Mb0041-Financial and Management Accounting-4 Credits

Accounting concepts: Accounting is the language of business.

Accounting information has to be suitably recorded classified, summarised and presented. Accountants adopt the following concepts in recording of accounts 1. Business Entity concept The business unit is treated as a separate and distinct from the persons who owe it.Hence business transactions must be kept completely separate from the private affairs of the owner this concept enables the owner top ascertain the picture of a business. 2. Going concern concept It is assumed that the business will exist for the future and transactions are recorded from this point of view. A firm is said to be a going concern when there is neither the intention nor the necessity to wind up its operation.

In other words, it continues to operation at its present scale in foreseeable future. 3. Money Measurement Concept All transactions are expressed and interpreted in terms of money.Accounting records only those transaction, which are being expressed in monetary terms through quantitative records are also kept. 4. Accounting period concept A business is assumed to continue indefinitely. In order to ascertain the state of affairs of the business at different intervals we have to choose the intervals for ascertaining the financial position and operational results at each such interval, which is known as accounting period.

Order custom essay Mb0041-Financial and Management Accounting-4 Credits with free plagiarism report

450+ experts on 30 subjects Starting from 3 hours delivery

Get Essay Help

5. Dual Aspect concept Each transaction has two aspects. 1) Debit aspect. 2) Credit aspect. If a business has acquired an asset it must have result,There has been a profit leading to an increase in the amount that the business owes to the proprietor Accounting Principles: The double entry system of accounting is based on a set of principle which is called generally accepted accounting principles. It incorporates the consensus at a particular time as to: •Which economic resources and obligations should be recorded as assets and liabilities by financial accounting, •Which changes in assets and liabilities should be recorded •When these changes are to be recorded, •How the assets and liabilities and changes in them should be measured, •What information should be disclosed and Which financial statement should be prepared. Q .

2 Pass Journal entries for the following transactions. Solution: Journal DateParticulars LfDebitCredit Cash A/C Dr To capital A/C (Being Madan invested in business) Purchase A/c Dr To cash A/C (Being credit purchases) Drawing A/C Dr To cash A/C (Being cash withdrawn for personal use) Purchase A/C Dr To cash A/C (Being cash purchase)Wages A/C Dr To cash A/C (Being wages paid)70000 14000 3000 12000 5000 70000 14000 3000 12000 5000 Q. 3Explain the various types of errors disclosed by trial balance Ans: Those errors that can be disclosed by trial balance can easily be located. As soon as the trial balance does not tally, the accountant can proceed to find out the spots where the errors might have been committed. The total amount of difference in the trial balance is temporarily transferred to a “Suspense Account “so that it can be mitigated as and when the error get rectified.Therefore the suspense account get debited or credited as the case may be on rectification of these types of error. The following are errors: a) Posting a wrong amount; This mistake may occur while posting an entry from subsidiary book to ledger.

b) Posting to the wrong side of an account: This error is committed while posting entries from subsidiary book to ledger. c) Wrong totalling: Both under casting and over casting are detected by trial balance. if any account is wrongly totalled, it gets reflected in the trial balance. ) Omitting to post an entry from subsidiary book to ledger: If an entry made in the subsidiary book does not get posted to ledger, the trial balance does not tally. e)Omission of an account altogether from being I shown in trial balance. f) Posting an amount to a correct account more than once; This result is imbalance in trial balance. g) Posting an item to the same side of two different ledger accounts: If two accounts are debited/credited for the same transaction, this type of error occurs.

Q. 4 From the following balances extracted from trail balance, prepare trading Account. Solution: The closing stock at the end of the period is Rs. 6000 TRADING ACCOUNT FOR THE YEAR ENDING------ Dr Particulars Rs Cr Particulars Rs To stock on 1-1-200470700 To purchase 102000 (-) Returns Outwards 3000 99000By sales 250000 (-)Returns Inwards 3000 247000 To carriage inwards5000By closing stock56000 To import duty6000 To clearing charges7000 To Royalty10000 To Fire Insurance2000 To Wages8000 To Gas,electricity,water4000 To GROSS PROFIT91300 TOTAL303000TOTAL303000 Q. 5Differentiate Financial Accounting and management accounting. Ans: S. NoBasis of differenceFinancial accountingManagement Accounting 1.

. 3. 4. 5. 6. Object Nature Subject matter Compulsion Precision ReportingTo record various transaction in order to know the financial position. It is helpful to share holders, creditors, bankers etc.

It is mainly concerned with the historical data. It is concerned with assessing the results of the whole business. It is compulsory in certain undertakings Actual figures are recorded and there is no room for using approximate figures It is prepared to find out profitability and financial position of the concern. It is useful for outsiders. To help the management in formulating policies and plans.It deals with the projection of data for the future. It deals separately with different units, Department and cost centres.

It is not compulsory No employee is given to actual figures. the approximate figures are more useful than the exact figures It is only for internal use. Q. 6 Following is the Balance sheet of M/s Srinivas Ltd. you are required to prepare a fund flow statement.

Don't let plagiarism ruin your grade

Run a free check or have your essay done for you

Check my essay Hire Writer