MDU Paper 2010 Unit -1 Question 1: Accounting concept The 'concept' includes those basic assumptions or conditions upon

on which the science of accounting is based. 1. Separate Entry 2. going Concern 3. Money Measurement 4. Cost Concept/ Principle 5. Dual Aspect 6. Accounting Period 7. Matching or Accrual 8. Realization Accounting Conventions The term 'Convention' includes those custom or traditions which guide the accountant while preparing the accounting statement. 1. Conservatism 2. Full Disclosure 3. Consistency 4. Materiality Unit -2 Question 3: FFS - A fund flow statement is a summary of a firm's inflow and outflow of funds. It tells us from where funds have come and where funds have gone. Detailed with Examples. Techniques for preparing FFS 1. Determine the increase or decrease in working capital by preparing a schedule of change in working capital. 2. The schedule of change in working capital can be prepared by comparing the current assets and current liabilities of two period. Item Current Assets Cash Balance Bank Balance Marketable Securities Account Receivable Stock in Trade Prepaid Expenses Current Liabilities Bank Overdraft Outstanding Expenses Account Payable Net Increase or Decrease in working capital Rules of preparing the schedule: A. Increase in a current assets, result in increase in Working Capital B. Decrease in a current assets, result in Decrease in Working Capital C. Increase in a current liabilities, result in Decrease in Working Capital D. Decrease in a current liabilities, result in increase in Working Capital As on As on Increase Change Decrease Change

While preparing a FFS, current assets and current liabilities are to be ignored. Attention is to be given to fixed assets and fixed liabilities. The statement may be prepared in the following form. Particular Source of Fund issues of shares issue of debentures long term borrowing sales of fixed assets operating profit Total Sources Application of funds Redemption of redeemable preferences shares Redemption of debentures Payment of other long term loans Purchases of fixed assets Operating Cost Payment of Dividend, taxes etc. Total Uses Net Increase/ Decrease in working capital (Total Sources Total Uses) Sources of FFS In order to prepare a fund flow statement, it is necessary to find out the sources and application of funds. Sources of founds 1. Internal Sources A. Add the following Depreciation, preliminary expenses or goodwill, provision for taxes, debenture contribution, loss on sales. B. Deduct the following profit on sale, profit on revaluation, non-operating income, 2. External Source A. Fund from long term loans B. Sales of fixed Assets C. Funds from increase in share capital Application of funds 1. Purchases of fixed assets. 2. Payment of dividend. 3. Payment of fixed liabilities. 4. Payment of Taxes liability. Use of Funds Flow Statements: FFS helps the financial analyst in having more detailed analysis and understanding of change in the distribution of resources between two balance sheet dates. The use of FFS can be put as follows. 1. It explain the financial consequence of business operation. 2. It answer intricate queries. 3. It acts as an instrument for allocation of resources. 4. It is a test as to effective or otherwise use of working capital. Amount

Unit 3 Question 5: Cost accounting is a system of classifying, recording & appropriate allocation of expenditure in such a manner so that per unit & total cost of goods produced or services rendered can be computed correctly. cost accounting is the technique & process of ascertainment of cost. I.C.M.A Objective of Cost: 1. Ascertainment of cost. 2. Estimations of cost. 3. Cost Control 4. Cost Reduction 5. Determining selling price 6. Facilitating preparation of financial and other statements 7. providing basis for operating policy. Importance/ Advantages of cost accounting. ADVANTAGES TO MANAGEMENT: 1. Aids in price fixing. 2. Helps in estimates. 3. Wastage are eliminated. 4. Costing make comparisons possible. 5. Provides data for periodical profit and loss account. 6. Aids in determining and enhancing efficiency. 7. Helps in inventory control. 8. Help in determining of break even point. 9. Helps in determining the level of output for a desire profit. 10. Helps in periods of trade depression and competition 11. channelizing production in right line. ADVANTAGES TO EMPLOYEES: 1. Better Wages. 2. Low Labour Turnover. 3. Elimination of strikes & lockouts. ADVANTAGES TO CONSUMER: It provides Cost Control. These help the organization to offer product & services at lower prices & of good Quality. ADVANTAGES TO GOVT. : It is useful for Govt. for deciding the state subsidy to Industry & also for Economic Planning. With the above concepts we can say cost accounting is becoming more and more relevant in the emerging economic scenario Question 6: FIRST-IN-FIRST-OUT (FIFO) As per this method, the material which having purchases will be issued/sold first. Therefore the cost of good sold will be based upon oldest prices but the closing stock of the balance sheet will be at the latest precise.

