Name:-P.

Pavan Kalyan Reddy

Roll. No:- F20028
Subject:-Managerial Accounting.

1.Mr. Abhinav started a small shop of selling dairy products. He wanted to

maintain proper books of accounts. But, he had very little knowledge of
accounting. He maintained only three books – purchases, sales and cash book by
himself. He bought some dairy products and a refrigerator to store the milk
products for which the payment was made by cheque but recorded the same in the
purchases book. He also spent for the transportation charges and paid some money
to the person who unloaded the stock. He recorded the same in the cash book.
He made both cash and credit sale for the next few weeks. He entered the entire
sales in the sales book. In the middle of the month, he was in need of some money
for his personal use. So he took some money, but did not record in the books.
Now, discuss on the following points:
i. Do you think Mr. Abhinav needs an accountant? Why do you think so?
Answer:-Yes, Mr. Abhinav needs an accountant because he records all cash and
credit transactions.

ii. Does he maintain enough books of accounts?

Answer:-Yes, he maintains enough books of accounts.

iii. What other books do you think that he needs to maintain?

Answer:-He needs to maintain a petty cashbook.

a. What will be the impact on the profit, if he records the purchase of refrigerator
in the purchases book?
Answer:-The purchase book will be over cast because this transactions will be
recorded in proper Journal.

b. Is it important to record the money taken for personal use? Will it affect the final
accounts?
Answer:-Yes, then only the actual profit or loss can be found out in the business.
iv. Identify some of the accounting principles relevant to this situation.
Answer:-Some of the accounting principles relevant to this situation are:- matching,
Principles, business entity concept, money measurement concept, dual output concept,
periodicity concept and going concern concept.

2. Lucky & Co’s income statement shows a loss of ` 3,000. The owner thinks that
there is no need to provide for depreciation as the company has made a loss. He
also suggests his accountant to change the method of depreciation for the next year
so as to avoid the loss. But, the accountant is hesitant to make the necessary
changes suggested by his owner.
Now, discuss on the following points:
i. Do you agree on the point that there is no need to charge depreciation when
the company has made a loss?
Answer:-
ii. Why does the accountant hesitate to make the changes suggested by his
owner?
iii. What are the accounting principles not followed if the accountant agrees to
his owner’s suggestion?
iv. Do you think charging depreciation could be the only reason for the
company’s loss?

3. Rameela, a class 11 student, visited one of her relative’s furniture shop. She met the
accountant of the shop. He was busy with preparing final accounts. At that time, one of
the staff approached the accountant with a list of errors found in ledger postings.
Rameela asked the accountant, in a surprised tone, “Is it possible to rectify the errors
before preparing the final accounts?”
The accountant replied, “Yes, it is!”.
Rameela was curious to analyze the errors. She found the following:
i. Furniture sold on credit to Siva and company for ` 12,000 was debited to Sam and
company.
ii. Rent paid ` 2,500, was debited to rent account as ` 250.
iii. The total of purchase journal was undercast by ` 1,000.
iv. A sales invoice for ` 2,000, completely omitted from the books.
v. Stationery bought for ` 250, was posted to purchases account.

Can you help Rameela to identify and rectify the errors

Answer: