The document discusses various topics related to management accounting and capital budgeting. It defines management accounting as the presentation of accounting information to assist management in policy creation and day-to-day operations. It also lists the characteristics, scope, objectives, tools, advantages and disadvantages of management accounting. Further, it explains concepts like ratio analysis, cash flow statement, budgetary control and capital budgeting. Key capital budgeting techniques discussed include payback period, accounting rate of return, net present value, profitability index and internal rate of return.

1. MANAGEMENT
ACCOUNTING

2. INTRODUTION

3. “Management Accounting is the
presentation of accounting information in such
a way as to assist management in the creation
of policy and in the day-to-day operations of
an undertaking” - ICMA
 Define management
accounting.

4. List out the characteristics of
management accounting.
 Providing financial information
 Cause and effect analysis
 Use of special techniques and concepts
 Decision making
 No fixed conventions
 Achievement of objectives
 Improving efficiency
 Forecasting

5. List out the scope of management
accounting.
 Financial Accounting
 Cost Accounting
 Budgeting & Forecasting
 Inventory control
 Statistical Analysis
 Analysis of Data
 Internal Audit
 Tax Accounting
 Methods & Procedures

6. List out any objectives & functions
of management accounting.
Presentation of data
Aid of Planning & Forecasting
Help in Organizing
Decision Making
Effective Control
Motivating Employees

7. What are the tools & techniques of
management accounting?
Financial Policy & Accounting
Analysis of Financial Statement
Historical Cost Accounting
Budgetary Control
Standard Costing
Marginal Costing

8. State the advantages of
management accounting.
 Increase in efficiency
 Effective Planning
 Performance Evaluation
 Profit Maximization
 Reliability
 Effective Communication
 Employee Morale
 Control & Co-ordination
 Elimination of Wastages

9. State the disadvantages of
management accounting.
 Dependence for basic records
 Personal Bias
 Management Accounting is only a Tool
 Provides only Data
 Broad based scope
 Resistance to change
 Costly to install
 Evolutionary stage

10. RATIO ANALYSIS

11. What is ratio?
Ratio is a mathematical
relationship between two items
expressed in a quantitative form.

12. What do you mean by ratio
analysis?
It is the process of determining and
presenting the relationship of items and
groups of items in the financial
statements.
Analysis and interpretation of financial
statements with the help of ratios is
termed as ratio analysis.

13. What are the modes of expressing
ratios?
In Proportion: Amounts of two items are
expressed in the common denominator.
Example (2 : 1)
In Rate or Times: 2 times or 3 times
In Percentage: The amount obtained is
multiplied by 100 to show the relationship
in terms of percentage Example- 25%

14. What are the steps involved in
ratio analysis?
Selection of relevant information
Comparison of calculate ratios
Interpretation and Reporting

15. State any five advantages of ratio
analysis.
Forecasting
Managerial Control
Facilitates Communication
Measuring Efficiency
Facilitating investment decisions
Inter firm comparison

16. State any five limitations of ratio
analysis.
Practical knowledge
Ratios are means
Inter-relationship
Non availability of standards or norms
Accuracy of financial information
Time lag
Change in price level

17. What is profitability ratios?
Profitability ratios are a type of
accounting ratio that helps in
determining the financial performance
of business at the end of an
accounting period.

18. What do you mean by ROI or
Return on Investment?
Return on investment (ROI) is a financial
ratio used to calculate the benefit an
investor will receive in relation to their
investment cost.

19. What do you mean by Gross Profit
Ratio?
Gross profit ratio (GP ratio) is a financial ratio that
measures the performance and efficiency of a
business by dividing its gross profit figure by the
total net sales.

20. What is Operating Ratio?
The operating ratio shows the
efficiency of a company's
management by comparing the total
operating expense of a company to
net sales

21. What is operating profit ratio?
Operating profit ratio is a metric that is obtained by
dividing the operating income of a business by its
net sales.

22. What is Net Profit Ratio?
Net Profit Ratio, also referred to as the Net Profit
Margin Ratio, is a profitability ratio that measures
the company's profits to the total amount of
money brought into the business.

