ASSIGNMENT

NAME : AJIT KUMAR THAKUR

ROLL NO. : 1502000803
DRIVE : SPRING 2015
SEMESTER : MBA/MBADS/MBAFLEX/MBAHCSN3/PGDBAN2
SUBJECT CODE & NAME : MB0041- FINANCIAL AND MANAGEMENT
ACCOUNTING
BKI ID : B1624

1. Analyze the following transaction under traditional approach.

18.1.2011 Received a cheque from a customer, Sanjay at 5 p.m. Rs.20,000

19.1.2011 Paid Ramu by cheque Rs.1,50,000

20.1.2011 Paid salary Rs. 30,000

20.1.2011 Paid rent by cheque Rs. 8,000

21.1.2011 Goods withdrawn for personal use Rs. 5,000

25.1.2011 Paid an advance to suppliers of goods Rs. 1,00,000

26.1.2011 Received an advance from customers Rs. 3,00,000

31.1.2011 Paid interest on loan Rs. 5,000

31.1.2011 Paid instalment of loan Rs. 25,000

31.1.2011 Interest allowed by bank Rs. 8,000

Ans :-

Date Accounts Involved Nature of Account Affects Debit/

Credit
18.1.11 Cash a/c Real Cash(Cheque)is coming Debit
Sanjays a/c Personal Sanjay is the giver Credit
19.1.11 Ramus a/c Personal Ramu is the Receiver Debit
Bank a/c Personal Bank is the giver Credit
20.1.11 Salary a/c Nominal Salary is expenses Debit
Cash a/c Real Cash is going out Credit
20.1.11 Rent a/c Nominal Rent is an expenses Debit
Bank a/c personal Bank is the giver Credit
25.1.11 Advance to suppliers a/c Personal Suppliers are receivers Debit
Cash a/c Real Cash is going out Credit
26.1.11 Cash a/c Real Cash is coming Debit
Advance from customer a/c personal Customers are givers Credit
31.1.11 Interest on loan a/c Nominal Interest is expenses Debit
Cash a/c Real Cash is going Credit
31.1.11 Loan a/c Personal Lender is receiver Debit
Cash a/c Real Cash is going out Credit
31.1.11 Bank a/c Personal Bank is the receiver Debit
Bank interest a/c Nominal Bank interest is an income Credit
2 The trial balance of Nilgiris Co Ltd., as taken on 31st December, 2002 did not tally and the difference
was carried to suspense account. The following errors were detected subsequently.

a) Sales book total for November was under cast by Rs. 1200.

b) Purchase of new equipment costing Rs. 9475 has been posted to Purchases a/c.

c) Discount received Rs.1250 and discount allowed Rs. 850 in September 2002 have been posted to wrong
sides of discount account.

d) A cheque received from Mr. Longford for Rs. 1500 for goods sold to him on credit earlier, though entered
correctly in the cash book has been posted in his account as Rs. 1050.

e) Stocks worth Rs. 255 taken for use by Mr Dayananda, the Managing Director, have been entered in sales day
book.

f) While carrying forward, the total in Returns Inwards Book has been taken as Rs. 674 instead of Rs. 647.

g) An amount paid to cashier, Mr. Ramachandra, Rs. 775 as salary for the month of November has been debited
to his personal account as Rs. 757. Pass journal entries and draw up the suspense account.

Journal entries of all the transactions Suspense account with Conclusion

Ans: Journal proper of Nilgiris co Ltd

Date Particulars LF Debit Credit

Rs. Rs.
31.12.2002 Suspense a/c Dr 1200 1200
To sales a/c
(Being under casting of sales book rectified)
31.12.2002 New Equipment a/c Dr 9475 9475
To Purchase a/c
(Being wrong debit given to purchase account rectified)
31.12.2002 Discount allowed a/c Dr 1700
Suspense a/c Dr 800
To Discount received a/c 2500
(Being discount received and discount allowed posted to wrong
sides of discount account rectified)

