BBMKU VIDYA GUESS SEM - VI 20-23 Ques :- Describe the nature and scope of Management Accounting. Ans :- Nature of Management Accounting are as Course of Study Under Choice Based Credit System (CBCS) follows _ (i) Selective Nature :- Management accounting is selective in nature. It selects only those plans or alternatives which seems to be more attractive and profitable. Similarly only those MANAGEMENT ; facts and figures are presented before the management which are ACCOUNTING ny, we ful for managerial decisions. r aa es :- In management accounting, SIXTH SEMESTERS the accounting jnformation is used..in”Such_a-wWay-so that ‘SNe organisational objectives tind targets mndy be achieved and efficiency of business fiiay be improved.” ew (iii) Integrated System :~ Management accounting is an integrated system in which techniques related to various subjects are used in the process of data collection, analysis and decision. making, These subjects include cost accounting, financial accounting, ics, economics, business laws, industrial psychology; etc. (iv) Cause and Effect Analysis :- Management accounting lays emphasis on the analysis of cause’ and ‘effect’ of different variables. For example, financial accounting is limited to the preparation of profit and loss account and finding out the result nthe form of profit or loss but does not account for its causes. But management accounting examines causes of’such results,.If there 1 loss, the reasons for the loss aré proved. If there is.a profit, the factors directly influencing the profitability are studied (v) Both as a Science and an Art :- In management accounting data are collected systematically and they are analysed h the help of various formulae and techniques and on this basis it ascience. On the other hand, subjective judgement of management nd various needs of the organisation are also taken into account le taking decisions and on this basis it is an art. On the whole, management accounting is both, a science as well as an art. (vi) More concerned with Future :- Management accounting is more concerned with future’. No doubt, analysis and interpretation are made on the basis of historical data, but the important objective of management accounting is to determine Unit I :- Management Accounting tives nature, function, difference betweeh ManagementAccoun I Management, Role of Management Accoun- ing and Financi tion of selling price, Exploring new market, Make or Buy, Prod~ uct- Mix, sales- Mix. operate or shut down, etc. Absorption cost ing, Marginal Costing and Standard Costing. Unit IV :- Analysis and interpretation of Financial State- ments. Ratio Analysis, Fund Flow Analysis, Cash Flow Analysis ive and common size Statements. compa BBMKU Mgt.A/e Eng BBMKU Mgt.A/c Engpolicies for future, to make forecasting and to help management in its task of planning and budgeting. ea (vii) Supplies Information and not decision : important nature of manage-ment accounting Is that its provides, requisite information and not decisions. However, decisions are taken by management with the help of these informa-tions. “The role of management accounting can be compared to a map. Eve wise traveller carries a map with him, but he does not ask the m: where he should go.” ‘ (viii) Accounting Service :- Management accounting function of accounting service towards management. Under this service necessary informations aré provided tovarious levels of management, These informations may be financial as well as non-financial. Scope of Management Accounting ~ The following are some of the areas of specialisation included within the ambit ofmariagement accounting ;- © : (i) Tax Accounting :- In present times, tax accounting has also become a part of management accounting.,It involves preparation of various returns relating to income, production and sales, calculation of tax liability anid timely payment of taxes. (ii) Office Services := In some cases office Services may also be under the. control of management accountant. This responsibility covers data processing and fepotting aboutthe utility of different office machines. “ caramel (iii) Internal Audit :- Interval atidit is reqilited to assess the performance of various depariments’and to make the system of internal control effective. Moreover, internal audit helps management in fixing responsibility of different individuals. (iv) Specific Techniques of Accounting :- These techniques include Decision Accounting, Control Accounting, Responsibility Accounting, Development Accounting, Revaluation Accounting, etc. (v) Financial Accounting :- Financial accounting means general accounting which pertains to recording of all business transactions in the books of prime entry, posting them into ledger accounts, balancing them and preparing a trial balance, from and ‘out of which a Profit and Loss Account showing financial results BBMKU VIDYA GUESS SEM - VI 20-23 of the business and a balance sheet showing assets and liabilities of the business concern are prepared. Various statements prepared and data collection on the basis of this accounting provide an useful and meaningful base to management accounting. | (vi) Interpretation of Data :- Interpretation is as important as compiling of financial statements. Therefore, the management accountant interprets various financial statements and presents them in simple language to the management. 2 (vii) Cost Accounting :- Cost accounting is an important differential costing, etc."are very helpful togneshapagentent for planning various business activities. = 8" (viii) Financial Management :- It is concemed with the planning and controlling of finaricial resourées of the 'firm so that the funds at disposal may be utilised effectively. Though, financial management has developéd as a Separate subject, management accounting includes and extends to'the functioning:of financial management also, ¢ 5) © A > we “© (ix) Inventory Control :-» Inventory control is an important technique for cost control and efficiency of the‘ehterprise. It involves. determination of different levels*of stocks"such. as economic order quantity (E.O.Q.), re-order point, mini-mum level. maximum level, etc, and for all these levels management accountant provides useful guidelines to the management. 4. Information of Changes in Financial Position :- nancial statements also provide information about changes in cial resources and obligations during a specified period. 