EPGDM - Term1

MGT402 - Management Accounting and Analysis

Assignment
Submitted By: Ramakrishna R
Reg # - EPGDM-09-18/041 // 180101619041

Question No 1.
Given here are a few situations: State the accounting assumption or principle that describes each of
the given situations.

a. Personal and business transactions are separately maintained.

Ans: Business Entity Concept/Principle

b. Inventory is recorded at its purchase price.

Ans: Cost Concept/Principle

c. The death of the chief executive officer of the company is not recorded in accounts.
Ans: Money Measurement Concept/Principle

d. In case of doubt, it is considered better to understate rather than overstate income.

Ans: Conservatism or Prudence Concept/Principle

e. Assets are not stated at their liquidation value.

Ans: Cost Concept/Principle

f. Financial Statements are prepared on an annual basis.

Ans: Accounting Period Concept/Principle

g. Expenses are recognized in the same period as the related revenues.

Ans: Matching Concept/Principle

h. Revenue is recognized when it is earned and expense is recognized when it is incurred.

Ans: Accrual or Realisation Concept/Principle

i. The accounting records only events that affect the financial position of the entity and at the same
time can be reasonably determined in monetary terms.
Ans: Money Measurement Concept/Principle

j. Same treatment is given to comparable transactions from period to period.

Ans: Consistency Principle

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Question No 2.
The manager of a company who did not have proper accounting knowledge prepared the following
balance sheet. He has wrongly classified the items under assets, liabilities and owners’ equity.
Owner’s Equity and Rs Assets Rs
Liabilities
Share Capital 10,00,000 Retained Earnings 5,00,000
Equipment 9,00,000 Land and Buildings 7,00,000
Cash 2,00,000 Long – term loan 4,00,000
Accounts Payable 2,00,000
Accounts Receivables 3,00,000
21,00,000 21,00,000

Prepare the correct Balance sheet.

Answer:
Owner’s Equity and Rs. Assets Rs.
Liabilities

Share Capital 10,00,000 Equipment 9,00,000

Retained Earnings 5,00,000 Cash 2,00,000

Long – term loan 4,00,000 Land and Buildings 7,00,000

Accounts Payable 2,00,000 Accounts Receivables 3,00,000

TOTAL 21,00,000 TOTAL 21,00,000

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Question No 3.
Using Accounting Equation, Answer the following independent Questions.

A. New Company’s assets are Rs.250 lakh and its external liabilities are of Rs.100 lakh, determine
the amount of owner’s Equity.
Answer:
Equity is the difference between what your businesses is worth (your assets) minus what you owe on
it (your debts and liabilities).
Assets – Liabilities = Equity
Rs.250 lakh – Rs.100 Lakh = Rs.150 Lakh.
Hence, the amount of owner’s Equity is Rs.150 Lakh

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B. Royal Industries has total assets of Rs.100 lakh and owners’ Equity of Rs.70 lakh, Compute the
amount of external liabilities.

Answer:
Assets – Equity = Liabilities
Rs.100 lakh – Rs.70 Lakh = Rs.30 Lakh.
Hence, the amount of external liabilities is Rs.30 Lakh

C. Small Enterprise has following amounts appearing in Balance Sheet as at 31st December, 2015:
Capital Rs 50 lakh, Reserves and undistributed profits Rs 15 lakh, and total external liabilities Rs 35
lakh, Determine the amount of total assets.

Answer:
Assets = Equity + Liabilities
Assets = Rs.50 lakh + Rs.15 lakh + Rs.35 lakh = Rs.100 lakh
Hence, the mount of total Assets is Rs.100 Lakh
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Question No 4.
Journalize the following transactions, Post them into ledger account and Prepare a Trial Balance
2017
March – 1 Commenced business with cash Rs.1,00,000
March – 2 Purchased goods for cash Rs. 25,000
March – 3 Purchased furniture for cash Rs. 6,000
March – 5 Purchased goods from Suresh on credit Rs. 5,000
March – 7 Sold goods for cash Rs. 30,000
March – 10 Sold goods to Mahesh on credit Rs. 25,000
March – 12 Returned goods to Suresh Rs. 500
March – 13 Mahesh returned us goods worth Rs. 500
March -15 Paid Rs. 4,450 to Suresh by cheque in full settlement of his account
March – 20 Received a cheque of Rs. 24,450 from Mahesh and gave a discount of Rs. 50
March – 25 Withdrew cash for personal use Rs. 2,500
March – 28 Paid rent of Rs. 5,000 and Salary Rs. 6,000 by cheque

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Answer:
Journal Entries
Date Debit Credit
2017 Particulars L.F Amount Rs. Amount Rs.
March 1 Cash A/c Dr 100000
To Capital A/c Cr 100000
(Business started with Cash)

2 Purchase A/c Dr 25000

To Cash A/c Cr 25000
(Purchased goods by Cash)

3 Furniture A/c Dr 6000

To Cash A/c Cr 6000
(Purchased Furniture by Cash)

5 Purchase A/c Dr 5000

To Suresh A/c Cr 5000
(Purchased goods from Suresh on credit)

7 Cash A/c Dr 30000

To Sales A/c Cr 30000
(Sold goods for Cash)

10 Mahesh A/c Dr 25000

To Sales A/c Cr 25000
(Sold goods to Mahesh on credit)

12 Suresh A/c Dr 500

To Purchase Return A/c Cr 500
(Returned goods to Suresh)

13 Sales Returns A/c Dr 500

To Mahesh A/c Cr 500
(Goods return from Mahesh)

