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Course Code :MS-04
Course Title : Accounting
and Finance for Managers
Note : Attempt all the questions and submit this assignment on or before
30th April, 2013 to the coordinator of your study center.
Q1. Explain in detail the various
accounting concepts and discuss the application of these concepts in the
preparation of financial statements.
Ans. Accounting is the language used
by businesses to communicate their financial information and performance to
interested parties. Like every language accounting too has a set of concepts
that it is based on. Accounting has a set of twelve fundamental concepts that
form the basis of all accounting; these concepts are called the General
Accepted Accounting Principles (GAAP). These concepts explain the meaning of
all the figures that are found in the
Q2. Fairdeals Ltd. presents the
balance sheets as at 31.12.2009 and 31.12.2010 as follows:
|
31.12.09
|
31.12.10
|
Assets
|
Rs.
|
Rs.
|
Fixed Assets at cost
|
31,30,000
|
36,05,000
|
Less: Depreciation
|
6,80.000
|
8,20,000
|
|
24,50,000
|
27,85,000
|
Investments
|
12,50,000
|
13,50,000
|
Marketable Securities
|
60,000
|
30,000
|
Inventories
|
4,10,000
|
5,20,000
|
Book Debts
|
5,30,000
|
5,05,000
|
Cash and Bank
|
1,20,000
|
1,40,000
|
Preliminary Expenses
|
1,00,000
|
50,000
|
|
49,20,000
|
53,80,000
|
Liabilities
|
||
Share Capital
|
20,00,000
|
25,00,000
|
Reserve and Surplus
|
4,20,000
|
4,70,000
|
Profit and Loss Account
|
3,80,000
|
4,00,000
|
13.5% Debentures (Convertible)
|
10,00,000
|
8,00,000
|
Mortgage Loan
|
3,00,000
|
2,50,000
|
Current Liabilities
|
8,20,000
|
9,60,000
|
|
49,20,000
|
53,80,000
|
You are informed that during 2010
(i)
Rs. 2,00,000 of debentures were converted into shares at par;
(ii)
Rs. 1,00,000 shares were issued to a vendor of fixed assets;
(iii)
A machine costing Rs. 50,000 book value Rs. 30,000 as at 31st
December, 2009 was disposed off for Rs. 20,000;
(iv)
Rs. 30,000 of marketable securities (cost) was disposed off for Rs.
36,000.
You are required to prepare a
schedule of working capital changes and funds flow statement of the company for
2010.
Ans.
Q3. An Analysis of S Ltd. cost
records give the following information.
|
Variable Cost
|
Fixed Cost
|
|
(% of Sales)
|
Rs.
|
Direct Material
|
32.8%
|
-
|
Direct Labour
|
28.4
|
-
|
Factory Overhead
|
12.6
|
1,89,000
|
Distribution Overhead
|
4.1
|
58,400
|
Administration Overhead
|
1.1
|
66,700
|
Budgeted sales for the next year
are Rs. 18, 50,000. You are required to determine:
(a)
Break even sales value
(b)
Profit at the budgeted sales volume
(c)
Profit if actual sales: (i) drop by 10% (ii) increase by 5% from the
sale.
Ans. (a). Break-
Q4. Briefly explain the
following :
a) Rolling budget
b) Performance budgeting
c) Zero base budgeting
d)
Measures of financial beverage
Ans. (a) A rolling budget is a budget
that is continually updated to add a new budget period as the most recent
budget period is completed. A rolling budget calls for considerably more
management attention than is the case when a company produces a one-year static
budget, since some budgeting activities must now be repeated every month. In
(b). Performance budgeting - the use of performance criteria to link
funding to results - has become a key element in the public sector reform
agendas of many countries. This book examines the diverse range of models that
have emerged. Using a combination of theoretical analysis and case studies, it
sheds light on what works
(c). A method of budgeting in which all expenses
must be justified for each new period. Zero-based budgeting starts from a “zero
base” and every function within an organization are analyzed for its needs and
costs. Budgets are then
(d).
Q5. What is capital structure?
Explain the features and determinants of an appropriate capital structure.
Ans. Capital
structure: It represents the total long-term investment in a business firm.
It includes funds raised through ordinary and preference shares, bonds, debentures,
term loans from financial institutions, etc. Any earned revenue and capital
surpluses are included.
Capital Structure Planning:
Decision regarding what type of capital structure a company should have is of
critical importance because
Dear
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