Professional Documents
Culture Documents
ASSIGNMENT
STATISTICS FOR MANAGEMENT
1&2
Page 1
ASSIGNMENT SET - 1
Q.1 Assure you have just started a Mobile store. You sell mobile sets and currencies of Airtel, Vodaphone, Reliance and BSNL. Take five transactions and prepare a position statement after every transaction. Did you firm earn profit or incurred loss at the end? Make a small comment on your financial position at the end.
Started business with cash purchased nokia handsets purchased BSNL and Reliance recharge vouchers sold a handset for 6000 costing 5850 Sold recharge vouchers of 1500 profit 6% Puchased a second hand cell on crerdit sold a handset for 10000 costing 9150 Repair work of the second hand set Sold the hand set for 5000 Sold a hand set on credit for 10000 costing 9500 on credit Realised 70% from the customer Customer became bad debt
25000 5000 -5850 -1500 3000 -9150 -3000 -9500 10000 -7000 -3000 3500 0
40000
500
38590
39590
3000
42590
42590
Page 2
Accounting Standards (ASs) AS 1 Disclosure of Accounting Policies AS 2 Valuation of Inventories AS 3 Cash Flow Statements AS 4 Contingencies and Events Occurring after the Balance Sheet Date AS 5 Net Profit or Loss for the period, Prior Period Items and Changes in Accounting Policies AS 6 Depreciation Accounting AS 7 Construction Contracts (revised 2002) AS 8 Accounting for Research and Development AS 9 Revenue Recognition AS 10 Accounting for Fixed Assets AS 11 The Effects of Changes in Foreign Exchange Rates (revised 2003), AS 12 Accounting for Government Grants AS 13 Accounting for Investments AS 14 Accounting for Amalgamations AS 15 Employee Benefits Limited Revision to Accounting Standard (AS) 15, Employee Benefits AS 15 (issued 1995) Accounting for Retirement Benefits in the Financial Statement of Employers AS 16 Borrowing Costs AS 17 Segment Reporting AS 18, Related Party Disclosures AS 19 Leases AS 20 Earnings Per Share AS 21 Consolidated Financial Statements AS 22 Accounting for Taxes on Income. AS 23 Accounting for Investments in Associates in Consolidated Financial Statements AS 24 Discontinuing Operations AS 25 Interim Financial Reporting AS 26 Intangible Assets AS 27 Financial Reporting of Interests in Joint Ventures AS 28 Impairment of Assets AS 29 Provisions,Contingent` Liabilities and Contingent Assets AS 30 Financial Instruments: Recognition and Measurement and Limited Revisions to AS 2, AS 11 (revised 2003), AS 21, AS 23, AS 26, AS 27, AS 28 and AS 29 AS 31, Financial Instruments: Presentation Accounting Standard (AS) 32, Financial Instruments: Disclosures, and limited revision to Accounting Standard (AS) 19, Leases
Page 3
Q.3 Prepare Three-column Cash Book of M/s Thuglak & Co. from following particulars
20X1Jan
1. Cash in hand Rs. 50,000, Bank Overdraft Rs. 20,000 2. Paid into bank Rs. 10,000 3. Bought goods from Hari for Rs, 200 for each 4. Bought goods for Rs. 2,000 paid cheque for them, discount allowed 1% 5. Sold goods to Mohan for each Rs. 1.175 6. Received a cheque from Shyam to whom goods were sold for Rs. 800.Discount allowed 12.5% 7. Shyams cheque deposited into bank 8. Purchased an old typewriter for Rs. 200 , Spent Rs. 50 on its repairs 9. Bank notified that Shyams cheque has been returned dishonored and debited the account in respect of charges Rs. 10 10. Received a money order Rs. 25 from Hari 11. Shyam settled account by cheque for Rs. 820,Rs.20 for interest charged. 12.Withdrew from the bank Rs. 10,000 18. Discounted a B/E for Rs. 1,000 at 1% through bank 20. Honored our own acceptance by cheque Rs. 5,000 22. Withdrew fir personal use Rs. 1,000 24. Paid tread expenses Rs. 2,000 25. Withdrew from bank for private expenses Rs. 1,500 26. Purchased machinery from Rajiv for 5,000 and paid him by means of a bank draft purchased for Rs. 5,005 27. Issued cheque to Ram Saran for cash purchased of furniture Rs. 1,575 28. Received commission cheque Rs. 500 from R.& Co, deposited in bank 29. Ramesh who owned us Rs. 500 became bankrupt paid 50 paise in rupee 30. Received payment of a loan of Rs. 5,000 & deposited Rs. 3,000 into bank 31. Paid rent to landlord Mohan by cheque of Rs. 220 31. Interest allowed by bank Rs. 30 31. Half-yearly bank charges Rs. 50