5. Help in Financial Forecasting :- One of the objective: is to provide all such necessary facts and figures which may assist making reliable finane i 6. Information to meet user’s needs :- It is also an objective of financial st hould disclose, to some possible extent, variou BBMKU Met.A/e ng.20] BBMKU VIDYA GUESS SEM - VI_20-23 BBMKU VIDYA GUESS SEM - VI 20-23 21] nancial institutions, stoc] of its users such as investors, creditors, exchanges, researchers, etc. 3 limitations of financial statements :~ Generally, the following limitations should be taken into account while analysing the financial statements : (1) Lack of Preciseness :- The information furnished by the financial state-ments are not precise. Since the construction of these statements is based on practical methods and rules used and propounded on the basis of experiences of several years'of accountancy profession, therefore, the information emanating from them can not be precisely measured. (2) Based only on Financial Factors :- Financial Statements don’t disclose the correct financial position of the business concern. The financial position of a business concern is affected by several factors (economic, social and financial); but only financial factors are being recorded in financial statements: social and economic factors are not incorporated in these statements. (3) Static Picture :- Balance Sheet is considered to be a static document: and it reflects the position of the concern at a momentof time. The real position of the concern may be changing day-to-day. As a result of this limitation, there is possibility of window-dressing in the Balance Sheet. (4) Values shown are not real values :- Balance Sheet is not a valuation statements. In other words, the values shown in it are not real values of assets or values for which these can be sold. It is thus clear that the exact position of the business cannot be gauged form the Balance Sheet. (5) Estimated Profit :- Profit disclosed by the Profit and Loss Account is also nota real profit. The Profit and Loss Account for a particular year e ich is never accurate and correct. mathematically or from economic point of view. because a number of items shown in the Profit and Loss Account are just estimated. financial statements are dumb; they do not speak themselves. It is also worthwhile to note that human judgment is always invelved in the interpretation of financial statements. It is the user who provides tongue to these data and make them to speak. i (6) Problem of Interpretation :- Data contained in the | Explain meaning, definition and ity Accounting. Also discuss Ques»: characteristics of Respons' its advantages and limitations. ‘Ans :- Responsibility accounting is a specific technique of managerial control wherein respon-sibilities of various individuals or groups are identified in terms of work, revenue or cost so that the concerned person or group may be held responsible for cost variances, if any. ‘Accordin to Robert N Anthony, “Responsibility Accounting is that type of Management Accounting that collects and reports both planned and actual accounting information in terms of responsibility centres. ‘According to Anderson “This concept (i-., responsibility accounting) encompasses an accounting system in which the information and data are gathered and reported in amanner closely related to the responsibility structure of the enterprise.” ‘According to Kohler, “It is (Responsibility Accounting) classification, management, maintenance, review and appraisal of accounts serving the purpose of providing. information on the quality, quantity and standards of performance attained by persons to whom authority has been assigned. The main features or characteristics of responsibility ac- counting are as follows = (J) Determination of Functional Areas :- The initial point of responsibility accounting is the preparation of organisation chart which explains the functional areas of each executive, so that they may be held responsible for their work performance. . (2) Classification of Costs on the basis of Cost Centres in responsibility accounting all costs are classified on the basis of cost centres. Moreover, only those costs are considered at each responsibility centre over which the executive of that centre has control. (3) Separate Collection of Non-controllable Costs There is no cost like non-controllable cost in the system of responsibility accounting because each cost is controllable by one or other executive. However, if there are some non-contro| jable costs at a particular cost centre these costs are kept separately. BBMKU Mgt.A/ec Eng(4) Proper Classification of Controllable Costs :- All controllable costs of each centre are classified in such a way in various categories, so that it may provide suitable base for analysis from the view of responsibility. (5) Reporting of Work Performance responsibility accounting system, each execu-tive of responsibility centre makes a comparison of actual performance or results with predeter-mined targets or goals. Thereafter, he presents a repos before the top management indicating his success or failure, ‘Advantages of Responsibility Accounting ;-< The main advantages of responsibility accounting ere as follows: af ta, a et Ee ; (1) Assignment of Responsibility :~ Each and every individual in the organisation is‘assigned a definite responsibility and on this basis they are accountable for their performance. Moreover, every individual knows what is expected tohim. Thus, the responsibility of each person for his satisfactory or unsatisfactory performance can easily be identified and nobody can’ shift his responsibility if something goes wrong, * Ws (2) Improvement in Performance :- The assigning of responsibility to-specific persons acts as a motivational catalyst also. Every person knows that if there will be some deficiencies in his performance, they will be reported to top. managementand he will have to explain his perfor-mances - . (3) Helpful in Cost Planning. responsibility accounting complete information is collected in respect of costs and revenues. These informations help in planning for future costs and revenues; fixing of standards and preparing of budgets : (4) Delegation and Control :- Responsibility accounting enables management to delegate authority while retaining overall control. The work goes on smoothly because responsibility is also ixed with delegation of authority. If there is any deficiency, that is regularly reported to the top management. : (5) Helpful in Decision-Making :- This system is very helpfull to management in the process of decision-making because it enables the regular collection of data related to revenues, costs, profits and variances. ——# Under ™ BBMKU VIDYA GUESS SEM - VI 20-23 (6) Cost Control:- Responsibility accounting lays special emphasis on cost control, so this system motivates the management for effective cost control. (7) Basis of Appraisal of Managers :- Responsibility accounting provides base for the appraisal of success or failures of managers which makes it easier to take decisions related to their transfer, promotion, training, etc. (8) Awareness among Supervisory Staff:- It increases interests and awareness among the supervisory staff as theysate called upon to explain about the deviations for which,they’ are ~ Bes. ‘Accounting’ “[tistrue that responsibility accounting is an important tool for cost planning and control but it has following limitations also :- (1) Problem of Classification of Costs :- It is necessary to divide costs as controllable and non-controllable from the view ofeffectiveness of responsibility accounting. However; many times it becomes a question of debate that which costs\should be controllable and which are tion-controllable? ee (2) Delay in Reporting :- If there is delay in preparation of responsibility reporting and its communication, the