Financial and Management Accounting 

Name: Deepti Sajesh

Roll Number: 530910495

Learning Centre: Wisdom Institute , Abu Dhabi

Subject: Financial &

Assignment No.:MB0025 (Set-1)
Management Accounting

Date of Submission at the Learning Centre:28-08-09

MB 0025  Page 1 
 
 Financial and Management Accounting 
 

Index

Sr. No Topic Page No

Set -1

Difference Between Financial

01 03 
Accounting & Management Accounting

Statement in Changes in financial

02 04 
position

03 Transactions in Subsidiary book 06 

04 a Closing Balance of Cash & Bank 08 

04 b Trial Balance – Adjustments in firms A/c 09 

Prepare Trading, P&L A/c and Balance 10 

05
Sheet  

Difference between Standard Costing &

06 14 
Budgetary Control

MB 0025  Page 2 
 
 Financial and Management Accounting 
 

Answer the following question:

1. Explain the differences between Financial Accounting and Management

Accounting.

Financial accounting is the preparation and communication of financial information to outsiders

such as creditors, bankers, government, customers and so on. Another objective of financial
accounting is to give complete picture of the enterprise to shareholders. Management accounting
on the other hand aims at preparing and reporting the financial data to the management on
regular basis. Management is entrusted with the responsibility of taking appropriate decisions,
planning, performance evaluation, control, management of costs, cost determination etc., For
both financial accounting and management accounting the financial data is the same and the
reports prepared in financial accounting are also used in management accounting But the
following are major differences between Financial accounting and Management accounting.

Financial Accounting Management Accounting

The primary users of financial accounting

Top, middle and lower level managers use the
information are shareholders, creditors,
information for planning and decision making
government authorities, employees etc.,

Management accounting may adopt any

Accounting information is always expressed
measurement unit like labour hours, machine
in terms of money
hours or product units for the purpose of
analysis

Financial data is presented for a definite

Reports are prepared on continuous basis,
period, say one year or a quarter
monthly or weekly or even daily

Financial accounting focuses on historical Management accounting is oriented towards

data. Future.

Financial accounting is a discipline by itself Management accounting makes use of other

and has its own principles, policies and disciplines like economics, management,
conventions. information system, operation research etc.,

MB 0025  Page 3 
 
 Financial and Management Accounting 
 
Q2. Hiran, a retailer, has prepared the following balance sheets for the years
ending 31st March 2004 and 2005:

Balance Sheets as on 31st March, 2004 and 2005

Particulars 2004 2005

Freehold property at cost 200000 200000
Furniture 32000 8000 30000 10000
Less depreciation 23200 20000
Current Assets: 36000 34000
Stock 50000 34000
Debtors and prepayments 4000 2000
Cash in hand and at bank
Liabilities: 254800 260000
Capital 24000 20000
Trade and accrued expenses 20000 -------
Loan account

Total 298800 280000

Other data: The net profit for the year 2004 was Rs.40000. Hiran is paid a salary of Rs.16,000.
His drawings amounted to Rs.45,200. You are required to prepare a statement of changes in
financial position, on working capital basis.

The layout for schedule of changes in Working Capital is as follows

MB 0025  Page 4 
 
 Financial and Management Accounting 
 

Balances as on Effect on

Schedule of changes in Working Capital is as follows:

2004 2005 Increase Decrease

A .CURRENT
ASSETS:

Cash in hand & bank 4000 2000 2000

Sundry Debtors 50000 34000 16000
Stock or Inventory 36000 34000 2000
B. CURRENT _
-
LIABILITIES

4000
Trade and accrued expenses 24000 20000
16,000
Net Working Capital
Decrease in
Working(A-B)

Statement of Profit and loss adjustment a/c:

Particulars Amount Particulars Amount

Salaries 16000
Net profit for the year 40000
Funds from operations 2004
transferred to
applications 24000
Total 40000 40000

Funds Flow Statement:

Particulars Amount Particulars Amount

Increase in capital 5200
Decrease in working
16000
Capital
Fund Flow from
24000
operations
Total

MB 0025  Page 5 
 
 Financial and Management Accounting 
 

Q3. Enter the following transactions in proper subsidiary book. Find out the
total of:

a) Purchase book b) sales book c) purchase return book d) sales return book.
a) Purchase book

Amount Rs.
Date Supplier Ledger Folio Inward Invoice
Dr
Purchase from
Jan 1 34000
Kartik
Purchase from
Jan 10 40000
vikas
Purchase from
Jan 12 102000
Naveen
Purchase from
Jan 15 100000
Brinda
Purchase from
Jan 25 45000
Anand
Total 321000

b) Sales Book

Outward Amount Rs.

