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Accounting for Managers (VVN)
1 . Why it is said that management accounitng is concerned with providing information in such a way to help the managers in their day to day activities?
2 . Distinguish between management accounitng and financial accounting?
3 . Define the term cash flow statement? Why it is prepared in the world of accounting?
4 . Describe the meaning of Zero Base Budgeting? What is its significance?
5 . Discuss in brief the tools and techniques of management accounting?
6 . Discuss the significance of Budgetory Control in organisational context?
7 . How Standard Costing is different from Budgetory Costing?
8 . Explain the concept of Break Even Analysis? What are the advantages of achieving break even point
Case Detail :
Defence Minister, who had put the corpus figure at about USD 3 billion, countered reports that the ministry has failed to utilise about Rs 11,000 crore from the capital budget of 2015-16. He said the country has actually saved money. The Indian government has “recalibrated” the management of an account, which was used to pay money to the US under Foreign Military Sales route, after a review showed that nearly USD 2.3 billion had piled up without earning any interest, The minister also said that the Defence Budget for the next fiscal, “nearly Rs 2.59 lakh crore” sans the pension allocation, was adequate and as per the ministry’s requirement. India and the US have now fine tuned the FMS procedure whereby rather than raising bills case-wise every quarter, all the funds against various cases have been pooled together in a corpus.
The corpus had been created in September last year, defence sources said. A statement released by the ministry said that as and when funds are required to be paid per case, fullfilment of contractual liabilities, the said amount is being withdrawn from the corpus. “Consequent to this creation of the corpus in consultation with the US government, no payments have been made in the last two quarters of the financial year 2015-16, against cases which necessitated payments, against the said contracts. “Instead, payment is being effected from the corpus of 2.3 billion US dollars. It is hoped that no payments shall be required to be made till the amount of 2.3 billion US dollars is depleted and there is a necessity for us to replenish certain amount as required,” the ministry said.
It said that this has happened through “scrupulous and holistic financial management”. Consequently, while the US government will continue to meet their contractual obligations, there will be no additional burden on the Indian government on this account. It enables utilisation of scarce funds on other projects and hedges the country against adverse exchange rates, the ministry said. Earlier in the day, Parrikar, who had put the corpus figure at about USD 3 billion, countered reports that the ministry has failed to utilise about Rs 11,000 crore from the capital budget of 2015-16. He said the country has actually saved money.
He said that even though the provision of capital acquisition in the budget was around Rs 77,000 crore, the actual anticipated spending will be around Rs 66,000 crore. “We have taken measures by which Rs 11,000 crore saving appears there,” Parrikar said, briefing reporters about the defence budget for the next fiscal.
The minister said this was the “first time” that Defence Ministry took stock of Foreign Military Sales under which defence equipment is bought from the US via a government-to- government route. “We pay to the government in an account which is held by the US or managed by the government of US from where the payments, as per the contract, is made to private companies. “Unluckily, because of ill management or lack of attention to the provision of this account, we had slightly less than USD 3 billion dollars (USD 2.3 bn) which had piled up in this account and was not earning any interest,” Parrikar said.
He added that somewhere around May and June last year, the ministry held a “review” and realised that “unnecessarily money is lying with the US government without appropriate contractual obligation being carried out”. “And we are transferring the money without actually taking stock of the balance. So, it was a government of India account with the American government for FMS. I am happy to tell you that we have recalibrated the full management of the account,” he said.
Parrikar said the amount in the account has now come down to around “USD 1.7-1.8 billion”. Explaining how so much money got accumulated, he said the money is sent in stages as per the contract schedule. “At times, for some reason the schedule gets disturbed. Sometimes, the amount is calibrated based on rough calculations and the actual expenditure is slightly less. Sometimes, it goes up but most of the time it is less. In nutshell, money got accumulated, disbursal was less. There was a delay in payment and we are now using it for clearing,” he said. Parrikar said that last year, the ministry paid about Rs 5,000-6,000 crore from this fund for the country’s committed liability for supply against the US government’s direct military sales route.
