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4.Choose an Indian Company of your choice that has adopted Balance Score Card and detail on it.Tata motorsTata Motors is t...
(a) Accounting Standards (ASs) AS 1 Disclosure of Accounting PoliciesAS 2 Valuation of Inventories AS 3 Cash Flow Statemen...
approving Interpretations of IFRSs as developed by the IFRS Interpretations Committee (formerly called theIFRIC). All meet...
1.   18. Discounted a B/E for Rs. 1,000 at 1% through bank20. Honored our own acceptance by cheque Rs. 5,00022. Withdrew f...
5.From the following data of Jagdish Company prepare (a) a statement of source and uses of working capital    (funds) (b) ...
Answer:                                       Schedule of change in working capital6.What is a cash budget? How it is usef...
cash expenditures, this expenditure comes out to an annual total of $365, which may be better spent on other things.If you...
SET24.Following are the extracts from the trial balance of a firm as at 31st March 2009Name of the account                ...
3.State the importance of differentiating between the fixed costs and variable costs in managerial decision. Variable cost...
Process Costing: In this method of costing the costs are determined for various different manufacturing activities orproce...
3. Suppliers - Along with other data suppliers will look at a companys balance sheet and profit and loss account tosee if ...
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  1. 1. 4.Choose an Indian Company of your choice that has adopted Balance Score Card and detail on it.Tata motorsTata 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 Telecomand Norwegian Air Force for achieving excellence in performance.The commercial vehicle business unit (CVBU) of Tata Motors, Indias largest automobile manufacturer, receivedprestigious Balanced Scorecard Collaborative, The coveted Steuben crystal Rising Star trophy was presented atBalanced 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 operationalperformance. Defining, cascading and communicating strategies across the organisation have brought abouttransparency and alignment.The scorecard incorporates SQDCM (safety, quality, delivery, cost and morale) and VMCDR (volume, marketshare, 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 threeyears back, we are extremely pleased that it has helped us achieve significant improvements in our overallperformance. I am quite positive that the BSC will play an important part in our objective to become a world-classorganization."Balanced Scorecard Collaborative president Dr David P Norton said, "We created the Hall of Fame topublicly acknowledge the hard work and remarkable results of implementing the Balanced Scorecard to create thestrategy-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," theBSC puts strategy at the centre of the management process, allowing organizations to implement strategies rapidlyand reliably.Balanced Scorecard Collaborative, Inc. is a new kind of professional services firm dedicated to the worldwideawareness, use, enhancement, and integrity of the Balanced Scorecard as a value-added management process. TataMotors range of commercial vehicles spans over 135 models and can haul loads ranging from 2 to 40 tones. Theproduct portfolio also includes 12 to 60-seater buses, tippers and tractor-trailers. Tata Motors vehicles meet thestringent 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 oftime. Cash budgets are often used to assess whether the entity has sufficient cash to fulfill regular operations and/orwhether too much cash is being left in unproductive capacities. A cash budget is extremely important, especially forsmall businesses, because it allows a company to determine how much credit it can extend to customers before itbegins 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 foradditional savings by cutting unnecessary costs. For example, without setting a cash budget, spending a dollar a dayon a cup of coffee seems fairly unimpressive. However, upon setting a cash budget to account for regular annualcash 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 ordeficiency at selected point of time and enables arrange for the deficiency before time or to plan for investing thesurplus 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 inadvance. It, thus, helps planning for raising the funds through the most profitable sources at reasonable terms andcosts.(3) Maintenance of Ample cash Balance. Cash is the basis of liquidity of the enterprise. Cash budget helps inmaintaining the liquidity. It suggests adequate cash balance for expected requirements and a fair margin for thecontingencies.2a. List the accounting standards issued by ICAI.2b. Write short notes of IFRS.
