Questions and Answers of Financial Accounting For Managers

Below are typical transactions for a company. Indicate whether each transaction is classified as a financing, investing, or operating activity.Type of Business Activity Related Transactions 1.
Below are typical transactions for a company. Indicate whether each transaction is classified as a financing, investing, or operating activity.Type of Business Activity Transactions 1. ________
Indicate whether a company would classify the transaction as financing, investing, or operating.Transactions 1. Receive cash from investors.2. Pay rent for the current period.3. Purchase office
Account classifications include assets, liabilities, stockholders' equity, dividends, revenues, and expenses. Indicate the account classification for each account name. Account Classifications 1.
For each transaction, indicate whether a company would classify the related account as an asset, liability, stockholders' equity, dividend, revenue, or expense. Transactions 1. Receive cash from
Match each qualitative characteristic with its definition:1.A) All information necessary to describe an item is reported.2.B) Information provides feedback on past activities.3.C) Information is
Listed below are 4 terms followed by a list of phrases that describe or characterize the terms. Match each phrase with the correct term. 1. Unqualified opinion 2. Auditor's report 3. Qualified
Match each organization to its role:1.A) Ensure that auditors follow strict guidelines when conducting their audits.2.B) Independent, private-sector group that is primarily responsible for setting
Match each financial statement with the accounts reported on it:1.A) Dividends.2.B) Assets and liabilities.3.C) Revenues and expenses.Income statement Statement of stockholders' equity Balance sheet
Match each business activity with its example.1.A) Purchase office building.2.B) Pay utilities.3.C) Receive investments from stockholders.Operating Financing Investing
Kazam Services begins the month with capital of £200,000 and the following assets and liabilities:The following transactions took place in the accounting records of the business during the last
XYZ Ltd’s Profit and Loss account shows the following:Based on these figures, which of the following statements is true?a Sales, cost of sales and expenses have all increased, therefore profit,
National Retail Stores has identified the following data from its accounting records for the year ended 31 December: sales £1,100,000; purchases £650,000;expenses £275,000. It had an opening stock
In this example, prices had been rising in each year. How would Example Corporation and their accounting choices have differed if inventory purchase prices had been stable or had been falling, over
Prepare a pro forma Statement of Cash Flows for the Monterrey Manufactur¬ ing Company for 2004-
Prepare pro forma 2004 financial statements similar to Exhibits 1 and 2.
Enter the year’s projections on the T-accounts. Entries should be coded as il¬ lustrated by the sample entry for sales of $2,442,000 (coded 1).
Prepare a statement of financial position as of June 30, 1989, for Thumbs-Up Video, Inc.
Prepare an income statement for Thumbs-Up Video, Inc., from incorporation through June 30, 1989. Disregard any income taxes that might be due.
Prepare an income statement for the six months ended June 30, 2003. Did the company incur a loss as Mr. Larson suggested?
Prepare a statement of financial position at June 30, 2003, and a statement of cash flows for the six-month period.
Prepare a set of financial statements for the stockholders for the year 2003: a statement of financial position at December 31, 2003; an income statement; and a statement of cash flows for the year
How would you have reported to stockholders on the financial performance of Chemalite, Inc., for its first year, January 1, 2003 to December 31, 2003?
How would you have reported on operations of Maria Hernandez & Associ¬ ates through August 31, 2004? Had the company made a profit as Maria Her¬ nandez believed? If so, how would you explain why
How would you report the status of the business on August 31, 2004?
Construct a set of T accounts to record the transactions that occurred at Thumbs'Up Video, Inc., from November 1988 through June 1989.
What factors should the management of Example Corporation consider when deciding whether to switch from LIFO to FIFO at the beginning of Year 2 ? Would this change impact the balance sheet or income
Prepare a summary of the cash transactions for the six months ended June 30, 2003.
What would have happened if Example Corporation had been using FIFO at the beginning of Year 1, instead of using LIFO that year?
Complete the following balance sheet and profit and loss statement based on the information given as follows:Profit and Loss Statement Liabilities Current liabilities Long-term debts Equity capital
Financial information can be used to ascertain efficiency or otherwise in utilization of assets. Which ratios can be used to measure efficiency in assets utilization?
Assuming that Sharda Limited uses a perpetual inventory system and keeps detailed record of purchase and sales. The datewise break up of purchase and sales during the quarter is given below:Using
Based upon the revised Trial Balance, prepare the profit and loss account of Snow White & Co for the year ended 31st December 2017 and the Balance Sheet as on that date. Particulars Purchases
The excerpts from the profit and loss account of MG Retails Limited for the last two years are given as follows: You are required to:1. Calculate the yearonyear growth of sales and net profit.2.