system may not prove to be effective. , a (3) Inter-departmental Confliets :~ Under responsibility accounting; manager of each depart-ment gives specific attention towards the performance of his department which may become a cause of conflict and competition among various individuals and departments. GRA In the end, it should be noted that the effectiveness of responsibility accounting rests upon certain pre-requisites, such as well-defined organisational structure, proper delegation of work and responsibility, proper allocation of costs, proper system of reporting, etc. Ques :- Define Budget. Also describe its objectives, importance and limitations. : ‘Ans :-A budget is the monetary or quantitative presentation of business plans and policies to be pursued in the future period of time. Some of its definitions are as follows : BBMKU Mgt.A/c EngBBMKU VIDYA GUESS SEM - VI_20-23 According to I.C.M.A London, “A Budget is a financial statement prepared prior to a predetermined period of time of the policy to be persed during that period for the purpose of attaining agiven objective.” According to Brown and Howard, “A Budget is a pre- determined statement of management policy during a given period which provides a standard for comparison with the results actually hieved. Objectives Of Budgeting = The main objective of budgeting is to assist the management its main functions of planning, co-ordination and control. In fact budget is an important instrument of communication through, which agement communicates its policies and targets to the persons doing work. The objectives of budgeting may be classified into three group: no og) 4 = 1. Policy relating Objectives (1) To express the policies and objectives of the firm i e terms. (2) To prepare quantitat anisational units of the fi (4) To develop a system of re; nd objectives of the firm. Il. Administrative Objectives (1) To determine responsib (3) To develop a system o d economy, BBMKU VIDYA GUESS SEM - VI 20-23 ‘A budget is a plan of the policy to be pursued during the defined period of time to attain a given objective. In other words, planning and budgeting are closely related with each other and in this context following advantages may be mentioned : (1) Action on the basis of Well Decided Plan :- Under budgeting all actions are guided by well thought out plan because a budget is prepared after a careful study and research. (2) Mechanism for Policy Implementation :- Budgeting provides a mechanism through which the policies of management ‘an be implemented effectively. e (3) Work on the basis of Best Option Various available options are considered, while preparing budgets and efforts are made to select the best option. It improves the effectiveness of planning. (4) Communication :- Budget is an important media of communication which establishes link between the top management nd the operatives. Thus, the actual operators can understand the policy of top management more precisely and clearly. (5) Objectivity: Budgeting expresses all business activities in numerical terms and it develops the quality of objectivity in planning, Il, Budgeting and Co-ordination “ Co-ordination is the essence of management and budget. ¢ makes the work of co-ordination simple and sure. Budgeting © useful in co-ordination in following manner :- . (1) Co-ordination in Budget Preparation + While preparing budgets, individual goal, problem and potentiality of all departments are given due considerations and each departmental executive iven an opportunity to present his case. All these aspects and views are co-or-dinated the budget. (2) Co-ordi n in Working :- Budgeting promotes co-ordination among policies. plans and actual working. ; (3) Communication and Co-ordination :- Budget is @ media of communication and on the basi of it each member of management is having perfect and clear-cut knowledge as “what is the plan’ and liow, when and by whom it ean be implemented Thus, budgetary control helps in maintaining continuous co- ord Smong administration, management and organisation BBMKU Mgt.A/e EngBBMKU VIDYA GUESS SEM - VI_ 20-23 Bel Budgeting helps _ g budgets of * III. Budgeting and Control (1) Control on Cost of Production controlling cost of production by determi ferent budget centres. . (2) Control on Liquidity :- The liquidity position of the firm can easily be controlled according to need by the technique of cash budgeting. . (3) Control on Capital Expenditure :- Capitat oo : helps in making control on capital expenditure and having bests of available resources of ca (4) Effective Utilisation of Resources s+ It ensures effective utilisation of men-materials, machines.and money because production is planned according to the availability of these resources. (5) Standards for Measuring Performance :- Budget provides standards of expected perfor-mance, against which actual performance of departments and employees can be compared. (6) Feeling of Cost Consciousness :- Budgetary control helps in developing a feeling of costconsciousness and in restricting expenditure to the minimum. ~~ Limitations of Budgeting : ‘Though budgeting is an important de control, it suffers from the following limitations = (1) Budgets are based on Plan Estiriates :- Budgets are based on estimates made for planning: Naturally the success or failure of budget depends to a large extent upon the accuracy of these estimates. Though, it is not possible to*have cent-percent accuracy in these estimates but if they are very far from reality, the entire system of budgeting will be a futile exercise. This aspect of budgeting should always be kept in mind while interpreting the results thereof. (2) Budgeting is not a Substitute of Management :- Budget is not a substitute of management, it is only a tool of management for achieving es of the concern. Hence, the success of budgeting depends on the ability and efficiency of hose persons who are responsible for budgetary system (3) Operation of the Budget Plan is not Automatic :- Mere preparation of budget cannot ensure the advantages of e of management “_ BBMKU VIDYA GUESS SEM - VI. 20-23 27] budgeting. The execution of budget is as important as its preparation. However, its operation is not automatic. In this context it is required that each executive must feel his responsibility and should make necessary efforts to attain the budgeted goals. (4) Time Effect :- It takes some time in preparing budgets and during this period many such changes may occur due to which it becomes difficult to maintain the accuracy of budget. (5) Prohibitive Cost :- The installation of budget ing system involves too much time and costs. Normally, small concetas cannot afford it. Therefore, there should be proper balances E expected profits from, budgetary system and Cost of @1 fon, (6) Effects of Changing Con ‘In rapidly changing conditions ifmay not be possible to achieve the budgeted targets. ‘Budgets may have to be revised from time to time but frequent * revision of targets reduces the importance of budget ahd involves additional expenditure too. Budgeting may serve as constraints on managerial initiative a every executive tries to achieve the