master of business administration mb0041

8/3/2019 Master of Business Administration Mb0041

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MASTER OF BUSINESS

ADMINISTRATION

NAME KAUSHAL KUMAR

REGISTRATION NO. 521101945 LEARNING

CENTER NAME

LEARNING CENTER CODE

COURSE MBA

SEMESTER 1

SUBJECT MB0041

SET NO.

DATE OF SUBMISSION

MARKS AWARDED

Directorate of Distance Learning

Sikkim Manipal University

II Floor, Syndicate Building

Manipal 576 104

Signature of the Coordinator Signature of the LC Signature of Evaluator


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Master of Business Administration - MBA Semester 1

MB0041 Financial and Management Accounting

Assignment Set- 1 (60 Marks)

Note: Each question carries 10 Marks. Answer all the questions.

Question.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.


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Question .2a.List the accounting standards issued by ICAI.

2b. Write short notes of IFRS.

Answer.2 (a) Accounting Standards (ASs)

AS 1 Disclosure of Accounting Policies

AS 2 Valuation of Inventories

AS 3 Cash Flow Statements

AS 4 Contingencies and Events Occurring after the Balance Sheet Date

AS 5 Net Profit or Loss for the period, Prior Period Items and Changes in

Accounting Policies

AS 6 Depreciation Accounting

AS 7 Construction Contracts (revised 2002)

AS 8Accounting for Research and Development

AS 9 Revenue Recognition

AS 10Accounting for Fixed Assets

AS 11 The Effects of Changes in Foreign Exchange Rates (revised 2003)

AS 12Accounting for Government Grants

AS 13Accounting for Investments

AS 14Accounting for Amalgamations

AS 15 Employee Benefits Limited Revision to Accounting Standard (AS)

15, Employee Benefits

AS 15 (issued 1995) Accounting for Retirement Benefits in the Financial

Statement of Employers

AS 16 Borrowing Costs

AS 17 Segment Reporting


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AS 18, Related Party Disclosures

AS 19 Leases

AS 20 Earnings Per Share

AS 21 Consolidated Financial Statements

AS 22Accounting for Taxes on Income.

AS 23Accounting for Investments in Associates in Consolidated Financial

Statements

AS 24 Discontinuing Operations

AS 25 Interim Financial Reporting

AS 26 Intangible Assets

AS 27 Financial Reporting of Interests in Joint Ventures

AS 28 Impairment of Assets

AS 29 Provisions, Contingent` Liabilities and Contingent Assets

AS 30 Financial Instruments: Recognition and Measurement and Limited

Revisions to AS 2, AS 11 (revised 2003), AS 21,

AS 23, AS 26, AS 27, AS 28 and AS 29

AS 31, Financial Instruments: Presentation Accounting Standard (AS) 32,

Financial Instruments: Disclosures, and limited revision to

Accounting Standard (AS) 19, Leases

IFRS

The IFRS Foundation is an independent, not-for-profit private sectororganization working in the public interest. Its principal objectives are: to develop a single set of high quality, understandable, enforceable and

globally accepted international financial reporting standards (IFRSs)through its standard-setting body, the IASB;

to promote the use and rigorous application of those standards;


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to take account of the financial reporting needs of emerging economiesand small and medium-sized entities (SMEs); and

to bring convergence of national accounting standards and IFRSs to highquality solutions.

The governance and oversight of the activities undertaken by the IFRSFoundation and its standard-setting body rests with its Trustees, who are alsoresponsible for safeguarding the independence of the IASB and ensuring thefinancing of the organisation. The Trustees are publicly accountable to aMonitoring Board of public authorities.Standard-settingThe IASB (International Accounting Standards Board)The IASB is the independent standard-setting body of the IFRS Foundation. Its

members (currently 15 full-time members) are responsible for thedevelopment and publication of IFRSs, including the IFRS for SMEs and forapproving Interpretations of IFRSs as developed by the IFRS InterpretationsCommittee (formerly called the IFRIC). All meetings of the IASB are held inpublic and webcast. In fulfilling its standard-setting duties the IASB follows athorough, open and transparent due process of which the publication ofconsultative documents, such as discussion papers and exposure drafts, forpublic comment is an important component. The IASB engages closely withstakeholders around the world, including investors, analysts, regulators,business leaders, accounting standard-setters and the accountancy profession.

