Management Accounting - the Cash Flow Statement Is as Useful to Shareholders and Lenders as to Management. Explain

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Management Accounting

Solve any 8 questions out of 10

1. “Management accounting is a mid-way between financial and cost accounting.” Elucidate.

2. What is the major revenue recognition criterion?

3. What is a trading account? What are its major constituents? What is its major outcome?

4. The cash flow statement is as useful to shareholders and lenders as to management. Explain.

5. (a) “All future costs are relevant.” Do you agree? Why?

(b) “Fixed costs are really variable. The more you produce the less they become.”

Do you agree? Explain.

6. In connection with inventory ordering and control, certain terms are basic. Explain the meaning of each of the following:

1. Economic order quantity

2. Re-order point

3. Lead time

4. Safety stock

7. What is meant by under/over-absorption of factory overheads? How will you account for them in cost accounts? Does it bear any impact while submitting quotations?

8. A manufacturing company operating a system of budgetary control finds that their production capacity during the year varies between 75 per cent and 90 per cent as against the budgeted capacity of 80 per cent for the year. It has been suggested that a system budgets should be introduced to effectively control costs. Outline the steps you would take to implement this suggestion keeping in mind that the management would still require periodic comparison with their overall budget during the year.

9. “Transfer prices must always be equal to externally determined market of comparative products or services.” Comment fully.

10. Suppose a firm is considering replacing an old machine with a new one. The firm does not anticipate that any new revenues will be created by the replacement...