31.12.2002 Suspense a/c Dr 450 450

To Longfords a/c
(Being short credit given to Longford rectified)
31.12.2002 Sales a/c Dr 255
To Return inward a/c 255
(Being stock used for personal purpose wrongly credited to sales
a/c rectified)
31.12.2002 Suspense a/c Dr 27
To Return inwards a/c 27
(Being excess debit given to returns inwards a/c to the extent of Rs
27, now rectified )
31.12.2002 Salary a/c Dr 775
To Ramachandras a/c 757
To Suspense a/c 18
(Being the wrong debit of salary to the personal accont of
Ramachandra now rectified)
 Suspense Account

Particulars Amount Particulars Amount

To sales A/c 1200 By sales A/c 255
To Discount received a/c 800 By salary A/c 18
To Longford a/c 450 By Balance c/d 2204
To Returns inward a/c 27

Total 2477 Total 2477

3. From the given trial balance draft an Adjusted Trial Balance.

Trial Balance as on 31.03.2011

Adjustments:
1. Charge depreciation at 10% on Buildings and Furniture and fittings.
2. Write off further bad debts 1000
3. Taxes and Insurance prepaid 2000
4. Outstanding salaries 5000
5. Commission received in advance1000

Preparation of ledger accounts

Preparation of trial balance
 Ans: Ledger accounts

Dr Furniture and fittings a/c Cr

Particulars Rs. Particulars Rs.

To balance b/d 10000 By depreciation a/c 1000
By balance c/d 9000

Total 10000 Total 10000

to balance b/d 9000

Dr Buildings a/c Cr

Particulars Rs. Particulars Rs.

To bal b/d 500000 By Depreciation 50000
By bal c/d 450000
Total 500000 Total 500000

To bal b/d 450000

Dr Bad debts a/c Cr

Particulars Rs. Particulars Rs.

To bal b/d 2000 By bal c/d 3000
To Sundry Debtors 1000
Total 3000 Total 3000
To bal b/d 3000
Dr Sundry debtors a/c Cr

Particulars Rs. Particulars Rs.

To bal b/d 25000 By Bad Debts 1000

To bal c/d By bal c/d 24000

Total 25000 Total 25000

To bal b/d 24000

Dr Taxes and insurance a/c Cr

Particulars Rs. Particulars Rs.

To bal b/d 5000 By Prepaid taxes and

To bal c/d Insurance 2000
By bal c/d 3000
Total 5000 Total 5000

To bal b/d 3000

Dr. Prepaid taxes & insurance a/c Cr.

Particulars Rs. Particulars Rs.

To taxes & insurance 2000 By bal c/d 2000

Total 2000 Total 2000

To bal b/d 2000

Dr Salaries a/c Cr

Particulars Rs. Particulars Rs.

To bal b/d 20000 By bal b/d 25000
To Outstanding Salaries 5000

Total 25000 Total 25000

Total 25000
Dr Outstanding salaries a/c Cr

Particulars Rs. Particulars Rs.

To bal c/d 5000 By salaries 5000

Total 5000 Total 5000

By bal b/d 5000

Dr Depreciation a/c Cr

Particulars Rs. Particulars Rs.

To Furniture and fittings 1000

To Buildings 50000 By bal c/d 51000

Total 51000 Total 51000

To bal b/d 51000

Dr Commission a/c Cr

Particulars Rs. Particulars Rs.

To commission received in By bal b/d 5000
advance 1000
To bal c/d 4000

Total 5000 Total 5000

By bal b/d 4000

Dr Commission received in advance a/c Cr

Particulars Rs. Particulars Rs.

By commission 1000
To bal c/d 1000
Total 1000 Total 1000
By bal b/d 1000
Adjusted Trial Balance as on 31.03.2011

Debit balances Rs. Adjustments Adjusted amount

Furniture and Fittings 10000 -1000 9000

Buildings 500000 -50000 450000

Sales Returns 1000 1000

Bad Debts 2000 +1000 3000

Sundry Debtors 25000 -1000 24000

Purchases 90000 90000

Advertising 20000 20000

Cash 10000 10000

Taxes and Insurance 5000 -2000 3000

General Expenses 7000 7000

Salaries 20000 +5000 25000

Depreciation - 1000+50000 51000

Prepaid Taxes and Insurance - 2000 2000

TOTAL 690000 690000

Credit balances Rs. Adjustments Adjusted amount

bank over draft 16000 16000
Capital account 400000 400000
Purchase return 4000 4000
Sundry creditors 30000 30000
Commission 5000 -1000 4000
Sales 235000 235000
Outstanding salaries - 5000 5000
Commission received in advance - 1000 1000

Total 690000 690000

 4. Compute trend ratios and comment on the financial performance of Infosys
Technologies Ltd. from the following extract of its income statements of five years.

