MB0041 –Financial and Management Accounting



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Master of Business Administration- MBA Semester 1

MB0041 –Financial and Management Accounting- 4 Credits

(Book ID: B1624)

Assignment Set- 2 (60 Marks)

Note: Answer all questions (with 300 to 400 words each) must be written within 6-8 pages. Each Question carries 10 marks 6 X 10=60


Q1. An accountant finds that the trial balance of his client did not tally and it showed an excess credit of Rs. 69.74. He transferred it to a suspense account and later discovered the following errors.

a) Rs. 44.37 paid to Anand has been credited to his account as Rs. 34.37.

b) A purchase of Rs. 145.50 has been posted as Rs. 154.50 to the purchases account.

c) An expenditure of Rs. 158 on repairs has been debited to the buildings account.

d) Rs. 80 was allowed by B as discount which has not been entered in the books.

e) A sum of Rs. 125.05 realised on the sale of old furniture has been posted to the sales account.

Give journal entries to rectify the errors and show the suspense account as it would appear after adjustments

Hint: Total of suspense a/c = 78.74


Answer :


Q2. Distinguish between management accounting and financial accounting.


Answer : Financial and management accounting are both important tools for a business, but serve different purposes. A business uses accounting to determine operational plans in the future, to review past performance and to check current business functions. Management and financial accounting have different audiences, as investors are not usually involved in the day-to-day operations of the business but are


Q3. Draw the Balance Sheet for the following information provided by Sarawath Ltd..

a. Current Ratio                                                  : 2.50

b. Liquidity Ratio                                                 : 1.50

c. Net Working Capital                                        : Rs.300000

d. Stock Turnover Ratio                                      : 6 times

e. Ratio of Gross Profit to Sales                         : 20%

f. Fixed Asset Turnover Ratio                             : 2 times

g. Average Debt collection period                     : 2 months

h. Fixed Assets to Net Worth                             : 0.80

i. Reserve and Surplus to Capital                       : 0.50


Hint: B/S total 1100000


Answer :


Q4. Following is the balance sheet for the period ending 31st March 2006 and 2007. If the current year’s net loss is Rs.38,000, calculate the cash flow from operating activities.


  31st MARCH






Short-term loan to employees












Provision for doubtful debts





Bills payable






Stock in trade






Bills receivable






Prepaid expenses






Outstanding expenses








Hint: Net cash lost in operating activities (69800)


Answer :



Q5. The following data are related to the manufacture of a standard product during the month of July 2009.



Raw materials consumed




Direct wages


Rs. 9,000



Machine hours worked


900 hours


Machine hours rate




Administrative overheads


20% of works cost


Selling overheads


Re.0.50 per unit


Units produced




Units Sold


16,000 @ Rs.4 per unit


Prepare a cost sheet from the above to show:

a. The cost per unit

b. The profit per unit sold and profit for the period


Hint: Profit = 24000


Answer :


Q6. Write the differences between absorption costing and management costing.


Answer : What is Absorption Costing?


A management cost accounting method of expensing all the costs related with the production of a particular product is known as absorption costing. Absorption costing utilizes the total overhead costs and total direct costs related with producing a product as the cost base. The GAAP need absorption costing for external reporting. Generally accepted accounting principles (GAAP) require the absorption costing for the




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