15 Suresh A/c Dr 4500

To Discount A/c Cr
50
To Bank A/c Cr
4450
(Paid Suresh by cheque in full settlement & received
discount)
20 Bank A/c Dr 24450
Discount A/c Dr 50
To Mahesh A/c Cr 24500
(Cheque received from Mahesh & discount allowed
to him)
25 Drawings A/c Dr 2500
To Cash A/c Cr 2500
(Withdrew cash for personal use)

28 Rent A/c Dr 5000

Salary A/c Dr 6000
To Bank A/c Cr 11000
(Paid Rent and Salary by cheque)

TOTAL ₹ 234,500 ₹ 234,500

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Ledger Accounts
Dr Cash Account Cr
Date Amount Date Amount
2017 Particulars J.F Rs. 2017 Particulars J.F Rs.
March
March 1 To Capital A/c 100000 1 By Purchase A/c 25000
March
March 7 To Sales A/c 30000 3 By Furniture A/c 6000
March
25 By Drawings A/c 2500
March
31 By Balance c/d 96500
Total 130000 Total 130000
April 1 To Balance b/d 96500

Dr Capital Account Cr
Date Amount Date Amount
2017 Particulars J.F Rs. 2017 Particulars J.F Rs.
March March
31 To Balance b/d 100000 1 By Cash A/c 100000

Total 100000 Total 100000

April 1 By Balance b/d 100000

Dr Purchase Account Cr
Date Amount Date Amount
2017 Particulars J.F Rs. 2017 Particulars J.F Rs.
March
March 2 To Cash A/c 25000 31 By Balance c/d 30000
March 5 To Suresh A/c 5000

Total 30000 Total 30000

April 1 To Balance b/d 30000

Dr Furniture Account Cr
Date Amount Date Amount
2017 Particulars J.F Rs. 2017 Particulars J.F Rs.
March
March 3 To Cash A/c 6000 31 By Balance c/d 6000

Total 6000 Total 6000

April 1 To Balance b/d 6000

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Dr Sales Account Cr
Date Amount Date Amount
2017 Particulars J.F Rs. 2017 Particulars J.F Rs.
March March
31 To Balance c/d 55000 7 By Cash A/c 30000
March
10 By Mahesh A/c 25000

Total 55000 Total 55000

April 1 By Balance b/d 55000

Dr Purchase Return Account Cr

Date Amount Date Amount
2017 Particulars J.F Rs. 2017 Particulars J.F Rs.
March March
31 To balance c/d 500 12 By Suresh A/c 500

Total 500 Total 500

April 1 By Balance b/d 500

Dr Sales Return Account Cr

Date Amount Date Amount
2017 Particulars J.F Rs. 2017 Particulars J.F Rs.
March March
13 To Mahesh A/c 500 31 By Balance c/d 500

Total 500 Total 500

April 1 To Balance b/d 500

Dr Bank Account Cr
Date Amount Date Amount
2017 Particulars J.F Rs. 2017 Particulars J.F Rs.
March March
20 To Mahesh A/c 24450 15 By Suresh A/c 4450
March
28 By Rent A/c 5000
March
28 By Salary A/c 6000
March
31 By Balance c/d 9000
Total 24450 Total 24450
April 1 To Balance b/d 9000

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Dr Discount Allowed Account Cr
Date Amount Date Amount
2017 Particulars J.F Rs. 2017 Particulars J.F Rs.
March March
20 To Mahesh A/c 50 31 By balance b/d 50

Total 50 Total 50
April 1 To Balance b/d 50

Dr Discount Received Account Cr

Date Amount Date Amount
2017 Particulars J.F Rs. 2017 Particulars J.F Rs.
March March
31 To balance c/d 50 15 By Suresh A/c 50

Total 50 Total 50
April 1 By Balance b/d 50

Dr Drawings Account Cr
Date Amount Date Amount
2017 Particulars J.F Rs. 2017 Particulars J.F Rs.
March March
25 To Cash A/c 2500 31 By balance b/d 2500

Total 2500 Total 2500

April 1 To Balance b/d 2500

Dr Rent Account Cr
Date Amount Date Amount
2017 Particulars J.F Rs. 2017 Particulars J.F Rs.
March March
28 To Bank A/c 5000 31 By Balance c/d 5000

Total 5000 Total 5000

April 1 To Balance b/d 5000

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Dr Salary Account Cr
Date Amount Date Amount
2017 Particulars J.F Rs. 2017 Particulars J.F Rs.
March March
28 To Bank A/c 6000 31 By balance c/d 6000

Total 6000 Total 6000

April 1 To Balance b/d 6000

Dr Suresh Account Cr
Date Amount Date Amount
2017 Particulars J.F Rs. 2017 Particulars J.F Rs.
March To Purchase Returns March
12 A/c 500 5 By Purchase A/c 5000
March
15 To Discount A/c 50
March
15 To Bankt A/c 4450

Total 5000 Total 5000

Dr Mahesh Account Cr
Date Amount Date Amount
2017 Particulars J.F Rs. 2017 Particulars J.F Rs.
March March By Sales Returns
10 To Sales A/c 25000 13 A/c 500
March
20 By Bank A/c 24450
March
20 By discount A/c 50

Total 25000 Total 25000

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 Trial Balance as on 31st March 2017
Debit Credit
Sl.no. Heads of Account Rs. Rs.
1 Cash A/c 96500
2 Capital A/c 100000
3 Purchase A/c 30000
4 Furniture A/c 6000
5 Sales A/c 55000
6 Purchase Return A/c 500
7 Sales Return A/c 500
8 Bank A/c 9000
Discount Allowed
9 A/c 50
Discount Received
10 A/c 50
11 Drawing A/c 2500
12 Rent A/c 5000
13 Salary A/c 6000
TOTAL ₹ 155,550 ₹ 155,550

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