  2. 2. (a) Accounting Standards (ASs) AS 1 Disclosure of Accounting PoliciesAS 2 Valuation of Inventories AS 3 Cash Flow Statements AS 4 Contingencies and Events Occurring after the Balance Sheet DateAS 5 Net Profit or Loss for the period, Prior Period Items and Changes in Accounting Policies AS 6 Depreciation AccountingAS 7 Construction Contracts (revised 2002)AS 8 Accounting for Research and DevelopmentAS 9 Revenue RecognitionAS 10 Accounting for Fixed AssetsAS 11 The Effects of Changes in Foreign Exchange Rates (revised 2003)AS 12 Accounting for Government Grants AS 13 Accounting for InvestmentsAS 14 Accounting for Amalgamations AS 15 Employee Benefits Limited Revision to Accounting Standard (AS) 15, Employee BenefitsAS 15 (issued 1995) Accounting for Retirement Benefits in the Financial Statement of Employers AS 16 Borrowing CostsAS 17 Segment ReportingAS 18, Related Party DisclosuresAS 19 Leases AS 20 Earnings Per ShareAS 21 Consolidated Financial Statements AS 22 Accounting for Taxes on Income.AS 23 Accounting for Investments in Associates in Consolidated Financial StatementsAS 24 Discontinuing OperationsAS 25 Interim Financial ReportingAS 26 Intangible AssetsAS 27 Financial Reporting of Interests in Joint VenturesAS 28 Impairment of AssetsAS 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 29AS 31, Financial Instruments: Presentation Accounting Standard (AS) 32, Financial Instruments: Disclosures, andlimited revision to Accounting Standard (AS) 19, LeasesIFRSThe IFRS Foundation is an independent, not-for-profit private sector organization working in the public interest. Itsprincipal 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 bodyrests with its Trustees, who are also responsible for safeguarding the independence of the IASB and ensuring thefinancing of the organisation. The Trustees are publicly accountable to a Monitoring Board of public authorities.Standard-settingThe IASB (International Accounting Standards Board)The IASB is the independent standard-setting body of the IFRS Foundation. Its members (currently 15 full-timemembers) are responsible for the development and publication of IFRSs, including the IFRS for SMEs and for
  3. 3. approving Interpretations of IFRSs as developed by the IFRS Interpretations Committee (formerly called theIFRIC). All meetings of the IASB are held in public and webcast. In fulfilling its standard-setting duties the IASBfollows a thorough, open and transparent due process of which the publication of consultative documents, such asdiscussion papers and exposure drafts, for public comment is an important component. The IASB engages closelywith stakeholders around the world, including investors, analysts, regulators, business leaders, accounting standard-setters and the accountancy profession.The IFRS Interpretations CommitteeThe IFRS Interpretations Committee (formerly called the IFRIC) is the interpretative body of the IASB. TheInterpretations Committee comprises 14 voting members appointed by the Trustees and drawn from a variety ofcountries and professional backgrounds. The mandate of the Interpretations Committee is to review on a timely basiswidespread accounting issues that have arisen within the context of current IFRSs and to provide authoritativeguidance (IFRICs) on those issues. Interpretation Committee meetings are open to the public and webcast. Indeveloping interpretations, the Interpretations Committee works closely with similar national committees andfollows a transparent, thorough and open due process.(4) Controlling Cash Expenditure. Cash budget acts as a controlling device. The expenses of various departmentsin 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 proposedexpansion 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 positionof the firm. It helps in following a sound consistent dividend policy.(8) Basis of Long-term Planning and Co-ordination. Cash budget helps inco-coordinating the various finance functions, such as sales, credit, investment, working capital etc. it is animportant basis of long term financial planning and helpful in the study of long term financing with respect toprobable 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. 20,000Jan 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. 4. 1. 18. Discounted a B/E for Rs. 1,000 at 1% through bank20. Honored our own acceptance by cheque Rs. 5,00022. Withdrew fir personal use Rs. 1,00024. Paid tread expenses Rs. 2,00025. Withdrew from bank for private expenses Rs. 1,50026. Purchased machinery from Rajiv for 5,000 and paid him by means of a bank draft purchased for Rs.5,00527. Issued cheque to Ram Saran for cash purchased of furniture Rs. 1,57528. Received a cheque for commission Rs. 500 from R.& Co. and deposited into bank29. Ramesh who owned us Rs. 500 became bankrupt and paid us 50 paise in the rupee30. Received payment of a loan of Rs. 5,000 and deposited Rs. 3,000 out of into bank31. Paid rent to landlord “Mohan” by cheque of Rs. 22031. Interest allowed by bank Rs. 3031. Half-yearly bank charges Rs. 50
  5. 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. 6. Answer: Schedule of change in working capital6.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 oftime. Cash budgets are often used to assess whether the entity has sufficient cash to fulfill regular operations and/orwhether too much cash is being left in unproductive capacities. A cash budget is extremely important, especially forsmall businesses, because it allows a company to determine how much credit it can extend to customers before itbegins 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 foradditional savings by cutting unnecessary costs. For example, without setting a cash budget, spending a dollar a dayon a cup of coffee seems fairly unimpressive. However, upon setting a cash budget to account for regular annual
  7. 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 ordeficiency at selected point of time and enables arrange for the deficiency before time or to plan for investing thesurplus 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 inadvance. It, thus, helps planning for raising the funds through the most profitable sources at reasonable terms andcosts.(3) Maintenance of Ample cash Balance. Cash is the basis of liquidity of the enterprise. Cash budget helps inmaintaining the liquidity. It suggests adequate cash balance for expected requirements and a fair margin for thecontingencies.(4) Controlling Cash Expenditure. Cash budget acts as a controlling device. The expenses of various departmentsin 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 proposedexpansion 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 positionof the firm. It helps in following a sound consistent dividend policy.(8) Basis of Long-term Planning and Co-ordination. Cash budget helps inco-coordinating the various finance functions, such as sales, credit, investment, working capital etc. it is animportant basis of long term financial planning and helpful in the study of long term financing with respect toprobable 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 youfirm earn profit or incurred loss at the end? Make a small comment on your financial position at the end.
