Professional Documents
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Assignment FM
Assignment FM
NAME AYUSHMAN
ROLL NUMBER 2314508261
SEMESTER I
COURSE CODE & NAME DMBA104- FINANCIAL AND MANAGEMENT
ACCOUNTING
ANSWER 1
Accounting concepts are the basic conditions or assumptions upon which the science of
accounting is based. There are five basic concepts of accounting, namely – business entity
concept, (separate entity concept), going concern concept, money measurement concept,
periodicity concept, and accrual concept
1 Business separate entity concept This concept states that business is a separate entity and
it is different from the proprietor or the owner. In this concept a company can own assets and
incur liabilities in its own name. This separation not only has important legal implication but
also has an accounting implication. This enables the business to segregate the transactions of
the company from the private transactions of the proprietor(s). It distinguishes between the
personal assets and liabilities of the owners with that of the business.
This legal separation between business and ownership is kept in mind while recording the
transactions in the books of business.
2 Going concern concept In this concept the business entity will continue fairly for a long
time to come. It assumes that there is neither the necessity nor the intention to close down
either the entire business or substantial operations of the business.
4 Periodicity (accounting period) concept As per the going concern concept, the life of
business is indefinite. This makes it difficult to wait indefinitely to stop and look back at how
the company performed and also makes it too late to take corrective actions if any. Hence, the
indefinite life of business is split into regular intervals of time. Such regular time intervals are
called accounting periods.
NAME AYUSHMAN
ROLL NUMBER 2314508261
SEMESTER I
COURSE CODE & NAME DMBA104- FINANCIAL AND MANAGEMENT
ACCOUNTING
• Expenses incurred for an accounting period must be recorded in that accounting period
regardless of whether it is actually paid in that accounting period or not.
• Income earned for an accounting period must be recorded in that accounting period
regardless of whether it is actually received in that accounting period or not.
ANSWER 2
Subsidiary book
1 Purchases book (purchases journal) This book is meant for recording purchases. However,
only credit purchases of goods are recorded in this journal as the cash purchases will pass
through the cash book. The format of purchases book is given below .
• Date – The credit purchases made are entered in this book in chronological order. The date
of purchase is entered in this column.
• Purchase invoice number – The invoice number of that particular purchase is entered in
this column.
• Name of the supplier – Name and address of the supplier (creditor) is entered in this
column.
• Details – Details of a particular purchase like description of the goods, quality, quantity,
unit selling price, gross amount of the bill, trade discount if any, etc. are entered in this
column.
ASSIGNMENT
NAME AYUSHMAN
ROLL NUMBER 2314508261
SEMESTER I
COURSE CODE & NAME DMBA104- FINANCIAL AND MANAGEMENT
ACCOUNTING
• Amount – The net amount of the bill (gross minus trade discount if any) is entered in this
column. This amount represents the amount of bill due to that particular supplier (creditor).
• Credit period It is the time given by a supplier to a customer to make payment for the
purchases made. Normally the credit period allowed in business is 30 days, 45 days, 60 days,
or 90 days.
2 Sales book Sales book or sales day book is the subsidiary book meant for recording sales.
However, only credit sale of goods are recorded in this journal as the cash sales will pass
through the cash book. The format of sales book is given below.
3 Purchases returns book Purchases returns refer to goods returned to the supplier out of
purchases made from him. The reason for such return of goods can be because the goods
were damaged, were not as per specifications, or were not as per the sample approved.
Purchases returns book It is the subsidiary book meant for recording the purchases returns.
However, only such returns, which are made out of credit purchases, are recorded in this
journal as the returns out of cash purchases will pass through the cash book. The purchases
returns book is also called “Returns Outwards Book”
4 Sales returns book Sales returns refer to goods returned by the customer out of sales made
to him. The reason for such return of goods can be because the goods were damaged, were
not as per specifications, or were not as per the sample approved.
ASSIGNMENT
NAME AYUSHMAN
ROLL NUMBER 2314508261
SEMESTER I
COURSE CODE & NAME DMBA104- FINANCIAL AND MANAGEMENT
ACCOUNTING
5 Bills receivable book Bill receivable book is one of the subsidiary books. To prepare this
book one should know about the bill of exchange. A bill of exchange is defined by the Indian
Negotiable Instruments Act, 1881 as “an instrument in writing containing an unconditional
order signed by the maker, directing a certain person to pay a certain sum of money only to,
or to the order of a certain person or to the bearer of the instrument ”. Normally a bill of
exchange is raised when goods are sold or purchased on credit. The parties to a bill of
exchange are:
• Drawer – He is the creditor who writes (draws) the bill of exchange on the debtor.
• Payee – He is the person who is entitled to receive the amount mentioned in the bill.
Normally the drawer is also the payee of the bill.
6 Bills payable book Bills payable book is a subsidiary book meant for recording
acceptances given to creditors.
7 Cash book Cash book is the most important subsidiary book. It is the book meant for
recording all cash transactions i.e., cash receipts and cash payments made during a particular
period.
