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MBA Assignme ntSemester 1
Financial and Management Accounting
Manish Kumar Jain

3. Measuring: This denotes expressing the value of business transactions and events in terms of money. Transaction is the transfer of money or goods or services from one person or account to another person or account. 2. 8. Its purpose to identify the financial strengths and weaknesses of the enterprise. 6. This function involves the preparation of financial statements such as income statement. .Master of Business Administration-MBA Semester 1 MB0041 – Financial and Management Accounting. It identifies the transaction of financial character that is required to be recorded in the books of accounts. Communicating: It deals with communicating the analyzed and interpreted data in the form of financial reports/statements to use the users of financial information.1 What is accounting cycle? List the sequential steps involved in Accounting cycle. Identification: This is the first step of accounting cycle. 4. 7. Recording: It deals with recording of identifiable and measurable transactions and events in systematic manner in the books of original entry that are in accordance with the principles of accountancy. Accounting cycle:1.4 Credits Q. 5. Ans. so as to enable the user to make reasoned decision out of the alternative course of action. balance sheet. Interpreting: It deals with explaining the significance of those data in a manner that the end users of the financial statements can make a meaningful judgment about the profitability and financial position of the business. Analyzing: it deals with the establishment of relationship between the various items or group of item taken from income statement or balance sheet or both. statement of changes in financial position and cash flow statement. Classifying: It deals with periodic grouping of transactions of similar nature that appear in the books of original entry into appropriate heads by posting or transfer of entries. The accountants should interpret the stamen in a manner useful to the users. Summarizing: It deals with summarizing or condensing transactions in a manner useful to others.

What is the matching principle? Why should a business concern follow this principle? Ans. income statement & funds flow statement are mandatory Any change in foreign exchange fluctuations cannot be capitalized but the difference can be shown or debited to income statement. 2 A.Q. Bring out the differences between Indian GAAP and US GAAP norms. For listing the securities in other country’s stock exchange US GAAP is mandatory . Financial accounting. Management accounting and income tax accounting are prepared separately The basic tenets is globalization of business Any long term loan repayable is the current financial year is shown separately In lease contract. B. lessee is more beneficiary because he can claim depreciation allowance It is more transparent and accepted worldwide. Differences between Indian GAAP and US GAAP:US GAAP It is established under FASB and AICPA Balance sheet. More disclosure is required INDIAN GAAP It is established under ICAI Balance sheet and income statement are alone mandatory Any difference in foreign exchange can be capitalized Only financial accounting and income tax accounting are prepared The basic tenet is localization Long term loans maturing in the current financial year need not be disclosed separately In lease contract. lessee is eligible for depreciation allowance and not the lessee It is comparatively less transparent.

Q. 25000 costing Rs. Here costs are reported as expenses in the accounting period in which the revenue associated with those costs is reported. 20000 d) Sold goods for cash Rs. This is matching cost and revenue principle. 50000 b) Paid rent in advance Rs. A business concern should follow this principle to know his actual earnings and growth for the year. 1000 c) Purchase goods for cash Rs. X Transaction A B C D E F End Equation Cash 50000 -1000 18000 25000 -5000 20000 31000 Goods Asstes Advance Rent 1000 Salary Moped Liabilities + Owner's Equity Outstanding X's Salary Creditors Capital 50000 38000 -22000 5000 20000 20000 3000 20000 3000 -3000 16000 1000 Total=73000 5000 3000 20000 Total=73000 50000 . 3000 f) Bought moped for personal use Rs. 20000 Ans. 5000 and salary outstanding is Rs. Accounting equation for the transactions of Mr. 18000 and Credit Rs.3 Prove that the accounting equation is satisfied in all the following transactions of Mr. whether the expenditure is paid during that period or not. which is important to find out the profit earned for that period.Principle of matching Cost and Revenue Revenue earned during a period is compared with the expenditure incurred to earn that income. 22000 e) Paid salary Rs. X a) Commence business with cash Rs.

4 Following are the extracts from the Trial Balance of a firm as on 31st March 2007.Q. 1000 3) Maintain a provision for bad debts @ 10% on debtors 4) Maintain a provision for discount @ 2% on debtors Required: Pass the necessary journal entries and show the relevant accounts including final accounts. 4000 Cr. 4000 2) Additional Discount allowed to Debtors Rs. Ans. Dr Sundry Debtors Provision for Doubtful Debts Provision for Discount on Debtors Bad Debts Discounts 3000 1000 205000 Cr 10000 1800 Additional Information: 1) Additional Bad Debts required Rs. 4000 . Journal Entries:- Date 31/3/2007 Journal Entries Particulars Bad Debts a/c Dr To Debtors a/c Dr.

