Questions and Answers of Financial Accounting For Managers

Financial shenanigans are short-term measures’. Comment.
Based upon the given Trial Balance and the additional information, prepare the statement of profit and loss of Shivam Industries Limited for the year ended 31st March 2017:Trial Balance of Shivam
Bharti Airtel Limited was promoted by Mr. Sunil Mittal in the year 1995. With the opening of telecom sector in India, the company launched its mobile services under the brand name ‘Airtel’ in
‘Financial accounting information is primarily used by the external users whereas management accounting information is exclusively used by internal users’. Explain.
What are the key differences between financial accounting and management accounting?
Identify three primary financial statements and state their purposes.
The accounting and disclosure requirements are greatly influenced by the regulations. Briefly explain the accounting environment in India.
Mr. Smart Lal commenced his trading business in the name of Exotica Trading Company on 1st April 2017 with a capital of ₹ 1,000,000 and a loan from the State Bank of India amounting to ₹ 500,000.
Explain the following accounting principles with suitable examples: 1. Accounting period 2. Separate entity 3. Money measurement 4. Substance over form 5. Historical cost 6. Dual aspect
Curewell Pharmaceutical Limited is facing a law suit wherein it may be liable to pay a fine of ₹ 10 million. The lawyer of the company has advised that there is a high probability of the company
A business enterprise recorded cash sales of ₹ 15.5 million and credit sales of ₹ 7.8 million during the year 2016– 17. The cash purchases during the year were ₹ 13 million whereas credit
‘Gains are recorded if reasonably certain, whereas losses are recorded even if reasonably probable’. Explain the statement and identity the accounting principle.
Hindustan Unilever Limited (HUL), incorporated in 1933, is a part of the Unilever Group. The company is present in various segments including home and personal care, food and beverages, and water.
Shivam Limited borrowed a sum of ₹ 50 million from the State Bank of India on 1st August 2016 for a period of one year. The loan matured on 30th July 2017 and was duly repaid on due date with
Alto Limited bought a building for ₹ 30 million in the year 2014–15 which is being used for office purposes. Due to fall in the real estate prices in the area, the company ascertains that the
As per consistency principle, accounting policies once chosen cannot be changed. Do you agree?
Which of the following transactions are subject matter of accounting: 1. Purchase of 200 kg of goods by the firm on credit for ₹ 100,000. 2. Resignation of one of the key salesman of the
Thanks to your help Roney is able to present the recasted and duly tallied Trial Balance to the Chief Accountant. The Chief Accountant informed him some additional transactions that need to be
Eighth Wonder & Co is engaged in cosmetics business. The trial balance and additional information as on 31st March 2017 are given below. You are required to prepare the profit and loss account
From the following Trial Balance of SSS Limited, prepare the profit and loss account for the year ended 31st March 2017 and a Balance Sheet on that date: Trial Balance of SSS Limited as on 31st
Financial statements of companies are much more detailed and structured. Why?
Ramesh, a fresh graduate, has recently joined his first job in a bank. His supervisor has asked him to find certain information from financial statements of a company. Please help him by suggesting
Identify financial statements which include the following information: 1. Shares issued during the year 2. Other income earned during the year 3. Trade receivables at the end of the year 4.
Explain the key requirements as laid down by Ind AS 1 relating to the presentation of financial statements.
Write a short note on various financial statements which are required to be prepared by a company.
The statement of profit and loss is a flowbased statement whereas the balance sheet is a static statement. Explain.
Asian Paints was set up in the year 1942 and is India’s leading paint company with a group turnover of ₹ 170.85 billion. The group has an enviable reputation in the corporate world for
For better understanding of financial statements, it is important to go through the notes to accounts. Do you agree?
In each of the following cases ascertain the amount to be charged as expenses in the statement of profit and loss for the year 2016–17: 1. Premises taken on rent on 1st August 2016 by paying a
Ascertain the impact of the following transaction on the profit and loss statement for the financial year 2016–17: 1. The company borrowed ₹ 100 crore from the State Bank of India the rate of
The details of income and expenses of SDTV Limited for the year 2017 is given below:You are required to prepare the statement of profit and loss for the company using suitable heads for income and
Identify the main accounting principles having a bearing on the preparation of the statement of profit and loss.