Page 5
Solution
Dr Date
2011 1-Jan 2-Jan 5-Jan 6-Jan 7-Jan 10-Jan 11-Jan 12-Jan
Cr LF VN Cash Bank
20000 10000 200 1980 700 250 700 10 10000 5000 1000 2000 1500 5005 1575 220 50 49750 63900 46040 20
LF VN Cash
50000 1175 700 25
Bank Disc
Date
2011 1-Jan 2-Jan 3-Jan 4-Jan 7-Jan 8-Jan 9-Jan 9-Jan 12Jan 20Jan 22Jan 24Jan 25Jan 26Jan 27Jan 31Jan 31Jan 31Jan
Partriculars
By, Balance B/d By, Bank By, Hari By, Purchase By, Bank By, Typewriter By, Shyam By, Charges By, Cash By, Bills Payable By, Drawings By, Trade Exp By, Drawings By Machinery By, furniture By, Rent By, Bank Charge By, Balance c/d
Disc
18-Jan To, Bills Receivable 28-Jan To, Commission 29-Jan To, Ramesh To, Loan 30-Jan Repayment 31-Jan To, Interest
100
20
Page 6
Q.4 Choose an Indian Company of your choice that has adopted Balance Score Card and detail on it.
Tata motors Tata Motors is the first Indian company to be inducted in the Balance Scorecard Hall of Fame. Joins the thirty-member elite club of organizations including Hilton Hotels, BMW Financial Services, US Army, Korea Telecom and Norwegian Air Force for achieving excellence in performance. The commercial vehicle business unit (CVBU) of Tata Motors, India's largest automobile manufacturer, received prestigious Balanced Scorecard Collaborative, The coveted Steuben crystal 'Rising Star' trophy was presented at Balanced Scorecard Asia Pacific Summit held at Australia. Tata Motors-CVBU has been recognized for having achieved a significant turnaround in its overall performance. The implementation of the Balanced Scorecard has enabled greater focus on different elements of operational performance. Defining, cascading and communicating strategies across the organisation have brought about transparency and alignment. The scorecard incorporates SQDCM (safety, quality, delivery, cost and morale) and VMCDR (volume, market share, customer satisfaction, dealer satisfaction and receivables).Ravi Kant, executive director, CVBU, Tata Motors, said, "While we were conscious of the benefits of the Balanced Scorecard when we began implementing it three years back, we are extremely pleased that it has helped us achieve significant improvements in our overall performance. I am quite positive that the BSC will play an important part in our objective to become a world-class organization."Balanced Scorecard Collaborative president Dr David P Norton said, "We created the Hall of Fame to publicly acknowledge the hard work and remarkable results of implementing the Balanced Scorecard to create the strategy-focused organization. The Balanced Scorecard Hall of Fame pays tribute to the success that each organization has attained. Tata Motors- CVBU shares the honour with the city of Brisbane and Korea Telecom (KT).The Balanced Scorecard (BSC) concept-created by Dr Robert S Kaplan and Dr David P Norton in 1992, has been implemented in thousands of corporations, organizations, and government agencies worldwide. Based on the simple premise that "measurement motivates," the BSC puts strategy at the centre of the management process, allowing organizations to implement strategies rapidly and reliably. Balanced Scorecard Collaborative, Inc. is a new kind of professional services firm dedicated to the worldwide awareness, use, enhancement, and integrity of the Balanced Scorecard as a value-added management process. Tata Motors range of commercial vehicles spans over 135 models and can haul loads ranging from 2 to 40 tones. The product portfolio also includes 12 to 60-seater buses, tippers and tractor-trailers. Tata Motors vehicles meet the stringent Euro emission norms. The company currently has an export base in most parts of South Asia, Africa, Middle East and Europe. Tata Motors recently crossed the 3-million production milestone.