8 Petty cash book A separate cash book can be maintained for petty (small) expenses like
stationery, postage, stamps, refreshments, carriage, cartage, daily wages, etc. Such a separate
book is known as petty cash book. Types of petty cash book
The petty cash book is normally maintained under a system called Imprest system. Under this
system, at the beginning of a month, a fixed sum of money is given by the chief cashier to the
petty cashier to meet petty expenses. At the commencement of the next period, the petty
cashier is reimbursed to the extent of amount spent by him during the earlier period.
ANSWER 3
ASSIGNMENT
NAME AYUSHMAN
ROLL NUMBER 2314508261
SEMESTER I
COURSE CODE & NAME DMBA104- FINANCIAL AND MANAGEMENT
ACCOUNTING
TO CLEARING 7,000
CHARGES
TO ROYALTY 10,000
TO WAGES 8,000
ASSIGNMENT
NAME AYUSHMAN
ROLL NUMBER 2314508261
SEMESTER I
COURSE CODE & NAME DMBA104- FINANCIAL AND MANAGEMENT
ACCOUNTING
WATER
2,09,000 2,09,000
ANSWER 4
NAME AYUSHMAN
ROLL NUMBER 2314508261
SEMESTER I
COURSE CODE & NAME DMBA104- FINANCIAL AND MANAGEMENT
ACCOUNTING
ANSWER 5
Marginal Costing
Marginal costing is defined as “The ascertainment of marginal cost and of the effect on profit
of changes in volume or type of output by differentiating between fixed costs and variable
cost.”
It is a special technique of costing under which the costs are separated into variable and fixed
costs and only the variable costs are charged to operations, processes or products and the
fixed costs are charged against the profits of the period in which they are incurred.
Assumptions
ASSIGNMENT
NAME AYUSHMAN
ROLL NUMBER 2314508261
SEMESTER I
COURSE CODE & NAME DMBA104- FINANCIAL AND MANAGEMENT
ACCOUNTING
1. Segregation of cost into fixed and variable The whole principle of marginal costing is
based on the idea that some costs vary with production while some costs don’t. Therefore, it
is assumed that a clear bifurcation between fixed and variable costs is possible. Even if some
costs do not entirely qualify as fixed or as variable, it is still possible to separate such mixed
cost with respect to the amount, which remains fixed and the amount which varies with
production.
2. Volume is the only factor which influences the cost It is assumed that other factors like the
demands, tastes, and preferences of consumers, availability of substitute products, availability
and price of inputs, etc. are constant. Hence, volume is the only factor which influences the
cost.
3. Constant selling price It is assumed that the selling price will be constant for any level of
sales.
4. Constant total fixed cost It is assumed that the total fixed cost will be constant for any level
of production.
5. Constant variable cost per unit It is assumed that the variable cost per unit will be constant
for any level of production.
6. No closing stock It is assumed that the firm will be able to sell all its production. All the
units produced would be sold. Hence, there would be no opening and closing stocks.
7. Linear relationship between costs and revenues It is assumed that the costs and revenues
are linearly related to volume. The change in costs and revenues is proportionate to the
change in volume (number of units sold).
Limitations
There are certain limitations of marginal costing. They can be described as follows:
Suitability – The techniques of marginal costing cannot be applied to all types of concerns.
E.g., industries working on contract basis.
Inventory valuation difficulties – Since the work-in-progress and the closing inventories are
valued on marginal cost basis, it will not be a sound decision from the balance sheet point of
view.
ASSIGNMENT
NAME AYUSHMAN
ROLL NUMBER 2314508261
SEMESTER I
COURSE CODE & NAME DMBA104- FINANCIAL AND MANAGEMENT
ACCOUNTING
Segregation of costs – Though the marginal costing principles call for the differentiation of
costs into fixed and variable, in practice it becomes difficult to classify them precisely.
ANSWER 6
Budgetary Control
An effective budgeting system should have essential features to get the best results. In this
direction, the following may be considered as essential features of an effective budgeting.
• Business policies defined – The top management of an organisation should have an action
plan for every activity and department. Every budget should reflect the business policies
formulated from time to time. The policies should be precise, clearly defined, and the same
must be communicated to the persons involved in the execution.
• Forecasting – Business forecasts are the foundation of budgets. Time and again,
discussions should be arranged to derive the most profitable combinations of forecasts. As far
as possible, quantitative techniques should be used while forecasting
• Accounting system – To make the budget a successful document, there should be proper
flow of accurate and timely information. The accounting adopted by the organisation should
be proper and must be fine-tuned from time to time
NAME AYUSHMAN
ROLL NUMBER 2314508261
SEMESTER I
COURSE CODE & NAME DMBA104- FINANCIAL AND MANAGEMENT
ACCOUNTING
• Availability of statistical information – Since budgets are always prepared and expressed
in quantitative terms, it is essential that sufficient and accurate relevant data is available to
each department.
• Motivation – Since budget acts as a mirror, the entire organisation should become smart in
its approach. Every employee, both executive and non-executive should be a part of the
overall exercise. Employees should be persuaded than pressurised to appreciate the benefits
of the budgets so that the fruits can be shared by all the members of the organisation.