Q.1 Assure you have just started a Mobile store.

You sell mobile sets and currencies of Airtel, Vodaphone, Reliance and BSNL. Take five transactions and prepare a position statement after every transaction. Did you firm earn profit or incurred loss at the end? Make a small comment on your financial position at the end. Answer: We shall consider five transactions and show how they are accounted for in the booksof the business. 1. Mr. Rajesh brings Rs.100000 cash as capital into his business. 2. He purchases Mobile Set to his shop Rs.10000 3. He buys currencies for cash Rs.50000 4. He sells currencies worth Rs.30000 for Rs.40000 on credit to Arjun 5. He pays wages to servants Rs.1000 Transaction 1: The business receives capital in cash. Capital is a liability and cash isan asset to the business. Liablity Capital 100000 assest cash 100000

Transaction 2: Mobile Set is purchased for cash. This transaction can be reflected asunder Another way to look at the same equation is that assets equals liabilities plus owner's equity. Looking at the equation in this way shows how assets were financed: either by borrowing money (liability) or by using the owner's money (owner's equity). Balance sheets are usually presented with assets in one section and liabilities and net worth in the other section with the two sections "balancing." NET PROFIT SALES AIRTEL VODAPHONE 10000 100000 200000 500000

NETWORH(CAPITAL)

100000

200000 VODAPHONE 15% 25%

AIRTEL NET PROFIT/SALES*100 5% NET PROFIT/ NET WORTH*100 10%

Q.2a. List the accounting standards issued by ICAI. Ans - The Institute of Chartered Accountants of India (ICAI) is a national professional accounting body of India. It was established on 1 July 1949 as a body corporate under the Chartered Accountants Act, 1949 passed by the Parliament of India to regulate the profession of Chartered Accountancy in India. ICAI is the second largest professional accounting body in the world in terms of membership second only to American Institute of Certified Public Accountants. ICAI is the only licensing cum regulating body of the financial audit and accountancy profession in India. Accounting Standards As of 2010, the Institute of Chartered Accountants of India has issued 32 Accounting Standards. These are numbered AS-1 to AS7 and AS-9 to AS-32 (AS-8 is no longer in force since it was merged with AS-26).Compliance with Accounting Standards issued by ICAI has become a statutory requirement with the notification of Companies (Accounting Standards) Rules, 2006 by the Government of India.Before the the constitution of the National Advisory Committee on Accounting Standards (NACAS), the institute was the sole accounting standard setter in India. However NACAS is not an independent body. It can only consider

Accounting Standards recommended by ICAI and advise the Government of India to notify them under the Companies Act, 1956. Further the accounting standards so notified are applicable only to companies registered under the companies act, 1956. For all other entities the accounting standards issued the ICAI continue to apply. Technical standards ICAI formulates and issues technical standards to be followed by Chartered Accountants and others. Non-Compliance of these standards by the members will lead to disciplinary action against them. The technical standards issued by ICAI includes, Accounting Standards, Audit and Assurance Standards, Standards on Internal Audit, Corporate Affairs Standard, Accounting Standards for Local Bodies, etc.. Audit and Assurance Standards As of 2010 ICAI has issued 43 Engagement and Quality Control Standards (formerly known as Auditing and Assurance Standards) covering various topics relating to auditing and other engagements. All Chartered Accountants in India are required to adhere to all these standards. If a Chartered Accountant is found not to follow the said standards he is deemed guilty of professional misconduct. These standards are fully compatible with the International Standards on Auditing (ISA) issued by the IAASB of the IFAC except for two standards SA 600 and SA 299, where corresponding provisions do not exist in ISA. 2b. Write short notes of IFRS? Ans - International Financial Reporting Standards (IFRS) are principles-based Standards, Interpretations and the Framework (1989) adopted by the International Accounting Standards Board (IASB).

Many of the standards forming part of IFRS are known by the older name of International Accounting Standards (IAS). IAS were issued between 1973 and 2001 by the Board of the International Accounting Standards Committee (IASC). On 1 April 2001, the new IASB took over from the IASC the responsibility for setting International Accounting Standards. During its first meeting the new Board adopted existing IAS and SICs. The IASB has continued to develop standards calling the new standards IFRS. Structure of IFRS IFRS are considered a "principles based" set of standards in that they establish broad rules as well as dictating specific treatments. The objective of financial statement is to provide information about the financial position,performance and changes in the financial position of an entity. It should also provide thecurrent financial status of the entity to all the users of financial information. IFRS followsaccrual basis of accounting and the financial statements are prepared on the basis thatan entity will continue for the foreseeable future International Financial Reporting Standards comprise:

International Financial Reporting Standards (IFRS) standards issued after 2001 International Accounting Standards (IAS)standards issued before 2001 Interpretations originated from the International Financial Reporting Interpretations Committee (IFRIC)issued after 2001 Standing Interpretations Committee (SIC)issued before 2001 Framework for the Preparation and Presentation of Financial Statements (1989)