23. What do you mean by EPS or Earnings Per
Share?
Earnings per share or EPS is an important
financial measure, which indicates the
profitability of a company.

24. What is Payout?
Payout Ratio is the ratio between the
amount of dividend paid by a company and
its net income in a specific period.

25. What is Turnover Ratios?
A turnover ratio represents the amount of
assets or liabilities that a company replaces
in relation to its sales. The concept is useful
for determining the efficiency with which a
business utilizes its assets.

26. What is Working Capital?
The capital of a business which is
used in its day-to-day trading
operations, calculated as the current
assets minus the current liabilities.

27. What do you mean by Solvency Ratios?
Solvency ratios are ratios which
measure the ability of a firm to pay its
long-term debt obligations.

28. What is Current Ratio?
The current ratio is a liquidity
ratio that measures a company's
ability to pay short-term obligations or
those due within one year.

29. What is Liquid Ratio?
A liquidity ratio is a type of financial
ratio used to determine a company's
ability to pay its short-term debt
obligations.

30. What is Debt-Equity Ratio?
The debt-to-equity (D/E) ratio indicates
how much debt a company is using to
finance its assets relative to the value
of shareholders' equity.

31. What is Proprietary Ratio?
Proprietary ratio is a type of solvency
ratio that is useful for determining the
amount or contribution of
shareholders or proprietors towards
the total assets of the business.

32. What is Capital Gearing Ratio?
The capital gearing ratio is the ratio of
all capital with a fixed return
(i.e., preference share capital plus
long-term liabilities) to all capital with
a variable return (i.e., ordinary share
capital).

33. What do you mean by capital employed?
Capital employed, also known as funds
employed, is the total amount of
capital used for the acquisition of
profits by a firm or project

34. CASH FLOWSTATEMENT

35. What do you mean by cash flow?
Cash flow refers to the net balance of
cash moving into and out of a business
at a specific point in time.

36. What is Cash Flow Statement?
What is cash flow statement meaning?
A cash flow statement is a financial
statement that provides aggregate
data regarding all cash inflows a
company receives from its ongoing
operations and external investment
sources.

37. Write down the objectives of Cash Flow
Statement.
To provide information on a firms
liquidity and solvency to change cash
flow in future circumstances.
To provide additional information for
evaluating changes in assets,
liabilities and equity.

38. List out the advantages of CFS.
(a) Ascertaining Liquidity and Profitability
Positions: ...
(b) Ascertaining Optimum Cash Balance: ...
(c) Cash Management: ...
(d) Capital Budgeting Decisions: ...
(e) Superiority over Accrual Basis of Accounting:
...
(f) Planning and Co-ordination: ...
(g) Movement of Cash:

39. List out some of the limitations of CFS.

40. What is cash & cash equivalents?
Cash and cash equivalents refers to the line item
on the balance sheet that reports the value of a
company's assets that are cash or can be
converted into cash immediately.

41. State the classifications of CFS
Cash flow from Operating Activities
Cash flow from Investing Activities
Cash flow from Financing Activities

42. What are the steps involved in the
preparation of CFS.
Computation of opening & closing Balance of
Cash & Cash Equivalents.
Determining net cash provided by operating
activities.
Ascertaining net cash provided by Investing &
Financing Activites.
Actual Preparation of CFS.
Reconciliation

43. BUDGETARY CONTROL

44. What do you mean by budget?
A budget is the monetary or quantitative
expression of business plans and policies to be
pursued in the future period of time.

45. Define Budget
A budget is used to forecast financial results and
financial position for a future period.

46. What is Budgeting?
The entire process of preparing the budgets is
known as budgeting

47. What do you mean by budgetary control?
Budgetary control is the process of preparation
of budgets for various activities and comparing
the budgeted figures for arriving at deviation if
any, which are to be eliminated in future.

