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DRIVE- SPRING 2014
PROGRAM-
MBADS/ MBAFLEX/ MBAHCSN3/ MBAN2/ PGDBAN2
SEMESTER-
1
SUBJECT
CODE & NAME- MB0041 & FINANCIAL AND MANAGEMENT ACCOUNTING
Q1.
Accounting is an art of recording, classifying and summarizing in a significant
manner and in terms of money transactions and events. Explain the accounting
process and write the objectives of accounting. (Explanation of accounting
process, Objectives of accounting) 2, 8
Answer: Accounting
Process
1. Identifying
the transactions and events – This is the first step in the accounting
process. It recognises the transactions of financial character that are
essential to be recorded in the books of accounts. When money, goods, or
services are transferred from one person or account to another person or
account, it is known as a transaction.
Q2.
Journal is a book of original entry and only one journal is maintained if the
business is very small in size and the transactions are limited. Give the
meaning of a subsidiary book. List and explain all the types of subsidiary
books. (Explanation of subsidiary books, Explanation of all types of subsidiary
books) 3, 7
Answer: Subsidiary
Books
Each subsidiary
book is meant for recording transactions of a particular type. Typically, the
subsidiary books are maintained for transactions that occur most repeatedly and
are most voluminous. For example, sales, purchases, and cash transactions.
Q3.
For the following balances extracted from a trial balance, prepare a trading
account.
|
Particulars
|
Amount in Rs.
|
|
|
|
|
Stock on
1-1-2004
|
70700
|
|
|
|
|
Returns
inwards
|
3000
|
|
|
|
|
Returns
outwards
|
3000
|
|
|
|
|
Purchases
|
102000
|
|
|
|
|
Debtors
|
56000
|
|
|
|
|
Creditors
|
45000
|
|
|
|
|
Carriage
inwards
|
5000
|
|
|
|
|
Carriage
outwards
|
4000
|
|
|
|
|
Import duty on
materials received from abroad
|
6000
|
|
|
|
|
Clearing
charges
|
7000
|
|
|
|
|
Rent of
business shop
|
12000
|
|
|
|
|
Royalty paid to extract
materials
|
10000
|
|
|
|
|
Fire insurance
on stock
|
2000
|
|
|
|
|
Wages paid to
workers
|
8000
|
|
|
|
|
Office
salaries
|
10000
|
|
|
|
|
Cash discount
|
1000
|
|
|
|
|
Gas,
electricity, and water
|
4000
|
|
|
|
|
Sales
|
250000
|
|
|
|
Preparation of
trading account
Answer:
|
Solution
|
|
|
|
|
|
|
|
|
|
Dr
|
Trading Account For the Year
Ending - - -
|
Cr
|
||||
|
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||
|
|
Particulars
|
Rs.
|
Particulars
|
|
Rs.
|
||
|
|
|
|
|
|
|
|
|
|
|
To stock on 1-1-2004
|
70700
|
|
|
|
|
|
Q4.
Write short notes on:
a)
Cost Management System (CMS)
b)
Value added
Answer: Cost
Management System (CMS)
The explosion in
technology coupled with increasing worldwide competition, is forcing managers
to produce high quality goods and services in order to provide outstanding
customer service and at the lowest possible cost. Horngren and others define a
CMS as “a collection of tools and techniques that identifies how management’s
decisions affect costs”.
Q5.
Ajay industries manufactures a product X. On 1st January, 2007, there were 5000
units of finished product in stock.
|
Work-in-progress
|
Rs.57,400
|
|
Raw materials
|
Rs.1,16,200
|
The information available from cost
records for the year ended 31st December, 2007 is as follows:
|
Direct material
|
9,06,900
|
|
|
|
|
Direct labour
|
3
,26,400
|
|
|
|
|
Freight on R M purchased
|
55,700
|
|
|
|
|
Indirect labour
|
1,21,600
|
|
|
|
|
Other
factory overhead
|
3,17,300
|
|
|
|
|
|
|
|
|
|
|
|
Stock
of raw materials on 31st Dec 2007
|
96,400
|
|
|
|
|
Work-in-progress
on 31st Dec 2007
|
78,200
|
|
|
|
|
Sales (1,50,000 units)
|
30,00,000
|
|
|
|
|
|
|
|
|
|
|
Indirect materials
|
2,13,900
|
|
|
|
|
|
|
|
|
There
are 15000 units of finished stock in hand on 31st December 2007.
Prepare a statement of cost and profit assuming that opening stock of finished
goods is to be valued at the same cost per unit as the finished stock at the
end of the period.
(Preparation of statement of cost and profit) 10
Solution:
Statement of Cost and Profit of
Product X
|
Particular
|
|
Rs.
|
Rs.
|
|
|
|
|
|
|
|
|
|
|
Opening Stock
of Raw Materials
|
1,16,200
|
|
|
|
|
Q6.
Assume a company is considering dropping product B from its line because
accounting statement shows that product B is being sold at a loss.
|
Product
|
|
Income Statement
|
|
|
|
|
|
|
|
|
|
|
|
A
|
B
|
C
|
Total
|
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
Sales revenue
|
50,000
|
7,500
|
12,500
|
70,000
|
|
|
|
|
|
|
|
|
|
Cost of sales:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
D. material
|
7,500
|
1,000
|
1,500
|
10,000
|
|
|
|
|
|
|
|
|
|
D. labour
|
15,000
|
2,000
|
2,500
|
19,500
|
|
|
|
|
|
|
|
|
|
Indirect
manufacturing cost (50% of
|
7,500
|
1,000
|
1,250
|
9,750
|
|
|
Direct labour)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
30,000
|
4,000
|
5,250
|
39,250
|
|
|
|
|
|
|
|
|
|
Gross margin
on sales
|
20,000
|
3,500
|
7,250
|
30,750
|
|
|
|
|
|
|
|
|
|
Selling and
Admn
|
12,500
|
4,500
|
4,000
|
21,000
|
|
|
|
|
|
|
|
|
|
Net income
|
7,500
|
(1,000)
|
3,250
|
9,750
|
|
|
|
|
|
|
|
|
Additional
information:
a)
Factory
overhead cost is made up of fixed cost of Rs. 5850 and variable cost of Rs.
3900.
b) Variable cost by products are: A – Rs. 3000, B
– Rs. 400, and C – Rs. 500.
c)
Fixed costs and
expense will not be changed if product B is eliminated.
d)
Variable selling
and administrative expenses to the extent of Rs. 11000
can be traced to the product: A -
Rs.7,500, B - Rs.1500, and C - Rs. 2000.
e) Fixed
selling and administration expense are Rs. 10000.
(Preparation of income statement , Conclusion with
interpretation ) 8, 2
Solution:
|
Product
|
|
|
Income Statement
|
|
|
|
|
|
|
|
|
|
|
|
|
|
A
|
B
|
C
|
Total
|
|
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||||
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