role in these managerial functions

performed by managers.

(1) Planning:
Planning is formulating short term and long-term plans and actions to achieve a
particular end. A budget is the financial planning showing how resources are to
be acquired and used over a specified time interval.

Management accounting is closely interwoven in planning both because it

provides information for decision-making and because the entire budgeting
process is developed around accounting-related reports. Management
accounting helps managers in planning by providing reports which estimate the
effects of alternative actions on an enterprise’s ability to achieve desired goals.
For example, if a business enterprise determines a target profit for a year, it
should also determine how to reach that target.

(2) Organising:

Organising is a process of establishing an organizational framework and

assigning responsibility to people working in an organization for achieving
business goals and objectives.

Management accounting helps managers in organising by providing reports and

necessary information to regulate and adjust operations and activities in the
light of changing conditions.

(3) Controlling:

Control is the process of monitoring, measuring, evaluating and correcting

actual results to ensure that a business enterprise’s goals and plans are achieved.
Control is accomplished with the use of feedback. Feedback is information that
can be used to evaluate or correct the steps being taken to implement a plan.
Feedback allows the managers to decide to let the operations and activity
continue as they are, take remedial actions to put some actions back in harmony
with the original plan and goals or do some rearranging and re-planning at
midstream.

Management accounting helps in the control function by producing

performance reports and control reports which highlight variances between
expected and actual performances. Such reports serve as a basis for taking
necessary corrective action to control operations. The use of performance and
control reports follows the principle of management by exception.