Professional Documents
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Course Code
Course Title
Assignment Code
Assignment Coverage
MS - 04
Accounting and Finance for Managers
MS-04/TMA/SEM - II/2016
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KIAN PUBLICATION
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1. Take an organization of your choice & find out how the Accounting Reports are prepared by them
and how these reports are useful for managers while making decisions relating to the activities of a
Business.
Accounting has been defined as "---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------, and other obligations to sales revenue and owners' equity. An
understanding of the financial data contained in accounting documents, then, is regarded as essential to reaching an accurate
picture of a business's true financial well-being. Armed with such knowledge, businesses can make appropriate financial and
strategic decisions about their future; conversely, ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- reflected in the words of the American Institute of Certified Public Accountants
(AICPA), which defined accounting as a "service activity."
The organization I am referring here is MSA Safety Company. Which deals in providing safety products. I am
here going to discuss followed by MSA Safety company for preparing Accounting reports.
Objective of an Accounts Preparation Engagement
This ordinarily entails reducing -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------. However, users of the compiled financial information derive some
benefit as a result of the chartered accountants' involvement because the service has been performed with professional
competence and due care.
17. This would normally -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------no errors had been made in the accounts preparation.
18. The chartered accountants would normally -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------type of entity concerned.
19. The verification work suggested in paragraphs 20 to 28 falls well short of an audit and does not include any detailed
procedures to verify the validity or completeness of the books and records generally. Indirectly, however, these procedures
would give the chartered accountant some comfort that the accounts properly reflect the business of the entity and are free from
material error.
20. If the chartered accountants become -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------the engagement.
21. Where there are departures from -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------, if the departures are such that they render the accounts misleading then the chartered
accountants should withdraw from the engagement.
Notification of withdrawal from engagement
22. The chartered accountants would normally explain to management their reasons for withdrawing from the engagement unless
this would constitute a breach of legal or other regulatory requirement (such as the tipping off provisions of the money
laundering legislation). Content of Accounts Companies Incorporated Under The Companies Act 2006
23. The Companies Act 2006 -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------Under Other Legislation
24. Accounts prepared for entities ----------------------------------------------------------------------------- requirements, all applicable
financial reporting standards/FRSSE and supporting pronouncements including, where relevant, a SORP.
Unincorporated Entities
25. Unless there are specific reasons for not -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------pronouncements, including where relevant, a SORP.
26. Section 25 of the Income -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------of Management
27. The chartered accountants may wish to obtain an acknowledgement from management in a letter of representation of its
responsibility for the financial information supplied.
28. In the case of a company, ----------------------------------------------------------------------------------------------------------------------------------------------------------------------- view and have been prepared in accordance with the Companies Act 2006 In particular
the directors are required to:
select suitable accounting policies and then apply them consistently;
make judgements and estimates that are reasonable and prudent; and
prepare accounts on a going concern basis unless it is inappropriate to presume that the company will continue in
business.
The directors are also responsible for safeguarding the assets of the company and for taking steps for the prevention and
detection of fraud and other irregularities.
29. The engagement to prepare -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------in this respect.
Management Approval of Accounts
Importance of AccountingAccountancy plays a vital role in -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------attention to the management reporting and interpretation of the meaningful implication of the
data.
The importance of accounting concepts -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------. In order to demonstrate the role of accounting concepts and convention producing a viable
financial report of any going concern, the following objectives are set out in this study:
These examines how accounting ----------------------------------------------------------------- which are used in decision making and
for evaluation of financial strength, profitability, and future protection of the organization.
However, it was not possible to cover all organization that use accounting concepts and convention in Nigeria. This is because
much energy is required, it is expensive as well as time consuming.
The Nigeria Breweries PLC having been selected, the -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------corporate goals.
As stated earlier, an understanding of the basic -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------of accounting information. These are the benefits the various users of financial
statements gets;
o
o
o
o
Furthermore, this study provides a better understanding of the desire for objectivity which is often at the desire for objectivity
of the financial accounting method in use at the present time.