Date Customer Ledger Folio
Invoice Cr
Sold Goods to
Jan 5 12000
Vinay
Sold goods to
Jan 7 10000
Nagaraj
Sold goods to
Jan 20 16000
Gururaj
Total 38000

c) Purchase Return book

Supplier/ Outward
Date Ledger Folio Amount Rs.
Creditor Invoice
Good returned to
Jan 14 4000
kartik

MB 0025  Page 6 
 
 Financial and Management Accounting 
 
Returned good to
Jan 22 2000
Naveen
Total 6000
d) Sales Return book

Customer/ Outward
Date Ledger Folio Amount Rs.
Debtors Invoice
Returned good
Jan 14 3000
by Vinay
Natraj returned
Jan 22 2000
goods
Total 5000

MB 0025  Page 7 
 
 Financial and Management Accounting 
 

Q 4 a. On 01-04-2007 Mr. Gundu Rao stated business with Rs. 3, 00,000 cash
and opened a bank account with Rs. 1, 50,000. He purchased furniture for his
business for Rs. 25000. Goods were bought from selvaraj for Rs. 50000 on
credit. He sold goods for Rs. 27000 in cash and Rs. 30000 on credit. He paid
Rs. 2500 for business expenses during April month. Rs. 10000 was withdrawn
for office purpose form the back. Find out the closing balance of cash and
bank.

Date Particulars LF Cash Bank Date Particulars LF Cash Bank

To capital
1/04/07 a/c of 300,000 1/04/07
Gundu Rao

To bank a/c C 1,50,000 By cash C 1,50,000

By
To sales a/c 27000 25000
furniture

Cash
withdrawn
To bank C 10,000 10,000
for office
exp

31/4/07 31/4/07 By bal c/d 16,0500 14000

Total 337000 150000 337000 150000

1/5/07 To Bal b/d 160500 140000

MB 0025  Page 8 
 
 Financial and Management Accounting 
 

Q 4b. Following are the extracts from the Trial Balance of a firm as on 31st

December 1998:
TRIAL BALANCE

As on 31st December 1998

Particulars Dr. Cr.

Salaries A/c - 10,000

Rent a/c - 5,000

Additional Information:

I. Salary for the month of December Rs.2000 has not yet been paid.

II. Rent amounting to Rs.1000 is still outstanding

You are required to pass the necessary adjusting entries and show how the above items will
appear in the Firm’s Account

Entry:

Salary a/c Dr 2000

To Salary outstanding A/c 2000

Rent a/c Dr. 1000

To rent outstanding 1000

Trial balance

Particulars Dr. Cr.

Salaries A/c 12000

Rent a/c 6000

MB 0025  Page 9 
 
 Financial and Management Accounting 
 

Q5. From the following figures extracted from the book if Shri Govind, you
are required to prepare a Trading and Profit & Loss Account for the year
ended 31st March, 1999 and a Balance Sheet as on that date after making the
necessary adjustment.

Particulars Amount Rs Particulars Amount Rs.

Shri Govind’s 228800 Stock 1.4.1999 38500
Capital
Shri Govind’s 13200 wages 35200
Drawings
Plant and 99000 Sundry Creditors 44000
Machinery
Freehold Property 66000 Postage and 1540
Telegrams
Purchases 110000 Insurance 1760
Returns Outwards 1100 Gas and Fuel 2970
Salaries 13200 Bad Debt 660
Office Expenses 2750 Office Rent 2860
Office Furniture 5500 Freight 9900
Discounts A/c (Dr.) 1320 Loose Tools 2200
Sundry Debtors 29260 Factory Lighting 1100
Loan to Shri 44000 Provision for D/D 880
Krishna @
10% p.a. –balance
on 1.4.1999
Interest on loan to
Shri Krishna 1100
Cash at Bank 29260 Cash in Hand 2640
Biils Payable 5500 Sales 231440
Adjustments

1. Stock on 31st March, 1999 was valued at Rs. 72,600

2. A new machine was installed during the year costing Rs. 15,400, but it was not recorded in the
books as no payment was made for it. Wages Rs. 1,100 paid for its erection has been debited to
wages account.