IAS 8 Par. 11

"In making the judgement described in paragraph 10, management shall refer to, and consider the applicability of, the following sources in descending order: (a) the requirements and guidance in Standards and Interpretations dealing with similar and related issues; and (b) the definitions, recognition criteria and measurement concepts for assets, liabilities, income and expenses in the Framework." Q.3 Prepare a Three-column Cash Book of M/s Thuglak & Co. from The following particulars: May 1 st Balance of cash in hand rs 14000 bank overdreaft at bank 5000

4 th investead futhere capital 10000 out of which 6000was depositead in the bank 6 th sold goods for cash 30000 6 th collectead from deboters of last year 80000 discount allowead to them 2000 10 th purchesead goods for cash 5500 11 th paid ram vilas our crediter 25000discount allowead by him 650 rs 13 th comsion paid to our agent 5300 rs 14 th rent pad 400 electricity bill 100 14 th drew cheques for personal uses rs 7000

17 th ash sales 2500 18 th collection from atal bihri 400 depositead in the bank on 19 april 19 th drew from the bank for offices use 5000 22 drew cheqes for petty expenses 1500 24th divindead receivead by cheque 500depositead in the bank of same day 24th comsion res by cheqe 2300 depoisit bank same day 24 th drew saleray 15000 24 th deposit bank 10000 Ans To bal b/d To capital To saleas To deboters To saleas To atal To cash To bank To divend To comm. To cash To cash Cash 14000 4000 3000 80000 28,000 5000 7,48,400 2300 20,000 2300 10000 Bank 6000 25000 40000 40000 500

Total By balanceb/d By purchese By ramvilas By comsiion By officefurniture By rent By electricity By dreawings By banks By cash By petty expenses By bank By salary By bank total

200300 Cash 55000 25000 5300 2000 400 1000

58800 Bank 5000

7000 40000 5000 1500 2300 15000 10000 200300 58800

Q.4 Choose an Indian Company of your choice that has adopted Balance Score Card and detail on it.? Ans The Balanced Score Card is a framework for integrating measures derived fromstrategy. While retaining financial measures of past performance, the Balanced ScoreCard introduces the drivers of future financial performance. (Figure 1) The drivers(customer, internal business process, learning & growth perspectives) are derived fromthe organization's strategy translated into objectives and measures.The Balanced Score Card is more than a

measurement system it can be used as anorganizing framework for their management processes. The real power of the BalancedScore Card is when it is transformed from a measurement system to a managementsystem. It fills the void that exists in most management systems - the lack of asystematic process to implement and obtain feedback about strategy The balanced scorecard (BSC) is a strategic performance management tool - a semi-standard structured report, supported by proven design methods and automation tools, that can be used by managers to keep track of the execution of activities by the staff within their control and to monitor the consequences arising from these actions.[1] It is perhaps the best known of several such frameworks (it is the most widely adopted performance management framework reported in the annual survey of management tools undertaken by Bain & Company, and has been widely adopted in English-speaking western countries and Scandinavia in the early 1990s). Since 2000, use of the Balanced Scorecard, its derivatives 2GC Limited (2009), "2GC Balanced Scorecard Usage Survey 2009", 2GC Active Management has a very broad experience having worked with organisations in 33 countries across public, private and NGO sectors on the design, introduction and use of Balanced Scorecard. Our clients tell us they are looking for Balanced Scorecard to help them: To provide reliable information to reassure leadership teams that their strategic plans are being implemented efficiently and effectively and are having the impact they expect; To enable improved alignment behind strategic goals across the whole organisation;

To instil greater clarity and consensus within management teams concerning their shared goals and priorities, and to provide them with unambiguous feedback on their progress in achieving them; To strengthen existing management processes, making them more focused on achieving and maintaining performance improvements; To provide a better and wider understanding of the role and contribution of shared services ( HR, Finance) within the overall strategic context; To provide a more reliable basis for the awarding of incentive based pay. e Resources section of the 2GC web site contains a wealth of useful information on Performance Management in general and the Balanced Scorecard in particular. In addition to answers to other Balanced Scorecard FAQs, the Resources section contains longer papers (such as the one cited above) on a variety of topics, case studies and various short presentations, all of which can be downloaded without charge. e website also has recommendations for books and articles on the subject and links to useful web sites. For information on 2GC's professional services including consultancy and training programmes, About 2GC Active Management...

