Set 21. YearCurrent AssetsCurrentLiabilities Current Ratio 2009 12000 11000 1.0909090912010 24100 16000 1.

50625 YearQuick Assets Quick Liability Quick ratio 2009 6500 11000 0.5909090912010 12700 16000 0.79375 YearCredit SalesAverageDebtors Debtors Turn over 2009 43000 4500 9.5555555562010 69000 6100 11.31147541 YearYear in daysDebtorsTurnoverDebt Collectionperiod 2009 365 9.555555556 38.197674422010 365 11.31147541 32.26811594 YearCost of goodssold InventoryStock Turnoverperiod 2009 32500 5500 5.9090909092010 57000 11400 5 2. Job Costing:This is a product related classification of costing system. The cost is ascertained for each job or work order processed.This systems is used where most of the manufacturing activities are planned and carried out for distinct jobs orcustomers. The utility of this method increases when there is great variability in nature of jobs or work orders processed.Batch Costing :This method determines the cost associated with each batch pf products manufactured. This differs from job or workorder costing in the variability of the production batches. In this case the production batches consist of mostly standardproducts or components. What varies is mostly the size of batches and the timing of their processing.Process Costing:In this method of costing the costs are determined for various different manufacturing activities or processes.

Thesecosts are the assigned to different products on the basis of some criteria like quantity processed or the time taken forprocessing. This method of costing is suitable for manufacturing units that use continuous processes or mass productiontechniques. This method is particularly suitable where there are many different products and process routes, whereoutput of one process becomes input for another.Operation Costing:This method is similar to the process costing. However the products manufactured have limited variation. For example acement plant may use this method.Multiple costing:Most of the organizations use a combination of different costing method rather than just one method. Multiple costingrefers to such combinations of different methods. 3. Variable costs are costs that can be varied flexibly as conditions change. In the John Bates Clark model of the firm thatwe are studying, labor costs are the variable costs. Fixed costs are the costs of the investment goods used by the firm, on

the idea that these reflect a long-term commitment that can be recovered only by wearing them out in the productionof goods and services for sale.The idea here is that labor is a much more flexible resource than capital investment. People can change from one taskto another flexibly (whether within the same firm or in a new job at another firm), while machinery tends to be designedfor a very specific use. If it isn't used for that purpose, it can't produce anything at all. Thus, capital investment is muchmore of a commitment than hiring is. In the eighteen-hundreds, when John Bates Clark was writing, this was prettyclearly true. Over the past century, a) education and experience have become more important for labor, and have madelabor more specialized, and b) increasing automatic

control has made some machinery more flexible. So the differencesbetween capital and labor are less than they once were, but all the same, it seems labor is still relatively more flexiblethan capital. It is this (relative) difference in flexibility that is expressed by the simplified distinction of long and shortrun.Of course, productivity and costs are inversely related, so the variable costs will change as the productivity of laborchanges.Here is a picture of the fixed costs (FC), variable costs (VC) and the total of both kinds of costs (TC) for the productivityOutput produced is measured toward the right on the horizontal axis. The cost numbers are on the vertical axis. Noticethat the variable and total cost curves are parallel, since the distance between them is a constant number -- the fixedcost. 4. Sundry debtors 205000Less Bad debt 5000less PBD 20000180000 Date Particulars L F Dr Cr Debtors A/c50005000P/L A/c DrTo Bad debt A/c50005000P/L A/c To, Provision for bad debt A/c2000020000

Dr Bad Debt A/c Cr Date Partriculars LF Rs Date Partriculars LF RsTo P/L A/c 5000 By, Debtors A/c 50005000 5000Dr P/L A/c Cr Date Partriculars LF Rs Date Partriculars LF RsTo Bad debt A/c 5000To, PBD 2000025000Balance SheetLiability Rs Assets Rs Sundry debtors 205000LESS Bad debt 5000LESS PBD 20000180000 6. Accounting plays a very important role in all businesses but it is not just the business itself that finds accountinginformation useful. There are other stake holders who rely on accounting information to make decisions. Thesestakeholders include:1. Shareholders Shareholders use the balance sheet and profit and loss account produced by limited companies todecide if they are going to increase or decrease their holding.2. Management - Management in every level of the business from director level to supervisor level rely on accountinginformation to do their job properly. They all use the same information for different purposes. For example, directorsuse it for strategic purposes and middle management can use it to see if they are meeting their financial targets.3. Suppliers - Along with other data suppliers will look at a company's balance sheet and profit and loss account to see if and how much credit they are willing to give to present and potential customers.4. Lenders - Similar to suppliers lenders also need to make

sure a company is in a healthy financial situation before theystart to lend money.5. Government - Governments use the information provided by a company about its finances to levy tax on the profits.6. Customers - Before another company becomes a customer or enters into a joint venture, they will look at thecompany's finances to make sure the company is not in trouble and that their supplies are not about to dry up.7. Employees Employees also have an interest in how well their employer is doing so use financial accountinginformation for this purpose.