MS-04 Accounting and Finance for Managers

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ASSIGNMENT

Course Code      :MS-04

     Course Title     :  Accounting and Finance for Managers

Note : Attempt all the questions and submit this assignment on or before 30^th 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 31^st 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

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