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ma answers.pdf

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2.Comparitive Balance Sheet
3.Current Assets
4.Trend Percentage
5.Advantages of Fund flow Statement
Advantages of Funds Flow Statement :
Preparation of 'Funds Flow Sta...
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ma answers.pdf

  1. 1. 2.Comparitive Balance Sheet
  2. 2. 3.Current Assets
  3. 3. 4.Trend Percentage 5.Advantages of Fund flow Statement Advantages of Funds Flow Statement : Preparation of 'Funds Flow Statement' is beneficial in the following manner : 1) Helps in the Analysis of Financial Operations : The net effect of different business transactions on the Operational' as well as "Financial' status of an organisation are disclosed through the 'Financial Statements' ('Balance Sheet and Profit and Loss Account') prepared for an accounting period. The 'Balance Sheet' reveals the position regarding
  4. 4. various resources of funds of a business enterprise and the applications thereof as on a specific date. However, it does not bring to the forefront the reasons behind the changes in the assets and liabilities of an organisation between two different points of time. The analysis of 'Funds Flow Statement' not only explains the reasons for those changes, it also brings out the impact of such changes on the liquidity status of the organisation. 2) Helps in the Formation of a Reasonable Dividend Policy : There may be a situation, where a company may have enough available profits for dividend distribution, still it is not advisable to distribute dividend due to liquidity constraints. Analysis of 'Funds Flow Statement' facilitates formulation of a reasonable dividend policy in such situations. 3) Helps in the Proper Distribution of Resources : Generally, the resources of any organisation are constrained and it is the endeavour of the organisation to use those resources in an optimal and prudent manner. The 'Funds Flow Statement' is helpful to the management in taking appropriate decisions with regard to the deployment or allocation of limited resources. 4) Helps in Improving the Use of Working Capital : A Funds Flow Statement' reveals the efficiency of the management in utilising the available 'Working Capital'. It also advices the steps to be taken for improving the Working Capital Management of the company. 5) Helps Knowing the Overall Creditworthiness of a Firm : Funds Flow Statement for a number of years is one of the most important documents required by the financial institutions and banks (e.g. State Financial Institutions (SFIs), State Industrial Development Corporations (SIDCs), Industrial Finance Corporation of India (IFC), and all the commercial banks), before granting loans. It helps them in ascertaining the creditworthiness or repaying capacity of the business enterprise. Thus, it is mandatory for these financial institutions to prepare funds flow statement.
  5. 5. 6.CASH FLOW STATEMENT 7.Examples of Fund flow Statement https://learn.financestrategists.com/explanation/management-accounting/what-is-fund-fl ow-statement/ 8.Margin of safety https://www.accountingformanagement.org/margin-of-safety/ 9.BEP https://www.investopedia.com/terms/b/breakevenpoint.asp 10Cost volume profit analysis https://www.investopedia.com/terms/c/cost-volume-profit-analysis.asp#:~:text=Cost%2D volume%2Dprofit%20(CVP)%20analysis%20is%20a%20way,a%20certain%20minimum%2 0profit%20margin. 11.Marginal costing concept https://businessjargons.com/marginal-costing.html 12.Budgetary control https://www.economicsdiscussion.net/cost-accounting/budgetary-control/32588 13.zero based budget
  6. 6. https://www.investopedia.com/terms/z/zbb.asp 14.Absorption Costiing https://www.investopedia.com/terms/a/absorptioncosting.asp#:~:text=Absorption%20cos ting%2C%20sometimes%20called%20%E2%80%9Cfull,for%20by%20using%20this%20me thod. 15.Standard costing https://learn.financestrategists.com/explanation/variance-analysis/standard-costing/ 16.Characteristic of Budget https://www.simandhareducation.com/blog/post-cma-exam-study-notes-characteristics-o f-successful-budgeting.php 17.Types of costs https://www.toppr.com/guides/business-economics/laws-of-production/concept-of-costs/ 18.Prime cost https://www.investopedia.com/ask/answers/052615/what-prime-cost-formula.asp 19.Uses of Cost accounting https://www.toppr.com/guides/fundamentals-of-accounting/fundamentals-of-cost-account ing/importance-of-cost-accounting/ 20.Advantages and disadvantage of management https://www.aplustopper.com/management-accounting-advantages-and-disadvantages/ 21.Management accounting is nothing more than the use of financial statement. https://www.dynamictutorialsandservices.org/2020/11/management-accounting-solved-pa pers.html 22.Ratio and uses https://www.managementstudyguide.com/users-of-ratio-analysis.htm
  7. 7. 23.Fund Flow Statement https://www.toppers4u.com/2020/12/fund-flow-statement-objectives.html 24.Steps involved in preparing fund flow statement https://www.yourarticlelibrary.com/accounting/financial-statements/preparing-funds-flow- statement-steps-rules-and-format/57272 25.Margin of Safety https://blog.finology.in/stock-market/margin-of-safety-its-importance https://qsstudy.com/significance-margin-safety/ 26.Marginal Costing Vs Absorption Costing https://keydifferences.com/difference-between-marginal-costing-and-absorption-costing. html 27.Different Methods of Costing https://www.economicsdiscussion.net/cost-accounting/different-methods-of-costing/316 51 28. Cost heads https://businessjargons.com/cost-sheet.html#:~:text=Cost%20Heads,-Prime%20Cost%3A %20Prime&text=It%20includes%20direct%20material%20cost,the%20workers%20and%20 production%20manager. —- PART C 5.i) Cost Variance = Standard Cost – Actual Cost 5,100 – `4,950 = `150 (F) Workings:
