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Questions and Answers of
Management Accounting
List the main elements of balance sheet and income statement.
In preparing balance sheet, would you use the historical cost or current market value while dealing with assets? Explain.
What is the major revenue recognition criterion?
Name the accounting principle involved/violated/affected in the following:(i) The firm changes method of depreciation.(ii) The firm does not consider unused stationery as asset.(iii) The firm follows
Using accounting equation, answer the following independent questions.(i) New company’s assets are ₹250 lakh and its external liabilities are of ₹100 lakh, determine the amount of owners’
Name the 5 major areas in which different accounting policies can be adopted by business enterprises. What is the requirement of the relevant accounting standard in this regard?
Describe in brief the major requirements of accounting standards related to valuation of inventories and depreciation accounting.
What is the criteria of revenue recognition?
Describe in brief disclosure requirements of accounting standards related to accounting for fixed assets and investments.
Explain the concepts of basic earnings per share and diluted earnings per share. How are they computed?
Explain the terms: (i) timing differences, (ii) permanent differences, (iii) deferred tax liability and (iv) deferred tax asset as per accounting standard related to taxes on income.
What is the basis of recognising intangible assets? How are they amortised? What are the major disclosure requirements of accounting standard for such assets?
What is impairment of assets? Is reversal of impairment loss feasible? Explain your answer based on the requirements of accounting standard.
Define provisions, contingent liabilities and contingent assets. State the major requirements of their accounting and disclosure of all the three to conform the needs of accounting standard.
Mr. Ashwin commenced business (in the name of M/s Ashwin Associates) from April 1, 2013 as a garment manufacturer. Following are the transactions for the six months ending September 30, 2013.1.
From the trial balance drawn in P.3.1 and from the following adjustment transactions (a) pass adjustment entries and prepare (b) (i) manufacturing account, (ii) trading account, (iii) P\&L account
(a) Record closing entries for P.3.2 and (b) opening entry as on October 1, 2013 in the books of Aswin Associates.P.3.2From the trial balance drawn in P.3.1 and from the following adjustment
Prepare special journal books from the transactions contained in P.3.1.P.3.1 Mr. Ashwin commenced business (in the name of M/s Ashwin Associates) from April 1, 2013 as a garment manufacturer.
Small Toy Private Limited (STPC) has been manufacturing toys as well as buying from the market since 2001. The owners of the company are satisfied both with its profit margins its reputation in the
Name the steps (in sequence form) involved in the accounting cycle.
Debit implies increase and credit implies decrease. Do you agree with the statement? Explain your answer.
What are nominal, real and personal accounts? Give four examples of each of them.
What is balancing of account? What are the two types of balances? Can a cash account have credit balance?
What is journal? State its two broad categories. Name the five special journal.
What is ledger? State its two broad types. Name three special ledger books.
What is a trial balance? Name the errors disclosed as well as not disclosed by trial balance.
“Trial balance is not a conclusive proof as to the absolute accuracy of books of accounts. It may agree and yet there may be some errors in the books that remain undisclosed.” Elaborate. Give
State the procedure of posting from 4 special journal books to ledger books. Explain the procedure with examples. What is the advantage of writing journal folio and ledger folio numbers?
What are adjustment entries? What is their rationale? Name 5 adjustment items and pass their adjustment entries.
What are closing entries? Why are they needed? Name the type of accounts (a) required to be closed and (b) not required to be closed.
What is an ‘opening entry’? Why is it needed? Pass the opening entry with imaginary figures.
“Double entry implies that transaction is recorded in journal and ledger.” Explain.
Distinguish between the following:(i) Long-term assets and Current assets(ii) Tangible assets and Non-tangible assets(iii) Long-term liabilities and Current liabilities(iv) Gross profit and Operating
What is a manufacturing account? What is its objectives? Prepare a manufacturing account with appropriate imaginary figures.
What is a trading account? What are its major constituents? What is its major outcome?
What is a profit and loss account? Draw its format with as many items as possible.
“While balance sheet is like a snapshot, profit and loss account is like a moving picture.” Explain.
“While interest payment is an expense, dividend payment, in contrast, is not reckoned expense.”Explain.
“Revenues are positive shareholders equity accounts while expenses are negative accounts in this regard.” Explain.
What is P&L Appropriation Account? What purpose does it serve? Do you require such an account in all type of firms? Draw such an account with imaginary figures.
“Capital expenditures and deferred revenue expenditures need to be apportioned to determine true income.” Explain. Give 3 examples of each.