MB 0025  Page 10 
 
 Financial and Management Accounting 
 
3. Depreciate: Plant and Machinery by 33 1/3 %

Furniture by 10% Freehold property by 5%

4. Loose tools were valued at Rs. 1,760 on 31.3.1999.

5. Of the Sundry Debtors Rs. 600 are bad and should be written off.

6. Maintain a provision of 5% on Sundry Debtors for doubtful debts.

7. The manager is entitled to a commission of 10% of the net profits after charging such
commission.

Ans.
Trading A/c for the year ended 31st March, 1999:

Total Amt Total Amt

Particulars Amount Particulars Amt
Dr. Cr.

Purchase Sales 231440

Less: Purchase 110000

108900 Closing stock 72600
return 1100

Wages

35200
Less: erection 34100
1100
Factory
Lighting
1100
Gas & Fuel
2970
Freight
9900
To gross profit
transferred to
P& L A/c

Total 304040 304040

MB 0025  Page 11 
 
 Financial and Management Accounting 
 
Profit & Loss A/c for the year ended 31st March, 1999

Total Amt Total Amt

Particulars Amount Particulars Amount
Dr. Cr.
By Bal b/d
Salaries 13200 from trading 147070
a/c
Office Interest
2750 1100
expenses Received
Discount 1320
Postage &
1540
Telegram
Insurance 1760
Office rent 2860
Bad debts 1260
Provision for
1463 – 880 583
bad debts
Depreciation
550
on Furniture
Depreciation
on plant & 38130
machinery
Depreciation
on freehold 3300
property
Managers
NP * 10/110 13470
Commission
To net profit
transferred to 80723
B/S
Total 148170 148170

MB 0025  Page 12 
 
 Financial and Management Accounting 
 
Balance Sheet for the year ended 31st March, 1999

Liabilities Details Amount Assets Details Amount

Shri Govind’s
228800 Cash at bank 29260
capital

Shri govind’s
-13200 Cash in hand 2640
drawings

Plant &
Add net profit +80723 296323 99000+15400
Machinery
Less: Dep 38130 76270
Sundry Free hold
44000 66000
Creditors property
Bills Payable 5500 Less : Dep 5500 62700
Office
550
furniture

Less : Dep
4950
Loose tools

Sundry
29260 2200
Debtors

Less
provisions for 583
bad debts

Closing Stock 72600

Total 345823 345823

MB 0025  Page 13 
 
 Financial and Management Accounting 
 

6. Differentiate between Standard Cost and Budgetary Control

Following are some of the differences identified:

1. The scope of budgetary control is wider. It is integrated plan of action, a coordinated plan
in respect of all functions of an enterprise the scope of standard costing, on the other
hand, is limited to the operating level. Here too, it is further linked to costs. Budgetary
control is extensive whereas standard costing is intensive in its application
2. Budgetary control deals with costs and revenues. But standard costing restricts only with
costs.
3. Budgetary control takes into account all activities such as production, sales, purchase3s,
finance, capital expenditure, personnel whereas standard costing is restricted to deal with
only costs.
4. Budgetary control targets are based on past actual adjusted to future trends. In standard
costing, standards are based on technical assessment.
5. At the approach level, budgeted targets work as the maximum limit of expenses above
which the actual expenditure should not normally exceed. Under standard costing,
standards are attainable level of performance.
6. Budget is projection of final accounts. Standard costs are projection of only cost
accounts.
7. Budgetary control emphasizes the forecasting aspect of the future operations. Standard
8. Costing scope and utility is limited to only operating level of the concern.
9. In budgetary control, the degree of variance analysis tends to be much less and variances
are not revealed through the accounts but are revealed in total. But in standard costing,
variances Financial and Management are analyzed in details according to their
originating causes and ar3e revealed through different accounts.
10. Budgetary control is possible even in parts of expenses according to the attitude of
management. A standard costing system can not be operated in parts. All items of
expenditure included in cost units are to be accounted for.

MB 0025  Page 14