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ASSIGNMENT [0041] FINANCIAL MANAGEMENT ACCOUNTING NAME MEENA

QUESTION1 ..Give the classification of accounting equestion approach with its meaning and examples . compare the traditional approach with morden approach of accounting equation approach . analyze the transaction under traditional approach . a.. 20.1.2011 Paid salary Rs. 30,000 b . 20.1.2011 Paid rent by cheque Rs. 8,000 c.21.1.2011 Goods withdrawn for personal use Rs. 5,000 d 25.1.2011 Paid an advance to suppliers of goods Rs. 1,00,000 e.. 26.1.2011 Received an advance from customers Rs. 3,00,000 f. 31.1.2011 Paid interest on loan Rs. 5,000 g.. 31.1.2011 Paid instalment of loan Rs. 25,000 h. 31.1.2011 Interest allowed by bank Rs. 8,000

ANSWER CLASSIFICATION OF ACCOUNTING EQUESTION APPROACH WITH MEANING Accounting equation approach classifies different types of accounts into assets account, liabilities account, capital account, revenue account, and expenses account.

Types of Accounts Asset account

Meaning Deals with tangible and intangible real assets

Liabilities account

Capital account

Deals with the financial obligations of the firm on outsiders Deals with accounts of the owners of the company

Examples Land account, building account, plant and machinery account, cash account, goodwill account, trademark account, patents account, investments account Long term loans, debentures, bank loans, trade creditors, outstanding expenses Capital account, drawings account

Revenue account

Expenses account

Deals with the amount charged for goods sold or service rendered, and other incomes Deals with expenses incurred in the process of earning revenue

Sales account, royalty received account, interest received account, dividend received account Purchases account, discount allowed account, interest paid account, loss by fire account

Traditional approach Personal account to owners) having debit balance to owners) having credit balance Real account

Modern approach

Nominal account

Analysis of traction - with accounts involved nature of accounts affect and debit/ credit

NO.

date

particular

Dr.

Cr.

a] b] c]

20.1.2011 20.1.2011 21.1.2011

Salary a/c dr. To cash a/c Rent a/c dr. To bank a/c Drawing a/c dr. To purchase a/c [ being drawing to purchase a/c ]

30000 8000 5000

30000 8000 5000

d] 25.1.2011 e] 26. 1.2011

f]

31.1.2011

Suppliers a/c dr. to cash a/c[ being adverestment ] Cash a/c dr. To customer a/c [being cash a/c adverstment cash a/c ] Interest on dr. to customer a/c [being casha/c Loan a/c dr. To cash a/c Bank a/c dr. To cash a/c

100000

100000

300000

300000

5000

5000

g]

31.1.2011

25000

25000

31.1.2011 h]

8000 8000

QUESTION 2The following trial balance was extracted from the books of Chetan, a small businessman. Do you think it is correct? If not, rewrite it in the correct form?

ANSWER.. JOURNAL ENTRIES OF ALL THE TRASACTION ..

Debits Stock Purchases Wage & salary Rent & rates Sundry detors Return inwards Discount allowed Scooty Carrige chaeges total

Rs. 8250 12750 2500 1850 7600 1590 800 1750 700 37790

Credits Capital a/c Sales Sundry creditors Bills payable Return outwards Discount recieved Bank overdraft

Rs. 10000 15900 7250 690 700 800 2450

total

37790

Conclusion..

QUESTION 3.. From the given trail balance draft an adjusted trials balance? Trial Balance as on 31.03.2011

Answer 3. Preparation of ledger

QUESTON 4. Compute trend ratios and and comment on the financial performance of infosys technologies Ltd. From the following extracts of its income statements of five years.