HCL Technologies Limited is a leading IT solution provider company with operations is 32 countries and 116,000 employees. The global revenue of the company exceeded USD 7.2 billion. HCL Technologies
Classify the following incomes into operating income, other income, exceptional income or extraordinary income: 1. Interest earned by a bank. 2. Interest earned by a manufacturing company on the
Cipla is a leading global pharmaceutical company, dedicated to highquality, branded and generic medicines. We are trusted by healthcare professionals and patients across geographies. Cipla was
‘Interest paid is an expense whereas dividend paid is an appropriation of profit’. Explain.
Classify the following expenses under various heads of statement of profit and loss as per Schedule III of the Companies Act, 2013: 1. Staff welfare expenses2. Interest paid 3. Payment to contract
Hindustan Unilever Limited (HUL) is India’s largest Fast Moving Consumer Goods company. HUL has over 35 brands spanning 20 distinct categories such as soaps, detergents, shampoos, skin care,
Explain the accounting for different types of employees’ cost.
Mahaveer Limited earned a PAT of ₹ 33.80 million for the year 2017. The share capital of the company is made up of eight million equity shares of ₹ 2 each and one million preference shares of ₹
Tech Mahindra Limited made a profit of ₹ 743 crore for the year 2009–10 after making a provision of ₹ 131 crore towards taxes and ₹ 130 crore towards depreciation and amortization. The
Differentiate between basic earnings per share and diluted earnings per share.
Hero MotoCorp Ltd. (Formerly Hero Honda Motors Ltd.) is the world’s largest manufacturer of twowheelers, based in India. In 2001, the company had achieved the coveted position of being the
On the basis of the following information, prepare the profit and loss account for the Jack Paints Limited for the year 2016–17. Show EBITDA, EBIT and PBT separately. Particulars Gross
‘Deferred tax assets and deferred tax liabilities arise due to timing difference between taxable income and reported income’. Explain the statement with suitable examples.
From the following balance extracted from the books of accounts of Solid Steels Limited as on 31st March 2017, prepare the statement of profit and loss. The closing stock as on 31st March 2017:
Explain the different measures of profit.
Star Limited has an authorized capital of ₹ 600 million divided into 60 million equity shares of ₹ 10 each. The trial balance of the company for the year ended 31st March 2017 is as
The share capital of the Jack Paints Limited consists of 96 million equity shares of the face value ₹ 10 each. In addition, the company also has given stock options to its employees which can be
What is the basic principle behind accounting for research and development expenses?
In continuation of Case 5.1 given in Chapter 5, you are required to prepare the balance sheet of Asian Paints Limited for the year ended 31st March 2017. The relevant information extracted from the
‘The balance sheet represents the financial position of an enterprise on a particular date’. Explain.
The authorized share capital of Super Growth Limited consisted of 10 million equity shares of the face value ₹ 10 each and one million 10% preference shares of the face value ₹ 100 each. Out of
Easy Going Financial Services Limited with an authorized share capital of ₹ 100 million (10 million equity shares of ₹ 10 each) issued seven million equity shares for subscription at par.
In continuation of Case 5.2 given in Chapter 5, you are required to prepare the balance sheet of HCL Technologies Limited for the year ended 31st March 2017. The relevant information extracted from
Define the terms asset, liability and equity.
Pee Ess Limited with an authorized share capital of ₹ 50 million divided into five million equity shares of ₹ 10 each made a public issue of two million equity shares at par. The company called
How will you classify the following items in the balance sheet of a company: 1. Goodwill 2. Sundry creditors 3. Provisions for doubtful debts 4. Instalments of longterm loans due for repayment
Use the trial balance and additional information given in Case 5.3 in Chapter 5, and prepare the balance sheet of Cipla Limited as on 31st March 2017.Case 5.3Cipla is a leading global pharmaceutical
In the balance sheet of High Tech Tools Limited on 31st March 2017, the equity appeared as follows: The company decided to issue bonus shares to the existing shareholders in the ratio of 5:1 by
How do you differentiate current liabilities from noncurrent liabilities?
How would the following transactions be disclosed in the balance sheet::1. The company has incurred ₹ 320 Crore on the construction of a building that is yet to be completed. 2. An advance of ₹
Use the trial balance and additional information given in Case 5.4 in Chapter 5 and prepare the balance sheet of HUL Limited as on 31st March 2017.Case 5.4Hindustan Unilever Limited (HUL) is
How does the valuation of current assets differ from that of noncurrent assets?