“Extraordinary items warrant exclusion to judge true operating performance of a business enterprise.”Elaborate. Give 3 examples each of abnormal losses and of abnormal gains.
Write short notes on the following:(i) Account(ii) Rules of debit and credit(iii) Cost of goods sold(iv) Errors of commission
State the rules of debit and credit as applied to (a) expense accounts, (b) asset accounts(c) capital account.
Indicate whether the following accounts would normally possess a debit or credit balance:(a) Salaries, (b) Debtors, (c) Creditors, (d) Plant and machinery, (e) General reserve, (f) Patents,(g)
Arrange the following information in the sequence of accounting cycle:(a) Posting to the ledger,(b) Trial balance is prepared,(c) Business transaction takes place,(d) Income statement is prepared,(e)
Indicate whether the following statements are true or false:(a) All debit entries are posted on the left side of accounts and are indicative of decrease in the account balances.(b) All credit entries
Fill in the following blanks:(i) Cost of goods sold = Opening stock of finished goods (+) __________ (–) Closing stock of finished goods in the case of trading firms.(ii) Gross profit = Sales
Journalise the following transactions of a hypothetical firm during the period January 1 to January 31. January 11 January 2 January 3 January 4 January 6 January 6 January 6 January 10 January 12
Journalise the following transactions. Post them into ledger and prepare trial balance. 2013 April 1 April 2 April 3 April 4 April 10 April 13 April 15 April 18 April 19 April 25 April 28 Mohan
Enter the following transactions in cash book and bank book with discount columns. 2013 May 1 May 4 May 5 May 6 May 10 May 11 May 13 May 14 May 14 May 14 May 16 May 17 May 18 May 19 May 22 May 24 May
Mittal \& Co Pvt Ltd. ('MCPL'), registered on April 5, 2013 as a private limited company, is primarily engaged in fabrication and sale of steel products. For the transactions undertaken during the
From the following ledger balances of Mr. Dinesh, prepare a trading account, P\&L account for the current year ended 31st March 2013 and a balance sheet as on that day, after making the necessary
From the following trial balance, prepare manufacturing account, trading account, P&L A/c for the year ending March 2013 and a balance sheet as on that date of small manufacturing firm owned by
From the following balances extracted from the books of Small Toy Limited as at March 31, 2013(after preparation of the profit and loss account), prepare the balance sheet as at the above
Show the presentation of the following information under the appropriate heads of the balance sheet of a public limited company.(i) General reserve (beginning) stood at ₹30,00,000, profit and loss
The following is the Trial balance of Amit Ltd., as at March 31, 2013:Prepare profit and loss account for the year ended 31st March, 2013 and balance sheet as at that date after considering the
State whether the following statements are true or false.(a) A company must prepare its profit and loss account in the format as prescribed by the Companies Act.(b) It is statutory for the company to
Fill in the blanks:(a) SEBI has mandated corporate governance in the listing requirement in clause____________ of the listing agreement.(b) Apart from mandatory requirements listed in clause 49, the
State the particular items to be disclosed in a company’s balance sheet as per Schedule VI of the Companies Act 1956 in respect of (a) fixed assets and (b) share capital.Schedule VI of the
Name four contingent liabilities which may be shown as a footnote to balance sheet of a company.
Draw-up pro-forma balance sheet in horizontal form as per the requirements of Schedule VI of the Companies Act 1956. Schedule VI of the Companies Act 1956 From the following trial balance of Prakash
Explain the provisions relating to maintenance of books of account and presentation of financial statements of a company.
Write short notes on the following:(a) Segment reporting (b) Interim financial reporting (c) Related party disclosure.
Enumerate, the mandatory and voluntary contents of Clause 49 of the listing agreement regarding corporate governance.