ANSWER PREPRATION OF TREND ANALYSIS computation of trends ratios [trends percentage ] for a series of years . horizontal analysis gives a picture of only two years . The efficiency or short fall of the organization in the form of trend analysis . The current year in comparision with the previous year . under the data to be analysed is taken for a series of years . the base year data is taken as 100. For for the subsequent years, the trend percentage are computed . The formula for computing trend percentage for a particular year is given by.. Trend ratio = figure for that particular year *100 Figure for the base year

PREPRATION OF TREND RATIO compute trend ratio

Figure for that particular year*100

Figure for the base year

REVENUE TREND RATIO.. 21,693* 100 = 156.14 13,893 16692 * 100 = 120.15 13,893 OPERATING PROFIT [PBIDT] 8,968 * 100 =179.02 4391 7195 * 100 = 163.86 4391 5,238 * 100 =119.29 4391

22,742 * 100 =163.6 13,893

PAT from ordinary activities 6,835 * 100 = 177.26 3,856 6218 * 100 = 161.21 3,856 5988 *100 = 155.29 3,856 4659 * 100 = 120.82 3856

Conclusions trend ratios 1] the ravenue and operating profit [PBIDT] have almost doubled in four years . 2] the PAT form ordinary acitivies has increased by 77.26% in the same period .

QUESTION 5 .. Give the meaning of cash flow analysis and put down the objectives of cash flow analysis . explain the prepration of cash flow statement.

Answer meaning of cash flow analysis .. Cash flow analysis is an important tool of financial analysis. It is the process of understanding the change in position with respect to cash in the current year and the reasons responsible for such a change. Incidentally, the analysis also helps us to understand whether the investing and financing decision taken by the company during the year are appropriate are not. Cash is the of life blood of business . A firm recives cash from various sources like sales , debtors , sales of assets , investment etc. like wise the firm needs cash to make payment to salaries ,rent dividend, interest etc. cash flow statement revales the inflow and outflow of cash during a particular period .

Objectives of Cash Flow Analysis Cash flow analysis is done with the objective of understanding some of the following important questions:

previous year? urrent year?

machinery, purchase of land?

Preparation of Cash Flow Statement.. The preparation of cash flow statement is similar to the preparation of fund flow statement. It requires the identification of the sources of cash and the uses of cash. 1] Opening of accounts for non current items ( to find out the hidden information ) 2] Prepration of adjusted P& L A/C (TO find out cash from operation or profit , and cash lot in operation or loss 3] comparision of current items - to find out inflow or outflow of cash . 4} prepration of cash flow statement . To prepare account for all non current items is easier for preparing cash flow statement . Cash from operation can be preparied by this formula , Drecases in current assets increases in current assets net profit + increases in current libilites decreases in current liabilities Csh flow statement can be preparied in statement from or account from . In flow of cash Opening cash balance Cash from operation Sales of assets Issues of debentures Raising of loans Collection fromdebentures Raising of loans Collection of loans Out flow of cash Redemptionof pref. share Redemption of debenture Repayment of loans Payment of dividends Cash lost in operation Pay of taxs Cash lost in poperation Xxx Xxx Xxx Xxx Xxx xxx Xxx Xxx

Xxx Xxx Xxx xxx xxx Xxx xxx Xxx

Refund of taxs

xxx XXX

XXX

QUESTION 6. Write the assumptions of marginal costing . Diffierentiate between absorption costing and marginal costing .

Answer Assumptions of Marginal Costing Marginal costing is based on the following assumptions: 1. Segregation of cost into fixed and variable The whole principle of marginal costing is based on the idea that some costs vary with production while some costs dont. Therefore, it is assumed that a clear bifurcation between fixed and variable costs is possible. 2. Volume is the only factor which influences the cost It is assumed that other factors like the demands, tastes, and preferences of consumers, availability of substitute products, availability and price of inputs, etc. are constant. Hence, volume is the only factor which influences the cost. 3. Constant selling price It is assumed that the selling price will be constant for any level of sales. 4. Constant total fixed cost It is assumed that the total fixed cost will be constant for any level of production. 5. Constant variable cost per unit It is assumed that the variable cost per unit will be constant for any level of production. 6. No closing stock It is assumed that the firm will be able to sell all its production. All the units produced would be sold. Hence, there would be no opening and closing stocks. 7. Linear relationship between costs and revenues It is assumed that the costs and revenues are linearly related to volume. The change in costs and revenues is proportionate to the change in volume (number of units sold). Differences between Absorption Costing and Marginal Costing

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