The IFRS Interpretations CommitteeThe IFRS Interpretations Committee (formerly called the IFRIC) is the

interpretative body of the IASB. The Interpretations Committee comprises 14

voting members appointed by the Trustees and drawn from a variety of

countries and professional backgrounds. The mandate of the Interpretations

Committee is to review on a timely basis widespread accounting issues that

have arisen within the context of current IFRSs and to provide authoritative

guidance (IFRICs) on those issues. Interpretation Committee meetings are opento the public and webcast. In developing interpretations, the Interpretations

Committee works closely with similar national committees and follows a

transparent, thorough and open due process.


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Question.3 Prepare a Three-column Cash Book of M/s Thuglak &

Co. from The following particulars:

20X1 Jan 1. Cash in hand Rs. 50,000, Bank Overdraft Rs. 20,000

2. Paid into bank Rs. 10,000

3. Bought goods from Hari for Rs, 200 for each

4. Bought goods for Rs. 2,000 paid cheque for them, discount allowed

1%

5. Sold goods to Mohan for each Rs. 1.175

6. Received a cheque from Shyam to whom goods were sold for Rs.

800.Discount allowed 12.5%

7. Shyams cheque deposited into bank

8. Purchased an old typewriter for Rs. 200 , Spent Rs. 50 on its repairs

9. Bank notified that Shyams cheque has been returned dishonoredand debited the account in respect of charges Rs. 10

10.Received a money order Rs. 25 from Hari

11.Shyam settled his account by means of a cheque for Rs. 820, Rs. 20

being for interest charged.

12.Withdrew from the bank Rs. 10,000

18.Discounted a B/E for Rs. 1,000 at 1% through bank

20. Honored our own acceptance by cheque Rs. 5,000

22. Withdrew fir personal use Rs. 1,000


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24. Paid tread expenses Rs. 2,000

25. Withdrew from bank for private expenses Rs. 1,500

26. Purchased machinery from Rajiv for 5,000 and paid him by meansof a bank draft purchased for Rs. 5,005

27. Issued cheque to Ram Saran for cash purchased of furniture Rs.

1,575

28. Received a cheque for commission Rs. 500 from R.& Co. and

deposited into bank

29. Ramesh who owned us Rs. 500 became bankrupt and paid us 50

paise in the rupee

30. Received payment of a loan of Rs. 5,000 and deposited Rs. 3,000

out of into bank

31. Paid rent to landlord Mohan by cheque of Rs. 220

31. Interest allowed by bank Rs. 30

31. Half-yearly bank charges Rs. 50


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Answer.3:-


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Question.4 Choose an Indian Company of your choice that has

adopted Balance Score Card and detail on it.

Answer.4Tata motors

Tata Motors is the first Indian company to be inducted in the Balance ScorecardHall of Fame. Joins the thirty-member elite club of organizations includingHilton Hotels, BMW Financial Services, US Army, Korea Telecom and NorwegianAir Force for achieving excellence in performance.The commercial vehicle business unit (CVBU) of Tata Motors, India's largestautomobile manufacturer, received prestigious Balanced ScorecardCollaborative, The coveted Steuben crystal 'Rising Star' trophy was presented atBalanced Scorecard Asia Pacific Summit held at Australia.Tata Motors-CVBU has been recognized for having achieved a significant

turnaround in its overall performance. The implementation of the BalancedScorecard has enabled greater focus on different elements of operational

