Management Accounting

Class: III B.Com

UNIT – I
Part A
1) The branch of accounting which primarily deals with processing and presenting
accounting data fro internal use is ________________
a) Cost accounting
b) Financial accounting
c) Management accounting
d) Inflation accounting
2) The term management accounting was used in
a) 1950
b) 1939
c) 1910
d) 1947
3) Management accounting is also known as _______________
a) Price level accounting
b) Historical accounting
c) Decision accounting
d) None of these
4) Which of the following is not a technique of management accounting
a) Budgetary control
b) Standard costing
c) Marginal costing
d) Process costing
5) Management accounting is helpful in increasing _______________
a) Performance
b) Profitability
c) Efficiency
d) Production
6) Management accounting has a ___________ scope than cost accounting
a) Wider
 b) Narrower
c) Smaller
d) None of these
7) Management accounting helps in ___________ data
a) Analysis
b) Interpretation
c) Analysis and interpretation
d) None of these
8) Management accounting provides alternative choices for managerial ___________
a) Decisions
b) Policies
c) Uses
d) None of these
9) Publication of management accounting statements are ______________
a) Compulsory
b) Not optional
c) Optional
d) None of these
10) Management accounting deals only with that information which is useful to the
___________
a) Accountant
b) Owners
c) Management
d) All of the above
11) The prime function of management accounting is to -------------------------------
a) Interpret financial data
b) Assist the management in performing its functions
c) Record business transaction
d) None of these
12) Management accounting relates to ________
a) Recording of accounting data
b) Recording of costing data
c) Presentation of accounting data
d) None of these
13) Management accounting analyses accounting data with the help of -------------------------
a) Auditors
b) Statutory forms
c) Tools and techniques
d) None of these
14) Management accounting and cost accounting functions are --------------------------
a) Neutral in effect
b) Complementary in nature
c) Contradictory in nature
d) None of these
15) Management accounting provides valuable services to management in performing ____
a) Coordinating functions
b) Controlling functions
c) Planning functions
d) All managerial functions
16) The purpose of management accounting is to
A). Help banks make decisions
B). Past orientation
C). Help investors make decision
D). Help managers make decisions
17) The correct order of process of establishing the standards, is
A). Decision about types of standards to be used, Study of technical details, Study of
existing costing system
B). Study of existing costing system, Study of technical details, Decision about types
of standards to be used
C). Study of technical details, Study of existing costing system, Decision about types
of standards to be used
D). None of the above
18) Management accounting assists the management
a) In planning, direction and control
b) Only in planning
c) Only in direction
d) Only in control
19) Which of the following are tools of management accounting?
A) Standard costing
B) Decision accounting
C) Human Resources Accounting
D) Budgetary control
a) A, C and D
b) A, B and D
c) A, B , C, D
d) A, B and C
20) The concept of management accounting was coined by?
a) R.N Anthony
b) J. Batty
c) James H. Bliss
d) American Accounting Association
21) An accounting approach, in which the expected benefits exceed the expected cost is
classified as
a) Cost-benefit approach
b) Benefit approach
c) Cost approach
d) Accounting approach
22) Management accounting deals with
a) Qualitative information
b) Quantitative information
c) None of the above
d) Both a and b
23) Decisions regarding usage of material, kind and changes in plant processing are a part of
a) Help management
b) Future management
c) Cost management
d) Past management
24) In management accounting, an emphasis and focus must be
a) Past oriented
b) Future oriented
c) Bank oriented
d) Communication oriented
 Part B
1. Distinguish between financial accounting and cost accounting.
2. Bring out the limitations or disadvantage or demerits of management accounting.
3. Briefly explain the objectives of management accounting
4. What are the characteristics / natures of management accounting