budgeted targets only. There may be some efficient persons wha can exceed the targets but: they, will also feel contended by.reaching the targets. _, Ques :2 Define Budgetary control. Also-déSeribe its es, importance and limitations. Ans :- Budgetary control is an important techniqi of cntol on business activities by:manage-ment, in which operated on the basis of pre-prepared budget.and thereafter actual results are evaluated in the tight of budget estimates. According to W.W Bigg, “The term ‘Budgetary Control” 's applied to a system ‘of management and accounting control by which all operations and output are forecasted as far as ahead possible and the actual results, when known, are compared with the budget estimates. “According to Brown and Howard, “Budgetary control is system of controlling costs which includes the preparation of budgets, co-ordinating the departments and establishing respons ies, comparing actual per ance with the budgeted and acting upon results to achieve maximum profitability. RRBMKI!I Mot. Ve HBBMKU VIDYA GUESS SEM - VI 20-23 [29 [28|___BBMRU VIDYA GUESS SEM - VI 20-23 Objectives of Budgetary Control = ; Budgetary control is essential for policy planning ang control, It also acts as an instrument of co-ordination. The main objectives of budgetary control are as follows = 1. Toassist in policy formulation on the basis of proper and reliable data. * 2. To ensure planning for future by setting up various budgets. e a 3. To determine short-term and long-term financial-and physical targets. - 4. To operaté various cost centres and departments with efficiency and economy. 5. To classify expenses according to their nature such as direct and indirect expenses: fixed, variable and semi-variable expenses. ete. ‘ 6. To help administration as under this system, executives perform their functions accord-ing to predetermined budgets. . 7. To anticipate capital requirements and to make necessary arrangement for it : 8. To make cost accounting more reliable and systematit 9. To eliminate wastes and increase in profitability. 10. To correct the variations from the established standards. 11. To fix the responsibility of various individuals in the organisation. Characteristics of Budgetary Control (1) Planning :- In the system of budgetary control. first of a plan is prepared in respect of various business activities for a definite period. This plan is prepared on the basis of available resources and targets of the business concern (2) Co-ordination :- Co-ordination among various departments of a business is ai rtant pre-requisite for budgetary. ious departments prepare budgets in respect departments and a master budget is prepared on the basis of these departmental budgets. (3) Proper Recording - ivity is recorded properly and on In budgetary control every. it basis necessary data ar (4) Assignment of Responsibility :- After the approval of budgets, they are divided for various departments and sub- departments and responsibility of relevant authorities are assigned on that basis. (5) Revietv :+ Budgeted data and actual data are compared from time to time. If the position is favourable, arrangements are made to maintain and motivate such situation. (6) Follow-up :- If actual data are adverse, necessary corrective actions are decided and follow-up measures-are undertaken for their effective implementation Importance of Budgetary Control :- (i) A Tool for Improvement in Plamning :- Asa result of continuous use of Budgetary Control System, management's ability and power to foresee or think ahead is greatly enhanced. This enables them to forecast future operational problems and difficulties and to arrange for suitable and corrective actions quite n advance. This certainly brings an improvement in planning process and it becomes more clear, precise, attainable and effective. Management also finds opportunity to modify and to revis policy and such revised policy may be used as a base for next plan and budget and so on. (ii) As an aid in Co-ordination :- As pointed out earlier, budgets of various departments-are prepared in such a way as to lead co-ordinated efforts to achieve common goal. Since departmen-tal budgets are related to-each other, balanced operations in the business are encouraged and co-operative feelings are promoted and developed. All segments of the business participate actively in the budget preparations and therefore mutual co- operation, team-spirit and mutual exchange of thoughts, ete. are born in them and all these contribute to effective co-ordination Thus, Budgetary Control System provides for a co-ordinated effort and ensures harmony between the overall objectives and objectives of its various parts (departments). Itacts as a coordinating machinery between different departmental heads. (iii) A Vehicle of Comprehensive Control :- The foremost benefit of Budgetary Control System lies in the fact that can have comprehensive control over vatious functions of the BBMKU Mgt.A/e Eng[30] BBMKU VIDYA GUESS SEM - VI 20-23 business concern. This is given effect in two ways. First, it limits the chances of wastages and thus controls production function It also keeps under control the expenses and cost by limiting allowable expenses for various departmental heads. It also facilitates centralised control, even if decentralised function is essential, Secondly, control is also effected through the comparison of actual performance with budgeted targets and locating the variances. Thus, tinfavourable variances or trends may be arrested at the earlie; opportunity. : = es ‘An Instrument of Motivation :- Budgetary.Control System provides a scientific basis for making appraisal of personal efficiency and inefficiency and in this‘way itacts as incentives to all personnel. Everybody in the concern becomes conscious and responsible to his duty and strives to contribute his maximum to the common goal and in turn gets personal awards/appraisal. (v) A Media of Communication :- Budgets translate the goals and targets of the business concern in terms of quantities - both physical and monetary, Thus, the overall goal and departmen- tal targets are easily communicated to'all persons concerned. Limitations of Budgetary Control :- (1) Changing Situations :- Business situations do. not emain static. They go on changing on account of trade cycle, ‘nflation, economic recession and government policies. In this context-it becomes difficult to prepare a perfect budget. (2) Effect ofUnclarified Facts :- Various unelarified.and undisclosed facts are not considered in the preparation of budgets, while these facts have their significant effects on actual opera-tions. (3) Dictatorial Attitude :- Sometimes budgetary contro may develop dictatorial attitude and authorities may be extremely strict in order to follow-up the budgetary limits. (4) Limited Freedom for Accountants :- Budgetary control restricts the freedom of accountants. They can do work w { targets determined by budgets and do not remain free to do work according to situations. (5) Formal Arrangement :- Sometimes budgets become merely a paper formality and efforts‘are not made for their proper BBMKU VIDYA GUESS