48. List out the objectives of Budgetary
Control?
Planning
Co-ordination
Efficiency & Economy
Increase in Profitability
Anticipation of future capital expenditure
Control
Deviations

49. List out some of the advantages of
Budgetary control.
Maximization of profits
Effective Co-ordination
Evaluation of Executive Performance
Clear-cut Goals & Targets
Economy n Operations

50. List out the limitations of Budgetary
Control?
Prediction of ascertain future.
Changes of Conditions.
Difficulty in Co-ordination
Conflict among different departments
Complacence

51. What are the essentials of successful
Budgetary Control?
Top Management Support
Clearly defined Organisational Structure
Efficient Accounting System
Reporting of Deviations
Motivation
Realistic Targets
Flexibility

52. What are the steps involved in preparation
of Budgets?
Determination of Key factor
Making Forecasts
Evaluation of Alternative Combination of Factors
Preparation of various functional budgets
Preparation of Master Budgets

53. What is Fixed Budget?
A fixed budget is a budget that remains uniformly
unaffected irrespective of changes in the volume
of sales, revenue, no of units produced

54. What is Flexible Budget?
A flexible budget, also called a variable budget, is
financial plan of estimated revenues and
expenses based on the current actual amount of
output.

55. What do you mean by Master Budget?
A master budget can be defined as the
aggregation of all the lower level budgets, which
are calculated by various functional areas of the
business

56. What is Zero Base Budget?
Zero-based budgeting (ZBB) is a method of
budgeting in which all expenses must be justified
for each new period. The process of zero-based
budgeting starts from a "zero base," and every
function within an organization is analyzed for its
needs and costs.

57. What is Production Budget?
A production budget is a financial plan that lists
the number of units to be manufactured during a
period. In other words, this is a report that
estimates the number of units that a plant will
produce from period to period.

58. What are the steps involved in ZBB?
 Specification of decision units.
 Development of decision packages
 Prioritization of activities, projects and
programmes.
 Approval and allotment of funds

59. List out the advantages of Zero Base
Budgeting?
 Optimum use of financial resources
 Weeding out of Wastage
 Participation by all concerned
 Flexibility in Budget
 Realistic Targets

60. List out the limitation of Zero Base
Budgeting?
 Time Consuming
 Lack of Skilled Managerial Personnel
 Limited Application

61. What is Sales Budget?
 Sales budget is a financial plan, which shows
how the resources should be allocated to
achieve forecasted sales.

62. What is Profit Centre?
 A profit center is a department that incurs
costs but also earns revenue by selling its
goods and services to customers.

63. CAPITAL BUDGETING

64. What is Capital Budgeting?
 Capital Budgeting is considered as the process
of making investment decisions on capital
expenditure.

65. Define capital budgeting.
 According to Hampton, John . J:
 “Capital Budgeting is the firm’s formal process
for the acquisition and investment of capital”.

66. List out some of the features of Capital
Budgeting.
 Large Investments. Capital budgeting is related
to investments of large funds. ...
 Irreversible Decisions. ...
 High Risk. ...
 Long-term Impact on Profitability. ...
 Impacts on Cost Structure. ...
 Difficult Decisions. ...
 Impact on Competitive Strength

67. Write down the importance of capital
budgeting.
 Capital budgeting helps financial decision-makers make
informed financial decisions for projects.
 Investing in new equipment, technology and buildings
 Upgrading and maintaining existing equipment and
technology
 Completing renovation projects on existing buildings
 Expanding their workforce
 Developing new products
 Expanding into new markets

68. What do you mean by Pay-back period?
The payback period is the time taken to recover an
investment's initial investment. It is the number of years to
repay the initial investment made for a project.

69. What is Accounting rate of return?
The accounting rate of return, also known as the return on
investment, gives the annual accounting profits arising
from an investment as a percentage of the investment
made.

70. What do you understand by ‘Net Present
Value’?
The Net Present Value (NPV) is a method that is primarily
used for financial analysis in determining the feasibility of
investment in a project or a business. It is the present
value of future cash flows compared with the initial
investments.

71. What is Profitability index?
Profitability index is a financial tool which tells us whether
an investment should be accepted or rejected. It uses the
time value concept of money

72. What do you mean by Discounted Pay-
back Period?
The discounted payback period is the number of years
after which the cumulative discounted cash inflows cover
the initial investment

73. What is IRR?
The internal rate of return (IRR) is a metric used in
financial analysis to estimate the profitability of potential
investments.

74. What are the methods of Capital
Budgeting?