What is the objective of disclosing information about discontinued operations? Is abandonment of particular product in view of continuous decrease in market demand and diverting the resource to new
Explain the reporting and recognition requirement in the case of jointly controlled entities in(a) separate financial statement and (b) consolidated financial statements. Your answer is to be based
The following balances have been extracted from the books of X Ltd as on March 31, 2013:Additional Information:(i) Closing stock of finished goods at cost is ₹60,00,000.(ii) The original cost of
Given below is the Trial Balance (rounded off to rupees thousands) of Supreme Chemical limited as at the end of their financial year 2012–13 and additional information to be considered while
Answer the following:(a) A company sold building for cash at ₹100 lakh. The profit and loss account has shown ₹40 lakh profit on sale of building. How will you report it in cash flow statement
Compute cash generated from operations during the year 2012-13, from the following data: Particulars Sundry debtors Sundry creditors Outstanding expenses Outstanding income Stock in trade Prepaid
From the following summary cash account of Y Ltd., prepare cash flow statement for the current year ended March 31 in accordance with AS-3 using the direct method. The company does not have any cash
Charatlal, the president and majority shareholder, was a superb operating executive. He was an imaginative, aggressive marketing man and an ingenious, creative production man. But he had little
Prepare a statement from the following financial information of ABC company, to explain the causes of increase in cash despite the firm incurring losses. Income statement Sales Dividends from
Nandini Ltd. provides the following data:Comparative trial balanceNotes: (a) The depreciation charged for the year was ₹60 lakh.(b) The book value of the building and equipment disposed off was
The manager of a small plastic manufacturing company has reviewed the annual financial statements for the current year and is unable to determine from a reading of the balance sheet the reasons for
The following are the summarised balance sheets of Sound Ltd. as on March 31 for the two consecutive years 1 and 2:Additional information (` in thousand):(1) 15% Debentures of ₹300 was redeemed
The following are the summarised balance sheets of Hypothetical Ltd. as at March 31 for the two consecutive years 1 and 2. Prepare CFS as per AS-3.Additional information (₹in thousand)(i) An amount
Indicate whether the following statements are True or False.(i) Cash from business operations can be determined from income statement.(ii) Working capital from business operations can be determined
Fill in the following blanks with right answer:(i) Cash flow statement (based on AS-3) indicates change in_______________ (cash/bank/cash and cash-equivalents).(ii) Decrease in creditors
From the following financial information, select non-cash investing, financing and operating activities:Redemption of debentures by converting into equity shares.Buy back of equity shares.Purchase of
“The analysis of cash flow statement in any organisation can be very useful to the management.”Elucidate the statement.
The cash flow statement is as useful to shareholders and lenders as to management. Explain.
Name three activities in which cash flows are classified as per Accounting Standard 3. Also give three examples of transactions covered in these activities.
Describe in brief the procedure of determining cash flow from operating activities as per indirect method of AS-3. Take an appropriate example to illustrate your answer.
Explain with example the two methods of determining cash provided by operating activities.
Explain why decrease in current liabilities decrease cash and decrease in current assets increase cash.
“Depreciation is a non-cash expense. Still it is an integral part of cash flows”. Explain.
Write short notes on the following(i) Cash-equivalents(ii) Extra-ordinary items(iii) Treatment of interest and dividends received in cash flow statement (based on AS-3).(iv) Major non-cash items.
The directors of Precision Tools Ltd. are worried at the deteriorating financial position of the company. The company has utilised full overdraft facility from the bank and is still not able to pay
Given the following data (Rs thousands), prepare a cash flow statement based on AS-3. Liabilities Equity share capital Reserves Total shareholder's equity Debentures Current liabilities Bills payable
From the information contained in income statement and balance sheet of ‘A’ Ltd., prepare cash flow statement: Net sales Less: Cash cost of sales Depreciation Salaries and wages Income statement
The Balance Sheet of Royal Limited as on 31st March, 2012 and 31st March, 2013 are given below:Additional Informations:(i) During the year 2012–2013, Fixed Assets costing ₹2,40,000 (accumulated
The Avon Ltd has a capital of ₹10,00,000; its turnover is 3 times the capital and the net profit margin on sales is 6 per cent. What is the return on investment?
B Raj Ltd sells goods on cash as well as credit. The following particulars are extracted from their books of accounts for the current year-end. Particulars Total gross sales Cash sales (included in
The following are the ratios relating to the activities of National Traders Ltd:Gross profit for the current year ended December 31 amounts to ₹4,00,000. Closing stock of the year is ₹10,000
The capital of E. Ltd. is as follows:Additional information: Profit (after tax at 35 per cent), ₹2,70,000; Depreciation, ₹60,000; Equity dividend paid, 20 per cent; Market price of equity shares,
Z Ltd purchased a retail store and commenced business on April 1. From the following information, you are required to prepare in as much details as possible, a trading and profit and loss account for
Using the following information, complete the balance sheet given below: Total debt to net worth: 0.5 to 1. Turnover of total assets (based on year-end sales figures): 2. Gross profit: 30 per cent
As the manager of a financial services company, you have received a proposal seeking a term loan of ₹300 lakh, from a firm planning an investment in fixed assets of ₹500 lakh in a new project.
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