This information enables managers -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------of which involve strategic decisions which affect the long-term health of their own
organizations
Role of accounting concepts in the preparation of financial statements
Financial accountants produce -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------the International Financial Reporting
Standards.
Financial accounting serves the following purposes:
Accountancy plays a vital role in the -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------total attention to the management reporting and interpretation of the meaningful implication
of the data.
2. Prepare the Cash Flow Statement for XYZ Ltd. for the year 2015-16 and analyze its cash flow
position.
`
The following additional information has been provided regarding the firm:
(i) Current liabilities denote amount that is payable to suppliers.
(ii) Raw materials constitute 80% of the inventory balance of the firm.
(iii)Loans and advance include income tax paid Rs. 240 lakh (previous year Rs. 150 lakh)
(iv) During 2015-16 10 lakh of equity shares of Rs. 10 each were issued at par. Long-term loans raised
during the year amounted to Rs. 160 lakh.
(v) The interest shown in the P&L account has actually been paid for in cash and other income is realized
in cash.
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3. With the help of a suitable illustration, explain how the costs and volume influence profit of a business.
A few different ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------potential. This relationship is
sometimes express as the cost volume profit, or CVP relationship.
Cutting
costs
may
include
negotiating for lower material costs, reducing inefficiencies in business operations or labor cuts. As long as these cost cuts do not
create a profound drop in revenue performance, profits will improve.
The cost structure of a firm describes the ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------to profit more from
increasing sales, and lose more from decreasing sales than a similar firm with low operating leverage.
Companies with high operating leverage ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------tend to be much less sensitive to changes in sales than their high operating leverage counterparts.
Sales Volume
The demand for a product will greatly ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------the sale. Under a basic pricing strategy, if the sales volume of a product is too low, the business will generally
lower the price point to increase sales. This will, however, also result in a reduced profit on the item for the business. In many --------------------------------------------------------------------- in a higher sales volume.
Sales volume means the amount of --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------your gross profits and your net income. If
you can lower your costs without impacting revenue and maintain the same sales volume, your profits will go up.
Profits
When looking at the ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------profit,
the
business
will
generally adversely affect the demand for the product. On the other hand, lowering the price point of an item will generally
lower the profit for the item but will increase the demand for the product.
income
when fixed costs are subtracted from gross profit. These are costs you incur regardless of how many items you produce or sell.
Common fixed costs include insurance, interest, rent and labor costs not directly died to production.
Companies use various strategies to -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------added value solutions may focus more
on creating a strong sense of value for the product itself in order to get higher sales prices and greater margins, thus reducing the
need for as much volume.
Companies with a relatively high proportion of fixed costs have high operating leverage. For example, companies that produce
computer processors, such as NEC and Intel, tend to make large investments in production facilities and equipment and
therefore have a cost structure with high fixed costs. Businesses that rely on direct labor and direct materials, such as auto repair
shops, tend to have higher variable costs than fixed costs.
Operating leverage is an important concept ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------has relatively high fixed costs, and Low Operating Leverage Company (LOLC) has relatively low fixed
costs.
A little bit of simple maths can help us answer numerous different cost-volume-profit questions.
We know that total revenues are --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------of total revenue over total costs will give rise to profit (P). By putting this information into a
simple equation, we come up with a method ------------------------------------------------------------------------------------------------------------------------ continuing with the example of Company A above.
It would, therefore, be --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------all levels of output in the short-run, and, therefore, unit costs are appropriate.
4. A Company is considering to replace an existing machine for which two suppliers have given
quotation. Supplier A has proposed a machine costing Rs. 180 lakh that uses the existing boiler while
supplier B has quoted for the machine Rs. 110 lakh but that requires modification in the existing energy
supply system costing Rs. 30 lakh. The machines have a life of 10 years and can be sold for 5% and 10%
of the original cost respectively for Suppliers A and B. The additional working capital requirement
expressed as % of revenue are 20% and 25% respectively because of larger requirement of fuel for the
machine from
The firm charges depreciation on SLM basis with zero book value and has a tax rate of 35% for all
kinds of income. The cost of capital for the firm is 12%
Which of the suppliers should the company prefer?