performance. Defining, cascading and communicating strategies across the

organisation have brought about transparency and alignment. The scorecard

incorporates SQDCM (safety, quality, delivery, cost and morale) and VMCDR

(volume, market share, customer satisfaction, dealer satisfaction and

receivables).Ravi Kant, executive director, CVBU, Tata Motors, said, "While we

were conscious of the benefits of the Balanced Scorecard when we began

implementing it three years back, we are extremely pleased that it has helpedus achieve significant improvements in our overall performance. I am quite

positive that the BSC will play an important part in our objective to become a

world-class organization."Balanced Scorecard Collaborative president Dr

David P Norton said, "We created the Hall of Fame to publicly acknowledge

the hard work and remarkable results of implementing the Balanced

Scorecard to create the strategy-focused organization. The Balanced

Scorecard Hall of Fame pays tribute to the success that each organization has

attained. Tata Motors- CVBU shares the honor with the city of Brisbane andKorea Telecom (KT).The Balanced Scorecard (BSC) concept-created by Dr

Robert S Kaplan and Dr David P Norton in 1992, has been implemented in

thousands of corporations, organizations, and government agencies

worldwide. Based on the simple premise that "measurement motivates," the

BSC puts strategy at the centre of the management process, allowing


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organizations to implement strategies rapidly and reliably. Balanced

Scorecard Collaborative, Inc. is a new kind of professional services firm

dedicated to the worldwide awareness, use, enhancement, and integrity of the

Balanced Scorecard as a value-added management process. Tata Motors range

of commercial vehicles spans over 135 models and can haul loads rangingfrom 2 to 40 tones. The product portfolio also includes 12 to 60-seater buses,

tippers and tractor-trailers. Tata Motors vehicles meet the stringent Euro

emission norms. The company currently has an export base in most parts of

SouthAsia, Africa, Middle East and Europe. Tata Motors recently crossed the

3-million production milestone

Question.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

Assets 2008 2007

Cash 1,26,000 1,14,000

Short-term investment 42,400 20,000

Debtors 60,000 50,000

Stock 38,000 28,000

Long term Investment 28,000 44,000

Machinery 2,00,000 1,40,000

Building 2,40,000 80,000

Land 14,000 14,000

Total 7,48,400 4,90,000

Liabilities and Equity

Accumulated depreciation 1,10,000 60,000


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Creditors 40,000 30,000

Bills Payable 20,000 10,000

Secured loans 2,00,000 1,00,000

Share capital 2,20,000 1,60,000

Share premium 24,000 Nil

Reserves and surplus 1,34,400 1,30,000

Total 7,48,400 4,90,000

Income statement

Sales 2,40,000

Cost of goods sold 1,34,600

Gross Profit 1,05,200

Less Operating expenses:

Depreciation machinery 20,000

Depreciation building 32,000

Other expenses 40,000 92,000

Net profit from operation

13,200

Gain on sale on long-term investment 4,800

Total 18,000

Loss on sale of machinery 2,000

Net Profit 16,000


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Adjustments:

1)Machinery worth Rs.70000 was purchased and worth Rs.10000 was sold

during the year [Accumulated depreciation on machinery is Rs.18000

after adjusting depreciation on machinery sold]. Proceeds from the sale ofmachinery were Rs.6000

2)Dividends paid during the year Rs.11600

Answer.5

Schedule of change in working capital


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Question.6 What is a cash budget? How it is useful in

managerial decision making?

Answer.6Cash budget is an estimation of the cash inflows and outflows for

a business or individual for a specific period of time. Cash budgets are oftenused to assess whether the entity has sufficient cash to fulfill regular

operations and/or whether too much cash is being left in unproductive

capacities. A cash budget is extremely important, especially for small

businesses, because it allows a company to determine how much credit it can

extend to customers before it begins to have liquidity problems. For

individuals, creating a cash budget is a good method for determining where

their cash is regularly being spent. This awareness can be beneficial because

knowing the value of certain expenditures can yield opportunities foradditional savings by cutting unnecessary costs. For example, without setting

a cash budget, spending a dollar a day on a cup of coffee seems fairly

unimpressive. However, upon setting a cash budget to account for regular

annual cash expenditures, this expenditure comes out to an annual total of

$365, which may be better spent on other things. If you frequently visit

specialty coffee shops, your annual expenditure will be substantially more.

