A cash budget is a forecast of cash inflows and outflows over a specific period, usually a month or quarter. It is useful for managerial decision making in the following ways: 1. Liquidity management: A cash budget helps assess if a business will have sufficient cash to meet its day-to-day operational expenses and other commitments. It identifies periods of cash surplus or deficit in advance so corrective actions can be taken. 2. Working capital management: By forecasting cash flows, a cash budget determines the optimal level of current assets like inventory and receivables required. This helps manage working capital efficiently. 3. Capital expenditure planning: Large capital expenditures are identified upfront through a cash budget. This

1. 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.
We shall consider five transactions and show how they are accounted for in the
books of the business.
1. Mr. Rajesh brings Rs.100000 cash as capital into his business.
2. He purchases Mobile Set to his shop Rs.10000
3. He buys currencies for cash Rs.50000
4. He sells currencies worth Rs.30000 for Rs.40000 on credit to Arjun
5. He pays wages to servants Rs.1000
Transaction 1: The business receives capital in cash. Capital is a liability and cash
is an asset to the business.
Liability Asset
Capital 100000 Cash 100000
Transaction 2: Mobile Set is purchased for cash. This transaction can be reflected
as under
Capital 100000 Cash Rs.
(100000-
10000) 90000
Mobile Set 10000
Total 100000 Total 100000

2. Transaction 3: Purchased of currencies for cash. This can be reflected in the
statement as under.
Capital 100000 Cash Rs.
(90000-
50000) 40000
Mobile Set 10000
Stock of 50000
currencies
Total 100000 Total 100000
Transaction 4: Sold currencies to Arjun on credit for Rs.40000, the cost of which
is only Rs. 30000. In this transaction the affected accounts are Currencies account,
Arjun account and Profit & Loss account. Since the profit belongs to the owner it is
fair to add it to the owner’s capital. The effect of this transaction can appear on the
statement as shown below:
Capital 100000 Cash 40000
Profit 10000 Mobile Set 10000
Stock of 20000
currencies(50000-
30000)
Arjun (Debtors) 40000
Total 110000 Total 110000

3. Transaction 5: Payment of wages Rs.1000.The cash balance gets reduced in the
asset side and profit gets reduced as a result of the expenditure (wages account)
on the liability side. This changes the statement as shown below:
Capital 100000 Cash (40000 39000
– 1000)
Profit 9000 Mobile Set 10000
(10000-
1000)
Stock of 20000
currencies
Arjun 40000
(Debtors)
Total 109000 Total 109000
According to above book keeping entry Mr. Rajesh brings Rs.100000 cash as
capital into his business. And one end of 5 transection his capital is Rs 109000. so,
it is clear that Firm earn profit of Rs 9000.

4. 2 (A) List the accounting standards issued by ICAI
 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,

5.  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
2(B) Write short notes of IFRS
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
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

6.  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.

7. 3.Prepare a Three-column Cash Book of M/s Thuglak & Co. from The
following particulars:
20X1 1. Cash in hand Rs. 50,000, Bank Overdraft Rs. 20,000
Jan
2. Paid into bank Rs. 10,000
3. Bought goods from Hari for Rs, 200 for each
4. Bought goods for Rs. 2,000 paid cheque for them, discount allowed 1%
5. Sold goods to Mohan for each Rs. 1.175
6. Received a cheque from Shyam to whom goods were sold for
Rs.800.Discount allowed 12.5%
7. Shyam’s cheque deposited into bank
8. Purchased an old typewriter for Rs. 200 , Spent Rs. 50 on its repairs
9. Bank notified that Shyam’s cheque has been returned dishonored and
debited the account in respect of charges Rs. 10
10. Received a money order Rs. 25 from Hari
11. Shyam settled his account by means of a cheque for Rs. 820, Rs. 20
being for interest charged.
12. Withdrew from the bank Rs. 10,000
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

9. 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

10. 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.

11. 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

12. 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
Answer:
Schedule of change in working capital

13. 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
substantiallymore.
The importance of cash budget may be summarized as follow:-
Helpful in Planning.

14.  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.
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.
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.
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.
Evaluation of Performance.
 It acts as a standard for evaluating the financial performance.
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.
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.
Basis of Long-term Planning and Co-ordination.
 Cash budget helps in co-coordinating the various finance functions, such as

15. 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.
Master of Business Administration- MBA
Semester 1
MB0038 –Financial Management Accounting–
4 Credits

16. (Book ID:B1127)
Assignment Set- 1 (60 Marks)