SEM - VI_ 20-23 31 (6) Efforts to Hide Variations :- If there are adverse variances, departmental officers may hide the correct and real facts in order to cover their weaknesses. ___ Ques :- What is Marginal Costing ? Discuss some of the important implications of marginal costing for managerial decisions. Also distinguish between marginal costing and Absorption Costing. Ans :- Marginal costing is a method of costing that is concerned with changes in costs resulting from changes in the volume or range of output and sales An increase or decrease in total costs that is caused by an crease or decrease in the volume of production and sales is known as marginal cost, differential cost, or incremental cost. Thus, marginal costs relate to future costs‘and can be determined by subtracting the total at one level of output or sale from that at another level, It Should be noted that marginal costs refer to the increase or decrease in costs on account of the block of units produced or remain the same. Marginal costing is a very useful technique in solving various managerial problems and contributing in various areas of decisions. In this chapter, the uses of marginal costing in following important areas have been discussed :- 7 ~ (1) Make or Buy Decision, (Il) Change in Product Mix, (Ill) Pricing Decisions, (IV) Exploring a New Market. (V) Shut-down Decisions. I, MAKE OR BUY DECISION ion” is a problem - “Make or Buy respect of which management has to to decide whether a certain product or a component should be made in the factory itself or bought from outside suppliers The nature of decision regarding make or buy may be of lowing types := 7 (a) Stopping the production of the part and bu market: he BBMKU Met. A/c ne iBRMKU VIDYA GUESS SEM - VI 20-23 (b) Stopping the purchase of a component and to produce in own factory. q II. Change in Product Mix (1) Introducing a New Line or Department :- problem of introducing a new product or line involves decision i wo respects—(i) Whether a new product or line should be added to the existing production or not, and (ii) If it should be introduced, then what should be the model or design or shape of the new produ In other words, if new product can be produced in more than model, which model should be introduced? "A decision like above should not onlyibe ‘based on contribution but other relevant factors shoulld-also’be considered. The marginal cost of new productin all its possible models should "> be considered, It is also possible thata portion of the cost of facilities relating to the original production may’be used for the purpose of producing new product. Some additional investments in the form of additional plant and machinery may be desired. This will likely increase the fixed overheads, which should also be considered alongwith marginal costs. é (2) Selecting Optimum Product-Mix :- When a company is engaged in a number of lines or products, there may arise a problem of selecting most optimum product-mix which would maximise the earnings. This problem becomes complicated, when one of the factors happens to be limiting or key factors. Under such a situation, profitability will be improved only by economising the searce resources (key factors). As pointed out earlier, contribution per unit of key factor is the real index of profitability under such a case. Thus, while deciding a profitable mix of products, Contribution per unit of Key Factor should be considered. The product giving highest contribution per unit of key factor should be considered as most desirable product and in this way all products may be assigned ranks in order of priority, Selection of products in this way will offer an optimum product-mix at which the profit will be maximum. Thus, guiding principles for taking a decision in respect of product-mix are :- (i) Calculate contribution per unit of key factor, (iii) Available key factor should be utilised in the ee eel ies oduct which has been assigned first rank; Ill PRICING DECISIONS | "#74 00. Itis generally contended that price, i be such as to cover total cost (Marginal C ts * Bad Congas well as desired profit, In such a inal costo wil oa de E 1a case, marginal costing y any significant role. Again, ina competitive market vases determined by the individual concer butis governed by the Pharket aes aA costing (Particularly Marginal. Costing at helpful rice determination oinly in short-term and-m y conditions, Here we shall confiné our discussion oalvicthe chery ie i (1) Normal Prieé; Sead (2) Minimum Price, @ Devos Price, pecial Price includ (5) _Price-changes. abe poping, ‘i IV, EXPLORING A NEW. MARKET \ _ Schemes of sales promotion as di aim at increasing the sales v F not cussed earlier would lume within the usual sak itori a . sales territories, Sales votume san also be increased by taping new territories, This an pe done either by extending its own marketing organisation (ouch as. pening a Branch/DepovShop) o through local distributors. be ee Significant to note that some initial expenses will have to Es red in organising sales-channels in the new territories. A oe compet ion may also be there due to the attachment of SE of that area to some other brand, removal of which wi 7 Wvel gher sel ingand distribution co Again, Marginal Costing > helpful in providing adequate and r inga dee neal in row a elevant data for taking a ae V. Shutdown Decisions 3 Shutdown decisions may be Py. t¥0 types = (a) (a) Closure of entire business, (b) Drop} Product or Department. ing aUVIDY GUESS SPE (a Ravketat by cavictiag fied ook Soen comentenes AN VS. Divdtiat sf atownnor conning “named” SRAM ANT A OOS SRR RS ese RUM are BANAT OMA AUR Pa a gee! OER RO Lae RS ROPE SY ONAN OE OEY BOON AOR MANDARIN UC SONS RRNA UR ERRNO OF eat The, Ree as NRTA ORE QO HAY BARRE Seog at TR ee N RE SNOE ARERR YRC PRE gH! DUNNE, WS) Vides ae ON pment olf Nine Over > ie MANNA STARR ARENT ONT BSA SOUT, RRO GS AR WIRE RRR HS Ne BORN OA SERA COWHR, 18) Verennttinn @F RRS Dh deoprror org GREE, SAN SANA NRC RORARRS. SRL ERE REA NO WIRY AAQUAR SORT, SGP SERRATE Malt SNARE RAHN LT RL ORR R SSAC DREN SARTO SONG RRR SRNR NESE RNIN OSIM BREE ON Qe ERMAN LX AN RAHA - NRE ORR RRR IK So Ra iN Na ‘ \ A ANN RNs SYPS ARAS ORS NNR \ IY DARKANE QO NT AD es - K \ i DIRRRRRR SRO NAAR, NAVAN NAAT SY NN . \ ew LO RN ANE ANT A hy . ANAT RAIA VRAIN MRR RN EOS RRR Nt RAerns SSI NOT, SANSAY NRCS Soon tla ARIE BH, ENA Cumann at SSAY Ag SRON A SAR aa A eat a Vian A Rd WN any Nate NAN ARR Veet OAD AY SNS AAV ARRAN Rah NRHA. OL HORNY WER A AANA AW AWE NR RAN HE ge, VnBBMKU VIDYA GUESS SEM - VI 20-23 _] (©) Basis of Managerial Decisions :- Under absorption costing managerial decisions are based on profit, £¢., surp! sf sales revenue over total cost, while in marginal costing managerial_— decisions are directed by contribution or profit volume ratio. | (7) Application :- Absorption costing is well suited ie determining long-term cost and long-term pricing bo icy, ng marginal costing is used for solving various managerial decisions, planning and control. : Ques :- Define Standard costin: oie advantages and limitations. otter re Standard costing is a process.and. te¢hnique of accounting in which actual.costs incurred aresompared with pre~ determined costs. On the basis of comparison efficiency of operation is determined and necessary corrective measures are, taken if there are some variances. Some important definitions of stand: rd costing are as follows ‘According to HJ. Wheldon. Bel 1g. Discuss its ob; ‘Standard costing is a method f i is r -d to.show : of ascertaining the costs whereby statistics are prepared t (a) the standard costs; (b) the actual costs; (c) the difference costs; which is'termed as variance”. 