Part C
1. Brief the advantage or merits of management accounting.
2. How does the management accounting differ from financial accounting?
3. Describe the functions of management accounting.
4. Brief out the scope of management accounting.
5. Explain the tools or techniques management accounting.
 UNIT – II
Ratio analysis
Part A
1. ________ is the relationship between quick assets and current liabilities .
A. Current ratio
B. Absolute liquidity ratio
C. Acid test ratio
D. Proprietary ratio
2. When the concept of ratio is defined in respected to the items shown in the financial
statements, it is termed as
A. Accounting ratio
B. Financial ratio
C. Costing ratio
D. None of the above
3. General Profitability ratios are based on
A. Investments
B. Sales
C. A & B
D. None of the above
4. Gross Profit ratio is also termed as
A. Gross Profit Margin
B. Gross Margin to net sales
C. Both a and b
D. All of the above
5. While calculating Gross Profit ratio,
A. Closing stock is deducted from cost of goods sold
B. Closing stock is added to cost of goods sold
C. Closing stock is ignored
D. None of the above
6 . Ratios of different items for various periods are calculated and compared
A. Common size
B. Comparative
C. Trend analysis
 D. Ratio analysis
7 The ratio which depicts the relationship between two items, one of which is drawn from
the Balance Sheet and the other from the revenue account
A. Current ratio
B. Equity Ratio
C. Net Profit ratio
D. Debtors Turn over Ratio
8 . The ratio of liquid asset to current liabilities
A. Quick ratio
B. Current ratio
C. Absolute liquid ratio
D. Combined ratio
9 . Long term solvency of a firm can be measured by
A. Current ratio
B. Net profit ratio
C. Gross profit ratio
D. Debt equity ratio
10 . The ratio that shows the relationship between fixed asset to share holders fund
A. Fixed asset to net worth
B. Fixed asset ratio
C. Fixed assets turn over ratio
D. Net worth ratio
11 . The ratio that includes whether investment in inventory is efficiently used or not
A. Inventory turnover ratio
B. Working capital turn over ratio
C. Fixed asset turn over ratio
D. Activity ratio
12 . Comparison and interpretation of ratio is known as ---------------------
A. Fund flow analysis
B. Cash flow analysis
C. Ratio analysis
D. Trend analysis
13 . Powerful tool for analyzing financial statement is ----------
A. Trend analysis
 B. Ratio analysis
C. Analysis
D. Interpretation
14 . The relationship between two amount or variables is measured with the help of ------------
A. Ratio
B. Trend
C. Comparative
D. Common size
15. The main aim of the ratio analysis is to help the ----------of the firm
A. Owners
B. Officials
C. Departments
D. Management
16. Ratios indicate trends in important items and this helps in -----------
A. Forecasting
B. Reporting
C. Analyzing
D. Interpreting
17. Ratios may be used as a measure of -------------
A. Efficiency
B. Solvency
C. Profitability
D. None of the above
18. The ratio that highlight the end result of business activities are known as ----------------
ratios
A. Liquidity
B. Leverage
C. Activity
D. Profitability
19. The efficiency of the management can be measured with the help of ------------------
A. Activity ratio
B. Leverage ratio
C. Liquidity ratio
D. Profitability ratio
20. The ratio of current asset to current liability is known as --------------
A. Liquid ratio
B. Current ratio
C. Absolute liquid ratio
D. Turn over ratio
21.The asset, the amount of which can be realized within a period of one year are known as
----------------
A. Current liability
B. Current asset
C. Liquid liability
D. Fixed asset
22. The ratio which shows the relationship between borrowed funds and owners capital is
---------------
A. Proprietary ratio
B. Debt equity ratio
C. Capital gearing ratio
D. Fixed asset ratio
23. The relationship between total outside liabilities and total assets can be indicated through
------------
A. Fixed asset ratio
B. Solvency ratio
C. Fixed asset turn over ratio
D. Proprietary ratio
24. Debt service ratio is also known as --------------
A. Interest coverage ratio
B. Dividend payout ratio
C. Solvency ratio
D. Debtors turn over ratio
25. Debt equity ratio is an example of ---------------- ratios
A. Balance sheet ratio
B. Profit & loss account ratio
C. Mixed ratio
D. Liquidity ratio
 Part B
1. Calculate Gross profit Ratio from the following figures.
Rs.
Sales 10, 00,000
Sales Return 1, 00,000
Opening Stock 2, 00, 000
Purchase 6, 00, 000
Purchase Returns 1, 50, 000
Closing Stock 65, 000

2. From the following details of a business concern calculate the net profit ratio
Sales 3, 50, 000
Cost of goods sold 1, 50,000
Administration Exp. 50, 000
Selling expenses 10, 000