2GC is a research-led consultancy expert in addressing the strategic and performance management issues faced by organisations in today's era of rapid change and intense competition. Central to much of 2GC's work is the application of 3rd Generation Balanced Scorecard, an approach to strategic implementation, strategy management and performance measurement. Q.5 From the following data of Jagdish Company prepare (a) a statement of source and uses of working capital (funds) (b) a schedule of changes in working capital? Ans

Details Sundeary Debtors Cash in hand Cash it bank Bills receivable Inventeray Bills payable Outstanding expenses Sundary creaditoras Bank overdraft

2008 65000 13000 1500 16000 90000 12000 600 30 30000

2007 105000 20,000 20000 30000 84000 80000 5000 58000 42000

Short teramloans

32000

3600

Ans Scchedule of changes working capital Deatalis Cureeant assets Cash in hand Cash it bank Sundarey dabators Bills receivable Inventeray To curnt assets Current libilatieas Sundarey creadtiors Bills paybele Outstanding expenses 2007 13000 15000 65000 16000 90000 199000 30000 12000 6000 2008 20,000 6500 105000 30000 84000 259000 58000 8000 5000 Inc 7000 16000 40000 14000 6000 dec

4000 1000

28000 -

Particulaers 2007 Equity 50000 shere

2008 65000

particulaers 2007 Cash 10000 balnce

2008 13000

capital P& loss Treade creditors Morteage Short teram loans Accuread expenses Total

14750 29000 10000 15000 8000 126750

17000 31000 15000 16500 7500 15200

Debtors 25000 Investment 5000 Fxd assests 500000 Less 5250 deperaction God will 5000 stock 37000 126750

27000 Nil 80000 7000 Nil 39000 152000

Machinery A/c Particulaers Rs To open blance 15000 To shere capital a/c To cash a /c Total 250000 8000 183000

Particulaers By adjustead p /Loss By gen reserve account By cah A/C sale By cl blnce c/d

Rs 12000 200 1800 169000 183000

Q.6 What is a cash budget? How it is useful in managerial decision making? Ans A proper control over cash is very essential. Cash is an important component in anyactivity. The control becomes inescapable. If cash is not properly managed or if it ismismanaged, the ultimate result would be disastrous. In many times and in manybusiness situations, business failures are noticed due to the

lacunae found in the cashmanagement. Hence cash budgeting occupies a pivotal place in the study of FinancialManagement.Cash budgeting is the process of forecasting the expected receipts known as cashinflows, and expected payments known as cash outflows to meet the future obligations.The written statement of receipts and payments is known as the cash budget. It is acrystal ball which enables one to observe the future movements in cash position. It is amere forecast of cash position of an undertaking for a definite period of time. The periodmay be daily, weekly, monthly, quarterly, semiannually, or annually. The major twocomponents of cash budget would be forecast first the cash receipts and then secondforecasting the cash disbursements. A budget is a list of all planned expenses and revenues. It is a plan for saving and spending. A budget is an important concept in microeconomics, which uses a budget line to illustrate the tradeoffs between two or more goods. In other terms, a budget is an organizational plan stated in monetary terms. In summary, the purpose of budgeting is to: 1. Provide a forecast of revenues and expenditures, that is, construct a model of how our business might perform financially if certain strategies, events and plans are carried out.

2. Enable the actual financial operation of the business to be measured against the forecast. budgeting approach designed for companies with fluctuating income, high fixed costs, or income depending on sunk costs, as well as NPOs and NGOs. The approach builds on the strengths of proven budgeting approaches, leverages the respective

advantages for situations of fluctuating incomes, and at the same time reduces possible negative impacts. The traditional budgeting approach, also called line-item budget, normally consists of a set of several budgets that build on oneanother and have to be integrated. For a manufacturing company, these budgets may be.

sales budget production budget direct materials usage budget direct materials purchase budget direct labor budget factory overhead budget selling and administration budget cash budget.

his approach typically builds on the previous year sales and cost structure and it works fine for unit level costs where the consumption of resources varies proportionately with the volume of the final output of products or services. Such approaches are also called incremental budgeting. Decision making can be regarded as the mental processes (cognitive process) resulting in the selection of a course of action among several alternative scenarios. Every decision making process produces a final choice.The output can be an action or an opinion of choice. Decision-Making Steps When in an organization and faced with a difficult decision, there are several steps one can take to ensure the best possible solutions will be decided. These steps are put into seven effective ways to go about this decision making process (McMahon 2007).

The first step - Outline your goal and outcome. This will enable decision makers to see exactly what they are trying to accomplish and keep them on a specific path. The second step - Gather data. This will help decision makers have actual evidence to help them come up with a solution. The third step - Brainstorm to develop alternatives. Coming up with more than one solution ables you to see which one can actually work. The fourth step - List pros and cons of each alternative. With the list of pros and cons, you can eliminate the solutions that have more cons than pros, making your decision easier. The fifth step - Make the decision. Once you analyze each solution, you should pick the one that has many pros (or the pros that are most significant), and is a solution that everyone can agree with. The sixth step - Immediately take action. Once the decision is picked, you should implement it right away.

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