(a) as per NPV rule
(b) as per IRR rule.
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5. How would you judge the efficiency of the management of working capital in a business
enterprise? Explain with the help of hypothetical data.
There are no set rules or --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------should be made in order to determine total investment in working capital.
The firm should maintain a sound working ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------capital not only impairs firms profitability but also results in production interruptions
and inefficiencies.
An enlightened management should, therefore, maintain a right amount of working capital on a continuous basis. Only then a
proper functioning of the business operations will be ensured. Sound financial and statistical techniques, supported by judgment
should be used to predict the quantum of working capital needed at different time periods.
A firms net working capital position is ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------. Lenders such as commercial banks insist that the firm should maintain a minimum net
working capital.
There is an unavoidable need to manage working capital well. Working capital management refers to the administration of all
aspects of current assets, namely cash, marketable securities, debtors and inventories and current liabilities. The financial
manager must determine levels and composition of current assets. He must see that right sources are tapped to finance current
assets, and that current liabilities are paid in time.
The current assets holdings of the firm ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------capital management should be within these policy frameworks.
The two important aims of the working ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------assets holdings. If the firm maintains a relatively large investment in current assets, it
will have no difficulty in paying claims of creditors when they become due and will be able to fill all sales orders and ensure
smooth production. Thus a liquid firm has less risk of ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ position. A considerable amount of the
firms funds will be tied up in current assets, and to the extent this investment is idle, the firms profitability will suffer.
To have higher profitability, the firm may sacrifice solvency and maintain a relatively low level of current assets. When the firm
does so, its profitability will improve as less funds are tied up in idle current assets, but its solvency would be threatened and
would be exposed to greater risk of cash shortage and stock-outs.
To judge the efficiency of the ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------very high, it has excessive liquidity. It returns of assets will be low, as funds tied up in idle cash
and stocks earn nothing and high levels of debtors reduce profitability. Thus, the cost of liquidity (through low rates of return)
increases with the level of current assets.
For example, following are the hypothetical data for three firms following different working capital policies and their outcome:
In determining the optimum level of current ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------the firm should maintain its current assets at that level where the sum of these two
costs is minimized.
Working capital refers to a --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- extent, depends on its
efficiency in managing working capital. Some of the parameters for judging the efficiency in managing working capital are:
Whether maximum possible --------------------------------------------------------------------------------------------------------------------------------------------------------------. Both depend upon a company's strength as a seller and as a buyer.
Whether adequate credit is ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------supplier imposes the credit terms as 100% advance, i.e., negative
trade credit.
Whether there are adequate safeguards to ensure that neither overtrading nor undertrading takes place.
The following indices can be used for measuring the efficiency in managing working capital:
Current Ratio (CR)
CR = Current Assets/Current Liabilities
It indicates the ----------------------------------------------------------------------- the trend of working capital over a period of time.
Quick Ratio (QR)
QR = Liquid Assets/Current Liabilities
Where liquid assets include Cash in hand, --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- stock and prepaid expenses.
Current liabilities include Sundry Creditors, Bills Payable, Bank Overdraft, Outstanding Expenses etc.
Cash to Current Assets: If cash --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- profit, the proportion should usually be kept low.
Sales to Cash Ratio
Sales to Cash Ratio = Sales/Average cash balance during the period.
Cash should be -------------------------------------------------------------------------------------------- minimum cash on hand.
Average Collection Period
(Debtors/Credit Sales) x 365
This ratio ---------------------------------------------------------------------------------------- settle their bills.
Average Payment Period
Average payment period = (Creditors/Credit purchases) x 365
It indicates how ------------------------------------------------------------------------ from its suppliers.
http://ignousolvedassignmentsmba.blogspot.in/
KIAN PUBLICATION
Whatsapp- 9580039150
ignousolvedassignmentsmba@gmail.com
kianpublication1@gmail.com
ignou4you@gmail.com