On Debtors By Bad Debts By Balance c/d 205000 Amount 1000 4000 200000 205000 Particulars To Debtors To Balance c/d Provision for Bad Debts A/c Amount Particulars 4000 By Balance b/d 20000 By P & L Amount 10000 14000 24000 24000 Particulars To Bad Debts To Balance c/d Provision for Discount A/c Amount Particulars 1000 By Balance b/d 3600 By P & L Amount 1800 2800 4600 Bad Debts A/c Particulars Amount To Provision for Bad Debts 4000 4000 4600 Particulars By Debtors Amount 4000 4000 Particulars To Provision for Discount Discount A/c Amount 1000 Particulars By Debtors Amount 1000 .31/3/2007 Provision for Bad Debts a/c Dr To Bad Debts a/c Discount on Debtors a/c Dr To Debtors a/c Provision for Discount a/c Dr To Discount on Debtors a/c 4000 4000 1000 1000 1000 1000 31/3/2007 31/3/2007 Particulars To Balance b/d Debtors A/c Amount Particulars 205000 By Dis.

Differences between trade discount and cash discount:1. 5 (A) Bring out the differences between trade discount and cash discount. .1000 1000 P & L A/c AmountParticulars To Provision for Bad DebtsAmountParticulars 14000 To Provision for Discount 2800 Particulars Amount Balance Sheet Particulars Debtors 200000 Less: Provision 20000 Less: Provision 3600 Amount 176400 Q. trade practice etc while cash discount is a reduction granted from the invoice price in consideration of immediate payment or payment within a stipulated period. Ans. Trade discount is a reduction granted by a supplier from the list price on goods or services on business consideration such as quantity bought. (B) Explain the term (a) Asset (b) Liability with help of examples.

Liquid Assets are those which can be easily converted into cash and for instance cash in hand. Hence no further entry is required in the books of accounts. bills receivable. current. Land and buildings. 4. They are intended to be converted into cash within a short period of time. Ex. Trade discount is allowed to promote the sales while cash discount is allowed to encourage early or prompt payment. Plant and machinery which is used fairly for long period. debtors. Ex.2. cash at bank etc. Current Liability is that obligation which ahs to be satisfied within a year. Cash discount is shown as an expense in Profit and Loss account. Stock in trade. Trade discount is shown by the way of deduction in the invoice itself. Trade discount may vary with the quantity purchased while cash discount varies with the period. liquid or fictitious. 3. cash at bank. are regarded as assets. Fixed Assets are those which are held for use in the production or supply of goods and services. Ex. Assets may be fixed. salaries payable. term loans. Ex. Liability It is financial obligation of an enterprise arising from past even the settlement of which is expected to result in an outflow of resources embodying economic benefit. Assets An asset is a resources legally owned by the enterprises as a result of past events and from which future economic benefits are expected to flow to the enterprises. Loans payable. marketable investments etc. debtors and stock etc. Current Assets are those which are held or receivable within a year or within the operating cycle of the business. furniture and fixtures. For example payment o be made sundry creditors for the goods supplied by them . plant and machinery. cash in hand and at bank. Fictitious Assets are in the form of such expenses which could not be written off during the period of their incidence For example promotional expenses of a company which could not be treated as expenditure in the year of incidence are shown as fictitious assets.

1800 2) Depreciate fixtures and fittings by Rs.on credit. Adjustments: 1) Stock on hand on 31st March 2008 was valued at Rs. After redrafting the Trial Balance. You. prepare trading and P&L account. Q. 25 3) Rs. 6 A fresh MBA student joined as trainee was asked to prepare Trail Balance. as a senior accountant find out the errors and rectify them. 40 Particulars Capital Cash in Hand Purchases Sales Cash at Bank Fixtures and Fittings Freehold Premises Debit Credit 7670 30 8990 11060 885 225 1500 . He was unable to submit a correct Trial Balance. bills payable accepted by the businessman. overdraft raised by the businessman in a bank etc. 35 was due and unpaid in respect of salaries 4) Rates and insurance has been paid in advance to the extent of Rs.

Lighting and Heating Bills Receivable Returns Inward Salaries Creditors Debtors Stock at 1st April 2007 Printing Bills Payable Rates. Taxes and Insurance Discount Received Discount Allowed 65 825 30 1075 1890 5700 3000 225 1875 190 445 200 22940 22940 Trading A/c Particulars To Opening Stock To Purchase To Lighting & Heating To Gross Profit Amount 3000 8990 65 775 Particulars By Sales Less: S/R By Closing Stock 11060 30 11030 1800 Amount 12830 12830 Profit & Loss A/c .

Tax & Ins 190 Less: Advance paid 40 To Discount Allowed To Depreciation Amount 1110 225 150 200 25 1710 Particulars By Gross Profit By Discount Received By Loss Amount 775 445 490 1710 Balance Sheet as on 31st March. 2008 Particulars Amount Particulars Capital 7670 Cash in hand Creditors 1890 Stock in hand Bills Payable 1875 Cash at Bank Outstanding Salary 35 Fixture & Fitting 225 Less: Depreciation 25 Freehold Premises Debtors Advance Rate & Ins Loss Bills Receivable 11470 Amount 30 1800 885 200 1500 5700 40 490 825 11470 .Particulars To Salaries 1075 Add: O/S 35 To Fixtures & Fittings T0 Rate.