Source: Infosys Technologies Ltd. Annual Report)

Preparation of trend analysis
Preparation of trend ratios
Conclusion
Ans Infosys Technologies Ltd
Trend Analysis

Particulars 2010-11 2009-10 2008-09 2007-08 2006-07

Revenue 27501 22742 21693 16692 13893
Operating profit (PBIDT) 8968 7861 7195 5238 4391
PAT from ordinary activities 6835 6218 5988 4659 3856

Trend Ratios
Revenue 197.95 163.69 156.14 120.15 100
Oprating profit(PBIDT) 204.24 179.03 163.86 119.29 100
PAT from ordinary activities 177.26 161.26 155.29 120.82 100

Comment: The Revenue and Operating Profit (PBIDT) have almost doubled in four years. The PAT
from ordinary activities has increased by 77.26% in the same period

5. Give the meaning of cash flow analysis and put down the objectives of cash flow
analysis. Explain the preparation of cash flow statement.?
Meaning of cash flow analysis .?
Objectives of cash flow analysis .?
Explanation of preparation of cash flow analysis .?
Ans: 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.

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 flow analysis is presented in the form of a statement. Such a statement is called a cash flow statement

Objectives of cash flow analysis -

Cash flow analysis is done with the objective of understanding some of the following important questions :
What is the change in the cash position of the firm for the current year as compared to the previous year?
How good was the liquidity position of the firm?

What were the sources of cash during the current year?

How much cash was generated from operations?

What were the applications of cash during the current year?

How much cash was spent on investment activities, such as purchase of new plant and machinery, purchase of
land?

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. A source of cash is a transaction which
brings an inflow of cash. An application of cash is a transaction which leads to an outflow of cash. It may be
noted that the sources of cash increase the cash balance and applications of cash decrease the cash balance.

6. Write the assumptions of marginal costing. Differentiate between absorption costing and
marginal costing. Assumptions of marginal costing (all 7 points), Differences of marginal and
absorption costing (Includes all 8points) ?

Ans: Marginal costing is based on the following assumptions: -

1. Segregation of cost into fixed and variable

2. Volume is the only factor which influence the cost
3. Constant total fixed cost
4. Constant selling price
5. Linear relationship between cost and revenues
6. No closing stock
7. Constant variable cost per unit
 Differences between absorption costing and marginal costing:-

Absorption Costing:

1. It is known as full costing. Both fixed and variable are included to ascertain the cost.
2. Different unit costs are obtained at different levels of output because of fixed expenses remaining
the same.
3. Difference between sales and total cost (marginal cost and fixed cost) is profit.
4. A portion of fixed cost is carried forward to the next period because closing stock of work-in-
progress and finished goods are valued at the cost of production, which is inclusive of fixed cost.
5. The apportionment of fixed expenses on an arbitrary basis gives rise to over or under absorption of
overheads
6. It affects managerial decisions in certain areas. E.g., whether to accept the export order or not,
whether to buy or manufacture, etc.
7. Costs are classified according to functional basis such as production cost, office and administrative
cost, and selling and distribution costs.
8. It fails to establish relationship of cost, volume, and profit.

Marginal Costing:

1. only variable costs are included. Fixed costs are recovered from contribution.
2. Marginal cost per unit remains same at different levels of output because variable expenses vary in
the same proportion in which output varies.
3. Difference between sales and marginal cost is contribution and difference between contribution and
fixed cost is profit or loss.
4. Stock of work-in-progress and finished goods are valued at marginal cost. Fixed cost of a particular
period is charged to that very period and is not carried over to the next period.
5. Products are charged only with variable cost, hence marginal costing does not lead to over or
under absorption of fixed overheads.
6. It is very helpful in taking managerial decisions. It considers the additional cost involved, assuming
fixed expenses to remain constant.
7. Costs are classified according to the behaviour of costs fixed costs and variable costs.
8. CVP relationship is an integral part of marginal costing.

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