  8. 8. (a) Calculation of Actual Cost: 85 workers for 50 hours @ 1 per hour = 4,250 10 workers for 50 hours @ 80 p. per hour = 400 5 workers for 50 hours @ `1.20 per hour = 300 Total actual cost 4,950 (b) Calculation of Standard Rate: Standard cost per (gang hour) = 100 × 50 × `1 = `5000 Standard production (per gang hour) = 100 × 200 × 50 = 10000 unit Standard rate per unit = `5000 10000 = 50 p. per unit. (c) Calculation of Standard Cost: Actual production × Standard rate 10,200 units × 50 p. per unit = `5,100 (ii) Rate Variance: As the actual wage rate has deviated from the standard in respect of only 15 workers out of a total of 100 workers, wages rate variance would be calculated only in respect of these 15 workers. Actual Hours (Standard Rate – Actual Rate) Therefore, 500 Hours (`1 – 80 p.) = `100 (F) 250 Hours (`1 – `1.20) = `50 (A) Thus, the total rate variance is `50 (F).
  9. 9. (iii) Efficiency Variance: Efficiency variance is indicated by the fact that, as compared with standard production of 10,000 units (200 units × 50 hours), the actual production is 10,200 units Standard Rate (Standards Hours – Actual Hours) `1 (5,100 - 5,000) = `100 favourable. Calculation of Standard Hours= 5000 10200 = 5,100 hours. 10000 Yield Variance: Standard labour cost per unit of output (SY – AY) 0.50 (10,000 – 10,200) = `100 (F) Verification: Cost Variance = Rate Variance + Efficiency Variance 150 (F) = 50 (F) + `100 (F) PART C 3. b) Calculation of present profit ` Selling price per unit A 20.00 Material cost per unit 8.00 Conversion cost per unit 6.00 Dealer‘s margin per unit 2.00 Variable cost per unit B 16.00 Contribution per unit A – B 4.00 Total contribution (` 4 x 90,000 units) 3,60,000 Less : fixed cost 2,50,000 Profit 110,000
  10. 10. The present profit can be maintained by keeping total contribution at present level of ` 3,60,000 (i) Reducing sales price by 5% Reducing sales price by 5% New selling price per unit = 20 – 1 = ` 19.00 New dealer‘s margin per unit = 19 x 10/100 = ` 1.90 New variable cost per unit = 8 + 6 +1.90 = ` 15.90 New contribution per unit = 19.00 – 15.90 = ` 3.10 Desired sales (units) to maintain the present level of profit : = Desired contribution/ New contribution per unit = 3,60,000/3.10 = 116129 (ii) Increasing dealer‘s margin by 25% New dealer‘s margin per unit = 2 + 25% of 2 = ` 2.50 New variable cost per unit = 8 + 6 + 2.50 = ` 16.50 New contribution per unit = 20.00 – 16.50 = ` 3.50 Desired sales (units) required to maintain the present level of profit = Desired contribution/ New contribution per unit = 3,60,000/ 3.50=102875 PART C . 2 How cost Accounting helps the firm in determining the Selling Price? • Ans : Cost accounting provides detailed and relevant cost figures
  11. 11. for determining the selling price of products or services. • In fixing selling prices. However, regard must be had to the cost structure, condition of the market, the type of consumer, the area of distribution, the quantity, which can be supplied, the demand for the product and supply
  12. 12. thereof. • A cost accountant should not only accurately ascertain the total cost but also analyze such total cost under variable and fixed cost so that management may quote prices even below total cost but above variable or marginal costs for increasing volume of sales leading maximization of profit. Que 2: According to you, by adopting Cost Accounting
  13. 13. method, Can a firm prepare a Financial Statement? Ans: In order to prepare financial statements it is required to determine the stock-values at the end of the period over which such financial statements are to be prepared. Physical stock-taking is a lengthy procedure and the business has to be closed down for stock-taking purpose. Where cost accounts are kept, the ascertainment of
  14. 14. the value of closing stocks of raw materials, work-in-progress and finished goods become easy and as such financial statements can be prepared monthly or even weekly. Que 3: Which kind of operating policy decision can we take by using Cost Accounting Method? • Ans: These policies may be- •
  15. 15. • Determination cost-volume-profit relationship; • Whether to shut down or operate at a loss; • Whether to make or buy from outside suppliers; and • Whether to continue with the existing plant and machinery or to replace them by improved and economic ones. Que 4 : (4) From the case, what are the benefits/
  16. 16. Advantages enjoyed by a firm, by adopting Cost Accounting? • Ans: They are as follows --- • Establishment of more accurate unit costs, a knowledge of which results in establishment of fair selling prices and in the elimination of unprofitable lines of product. • Elimination of inefficiencies in plant operation. These inefficiencies are costly and arc caused by material wastage, use of obsolete machinery, poor planning, or assignment of men to work for which they are not qualified. • Presentation of more frequent and more accurate
  17. 17. financial accounts with the help of perpetual inventory system of stock control.

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