“Money has been paid, but the government is saving from its budget Rs 5,000-6,000 crore which we paid. We have saved USD 700-800 million precious foreign exchange that has been utilised from the fund which was lying there because of lack of management. We have now started managing it,” he said. Parrikar said that even though an expenditure was incurred, money did not leave its coffers. “The money was already in someone else’s pocket. We have only asked him to pay on our behalf,” he said, adding that another Rs 2,000-3,000 crore was saved because the ministry is now strictly monitoring staged payment clauses. “We are not allowing it to be loosely paid even to defence PSUs. So, these payments of committed liability have slipped,” he said.
Talking about the budget for the next fiscal, he said there is Rs 70,000 crore for defence acquisition even though the actual capital budget is over Rs 86,000 crore. The spending through the capital route is over a period of time, he said. As per new contracts being signed, nearly 10-15 per cent of the amount has to be paid at the onset, he added. Parrikar explained that for the nearly Rs 1.20 lakh crore worth of contracts signed since the NDA government took over, it would have paid a maximum of Rs 17,000 crore. “Acquisition funds provided is as per calibrated purchases which are going to be done. For the first time in Defence Ministry, we have carried out an extensive review of the next 10 years’ cash flow position vis-a-vis the requirement of the military,” he said. Replying to a query on the Mountain Strike Corps, which was cleared by the Cabinet Committee on Security (CCS) in September, 2013, Parrikar said, “Whatever arrangements need to be made, have been done.” Asked about large sums to be spent on salaries and pensions in the wake of the expected decision on the Seventh Pay Commission, Parrikar said the “expenditure is inevitable”.
He added that the government was keen on rationalising the strength of the army through a process undertaken by the force itself. “We have asked army to undertake the exercise,” he said. Parrikar said another way of cutting down expenditure was to use simulators for training pilots and drivers.
1. Do you really think that Capital Budget has not been used appropriately? Comment?
Answer:
2. What the case is all about? Provide a brief summary?
Answer:
3. Discuss any three concepts that fall under management accounting and are discussed in this case and How?
Answer:
1. ……………… costing traces overhead costs to products by focusing on the activities that drive costs.
FIFO
NPV
ABC
LIFO
2. ……… variance arises when the actual cost is greater than the standard cost.
Half
Double
Unit
Adverse
3. ………………. accumulation refers to the manner in which costs are collected and identified with specific customers, jobs, batches, orders, departments and processes.
Cost
Debt
Both
None
4. ……………Flow Assumption is a cost flow assumption refers to how costs flow through the inventory accounts, not the flow of work or products on a production line.
Cost
Fund
Profit
Loss
5. Cost of an activity that is required or performed to support a specific customer is ………….Level Cost.
Customer
Investor
Treasury
All
6. The term management accounting was first coined in
1967
1950
1976
1999
7. Management accounting is
Subjective
Objective
Both
None
8. The use of management accounting is
Restricted
Tough
Optional
Mandatory
9. The management accounting can be stated an extension of …………. Accounting.
Cost
Responsibility
Financial
All
10. Management accounting highlights staff relationship with top management as well as other personnel.
Perfact
FALSE
TRUE
Can’t Say
11. Management accounting assists the management in………………
Planning
Direction
Control
All
12. The definition ‘Management Accounting is the presentation of accounting information in such a way as to assist management in the creation of policy and the day-to-day operation of an undertaking.’
American Accounting Council
Ango-American Council on Productivity
AIMA
Indian accounting Council
13. Management accounting deals with
Quantitative
Qualitative
Both None
None
14. Management accounting information can be disclosed to outsiders.
FALSE
Can’t Say
Sometimes
TRUE
15. Management accountancy is a structure for
Investing
Decision Making
Operating
Auditing
16. Given Break even sales is 40,000 Profit earned is Rs 2,000 and fixed cost is Rs 8,000. Determine actual sales.
30000
40000
50000
32000
17. What will be the impact on B.E.P if variable costs are reduced?
Decrease
Increase
Equal
Null
18. Who coined the term Management Accounting?
Semulson
Warton
James H Bliss
Parado
19. The profit at the level of existing sales is computed as
Sales – (Fixed cost + Variable cost)
Sales – (Variable cost + Fixed cost)
Both
None
20. Given fixed costs is Rs 1,00,000 selling price per unit is Rs 10 and variable cost per unit is Rs 6. If variable cost increase by 10% and fixed cost decrease by 10%s , B.E.P will be Increase By ……… unit.