  8. 8. SET24.Following are the extracts from the trial balance of a firm as at 31st March 2009Name of the account Dr CrSundry debtors 2,05,000Bad debts 3,000Additional Information1) After preparing the trial balance, it is learnt that Mr.X a debtor has become insolvent and nothing couldbe 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 205000Less :- Bad debt 5000less :- PBD 20000 180000
  9. 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 firmthat we are studying, labor costs are the variable costs. Fixed costs are the costs of the investment goods used by thefirm, on the idea that these reflect a long-term commitment that can be recovered only by wearing them out in theproduction of goods and services for sale. The idea here is that labor is a much more flexible resource than capitalinvestment. People can change from one task to another flexibly (whether within the same firm or in a new job atanother firm), while machinery tends to be designed for a very specific use. If it isnt used for that purpose, it cantproduce 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 laborare 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 theproductivity.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 -- thefixed cost.2.Explain different methods of costing. Your answer should be studded with examples (preferably firm nameand product) for each method of costing.This is a product related classification of costing system. The cost is ascertained for each job or work orderprocessed. This system is used where most of the manufacturing activities are planned and carried out for distinctjobs or customers. The utility of this method increases when there is great variability in nature of jobs or work ordersprocessedBatch Costing : This method determines the cost associated with each batch pf products manufactured. This differsfrom job or work order costing in the variability of the production batches. In this case the production batchesconsist of mostly standard products or components. What varies is mostly the size of batches and the timing of theirprocessing.
  10. 10. Process Costing: In this method of costing the costs are determined for various different manufacturing activities orprocesses. These costs are the assigned to different products on the basis of some criteria like quantity processed orthe time taken for processing. This method of costing is suitable for manufacturing units that use continuousprocesses or mass production techniques. This method is particularly suitable where there are many differentproducts 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 limitedvariation. 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 onemethod. Multiple costing refers to such combinations of different methods.1.Selected financial information about Vijay merchant company is given below: 2010 2009Sales 69,000 43,000Cost of Goods Sold 57,000 32,500Debtors 7,200 3,000Inventories 11,400 5,500Cash 1,500 800Other current assets 4,000 2,700Current liabilities 16,000 11,000Compute 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 accountinginformation useful. There are other stake holders who rely on accounting information to make decisions. Thesestakeholders include:1. Shareholders - Shareholders use the balance sheet and profit and loss account produced by limited companies todecide 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 onaccounting information to do their job properly. They all use the same information for different purposes. Forexample, directors use it for strategic purposes and middle management can use it to see if they are meeting theirfinancial targets.
  11. 11. 3. Suppliers - Along with other data suppliers will look at a companys balance sheet and profit and loss account tosee 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 beforethey start to lend money.5. Government - Governments use the information provided by a company about its finances to levy tax on theprofits.6. Customers - Before another company becomes a customer or enters into a joint venture, they will look at thecompanys 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 accountinginformation for this purpose.5.A change in credit policy has caused an increase in sales, an increase in discounts taken, a decrease in theamount of bad debts, and a decrease in investment in accounts receivable. Based upon this information, thecompany’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 increasedAverage collection period has decreasedSince sales have increased, you would expect accounts receivable to increase too, if the Average collection periodremained the same.But youre told that AR has decreased, so the Average collection period must have decreased, i.e. the customers aretaking fewer days to pay up.

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