5% ae ne dnere Bio ‘and Howard, “Standard costingsis a technique of accounting which compares the standard cost of each product or service with the actual costs, to determine the effici of the operations so that any: remedial action may. immediately.” = § Objectives of Standard Costing : 1. Increase in Efficiency.and Productivity :- The first objective of standard costing is to improve the quality and minimise: the cost so as to face competition effectively. In fact standard costing is a tool of management control with the help of which efficiency and productivity can be improved and these objectives can be achieved. 2. Cost Control :- The purpose of determining standard cost and then to compare it with actual cost is to make effective control on cost. 3. Determination of Responsibility :- One important objective of standard costing is to identify the persons or centres BBMKU VIDYA GUESS SEM- VI 2023 [37] responsible for variances, so that they may be controlled properly. ___4. Supplement to Budgetary Control :. Stardand costing is also adopted to make budgetary control a success. In fact management control becomes more effective if budgetary control and standard costing are introduced simultaneously. : 5. Information to the Management :- To provide important inform: 'on to management is also an objective of standard costing. This costing provides all such information due to which the production work could not be completed as per pre-determined plan and standards so that necessary corrective action maybe taken at appropriate time. - ; 6, Progressiveness of Management: i-'One objective of standard -costing is to develop’the feeling of looking forward among managerial personnel and to make management dynamic and progressive continuously. a Advantages of Standard Costing Standard costing is useful not only for cost control but it is also helpfitl in production planning and policy formulation. The main advantages of standard costing may be studied under following heads :- ” 1. Advantages from the view of Cost Accounting 1. Elimination of the Weaknesses of Historical Costing :- In historical costing actual costs are recorded after they have been incurred and thus they are not of much use in price determination, cost control, etc. Standard costing eliminates such tations, because under this system cost data are compiled before production is commenced, are readily available and are in themselves a valuable guide to management. 2. Simple and Economie :- Standard costing involves a great deal of preliminary work for setting standards, but once the standards are fixed, the clerical work of costing is considerably reduced. Thus, it provides a simple and economical means of costing. 3. Cost Control :- Standard costing helps in cost control Iso, Once the standards are fixed, they are followed and analysed constantly. Whenever, a variance occurs, the reasons are studied and immediate corrective measures are undertaken. I. Motivational Adyantages b Tl Mot A/e En5 SEM - VI 20-23 BBMKU VIDYA. GUES! 1. Cost Consciousness :- Standard costing develops an environment of cost consciousness among, employees, executives and top management, because actual cost 1s compared, with standard cost. If there are variances, the person or SrOuP responsible for that is identified. 2. Measurement of a Standards set in standard costing pro’ actual costs are compared and effic labour and machine can easily be'asck deficiencies, necessary corrective mea: : rds :- The process ‘ cated task as it requires technical required to be undertaken for this pune sok rogue. btee se, time and money. Moreover, if wrong standards redolent te Purpose of the system would fail fe ceeernincts the sandard inet, Suitable for Small Firms :- ertained. If there are cert standard costing may not be suitable for small con sures may be taken. 0 tem 3 Alll incentive Wage 4. Difficulty in Fixing Responsibility - yh - jhe nd Increase in Efficiency ide yardsticks against which jency in the use of materi The system of cerns Keeping in 3. Basts of Incentive Wage System plans are based on certain’ standards. Hence, ineentive wage. payment meats ty for variances is fixed in the protéss of systems can easily be operated on.the basis of standard costing. ut it is not anygasy task~Under mafiy ciroumstan ating IIL. Managerial Effectiveness Advantages | ae c de 6 various reasonswhen it becomes: anes 1. Facility in Production Planning :- While adopting | ae ieresponsibility. For example, in the case 6f .nfavo rable standard costing, standards are fixed in respect of material, labour, lal our emeicy variance, it.is not necessary that Wo! pone use of machine, ete. These standards help in formulating production inefficient. This situation may also arise due to inferior are raw material or defect inmachines.”. * oegu plan and policies according to capacity and need of the firm. 2. Management by Exception :- The introduction of , 5. Changing Business Conditions :- In standard:costing standards are fixed ‘under specified conditions. In case,these standard costing system helps in the application of the principle stand of Management by Exception’. Variance analysis may pointout | fn ihe change, then either standards loose their suit y or the areas which are below standard and°management ¢an than fave to be modified. Thus, standard costing is not suitable in concentrate more on these areas for bringing further improve A concerns where frequent technological changes take place 3, Effective Delegation of Authority :~ Standard cos! i fluctuate frequently. maak makes the delegation of authority easier and more effective beeaisé —ofrecti . Need of Budgetary Control :~This syst os iia ed cork expected from each person is clearly stated | Concern, only when’budgetary control is also donee “Ques :- What do you understand by variances ? Describe its significance and their different open ae ns :- Variance analysis is an im ral point i I portant central point j thesystem of standardeostng In ast Variance analyse Wise mpletes the process of standard costing and helps in achieving while delegating authority to him, Limitations of Standard Costing : ‘Though standard costing is an important tool of cost control, it has certain practical limitations also. These limitations are as follows :~ 1. Unsuitable for Concerns Dealing in Non- el . é the standardised Products :- Standard costing is not much useful in pleateestves of standard costing i.e., cost control and profit those concerns where non-standardised products are produced of ia standard costi . | produstion is undertaken according to customer's specification. IN| standard fustandard costing variance means diffs Source such a case becomes difficult to set up standard for each job por dey to bape a apr idea . : ‘ A r f mn attemy provide managers with useful information for meastring efficiency ah BBMKU Mgt.A/c Eng * ~40 BBMKU VIDYA GUESS SEM - VI 20-23 and improving performance.” The process of analysis of variance involves following three steps :- 1. Computation of Variances :- First of all, variances are computed on the basis of various formulae. In this context total cost variances are divided into material variances, labour variances ‘and overhead variances and again these variances are segregated into several sub-variances. 