MB0041-Financial and Management Accounting 4 Credits (Book ID: B1130) Assignment Set- 1

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. ANS: We shall consider five transactions and show how they are accounted for in the books of 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 is an asset to the business. Liability Asset Capital 100000 Cash 100000 Transaction 2: Mobile Set is purchased for cash. This transaction can be reflected as Under.

Q.2a. List the accounting standards issued by ICAI? ANS: To bring uniformity in terminology, accounting concepts, conventions, and assumptions, the Institute of Chartered Accountants of India (ICAI) established Accounting Standards Board (ASB) in 1977. An Accounting Standard is a selected set of accounting policies or broad guidelines Accounting Standards Issued by the Institute of Chartered Accountants of India are as below: Disclosure of accounting policies: Valuation Of Inventories: Cash Flow Statements Contingencies and events Occurring after the Balance sheet Date Net Profit or loss For the period, Prior period items and Changes in accounting Policies. Depreciation accounting. Construction Contracts. Revenue Recognition. Accounting For Fixed Assets. The Effect of Changes In Foreign Exchange Rates. Accounting For Government Grants. Accounting For Investments. Accounting For Amalgamation. Employee Benefits. Borrowing Cost. Segment Reporting. Related Party Disclosures. Accounting For Leases. Earning Per Share. Consolidated Financial Statement. Accounting For Taxes on Income. Accounting for Investment in associates in Consolidated Financial Statement.

Discontinuing Operation. Interim Financial Reporting. Intangible assets. Financial Reporting on Interest in joint Ventures. Impairment Of assets. Provisions, Contingent, liabilities and Contingent assets. Financial instrument. Financial Instrument: presentation.

2b. Write short notes of IFRS. ANS: IFRS are standards, interpretations and framework for the preparation and presentation of financial statements. IFRS was framed by International Accounting Standards Board (IASB). 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 the current financial status of the e follows ntity to all the users of financial information. IFRS

accrual basis of accounting and the financial statements are prepared on the basis that an entity will continue for the foreseeable future. IFRS helps entities access global capital market with ease.

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 from strategy. While retaining financial measures of past performance, the Balanced Score Card introduces the drivers of future financial performance. The drivers (customer, internal business process, learning & growth perspectives) are derived from the organization's strategy translated into objectives and measures. The Balanced Score Card is more than a measurement system it can be used as an organizing framework for their management processes. The real power of the Balanced Score Card is when it is transformed from a measurement system to a management system. It fills the void that exists in most management systems - the lack of a systematic process to implement and obtain feedback about strategy

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 any activity. The control becomes inescapable. If cash is not properly managed or if it is mismanaged, the ultimate result would be disastrous. In many times and in many business situations, business failures are noticed due to the lacunae found in the cash management. Hence cash budgeting occupies a pivotal place in the study of Financial Management. Cash budgeting is the process of forecasting the expected receipts known as cash inflows, 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 a crystal ball which enables one to observe the future movements in cash position. It is a mere forecast of cash position of an undertaking for a definite period of time. The period may be daily, weekly, monthly, quarterly, semi-annually, or annually. The major two components of cash budget would be forecast first the cash receipts and then second forecasting the cash disbursements. The receipts of cash are formatted as follows: 1. Opening balance of cash in hand and cash at bank The Management Accounting Perspective of the Business Enterprise The management accounting view of business may be divided into two broad categories: (1) basic features and (2) basic assumptions. Basic Features The business firm or enterprise is an organizational structure in which the basic activities are departmentalized as line and staff. There are three primary line functions: marketing, production, and finance. The organization is run or controlled by individuals collectively called management. The staff or advisory functions include accounting, personnel, and purchasing and receiving. The organization has a communication or reporting system (e.g. budgeting) to coordinate the interaction of the various staff and line departmental functions. The environment in which the organization operates includes investors, suppliers, governments (state and federal), bankers, accountants, lawyers, competitors, etc.) This descriptive model shows that there are different levels of management. A commonly used approach is to classify management into three levels: Top management, middle management, and lower level management. The significance of a hierarchy of management is that decision making occurs at three levels. Basic Assumptions in Management Accounting The framework of management accounting is based on a number of implied assumptions. Although no single work has attempted to identify all of the assumptions, . Five categories of assumptions will be presented: 1. Basic goals 2. Role of management 3. Nature of Decision making 4. Role of the accounting department 5. Nature of accounting information Basic Goal Assumptions - The basic goals or objectives the business enterprise may be multiple. For example, the goal may be to maximize net income. Other goals could be to maximize sales, ROI, or earnings per share. Management accounting does not require a specific of type of goal. However, whatever form the goal takes,

management will at all times try to achieve a satisfactory level of profit. A less than satisfactory level of profit may portend a change in management. Role of Management Assumptions - The success of the business depends primarily upon the skill and abilities of managementwhich skills can vary widely among different managers. The business is not completely at the mercy of market forces. Management can through its actions (decisions) influence and control events within limits. In order to achieve desired results, management makes use of specific planning and control concepts and techniques. Planning and control techniques which management may use include business budgeting, cost volume profit analysis, incremental analysis, flexible budgeting, segmental contribution reporting, inventory models, and capital budgeting models. Management, in order to improve decision making and operating results, will evaluate performance through the use of flexible budgets and variance analysis. Decision making Assumptions A critical managerial function is decisionmaking. Decisions which management must make may be classified as marketing, production, and financial. Decisions may also be classified as strategic and tactical and long run and short run. A primary objective of decision making is to achieve optimum utilization of the businesss capital or resources. Effective decision making requires relevant information and special analysis of data.