Chit-Chat Limited funds its inventories by taking short-term loan from a bank @ 12% p.a. The estimated sale of the company for the coming year is ₹ 800 million with a gross margin of 25% on
Based upon the following information, comment on the capital structure of Swift Transport Limited using suitable ratios: Particulars Shareholders' funds Borrowed funds Earnings before Interest and
CSR Infotech Limited is engaged in software development and BPO services. The company is paying dividends since its inception. The relevant details from its financial statements are reproduced as
The financial information about two competing firms Black Limited and White Limited is given as follows: 1. Based upon the above information, compute the return on capital employed and return on
Business enterprises try to maximize their return on equity. What are the key drivers of ROE? Explain by using Dupont Analysis.
Sit-Sat Limited followed the calendar year as the accounting period till December 2015 and changed to financial year thereafter. During the switch over period, it prepared the accounts for fifteen
Based upon the trial balance of Star Limited as given in the problem 8 of Chapter 5, prepare the balance sheet of the company as on 31st March 2017. Make suitable assumptions as necessary.problem
After preparing the above trial balance, the following adjustments were identified. You are required to pass the necessary adjustment entries, prepare a revised Trial Balance and close the
In each of the following cases how will the transaction affect the balance sheet as on 31st March 2017:1. Premises taken on rent on 1st August 2016 by paying a deposit of ₹ 10 million. Quarterly
Based upon the trial balance given in Problem 3 of Chapter 5 (profit and loss statement) prepare the balance sheet of Shivam Industries Limited as on 31st March 2017.Problem 3Based upon the given
Please complete the income statement for the year 2016–17 based upon the information given: Particulars Sales Opening stock Purchases Closing stock Cost of goods sold Gross profit Operating
The profit and loss account of Innovative Products Limited for the years 2016 and 2017 is given below:The management was surprised to note that though the sales have increased by 9%, the profit
Sharda Limited uses periodic inventory system for accounting. The following data pertains to quarter ended 30th June 2017:The sales of the company during the quarter amounted to ₹ 2,700,000. The
Precision Limited deals in highly sophisticated engineering items. It imports these items in semi finished form. These items are processed further to meet the precise requirement of the customers.
Assume that Satluj Cements Limited charges depreciation on the written down value method basis and the rate of depreciation being 20% per annum. 1. Prepare the depreciation schedule for the above
Aar Dee Limited bought a machine for ₹ 600,000. The management estimates a useful life of 10 years for the machine after which it can be sold for ₹ 30,000. For accounting purposes, the company
Calculate the cash flow from operating activities on the basis of the following information using direct method and indirect method: Profit and Loss Statement for the Year Ended 31st December
A-One Industries follows financial year as its accounting period. On 1st December 2013, the company bought five computers for a total consideration of ₹ 500,000. The company estimates the useful
Pure Copper Limited bought pollution control equipments costing ₹ 30 million. As per the scheme of the government, to promote use of pollution control devices, 40% of the cost of the equipment is
The balance sheet of Axon Limited for the year 2017 and 2016 showed the following amounts under the heading borrowed funds:The company took fresh longterm loans during the year amounting to ₹ 250
The balance sheet of Axon Limited for the year 2017 and 2016 showed the following amounts under the heading property, plant and equipment: During the year, the company sold an item of PPE with
Established in 1976, Apollo Tyres Ltdis India’s leading tyre manufacturer, with operations in three continents, and headquartered in Gurgaon, outside India’s capital city of New Delhi. The equity
On the basis of the profit and loss statement for the year ended 31st March 2017, balance sheets as on 31st March 2017 and 2016 respectively, and the additional information, prepare the cash flow
The cash flow from operating activities (indirect method) in respect of AOne Batteries for the year 2017 is give as follows:On the basis of the information in the cash flow statement as above,
Based upon the following balance sheets, prepare the cash flow statement for the year 2016–17: Particulars Assets Non-current assets Property, plant and equipment (gross block) Less: Provision for
Based upon the following information calculate the economic value added (EVA) and market value added (MVA) for Hot & Spice Limited.The detail of capital employed by the company in the last two
The followings are the excerpts from the profit and loss account and the balance sheet of PL Limited for the year ended 31stMarch 2016 and 2017.1. Compute the net margin ratio, earnings per share and
The management of ABC Limited is happy to note that the profit for the year 2017 has improved compared to the previous year. You are required to critically review the profitability for the two years
‘The quality of analysis is dependent upon the quality of information depicted by the financial statements’. Do you agree?
Steel Authority of India Limited (SAIL) and Tata Steel Limited are the two largest steel producers in India. The former is a public sector giant set up in the year 1973 with over 85% of the capital
How do common size financial statement useful in analysis?