Page 7
Q.5 From the following data of Jagdish Company prepare (a) a statement of source and uses of working capital (funds) (b) a schedule of changes in working capital
Assets Cash Short-term investment Debtors Stock Long term Investment Machinery Building Land Total Liabilities and Equity Accumulated depreciation Creditors Bills Payable Secured loans Share capital Share premium Reserves and surplus Total 1,10,000 40,000 20,000 2,00,000 2,20,000 24,000 1,34,400 7,48,400 60,000 30,000 10,000 1,00,000 1,60,000 Nil 1,30,000 4,90,000 2008 1,26,000 42,400 60,000 38,000 28,000 2,00,000 2,40,000 14,000 7,48,400 2007 1,14,000 20,000 50,000 28,000 44,000 1,40,000 80,000 14,000 4,90,000
Income statement Sales Cost of goods sold Gross Profit 2,40,000 1,34,600 1,05,200
Page 8
Less Operating expenses: Depreciation machinery Depreciation building Other expenses Net profit from operation Gain on sale on long-term investment Total Loss on sale of machinery Net Profit 20,000 32,000 40,000 92,000 13,200 4,800 18,000 2,000 16,000
Adjustments: Machinery worth Rs.70000 was purchased and worth Rs.10000 was sold during the year [Accumulated depreciation on machinery is Rs.18000 after adjusting depreciation on machinery sold]. Proceeds from the sale of machinery were Rs.6000 Dividends paid during the year Rs.11600
Solution
Particulars Current Assets Cash Short term investment debtors Stock Current Liabilities Creditors Bills Payable
Schedule of change in working capital Effect in working Capital 2007 2008 Increase Decrease 114000 20000 50000 28000 212000 30000 10000 40000 172000 34400 206400 126000 42400 60000 38000 266400 40000 20000 60000 206400 206400 54400 12000 22400 10000 10000
(A)
10000 10000
34400 54400
Page 9
Partriculars dividend paid Depreciation on building Depreciation on machinery loss on sale of machinery To, Balance c/d
Adjusted P/L A/c Rs Partriculars 11600 By balance b/d profit on sale of 32000 investment 20000 Fund from operation 2000 134400 200000
200000
Source Loan taken share issued at premium Sale of investment sale of machinery Fund from operation Sale of machinery
Fund flow statement Rs Application increase in working 100000 capital 84000 dividend paid 20800 purchase of building 6000 purchase machinery 65200 32000 308000
308000
Page 10
Page 11
ASSIGNMENT SET - 2 Q.1 Selected financial information about Vijay merchant company is given below:
2010 Sales Cost of Goods Sold Debtors Inventories Cash Other current assets Current liabilities 69,000 57,000 7,200 11,400 1,500 4,000 16,000 2009 43,000 32,500 3,000 5,500 800 2,700 11,000
Compute the current ratio, quick ratio, average debt collection period and inventory turnover for 2009 and 2010. State whether there is a favorable or unfavorable change in liquidity from 2009 to 2010. At the beginning of 2009, the company had debtors of Rs..2500 and inventory of Rs.3000.
Year Current Assets 2009 2010 Year Quick Assets 2009 2010 Year Credit Sales 2009 2010 Year 2009 2010 Year 2009 2010
12000 24100
Quick ratio 6500 0.590909091 12700 0.79375 Debtors Turn over 43000 9.555555556 69000 11.31147541 Debt Collection Year in days Debtors Turnover period 365 9.555555556 38.19767442 365 11.31147541 32.26811594 Stock Turnover Cost of goods sold Inventory period 32500 5500 5.909090909 57000 11400 5
Current Liabilities 11000 16000 Quick Liability 11000 16000 Average Debtors 4500 6100
Page 12
Q.2 Explain different methods of costing. Your answer should be studded with examples (preferably firm name and product) for each method of costing Job Costing:
This is a product related classification of costing system. The cost is ascertained for each job or work order processed. This system is used where most of the manufacturing activities are planned and carried out for distinct jobs or customers. The utility of this method increases when there is great variability in nature of jobs or work orders processed.
Batch Costing : This method determines the cost associated with each batch pf products manufactured. This differs from job or work order costing in the variability of the production batches. In this case the production batches consist of mostly standard products or components. What varies is mostly the size of batches and the timing of their processing. Process Costing: In this method of costing the costs are determined for various different manufacturing activities or processes. These costs are the assigned to different products on the basis of some criteria like quantity processed or the time taken for processing. This method of costing is suitable for manufacturing units that use continuous processes or mass production techniques. This method is particularly suitable where there are many different products and process routes, where output of one process becomes input for another. Operation Costing: This method is similar to the process costing. However the products manufactured have limited variation. For example a cement plant may use this method. Multiple costing: Most of the organizations use a combination of different costing method rather than just one method. Multiple costing refers to such combinations of different methods.