2. Determination of the Causes of Variances computation of variances, causes responsible for each vari are determined. In fact variances by themselves are notgtfie unless the causes xesponsible for them-ar® identified. F variance analysis includéS detailed study i and their effects a 3. Disposition of Variances :- In this, ‘entified ag controllable and uncontrollable. Therea prepared for necessary actions to deal conto that management may take necessary corrective measures. Classification of Variances :- Normally, the basis of classification and their classified forms may be as under :- I. On Functional Basis On functional basis, variances may broadly be clas: into two groups, viz, Cost Variances and Sales Variances. 1. Cost Variances : Cost variances tefer to differences between standard level end actual performance in respect of various elements of cost. This is the most important type of variance and includes the calculation of following :- (i) Direct Material Variance (ii) Direct L abour Variance }) Overhead Variance: (a) Variable Overhead Variance, (b) Fixed Overhead Variance. 2. Sales Variances : A sales variance reveals the ference between actual sales and budgeted sales during a budget period. This variance may arise due to change in sales price, sales volume and sales mix. II. On Result Basis On the basis of result, the variances may be of the following two types: . BBMKU VIDYA GUESS SEM - VI_ 20-23 1. Favourable Variance :- If the actual cost is less than the standard cost the difference is known as favourable or credit variance. Generally, a favourable variance is considered ‘as a good indicator of business efficiency. 2. Unfavourable or Adverse Variance :- If the actual cost exceeds the standard cost, the difference is known as an unfavourable or adverse or debit variance. Normally, these Variances indicate the inefficiency and hence, these varian require closer and deeper analysis 11. On Measurement Basis arjances may of the jute Variances = the basis of monetary amountof, known as absolute variance and gi in this form. © Sea Sen 2, Relative Variances :- If variances, are expy percentage of standard cost, they are known: Seley ariances. ~ IV, On Controllability: Basis = VS he basis of controllability is of much significance fr the view of managerial decisions. On this basis variances may be: controllable enefi or uncontrollable » ene 1. Controllable Variances :- Controllable, variances are those which can be controlled by the managenfent or necessary steps can be taken to control these variancesIt is possible onl When any specified person or department may porisil for the variance. * * , 413,875 a “(Note 2) 6,700 Decrease in. Working seq PurchaSe of Truck___.7,500 Capital 5,325. Paymentof Dividend 5,000 ; oe 19.200 13,875, To Dep. on Furniture 1,200 To Dep. on Truck 1,500 rn To Balance c/d 2,997 13. 13,875 , 13,875 Note 2 Opening balance of Furniture erent Less : Depreciation i Purchase of Furniture (balancing figure) 6,700 Chosit balance of Furniture 17,500 BBMKLU Mot teensProbler : From the following information, prepere a Comparati Solution = ‘Comparative Income Statement Sheet of Pratibha Ltd.: Particulars 37st March, 2008 | 3ist March, Particulars 2008 2009 [Absoluie [Percent Rs. Change | age Equity Share Ca 25,00.000 25,00,0v0 Fixed Assets 30,00,000 36,00,000 Rs Bs Reserves and Surplus 5,00,000 6,00,000 sales 2,00,000 50,000} 25.00 Investment 5,00,000 fess : Cost of Goods Sold |_1,00.0 2s.000_| 25.00 Long-term Loan 15,00,000 © Gross Profi 1,00, 25.000 | 25.00 Current Asset 15,00,000 Less : Operating Expenses 0.000 Current Lial 5,00,000 Net Profit 90,000 Solution = j ‘Comparative Balance Sheet of Pratibha Ltd. (as at 31st March, 2008 & 2009) Particulars 2008 2009 | Absohut Rs RS. RS: ced Assets }30.00,000 | 36,00,000 | 6.00.00. } 20! Investment 5,00,000 - 3 Current Assets 15.00.000 {4,50:000) ah Total Assets} 50,00.000_ 3.50.000_ {2 7 Equity Share Capital F25,00.000 Reserves and Surplus 5.00,000 Long-term Loans 15,00,000 Current Liat 5.00,000 [50.00.00 Problem : Prepare a Comparative ne P Income Statement from Particulars Sales Less : Cost of Goods Sold Lees ; Opet Interpretation _; ‘ (1) Gross Profit: The coffiparison of two years clearly indicates that sales has increased by 25% and cost of goods Sold has also increased by 25% during this period. It has resulted in 25% inerease in gross profit also. (2) Operating Expenses and Net Profit : During 2009 operating expenses have been constant despite 25% increase in sales and gross thas resulted in 27.78% increase in net profit, which is an indication efficiency. a : Prepare a Funds Flow Statement from the follow ing data of ABC Ltd: March3 Cash Accounts Receivable Allowances for Bad debts Merchandis Furniture & Fixtures Truck Accumulated Depreciation on Truck Accounts Payable ied Earnings (+) Profit (-) Loss) +2997" i ‘dend of Rs, 3,000 was paid in 2008-09. Depreciation on furniture ‘turesamounted to Rs. 1,200 in 2008-09. It was credited to assetBBMKU VIDYA GUESS SEM - VI_ 20-23 Schedule of Changes in Working Capital Fist March Working Capi [rns Ja J eres Decri Rs. 4652 8,344) 3,692. Mt i ae Solution : Particulars Current Assets Cash Accounts Receivable (less allowances) Merchandise Soure of Funds Funds from O Decrease in ning balance of Furniture 12,000 Less : Depreciation 1,200 10,800 Purchase of Furniture : Closing balance of Furniture 3st March, 2020 : Rs. 4,000 soo 130 50 id 330 y parative absolute figuresénd Share Capital Land & Building | 2,000 | 3,000 ital Reserve Plant & Machinery| 1,000 | 1,500 10% Debentures Investment ‘600 | 00 Creditors 5 Total of F Assets (a) 200 an _ Investment (b) leo ~'° = 33.33 Current Assets 100 Debtors “tone 25 100 Stock 7 jaan BBMKU Mgt.A/c Enga Cash Total of C. Assets (c) | 1400 | 1700 | 300 =40 Equity Share Capital Reserve and Surplus 15 = 500 10% Debentures i 800° 200°~ | 2°xtoo=33.33 (Seewed een) 609} 800 | aorage = Problem : The income statement of Satyagrahi Lid, are given for tne years 2020and 2021, Convert these into common size income statement interpret the changes : colin Income Statement for the year endin Net Sales of Sales a Gross Profit Operating Expenses : {ing and Distribatiom Expenses a 0, istration B ay a Total Operating Exp: (b) “15,0007 ; Operating Profit (a ~b):[7,23,000 Other Income # Net Profit during the year Total ofFixet Libil. (a) ‘4750 _| “e700 | 1950 Solution? Creditors(6) | 250 | 300 | 50 Ee deme ws ‘Thtal Liabilities fab)’ | 5000 _| »7000_| 2060 Net Sales Interpretation : “<<. Short-term Financ: a S increased from Rs..1150 to Rs.:1400 and current ratio has also increased, - The previous current ratio was 5.6 (1400 5. 