1 What is Inflation Accounting?

the financial statements prepared under historical accounting are generally proved
to be statements of historical facts and do not reflect the current worth of business.
This may lead to overstated profits, under priced assets and misleading picture of
Business etc.
Inflation accounting is a term describing a range of accounting systems
designed to correct problems arising from historical cost accounting in the presence
of inflation.
Techniques of Inflation Accounting
Current Purchasing Power (CPP) Method OR General Price Level Approach:
Under this method of adjusting accounts to price changes, all items in the financial
statements are restated in terms of a constant unit of money i.e. in terms of
general purchasing power.
For measuring changes in the price level and incorporating the changes in the
financial statements we use General Price Index, which may be considered to be a
barometer meant for the purpose
The index is used to convert the values of various items in the Balance Sheet and
Profit and Loss Account.
Current Cost Accounting (CCA) Method
The CCA method matches current revenues with the current cost of the resources
which are consumed in earning them.
Under this method, asset are valued at current cost which is the cost at which asset
can be replaced as on a date

What is fund flow statement?

A financial statement that reported the changes in a company's working capital. The funds flow
statement has been replaced by the statement of cash flows
The cash flow statement reports the cash generated and used during the time interval specified in its
heading.
The cash flow statement organizes and reports the cash generated and used in the following
categories:

4. What is BEP?
Contribution Margin

Definition of Break-Even Point

The break-even point is the level at which total sales are equal to total costs.
Finding the break-even point begins with determining a product's contribution margin, calculated by subtracting
variable costs from revenues. Contribution margin can be expressed in dollars (to find break-even in units) or as a
percentage ratio (for break-even in dollars). Total fixed costs are then divided by the contribution margin to find the
break-even point.

What is Ratio Analysis?

Ratio analysis is based on line items in financial statements like the balance
sheet, income statement and cash flow statement; the ratios of one item or a
combination of items - to another item or combination are then calculated.
Ratio analysis is used to evaluate various aspects of a companys operating and
financial performance such as its efficiency, liquidity, profitability and solvency

What is Target Costing?

Target costing is a system under which a company plans in advance for the price points, product
costs, and margins that it wants to achieve for a new product. If it cannot manufacture a product at
these planned levels, then it cancels the design project entirely.
With target costing, a management team has a powerful tool for continually monitoring products from
the moment they enter the design phase and onward throughout their product life cycles. It is
considered one of the most important tools for achieving consistent profitability in a manufacturing
environment.
7. Explain Activity Based Costing.

Activity based costing (ABC) assigns manufacturing overhead costs to products in a more logical
manner than the traditional approach of simply allocating costs on the basis of machine hours.
Activity based costing first assigns costs to the activities that are the real cause of the overhead. It
then assigns the cost of those activities only to the products that are actually demanding the
activities.

An accounting method that identifies the activities that a firm performs, and then
assigns indirect costs to products. An activity based costing (ABC) system
recognizes the relationship between costs, activities and products, and through
this relationship assigns indirect costs to products less arbitrarily than traditional
methods.
8. Define Budget.

9 Define Trail balance

The trial balance is a report listing the ending debit and credit balances in all accounts at the end of a
reporting period. The trial balance has three uses:

Debits equal credits. The total of all debits should equal the total of all credits, resulting a report
balance of zero.

Worksheet. Depending on the report format, the trial balance can be used as a worksheet for planning
adjusting entries.

Source of financial statements. The information on the report can be aggregated to create the financial
statements, though accounting software handles this task automatically.

What is Transfer price

The price at which divisions of a company transact with each other. Transactions
may include the trade of supplies or labor between departments. Transfer prices
are used when individual entities of a larger multi-entity firm are treated and
measured as separately run entities.
Also known as "transfer cost".
In managerial accounting, when different divisions of a multi-entity company are
in charge of their own profits, they are also responsible for their own "Return on
Invested Capital". Therefore, when divisions are required to transact with each
other, a transfer price is used to determine costs. Transfer prices tend not to
differ much from the price in the market because one of the entities in such a
transaction will lose out: they will either be buying for more than the prevailing
market price or selling below the market price, and this will affect their
performance.