Bharti Airtel Limited is the largest provider of mobile telephone services in India. It also offers fixed lines, broad band and subscription television services. The total income of the income grew
Rising Stars Limited reported a profit after tax of ₹ 38 million for the year 2017. The company’s share capital consists of 2.5 million shares of face value ₹ 10 each. The company declared a
J K Cements Limited is a leading manufacturer of cement in India with installed grey cement capacity of 10.5 million tonne per annum. It is the second largest manufacturer of white cement with an
The management of Ram Sham Limited is concerned about the increasing level of sundry receivables. The company has the policy of giving 60 days credit to its customers. All the sales are on credit
You are given the following information in respect of Surya Limited and Chand Limited in similar business for the year ended 31st March 2017.1. Which company is managing its trade receivables
How does short-term solvency analysis differ from longterm solvency analysis?
The current assets and current liabilities of PTI Limited amounted to ₹ 230 million and ₹ 100 million, respectively. The current assets include inventories amounting to ₹ 80 million. Compute
Set up in 1954, Bharat Electronics Limited (BEL) is India’s foremost defense electronics company, a Navratna PSU under the Ministry of Defence. PQR is a multi-products, multi-technology,
Steel Scrap Trader sells its product at a gross margin of 25% on sales. Its annual sales are estimated to be ₹ 360 million. The inventory turnover ratio for the business is 4 times whereas the
High current ratio may also indicate lower efficiency in assets utilization. Do you agree?
Zing Limited has current assets of ₹ 4,650,000 and current liabilities of ₹ 1,850,000. The current assets include inventories amount to ₹ 1,100,000.1. Calculate the current ratio and liquid
The current ratio and liquid ratio of the company are 2.5:1 and 1.5:1. If the current assets amounted to ₹ 500 million, f ind the amount of inventories held by the company.
Differentiate between interest coverage ratio and debt service coverage ratio. Which one do you think is a better indicator of the debt servicing capacity of an enterprise?
Which key ratios would an investor in the equity market track?
The balance sheets and the profit and loss accounts of Maharaja Synthetics Limited for the last two years are given as follows: Statement Profit and Loss Account for the Year Ended 31st MarchOn the
On the basis of the following information compute the debt equity ratio and the interest coverage ratio. Particulars Share capital Other equity Debentures outstanding @ 10% Term loan @ 12% Profit
The balance sheet of Suvarana Textiles Limited as on 31st March 2018 and the profit and loss statement for the year ended on that date is given as follows.Based on the aforesaid information, you are
What is Z score?
The management of Holly Polly Printers Limited is concerned about the decline in the return on equity of the company over the last three years notwithstanding significant improvement in profits over
Saral and Sulabh Limited earned a profit after tax of ₹ 724 million for the year 2016–17. The capital of the company consists of 20 million preference shares of the face value ₹ 100 each
On the basis of the following, financial information relating to Zeta Limited comments upon the working capital management of the company. Use suitable ratios in support of your analysis.
The year 2017 had been a great year for Blue Sea Enterprises Limited. The net profit of the company has increased by almost 70% compared to the previous year. The management has declared an increased
The summarized profit and loss statement and the balance sheets for Beta Limited and Theta Limited are given as follows. Profit and Loss Statement for the Year ended 31st March 2017Balance Sheet as
The summarized profit and loss statement of Vroom Auto Limited, manufacturer of motor cycles is given as follows: You are required to:1. Prepare the common size profit and loss statement taking the
State Bank of India (SBI) is the oldest bank in India holding premier position in terms of balance sheet size, number of branches and market capitalization. It was adjudged as the best bank by the
Reliance Industries Limited (RIL) is a fortune 500 company, and is the largest private sector company in India. It is the flagship company of Reliance Group founded by Mr. Dhirubhai Ambani. The
Reliability is one of the key attributes of financial statements. Do you agree with the statement?
The Indian business and investor community received a shock on 7th January 2009 when Mr. Ramalinga Raju, CEO of Satyam Computer Limited (Satyam), by a letter to the board of directors admitted
Briefly describe the regulatory environment to ensure that the financial statements are reliable.
Define the term ‘financial shenanigans’. Is it necessarily illegal?
As per a report published in the Economic Times dated 23rd June 2011 titled ‘No standards, so real estate numbers remain a riddle’ in absence of any regulations in this regards, revenue
Revenue recognition is one of the most vulnerable accounting areas. Describe some of the methods of manipulating revenue recognition.
Explain the following financial shenanigan techniques:1. ‘Big bath’ accounting2. ‘Cookiejar’ accounting3. Channelstuffing4. Roundtripping
What steps would you suggest for the management to take to prevent financial shenanigans?
How will you detect presence of financial shenanigans in the financial statements?

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