Page 13
Q.3 State the importance of differentiating between the fixed costs and variable costs in managerial decision.
Variable costs are costs that can be varied flexibly as conditions change. In the John Bates Clark model of the firm that we are studying, labor costs are the variable costs. Fixed costs are the costs of the investment goods used by the firm, on the idea that these reflect a long-term commitment that can be recovered only by wearing them out in the production of goods and services for sale. The idea here is that labor is a much more flexible resource than capital investment. People can change from one task to another flexibly (whether within the same firm or in a new job at another firm), while machinery tends to be designed for a very specific use. If it isn't used for that purpose, it can't produce anything at all. Thus, capital investment is much more of a commitment than hiring is. In the eighteen-hundreds, when John Bates Clark was writing, this was pretty clearly true. Over the past century, a) education and experience have become more important for labor, and have made labor more specialized, and b) increasing automatic control has made some machinery more flexible. So the differences between capital and labor are less than they once were, but all the same, it seems labor is still relatively more flexible than capital. It is this (relative) difference in flexibility that is expressed by the simplified distinction of long and short run. Of course, productivity and costs are inversely related, so the variable costs will change as the productivity of labor changes. Here is a picture of the fixed costs (FC), variable costs (VC) and the total of both kinds of costs (TC) for the productivity
Output produced is measured toward the right on the horizontal axis. The cost numbers are on the vertical axis. Notice that the variable and total cost curves are parallel, since the distance between them is a constant number -- the fixed cost.
Page 14
Q.4 Following are the extracts from the trial balance of a firm as at 31st March 2009
Name of the account Sundry debtors Bad debts Additional Information 1) After preparing the trial balance, it is learnt that Mr.X a debtor has become insolvent and nothing could be recovered from him and entire 5,000 due from him was irrecoverable. 2) Create 10% provision for doubtful debt. Required: Pass the necessary journal entries and show the sundry debtors account, bad debts account, provision for doubtful debts account, P&L a/c and Balance sheet as at 31st March 2009. Sundry debtors Bad debt PBD 205000 5000 20000 180000 Particulars Bad debt A/c . Dr To, Debtors A/c P/L A/c Dr To Bad debt A/c P/L A/c .. Dr To, Provision for bad debt A/c LF Dr 5000 Cr 5000 5000 5000 Dr 2,05,000 3,000 Cr
Less less
Date
20000 20000
Dr Date
5000
5000
Page 15
Dr Date
LF
Cr Partriculars LF Rs
Liability
Balance Sheet Rs
Assets
Q.5 A change in credit policy has caused an increase in sales, an increase in discounts taken, a decrease in the amount of bad debts, and a decrease in investment in accounts receivable. Based upon this information, the companys (select the best one and give reason) 1) Average collection period has decreased 2) Percentage discount offered has decreased 3) Accounts receivable turnover has decreased 4) Working Capital has increased.
Solution 1) Average collection period has decreased Since sales have increased, you would expect accounts receivable to increase too, if the Average collection period remained the same. But you're told that AR has decreased, so the Average collection period must have decreased, i.e. the customers are taking fewer days to pay up.
Page 16
Accounting plays a very important role in all businesses but it is not just the business itself that finds accounting information useful. There are other stake holders who rely on accounting information to make decisions. These stakeholders include:
1. Shareholders - Shareholders use the balance sheet and profit and loss account produced by limited companies to decide if they are going to increase or decrease their holding. 2. Management - Management in every level of the business from director level to supervisor level rely on accounting information to do their job properly. They all use the same information for different purposes. For example, directors use it for strategic purposes and middle management can use it to see if they are meeting their financial targets. 3. Suppliers - Along with other data suppliers will look at a company's balance sheet and profit and loss account to see if and how much credit they are willing to give to present and potential customers. 4. Lenders - Similar to suppliers lenders also need to make sure a company is in a healthy financial situation before they start to lend money. 5. Government - Governments use the information provided by a company about its finances to levy tax on the profits. 6. Customers - Before another company becomes a customer or enters into a joint venture, they will look at the company's finances to make sure the company is not in trouble and that their supplies are not about to dry up. 7. Employees - Employees also have an interest in how well their employer is doing so use financial accounting information for this purpose.
Page 17