Management Accounts Assigement 1

Given here are a few situations:

a. Inventory is recorded at its purchase price.

True

b. Financial Statements are prepared on an annual basis.

False

c. Personal and business transactions are separately maintained.

True

d. Expenses are recognized in the same period as the related revenues.

True

e. The death of the chief executive officer of the company is not recorded in accounts.

True

f. In case of doubt, it is considered better to understate rather than overstate income.

True

g. Assets are not stated at their liquidation value.

False

h. The accounting records only events that affect the financial position of the entity and at the same time can be reasonably determined in monetary terms.

True

i. Same treatment is given to comparable transactions from period to period.

False

j.        Revenue is recognized when it is earned and expense is recognized when it is incurred.

True

2.      The manager of a company who did not have proper accounting knowledge prepared the following balance sheet. He has wrongly classified the items under assets, liabilities and owners’ equity.

Owner’s Equity and Liabilities | ₹ | Assets | ₹ |

Share Capital | 10,00,000 | Retained Earnings | 5,00,000 |

Equipment | 9,00,000 | Land and Buildings | 7,00,000 |

Cash | 2,00,000 | Long – term loan | 4,00,000 |

  |   | Accounts Payable | 2,00,000 |

  |   | Accounts Receivables | 3,00,000 |

  | 21,00,000 |   | 21,00,000 |

REQUIED:

Prepare the correct Balance sheet.

Owner’s Equity and Liabilities | ₹ | Assets | ₹ |

Share Capital | 10,00,000 | Retained Earnings | 5,00,000 |

Long – term loan | 4,00,000 | Land and Buildings | 7,00,000 |

| | Equipment | 9,00,000 |

Accounts Payable | 2,00,000 | Cash | 2,00,000 |

  |   | Accounts Receivables | 3,00,000 |

  | 21,00,000 |   | 21,00,000 |

3) Using Accounting Equation, Answer the following independent Questions.

a) New Company’s assets are ₹ 250 lakh and its...