Professional Documents
Culture Documents
2019 AFM Unit Test 1 Answer Key
2019 AFM Unit Test 1 Answer Key
2019 AFM Unit Test 1 Answer Key
It refers to the use of Accounting Information by the management internally to perform various
managerial functions like policy making, decision making, planning/Budgeting, controlling
MONEY MEASUREMENT
The money measurement concept states that a business should only record an accounting
transaction if it can be expressed in terms of money only. Those transactions which cannot be
expressed in money cannot be recorded in the books of accounts
Break Even Point[BEP} represents the Volume of sales required to cover up all the business
expenses.
What is Contribution ?
Contribution is the Difference between sales and variable cost.It represents sales above break-
even point sales.It’s a contribution towards fixed cost & profit.
What is Budgeting?
Budget is a financial plan expressed in quantitative form, it is prepared for future for various
business operation like production, purchase, sales etc, budgeting is process preparing budget
PART – B
2 Established principles & rules are No such account principles are followed
followed. .
3 Evaluate the performance of entire Evaluate the performance of different
business. division in an organization.
4 Both the internal and external parties can Only internal parties can use these
use these accounts information’s information’s for enhancement.
effectively.
5 Its purely based on past Its purely based on present
Preparation of this accounting is Preparation of this accounting is not
mandatory for company as per the law mandatory until the requirement arise.
(E.g.: Income tax act, company act, etc)
PART – C
for the production of 10,000 electrical goods the following are the budgeted Expenses
Particulars per unit
Direct material 60
Direct labour 30
Variable overheads 25
Fixed Overheads ( Rs.150000) 15
Variable expenses ( direct ) 5
Selling Expenses (10%fixed ) 5
Admin Expenses( Rs. 50,000) 5
Distribution Expenses(20% Fixed) 5
Total cost per unit 150
Prepare a budget for the production of 6000, 8000 electrical
16. The sales turnover and profit during two years were as follows.
Year Sales Profit
Rs. Rs.
2007 1,40,000 15,000
2008 1,60,000 20,000
When sales and profit or sales and cost of two periods are given, the P/V Ratio is obtained by
using the `Change formulae’.
Fixed cost can be found by ascertaining the contribution of one of the periods given by
multiplying sales with P/V Ratio. Then, contribution – Profit can reveal the fixed cost.
Ascertaining P/V ratio using the change formula and finding fixed cost are the essential
requirements in these types of problems.
Change in profit
(a) P/V Ratio = -------------------------- X 100
Change in sales
Change in profit = 20, 000 - 15,000 = Rs. 5,000
Change in sales = 1,60,000- 1,40,000 =Rs. 20,000
5,000
P/V Ratio = ------------- X 100 = 25%
20,000
Fixed expenses
(b)Break even point= -------------------------
P/V Ratio
Fixed expenses = Contribution - Profit
Contribution = Sales x P/V Ratio
25
Using 2007 sales, contribution =1,40,000 x ----- = Rs.35,000
100
Fixed expenses = 35,000 – 15,000 = Rs. 20,000
Note: The same fixed cost can be obtained using 2008 sales also.
20,000
Break even point = ------------ = Rs. 80,000
25%
-----------------------------------------------------------------------------------------------------
Prepare a Trading & profit & loss A/c for the year ended 31st march 2016 and a Balance sheet
from the following Trail Balance
Amount Amount
( dr Cr.
balances Balances
Drawings 45000 Capital 160000
Goodwill 90000 Bills Payable 35000
Buildings 60000 Creditors 70000
Machinery 40000 Purchases Return 2650
Bills Receivables 6000 Sales 218000
Opening stock 40000
Purchases 51000
Wages 26000
Carriage outwards 500
Carriage in wards 1000
Salaries 35000
Rent 3000
Discount 1100
Repairs 2300
Bank 25000
Cash 1600
Debtors 45000
Bad debts 1200
Sales Return 2000
Furniture 6000
Advertisements 3500
General expenses 450
485650 485650
Adjustments:
1)Closing stock was Rs 35,000
2)Depreciate Machinery & Furniture by 10%
3)Outstanding Wages Rs 1500
4) Prepaid Advertisements Rs 500
5)Create 5 % On debtors for bad debtors as provisions
-----------------------------------------------------------------------------------------