3. The following information is obtained from the books of sunil enterprises Ltd.,
Profit after tax Rs.2,77,000.
Equity dividend paid 20%
Market price of equity shares Rs. 50 per share
The company’s share capital consists of the following
40,000 equity shares of rs.20 each.
30,000,9% preference shares of Rs. 10 each
Calculate price earning ratio.
4. Compute the pay out ratio from the data provided by the equipment Leasing
Company Ltd. Also ascertain its Retained earnings ratio.
Net Profit 80, 000
Provision for tax 40,000
Prefrence dividend 10,000
No. of equity shares 30,000
Dividend per equity share 0.45
5. Ganesh Bros sells goods on cash and credit terms also purchased goods on cash
and credit terms. The following particulars are obtained from their books.
Total sales 5,00,000
Cash sales 40,000
Sales return 20,000
Debtors at the end 80,000
Bills receivable at the end 20,000
Reserve for Doubtful debts 1,000
Total purchases 3,00,000
Cash Purchases 50,000
Purchase returns 10,000
Creditors at the End 60,000
Bills payable at the end 20,000
Reserve for discount on creditors 2,000
Opening stock 50,000
Closing stock 40,000
Gross Profit 1,00,000
Fixed assets 10,00,000
Calculate activity ratios (Turnover ratios)
 6. Balance sheet of Rama Ltd. as at 31-12-1993 is as follows:
Liabilities Rs. Assets Rs.
Equity capital 2,00,000 Fixed assets 2,60,000
9% Preference share 1,00,000 Stock 50,000
capital
8% Debentures 1,00,000 Debtors 1,10,000
Profit and loss A/C 40,000 Bills receivable 6,000

Creditors 90,000 Bank Balance 4,000

5,30,000 5,30,000
Find out (1) Fixed assets ratio and (2) Capital gearing ratio.

Part C
1. The ratio relating to a company are given below:
Gross profit – 15 % Stock velocity – 6 months Debtors velocity – 3 months
Creditor velocity – 3 months, Gross profit for the year amount to Rs. 60,000. Closing
stock is equal to opening stock. Find out (a) Sales (b) Closing stock (c) Sundry
debtors (d) Sundry creditors.

2. From the following details, find out

(1) Current assets (2) Current liabilities (3) Stock
Current Ratio – 2.8 Liquid assets – 1.5 Working capital – 1,62,000

3. From the following balance sheet, calculate (1) Current Ratio (2) Liquid Ratio (3) Debt
Equity Ratio
(4) Proprietary Ratio
Balance sheet
Liabilities Rs. Assets Rs.
Share capital 5,00,000 Fixed assets 14,00,000
Reserve 3,00,000 Stock 5,00,000
6% debentures 11,00,00 Debtors 2,00,000
0
Bank overdraft 1,00,000 Cash 1,00,000
Creditors 2,00,000
22,00,00 22,00,000
0

4. Following is the profit and loss A/c of a company for the year ending 31-12-2014.
Particulars Rs. Particulars Rs.
To Opening stock 1,00,000 By Sales 5,60,000
To Purchase 3,50,000 By Closing stock 1,00,000
To Wages 9,000
To Gross profit 2,01,000

6,60,000 6,60,000
To Administrative expenses 20,000
 To Selling and distribution expenses 89,000 By Gross profit 2,01,000
To Non- operating expenses 30,000
To Net profit 80,000

2,19,000 2,19,000
Calculate (1) Gross Profit Ratio (2) Net Profit Ratio (3) Operating Ratio (4) Operating Profit
Ratio

5. From the following given ratio and figures prepare a summarized balance sheet of Moon
Ltd., for the year ended 31-12-2014.
Working capital - Rs. 60,000
Reserve and surplus - Rs. 40,000
Bank overdraft - Rs. 10,000
Fixed assets to proprietorship - 0.75
Current ratio - 2.5
Liquid ratio - 1.5
6. From the following details prepare statement of proprietary fund with as many details as
possible.
Stock velocity - 6
Capital turnover ratio - 2
Fixed turnover ratio - 4
Gross profit ratio - 20%
Debtors velocity - 2 months
Creditors velocity - 73 days
The gross profit was Rs. 60,000.Reserve and surplus Rs. 20,000. Closing stock
was Rs. 5,000 in excess of opening stock.