Cash budget is an estimation of cash inflows and outflows over a period of time. It allows businesses to determine how much credit can be extended and assess liquidity. It is important for planning, forecasting future cash needs, maintaining adequate cash balances, controlling expenses, evaluating performance, and testing proposed expansions. Key benefits include planning efficient cash use, arranging funds in advance, and following a sound dividend policy.

1. 4.Choose an Indian Company of your choice that has adopted Balance Score Card and detail on it.
Tata motors
Tata Motors is the first Indian company to be inducted in the Balance Scorecard Hall of Fame. Joins the thirty-
member elite club of organizations including Hilton Hotels, BMW Financial Services, US Army, Korea Telecom
and Norwegian Air Force for achieving excellence in performance.
The commercial vehicle business unit (CVBU) of Tata Motors, India's largest automobile manufacturer, received
prestigious Balanced Scorecard Collaborative, The coveted Steuben crystal 'Rising Star' trophy was presented at
Balanced 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 Balanced Scorecard 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 helped us 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 and Korea 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 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 ranging from 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 South Asia, Africa,
Middle East and Europe. Tata Motors recently crossed the 3-million production milestone.
6.What is a cash budget? How it is useful in managerial decision making?
Cash budget is an estimation of the cash inflows and outflows for a business or individual for a specific period of
time. Cash budgets are often used 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 for
additional 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.
2a. List the accounting standards issued by ICAI.
2b. Write short notes of IFRS.

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 8 Accounting for Research and Development
AS 9 Revenue Recognition
AS 10 Accounting for Fixed Assets
AS 11 The Effects of Changes in Foreign Exchange Rates (revised 2003)
AS 12 Accounting for Government Grants
AS 13 Accounting for Investments
AS 14 Accounting 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
AS 18, Related Party Disclosures
AS 19 Leases
AS 20 Earnings Per Share
AS 21 Consolidated Financial Statements
AS 22 Accounting for Taxes on Income.
AS 23 Accounting 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 sector organization 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;
to take account of the financial reporting needs of emerging economies and small and medium-sized
entities (SMEs); and
to bring convergence of national accounting standards and IFRSs to high quality solutions.
The governance and oversight of the activities undertaken by the IFRS Foundation and its standard-setting body
rests with its Trustees, who are also responsible for safeguarding the independence of the IASB and ensuring the
financing of the organisation. The Trustees are publicly accountable to a Monitoring Board of public authorities.
Standard-setting
The 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 the development and publication of IFRSs, including the IFRS for SMEs and for

3. approving Interpretations of IFRSs as developed by the IFRS Interpretations Committee (formerly called the
IFRIC). All meetings of the IASB are held in public and webcast. In fulfilling its standard-setting duties the IASB
follows a thorough, open and transparent due process of which the publication of consultative documents, such as
discussion papers and exposure drafts, for public comment is an important component. The IASB engages closely
with stakeholders around the world, including investors, analysts, regulators, business leaders, accounting standard-
setters and the accountancy profession.
The IFRS Interpretations Committee
The 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 open to 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.
(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 the financial 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.
3.Prepare a Three-column Cash Book of M/s Thuglak & Co. from The following particulars:
20X1 1. 1. Cash in hand Rs. 50,000, Bank Overdraft Rs. 20,000
Jan
1. 2. Paid into bank Rs. 10,000
1. 3. Bought goods from Hari for Rs, 200 for each
1. 4. Bought goods for Rs. 2,000 paid cheque for them, discount allowed 1%
1. 5. Sold goods to Mohan for each Rs. 1.175
1. 6. Received a cheque from Shyam to whom goods were sold for Rs. 800.Discount allowed 12.5%
1. 7. Shyam’s cheque deposited into bank
1. 8. Purchased an old typewriter for Rs. 200 , Spent Rs. 50 on its repairs
1. 9. Bank notified that Shyam’s cheque has been returned dishonored and debited the account in
respect of charges Rs. 10
1. 10. Received a money order Rs. 25 from Hari
1. 11. Shyam settled his account by means of a cheque for Rs. 820, Rs. 20 being for interest charged.
1. 12. Withdrew from the bank Rs. 10,000

4. 1. 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
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 means of 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

5. 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
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
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 of machinery
were Rs.6000
2)Dividends paid during the year Rs.11600

6. Answer:
Schedule of change in working capital
6.What is a cash budget? How it is useful in managerial decision making?
Cash budget is an estimation of the cash inflows and outflows for a business or individual for a specific period of
time. Cash budgets are often used 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 for
additional 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

7. 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.
(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 the financial 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.
Q.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.

8. SET2
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.
Sundry debtors 205000
Less :- Bad debt 5000
less :- PBD 20000
180000

9. 3.State the importance of differentiating between the fixed costs and variable costs in managerial decision.
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, labor costs 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 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)
education and 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.
2.Explain different methods of costing. Your answer should be studded with examples (preferably firm name
and product) for each method of costing.
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
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 the variability 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.

10. 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. This method 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 such combinations of different methods.
1.Selected financial information about 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
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.
6.Identify the users of accounting information.
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.

11. 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.
7. Employees - Employees also have an interest in how well their employer is doing so use financial accounting
information for this purpose.
5.A change in credit policy has caused an increase in 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
company’s (select the best one and give reason)
1. Average collection period has decreased
2. Percentage discount offered has decreased
3. Accounts receivable turnover has decreased
4. Working Capital has increased
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.