1471
1671
2345
1256
21. Cash Flow Statement is prepared from
P&L
Balance Sheet
None
Both
22. Provision of taxation is treated as
Current Liability
Appropriationof profits
None
Both
23. The alternative which shows ____ difference between the incremental revenue and the differential cost is the one considered to be the best choice for selection.
Maximum
Minimum
Equal
Null
24. __________ refers to changes in total costs that occur due to changes in volume of production or sales, product system, product mix or from the adoption of an alternative course of action.
Unit Cost
Trade Cost
Differential Cost
Upgradation Cost
25. If direct labor is not affected by the change in the type of material, it will form a part of differential cost.
FALSE
TRUE
Both
None
26. While preparing Cash Flow Statement, non-cash items and non-operating items are not required to be adjusted under________
Direct method
Indirect Method
Unit Method
All
27. Which of the following are cash flow from financing activities?
Interest Paid
Dividend Paid
None
Both
28. Acquisition and disposal of long term assets is included in cash flow from ………… activities.
Investing
Operating
None
Both
29. ABC Ltd had investment of Rs 68,000 as on 31.3.2013 and investment of Rs 56,000 as on 31.3.2014. During the year ABC Ltd sold 40% of its investments being held in the beginning of period at a profit of Rs 16,800. Determine cash flow from investing activities.
28800
59200
72800
12000
30. Listed Enterprises need to prepare Cash Flow Statement only under indirect method.
FALSE
Can’t Say
TRUE
Sometimes
31. In the case of financial enterprises, the cash flow resulting from interest and dividend received and interest paid should be classified as cash flow from ………………… activities.
Operating
Investing
Financing
All
32. Issue of bonus shares and conversion of debentures into equity are shown as a footnote to the Cash Flow Statement.
FALSE
Can’t Say
Sometimes
TRUE
33. In case of other enterprises cash flow arising from interest paid should be classified as cash flow from ________ while dividends and interest received should be stated as cash flow from ____.
laoning, Investing
Operating, Investing
Financing, Investing
Financing, operating
34. P/V ratio can be calculated on the basis of variable cost ratio as
1-variable cost ratio
2-variable cost ratio
3-variable cost ratio
4-variable cost ratio
35. Determine P/V ratio if Sales is Rs 1,00,000, Fixed cost is Rs 30,000 and Profit is Rs 20,000.
5%
25%
50%
35%
36. Breakeven point can be calculated in terms of units as well as in terms of amount.
FALSE
TRUE
Both
None
37. Determine B.E.P in units if Units produced if Rs 10,000, Fixed cost is Rs 40,000, Selling price is Rs 50 per unit and Variable cost us Rs 30 per unit.
10
20
30
40
38. Determine B.E.P if Sales is Rs 1,00,000, Variable cost is Rs 50,000 and Profit is Rs 20,000.
40000
50000
60000
30000
39. Given Sales in first and second year is Rs 80,000 and Rs 90,000 respectively. Also, profit is Rs 10,000 and Rs 14,000 respectively. What is the break-even point in rupees?
35000
55000
30000
45000
40. Margin of safety is that sales which is above Break-even point.
TRUE
Sometimes
Can’t Say
FALSE
We Also Provide SYNOPSIS AND PROJECT.
Contact www.kimsharma.co.in for best and lowest cost solution or
Email: solvedstudymaterial@gmail.com
Call: +91 82907-72200 (Call/WhatsApp) or +91 88003-52777 (WhatsApp Only)