The equity of Sooper Staar Limited as per the last two balance sheets are given as follows: Based upon the above information identify the reasons for changes in the share capital and reserves and
As on 31st December 2011, All Stars Limited has a loan outstanding from the State Bank of India amounted to ₹ 250 million. The loan is secured against mortgage of the land, building, plant and
In continuation of Case 5.5 given in Chapter 5, the summarized balance sheets of Hero Honda Motors Limited and Tech Mahindra Limited for the year ended 31st March 2017 are given below:Case 5.5Hero
As on 31st March 2017, the breakup of borrowed funds of Sabse Taza Retails Limited is as follows: The term loan is secured against the mortgage of company’s fixed assets, whereas the working
Differentiate between a liability, provision and contingent liability.
From the followings balances extracted from the books of SDTV Limited and additional information prepare the balance sheet of the company for the year ended 31st March 2017: Additional Information1.
The details of investments of High Power Electricity Limited as on 31st March 2017 are given as follows: The Regular Electrical Supply Limited is a subsidiary of the company. All other investments
Engineers India Limited (EIL) was set up in 1965 to provide engineering and related technical services for petroleum refineries and other industrial projects. Its range of services include project
The extracts from the books of account of Victoria Limited as on 31st March 2017 are given as follows. Prepare the balance sheet of the company as on 31st March 2017. Make suitable assumptions as
Muscle Power Builder Limited is engaged in the construction business. It follows proportionate completion method for booking revenue and accordingly revenue is booked according to the stage of
High Growth Fertilizers Limited is engaged in the manufacture and distribution of fertilizers in India. During the year 2016–17, the company made a profit of ₹ 693.27 Crore. The Board proposed a
‘Revenue is recognized when earned and not necessarily when received’. Explain.
During the year 2017–18, the invoice value of goods sold by Avon Corporation amounted to ₹325 million. The company offered trade discount aggregating to ₹10 million. In addition, Goods and
Asia Computers Limited is a newly established company in the information technology sector. The company has plans to gradually enter BPO and software development activities. In the initial phases,
Discuss the principles of revenue recognition from sales of goods.
Fair White Limited is a FMCG company largely catering to domestic markets. During the year 2016–17, it received its maiden export order for $ 2 million for supply of fairness cream to USA. The
Desire Limited is in the business of manufacturing high fashion accessories. The company sold certain goods with an invoice price of ₹25 million to one of its customer offering him a discount of 2%
Strong Structure Limited was awarded a contract for construction of a flyover by the Government of Delhi on 1st October 2014. The contact consideration was fixed at ₹280 crore. The flyover was
Super Fast Internet Railway Ticketing Company Limited provides service of booking railway tickets through the Internet. The company made investment for setting up of infrastructure for providing such
Asian Paints is India’s largest and Asia’s third largest paint company. It manufactures a wide range of paints for decorative and industrial use. For the year 2003–04, the company reported a
How is the treatment of cash discount different from that of trade discount or quantity discount?
In which financial year, will revenue be recognized in each of the following cases: 1. Advance received from a customer on 31st December 2016. The goods are manufactured and invoiced on 1st April
Ram Bharose Limited, a steel trader follows a very liberal credit policy of allowing 120 days to its customer to pay against their purchases. This policy has helped the company in attracting new
Shine Info Limited is engaged in software development business. It received a contract for developing and implementing software for credit risk management for a leading bank on 1st January 2016. The
How are the indirect taxes (excise duty, sales tax, value added tax, service tax) treated while recording revenue?
MMTC Limited was established in the year 1963. It is a leading international trading company in India. It was awarded the status of ‘five star export house’ by the government of India for its
Explain method of revenue recognition from services using proportionate completion method.
Satyam Machines Limited is a manufacturer of high tech fabrication machines. Each machine is sold on cash down price of ₹3 million. The company also offers the same machine on instalment payment
Reliable Construction Limited is a real estate subcontractor. It completed some work for a large construction company for a consideration of ₹8 million. In addition to the work scope defined in the
What is the impact of uncertainty on revenue recognition?
RS Finance Limited is a nonbanking finance company in the business of providing loans. On 1st October 2016, it gave a loan of ₹1,000,000 to Mr. Ram at 10% per annum to be repaid after three
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
What are the different types of inventories?
The Drink Well Beer Limited runs a number of outlets for selling beer. Some of the bottles sold at these outlets are carried by the customers and are consumed later. In other cases, the beer is
‘Valuation of closing stock affects both the Balance Sheet and the Profit and Loss Statement’. Do you agree with the above statement?
The Bombay Dyeing and Manufacturing Company Limited was established in the year 1879. It is a leading player offering products like stylish linens, towels, home furnishings, leisure clothing and kids

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