The importance of cash budget may be summarized as follow:-

(1) Helpful in Planning. Cash budget helps planning for the most efficient use

of cash. It points out cash surplus or deficiency at selected point of time and

enables arrange for the deficiency before time or to plan for investing the

surplus money as profitable as possible without any threat to the liquidity.

(2) Forecasting the Future needs. Cash budget forecasts the future needs of

funds, its time and the amount well in advance. It, thus, helps planning for

raising the funds through the most profitable sources at reasonable terms and

costs.

(3) Maintenance of Ample cash Balance. Cash is the basis of liquidity of the

enterprise. Cash budget helps in maintaining the liquidity. It suggests

adequate cash balance for expected requirements and a fair margin for the

contingencies.


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(4) Controlling Cash Expenditure. Cash budget acts as a controlling device.

The expenses of various departments in the firm can best be controlled so as

not to exceed the budgeted limit.

(5) Evaluation of Performance. It acts as a standard for evaluating thefinancial performance.

(6)Testing the Influence of proposed Expansion Programme. Cash budget

forecasts the inflows from a proposed expansion or investment programme

and testify its impact on cash position.

(7) Sound Dividend Policy. Cash budget plans for cash dividend to

shareholders, consistent with the liquid position of the firm. It helps in

following a sound consistent dividend policy.(8) Basis of Long-term Planning and Co-ordination. Cash budget helps in

co-coordinating the various finance functions, such as sales, credit, investment,

working capital etc. it is an important basis of long term financial planning

and helpful in the study of long term financing with respect to probable

amount, timing, forms of security and methods of repayment.


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Master of Business Administration - MBA Semester 1

MB0041 Financial and Management Accounting

Assignment Set- 2 (60 Marks)

Note: Each question carries 10 Marks. Answer all the questions.

Question.1Selected financial informationabout Vijay merchant

company is given below:

2010 2009

Sales 69,000 43,000

Cost of Goods Sold 57,000 32,500

Debtors 7,200 3,000

Inventories 11,400 5,500

Cash 1,500 800

Other current assets 4,000 2,700

Current liabilities 16,000 11,000


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Compute the current ratio, quick ratio, average debt collection period and

inventory turnover for 2009 and 2010. State whether there is a favorable or

unfavorable change in liquidity from 2009 to 2010. At the beginning of 2009,

the company had debtors of Rs..2500 and inventory of Rs.3000 .

Answer.1

Question.2 . Explain different methods of costing. Your answer

should be studded with examples (preferably firm name and

product) for each method of costing.

Answer.2 This is a product related classification of costing system. The cost is

ascertained for each job or work order processed. This system is used where

most of the manufacturing activities are planned and carried out for distinct


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jobs or customers. The utility of this method increases when there is great

variability in nature of jobs or work orders processed

Batch Costing : This method determines the cost associated with each batch pf

products manufactured. This differs from job or work order costing in thevariability of the production batches. In this case the production batches consist

of mostly standard products or components. What varies is mostly the size of

batches and the timing of their processing.

Process Costing: In this method of costing the costs are determined for various

different manufacturing activities or processes. These costs are the assigned to

different products on the basis of some criteria like quantity processed or the

time taken for processing. This method of costing is suitable for manufacturing

units that use continuous processes or mass production techniques. Thismethod is particularly suitable where there are many different products and

process routes, where output of one process becomes input for another.

Operation Costing: This method is similar to the process costing. However the

products manufactured have limited variation. For example a cement plant may

use this method.

Multiple costing: Most of the organizations use a combination of different

costing method rather than just one method. Multiple costing refers to suchcombinations of different methods.

Question.3. State the importance of differentiating between the

fixed costs and variable costs in managerial decision.