250) whereas present current ratio i8 5.67 (1700 + 300) which ismuch more than standard of 2. Hence the short-term financial position is strong. However, the following points are worth considering. Debtors, stock and cash have increased by 25%, 12.5% and 50% respectively wi itor has increased by 20%. 2. Long-term Financi ion : The statements show fixed assets have increased by Rs. 15,00,000 i-e., 50% while Share Capital and Debentures have increased by 58.33% (i.¢., 25 + 33.33). Hence it appears that the increase in fixed assets has been financed by long term funds which is according to sound commercial principles. . 3. Profitability : The Reserve and Surplus has tremendously increased, i.€,, 500% I which indicates sound profitability position of the concer. Less :.Cost of Sales - GIP @ Operating Exp. $,000%100 4,504 Ad. Expenses ~ 5,000 17,000. Total Op. Exp.(b) [15.000 BBMKU Mgt.A/c EngOperating Income (ab) 25000] 5.95 | 43,000 9.56 TS TO TTT (4) Other Incomes |_5,000 119 | 5,000 Lu Less :Costofsales 9,100__ 60.7 | 10,125 __ 56.2 Total Incomes 30,000 7.14 | 48,000 10.67 nina spocear ae [Sao ef 7s (Non-operating Exp| 2,000 0.48_| 3,000 0.67 3,000 200 3300 183 \ ; Zi : Net Incomes [28000 6.66 | 45,000 10.00 rrEe" clear from the above statement that the cost of goods so! was 60.7% of the total net sales whereas it is 56.2% in the year 202 may happens due to @ ideal performance of the purchase department or duc to decrease in the price of materials. Due to decrease in cost of goods . sold gross profit has increased by 43.8% "2 Operating expenses for the year 2021 has decreased in comparison ein 2020 it was 30% whereas its 27.8% in the year 2021 3. Duc efficient administration and sales the net profit has inereased, inthe year 2020 it was 9% whereas in the year 202 15.4%. ‘On the basis of above explanations the position of the company is satisfactory. On the whole the progress (Profitability) is satisfactory. Problem : Convert the following income statement size income statement and explain the changes in 2020 in the conditions prevailing in 2021. = * Gross sales . Less: ~ Returns and discounts Less: __ Cost of sales Gross Profit on sales (a) Problem : From the following Balance Sheet of Amit Ltd Operating expenses : Selling expenses given in conventional from you are required to prepare a Common-size Administrative expenses nce Sheet for the purpose of vertical analysis Balance Sheet of Amit Ltd. (As at 31st March, 2021) Amount | Asseis, Amount Total operating exp. (b) Operating Profit (a -b) Add Other income Ps ne e-8) Total Income Less: Other expenses Net Profit 2020 20a " Amount % | Amount _% ‘Gsuoo] Gross Sales 15500 1020] 18360 1019 Less : Returns and discount 3002.0 |: 35019 [350 1.9 BBMKU Mgt.A/c Eng(4 BBMKU VIDYA GUESS SEM - VE 20-23 ] BBMKU VIDYA GUESS SEM - VI 20-23 Solution : . AmitLid eet Common-Size Balance Sheet ‘Amount |% with total issets/ Liab. Liabilities Side : Rs. Equity Share Capital 120,000 | 34.28 Pref. Share Capital 40,000 | 11.43 Reserve 50,000 | 14.29 Profit & Loss A/c Opening Stock To Purchases To Carriage To Wages To Gross Profit o/d Rs. To Adm. Expenses To Finance Expenses Interest Discount By Gross Profit b/d By Non-operating Incomes By Interest Divi By Profit on Sale of Securities} nd Bad debts 2,000 ‘To Selling & Di (jiiyNet Profit Ratio, (iv) Operating Ratio. Solution = (i) Expences Ratio (a) Non-oprating Exp. R; _ (Cost of Sales + Oprating Exp.x100 Sales ~ (iv) Oprating Ratio (1,70,000 + Oprating Exp.) x 100 ~3,00,000 — 242,000%100 _ 5 64g 3,00,000 BBMKU Mgt A/c EngProblem -Following is the Balance Sheet of XYZ Ltd. as on 31st March, 2021: ” _Liabili Asse Bs, Equity Share C Fixed Assets 4,00,000 Reserves & Surplus Stock 20,000 10% Debenture Sundry debtors 30,000 Sundry Creditors Cash at Bank 20,000 Provision for Taxation Prepaid Exp. 2 Stock + Debtors + Cash at Bank + Prepaid Exp. 20,000 +30,000 +20,000 +10,000= Rs. $0,000 Current Liabilities = Creditors + Proyision for Taxation. © =25,000-+5,000=Rs. 30,000 4 = Current Assets - (Stock + Prepaid Expenses Solution Current Assets Liquid Assets © =80,000-(20,000 + 10,000)=Rs. 50,000 Current Assets __ 80,000 e Ratio = 80000 6 A Current Ratio = Crrent Liabilities 30,000 % Liguid Assets _; 50,000 4 Liquid Ratio = = = er: : ani R00 Current Lia 30,000 * Problem : Given below is the summarised Trading and Prof Loss Account of Hindustan Products Ld. forthe year ending 31st De ber, 2020 adits Balance Sheet as at that date. You are required to c ) Current Ratio, (b) Operating Ratio, (c) Stock Turnover, (@) Fixed Assets, (e) Return on Total ‘Trading and Profit & Loss Account (For the Rs. Year ended 31st Dec., 2020) ‘To Opening Stock 9,95,000 Rs eae 95,000] By Sales To Purchases 54,52,500 | By Closing Stock rer 1,42,500) 90,000 ‘To Gross Profit e/d 34.00,000 Rs, To Selling & Distribution Exp ‘To Administrative Expenses ‘To Finance Expenses ‘To Non-operating Expenses To Net Profit Rs. ae By Gross Profit bid 5,00,000] By Non-operating In 1,50,000] sialaleie 15,00,000, 34,90,000 Rs, Solution : (a) Current Ratio = 25,00,0005 359-4 13,00,000 & (b) Operating Ratio. = LOSE of Goods Sold + Operating Exp Sales ar 100 Cost of Goods Sold = (9,95,000 + 54,52,500 + 1,42,500) = (14,90,000) =65,90,000 - 14,90,000 =RS. 51,00,000 Operating Expences = 3,00,000 + 15,00,000 + 1,50,000=Rs. 19,50,000 +51,00,000+ 19,50,000 Operating Ratio = $5,00,000 ~~ 1 70,50,000 -4 x 100 = 82% 85,00,000 : (©) Stock Tumover = Cost of Goods Sold ‘Average Stock Average Stock ~ 225.0007 1890.00. 24,85,000 _.12.42.500 z 2 BBMKU Mgt.A‘c Eng‘Schedule of Working Capital Changes Particulars W.C. Chany Tnerease [Decrease Bills Receivable Book debis Stock Investment Prepaid Expenses Rs. 1,000 2,000 5,000 7,000 Outstanding Exp. Total Working Capital Increase in Working Capi Problem# From the following Balance Sheets ason 31st March, and 2021, youre required to prepare statement showing flow of Funds :* Assets eee Cash SE Debtors Stock Land Liabilities Share Capital Creditors Retained eaming Rs, Solution : 31st March 2020 Rs. 35,000 50,000 1,25,000 1,20,000 | 70,000 80,000 60,000 Rs Zig 2,00,000 2,50,000 60,000 35,000 10,000, —25,000_ Ziggoo ks. Fiao00! Current Assets Cash BBMKU VIDYA GUESS SEM - VI 20-23 Sources of Funds: {issue of Share Capital Fund from Operations Uses of Funds: Problem : The comparative Balance Sheets of Z Ltd. as at years ended 2020 and 2021 were as follows Assets : Cash Accounts Receivable Stock Sinking Fund Investments BBMKU Mgt.A/c Eng, 3ist December 2021 2020 Rs. Rs, 8,500 23,500 30,600 12,000\ SUA QNMTUTINE Ingen Hath AD > AIAN NA RNOLD, ARES WAL DB CADIENL (hater A NUTNTTINE OE SAP AG rac AMAR HED fare OVO.22. Managment accounting gives actual information. (False) 23. Prepaid expenses are liqui ‘ (False) 24. In managment accounting no emphasis is given to actual, figures. (False) . In debi-equity ratio,equity includes only equity oe a . Balance sheet is the content of financial statement. . Fianancial statements are estimated facts.