LAST-IN-FIRST-OUT (LIFO) As per the method the material which is purchased in the last will be issued first, therefore the closing stock at the oldest price, but the cost of good sold will be latest price. Write advantages and disadvantages of both. Unit - 4 Question 7: Management accounting is the presentation of accounting information in such a way to assist management in creation of policy and day to day operation of an undertaking. Any form of accounting which enables a business to be conducted more efficiently can be regarded as Management accounting ICA England and Wales Function of Management Accounting 1. Provides data 2. Modifies data 3. Analyses and interprets data 4. Serves as a mean of communicating 5. Facilitates control 6. Use also qualitative information Utility of Management Accounting 1. Plaining 2. Controlling 3. Coordinating 4. Organizing 5. Motivating 6. Communicating Question 8: The establishment of budgets relating the responsibilities of executives to the requirements of a policy, and the continuous comparison of actual with the budgeted results either to secure by individual action the objectives of that policy or to provide a firm basis for its revision. Thus budgetary control involves the following: 1. Establishment of budgets 2. Continuous comparison of actuals with budget to achieve the target. 3. Revision of budget in the light of changed circumstances. Objectives of budgetary control 1. Bring Economics in working 2. Buck passing avoided. 3. Establishes coordination. 4. Guard against undue optimism. 5. Acts as a safe signal. 6. Adoption of uniform policy. 7. Decreases in production cost. 8. Adoption of standard costing principle. 9. Management by exception. 10. Optimum mix 11. Favour with credits agencies 12. Optimum Capitalization

Essentials of budgeting: 1. Determination of the objectives 2. Organization for budgeting 3. Creation of budget manual 4. Determination of responsibility for budgeting 4.A. Budget Controller 4.B. Budget Committee 5. Determination of the budget period. MDU Paper 2009 Unit -1 Question 1: same as question 1 of 2010 paper. Unit 2 Question 3: FFS helps the financial analyst in having more detailed analysis and understanding of change in the distribution of resources between two balance sheet dates. The use of FFS can be put as follows. 1. It explain the financial consequence of business operation. 2. It answer intricate queries. 3. It acts as an instrument for allocation of resources. 4. It is a test as to effective or otherwise use of working capital. Than difference between Fund Flow Statements and Income Statements. 1. FFS deals with financial resources for running business activity. IS disclose the result of business activity. 2. FFS match the fund raised and fund applied during the financial period. IS match the Income and expenses during that period. 3. Sources of fund are many besides operation, like share capital, debentures, sale of fixed assets etc. IS which discloses the result of operation. Thus, IS and FFS have different function to perform. Modern management need both. One can't substitute each other, but they are good complementary to each other. Unit 3 Question 5: Objective of Cost: 1. Ascertainment of cost. 2. Estimations of cost. 3. Cost Control 4. Cost Reduction 5. Determining selling price 6. Facilitating preparation of financial and other statements 7. Providing basis for operating policy. Cost Accounting department and other department Relationship of cost department with other departments A) Manufacturing Department B) Research & Design Department C) Personal Department D) Finance & Accounts Department E) Marketing Department F) Public Relation Department

Question 6:
METHODSOFINVENTORYVALUATION Specificidentificationpricemethod 1.Firstinfirstout(FIFO) 2.Lastinfirstout(LIFO) 3.Weightedaveragepricemethod 4.Basestockpricemethod 5.Specificidentificationmethod 6.HighestinFirstoutmethod. Justexplainthedefinitionof4to6andabove1to3needtoexplainadvantagesand disadvantagesalongwithdefinition. InperiodofPricerisebothFIFOandLIFOisbenefitsbutwhenwehavetochooseonlyone methodthanIwouldliketochooseLIFOmethodforinventoryvaluationbecauseitgivemore meaningfulincomebutlessrealisticbalancesheet. Unit4