Answer.3 Variable costs are costs that can be varied flexibly as conditions

change. In the John Bates Clark model of the firm that we are studying, laborcosts are the variable costs. Fixed costs are the costs of the investment goods

used by the firm, on the idea that these reflect a long-term commitment that can

be recovered only by wearing them out in the production of goods and services

for sale. The idea here is that labor is a much more flexible resource than capital

investment. People can change from one task to another flexibly (whether


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within the same firm or in a new job at another firm), while machinery tends to

be designed for a very specific use. If it isn't used for that purpose, it can't

produce anything at all. Thus, capital investment is much more of a

commitment than hiring is. In the eighteen-hundreds, when John Bates Clark

was writing, this was pretty clearly true. Over the past century, a) educationand experience have become more important for labor, and have made labor

more specialized, and b) increasing automatic control has made some

machinery more flexible. So the differences between capital and labor are less

than they once were, but all the same, it seems labor is still relatively more

flexible than capital. It is this (relative) difference in flexibility that is expressed

by the simplified distinction of long and short run. Of course, productivity and

costs are inversely related, so the variable costs will change as the productivity

of labor changes.

Here is a picture of the fixed costs (FC), variable costs (VC) and the total of both

kinds of costs (TC) for the productivity.

Output produced is measured toward the right on the horizontal axis. The cost

numbers are on the vertical axis. Notice that the variable and total cost curves

are parallel, since the distance between them is a constant number -- the fixed

cost


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Question.4 . Following are the extracts from the trial balance of a

firm as at 31st March 2009

Name of the account Dr Cr

Sundry debtors 2,05,000

Bad debts 3,000

Additional Information

1)After preparing the trial balance, it is learnt that Mr.X a debtor has

become insolvent and nothing could be recovered from him and,

therefore the entire amount of Rs.5,000 due from him was irrecoverable.

2)Create 10% provision for doubtful debt.

Required: Pass the necessary journal entries and show the sundry debtors

account, bad debts account, provision for doubtful debts account, P&L a/c and

Balance sheet as at 31st March 2009.

Answer.4

Sundry debtors 205000

Less :- Bad debt 5000less :- PBD 20000

180000


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Question.5 A change in credit policy has caused an increasein sales, an increase in discounts taken, a decrease in the amount

of bad debts, and a decrease in investment in accounts

receivable. Based upon this information, the companys (select

the best one and give reason)

1)Average collection period has decreased2)

Percentage discount offered has decreased

3)Accounts receivable turnover has decreased4)Working Capital has increased

Answer.5

Average collection period has decreased

Since sales have increased, you would expect accounts receivable to increase

too, if the Average collection period remained the same.

But you're told that AR has decreased, so the Average collection period must

have decreased, i.e. the customers are taking fewer days to pay up.


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Question.6 Identify the users of accounting information.

Answer.6 Accounting plays a very important role in all businesses but it is not

just the business itself that finds accounting information useful. There are

other stake holders who rely on accounting information to make decisions.

These stakeholders include:

1. Shareholders - Shareholders use the balance sheet and profit and loss

account produced by limited companies to decide if they are going to increase

or decrease their holding.

2. Management- Management in every level of the business from director level

to supervisor level rely on accounting information to do their job properly.

They all use the same information for different purposes. For example,

directors use it for strategic purposes and middle management can use it to

see if they are meeting their financial targets.

3. Suppliers - Along with other data suppliers will look at a company's balance

sheet and profit and loss account to see if and how much credit they are

willing to give to present and potential customers.

4. Lenders - Similar to suppliers lenders also need to make sure a company is

in a healthy financial situation before they start to lend money.

5. Government- Governments use the information provided by a company

about its finances to levy tax on the profits.

6. Customers - Before another company becomes a customer or enters into a

joint venture, they will look at the company's finances to make sure the

company is not in trouble and that their supplies are not about to dry up.


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7. Employees - Employees also have an interest in how well their employer is

doing so use financial accounting information for this purpose

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